AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 2003.
REGISTRATION NOS. 333-108558, 333-108558-01, 333-108558-02, 333-108558-03,
333-108558-04, 333-108558-05, 333-108558-06, 333-108558-07, 333-108558-08,
333-108558-09, 333-108558-10, 333-108558-11, 333-108558-12, 333-108558-13,
333-108558-14, 333-108558-15, 333-108558-16, 333-108558-17, 333-108558-18,
333-108558-19, 333-108558-20, 333-108558-21, 333-108558-22, 333-108558-23,
333-108558-24, 333-108558-25, 333-108558-26
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 1311 76-0396023
DELAWARE 1311 76-0605880
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
GREGORY JONES, ESQ. PEGGY A. HEEG, ESQ.
D. MARK LELAND EL PASO BUILDING
4 GREENWAY PLAZA 1001 LOUISIANA STREET, 30TH FLOOR
HOUSTON, TX 77046 HOUSTON, TX 77002
(832) 676-4853 (713) 420-2600
(Address, including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Registrant's Principal Number, Including Area Code, of Agent For Service)
Executive Offices)
COPY TO:
J. VINCENT KENDRICK
AKIN GUMP STRAUSS HAUER & FELD LLP
1900 PENNZOIL PLACE, SOUTH TOWER
711 LOUISIANA STREET
HOUSTON, TX 77002
(713) 220-5800
(713) 236-0822 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
EACH REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL SUCH REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
STATE OR OTHER I.R.S.
JURISDICTION OF EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF REGISTRANT GUARANTOR(1) ORGANIZATION NUMBER
- ------------------------------------- ---------------- --------------
Cameron Highway Pipeline GP, L.L.C. ........................ Delaware N/A
Cameron Highway Pipeline I, L.P. ........................... Delaware N/A
Crystal Holding, L.L.C. .................................... Delaware 76-0396023
First Reserve Gas, L.L.C. .................................. Delaware 76-0396023
Flextrend Development Company, L.L.C. ...................... Delaware 76-0396023
GulfTerra Alabama Intrastate, L.L.C. (formerly known as EPN
Alabama Intrastate, L.L.C.) .............................. Delaware 76-0396023
GulfTerra Field Services, L.L.C. (formerly known as EPN
Field Services, L.L.C.) .................................. Delaware 76-0396023
GulfTerra GC, L.P. (formerly known as EPN Gulf Coast,
L.P.) .................................................... Delaware N/A
GulfTerra Holding I, L.L.C. (formerly known as EPN GP
Holding I, L.L.C.) ....................................... Delaware 76-0396023
GulfTerra Holding II, L.L.C. (formerly known as EPN GP
Holding, L.L.C.) ......................................... Delaware 76-0396023
GulfTerra Holding III, L.L.C. (formerly known as EPN
Pipeline GP Holding, L.L.C.) ............................. Delaware 76-0396023
GulfTerra Holding IV, L.P. (formerly known as EPN Holding
Company I, L.P.) ......................................... Delaware N/A
GulfTerra Holding V, L.P. (formerly known as EPN Holding
Company, L.P.) ........................................... Delaware N/A
GulfTerra Intrastate, L.P. (formerly known as El Paso Energy
Intrastate, L.P.) ........................................ Delaware N/A
GulfTerra NGL Storage, L.L.C. (formerly known as EPN NGL
Storage, L.L.C.) ......................................... Delaware 76-0396023
GulfTerra Oil Transport, L.L.C. (formerly known as El Paso
Energy Partners Oil Transport, L.L.C.) ................... Delaware 76-0396023
GulfTerra Operating Company, L.L.C. (formerly known as El
Paso Energy Partners Operating Company, L.L.C.) .......... Delaware 76-0396023
GulfTerra South Texas, L.P. (formerly known as El Paso South
Texas, L.P.) ............................................. Delaware 04-3714142
GulfTerra Texas Pipeline, L.P. (formerly known as EPGT Texas
Pipeline, L.P.) .......................................... Delaware N/A
Hattiesburg Gas Storage Company ............................ Delaware 76-0396023
Hattiesburg Industrial Gas Sales, L.L.C. ................... Delaware 76-0396023
High Island Offshore System, L.L.C. ........................ Delaware 76-0396023
Manta Ray Gathering Company, L.L.C. ........................ Delaware 76-0396023
Petal Gas Storage, L.L.C. .................................. Delaware 76-0396023
Poseidon Pipeline Company, L.L.C. .......................... Delaware 76-0396023
- ---------------
(1) The address for each Registrant Guarantor is 4 Greenway Plaza, Houston,
Texas, 77046.
$250,000,000
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
OFFER TO EXCHANGE
6 1/4% SERIES B SENIOR NOTES DUE 2010
FOR ANY AND ALL OUTSTANDING 6 1/4% SERIES A
SENIOR NOTES DUE 2010
CUSIP: 40274WAA2 AND U4033XAA5
(GULFTERRA LOGO)
---------------------
This prospectus, the accompanying letter of transmittal and notice of
guaranteed delivery relate to our proposed exchange offer. We are offering to
exchange up to $250,000,000 aggregate principal amount of new 6 1/4% Series B
senior notes due 2010, which we call the Series B notes, which will be freely
transferable, for any and all outstanding 6 1/4% Series A senior notes due 2010,
which we call the Series A notes, issued in a private offering on July 3, 2003,
and which have certain transfer restrictions.
In this prospectus we sometimes refer to the Series A notes and the Series
B notes collectively as the notes.
- The terms of the Series B notes are substantially identical to the terms
of the Series A notes, except that the Series B notes will be freely
transferable and issued free of any covenants regarding exchange and
registration rights.
- All Series A notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of Series A notes may be withdrawn at any time prior to expiration
of the exchange offer.
- We will not receive any proceeds from the exchange offer.
- The exchange of Series A notes for Series B notes will not be a taxable
event for United States federal income tax purposes.
- Holders of Series A notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
- Series A notes not exchanged in the exchange offer will remain outstanding
and be entitled to the benefits of the Indenture, but, except under
certain circumstances, will have no further exchange or registration
rights under the registration rights agreement discussed in this
prospectus.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF FACTORS
YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus,
the accompanying letter of transmittal and related documents and any amendments
or supplements to this prospectus carefully before making your investment
decision.
---------------------
The date of this prospectus is September 26, 2003.
TABLE OF CONTENTS
Summary..................................................... 1
The Exchange Offer.......................................... 8
Ratio of Earnings to Fixed Charges.......................... 10
Risk Factors................................................ 11
The Exchange Offer.......................................... 14
Use Of Proceeds............................................. 25
Description Of Notes........................................ 26
United States Federal Income And Estate Tax
Considerations............................................ 72
Certain ERISA Considerations................................ 76
Plan Of Distribution........................................ 78
Experts..................................................... 79
---------------------
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports and other information with the
Securities and Exchange Commission (SEC) under the Securities Exchange Act of
1934. You may read and copy any documents we file at the SEC's public reference
room at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our filings with the SEC are also available to the public
from commercial document retrieval services and at the SEC's web site at
http://www.sec.gov. You can also obtain information about us at the offices of
the New York Stock Exchange (NYSE), 20 Broad Street, New York, New York 10005.
We "incorporate by reference" information into this prospectus, which means
that we disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this prospectus, except for any information
superseded by information contained directly in this prospectus, and the
information we file later with the SEC will automatically supersede this
information. The documents listed below and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, other than
information furnished under Item 9 of any Current Report on Form 8-K either
listed below or filed in the future that is not deemed filed under the
Securities Exchange Act of 1934 and, therefore, is not incorporated by reference
in this prospectus, are incorporated by reference into this prospectus and
contain important information about us and our financial condition.
- Annual Report on Form 10-K for the year ended December 31, 2002;
- Quarterly Report on Form 10-Q for the quarters ended March 31, 2003 and
June 30, 2003; and
- Current Reports on Form 8-K and 8-K/A dated January 2, 2003; March 19,
2003; April 7, 2003; April 8, 2003; April 10, 2003; April 11, 2003; May
1, 2003; May 8, 2003; May 14, 2003; May 16, 2003; June 6, 2003; July 1,
2003; July 14, 2003; August 18, 2003; August 21, 2003 and August 26,
2003.
You may request a copy of any document incorporated by reference in this
prospectus and any exhibit specifically incorporated by reference in those
documents, at no cost, by writing or telephoning us at the following address or
phone number:
GulfTerra Energy Partners, L.P.
4 Greenway Plaza
Houston, Texas 77046
(832) 676-4853
Attention: Investor Relations
Our website is http://www.gulfterra.com. We make available, free of charge
on or through our website, our annual, quarterly and current reports, and any
amendments to those reports, as soon as is reasonably possible after these
reports are filed with the SEC. Information contained on our website is not part
of this filing.
The information contained in this prospectus was obtained from us and other
sources believed by us to be reliable. This prospectus also incorporates
important business and financial information about us that is not included in or
delivered with this prospectus.
You should rely only on the information contained in this prospectus or any
supplement and any information incorporated by reference in this prospectus or
any supplement. We have not authorized anyone to provide you with any
information that is different.
You should not assume that the information in this prospectus or any
supplement is current as of any date other than the date on the front page of
this prospectus. This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any state or jurisdiction where the offer or
sale is not permitted.
We include cross references in this prospectus to captions in these
materials where you can find further related discussions. The above table of
contents tells you where to find these captions.
---------------------
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have incorporated by reference contain
or incorporate by reference forward-looking statements. Where any
forward-looking statement includes a statement of the assumptions or bases
underlying the forward-looking statement, we caution that, while we believe
these assumptions or bases to be reasonable and made in good faith, assumed
facts or bases almost always vary from the actual results, and the differences
between assumed facts or bases and actual results can be material, depending
upon the circumstances. Where, in any forward-looking statement, we express an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and is believed to have a reasonable basis. We cannot
assure you, however, that the statement of expectation or belief will result or
be achieved or accomplished. These statements relate to analyses and other
information which are based on forecasts of future results and estimates of
amounts not yet determinable. These statements also relate to our future
prospects, developments and business strategies. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "will," and similar terms and phrases, including
references to assumptions. These statements are contained in the sections
entitled "Summary," "Risk Factors," and other sections of this prospectus and
the documents we have incorporated by reference. These forward-looking
statements involve risks and uncertainties that may cause our actual future
activities and results of operations to be materially different from those
suggested or described in this prospectus and the documents we have incorporated
by reference. These risks include the risks that are identified in:
- the "Risk Factors" section of this prospectus;
- the section entitled "Risk Factors and Cautionary Statement" included in
our Annual Report on Form 10-K for the year ended December 31, 2002; and
- the other documents incorporated by reference.
These risks may also be specifically described in our Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and any amendments to these reports and
other documents filed with the Securities and Exchange Commission. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information or otherwise. If one or more of these
risks or uncertainties materialize, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected, estimated
or projected.
ii
SUMMARY
This summary information is to help you understand the notes. It likely
does not contain all the information that is important to you. You should
carefully read this prospectus and the documents incorporated by reference to
understand fully the terms of the notes, as well as other considerations that
are important to you in making your investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 11 of this prospectus,
as well as the section entitled "Risk Factors and Cautionary Statement" included
in our Annual Report on Form 10-K for the year ended December 31, 2002 and the
risk factors contained in the other documents incorporated by reference herein,
to determine whether an investment in the notes is appropriate for you. For
purposes of this prospectus, unless the context otherwise indicates, when we
refer to "us," "we," "our," or "ours," we are describing GulfTerra Energy
Partners, L.P., together with its subsidiaries, including GulfTerra Energy
Finance Corporation.
GULFTERRA ENERGY PARTNERS, L.P.
WHO WE ARE
Formed in 1993, GulfTerra Energy Partners, L.P. (NYSE: GTM), is one of the
largest publicly-traded master limited partnerships, or MLPs, in terms of market
capitalization. Since El Paso Corporation's initial acquisition of an interest
in us in 1998, we have diversified our asset base, stabilized our cash flow and
decreased our financial leverage as a percentage of total capital. We have
accomplished this through a series of acquisitions and development projects, as
well as many public offerings of our common units. We manage a balanced,
diversified portfolio of interests and assets relating to the midstream energy
sector, which involves gathering, transporting, separating, handling,
processing, fractionating and storing natural gas, oil and natural gas liquids,
or NGL. This portfolio, which we consider to be balanced due to its diversity of
geographic locations, business segments, customers and product lines, includes:
- offshore oil and natural gas pipelines, platforms, processing facilities
and other energy infrastructure in the Gulf of Mexico, primarily offshore
Louisiana and Texas;
- onshore natural gas pipelines and processing facilities in Alabama,
Colorado, Louisiana, Mississippi, New Mexico and Texas;
- onshore NGL pipelines and fractionation facilities in Texas; and
- onshore natural gas and NGL storage facilities in Louisiana, Mississippi
and Texas.
We are one of the largest natural gas gatherers, based on miles of
pipeline, in the prolific natural gas supply regions offshore in the Gulf of
Mexico and onshore in Texas and the San Juan Basin, which envelops a significant
portion of the four contiguous corners of Arizona, Colorado, New Mexico and
Utah. These regions, especially the deeper water regions of the Gulf of Mexico,
one of the United States' fastest growing oil and natural gas producing regions,
offer us significant infrastructure growth potential through the acquisition and
construction of pipelines, platforms, processing and storage facilities and
other infrastructure. In 2002, the Gulf of Mexico accounted for approximately 25
percent of all natural gas production in the United States and the supply
regions accessed by our pipelines in Texas and the San Juan Basin accounted for
approximately 33 percent.
OUR OBJECTIVE AND STRATEGY
Our objective is to operate as a growth-oriented MLP with a focus on
increasing cash flow, earnings and return to our unitholders by becoming one of
the industry's leading providers of midstream energy services. Our strategy
entails striving to continually enhance the quality of our cash flow by:
- maintaining a balanced and diversified portfolio of midstream energy
interests and assets;
- maintaining a sound capital structure;
- sharing capital costs and risks through joint ventures/strategic
alliances; and
1
- emphasizing fee-based operations and services for which the fees are not
traditionally linked to commodity prices (like gathering and
transportation) and managing commodity risks by using contractual
arrangements (like fixed-fee contracts and hedging and tolling
arrangements) and de-emphasizing our commodity-based activities
(including exiting the oil and natural gas production business by not
acquiring additional properties).
We intend to execute our business strategy by:
- constructing and acquiring onshore pipelines; gathering systems;
processing and fractionation facilities; and other midstream assets to
provide a broad range of more stable, fee-based services to producers,
marketers and users of energy products;
- expanding our existing offshore asset base, supported by the dedication
of new discoveries and long-term commitments, to capitalize on the
accelerated growth of oil and natural gas supplies from the deeper water
regions of the Gulf of Mexico;
- operating at a low cost by achieving economies of scale in select regions
through reinvesting in and expanding our organic growth opportunities, as
well as by acquiring new assets;
- sharing capital costs and risks through joint ventures/strategic
alliances, principally with partners with substantial financial resources
and strategic interests, assets and operations in the Gulf of Mexico,
especially in the deeper water, Flextrend and subsalt regions; and
- continuing to strengthen our solid balance sheet by financing and/or
refinancing our growth, on average, with 50 percent equity so as to
provide the financial flexibility to fund future opportunities.
In addition to our wholly-owned assets and operations, we conduct a
significant portion of our business through joint ventures/strategic alliances,
which we believe are ideally suited for midstream energy operations. We use
joint ventures to reduce our capital requirements and risk exposure to
individual projects, as well as to develop strategic relationships, realize
synergies and results from combining resources, and benefit from the assets,
experience and resources of our partners. Our partners in the Gulf of Mexico
include integrated and large independent energy companies with substantial
offshore interests, operations and assets, such as Shell Oil Products U.S. and
Marathon Pipeline Company, and Valero Energy Corporation, one of the top
refining and marketing companies in the United States.
In 2002, our cash outlay for investments of midstream energy infrastructure
assets totaled $1.7 billion. We acquired assets from El Paso Corporation and
third parties totaling $1.5 billion and $19 million, and we expended $228
million in funds for the construction of assets.
OUR KEY STRENGTHS
Stable cash flow primarily driven by fee-based revenues. Our cash flow
primarily derives from gathering, transportation, storage and other fee-based
services, the fees for most of which are not directly affected by changes in
energy commodity prices.
Balanced portfolio with proven track record of cash flow diversification
and leverage reduction. Since 1998, we have diversified and balanced our asset
base in terms of services, businesses, customers and geography by making
approximately $3.0 billion in capital expenditures while reducing our financial
leverage and increasing our financial flexibility through, among other things,
many public common unit offerings.
Strategic platform for continued expansion. We own and have interests in an
expansive portfolio of organic development opportunities for onshore and
offshore announced projects totaling over $900 million and the expertise to
continue to execute strategic transactions, as evidenced by the more than $2.5
billion of construction projects and accretive (in terms of cash flow per unit)
acquisitions announced since January 2002.
2
Diversified portfolio of attractive, strategically located assets. We own a
diversified portfolio of strategically located midstream assets well positioned
to capture growth in some of the largest natural gas producing basins in the
United States.
GENERAL PARTNER RELATIONSHIP
GulfTerra Energy Company, L.L.C., a newly-formed Delaware limited liability
company that is wholly-owned by a subsidiary of El Paso Corporation, is our sole
general partner. The business and affairs of our general partner are managed by
a board of directors, which we refer to as our board of directors, comprised of
two management directors who are also our executive officers and four
independent directors who meet the independent director requirements established
by the NYSE and the Sarbanes-Oxley Act of 2002. Our general partner recently
announced that the size of the board will be increased by the addition of one
more independent director. Through its board of directors, our general partner
manages our day-to-day operations.
OUR CORPORATE GOVERNANCE STRUCTURE AND INDEPENDENCE INITIATIVES
This year we have continued to improve our corporate governance model,
which currently meets the standards established by the SEC and the NYSE. During
the first quarter of 2003, we identified and evaluated a number of changes that
could be made to our corporate structure to better address potential conflicts
of interest and to better balance the risks and rewards of significant
relationships with our affiliates, which we refer to as Independence
Initiatives. Through July 2003 we have already implemented the following:
- added an additional independent director to our board of directors,
bringing the number of independent directors to four of the six-member
board;
- established a governance and compensation committee of our board of
directors consisting solely of independent directors, which is
responsible for establishing performance measures and making
recommendations to El Paso Corporation concerning compensation of its
employees performing duties for us;
- changed our name to GulfTerra Energy Partners, L.P. (NYSE: GTM);
- received a letter of credit from El Paso Merchant Energy North America
totaling $5.1 million regarding our existing customer/contractual
relationships with them;
- completed a resource support agreement with El Paso Corporation;
- modified our partnership agreement to: (1) eliminate El Paso
Corporation's right to vote its common units with respect to the removal
of the general partner; (2) effectively reduced the third-party common
unit vote required to remove the general partner from 72 percent to 67
percent; and (3) require the unanimous vote of the general partner's
board of directors before the general partner or we can voluntarily
initiate bankruptcy proceedings; and
- reorganized our structure, further reducing our interrelationships with
El Paso Corporation, resulting in our general partner being a Delaware
limited liability company that is not permitted to have:
- material assets other than its interest in us;
- material operations other than those relating to our operations;
- material debt or other obligations other than those owed to us or our
creditors;
- material liens other than those securing obligations owed to us or our
creditors; or
- employees.
3
We are in the process of implementing the following Independence
Initiatives:
- adding one more independent director to our board of directors;
- negotiating a master netting agreement that could partially mitigate our
risks associated with our ongoing contractual arrangements with El Paso
Corporation or any of its subsidiaries. Approval must be received from
our general partner's board of directors and from El Paso Corporation
prior to executing the master netting agreement.
Under the partnership agreement, our general partner has the responsibility
to, among other things, manage and operate our assets. In addition, our general
partner had agreed not to voluntarily withdraw as general partner on or prior to
December 31, 2002. Now that this obligation of the general partner has expired,
our general partner can withdraw with 90 days notice. We have no employees
today, a condition that is common among MLPs. Although this arrangement has
worked well for us in the past and continues to work well for us, we are
evaluating the direct employment of the personnel who manage the day-to-day
operations of our assets.
OUR RELATIONSHIP WITH EL PASO CORPORATION
El Paso Corporation, a NYSE-listed company, is a leading provider of
natural gas services and the largest pipeline company in North America. Through
its subsidiaries, El Paso Corporation:
- owns 100 percent of our general partner, which means that, historically,
El Paso Corporation and its affiliates have employed the personnel who
operate our businesses. We reimburse our general partner and its
affiliates for the costs they incur on our behalf, and we pay our general
partner its proportionate share of distributions -- relating to its one
percent general partnership interest and the related incentive
distributions -- we make to our partners each calendar quarter.
Furthering our Independence Initiatives efforts, El Paso Corporation has
announced its intention to sell between 5 and 10 percent of its ownership
interest in our general partner to a third party. El Paso Corporation has
the sole responsibility to determine the ultimate ownership status of the
general partner interest.
- is a significant stakeholder in us -- it owns approximately 23.2 percent,
or 11,674,245, of our common units (decreased from 23.4 percent as a
result of our common unit offering in August 2003), all 10,937,500 of our
Series C units, which we issued in November 2002 for $350 million, all
123,865 of our outstanding Series B preference units after adjustment for
the August contribution of Series B preference units associated with the
August common unit offering (with a liquidation value at June 30, 2003 of
$163.6 million), and our one percent general partner interest. As holders
of some of our common units and all of our Series C units, subsidiaries
of El Paso Corporation receive their proportionate share of distributions
we make to our partners each calendar quarter. In July 2003, we filed a
registration statement on Form S-3 to register for resale 2,000,000 of
the common units owned by affiliates of El Paso Corporation.
- is a customer of ours. As with other large energy companies, we have
entered into a number of contracts with El Paso Corporation and its
affiliates.
Historically, we have entered into transactions with El Paso Corporation
and its subsidiaries to acquire or sell assets. We have instituted specific
procedures for evaluating and valuing our material transactions with El Paso
Corporation and its subsidiaries. Before we consider entering into a transaction
with El Paso Corporation or any of its subsidiaries, we determine whether the
proposed transaction (i) would comply with the requirements under our indentures
and credit agreements, (ii) would comply with substantive law, and (iii) would
be fair to us and our limited partners. In addition, our general partner's board
of directors utilizes an Audit and Conflicts Committee comprised solely of
independent directors. This committee:
- evaluates and, where appropriate, negotiates the proposed transaction;
4
- engages an independent financial advisor and independent legal counsel to
assist with its evaluation of the proposed transaction; and
- determines whether to reject or approve and recommend the proposed
transaction.
We will only consummate any proposed material acquisition or disposition
with El Paso Corporation if, following our evaluation of the transaction, the
Audit and Conflicts Committee approves and recommends the proposed transaction
and our general partner's full board of directors approves the transaction.
Our relationship with El Paso Corporation has contributed significantly to
our past growth, and we have important ongoing contractual arrangements with El
Paso Corporation and some of its subsidiaries. However, we are a stand-alone
operating company with significant assets and operations. Our assets, operations
and financial condition are separate and independent from those of El Paso
Corporation. Our credit facilities and other financing arrangements do not
contain cross default provisions or other triggers tied to El Paso Corporation's
financial condition or credit ratings. Nonetheless, due to our relationship with
El Paso Corporation, adverse developments concerning El Paso Corporation could
adversely affect us, even if we have not suffered any similar developments.
The outstanding senior unsecured indebtedness of El Paso Corporation has
been downgraded to below investment grade and is currently rated Caa1 by Moody's
Investors Service (Moody's) and B by Standard & Poor's (S&P). These downgrades
are a result, at least in part, of the outlook for the consolidated business of
El Paso Corporation and its need for liquidity. In the event that El Paso
Corporation's liquidity needs are not satisfied, El Paso Corporation could be
forced to seek protection from its creditors in bankruptcy.
El Paso Corporation has announced its intent to sell between 5 and 10
percent of our general partner interest. If El Paso Corporation sells 50 percent
or more of its interest in our general partner without obtaining consent from
our lenders, we will experience a "change in control" under our credit
agreements and indentures, which will effectively cause all amounts outstanding
under those debt instruments to become due.
As discussed previously, we have implemented, and are in the process of
implementing, a number of Independence Initiatives that are designed to help us
better manage the rewards and risks relating to our relationship with El Paso
Corporation. However, even in light of these Independence Initiatives or any
other arrangements, we may still be adversely affected if El Paso Corporation
continues to suffer financial stress. For a more detailed discussion of our
corporate structure, our general partner, and our contracts and other
arrangements with El Paso Corporation and its subsidiaries, see the summary of
risk factors included in this prospectus and the risk factors included in the
documents incorporated by reference in this prospectus.
RECENT DEVELOPMENTS
In August 2003, Arizona Gas Storage, L.L.C. sold its interest in Copper
Eagle Gas Storage, L.L.C. to El Paso Natural Gas Company, a subsidiary of El
Paso Corporation. Copper Eagle Gas Storage is developing a natural gas storage
project located outside of Phoenix, Arizona. Arizona Gas Storage is an indirect
60 percent owned subsidiary of GulfTerra Energy Partners, L.P.
Cameron Highway Oil Pipeline System. In July 2003, we sold a 50 percent
interest in Cameron Highway to Valero Energy Corporation for $86 million forming
a joint venture with Valero. We also announced the completion of a $325 million
non-recourse financing for the project. Cameron Highway will be a 390-mile
pipeline that will have capacity to deliver up to 500,000 barrels of oil per day
from the southern Green Canyon and western Gulf of Mexico areas to refining
areas of Port Arthur and Texas City, Texas. When completed, the pipeline will be
one of the largest crude oil delivery systems in the Gulf of Mexico, sized to
handle oil movement for the Deepwater Trend discoveries, Holstein, Mad Dog, and
Atlantis, its initial anchor fields, as well as other Deepwater oil discoveries.
We will build and operate the pipeline, which is scheduled for completion during
the third quarter of 2004. Valero paid us approximately $70 million at closing,
including $51 million representing 50 percent of the capital investment expended
through that date for the pipeline project. In July 2003, we recognized $19
million as a gain from the sale of long-lived assets. In addition, Valero will
pay us a total of $16 million, $5 million to be paid once the system is
completed and the
5
remaining $11 million by the end of 2006. We expect to reflect the receipts of
these additional amounts in the periods received as gains from the sale of
long-lived assets in our income statement.
Equity Offerings. Our ability to execute our growth strategy and complete
our current projects is dependent upon our access to the capital necessary to
fund our projects and acquisitions. As previously announced, our strategy for
2003 is to raise approximately $300 million through the issuance of common units
and other equity securities.
In August 2003, we issued 507,228 common units in a registered offering to
a large institutional investor for $20 million. We used the net proceeds of
approximately $19.7 million for general partnership purposes.
In connection with this offering, our general partner in lieu of a cash
contribution, contributed approximately $0.2 million of our Series B preference
units to us to maintain its one percent general partner interest and these
preference units were subsequently retired.
OFFICES
Our principal executive offices are located at 4 Greenway Plaza, Houston,
TX 77046, and the phone number at this address is (832) 676-4853
6
OWNERSHIP STRUCTURE
Below is a chart depicting our ownership structure and our business
segments.
(OWNERSHIP STRUCTURE FLOW CHART)
- ---------------
| EL PASO |
| CORPORATION |
- ---------------
|
100%
|
- ---------------
| DEEP TECH |
|INTERNATIONAL|
| INC.(1) |
- ---------------
|
100%
|
- ---------------
|GULFTERRA GP |
| HOLDING |
| COMPANY(1) |
- ---------------
|
100%
|
- --------------- ---------------
| GULFTERRA | | |
| ENERGY | | |
| COMPANY, | | PUBLIC |
| L.L.C.(2) | | |
- --------------- ---------------
| |
| ------------------- |
-------------|GULFTERRA ENERGY |------------------
23.2% of the | PARTNERS, L.P. | 76.8% of the
common unit ------------------- common unit
limited partner | limited partner interest
interest(3) 100% |
of the 1% general |
partner interest(2) |
100% of the Series B |
preference unit |
limited partner |
interest(3) |
100% of the Series C |
unit limited partner |
interest(3) |
|
|
-----------------------------------------------------
| | | |
- --------------- ------------- -------------- ---------------
| NATURAL GAS | | OIL AND | | NATURAL | | PLATFORM |
| PIPELINES | | NGL | | GAS | | SERVICES |
| AND PLANTS | | LOGISTICS | | STORAGE | | |
- --------------- ------------- -------------- ---------------
- ---------------
(1) Neither Deeptech International, Inc. nor GulfTerra GP Holding Company
conduct any operations. DeepTech's only assets are cash, indirect ownership
of some of our common units and its ownership interests in GulfTerra GP
Holding. GulfTerra GP Holding's only assets are cash and its ownership
interests in GulfTerra Energy Company, L.L.C., which conducts no operations
outside of our operations. GulfTerra Energy Company, L.L.C.'s only assets
are cash and its one percent general partner interest in us.
(2) GulfTerra Energy Company, L.L.C., an indirect wholly-owned subsidiary of El
Paso Corporation, is our general partner.
(3) El Paso Corporation, through its subsidiaries, owns approximately 23.2
percent, or 11,674,245, of our common units, all 10,937,500 of our Series C
units and all 123,865 of our Series B preference units.
7
THE EXCHANGE OFFER
You are entitled to exchange in the exchange offer your outstanding Series
A notes for Series B notes with substantially identical terms. You should read
the discussion under the heading "Description of Notes" for further information
regarding the Series B notes.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" beginning on page 14 for
further information regarding the exchange offer and resale of the Series B
notes.
Registration rights agreement We sold $250 million in aggregate principal
amount of Series A notes to J.P. Morgan
Securities Inc., Credit Suisse First Boston
LLC, Wachovia Securities, Inc., Banc One
Capital Markets, Inc., BNP Paribas Securities
Corp., Credit Lyonnais Securities (USA) Inc.,
Fortis Investment Services LLC, Scotia Capital
(USA) Inc., Suntrust Capital Markets, Inc. and
Royal Bank of Scotland plc, as initial
purchasers in a transaction exempt from the
registration requirements of the Securities
Act. We entered into a registration rights
agreement dated as of July 3, 2003 with the
initial purchasers which grants the holders of
the Series A notes exchange and registration
rights. This exchange offer satisfies those
exchange rights.
The exchange offer $1,000 principal amount of Series B notes in
exchange for each $1,000 principal amount of
Series A notes. As of the date of this
prospectus, $250 million aggregate principal
amount of the Series A notes are outstanding.
We will issue Series B notes to holders on the
earliest practicable date following the
Expiration Date.
Resales of the Series B Notes Based on interpretations by the staff of the
SEC set forth in no-action letters issued to
third parties, we believe that, except as
described below, the Series B notes issued
pursuant to the exchange offer may be offered
for resale, resold and otherwise transferred by
holders of the Series B notes (other than a
holder that is an "affiliate" of ours within
the meaning of Rule 405, a person who is a
broker-dealer or a person who intends to
participate in the exchange offer for the
purpose of distributing the Series B notes)
under the Securities Act, without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
the Series B notes are acquired in the ordinary
course of the holder's business and the holder
has no arrangement or understanding with any
person to participate in the distribution of
the Series B notes.
Each broker-dealer that receives Series B notes
pursuant to the exchange offer in exchange for
Series A notes that the broker-dealer acquired
for its own account as a result of
market-making activities or other trading
activities, other than Series A notes acquired
directly from us or our affiliates, must
acknowledge that it will deliver a prospectus
in connection with any resale of the Series B
notes. The letter of transmittal states that by
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act.
8
If we receive notices in the letter of
transmittal, this prospectus, as it may be
amended or supplemented from time to time, may
be used for the period described below by a
broker-dealer in connection with resales of
Series B notes received in exchange for Series
A notes where the Series A notes were acquired
by the broker-dealer as a result of
market-making activities or other trading
activities and not acquired directly from us.
The letter of transmittal requires
broker-dealers tendering Series A notes in the
exchange offer to indicate whether the
broker-dealer acquired the Series A notes for
its own account as a result of market-making
activities or other trading activities, other
than Series A notes acquired directly from us
or any of our affiliates. If no broker-dealer
indicates that the Series A notes were so
acquired, we have no obligation under the
registration rights agreement to maintain the
effectiveness of the registration statement
past the consummation of the exchange offer or
to allow the use of this prospectus for such
resales. See "The Exchange Offer --
Registration Rights" and "-- Resale of the
Series B Notes; Plan of Distribution."
Expiration date The exchange offer expires at 5:00 p.m., New
York City time, on October 30, 2003, unless we
extend the exchange offer in our sole
discretion, in which case the term "Expiration
Date" means the latest date and time to which
the exchange offer is extended.
Conditions to the exchange
offer The exchange offer is subject to certain
conditions which we may waive. See "The
Exchange Offer -- Conditions to the Exchange
Offer."
Procedures for tendering the
Series A Notes Each holder of Series A notes wishing to accept
the exchange offer must complete, sign and date
the accompanying letter of transmittal in
accordance with the instructions, and mail or
otherwise deliver the letter of transmittal
together with the Series A notes and any other
required documentation to the exchange agent
identified below under "Exchange Agent" at the
address set forth in this prospectus. By
executing the letter of transmittal, a holder
will make certain representations to us. See
"The Exchange Offer -- Registration Rights" and
"-- Procedures for Tendering Series A Notes."
Special procedures for
beneficial owners Any beneficial owner whose Series A notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact the
registered holder promptly and instruct the
registered holder to tender on its behalf. See
"The Exchange Offer -- Procedures for Tendering
Series A Notes."
Guaranteed delivery procedures Holders of Series A notes who wish to tender
their Series A notes when those securities are
not immediately available or who cannot deliver
their Series A notes, the letter of transmittal
or any other documents required by the letter
of transmittal to the exchange agent prior to
the Expiration Date must tender their Series A
notes according to the guaranteed delivery
procedures set forth in "The
9
Exchange Offer -- Procedures for Tendering
Series A Notes -- Guaranteed Delivery."
Withdrawal rights Tenders of Series A notes pursuant to the
exchange offer may be withdrawn at any time
prior to the Expiration Date.
Acceptance of Series A Notes
and delivery of Series B Notes We will accept for exchange any and all Series
A notes that are properly tendered in the
exchange offer, and not withdrawn, prior to the
Expiration Date. The Series B notes issued
pursuant to the exchange offer will be issued
on the earliest practicable date following our
acceptance for exchange of Series A notes. See
"The Exchange Offer -- Terms of the Exchange
Offer."
Exchange agent Wells Fargo Bank, N.A. is serving as exchange
agent in connection with the exchange offer.
See "The Exchange Offer -- Exchange Agent."
Federal income tax
considerations The exchange of Series A notes for Series B
notes pursuant to the exchange offer will not
be treated as a taxable exchange for federal
income tax purposes. See "Federal Income Tax
Considerations."
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED DECEMBER 31,
- ---------------- --------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
2.14 2.00 2.25 1.54 1.81 1.17
These computations include us and our Restricted Subsidiaries. For these
ratios, "earnings" is the aggregate of the following items:
- pre-tax income or loss from continuing operations before adjustment for
minority interests in consolidated subsidiaries or income or loss from
equity investees;
- plus fixed charges;
- plus distributed income of equity investees;
- less interest capitalized; and
- less minority interest in pre-tax income of subsidiaries that have not
incurred fixed charges.
The term "fixed charges" means the sum of the following:
- interest expensed and capitalized, including amortized premiums,
discounts and capitalized expenses related to indebtedness; and
- an estimate of the interest within rental expenses.
10
RISK FACTORS
An investment in the notes is subject to a number of risks. You should
carefully consider the following risk factors as well as the section entitled
"Risk Factors and Cautionary Statement" included in our Annual Report on Form
10-K for the year ended December 31, 2002 and incorporated herein by reference,
as well as the other documents incorporated herein by reference, in evaluating
this investment. Realization of any of the following risks could have a material
adverse effect on the notes.
RISKS RELATED TO THE EXCHANGE OFFER
THE MARKET VALUE OF YOUR SERIES A NOTES MAY BE LOWER IF YOU DO NOT EXCHANGE
YOUR SERIES A NOTES OR FAIL TO PROPERLY TENDER YOUR SERIES A NOTES FOR
EXCHANGE.
Consequences of Failure to Exchange. To the extent that Series A notes are
tendered and accepted for exchange pursuant to the exchange offer, the trading
market for Series A notes that remain outstanding may be significantly more
limited, which might adversely affect the liquidity of the Series A notes not
tendered for exchange. The extent of the market and the availability of price
quotations for Series A notes would depend upon a number of factors, including
the number of holders of Series A notes remaining at such time and the interest
in maintaining a market in such Series A notes on the part of securities firms.
An issue of securities with a smaller outstanding market value available for
trading, or float, may command a lower price than would a comparable issue of
securities with a greater float. Therefore, the market price for Series A notes
that are not exchanged in the exchange offer may be affected adversely to the
extent that the amount of Series A notes exchanged pursuant to the exchange
offer reduces the float. The reduced float also may tend to make the trading
price of the Series A notes that are not exchanged more volatile.
Consequences of Failure to Properly Tender. Issuance of the Series B notes
in exchange for the Series A notes pursuant to the exchange offer will be made
following the prior satisfaction, or waiver, of the conditions set forth in "The
Exchange Offer -- Conditions to the Exchange Offer" and only after timely
receipt by the exchange agent of the Series A notes, a properly completed and
duly executed letter of transmittal and all other required documents. Therefore,
holders of Series A notes desiring to tender Series A notes in exchange for
Series B notes should allow sufficient time to ensure timely delivery of all
required documentation. Neither we, the exchange agent nor any other person is
under any duty to give notification of defects or irregularities with respect to
the tenders of Series A notes for exchange. Series A notes that may be tendered
in the exchange offer but which are not validly tendered will, following the
consummation of the exchange offer, remain outstanding and will continue to be
subject to the same transfer restrictions currently applicable to the Series A
notes.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
The Series A notes have not been registered under the Securities Act, and
may not be resold by purchasers thereof unless the Series A notes are
subsequently registered or an exemption from the registration requirements of
the Securities Act is available. However, even following registration or
exchange of the Series A notes for Series B notes, an active trading market for
the Series A notes or the Series B notes may not exist, and we will have no
obligation to create such a market. At the time of the private placement of the
Series A notes, the initial purchasers advised us that they intended to make a
market in the Series A notes and, if issued, the Series B notes. The initial
purchasers are not obligated, however, to make a market in the Series A notes or
the Series B notes and any market-making may be discontinued at any time at
their sole discretion. No assurance can be given as to the liquidity of or
trading market for the Series A notes or the Series B notes.
The liquidity of any trading market for the notes and the market price
quoted for the notes will depend upon the number of holders of the notes, the
overall market for high yield securities, our financial performance or prospects
or the prospects for companies in our industry generally, the interest of
securities dealers in making a market in the notes and other factors.
11
If the number of outstanding Series A notes is reduced through the exchange
offer, the existing limited market for the Series A notes will become further
constricted, with a probable decrease in the liquidity of the Series A notes.
Further, the Series A notes that are not tendered in the exchange offer will
continue to be subject to the existing restrictions upon their transfer. We will
have no obligation to provide for the registration under the Securities Act of
unexchanged Series A notes.
RISKS RELATED TO THE NOTES
FEDERAL AND STATE STATUTES WOULD ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES,
TO SUBORDINATE OR VOID THE NOTES AND THE RELATED GUARANTEES AND REQUIRE
HOLDERS OF NOTES TO RETURN PAYMENTS RECEIVED FROM US.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a court could subordinate or void the notes and the
related guarantees if, at the time the notes and the guarantees were issued,
certain facts, circumstances and conditions existed, including that:
- we received less than reasonably equivalent value or fair consideration
for the incurrence of such indebtedness;
- we were insolvent or rendered insolvent by reason of such incurrence;
- we were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
- we intended to incur, or believed that we would incur, indebtedness we
could not repay at its maturity.
In such a circumstance, a court could require the holders of the notes to
return to us or pay to our other creditors amounts we paid under the notes. This
would entitle other creditors to be paid in full before any payment could be
made under the notes. We may not have sufficient assets to fully pay the notes
after the payment to other creditors. The guarantees of the notes by our
subsidiaries could be challenged on the same grounds as the notes. In addition,
a creditor may avoid a guarantee based on the level of benefits received by a
guarantor compared to the amount of the subsidiary guarantee. The indenture will
contain a savings clause, which generally limits the obligations of each
guarantor to the maximum amount that is not a fraudulent conveyance. If a
subsidiary guarantee is avoided, or limited as a fraudulent conveyance or held
unenforceable for any other reason, you would not have any claim against the
guarantors and would be only creditors of us and GulfTerra Energy Finance
Corporation and any guarantor whose subsidiary guarantee was not avoided or held
unenforceable. In such event, claims of holders of notes against a guarantor
would be subject to the prior payment of all liabilities (including trade
payables) of such guarantor. We cannot assure you that, after providing for all
prior claims, there would be sufficient assets to satisfy claims of holders of
notes relating to any avoided portions of any of the subsidiary guarantees.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, we would be considered
insolvent if:
- the sum of our indebtedness, including contingent liabilities, were
greater than the fair value or fair saleable value of all of our assets;
- if the present fair value or fair saleable value of our assets were less
than the amount that would be required to pay our probable liability on
our existing indebtedness, including contingent liabilities, as it
becomes absolute and mature; or
- we could not pay our indebtedness as it becomes due.
There is a risk of a preferential transfer if:
- a subsidiary guarantor declares bankruptcy or its creditors force it to
declare bankruptcy within 90 days (or in certain cases, one year) after a
payment on the guarantee; or
- a subsidiary guarantee was made in contemplation of insolvency.
12
The subsidiary guarantee could be avoided by a court as a preferential
transfer. In addition, a court could require holders of notes to return any
payments made on the debt securities during the 90-day (or one-year) period.
WE MAY NOT BE ABLE TO SATISFY OUR OBLIGATION TO REPURCHASE NOTES UPON A CHANGE
OF CONTROL.
Upon a change of control (among other things, the acquisition of 50 percent
or more of El Paso Corporation's voting stock, or if El Paso Corporation and its
subsidiaries no longer own more than 50 percent of our general partner, or the
sale of all or substantially all of our assets), unless our creditors agree
otherwise, we would be required to repay the amounts outstanding under our
credit facilities and to offer to repurchase outstanding senior subordinated
notes, and possibly our outstanding senior notes, at 101 percent of the
principal amount, plus accrued and unpaid interest to the date of repurchase,
including any outstanding notes. We may not have sufficient funds available or
be permitted by our other debt instruments to fulfill these obligations upon the
occurrence of a change of control. El Paso Corporation has the sole
responsibility of determining the ultimate ownership status of the general
partner interest and publicly announced that it would consider selling up to 10
percent of its general partner interest.
YOUR RIGHTS TO RECEIVE PAYMENTS WILL BE UNSECURED AND EFFECTIVELY JUNIOR IN
RIGHT OF PAYMENT TO ALL OF OUR PRESENT AND FUTURE SENIOR SECURED INDEBTEDNESS
TO THE EXTENT OF THE VALUE OF THE COLLATERAL SECURING SUCH INDEBTEDNESS.
The notes are general senior unsecured obligations that rank equally in
right of payment with all of our existing and future unsecured and
unsubordinated debt. The notes are effectively junior in right of payment to all
of our and our subsidiary guarantors' senior secured debt to the extent of the
value of the collateral securing that debt. As of June 30, 2003, we had
approximately $732 million of senior secured indebtedness to which the notes and
the subsidiary guarantees would have been effectively junior in right of payment
and approximately $155 million available for borrowing under our credit
facility. In addition, the indenture governing the notes will, subject to
specified limitations, permit us to incur additional secured indebtedness and
your notes will be effectively junior to any such additional secured
indebtedness we may incur.
In the event of our bankruptcy, liquidation reorganization or other winding
up, our assets that secure our senior secured indebtedness will be available to
pay obligations on the notes only after all such senior secured indebtedness has
been repaid in full from such assets. Likewise, our failure to comply with the
terms of our credit facilities would entitle those lenders to foreclose on
substantially all of our assets that serve as collateral. In this event, our
senior secured lenders would be entitled to be repaid in full from the proceeds
of the liquidation of those assets before those assets would be available for
distribution to other creditors, including holders of the notes. Holders of the
notes will participate in our remaining assets ratably with all holders of our
unsecured indebtedness that is deemed to be of the same class as the notes, and
potentially with all of our other general creditors. We advise you that there
may not be sufficient assets remaining to pay amounts due on any or all of the
notes then outstanding. The subsidiary guarantees will have a similar ranking
with respect to secured and unsecured senior indebtedness of the guarantor
subsidiaries as the notes do with respect to our secured and unsecured senior
indebtedness.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO INDEBTEDNESS AND LIABILITIES OF
OUR SUBSIDIARIES THAT ARE NOT GUARANTORS.
The notes will be effectively subordinated to claims of all creditors of
any of our subsidiaries that are not guarantors of the notes, including
GulfTerra Arizona Gas, L.L.C., Arizona Gas Storage, L.L.C. and Matagorda Island
Area Gathering System. If any of GulfTerra Arizona Gas, L.L.C., Arizona Gas
Storage, L.L.C. and Matagorda Island Area Gathering System defaults on its debt,
the holders of the notes would not receive any money from that subsidiary until
its debts are repaid in full. For example, we do not expect that our
unrestricted subsidiaries will guarantee the notes. Most of our existing
subsidiaries other than GulfTerra Energy Finance Corporation, GulfTerra Arizona
Gas, L.L.C., Arizona Gas Storage, L.L.C. and Matagorda Island Area Gathering
System will guarantee the notes. See "Description of Notes."
13
THE EXCHANGE OFFER
For the purposes of this section, "we" means GulfTerra Energy Partners,
L.P., GulfTerra Energy Finance Corporation and the Subsidiary Guarantors.
REGISTRATION RIGHTS
At the closing of the offering of the Series A notes, we entered into a
registration rights agreement with the initial purchasers pursuant to which we
agreed, for the benefit of the holders of the Series A notes, at our cost,
- to file an exchange offer registration statement with the SEC with
respect to the exchange offer for the Series B notes within 95 days after
the date of the original issuance of the Series A notes, and
- to use our best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act within 150
days after the date of original issuance of the Series A notes.
Upon the exchange offer registration statement being declared effective, we
agreed to offer the Series B notes in exchange for surrender of the Series A
notes. We agreed to use our best efforts to cause the exchange offer
registration statement to be effective continuously, to keep the exchange offer
open for a period of not less than 20 business days and to use our best efforts
to cause the exchange offer to be consummated no later than 30 business days
after the exchange offer registration statement is declared effective by the
SEC.
For each Series A note surrendered to us pursuant to the exchange offer,
the holder of such Series A note will receive a Series B note having a principal
amount equal to that of the surrendered Series A note. Interest on each Series B
note will accrue from the last interest payment date on which interest was paid
on the Series A note surrendered in exchange therefor or, if no interest has
been paid on such Series A note, from the date of its original issue. The
registration rights agreement also provides an agreement to include in the
prospectus for the exchange offer certain information necessary to allow a
broker-dealer who holds Series A notes that were acquired for its own account as
a result of market-making activities or other ordinary course trading activities
(other than Series A notes acquired directly from us or one of our affiliates)
to exchange such Series A notes pursuant to the exchange offer and to satisfy
the prospectus delivery requirements in connection with resales of Series B
notes received by such broker-dealer in the exchange offer. We agreed to use our
best efforts to maintain the effectiveness of the exchange offer registration
statement for these purposes for a period of not more than 30 business days plus
one year after the exchange offer registration statement has become effective.
The preceding agreement is needed because any broker-dealer who acquires
Series A notes for its own account as a result of market-making activities or
other trading activities is required to deliver a prospectus meeting the
requirements of the Securities Act. This prospectus covers the offer and sale of
the Series B notes pursuant to the exchange offer made hereby and the resale of
Series B notes received in the exchange offer by any broker-dealer who held
Series A notes of the same series acquired for its own account as a result of
market-making activities or other trading activities other than Series A notes
acquired directly from us or one of our affiliates.
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that the Series B notes issued
pursuant to the exchange offer would in general be freely tradable after the
exchange offer without further registration under the Securities Act. However,
any purchaser of Series A notes who is an "affiliate" of ours, who is a
broker-dealer or who intends to participate in the exchange offer for the
purpose of distributing the related Series B notes
- will not be able to rely on the interpretation of the staff of the SEC,
- will not be able to tender its Series A notes in the exchange offer, and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the Series
A notes unless such sale or transfer is made pursuant to an exemption
from such requirements.
14
Each holder of the Series A notes (other than certain specified holders)
who wishes to exchange Series A notes for Series B notes in the exchange offer
will be required to make certain representations, including
- that it is not an affiliate of GulfTerra Partners,
- that it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B notes, and
- that it is acquiring the Series B notes in the exchange offer in its
ordinary course of business.
We further agreed to file with the SEC a shelf registration statement to
register for public resale the Transfer Restricted Securities held by any such
holder who provides GulfTerra Partners with certain information for inclusion in
the shelf registration statement if:
- the exchange offer is not permitted by applicable law or SEC policy, or
- any holder of notes which are Transfer Restricted Securities notifies
GulfTerra Partners prior to the 20th business day following the
consummation of the exchange offer that:
- it is a broker-dealer and holds notes acquired directly from GulfTerra
Partners or any of the affiliates of GulfTerra Partners,
- it is prohibited by law or SEC policy from participating in the exchange
offer, or
- it may not resell the Series B notes acquired by it in the exchange offer
to the public without delivering a prospectus, and the prospectus
contained in the exchange offer registration statement is not appropriate
or available for such resales by it.
For the purposes of the registration rights agreement, Transfer Restricted
Securities means each Series A note or Series B note until the earliest of the
date of which
- such Series A note or Series B note is exchanged in the exchange offer
and entitled to be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the Securities
Act,
- such Series A note or Series B note has been disposed of in accordance
with the shelf registration statement,
- such Series A note or Series B note is disposed of by a broker-dealer as
set forth in "Plan of Distribution" (including delivery of the prospectus
contained therein), or
- such Series A note or Series B note is distributed to the public pursuant
to Rule 144 under the Securities Act.
The registration rights agreement provides that:
(1) if we fail to file an exchange offer registration statement with
the SEC on or prior to the 95th day after the closing of the offering of
the Series A notes,
(2) if the exchange offer registration statement is not declared
effective by the SEC on or prior to the 150th day after the closing of the
offering of the Series A notes,
(3) if the exchange offer is not consummated on or before the 30th
business day after the exchange offer registration statement is declared
effective,
(4) if obligated to file the shelf registration statement and we fail
to file the shelf registration statement with the SEC on or prior to the
30th day after such filing obligation arises,
(5) if obligated to file a shelf registration statement and the shelf
registration statement is not declared effective on or prior to the 60th
day after the obligation to file a shelf registration statement arises, or
15
(6) subject to certain conditions, if the exchange offer registration
statement or the shelf registration statement, as the case may be, is
declared effective but thereafter ceases to be effective or useable in
connection with resales of the Transfer Restricted Securities, for such
time of non-effectiveness or non-usability (each, a "Registration
Default"),
we agree to pay to each holder of Transfer Restricted Securities affected
thereby additional interest ("Additional Interest") in an amount equal to $0.05
per week per $1,000 in original principal amount of Transfer Restricted
Securities held by such holder for each week or portion thereof that the
Registration Default continues for the first 90 day period immediately following
the occurrence of such Registration Default. The amount of the Additional
Interest shall increase by an additional $0.05 per week per $1,000 in original
principal amount of Transfer Restricted Securities with respect to each
subsequent 90 day period until all Registration Defaults have been cured, up to
a maximum amount of Additional Interest of $0.50 per week per $1,000 in
principal amount of Transfer Restricted Securities. We shall not be required to
pay Additional Interest for more than one Registration Default at any given
time. Upon curing all Registration Defaults, Additional Interest will cease to
accrue.
A Registration Default will be cured and Additional Interest will cease to
accrue upon:
- filing of the exchange offer registration statement (and/or, if
applicable, the shelf registration statement), in the cases of the
Registration Defaults described in clauses (1) and (4) above,
- the effectiveness of the exchange offer registration statement (and/or,
if applicable, the shelf registration statement), in the cases of the
Registration Defaults described in clauses (2) and (5) above,
- consummation of the exchange offer, in the case of the Registration
Default described in clause (3) above, and
- the filing of a post-effective amendment to the registration statement or
an additional registration statement that causes the exchange offer
registration statement (and/or, if applicable, the shelf registration
statement) to again be declared effective or made usable, in the case of
the Registration Default described in clause (6) above.
All accrued Additional Interest shall be paid by us to holders entitled
thereto by wire transfer to the accounts specified by them or by mailing checks
to their registered address if no such accounts have been specified.
Holders of the notes will be required to make certain representations to us
(as described in the registration rights agreement) in order to participate in
the exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement.
If we effect the registered exchange offer, we will be entitled to close
the registered exchange offer 20 business days after the commencement thereof;
provided that the we have accepted all notes theretofore validly rendered in
accordance with the terms of the exchange offer and no brokers or dealers
continue to hold any notes.
This summary of the material provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the registration rights
agreement, a copy of which is filed as an exhibit to the registration statement
of which this prospectus is a part.
Except as set forth above, after consummation of the exchange offer,
holders of Series A notes which are the subject of the exchange offer have no
registration or exchange rights under the registration rights agreement. See
"-- Consequences of failure to exchange," and "-- Resale of the Series B Notes;
Plan of Distribution."
16
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A notes which are not exchanged for Series B notes pursuant to
the exchange offer and are not included in a resale prospectus which, if
required, will be filed as part of an amendment to the registration statement of
which this prospectus is a part, will remain restricted securities and subject
to restrictions on transfer. Accordingly, such Series A notes may only be resold
(1) to us, upon redemption thereof or otherwise,
(2) so long as the Series A notes are eligible for resale pursuant to
Rule 144A, to a person whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities
Act, purchasing for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
other transfer is being made in reliance on Rule 144A,
(3) in an offshore transaction in accordance with Regulation S under
the Securities Act,
(4) pursuant to an exemption from registration in accordance with Rule
144, if available, under the Securities Act,
(5) in reliance on another exemption from the registration
requirements of the Securities Act, or
(6) pursuant to an effective registration statement under the
Securities Act.
In all of the situations discussed above, the resale must be in accordance
with any applicable securities laws of any state of the United States and
subject to certain requirements of the registrar or co-registrar being met,
including receipt by the registrar or co-registrar of a certification and, in
the case of (3), (4) and (5) above, an opinion of counsel reasonably acceptable
to us and the registrar.
To the extent Series A notes are tendered and accepted in the exchange
offer, the principal amount of outstanding Series A notes will decrease with a
resulting decrease in the liquidity in the market therefor. Accordingly, the
liquidity of the market of the Series A notes could be adversely affected. See
"Risk Factors -- Risks related to the exchange offer."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, a copy of which is attached to this prospectus
as Annex A, we will accept any and all Series A notes validly tendered and not
withdrawn prior to the Expiration Date. We will issue $1,000 principal amount of
Series B notes in exchange for each $1,000 principal amount of Series A notes
accepted in the exchange offer. Holders may tender some or all of their Series A
notes pursuant to the exchange offer. However, Series A notes may be tendered
only in integral multiples of $1,000 principal amount.
The form and terms of the Series B notes are the same as the form and terms
of the Series A notes, except that
- the Series B notes will have been registered under the Securities Act and
will not bear legends restricting their transfer pursuant to the
Securities Act, and
- except as otherwise described above, holders of the Series B notes will
not be entitled to the rights of holders of Series A notes under the
registration rights agreement.
The Series B notes will evidence the same debt as the Series A notes which
they replace, and will be issued under, and be entitled to the benefits of, the
indenture which governs all of the notes.
Solely for reasons of administration and for no other purpose, we have
fixed the close of business on September 30, 2003 as the record date for the
exchange offer for purposes of determining the persons to whom this prospectus
and the letter of transmittal will be mailed initially. Only a registered holder
of Series A notes or such holder's legal representative or attorney-in-fact as
reflected on the records of the trustee under the indenture may participate in
the exchange offer. There will be no fixed record date for determining
registered holders of the Series A notes entitled to participate in the exchange
offer.
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Holders of the Series A notes do not have any appraisal or dissenters'
rights under Delaware law or the indenture in connection with the exchange
offer. We intend to conduct the exchange offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
We shall be deemed to have accepted validly tendered Series A notes when,
as and if we have given oral or written notice thereof to the exchange agent.
The exchange agent will act as agent for the tendering holders of the Series A
notes for the purposes of receiving the Series B notes. The Series B notes
delivered pursuant to the exchange offer will be issued on the earliest
practicable date following our acceptance for exchange of Series A notes.
If any tendered Series A notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Series A notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Series A notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of the
Series A notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "-- Fees and expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" with respect to the exchange offer means 5:00
p.m., New York City time, on October 30, 2003 unless we, in our sole discretion,
extend the exchange offer, in which case "Expiration Date" shall mean the latest
date and time to which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
We reserve the right, in our sole discretion:
(1) to delay accepting any Series A notes,
(2) to extend the exchange offer,
(3) if any of the conditions set forth below under "-- Conditions to
the Exchange Offer" have not been satisfied, to terminate the exchange
offer, or
(4) to amend the terms of the exchange offer in any manner.
We may effect any such delay, extension or termination by giving oral or
written notice thereof to the exchange agent.
Except as specified in the second paragraph under this heading, any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement thereof. If the exchange offer
is amended in a manner determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Series A notes. The exchange
offer will then be extended for a period of five to 10 business days, as
required by law, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the exchange offer would otherwise
expire during such five to 10 business day period.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall not have an obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
thereof to the Dow Jones News Service.
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PROCEDURES FOR TENDERING SERIES A NOTES
Tenders of Series A Notes. The tender by a holder of Series A notes
pursuant to any of the procedures set forth below will constitute the tendering
holder's acceptance of the terms and conditions of the exchange offer. Our
acceptance for exchange of Series A notes tendered pursuant to any of the
procedures described below will constitute a binding agreement between such
tendering holder and us in accordance with the terms and subject to the
conditions of the exchange offer. Only holders are authorized to tender their
Series A notes. The procedures by which Series A notes may be tendered by
beneficial owners that are not holders will depend upon the manner in which the
Series A notes are held.
DTC has authorized DTC participants that are beneficial owners of Series A
notes through DTC to tender their Series A notes as if they were holders. To
effect a tender, DTC participants should either (1) complete and sign the letter
of transmittal or a facsimile thereof, have the signature thereon guaranteed if
required by Instruction 1 of the letter of transmittal, and mail or deliver the
letter of transmittal or such facsimile pursuant to the procedures for
book-entry transfer set forth below under "-- Book-Entry Delivery Procedures,"
or (2) transmit their acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP"), for which the transaction will be eligible, and follow the
procedures for book-entry transfer, set forth below under "-- Book-Entry
Delivery Procedures."
Tender of Series A Notes Held in Physical Form. To tender effectively
Series A notes held in physical form pursuant to the exchange offer,
- a properly completed letter of transmittal applicable to such notes (or a
facsimile thereof) duly executed by the holder thereof, and any other
documents required by the letter of transmittal, must be received by the
exchange agent at one of its addresses set forth below, and tendered
Series A notes must be received by the exchange agent at such address (or
delivery effected through the deposit of Series A notes into the exchange
agent's account with DTC and making book-entry delivery as set forth
below) on or prior to the Expiration Date, or
- the tendering holder must comply with the guaranteed delivery procedures
set forth below.
Letters of transmittal or Series A notes should be sent only to the
exchange agent and should not be sent to us.
Tender of Series A Notes Held Through a Custodian. To tender effectively
Series A notes that are held of record by a custodian bank, depository, broker,
trust company or other nominee, the beneficial owner thereof must instruct such
holder to tender the Series A notes on the beneficial owner's behalf. A letter
of instructions from the record owner to the beneficial owner may be included in
the materials provided along with this prospectus which may be used by the
beneficial owner in this process to instruct the registered holder of such
owner's Series A notes to effect the tender.
Tender of Series A Notes Held Through DTC. To tender effectively Series A
notes that are held through DTC, DTC participants should either
- properly complete and duly execute the letter of transmittal (or a
facsimile thereof), and any other documents required by the letter of
transmittal, and mail or deliver the letter of transmittal or such
facsimile pursuant to the procedures for book-entry transfer set forth
below, or
- transmit their acceptance through ATOP, for which the transaction will be
eligible, and DTC will then edit and verify the acceptance and send an
Agent's Message to the exchange agent for its acceptance.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each participant in DTC tendering the Series A notes and that such participant
has received the letter of transmittal and agrees to be bound by the terms of
the letter of transmittal and we may enforce such agreement against such
participant.
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Delivery of tendering Series A notes held through DTC must be made to the
exchange agent pursuant to the book-entry delivery procedures set forth below or
the tendering DTC participant must comply with the guaranteed delivery
procedures set forth below.
The method of delivery of Series A notes and letters of transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance or Agent's Message transmitted through
ATOP, is at the election and risk of the person tendering Series A notes and
delivering letters of transmittal. Except as otherwise provided in the letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the exchange agent prior to such date.
Except as provided below, unless the Series A notes being tendered are
deposited with the exchange agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed letter of transmittal or
a properly transmitted Agent's Message), we may, at our option, reject such
tender. Exchange of Series B notes for Series A notes will be made only against
deposit of the tendered Series A notes and delivery of all other required
documents.
Book-Entry Delivery Procedures. The exchange agent will establish accounts
with respect to the Series A notes at DTC for purposes of the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in DTC may make book-entry delivery of the
Series A notes by causing DTC to transfer such Series A notes into the exchange
agent's account in accordance with DTC's procedures for such transfer. However,
although delivery of Series A notes may be effected through book-entry at DTC,
the letter of transmittal (or facsimile thereof), with any required signature
guarantees or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the exchange agent at one or more of its addresses set forth in this
prospectus on or prior to the Expiration Date, or compliance must be made with
the guaranteed delivery procedures described below. Delivery of documents to DTC
does not constitute delivery to the exchange agent. The confirmation of a
book-entry transfer into the exchange agent's account at DTC as described above
is referred to herein as a "Book-Entry Confirmation."
Signature Guarantees. Signatures on all letters of transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Series A notes tendered thereby are tendered
(1) by a registered holder of Series A notes (or by a participant in DTC whose
name appears on a DTC security position listing as the owner of such Series A
notes) who has not completed either the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the letter of transmittal,
or (2) for the account of an Eligible Institution. See Instruction 1 of the
letter of transmittal. If the Series A notes are registered in the name of a
person other than the signer of the letter of transmittal or if Series A notes
not accepted for exchange or not tendered are to be returned to a person other
than the registered holder, then the signatures on the letter of transmittal
accompanying the tendered Series A notes must be guaranteed by an Eligible
Institution as described above. See Instructions 1 and 5 of the letter of
transmittal.
Guaranteed Delivery. If a holder desires to tender Series A notes pursuant
to the exchange offer and time will not permit the letter of transmittal,
certificates representing such Series A notes and all other required documents
to reach the exchange agent, or the procedures for book-entry transfer cannot be
completed, on or prior to the Expiration Date, such Series A notes may
nevertheless be tendered if all the following conditions are satisfied:
(1) the tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form provided by us herewith, or an Agent's
Message with respect to guaranteed delivery that is accepted by us, is
received by the exchange agent on or prior to the Expiration Date, as
provided below; and
20
(3) the certificates for the tendered Series A notes, in proper form
for transfer (or a Book-Entry Confirmation of the transfer of such Series A
notes into the exchange agent's account at DTC as described above),
together with the letter of transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by the letter of transmittal or a properly
transmitted Agent's Message, are received by the exchange agent within
three New York Stock Exchange trading days after the date of execution of
the notice of guaranteed delivery.
The notice of guaranteed delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the exchange agent and must include a
guarantee by an Eligible Institution in the form set forth in the notice of
guaranteed delivery.
Notwithstanding any other provision hereof, delivery of Series B notes by
the exchange agent for Series A notes tendered and accepted for exchange
pursuant to the exchange offer will, in all cases, be made only after timely
receipt by the exchange agent of such Series A notes (or Book-Entry Confirmation
of the transfer of such Series A notes into the exchange agent's account at DTC
as described above), and the letter of transmittal (or facsimile thereof) with
respect to such Series A notes, properly completed and duly executed, with any
required signature guarantees and any other documents required by the letter of
transmittal, or a properly transmitted Agent's Message.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Series A notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all Series A notes not properly tendered or any Series A notes our
acceptance of which, in the opinion of our counsel, would be unlawful.
We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Series A notes. The interpretation of the
terms and conditions of our exchange offer (including the instructions in the
letter of transmittal) by us will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Series A
notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with
respect to tenders of Series A notes through the exchange agent, neither we, the
exchange agent nor any other person is under any duty to give such notice, nor
shall they incur any liability for failure to give such notification. Tenders of
Series A notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
Any Series A notes received by the exchange agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived, or if Series A notes are submitted in a principal amount greater than
the principal amount of Series A notes being tendered by such tendering holder,
such unaccepted or non-exchanged Series A notes will either be
(1) returned by the exchange agent to the tendering holders, or
(2) in the case of Series A notes tendered by book-entry transfer into
the exchange agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, credited to an
account maintained with such Book-Entry Transfer Facility.
By tendering, each registered holder will represent to us that, among other
things,
- the Series B notes to be acquired by the holder and any beneficial
owner(s) of the Series A notes in connection with the exchange offer are
being acquired by the holder and any beneficial owner(s) in the ordinary
course of business of the holder and any beneficial owner(s),
- the holder and each beneficial owner are not participating, do not intend
to participate, and have no arrangement or understanding with any person
to participate, in a distribution of the Series B notes,
- the holder and each beneficial owner acknowledge and agree that (x) any
person participating in the exchange offer for the purpose of
distributing the Series B notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
a secondary resale
21
transaction with respect to the Series B notes acquired by such person
and cannot rely on the position of the Staff of the SEC set forth in
no-action letters that are discussed herein under "-- Resale of the
Series B Notes; Plan of Distribution," and (y) any broker-dealer that
receives Series B notes for its own account in exchange for Series A
notes pursuant to the exchange offer must delivery a prospectus in
connection with any resale of such Series B notes, but by so
acknowledging, the holder shall not be deemed to admit that, by
delivering a prospectus, it is an "underwriter" within the meaning of the
Securities Act,
- neither the holder nor any beneficial owner is an "affiliate," as defined
under Rule 405 of the Securities Act, of ours except as otherwise
disclosed to us in writing, and
- the holder and each beneficial owner understands, that a secondary resale
transaction described in clause (3) above should be covered by an
effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the SEC.
Each broker-dealer that receives Series B notes for its own account in
exchange for Series A notes, where such Series A notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Series B notes. See "-- Resale of the Series B Notes;
Plan of Distribution."
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A notes pursuant to
the exchange offer may be withdrawn, unless accepted for exchange as provided in
the exchange offer, at any time prior to the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the exchange agent at its address set forth herein prior to
the Expiration Date. Any such notice of withdrawal must
- specify the name of the person having deposited the Series A notes to be
withdrawn,
- identify the Series A notes to be withdrawn, including the certificate
number or numbers of the particular certificates evidencing the Series A
notes (unless such Series A notes were tendered by book-entry transfer),
and aggregate principal amount of such Series A notes, and
- be signed by the holder in the same manner as the original signature on
the letter of transmittal (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the trustee
under the indenture register the transfer of the Series A notes into the
name of the person withdrawing such Series A notes.
If Series A notes have been delivered pursuant to the procedures for
book-entry transfer set forth in "-- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures," any notice of withdrawal must specify
the name and number of the account at the appropriate book-entry transfer
facility to be credited with such withdrawn Series A notes and must otherwise
comply with such book-entry transfer facility's procedures.
If the Series A notes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal meeting the
requirements discussed above is effective immediately upon written or facsimile
notice of withdrawal even if physical release is not yet effected. A withdrawal
of Series A notes can only be accomplished in accordance with these procedures.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us in our sole discretion, which
determination shall be final and binding on all parties. No withdrawal of Series
A notes will be deemed to have been properly made until all defects or
irregularities have been cured or expressly waived. Neither we, the exchange
agent nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or revocation, nor shall
we or they incur any liability for failure to give any such notification. Any
Series A notes so withdrawn will be deemed not to have been validly tendered for
purposes of the exchange offer and no Series B notes will be issued with
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respect thereto unless the Series A notes so withdrawn are retendered. Properly
withdrawn Series A notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering Series A Notes" at any time
prior to the Expiration Date.
Any Series A notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the exchange offer, or which have been validly withdrawn, will be
returned to the holder thereof unless otherwise provided in the letter of
transmittal, as soon as practicable following the Expiration Date or, if so
requested in the notice of withdrawal, promptly after receipt by us of notice of
withdrawal without cost to such holder.
CONDITIONS TO THE EXCHANGE OFFER
The exchange offer shall not be subject to any conditions, other than that
(1) the SEC has issued an order or orders declaring the indenture
governing the notes qualified under the Trust Indenture Act of 1939,
(2) the exchange offer, or the making of any exchange by a holder,
does not violate applicable law or any applicable interpretation of the
staff of the SEC,
(3) no action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency with respect to the
exchange offer, which, in our judgment, might impair our ability to proceed
with the exchange offer,
(4) there shall not have been adopted or enacted any law, statute,
rule or regulation which, in our judgment, would materially impair our
ability to proceed with the exchange offer, or
(5) there shall not have occurred any material change in the financial
markets in the United States or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which on the financial
markets of the United States, in our judgment, would materially impair our
ability to proceed with the exchange offer.
If we determine in our sole discretion that any of the conditions to the
exchange offer are not satisfied, we may
(1) refuse to accept any Series A notes and return all tendered Series
A notes to the tendering holders,
(2) extend the exchange offer and retain all Series A notes tendered
prior to the Expiration Date applicable to the exchange offer, subject,
however, to the rights of holders to withdraw such Series A notes (see
"-- Withdrawal of Original Tenders"), or
(3) waive such unsatisfied conditions with respect to the exchange
offer and accept all validly tendered Series A notes which have not been
withdrawn.
If such waiver constitutes a material change to the exchange offer, we will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and will extend the exchange offer for a
period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders, if the exchange
offer would otherwise expire during such five to 10 business day period.
EXCHANGE AGENT
Wells Fargo Bank, N.A. the trustee under the indenture governing the notes,
has been appointed as exchange agent for the exchange offer. Questions and
requests for assistance, requests for additional copies of
23
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery and other documents should be directed to the exchange agent
addressed as follows:
By Mail:
Wells Fargo Bank, N.A.
Attn: Ms. Melissa Scott
501 Main Street
Suite 301
Forth Worth, Texas 76102
By Facsimile:
(817) 885-8650
Attention: Ms. Melissa Scott
Confirm by Telephone:
(817) 334-7065
Attention: Ms. Melissa Scott
By Hand:
Wells Fargo Bank, N.A.
Attn: Ms. Melissa Scott
501 Main Street
Suite 301
Forth Worth, Texas 76102
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telecopy, telephone or in person by officers and regular employees of
GulfTerra Energy Partners, L.P., our general partner and their affiliates.
No dealer-manager has been retained in connection with the exchange offer
and no payments will be made to brokers, dealers or others soliciting acceptance
of the exchange offer. However, reasonable and customary fees will be paid to
the exchange agent for its services and it will be reimbursed for its reasonable
out-of-pocket expenses in connection therewith.
Our out of pocket expenses for the exchange offer will include fees and
expenses of the exchange agent and the trustee under the indenture, accounting
and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
Series A notes pursuant to the exchange offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Series A notes pursuant to
the exchange offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the letter of transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Series B notes will be recorded at the carrying value of the Series A
notes and no gain or loss for accounting purposes will be recognized. The
expenses of the exchange offer will be amortized over the term of the Series B
notes.
RESALE OF THE SERIES B NOTES; PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of Series B notes. This prospectus,
24
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Series B notes received in exchange
for Series A notes where such Series A notes were acquired as a result of
market-making activities or other trading activities. In addition, until
December 29, 2003 (90 days after the date of this prospectus), all dealers
effecting transactions in the Series B notes, whether or not participating in
this distribution, may be required to deliver a prospectus. This requirement is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
We will not receive any proceeds from any sale of Series B notes by
broker-dealers. Series B notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions
(1) in the over-the-counter market,
(2) in negotiated transactions,
(3) through the writing of options on the Series B notes or a
combination of such methods of resale,
(4) at market prices prevailing at the time of resale,
(5) at prices related to such prevailing market prices, or
(6) at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Series B
notes.
Any broker-dealer that resells Series B notes that were received by it for
its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Series B notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B notes and any commission on concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver a prospectus and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
We agreed to permit the use of this prospectus by such broker-dealers to
satisfy this prospectus delivery requirement. To the extent necessary to ensure
that the prospectus is available for sales of Series B notes by broker-dealers,
we agreed to use our best efforts to keep the exchange offer registration
statement continuously effective, supplemented, amended and current for a period
of 30 business days plus one year from the closing of the offering of the Series
A notes or such shorter period as will terminate when all Transfer Restricted
Securities covered by such registration statement have been sold. We will
provide sufficient copies of the latest version of this prospectus to such
broker-dealers no later than one day after such request at any time during this
period.
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the Series B notes offered by this prospectus. In consideration for
issuing the Series B notes as contemplated in this prospectus, we will receive
in exchange Series A notes in like principal amount, the form and terms of which
are the same as the form and terms of the Series B notes, except as otherwise
described herein under "The exchange offer -- Terms of the Exchange Offer." The
Series A notes surrendered in exchange for the Series B notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Series B notes
will not result in any increase in our indebtedness.
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DESCRIPTION OF NOTES
You can find the definitions of terms in this description under the
subheading "Definitions." In this description, the word "Issuers" refers only to
GulfTerra Partners and GulfTerra Finance and not to any of their subsidiaries
and any reference to "GulfTerra Partners" or "GulfTerra Finance" does not
include any of their respective subsidiaries. As used in this section,
"GulfTerra Finance" or "GT Finance" means our subsidiary, GulfTerra Energy
Finance Corporation, which is a co-issuer of the notes.
The Issuers issued the Series A notes under the Indenture (the "Indenture")
dated as of July 3, 2003, among the Issuers, the Subsidiary Guarantors and Wells
Fargo Bank, N.A. as trustee (the "Trustee") in a private transaction that was
not subject to the registration requirements of the Securities Act. The Series B
notes will be issued under the same Indenture. The terms of the notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate that agreement in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
a holder of these notes. Copies of the Indenture are available upon request from
GulfTerra Partners. Capitalized terms used herein are defined below under
"-- Definitions."
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
GENERAL
The Series A notes and the Series B notes will constitute a single class of
debt securities under the Indenture. If the exchange offer is completed, holders
of Series A notes who do not exchange their Series A notes for Series B notes
will vote together with holders of the Series B notes for all relevant purposes
under the Indenture. In that regard, the Indenture requires that certain actions
by holders, including acceleration following an event of default, must be taken,
and certain rights must be exercised, by specified minimum percentages of the
aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether the required holders have given any notice,
consent or waiver or taken any other action permitted under the Indenture, any
Series A notes that remain outstanding after the exchange offer will be
aggregated with the Series B notes, and the holders of the Series A notes and
the Series B notes will vote together as a single series. All references in this
prospectus to specified percentages in aggregate principal amount of the notes
means, at any time after the exchange offer is completed, the percentages in
aggregate principal amount of the Series A notes and the Series B notes
collectively then outstanding.
THE NOTES
The notes are:
- general unsecured, senior obligations of the Issuers;
- senior in right of payment to any of our existing and future subordinated
Indebtedness, including the Existing Senior Subordinated Notes;
- pari passu in right of payment to any existing and future Indebtedness of
the Issuers that is not by its terms expressly subordinated to the notes,
including borrowings under the Partnership Credit Facility;
- effectively junior in right of payment to all present and future senior
secured Indebtedness of the Issuers, including borrowings under the
Partnership Credit Facility, to the extent of the value of the collateral
securing such Indebtedness; and
- unconditionally guaranteed on a senior, unsecured basis by the Subsidiary
Guarantors.
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THE GUARANTEES
As of the date of this prospectus, the notes are guaranteed by the
following subsidiaries of GulfTerra Partners:
- Cameron Highway Pipeline GP, L.L.C.
- Cameron Highway Pipeline I, L.P.
- Crystal Holding, L.L.C.
- First Reserve Gas, L.L.C.
- Flextrend Development Company, L.L.C.
- GulfTerra Alabama Intrastate, L.L.C.
- GulfTerra Field Services, L.L.C.
- GulfTerra GC, L.P.
- GulfTerra Holding I, L.L.C.
- GulfTerra Holding II, L.L.C.
- GulfTerra Holding III, L.L.C.
- GulfTerra Holding IV, L.P.
- GulfTerra Holding V, L.P.
- GulfTerra Intrastate, L.P.
- GulfTerra NGL Storage, L.L.C.
- GulfTerra Oil Transport, L.L.C.
- GulfTerra Operating Company, L.L.C.
- GulfTerra South Texas, L.P.
- GulfTerra Texas Pipeline, L.P.
- Hattiesburg Gas Storage Company
- Hattiesburg Industrial Gas Sales, L.L.C.
- High Island Offshore System, L.L.C.
- Manta Ray Gathering Company, L.L.C.
- Petal Gas Storage, L.L.C.
- Poseidon Pipeline Company, L.L.C.
Each Guarantee of a Subsidiary Guarantor of these notes is:
- a general unsecured, senior obligation of that Subsidiary Guarantor;
- senior in right of payment to any existing and future subordinated
Indebtedness of that Subsidiary Guarantor, including the guarantees by
that Subsidiary Guarantor of the Existing Senior Subordinated Notes;
- pari passu in right of payment to any existing and future Indebtedness of
that Subsidiary Guarantor that is not by its terms expressly subordinated
to the notes, including the guarantees by that Subsidiary Guarantor of
the borrowings under the Partnership Credit Facility; and
27
- effectively junior in right of payment to all present and future senior
secured Indebtedness of the Subsidiary Guarantors, including the
guarantees of borrowings under the Partnership Credit Facility, to the
extent of the value of the collateral securing such Indebtedness.
As a result of the effective subordination described above, in the event of
a bankruptcy, liquidation or reorganization of GulfTerra Partners or GulfTerra
Finance, holders of these notes may recover less ratably than secured creditors
of the Issuers who are holders of senior Indebtedness to the extent of the value
of the collateral securing such Indebtedness.
At June 30, 2003, outstanding amounts under credit facilities and debt
securities of the Issuers and the Subsidiary Guarantors were as follows:
AS OF 6/30/03
- ---------------------------------------------------------
(IN THOUSANDS UNAUDITED)
Senior secured............................... $ 732,646
Senior unsecured............................. 250,000
Senior subordinated.......................... 907,606
----------
Total...................................... $1,890,252
==========
As of the date of the Indenture, all of our Subsidiaries (other than
GulfTerra Finance and our Unrestricted Subsidiaries) will be "Restricted
Subsidiaries." Certain Subsidiaries in the future may not be Subsidiary
Guarantors. Also, under the circumstances described below under the subheading
"Covenants -- Designation of restricted and unrestricted subsidiaries," we will
be permitted to designate certain of our Subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the Indenture. Unrestricted Subsidiaries will not
guarantee the notes. As of the date of this prospectus, GulfTerra Arizona Gas,
LLC, Arizona Gas Storage, LLC and Matagorda Island Area Gathering System are the
only Unrestricted Subsidiaries. In addition, GulfTerra Partners has invested,
and may invest in the future, in Joint Ventures. The rights of GulfTerra
Partners to receive assets from any Subsidiary that is not a Subsidiary
Guarantor or from any Joint Venture that are attributable to GulfTerra Partners'
Equity Interests therein (and thus the ability of the holders of the notes to
benefit indirectly from such assets) are subject to the claims of all existing
and future third party Indebtedness and liabilities (including trade debt) of
such Subsidiary or Joint Venture.
PRINCIPAL, MATURITY AND INTEREST
The Issuers will issue notes offered hereby in an initial aggregate
principal amount of $250 million. Subject to compliance with the covenant
described below under "-- Incurrence of Indebtedness and Issuance of
Disqualified Equity," we may issue additional notes from time to time under the
Indenture. The Issuers will issue notes in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on June 1, 2010.
Interest on the notes offered hereby will accrue at the rate of 6 1/4% per
annum and will be payable semi-annually in arrears on June 1 and December 1,
commencing on December 1, 2003. The Issuers will make each interest payment to
the holders of record of these notes on the immediately preceding May 15 and
November 15.
Interest on the notes offered hereby will accrue from July 3, 2003.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to the Issuers, the
Issuers will make all payments of principal of, premium, if any, and interest
and Additional Interest, if any, on the notes in accordance with those
instructions. All other payments on these notes will be made at the office or
agency of the Paying Agent and Registrar within the City and State of New York,
unless the Issuers elect to make interest payments by check mailed to the
holders at their address set forth in the register of holders.
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PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Issuers
may change the Paying Agent or Registrar without prior notice to the holders of
the notes, and the Issuers or any of their Subsidiaries may act as Paying Agent
or Registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any note
selected for redemption or repurchase (except in the case of a note to be
redeemed or repurchased in part, the portion not to be redeemed or repurchased).
Also, the Issuers are not required to transfer or exchange any note for a period
of 15 days before a selection of notes to be redeemed or between a record date
and the next succeeding interest payment date.
The registered holder of a note will be treated as the owner of it for all
purposes.
THE GUARANTEES
To the extent that any of our Restricted Subsidiaries guarantee any of our
Indebtedness or any Indebtedness of any other Restricted Subsidiary, such
guarantor will be required to guarantee our obligations under the notes and the
Indenture.
The Subsidiary Guarantors will jointly and severally guarantee on a senior,
unsecured basis the Issuers' Obligations under the notes. The Obligations of
Subsidiary Guarantors under the Guarantees will rank senior in right of payment
to the existing and future subordinated Indebtedness of the Subsidiary
Guarantors, including the guarantees by the Subsidiary Guarantors of the
Existing Senior Subordinated Notes, and pari passu in right of payment to other
Indebtedness of the Subsidiary Guarantors that is not by its terms expressly
subordinated to the Obligations arising under the Guarantee, including the
guarantees by the Subsidiary Guarantors of borrowings under the Partnership
Credit Facility. However, the notes will be effectively junior in right of
payment to the existing and future senior secured Indebtedness of our Subsidiary
Guarantors, including such guarantees of borrowings under the Partnership Credit
Facility, to the extent of the value of the collateral securing such
Indebtedness. The Obligations of each Subsidiary Guarantor under its Guarantee
will be limited as necessary to prevent that Guarantee from constituting a
fraudulent conveyance under applicable law. See "Risk factors."
Although the Indenture limits the amount of Indebtedness that the Issuers
and the Subsidiary Guarantors may incur, such Indebtedness may be substantial
and all of it may be senior secured Indebtedness of Subsidiary Guarantors.
A Subsidiary Guarantor may not consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving person), another
person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) the person (if not otherwise a Subsidiary Guarantor) formed by or
surviving any such consolidation or merger assumes all the Obligations of
that Subsidiary Guarantor pursuant to a supplemental indenture satisfactory
to the Trustee, except as provided in the next paragraph.
GulfTerra Partners or any Subsidiary Guarantor, however, may be merged or
consolidated with or into any one or more Subsidiary Guarantors or GulfTerra
Partners.
The Guarantee of a Subsidiary Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Subsidiary Guarantor (including by
way of merger or consolidation), if GulfTerra Partners applies the Net
Proceeds of that sale or other disposition in accordance with the
applicable provisions of the Indenture; or
29
(2) in connection with any sale or other disposition of all of the
Equity Interests of a Subsidiary Guarantor, if GulfTerra Partners applies
the Net Proceeds of that sale in accordance with the applicable provisions
of the Indenture applicable to Asset Sales; or
(3) if GulfTerra Partners designates any Restricted Subsidiary that is
a Subsidiary Guarantor as an Unrestricted Subsidiary; or
(4) at such time as such Subsidiary Guarantor ceases to guarantee any
other Indebtedness of GulfTerra Partners.
See "Repurchase at the option of holders -- Asset sales."
Any Restricted Subsidiary that guarantees Indebtedness of either of the
Issuers or any other Restricted Subsidiary at a time when it is not a Subsidiary
Guarantor shall execute a Guarantee.
The notes will be non-recourse to GulfTerra Partners' general partner.
OPTIONAL REDEMPTION
The Issuers may redeem the notes, in whole or in part from time to time, on
at least 30 but not more than 60 days' prior notice mailed to the registered
address of each holder of notes to be so redeemed, at a redemption price equal
to the greater of (i) 100 percent of their principal amount plus accrued and
unpaid interest to the date of redemption or (ii) the sum of (a) the present
values of the Remaining Scheduled Payments (as hereinafter defined) on such
notes, discounted to the date of redemption, on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months), at the Treasury Rate plus 50
basis points plus (b) accrued and unpaid interest on the principal amount being
redeemed to the date of redemption.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of
the principal national securities exchange on which the notes are listed;
or
(2) if the notes are not so listed or there are no such requirements,
on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest and
Additional Interest, if applicable, cease to accrue on notes or portions of them
called for redemption unless the Issuers default in making such redemption
payment.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's notes pursuant to the Change of
Control Offer, subject to the satisfaction of the Tender Condition in the event
of a Change of Control that does not result in a Ratings Downgrade.
The Issuers will offer (the "Change of Control Offer") in respect of the
Change of Control, subject to the satisfaction of the Tender Condition in the
event of a Change of Control that does not result in a Ratings
30
Downgrade, a Change of Control Payment in cash equal to 101 percent of the
aggregate principal amount of notes repurchased plus accrued and unpaid interest
thereon, if any, and Additional Interest, if any, to the date of purchase (the
"Change of Control Payment"), subject to the rights of holders in whose name a
note is registered on a record date occurring prior to the Change of Control
Payment Date to receive interest on an interest payment date occurring after
such Change of Control Payment Date. Within 30 days following any Change of
Control, the Issuers will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes, subject to the satisfaction of the Tender Condition in the
case of a Change of Control that does not result in a Ratings Downgrade, on the
Change of Control Payment Date specified in such notice, pursuant to the
procedures required by the Indenture and described in such notice. The Issuers
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful and, in the case of a Change of Control Offer in respect of a Change of
Control that did not result in a Ratings Downgrade, only if the Tender Condition
is satisfied:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by GulfTerra
Partners.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
In the case of a Change of Control Offer in respect of a Change of Control
that did not result in a Ratings Downgrade, if the Tender Condition is not
satisfied, the Issuers shall not be required to purchase the notes pursuant to
the Change of Control Offer and any notes tendered pursuant to the Change of
Control Offer shall promptly be returned to the holders thereof.
The provisions described above that require the Issuers to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holder of the notes to require that the
Issuers repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
Under the Indenture, the change of control offers made pursuant to the
terms of each series of Subordinated Putable Debt Securities in respect of a
Change of Control must each (a) provide for the same time of expiration of the
period during which valid tenders of Subordinated Putable Debt Securities may be
made as the time of expiration of the period during which valid tenders of notes
may be made pursuant to the Change of Control Offer and (b) provide that the
date of purchase of Subordinated Putable Debt Securities validly tendered
pursuant to such change of control offer is the Change of Control Payment Date.
GulfTerra Partners' outstanding Partnership Credit Facility currently
prohibits GulfTerra Partners from purchasing any notes, and also provides that
certain change of control events with respect to GulfTerra Partners would
constitute a default under the agreements governing such Indebtedness. Any
future credit agreements or other agreements relating to Indebtedness to which
GulfTerra Partners becomes a party may contain similar restrictions and
provisions. Moreover, the exercise by the holders of their right to require the
31
Issuers to repurchase the notes could cause a default under such Indebtedness,
even if the Change of Control does not, due to the financial effect of such a
repurchase on GulfTerra Partners. If a Change of Control occurs at a time when
GulfTerra Partners is prohibited from purchasing notes, GulfTerra Partners could
seek the consent of the lenders of the borrowings containing such prohibition to
the purchase of notes or could attempt to refinance those borrowings. If
GulfTerra Partners does not obtain such a consent or repay those borrowings,
GulfTerra Partners will remain prohibited from purchasing notes. In such case,
GulfTerra Partners' failure to purchase tendered notes would constitute an Event
of Default under the Indenture which would, in turn, in all likelihood
constitute a default under those borrowings. Finally, the Issuers' ability to
pay cash to the holders upon a repurchase may be limited by GulfTerra Partners'
then existing financial resources. We cannot assure you that sufficient funds
will be available when necessary to make any required repurchases.
Notwithstanding the preceding paragraphs of this covenant, the Issuers will
not be required to make a Change of Control Offer upon a Change of Control and a
holder will not have the right to require the Issuers to repurchase any notes
pursuant to a Change of Control Offer if at the time of the Change of Control
(1) the notes have and have had for at least the last 90 consecutive days an
Investment Grade Rating from both Rating Agencies, (2) the aggregate principal
amount of Putable Debt Securities outstanding at such time is less than the
greater of (i) $250 million and (ii) 30 percent of the aggregate principal
amount of Non-Putable Debt Securities outstanding at such time, and (3) no
Default has occurred and is then continuing under the Indenture (the "Investment
Grade Suspension Provision").
In addition, notwithstanding the preceding paragraphs of this covenant, the
Issuers will not be required to make a Change of Control Offer upon a Change of
Control and a holder will not have the right to require the Issuers to
repurchase any notes pursuant to a Change of Control Offer if a third party
makes an offer to purchase the notes in the manner, at the times and otherwise
in substantial compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer and purchases all notes validly tendered
and not withdrawn under such purchase offer.
The definition of Change of Control includes a phrase relating to the sale,
transfer, lease, conveyance or other disposition of "all or substantially all"
of the assets of GulfTerra Partners and its Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
GulfTerra Partners to repurchase such notes as a result of a sale, transfer,
lease, conveyance or other disposition of less than all of the assets of
GulfTerra Partners and its Restricted Subsidiaries taken as a whole to another
Person or group may be uncertain.
ASSET SALES
The Issuers will not, and will not permit any of GulfTerra Partners'
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) GulfTerra Partners (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by (a) an executive officer
of GulfTerra Partners if the value is less than $25.0 million, as evidenced
by an Officers' Certificate delivered to the Trustee or (b) the Board of
Directors of the General Partner if the value is $25.0 million or more, as
evidenced by a resolution of such Board of Directors of the General
Partner; and
(3) at least 75 percent of the consideration therefore received by
GulfTerra Partners or such Restricted Subsidiary is in the form of cash or
Cash Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash:
(a) any liabilities (as shown on the Issuer's or such Restricted
Subsidiary's most recent balance sheet) of GulfTerra Partners or any
Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the notes or any Guarantee) that
are assumed
32
by the transferee of any such assets pursuant to a customary novation
agreement that releases GulfTerra Partners or such Restricted Subsidiary
from further liability; and
(b) any securities, notes or other Obligations received by
GulfTerra Partners or any such Restricted Subsidiary from such
transferee that are within 90 days after the Asset Sale (subject to
ordinary settlement periods) converted by such Issuer or such Restricted
Subsidiary into cash (to the extent of the cash received in that
conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
GulfTerra Partners or a Restricted Subsidiary may apply (or enter into a
definitive agreement for such application within such 360-day period, provided
that such capital expenditure or purchase is closed within 90 days after the end
of such 360-day period) such Net Proceeds at its option:
(1) to repay senior Indebtedness of GulfTerra Partners and/or its
Restricted Subsidiaries (or to make an offer to repurchase or redeem such
Indebtedness) with a permanent reduction in availability for any revolving
credit Indebtedness;
(2) to make a capital expenditure in a Permitted Business;
(3) to acquire other long-term tangible assets that are used or useful
in a Permitted Business; or
(4) to invest in any other Permitted Business Investment or any other
Permitted Investments other than Investments in Cash Equivalents, Interest
Swaps or Currency Agreements.
Pending the final application of any such Net Proceeds, we may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $20.0 million, the Issuers will make
a pro rata offer (an "Asset Sale Offer") to all holders of notes and all holders
of other Indebtedness that is pari passu in right of payment with the notes
containing provisions similar to those set forth in the Indenture with respect
to offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100 percent of principal amount plus accrued and
unpaid interest (including any Additional Interest in the case of the notes), if
any, and premium, if any, to the date of purchase, and will be payable in cash.
If any Excess Proceeds remain after consummation of an Asset Sale Offer,
GulfTerra Partners may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture, including, without limitation, the repurchase or
redemption of Indebtedness of the Issuers or any Subsidiary Guarantor that is
subordinated to the notes or, in the case of any Subsidiary Guarantor, the
Guarantee of such Subsidiary Guarantor. If the aggregate principal amount of
notes tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds
allocated for repurchases of notes pursuant to the Asset Sale Offer for notes,
the Trustee shall select the notes to be purchased on a pro rata basis. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The term Asset Sale excludes:
(1) any transaction whereby assets or properties (including ownership
interests in any Subsidiary or Joint Venture) owned by GulfTerra Partners
or a Restricted Subsidiary are exchanged or contributed for the Equity
Interests of a Joint Venture or Unrestricted Subsidiary in a transaction
that satisfies the requirements of a Permitted Business Investment or for
other assets or properties (including interests in any Subsidiary or Joint
Venture) so long as (i) the fair market value of the assets or properties
(if other than a Permitted Business Investment) received is substantially
equivalent to the fair market value of the assets or properties given up,
and (ii) any cash received in such exchange or contribution by GulfTerra
Partners or any Restricted Subsidiary is applied in accordance with the
foregoing "-- Asset sales" provision;
(2) any sale, transfer or other disposition of cash or Cash
Equivalents;
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(3) any sale, transfer or other disposition of Restricted Investments;
and
(4) any sale, transfer or other disposition of interests in oil and
gas leaseholds (including, without limitation, by abandonment, farm-ins,
farm-outs, leases, swaps and subleases), hydrocarbons and other mineral
products in the ordinary course of business of the oil and gas operations
conducted by GulfTerra Partners or any Restricted Subsidiary, which sale,
transfer or other disposition is made by GulfTerra Partners or any
Restricted Subsidiary.
COVENANTS
RESTRICTED PAYMENTS
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of GulfTerra Partners' or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving GulfTerra Partners
or any of its Restricted Subsidiaries) or to the direct or indirect holders
of GulfTerra Partners' or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than distributions or dividends
payable in Equity Interests of GulfTerra Partners (other than Disqualified
Equity) and other than distributions or dividends payable to GulfTerra
Partners or a Restricted Subsidiary);
(2) except to the extent permitted in clause (4) below, purchase,
redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving an
Issuer) any Equity Interests of GulfTerra Partners or any of its Restricted
Subsidiaries (other than any such Equity Interests owned by GulfTerra
Partners or any of its Restricted Subsidiaries);
(3) except to the extent permitted in clause (4) below, make any
payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Obligation or Guarantor
Subordinated Obligation, except (a) a payment of interest or principal at
the Stated Maturity thereof, (b) a purchase, redemption, acquisition or
retirement required to be made pursuant to the terms of such Indebtedness
(including pursuant to an asset sale or change of control provision) and
(c) any such Indebtedness of GulfTerra Partners or a Restricted Subsidiary
owned by GulfTerra Partners or a Restricted Subsidiary; or
(4) make any Investment other than a Permitted Investment or a
Permitted Business Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof and either:
(1) if the Fixed Charge Coverage Ratio for GulfTerra Partners' four
most recent fiscal quarters for which internal financial statements are
available is not less than 2.0 to 1.0, such Restricted Payment, together
with the aggregate amount of all other Restricted Payments made by
GulfTerra Partners and its Restricted Subsidiaries during the quarter in
which such Restricted Payment is made, is less than the sum, without
duplication, of:
(a) Available Cash constituting Cash from Operations as of the end
of the immediately preceding quarter, plus
(b) the aggregate net cash proceeds of any (i) substantially
concurrent capital contribution to GulfTerra Partners from any Person
(other than a Restricted Subsidiary of GulfTerra Partners) made after
the Issue Date, (ii) substantially concurrent issuance and sale made
after the Issue Date of Equity Interests (other than Disqualified
Equity) of GulfTerra Partners or from the issuance or sale made after
the Issue Date of convertible or exchangeable Disqualified Equity or
convertible or exchangeable debt securities of GulfTerra Partners that
have been converted into or exchanged for such Equity Interests (other
than Disqualified Equity), (iii) to the extent that any Restricted
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Investment that was made after the Issue Date is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash
Equivalents, the lesser of the refund of capital or similar payment made
in cash or Cash Equivalents with respect to such Restricted Investment
(less the cost of such disposition, if any) and the initial amount of
such Restricted Investment (other than to a Restricted Subsidiary of
GulfTerra Partners), plus
(c) the net reduction in Investments in Restricted Investments
resulting from dividends, repayments of loans or advances, or other
transfers of assets in each case to GulfTerra Partners or any of its
Restricted Subsidiaries from any Person (including, without limitation,
Unrestricted Subsidiaries) or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries, to the extent such amounts have
not been included in Available Cash constituting Cash from Operations
for any period commencing on or after the Issue Date (items (b) and (c)
being referred to as "Incremental Funds"), minus
(d) the aggregate amount of Incremental Funds previously expended
pursuant to this clause (1) or clause (2) below; or
(2) if the Fixed Charge Coverage Ratio for GulfTerra Partners' four
most recent fiscal quarters for which internal financial statements are
available is less than 2.0 to 1.0, such Restricted Payment, together with
the aggregate amount of all other Restricted Payments made by GulfTerra
Partners and its Restricted Subsidiaries during the quarter in which such
Restricted Payment is made, is less than the sum, without duplication, of:
(a) $120.0 million less the aggregate amount of all Restricted
Payments made by GulfTerra Partners and its Restricted Subsidiaries
pursuant to this clause (2)(a) during the period ending on the last day
of the fiscal quarter of GulfTerra Partners immediately preceding the
date of such Restricted Payment and beginning on the Issue Date, plus
(b) Incremental Funds to the extent not previously expended
pursuant to this clause (2) or clause (1) above.
For purposes of clauses (1) and (2) above, the term "substantially
concurrent" means that either (x) the offering was consummated within 120 days
of the date of determination or (y) the offering was consummated within 24
months of the date of determination and the proceeds therefrom were used for the
purposes expressly stated in the documents related thereto and may be traced to
such use by segregating, separating or otherwise specifically identifying the
movement of such proceeds.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment by GulfTerra Partners or any Restricted Subsidiary of
any distribution or dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied
with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated (in right of payment)
Indebtedness of GulfTerra Partners or any of its Restricted Subsidiaries or
of any Equity Interests of GulfTerra Partners or any of its Restricted
Subsidiaries in exchange for, or out of the net cash proceeds of, a
substantially concurrent (a) capital contribution to GulfTerra Partners or
such Restricted Subsidiary from any Person (other than GulfTerra Partners
or another Restricted Subsidiary) or (b) sale (a sale will be deemed
substantially concurrent if such redemption, repurchase, retirement,
defeasance or acquisition occurs not more than 120 days after such sale or
within 24 months of the date of determination and the proceeds therefrom
were used for the purposes expressly stated in the documents related
thereto and may be traced to such use by segregating, separating or
otherwise specifically identifying the movement of such proceeds) (other
than to a Restricted Subsidiary of GulfTerra Partners) of (i) Equity
Interests (other than Disqualified Equity) of GulfTerra Partners or such
Restricted Subsidiary or (ii) Indebtedness that is subordinated to the
notes or the Guarantees, provided that such new subordinated Indebtedness
with respect to the redemption,
35
repurchase, retirement, defeasance or other acquisition of pari passu or
subordinated Indebtedness (W) is subordinated to the same extent as such
refinanced Indebtedness (if the refinanced indebtedness is subordinated),
(X) has a Weighted Average Life to Maturity of at least the remaining
Weighted Average Life to Maturity of the refinanced pari passu or
subordinated Indebtedness, (Y) is for the same principal amount as either
such refinanced pari passu or subordinated Indebtedness plus original issue
discount to the extent not reflected therein or the redemption or purchase
price of such Equity Interests (plus reasonable expenses of refinancing and
any premiums paid on such refinanced pari passu or subordinated
Indebtedness) and (Z) is incurred by GulfTerra Partners or the Restricted
Subsidiary that is the obligor on the Indebtedness so refinanced or the
issuer of the Equity Interests so redeemed, repurchased or retired;
provided, however, that the amount of any net cash proceeds that are
utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded or deducted from the calculation of Available
Cash and Incremental Funds;
(3) the defeasance, redemption, repurchase or other acquisition of
pari passu or subordinated (in right of payment) Indebtedness of GulfTerra
Partners or any Restricted Subsidiary with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any distribution or dividend by a Restricted
Subsidiary to GulfTerra Partners or to the holders of its Equity Interests
(other than Disqualified Equity) on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of GulfTerra Partners or any Restricted
Subsidiary of GulfTerra Partners held by any member of the General
Partner's or GulfTerra Partners' or any Restricted Subsidiary's management
pursuant to any management equity subscription agreement or stock option
agreement or to satisfy Obligations under any Equity Interests appreciation
rights or option plan or similar arrangement; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $5.0 million in any 12-month period; and
(6) any payment by GulfTerra Partners pursuant to section 3.1(b) of
the Management Agreement to compensate for certain tax liabilities
resulting from certain allocated income.
In computing the amount of Restricted Payments previously made for purposes
of the immediately preceding paragraph, Restricted Payments made under clauses
(1) (but only if the declaration of such dividend or other distribution has not
been counted in a prior period) and, to the extent of amounts paid to holders
other than GulfTerra Partners or a Restricted Subsidiary, (4) of this paragraph
shall be included, and Restricted Payments made under clauses (2), (3), (5) and
(6) and, except to the extent noted above, (4) of this paragraph shall not be
included. The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by GulfTerra Partners or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined by the Board of Directors of the General
Partner whose resolution with respect thereto shall be delivered to the Trustee.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED EQUITY
GulfTerra Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and GulfTerra Partners will not issue any Disqualified Equity and will
not permit any of its Restricted Subsidiaries to issue any Disqualified Equity;
provided, however, that GulfTerra Partners and any Restricted Subsidiary may
incur Indebtedness (including Acquired Debt), and GulfTerra Partners and the
Restricted Subsidiaries may issue Disqualified Equity, if the Fixed Charge
Coverage Ratio for GulfTerra Partners' most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Equity is issued would have been at least 2.25 to 1.0, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if
36
the additional Indebtedness had been incurred, or the Disqualified Equity had
been issued, as the case may be, at the beginning of such four-quarter period.
So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by GulfTerra Partners and any Restricted Subsidiary
of the Indebtedness under Credit Facilities and the guarantees thereof;
provided that the aggregate principal amount of all Indebtedness of
GulfTerra Partners and the Restricted Subsidiaries outstanding under all
Credit Facilities after giving effect to such incurrence does not exceed
$1.2 billion less the aggregate amount of all repayments of principal of
Indebtedness under a Credit Facility that have been made by GulfTerra
Partners or any of its Restricted Subsidiaries in respect of Asset Sales to
the extent such repayments constitute a permanent reduction of commitments
under such Credit Facility;
(2) the incurrence by GulfTerra Partners and its Restricted
Subsidiaries of Existing Indebtedness;
(3) the incurrence by GulfTerra Partners and the Subsidiary Guarantors
of Indebtedness represented by the notes and the Guarantees and the related
Obligations;
(4) the incurrence by GulfTerra Partners or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of GulfTerra Partners or such Restricted Subsidiary, in an
aggregate principal amount not to exceed $40.0 million at any time
outstanding;
(5) the incurrence by GulfTerra Partners or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness (other than intercompany Indebtedness) that was not incurred
in violation of the Indenture;
(6) the incurrence by GulfTerra Partners or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among GulfTerra
Partners and any of its Restricted Subsidiaries; provided, however, that:
(a) if GulfTerra Partners or any Subsidiary Guarantor is the
obligor on such Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the notes, in the case of GulfTerra Partners, or the
Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary
Guarantor, and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
GulfTerra Partners or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness to a Person that is not
either GulfTerra Partners or a Restricted Subsidiary thereof, shall be
deemed, in each case, to constitute an incurrence of such Indebtedness
by GulfTerra Partners or such Restricted Subsidiary, as the case may be,
that was not permitted by this clause (6);
(7) the incurrence by GulfTerra Partners or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging foreign currency exchange rate risk of GulfTerra Partners
or any Restricted Subsidiary or interest rate risk with respect to any
floating rate Indebtedness of GulfTerra Partners or any Restricted
Subsidiary that is permitted by the terms of the Indenture to be
outstanding or commodities pricing risks of GulfTerra Partners or any
Restricted Subsidiary in respect of hydrocarbon production from properties
in which GulfTerra Partners or any of its Restricted Subsidiaries owns an
interest;
(8) the guarantee by GulfTerra Partners or any of the Restricted
Subsidiaries of Indebtedness of GulfTerra Partners or a Restricted
Subsidiary that was permitted to be incurred by another provision of
37
this covenant, provided, that in the event such Indebtedness that is being
guaranteed is a Subordinated Obligation or a Guarantor Subordinated
Obligation, then the guarantee shall be subordinated in right of payment to
the notes or the Guarantee, as the case may be;
(9) bid, performance, surety and appeal bonds in the ordinary course
of business, including guarantees and standby letters of credit supporting
such Obligations, to the extent not drawn;
(10) the incurrence by GulfTerra Partners or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (10), not to exceed $50.0
million;
(11) the incurrence by GulfTerra Partners' Unrestricted Subsidiaries
of Non-Recourse Debt; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event
shall be deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of GulfTerra Partners that was not permitted by this clause
(11);
(12) the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Equity, in the form of additional shares of the same class
of Disqualified Equity, provided, in each such case, that the amount
thereof is included in Fixed Charges of GulfTerra Partners as so accrued,
accredited or amortized; and
(13) Indebtedness incurred by GulfTerra Partners or any of its
Restricted Subsidiaries arising from agreements or their respective charter
documents providing for indemnification, adjustment of purchase price or
similar obligations.
For purposes of determining compliance with this "-- Incurrence of
indebtedness and issuance of disqualified equity" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (13) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
GulfTerra Partners will be permitted to classify such item of Indebtedness in
any manner that complies with this covenant. An item of Indebtedness may be
divided and classified in one or more of the types of Permitted Indebtedness.
LIENS
GulfTerra Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness or Attributable Debt on any
asset now owned or hereafter acquired, except Permitted Liens, without making
effective a provision whereby all Obligations due under the notes and Indenture
or any Guarantee, as applicable, will be secured by a Lien equally and ratably
with (or prior to in the case of Liens with respect to Subordinated Obligations
or Guarantor Subordinated Obligations, as the case may be) any and all
Obligations thereby secured for so long as any such Obligations shall be so
secured.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
GulfTerra Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Equity
Interests to GulfTerra Partners or any of GulfTerra Partners' Restricted
Subsidiaries, or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to GulfTerra
Partners or any of the other Restricted Subsidiaries;
(2) make loans or advances to or make other Investments in GulfTerra
Partners or any of the other Restricted Subsidiaries; or
38
(3) transfer any of its properties or assets to GulfTerra Partners or
any of the other Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements as in effect on the Issue Date and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of any such agreements or any Existing
Indebtedness to which such agreement relates, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, with respect to such distribution, dividend and other payment
restrictions and loan or investment restrictions than those contained in
such agreement, as in effect on the Issue Date;
(2) the Partnership Credit Facility and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive, taken as a whole, with respect to
such distribution, dividend and other payment restrictions and loan or
investment restrictions than those contained in such Credit Facility as in
effect on the Issue Date;
(3) the Indenture, the notes and the Guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Equity Interests of a
Person acquired by GulfTerra Partners or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than such Person,
or the property or assets of such Person, so acquired, provided that, in
the case of Indebtedness, such Indebtedness was permitted by the terms of
the Indenture to be incurred;
(6) customary non-assignment provisions in licenses and leases entered
into in the ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that contains any one or more of the restrictions described in
clauses (1) through (3) of the preceding paragraph by such Restricted
Subsidiary pending its sale or other disposition, provided that such sale
or disposition is consummated, or such restrictions are canceled or
terminated or lapse, within 90 days;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(10) Liens securing Indebtedness otherwise permitted to be issued
pursuant to the provisions of the covenant described above under the
caption "-- Liens" that limit the right of GulfTerra Partners or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien;
(11) any agreement or instrument relating to any property or assets
acquired after the Issue Date, so long as such encumbrance or restriction
relates only to the property or assets so acquired and is not and was not
created in anticipation of such acquisitions;
(12) any agreement or instrument relating to any Acquired Debt of any
Restricted Subsidiary at the date on which such Restricted Subsidiary was
acquired by GulfTerra Partners or any Restricted Subsidiary (other than
Indebtedness incurred in anticipation of such acquisition and provided such
encumbrances or restrictions extend only to property of such acquired
Restricted Subsidiary);
39
(13) any agreement or instrument governing Indebtedness permitted to
be incurred under the Indenture, provided that the terms and conditions of
any such restrictions and encumbrances, taken as a whole, are not
materially more restrictive than those contained in the Indenture, taken as
a whole;
(14) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements, including clawback, "make-well" or "keep-well" agreements, to
maintain financial performance or results of operations of a joint venture
entered into in the ordinary course of business; and
(15) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers may, directly or indirectly: (1) consolidate or
merge with or into another Person (whether or not such Issuer is the survivor);
or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) such Issuer is the surviving entity of such
transaction; or (b) the Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made is an entity organized or existing under the laws of the United
States, any state thereof or the District of Columbia, provided that
GulfTerra Finance may not consolidate or merge with or into any entity
other than a corporation satisfying such requirement for so long as
GulfTerra Partners remains a partnership;
(2) the Person formed by or surviving any such consolidation or merger
(if other than such Issuer) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
expressly assumes all the Obligations of such Issuer under the notes and
the Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) such Issuer or the Person formed by or surviving any such
consolidation or merger (if other than such Issuer):
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of such
Issuer immediately preceding the transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of disqualified equity;" provided, however,
that this clause (b) shall be deemed deleted and of no effect after the
date on which we and our Restricted Subsidiaries are no longer subject
to the Eliminated Covenants; and
(5) such Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and, if a supplemental indenture is required, such supplemental
indenture comply with the Indenture and all conditions precedent therein
relating to such transaction have been satisfied.
Notwithstanding the foregoing paragraph, GulfTerra Partners is permitted to
reorganize as any other form of entity in accordance with the procedures
established in the Indenture; provided that:
(1) the reorganization involves the conversion (by merger, sale,
contribution or exchange of assets or otherwise) of GulfTerra Partners into
a form of entity other than a limited partnership formed under Delaware
law;
40
(2) the entity so formed by or resulting from such reorganization is
an entity organized or existing under the laws of the United States, any
state thereof or the District of Columbia;
(3) the entity so formed by or resulting from such reorganization
assumes all the Obligations of GulfTerra Partners under the notes and the
Indenture pursuant to agreements reasonably satisfactory to the Trustee;
(4) immediately after such reorganization no Default or Event of
Default exists; and
(5) such reorganization is not adverse to the holders of the notes
(for purposes of this clause (5) it is stipulated that such reorganization
shall not be considered adverse to the holders of the notes solely because
the successor or survivor of such reorganization (i) is subject to federal
or state income taxation as an entity or (ii) is considered to be an
"includible corporation" of an affiliated group of corporations within the
meaning of Section 1504(b)(i) of the Code or any similar state or local
law).
The "Merger, consolidation, or sale of assets" covenant described in the
first paragraph of this section will not apply to a merger or consolidation, or
any sale, assignment, transfer, lease, conveyance or other disposition of assets
between or among GulfTerra Partners and any of its Restricted Subsidiaries.
No Subsidiary Guarantor may consolidate with or merge with or into (whether
or not such Subsidiary Guarantor is the surviving Person) another Person,
whether or not affiliated with such Subsidiary Guarantor, but excluding
GulfTerra Partners or another Subsidiary Guarantor, unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Subsidiary Guarantor) assumes
all the Obligations of such Subsidiary Guarantor pursuant to the Subsidiary
Guarantor's Guarantee of the notes and the Indenture pursuant to a supplemental
indenture and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists. Any Subsidiary Guarantor may be merged or
consolidated with or into any one or more Subsidiary Guarantors.
In the event of a sale or other disposition of all or substantially all of
the assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all or substantially all of the
Equity Interests of any Subsidiary Guarantor, then such Subsidiary Guarantor (in
the event of a sale or other disposition, by way of such a merger, consolidation
or otherwise, of all of the Equity Interests of such Subsidiary Guarantor) or
the Person acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of such Subsidiary Guarantor) will be
released and relieved of any Obligations under its Guarantee; provided that the
transaction complies with the provisions set forth under "Asset sales."
TRANSACTIONS WITH AFFILIATES
GulfTerra Partners will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to GulfTerra Partners or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by GulfTerra Partners
or such Restricted Subsidiary with an unrelated Person; and
(2) GulfTerra Partners delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million but less than or equal to $50.0 million, an Officers'
Certificate certifying that such Affiliate Transaction complies with
this covenant and that such Affiliate Transaction has been approved
(either pursuant to specific or general resolutions) by the Board of
Directors of the General Partner or has been approved by an officer
pursuant to a delegation (specific or general) of authority from the
Board of Directors of the General Partner; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$50.0 million, (A) a resolution of the Board of Directors of the
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General Partner set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the General Partner
and (B) either (I) an opinion as to the fairness to GulfTerra Partners
of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing
recognized as an expert in rendering fairness opinions on transactions
such as those proposed, (II) with respect to assets classified, in
accordance with GAAP, as property, plant and equipment on GulfTerra
Partners' or such Restricted Subsidiary's balance sheet, a written
appraisal from a nationally recognized appraiser showing the assets have
a fair market value not less than the consideration to be paid (provided
that if the fair market value determined by such appraiser is a range of
values or otherwise inexact, the Board of Directors of the General
Partner shall determine the exact fair market value, provided that it
shall be within the range so determined by the appraiser), (III) in the
case of gathering, transportation, marketing, hedging, production
handling, operating, construction, storage, platform use, or other
operational contracts, any such contracts are entered into in the
ordinary course of business on terms substantially similar to those
contained in similar contracts entered into by GulfTerra Partners or any
Restricted Subsidiary and third parties or, if none of GulfTerra
Partners or any Restricted Subsidiary has entered into a similar
contract with a third party, that the terms are no less favorable than
those available from third parties on an arm's-length basis, as
determined by the Board of Directors of the General Partner or (IV) in
the case of any transaction between GulfTerra Partners or any of its
Restricted Subsidiaries and any Affiliate thereof in which GulfTerra
Partners beneficially owns 50 percent or less of the Voting Stock and
one or more Persons not Affiliated with GulfTerra Partners beneficially
own (together) a percentage of Voting Stock at least equal to the
interest in Voting Stock of such Affiliate beneficially owned by
GulfTerra Partners, a resolution of the Board of Directors of the
General Partner set forth in the Officers' Certificate certifying that
such Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the General Partner.
Even though a particular Affiliate Transaction or series of Affiliate
Transactions may be covered by two or more of clauses (I) through (IV)
above, the compliance with any one of such applicable clauses shall be
satisfactory.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) transactions pursuant to the Management Agreement as in effect on
the date hereof;
(2) any employment, equity option or equity appreciation agreement or
plan entered into by GulfTerra Partners or any of its Restricted
Subsidiaries in the ordinary course of business and, as applicable,
consistent with the past practice of GulfTerra Partners or such Restricted
Subsidiary;
(3) transactions between or among GulfTerra Partners and/or its
Restricted Subsidiaries;
(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted payments;"
(5) transactions effected in accordance with the terms of agreements
as in effect on the Issue Date;
(6) customary compensation, indemnification and other benefits made
available to officers, directors or employees of GulfTerra Partners or a
Restricted Subsidiary, including reimbursement or advancement of
out-of-pocket expenses and provisions of officers' and directors' liability
insurance; and
(7) loans to officers and employees made in the ordinary course of
business in an aggregate amount not to exceed $1.0 million at any one time
outstanding.
ADDITIONAL SUBSIDIARY GUARANTEES
If GulfTerra Partners or any of its Restricted Subsidiaries acquires or
creates another Restricted Subsidiary after the Issue Date that guarantees any
Indebtedness of either of the Issuers, then that newly
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acquired or created Restricted Subsidiary must become a Subsidiary Guarantor and
execute a supplemental indenture satisfactory to the Trustee and deliver an
Opinion of Counsel to the Trustee within 10 Business Days of the date on which
it was acquired or created. If a Restricted Subsidiary that is not then a
Subsidiary Guarantor guarantees Indebtedness of either of the Issuers or any
other Restricted Subsidiary, such Restricted Subsidiary shall execute and
deliver a Guarantee. GulfTerra Partners will not permit any of its Restricted
Subsidiaries, directly or indirectly, to guarantee or pledge any assets to
secure the payment of any other Indebtedness of either Issuer unless such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture providing for the guarantee of the payment of the notes by such
Restricted Subsidiary, which guarantee shall be senior to or pari passu with
such Restricted Subsidiary's guarantee of or pledge to secure such other
Indebtedness (and, if such other Indebtedness being guaranteed or secured is a
Subordinated Obligation or a Guarantor Subordinated Obligation, then such
guarantee of or pledge to secure such other Indebtedness shall be expressly
subordinated in right of payment to such Restricted Subsidiary's guarantee of
the notes). Notwithstanding the foregoing, any Guarantee of a Restricted
Subsidiary that was incurred pursuant to this paragraph shall provide by its
terms that it shall be automatically and unconditionally released upon the
release or discharge of the guarantee which resulted in the creation of such
Restricted Subsidiary's Subsidiary Guarantee, except a discharge or release by,
or as a result of payment under, such guarantee.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The General Partner may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default or Event
of Default. If a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, all outstanding Investments owned by GulfTerra Partners and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of the covenant
described above under the caption "-- Restricted payments," for Permitted
Investments or for Permitted Business Investments, as applicable. All such
outstanding Investments will be valued at their fair market value at the time of
such designation. That designation will only be permitted if such Restricted
Payment, Permitted Investments or Permitted Business Investments would be
permitted at that time and such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. All Subsidiaries of an Unrestricted
Subsidiary shall be also Unrestricted Subsidiaries. The Board of Directors of
the General Partner may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if a Default or Event of Default is not continuing, the
redesignation would not cause a Default or Event of Default and provided that,
after giving effect to such designation, GulfTerra Partners and its remaining
Restricted Subsidiaries could incur at least $1.00 of additional Indebtedness
under the limitation on Indebtedness included in the first paragraph under the
caption "Incurrence of indebtedness and issuance of disqualified equity" above.
A Subsidiary may not be designated as an Unrestricted Subsidiary unless at the
time of such designation, (x) it has no Indebtedness other than Non-Recourse
Debt; (y) no portion of the Indebtedness or any other obligation of such
Subsidiary (whether contingent or otherwise and whether pursuant to the terms of
such Indebtedness or the terms governing the organization and operation of such
Subsidiary or by law) (A) is guaranteed by GulfTerra Partners or any other
Restricted Subsidiary, except as such Indebtedness is permitted by the covenants
under "-- Restricted payments" and "-- Incurrence of indebtedness and issuance
of disqualified equity" above, (B) is recourse to or obligates GulfTerra
Partners or any Restricted Subsidiary in any way (including any "claw-back,"
"keep-well" or "make-well" agreements or other agreements, arrangements or
understandings to maintain the financial performance or results of operations of
such Subsidiary, except as such Indebtedness or Investment is permitted by the
covenants captioned "-- Incurrence of indebtedness and issuance of disqualified
equity" and "-- Restricted payments") or (C) subjects any property or assets of
GulfTerra Partners or any Restricted Subsidiary, directly or indirectly,
contingently or otherwise, to the satisfaction thereof; and (z) no Equity
Interests of a Restricted Subsidiary are held by such Subsidiary, directly or
indirectly. Upon the designation of a Restricted Subsidiary that is a Subsidiary
Guarantor as an Unrestricted Subsidiary, the Guarantee of such entity shall be
released.
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SALE AND LEASE-BACK TRANSACTIONS
GulfTerra Partners will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and lease-back transaction; provided that
GulfTerra Partners or any Restricted Subsidiary that is a Subsidiary Guarantor
may enter into a sale and lease-back transaction if:
(1) GulfTerra Partners or that Subsidiary Guarantor, as applicable,
could have (a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and lease-back transaction under the Fixed
Charge Coverage Ratio test in the first paragraph of the covenant described
above under the caption "-- Incurrence of additional Indebtedness and
issuance of disqualified equity," and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption
"-- Liens;" provided, however, that clause (a) of this clause (1) shall be
deemed deleted and of no effect after the date on which we and our
Restricted Subsidiaries are no longer subject to the Eliminated Covenants;
(2) the gross cash proceeds of that sale and lease-back transaction
are at least equal to the fair market value, as determined in good faith by
the Board of Directors of the General Partner, of the property that is the
subject of such sale and lease-back transaction; and
(3) the transfer of assets in that sale and lease-back transaction is
permitted by, and GulfTerra Partners applies the proceeds of such
transaction in compliance with, any then applicable other provision of the
Indenture.
BUSINESS ACTIVITIES
GulfTerra Partners will not, and will not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses.
PAYMENTS FOR CONSENT
GulfTerra Partners will not, and will not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any holder of notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Indenture or the
notes unless such consideration is offered to be paid and is paid to all holders
of the notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the SEC, so long as any notes are outstanding,
GulfTerra Partners will file with the SEC (unless the SEC will not accept such a
filing) within the time periods specified in the SEC's rules and regulations,
and upon request, GulfTerra Partners will furnish (without exhibits) to the
Trustee for delivery to the holders of the notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
GulfTerra Partners were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by GulfTerra Partners' certified
independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if GulfTerra Partners were required to file such reports.
If as of the end of any such quarterly or annual period GulfTerra Partners
has designated any of its Subsidiaries as Unrestricted Subsidiaries, then
GulfTerra Partners shall deliver (promptly after such SEC filing referred to in
the preceding paragraph) to the Trustee for delivery to the holders of the notes
quarterly and annual financial information required by the preceding paragraph
as revised to include a reasonably detailed presentation, either on the face of
the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of the
financial
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condition and results of operations of GulfTerra Partners and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries and the designated Joint Ventures of GulfTerra
Partners.
In addition, whether or not required by the SEC, GulfTerra Partners will
make such information available to securities analysts, investors and
prospective investors upon request.
ELIMINATED COVENANTS
From and after the first day following a period of 90 consecutive days
during which the notes have an Investment Grade Rating from both Rating Agencies
and no Default has occurred and is then continuing under the Indenture, we and
our Restricted Subsidiaries will no longer be subject to the provisions of the
Indenture described above under the following headings under the caption
"-- Covenants":
- "-- Asset sales,"
- "-- Restricted payments,"
- "-- Incurrence of indebtedness and issuance of disqualified equity,"
- "-- Dividend and other payment restrictions affecting subsidiaries,"
- "-- Transactions with affiliates,"
- "-- Sale-Leaseback transactions" (only to the extent set forth in that
covenant),
- "-- Merger, consolidation or sale of assets," (only to the extent set
forth in that covenant), and
- "-- Reports."
(collectively, the "Eliminated Covenants"); provided, however, that the
provisions of the Indenture described above under the following headings:
- "-- Change of Control,"
- "-- Liens,"
- "-- Additional subsidiary guarantees,"
- "-- Business activities," and
- "-- Payments for consent"
will not be so eliminated. As a result, after the date on which we and our
Restricted Subsidiaries are no longer subject to the Eliminated Covenants, the
notes will be entitled to substantially reduced covenant protection.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Additional Interest with respect to, the notes;
(2) default in payment when due of the principal of or premium, if
any, on the notes;
(3) failure by GulfTerra Partners or any of its Subsidiaries to comply
with the provisions described under the captions "-- Change of control" or
"-- Asset sales";
(4) failure by GulfTerra Partners or any of its Restricted
Subsidiaries for 60 days after notice to comply with any of the other
agreements in the Indenture (provided that notice need not be given, and an
Event of Default shall occur, 60 days after any breach of the covenants
under "-- Covenants -- Restricted payments," "-- Covenants -- Incurrence of
indebtedness and issuance of disqualified equity" and "-- Merger,
consolidation or sale of assets");
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(5) default under any mortgage, Indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by an Issuer or any of GulfTerra Partners'
Restricted Subsidiaries (or the payment of which is guaranteed by GulfTerra
Partners or any of its Restricted Subsidiaries), whether such Indebtedness
or guarantee now exists or is created after the Issue Date, if that
default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $40.0 million or
more;
(6) failure by an Issuer or any of GulfTerra Partners' Restricted
Subsidiaries to pay final judgments aggregating in excess of $40.0 million,
which judgments are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in force and effect or any Subsidiary Guarantor, or
any Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its Obligations under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to
GulfTerra Partners or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuers, all outstanding notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the holders of
at least 25 percent in principal amount of the then outstanding notes may
declare all the notes to be due and payable immediately. Notwithstanding the
foregoing, so long as any Credit Facility shall be in full force and effect, if
an Event of Default pursuant to clause (5) above with regard to such Credit
Facility shall have occurred and be continuing, the notes shall not become due
and payable until the earlier to occur of (x) five business days following
delivery of written notice of such acceleration of the notes to the agent under
such Credit Facility and (y) the acceleration of any Indebtedness under such
Credit Facility.
Holders of the notes may not enforce the Indenture or the notes except as
provided in the Indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The holder of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest (or Additional Interest, if any) on, or the principal of, the notes.
The Issuers and the Subsidiary Guarantors are required to deliver to the
Trustee annually a statement regarding compliance with the Indenture. Upon any
officer of the General Partner or GulfTerra Finance becoming aware of any
Default or Event of Default, the Issuers are required to deliver to the Trustee
a statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS AND NO
RECOURSE AGAINST GENERAL PARTNER
No past, present or future director, officer, partner, employee,
incorporator, stockholder or member of the Issuers, the General Partner, or any
Subsidiary Guarantor, as such, shall have any liability for any Obligations of
the Issuers or the Subsidiary Guarantors under the notes, the Indenture, the
Guarantees or for any claim based on, in respect of, or by reason of, such
Obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Our General Partner and its directors, officers, employees and members, as
such, shall have no liability for any obligations of the Subsidiary Guarantors
or the Issuers under the notes, the Indenture or any subsidiary guarantee or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. Such waiver may not be effective to waive liabilities under the
federal securities laws, and it is the view of the Securities Exchange
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of the
Issuers' Obligations discharged with respect to the outstanding notes and all
Obligations of the Subsidiary Guarantors discharged with respect to their
Guarantees ("Legal Defeasance"), except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due (but not the Change of Control Payment or the
payment pursuant to an Asset Sale Offer);
(2) the Issuers' Obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Issuers' Obligations in connection therewith;
(4) the Legal Defeasance provisions of the Indenture; and
(5) the Issuers' rights of optional redemption.
In addition, GulfTerra Partners may, at its option and at any time, elect
to have the Obligations of the Issuers and the Guarantors released with respect
to certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the notes, cash in U.S. dollars,
non-callable U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding notes at the Stated Maturity
thereof or on the applicable redemption date, as the case may be, and
GulfTerra Partners must specify whether the notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, GulfTerra Partners shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that (a) GulfTerra Partners has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since
the Issue Date, there has been a change in the applicable federal income
tax law, in either case to the effect
47
that, and based thereon such Opinion of Counsel shall confirm that, the
holders of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, GulfTerra Partners shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which shall be applied to such deposit); or (b)
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which GulfTerra
Partners or any of its Restricted Subsidiaries is a party or by which
GulfTerra Partners or any of its Restricted Subsidiaries is bound;
(6) GulfTerra Partners must have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) GulfTerra Partners must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by GulfTerra Partners
with the intent of preferring the holders of notes over the other creditors
of GulfTerra Partners with the intent of defeating, hindering, delaying or
defrauding other creditors of GulfTerra Partners; and
(8) GulfTerra Partners must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Generally, the Issuers, the Subsidiary Guarantors and the Trustee may amend
or supplement the Indenture, the Guarantees and the notes with the consent of
the holders of at least a majority in principal amount of the notes then
outstanding. However, without the consent of each holder affected, an amendment
or waiver may not (with respect to any notes held by a nonconsenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter or waive the provisions with respect to the redemption of the
notes (other than provisions relating to the covenants described above
under the caption "-- Repurchase at the option of holders");
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment Default
that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
notes;
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(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the option of holders");
(8) except as otherwise permitted in the Indenture, release any
Subsidiary Guarantor from its Obligations under its Guarantee or the
Indenture or change any Guarantee in any manner that would adversely affect
the rights of holders; or
(9) make any change in the preceding amendment and waiver provisions
(except to increase any percentage set forth therein).
Notwithstanding the preceding, without the consent of any holder of notes,
the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement
the Indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of an Issuer's or Subsidiary
Guarantor's Obligations to holders of notes in the case of a merger or
consolidation or sale of all or substantially all of such Issuer's assets;
(4) to add or release Subsidiary Guarantors pursuant to the terms of
the Indenture;
(5) to make any change that would provide any additional rights or
benefits to the holders of notes or surrender any right or power conferred
upon the Issuers or the Subsidiary Guarantors by the Indenture that does
not adversely affect the rights under the Indenture of any holder of the
notes;
(6) to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act;
(7) to evidence or provide for the acceptance of appointment under the
Indenture of a successor Trustee;
(8) to add any additional Events of Default; or
(9) to secure the notes and/or the Guarantees.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of an Issuer or any Subsidiary Guarantor,
the Indenture limits its right to obtain payment of claims in certain cases, or
to realize on certain property received in aspect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to GulfTerra Partners at
4 Greenway Plaza, Houston, Texas, 77046, Attention: Investor Relations.
49
BOOK-ENTRY, DELIVERY AND FORM
The Series A notes were offered and sold to QIBs in reliance on Rule 144A
("Rule 144A notes") and in offshore transactions in reliance on Regulation S
("Regulation S notes"). Notes resold to Institutional Accredited Investors (as
defined in the Indenture) may have been represented by one or more Global notes
in registered, global form without interest coupons (collectively, "IAI Global
notes").
Rule 144A notes initially were represented by one or more notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global notes"). Upon issuance, the Rule 144A Global notes were:
- deposited with the Trustee as custodian for The Depository Trust Company
("DTC"), in New York, New York, and
- registered in the name of DTC or its nominee,
in each case for credit to an account of a Direct or Indirect Participant as
described below. Initially, Regulation S notes were represented by one or more
Global notes in registered, global form without interest coupons (collectively,
the "Regulation S Global notes"). The Regulation S Global notes were deposited
with the Trustee, as a custodian for DTC, in New York, New York and registered
in the name of a nominee of DTC for credit to the accounts of Indirect
Participants participating in DTC through the Euroclear System ("Euroclear") and
Clearstream International ("Clearstream"). During the 40-day period commencing
on the day after the later of the commencement of the offering of the original
notes and the original Issue Date (as defined) of the notes (the "Distribution
Compliance Period"), beneficial interests in the Regulation S Global note could
have been held only through Euroclear or Clearstream, and, pursuant to DTC's
procedures, Indirect Participants that held a beneficial interest in the
Regulation S Global note would not have been able to transfer such interest to a
person taking delivery thereof in the form of an interest in the Rule 144A
Global notes or the IAI Global notes. After the Distribution Compliance Period,
(i) beneficial interests in the Regulation S Global notes may be transferred to
a person that takes delivery in the form of an interest in the Rule 144A Global
notes or the IAI Global notes and (ii) beneficial interests in the Rule 144A
Global notes or the IAI Global notes may be transferred to a person that takes
delivery in the form of an interest in the Regulation S Global notes, provided,
in each case, that the certification requirements described below are complied
with. See "-- Transfers of interests in one Global note for interests in another
Global note." All registered global notes are referred to herein collectively as
"Global notes."
Except as set forth below, the Series B notes issued in the exchange offer
will be represented by one or more registered notes in global form (referred to
herein as the "Exchange Global note") and the Series A notes, if any remain
outstanding after the exchange offer, will be represented by one or more
registered notes in global form, in each case without interest coupons
(collectively, the "Global notes"). The Exchange Global note will be deposited
with, or on behalf of, the DTC and registered in the name of Cede & Co., as
nominee of DTC, or will remain in the custody of the Trustee pursuant to the
FAST Balance Certificate Agreement between DTC and the Trustee.
Beneficial interests in Series A notes, if any remain outstanding after the
exchange offer, will be subject to certain restrictions on transfer and will
bear a restrictive legend. In addition, transfer of beneficial interests in any
Global notes will be subject to the applicable rules and procedures of DTC and
its direct or Indirect Participants (including, if applicable, those of
Euroclear and Clearstream), which may change from time to time.
The Global notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in limited
circumstances. Beneficial interests in the Global notes may be exchanged for
notes in certificated form in limited circumstances. See "-- Transfers of
interests in Global notes for Certificated notes."
Initially, the Trustee will act as Paying Agent and Registrar. The notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
50
DEPOSITARY PROCEDURES
DTC has advised GulfTerra Partners that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Direct Participants") and to facilitate the clearance and
settlement of transactions in those securities between Direct Participants
through electronic book-entry changes in accounts of Participants. The Direct
Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and other
organizations, including Euroclear and Clearstream. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has advised GulfTerra Partners that, pursuant to DTC's procedures, (i)
upon deposit of the Global notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global notes that have been allocated to them by the Initial
Purchasers, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global notes. Direct Participants and Indirect Participants must maintain their
own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial
interests in the Global notes.
Investors in the Rule 144A Global notes and the IAI Global notes may hold
their interests therein directly through DTC if they are Direct Participants in
DTC or indirectly through organizations that are Direct Participants in DTC.
Investors in the Regulation S Global notes may hold their interests therein
directly through Euroclear or Clearstream or indirectly through organizations
that are participants in Euroclear or Clearstream. After the expiration of the
Distribution Compliance Period (but not earlier), investors may hold interests
in the Regulation S Global notes through organizations other than Euroclear and
Clearstream that are Direct Participants in the DTC system. Morgan Guaranty
Trust Company of New York, Brussels office will act initially as depository for
Euroclear, and Citibank, N.A. will act initially as depository for Clearstream
(each a "Nominee" of Euroclear and Clearstream, respectively). Therefore, they
will each be recorded on DTC's records as the holders of all ownership interests
held by them on behalf of Euroclear and Clearstream, respectively. Euroclear and
Clearstream must maintain on their own records the ownership interests, and
transfers of ownership interests by and between, their own customers' securities
accounts. DTC will not maintain such records. All ownership interests in any
Global notes, including those of customers' securities accounts held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interest in a
Global note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For other restrictions
on the transferability of the notes see "-- Transfers of interests in Global
notes for Certificated notes."
Except as described in "-- Transfers on Interests in Global Notes for
Certificated Notes," Owners of Beneficial Interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
Notes in Certificated Form and will not be considered the Registered Owners or
Holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, the Issuers, the Subsidiary Guarantors
and the Trustee will treat the persons in whose names the notes are registered
(including notes represented by Global notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal of, premium, if any, and interest and
Additional Interest, if any, on Global notes registered in the name of DTC or
its nominee will be payable by the Trustee to DTC or its nominee as the
51
registered holder under the Indenture. Consequently, none of the Issuers, the
Trustee nor any agent of the Issuers or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any Direct
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global notes or for
maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global note or (ii) any other matter relating to the
actions and practices of DTC or any of its Direct Participants or Indirect
Participants.
DTC has advised the Issuers that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Issuers or the Subsidiary Guarantors. None of the Issuers, the
Subsidiary Guarantors or the Trustee will be liable for any delay by DTC or its
Direct Participants or Indirect Participants in identifying the beneficial
owners of the notes, and the Issuers and the Trustee may conclusively relay on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the notes for all purposes.
The Global notes will trade in DTC's Same-day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the notes through Euroclear or Clearstream) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the notes through Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the notes
through Euroclear or Clearstream, on the other hand, will be effected by
Euroclear's or Clearstream's respective Nominee through DTC in accordance with
DTC's rules on behalf of Euroclear or Clearstream; however, delivery of
instructions relating to crossmarket transactions must be made directly to
Euroclear or Clearstream and within their established deadlines (Brussels time)
of such systems. Indirect Participants who hold interest in the notes through
Euroclear and Clearstream may not deliver instructions directly to Euroclear's
and Clearstream's Nominee. Euroclear and Clearstream will, if the transaction
meets its settlement requirements, deliver instructions to its respective
Nominee to deliver or receive interests on Euroclear's or Clearstream's behalf
in the relevant Global note in DTC, and make or receive payment in accordance
with normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or Clearstream
purchasing an interest in a Global note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or Clearstream
during the European business day immediately following the settlement date of
DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and Clearstream customers will not have
access to the cash amount credited to their accounts as a result of a sale of an
interest in a Regulation S Global note to a DTC Participant unit the European
business for Euroclear and Clearstream immediately following DTC's settlement
date.
DTC has advised GulfTerra Partners that it will take any action permitted
to be taken by a holder of notes only at the direction of one or more Direct
Participants to whose account interests in the Global notes are credited and
only in respect of such portion of the aggregate principal amount of the notes
to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the notes, DTC
reserves the right to exchange Global notes (without the direction of one or
more of its
52
Direct Participants) for legend notes in certificated form, and to distribute
such certificated forms of notes to its Direct Participants. See "-- Transfers
of interests in Global notes for Certificated notes."
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Regulation S Global
notes, the Rule 144A Global notes and the IAI Global notes among Direct
Participants, including Euroclear and Clearstream, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuers, the Subsidiary Guarantors, the
Initial Purchasers or the Trustee shall have any responsibility for the
performance by DTC, Euroclear and Clearstream or their respective Direct and
Indirect Participants of their respective Obligations under the rules and
procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and Clearstream
and their book-entry systems has been obtained from sources that the Issuers
believe to be reliable, but the Issuers take no responsibility for the accuracy
thereof.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL NOTE
Prior to the expiration of the Distribution Compliance Period, an Indirect
Participant who held an interest in the Regulation S Global Note through
Euroclear or Clearstream was not permitted to transfer its interest to a U.S.
Person taking delivery in the form of an interest in Rule 144A Global notes or
the IAI Global notes. After the expiration of the Distribution Compliance
Period, an Indirect Participant who holds an interest in Regulation S Global
notes will be permitted to transfer its interest to a U.S. Person who takes
delivery in the form of an interest in Rule 144A Global notes or the IAI Global
notes only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made in accordance with the
applicable restrictions on transfer.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
Person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared investment
discretion with respect to its assets), (iv) any trust of which any trustee is a
U.S. Person (other than a trust of which at least one trustee is a non-U.S.
Person who has sole or shared investment discretion with respect to its assets
and no beneficiary of the trust (and no settler, if the trust is revocable) is a
U.S. Person), (v) any agency or branch of a foreign entity located in the United
States, (vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
Person, (vii) any discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held for
the benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign jurisdiction
and formed by a U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act (unless it is organized or
incorporated and owned by "accredited investors" within the meaning of Rule
501(a) under the Securities Act who are not natural persons, estates or trusts);
provided, however, that the term "U.S. Person" shall not include (A) a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(k)(2)(vi) of Regulation S under the Securities Act and any other
similar international organizations, and their agencies, affiliates and pension
plans.
Prior to the expiration of the Distribution Compliance Period, a Direct or
Indirect Participant who held an interest in Rule 144A Global notes or IAI
Global notes was not permitted to transfer its interests to any person taking
delivery thereof in the form of an interest in Regulation S Global notes. After
the expiration of the Distribution Compliance Period, a Direct or Indirect
Participant who holds an interest in Rule 144A Global notes or IAI Global notes
may transfer its interests to a person who takes delivery in the form of an
interest in Regulation S Global notes only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made in accordance with Rule 904 of Regulation S.
53
Transfers involving an exchange of a beneficial interest in Regulation S
Global notes for a beneficial interest in Rule 144A Global notes will be
effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. In connection with such
transfer, therefore, appropriate adjustments will be made to reflect a decrease
in the principal amount of the one Global note and a corresponding increase in
the principal amount of the other Global note, as applicable. Any beneficial
interest in the one Global note that is transferred to a person who takes
delivery in the form of the other Global note will, upon transfer, cease to be
an interest in such first Global note and become an interest in such other
Global note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global note for as long as it remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("Certificated notes") if (i) DTC (x)
notifies the Issuers that it is unwilling or unable to continue as depositary
for the Global notes and the Issuers thereupon fail to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuers, at their option, notify the Trustee in
writing that they elect to cause the issuance of Certificated notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the notes. In any such case, the Issuers will notify the Trustee
in writing that, upon surrender by the Direct and Indirect Participants of their
interest in such Global Note, Certificated notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related notes.
Beneficial interests in the Global notes held by any Direct or Indirect
Participant may be exchanged for Certificated notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated notes
delivered in exchange for any beneficial interest in any Global note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
None of the Issuers, the Subsidiary Guarantors or the Trustee will be
liable for any delay by the holder of any Global note or DTC in identifying the
beneficial owners of notes, and the Issuers and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the holder of
the Global note or DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
Payments in respect of the notes represented by the Global notes (including
principal, premium, if any, interest and Additional Interest, if any) will be
made by wire transfer of immediately available same day funds to the accounts
specified by the holder of interests in such Global note. With respect to
Certificated notes, the Issuers will make all payments of principal, premium, if
any, interest and Additional Interest, if any, by wire transfer of immediately
available same day funds to the accounts specified by the holders thereof or, if
no such account is specified, by mailing a check to each such holder's
registered address. The Issuers expect that secondary trading in the
Certificated notes will also be settled in immediately available funds.
DEFINITIONS
Set forth below are defined terms used in the Indenture. Reference is made
to the Indenture for a full disclosure of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
54
Subsidiary of, such specified Person, but excluding Indebtedness which is
extinguished, retired or repaid in connection with such Person merging with
or becoming a Subsidiary of such specific Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10 percent or more
of the Voting Stock of a specified Person shall be deemed to be control by the
other Person; provided, further, that any third Person which also beneficially
owns 10 percent or more of the Voting Stock of a specified Person shall not be
deemed to be Affiliate of either the specified Person or the other Person merely
because of such common ownership in such specified Person. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings. Notwithstanding the foregoing, the term
"Affiliate" shall not include a Restricted Subsidiary of any specified Person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business
consistent with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of GulfTerra Partners
or GulfTerra Partners and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the Indenture described above under the
caption "-- Change of control," and/or the provisions described above under
the caption "-- Merger, consolidation or sale of assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of GulfTerra Partners'
Restricted Subsidiaries or the sale by GulfTerra Partners or any of its
Restricted Subsidiaries of Equity Interests in any of its Restricted
Subsidiaries;
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $5.0 million; or
(b) results in net proceeds to GulfTerra Partners and its Restricted
Subsidiaries of less than $5.0 million;
(2) a transfer of assets between or among GulfTerra Partners and its
Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to
GulfTerra Partners or to another Restricted Subsidiary;
(4) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Restricted payments;" and
(5) a transaction of the type described in the last paragraph of the
covenant entitled "Asset sales."
"Attributable Debt" in respect of a sale and lease-back transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and lease-back transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Available Cash" has the meaning assigned to such term in the Partnership
Agreement, as in effect on the Issue Date.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
55
"Cash Equivalent" means:
(1) United States dollars or, in an amount up to the amount necessary
or appropriate to fund local operating expenses, other currencies;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than one year from the date
of acquisition;
(3) certificates of deposit, time deposits and Eurodollar deposits
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 365 days, demand and overnight
bank deposits and other similar types of investments routinely offered by
commercial banks, in each case, with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch
Rating of "B" or better or any commercial bank of any other country that is
a member of the Organization for Economic Cooperation and Development
("OECD") and has total assets in excess of $500.0 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and
in each case maturing within six months after the date of acquisition; and
(6) money market funds at least 95 percent of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through
(5) of this definition.
"Cash from Operations" shall have the meaning assigned to such term in the
Partnership Agreement, as in effect on the Issue Date.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, lease, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of GulfTerra
Partners and its Restricted Subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act) other than
the El Paso Group;
(2) the adoption of a plan relating to the liquidation or dissolution
of GulfTerra Partners or the General Partner; and
(3) such time as the El Paso Group ceases to own, directly or
indirectly, the general partner interests of GulfTerra Partners, or members
of the El Paso Group cease to serve as the only general partners of
GulfTerra Partners.
Notwithstanding the foregoing, a conversion of GulfTerra Partners from a
limited partnership to a corporation, limited liability company or other form of
entity or an exchange of all of the outstanding limited partnership interests
for capital stock in a corporation, for member interests in a limited liability
company or for Equity Interests in such other form of entity shall not
constitute a Change of Control, so long as following such conversion or exchange
the El Paso Group beneficially owns, directly or indirectly, in the aggregate
more than 50 percent of the Voting Stock of such entity, or continues to own a
sufficient number of the outstanding shares of Voting Stock of such entity to
elect a majority of its directors, managers, trustees or other persons serving
in a similar capacity for such entity.
"Comparable Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City on the third business day preceding such redemption date.
56
"Comparable Treasury Issue" means the fixed rate United States Treasury
security selected by an Independent Investment Banker as having a maturity most
comparable to the remaining term of the notes to be redeemed (and which is not
callable prior to maturity) that would be utilized, at the time of selection and
in accordance with customary financial practices, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes to be redeemed.
"Comparable Treasury Price" means with respect to any redemption date for
the notes: (1) the average of the Comparable Treasury Dealer Quotations for such
redemption date, after excluding the highest and the lowest of such Comparable
Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than three such
Comparable Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to the dividends or distributions paid during such
period in cash or Cash Equivalents to such Person or any of its Restricted
Subsidiaries by a Person that is not a Restricted Subsidiary of such
Person; plus
(2) an amount equal to any extraordinary loss of such Person and its
Restricted Subsidiaries plus any net loss realized by such Person and its
Restricted Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net Income; plus
(3) the provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(4) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with aspect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income, excluding any such expenses to the extent incurred by a Person that
is not a Restricted Subsidiary of the Person for which the calculation is
being made; plus
(5) depreciation, depletion and amortization (including amortization
of goodwill and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income (excluding any such
expenses to the extent incurred by a Person that is neither GulfTerra
Partners, GulfTerra Finance, nor a Restricted Subsidiary;) minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of GulfTerra Partners shall be added to Consolidated
Net Income to compute Consolidated Cash Flow of GulfTerra Partners only to the
extent that a corresponding amount would be permitted at the date of
determination to be dividended or distributed to GulfTerra Partners by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
57
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the aggregate Net Income (but not net loss in excess of such
aggregate Net Income) of all Persons that are Unrestricted Subsidiaries
shall be excluded (without duplication);
(2) the earnings included therein attributable to all entities that
are accounted for by the equity method of accounting and the aggregate Net
Income (but not net loss in excess of such aggregate Net Income) included
therein attributable to all entities constituting Joint Ventures that are
accounted for on a consolidated basis (rather than by the equity method of
accounting) shall be excluded;
(3) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement (other than the Indenture or its
Guarantee), instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders;
(4) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(5) the cumulative effect of a change in accounting principles shall
be excluded.
"Consolidated Net Tangible Assets" means, at any date of determination, the
total amount of assets of the GulfTerra Partners and its Restricted Subsidiaries
after deducting therefrom:
(1) all current liabilities (excluding (A) any current liabilities
that by their terms are extendable or renewable at the option of the
obligor thereon to a time more than 12 months after the time as of which
the amount thereof is being computed, and (B) current maturities of
long-term debt); and
(2) the value (net of any applicable reserves) of all goodwill, trade
names, trademarks, patents and other like intangible assets, all as set
forth, or on a pro forma basis would be set forth, on the consolidated
balance sheet of GulfTerra Partners' and its consolidated subsidiaries for
GulfTerra Partners' most recently completed fiscal quarter, prepared in
accordance with generally accepted accounting principles.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders or members (or
consolidated partners' capital in the case of a partnership) of such Person
and its consolidated Subsidiaries as of such date as determined in
accordance with GAAP; plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Equity) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock.
"Credit Facilities" means, with respect to GulfTerra Partners, GulfTerra
Finance or any Restricted Subsidiary, one or more debt facilities or commercial
paper facilities, including the Partnership Credit Facility, providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Equity" means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or
58
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date on which the notes
mature. Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Equity solely because the holders thereof have the right
to require GulfTerra Partners or a Restricted Subsidiary to repurchase such
Equity Interests upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Equity if the terms of such Equity Interests
provide that GulfTerra Partners or Restricted Subsidiary may not repurchase or
redeem any such Equity Interests pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "-- Covenants -- Restricted payments."
"El Paso" means El Paso Corporation, a Delaware corporation, and its
successors.
"El Paso Group" means, collectively, (1) El Paso, (2) each Person of which
El Paso is a direct or indirect Subsidiary and (3) each Person which is a direct
or indirect Subsidiary of any Person described in (1) or (2) above.
"Eliminated Covenants" has the meaning given to such term under the caption
"-- Eliminated covenants" above.
"Equity Interests" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, and any rights (other than debt securities
convertible into capital stock) warrants or options exchangeable for or
convertible into such capital stock; and
(5) all warrants, options or other rights to acquire any of the
interests described in clauses (1) -- (4) above (but excluding any debt
security that is convertible into, or exchangeable for, any of the
interests described in clauses (1) -- (4) above).
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of GulfTerra Partners and its Restricted Subsidiaries in existence
on the Issue Date.
"Existing Senior Subordinated Notes" means the 8 1/2% Senior Subordinated
Notes of the Issuers originally issued in March 2003 with maturity in June 2010,
the 10 5/8% Senior Subordinated Notes of the Issuers originally issued in
November 2002 with maturity in December 2012, the 8 1/2% Senior Subordinated
Notes of the Issuers originally issued in May 2002 with maturity in June 2011,
the 8 1/2% Senior Subordinated Notes of the Issuers originally issued in May
2001 with maturity in June 2011 and the 10 3/8% Senior Subordinated Notes of the
Issuers originally issued in May 1999 with maturity in May 2009.
"Fixed Charges" means, with respect to any Person for any period, without
duplication,
(A) the sum of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries (excluding for purposes of this clause (1)
consolidated interest expense included therein that is attributable to
Indebtedness of a Person that is not a Restricted Subsidiary of the
Person for which the calculation is being made) for such period, whether
paid or accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions,
59
discounts, and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period (excluding for
purposes of this clause (2) any such consolidated interest included
therein that is attributable to Indebtedness of a Person that is not a
Restricted Subsidiary); plus
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such guarantee or Lien is called upon,
provided that this clause (3) excludes interest on "claw-back,"
"make-well" or "keep-well" payments made by GulfTerra Partners or any
Restricted Subsidiary; plus (4) the product of (a) all dividend
payments, whether or not in cash, on any series of Disqualified Equity
of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests
of GulfTerra Partners (other than Disqualified Equity) or to GulfTerra
Partners or a Restricted Subsidiary of GulfTerra Partners, times (b) a
fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP; less
(B) to the extent included in (A) above, amortization or write-off of
deferred financing costs of such Person and its Restricted Subsidiaries
during such period and any charge related to, or any premium or penalty
paid in connection with, incurring any such Indebtedness of such Person and
its Restricted Subsidiaries prior to its Stated Maturity.
In the case of both (A) and (B), such amounts will be determined after
elimination of intercompany accounts among such Person and its Restricted
Subsidiaries and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, guarantees, repays or redeems any Indebtedness
(other than revolving credit borrowings not constituting a permanent commitment
reduction) or issues or redeems Disqualified Equity subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence (and the application of the net proceeds thereof), assumption,
guarantee, repayment or redemption of Indebtedness, or such issuance or
redemption of Disqualified Equity, as if the same had occurred at the beginning
of the applicable four-quarter reference period (and if such Indebtedness is
incurred to finance the acquisition of assets (including, without limitation, a
single asset, a division or segment or an entire company) that were conducting
commercial operations prior to such acquisition, there shall be included pro
forma net income for such assets, as if such assets had been acquired on the
first day of such period).
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (4) of
the proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded;
60
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the Obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date;
(4) interest on outstanding Indebtedness of the specified Person or
any of its Restricted Subsidiaries as of the last day of the four-quarter
reference period shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on such last
day after giving effect to any Hedging Obligation then in effect; and
(5) if interest on any Indebtedness incurred by the specified Person
or any of its Restricted Subsidiaries on such date may optionally be
determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate or other rates, then the
interest rate in effect on the last day of the four-quarter reference
period will be deemed to have been in effect during such period.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets, or through letters of credit or reimbursement, "claw-back," "make-well,"
or "keep-well" agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantor Subordinated Obligation" means, with respect to a Subsidiary
Guarantor, any Indebtedness or other Obligations of such Subsidiary Guarantor
(whether outstanding on the Issue Date or thereafter incurred) which is
expressly subordinated in right of payment to the Obligations of such Subsidiary
Guarantor under its Guarantee pursuant to a written agreement, including the
guarantees by such Subsidiary Guarantor of the Existing Senior Subordinated
Notes.
"Hedging Obligations" means, with respect to any Person, the net
obligations (not the notional amount) of such Person under interest rate and
commodity price swap agreements, interest rate and commodity price cap
agreements, interest rate and commodity price collar agreements and foreign
currency and commodity price exchange agreements, options or futures contract or
other similar agreements or arrangements or hydrocarbon hedge contracts or
hydrocarbon forward sale contracts, in each case designed to protect such Person
against fluctuations in interest rates, of foreign exchange rates, or commodity
prices.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof), other
than standby letters of credit and performance bonds issued by such Person
in the ordinary course of business, to the extent not drawn;
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) all Attributable Debt of such Person in respect of any sale and
lease-back transactions not involving a Capital Lease Obligation;
(6) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable incurred in the ordinary course of business;
(7) representing Disqualified Equity; or
61
(8) representing any Hedging Obligations other than to (in the
ordinary course of business and consistent with prior practice) hedge risk
exposure in the operations, ownership of assets or the management of
liabilities of such Person and its Restricted Subsidiaries;
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person, provided that a
guarantee otherwise permitted by the Indenture to be incurred by GulfTerra
Partners or any of its Restricted Subsidiaries of indebtedness incurred by
GulfTerra Partners or a Restricted Subsidiary in compliance with the terms of
the Indenture shall not constitute a separate incurrence of indebtedness.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
For purposes of clause (7) of the preceding paragraph, Disqualified Equity
shall be valued at the maximum fixed redemption, repayment or repurchase price,
which shall be calculated in accordance with the terms of such Disqualified
Equity as if such Disqualified Equity were repurchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture;
provided, however, that if such Disqualified Equity is not then permitted by its
terms to be redeemed, repaid or repurchased, the redemption, repayment or
repurchase price shall be the book value of such Disqualified Equity. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional Obligations as described above and the maximum
liability of any guarantees at such date; provided that for purposes of
calculating the amount of any non-interest bearing or other discount security,
such Indebtedness shall be deemed to be the principal amount thereof that would
be shown on the balance sheet of the issuer thereof dated such date prepared in
accordance with GAAP, but that such security shall be deemed to have been
incurred only on the date of the original issuance thereof. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional Obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the Obligation,
of any contingent Obligations at such date.
"Independent Investment Banker" means J.P. Morgan Securities Inc. (and its
successors), or, if such firm is unwilling or unable to select the applicable
Comparable Treasury Issue, an independent investment banking institution
selected by GulfTerra Partners.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's or BBB- (or the equivalent) by Standard & Poor's or
the equivalent by any other nationally recognized statistical rating
organization.
"Investment Grade Suspension Provision" has the meaning given to such term
under the caption "-- Change of control" above.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other Obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of the lender and
commission, moving, travel and similar advances to officers and employees made
in the ordinary course of business) or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. For purposes of
the definition of "Unrestricted Subsidiary," the definition of "Restricted
Payment" and the covenant described under the "Limitation on Restricted
Payments" covenant (i) the term "Investment" shall include
62
the portion (proportionate to GulfTerra Partners' Equity Interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of
GulfTerra Partners or any of its Restricted Subsidiaries at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, GulfTerra
Partners or such Restricted Subsidiary shall be deemed to continue to have a
permanent "Investment" in such Subsidiary at the time immediately before the
effectiveness of such redesignation less the portion (proportionate to GulfTerra
Partners' or such Restricted Subsidiary's Equity Interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation, and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors of
the General Partner. If GulfTerra Partners or any Restricted Subsidiary of
GulfTerra Partners sells or otherwise disposes of any Equity Interests of any
direct or indirect Restricted Subsidiary of GulfTerra Partners such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of GulfTerra Partners, GulfTerra Partners shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "-- Restricted payments."
"Issue Date" means July 3, 2003, the date of the first issuance of notes
under the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien (statutory or
otherwise), pledge, charge, security interest, hypothecation, assignment for
security, claim, preference, priority or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement or any lease in the nature thereof, any option or other agreement to
grant a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statute) of
any jurisdiction.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Income" means, with respect to any Person, the consolidated net income
(loss) of such Person and its Restricted Subsidiaries, determined in accordance
with GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) the aggregate gain (but not loss in excess of such aggregate
gain), together with any related provision for taxes on such gain, realized
in connection with any Asset Sale or the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries; and
(2) the aggregate extraordinary gain (but not loss in excess of such
aggregate extraordinary gain), together with any related provision for
taxes on such aggregate extraordinary gain (but not loss in excess of such
aggregate extraordinary gain).
"Net Proceeds" means, with respect to any Asset Sale or sale of Equity
Interests, the aggregate proceeds received by GulfTerra Partners or any of its
Restricted Subsidiaries in cash or Cash Equivalents in respect of any Asset Sale
or sale of Equity Interests (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in any
such sale), net of, without duplication, (i) the direct costs relating to such
Asset Sale or sale of Equity Interests, including, without limitation, brokerage
commissions and legal, accounting and investment banking fees, sales
commissions, recording fees, title transfer fees, and any relocation expenses
incurred as a result thereof, (ii) taxes paid or payable as a result thereof, in
each case after taking into account any available tax credits or deductions and
any tax sharing arrangements and amounts required to be applied to the repayment
of Indebtedness secured by a Lien on the asset or Equity Interests that were the
subject of such Asset Sale or sale of Equity Interests, (iii) all distributions
and payments required to be made to minority interest holders in Restricted
Subsidiaries as a result of such Asset Sale and (iv) any amounts to be set aside
in any reserve established in accordance with GAAP or any amount placed in
escrow, in either case for adjustment in respect of the sale price of such asset
or assets or for liabilities associated with such Asset Sale or sale of Equity
Interests and retained by GulfTerra Partners or any of its Restricted
Subsidiaries until such time as such reserve is reversed or such escrow
63
arrangement is terminated, in which case Net Proceeds shall include only the
amount of the reserve so reversed or the amount returned to GulfTerra Partners
or its Restricted Subsidiaries from such escrow arrangement, as the case may be.
"Non-Putable Debt Securities" means debt securities of either of the
Issuers or any of the Restricted Subsidiaries (excluding any guarantees
thereof), including the notes, other than Putable Debt Securities.
"Non-Recourse Debt" means Indebtedness as to which:
(1) neither GulfTerra Partners nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender of such Indebtedness;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes) of GulfTerra Partners or any
of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity; and
(3) the lenders have been notified in writing that they will not have
any recourse to the stock or assets of GulfTerra Partners or any of its
Restricted Subsidiaries;
provided that in no event shall Indebtedness of any Person which is not a
Restricted Subsidiary fail to be Non-Recourse Debt solely as a result of any
default provisions contained in a guarantee thereof by GulfTerra Partners or any
of its Restricted Subsidiaries, provided that GulfTerra Partners or such
Restricted Subsidiary was otherwise permitted to incur such guarantee pursuant
to the Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of GulfTerra Energy Partners, L.P., effective as of August
31, 2000, as amended by the First Amendment thereto dated November 27, 2002, the
Second Amendment thereto dated May 5, 2003 and the Third Amendment thereto dated
May 16, 2003, as such may be amended, modified or supplemented from time to
time.
"Partnership Credit Facility" means the Sixth Amended and Restated Credit
Agreement among GulfTerra Partners, GulfTerra Finance, the lenders from time to
time party thereto and JPMorgan Chase Bank, as administrative agent, dated as of
March 23, 1995, as amended and restated through June 13, 2003, including any
deferrals, renewals, extensions, replacements, refinancings or refundings
thereof, and any amendments, modifications or supplements thereto and any
agreement providing therefor (including any restatement thereof and any
increases in the amount of commitments thereunder), whether by or with the same
or any other lenders, creditors, group of lenders or group of creditors and
including related notes, guarantees, collateral security documents and other
instruments and agreements executed in connection therewith.
"Permitted Business" means (1) gathering, transporting (by barge, pipeline,
ship, truck or other modes of hydrocarbon transportation), terminalling,
storing, producing, acquiring, developing, exploring for, processing,
dehydrating and otherwise handling hydrocarbons, including, without limitation,
constructing pipeline, platform, dehydration, processing and other
energy-related facilities, and activities or services reasonably related or
ancillary thereto, (2) any business that generates gross income that constitutes
"qualifying income" under Section 7704(d) of the Internal Revenue Code of 1986,
as amended, other than any business that generates any gross income arising from
the refining of a natural resource, and (3) any other business that does not
constitute a reportable segment (as determined in accordance with GAAP) for
GulfTerra Partners' annual audited consolidated financial statements.
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"Permitted Business Investments" means Investments by GulfTerra Partners or
any of its Restricted Subsidiaries in any Unrestricted Subsidiary of GulfTerra
Partners or in any Person that does not constitute a direct or indirect
Subsidiary of GulfTerra Partners (a "Joint Venture"), provided that:
(1) either (a) at the time of such Investment and immediately
thereafter, GulfTerra Partners could incur $1.00 of additional Indebtedness
under the first paragraph in the limitation of Indebtedness set forth under
the caption "-- Incurrence of indebtedness and issuance of disqualified
equity" above or (b) such Investment is made with the proceeds of
Incremental Funds (as defined in the covenant described under
"-- Covenants -- Restricted payments");
(2) if such Unrestricted Subsidiary or Joint Venture has outstanding
Indebtedness at the time of such Investment, either (a) all such
Indebtedness is non-recourse to GulfTerra Partners and its Restricted
Subsidiaries or (b) any such Indebtedness of such Unrestricted Subsidiary
or Joint Venture that is recourse to GulfTerra Partners or any of its
Restricted Subsidiaries (which shall include all Indebtedness of such
Unrestricted Subsidiary or Joint Venture for which GulfTerra Partners or
any of its Restricted Subsidiaries may be directly or indirectly,
contingently or otherwise, obligated to pay, whether pursuant to the terms
of such Indebtedness, by law or pursuant to any guaranty or "claw-back,"
"make-well" or "keep-well" arrangement) could, at the time such Investment
is made and, if later, at the time any such Indebtedness is incurred, be
incurred by GulfTerra Partners and its Restricted Subsidiaries in
accordance with the limitation on indebtedness set forth in the first
paragraph under the caption "-- Incurrence of Indebtedness and issuance of
disqualified equity" above; and
(3) such Unrestricted Subsidiary's or Joint Venture's activities are
not outside the scope of the Permitted Business.
The term "Joint Venture" shall include Atlantis Offshore, L.L.C., Coyote
Gas Treating, L.L.C., Deepwater Gateway, L.L.C., Poseidon Oil Pipeline Company,
L.L.C. and Cameron Highway Oil Pipeline Company and none of Atlantis Offshore,
Coyote Gas Treating, Deepwater Gateway, Cameron Highway and Poseidon Oil
Pipeline Company shall constitute a Restricted Subsidiary for purposes of the
Indenture (even if such Person is then a Subsidiary of GulfTerra Partners),
until such time as the Board of Directors of the General Partner designates, in
a manner consistent with the designation of an Unrestricted Subsidiary as a
Restricted Subsidiary or a Restricted Subsidiary as an Unrestricted Subsidiary,
each as described under "Covenants -- Designation of restricted and unrestricted
subsidiaries," Atlantis Offshore, Coyote Gas Treating, Deepwater Gateway,
Cameron Highway or Poseidon Oil Pipeline Company, including one or more of its
Subsidiaries, as the case may be, as a Restricted Subsidiary or an Unrestricted
Subsidiary.
"Permitted Investments" means:
(1) any Investment in, or that results in the creation of, any
Restricted Subsidiary of GulfTerra Partners;
(2) any Investment in GulfTerra Partners or in a Restricted Subsidiary
of GulfTerra Partners (excluding redemptions, purchases, acquisitions or
other retirements of Equity Interests in GulfTerra Partners) at any one
time outstanding;
(3) any Investment in cash or Cash Equivalents;
(4) any Investment by GulfTerra Partners or any Restricted Subsidiary
of GulfTerra Partners in a Person if as a result of such Investment such
Person becomes a Restricted Subsidiary of GulfTerra Partners or such Person
is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into,
GulfTerra Partners or a Restricted Subsidiary of GulfTerra Partners;
(5) any Investment made as a result of the receipt of consideration
consisting of other than cash or Cash Equivalents from an Asset Sale that
was made pursuant to and in compliance with the covenant described above
under the caption "-- Repurchase at the option of holders -- Asset sales;"
65
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Equity) of GulfTerra Partners;
(7) payroll advances in the ordinary course of business and other
advances and loans to officers and employees of GulfTerra Partners or any
of its Restricted Subsidiaries, so long as the aggregate principal amount
of such advances and loans does not exceed $1.0 million at any one time
outstanding;
(8) Investments in stock, Obligations or securities received in
settlement of debts owing to GulfTerra Partners or any of its Restricted
Subsidiaries as a result of bankruptcy or insolvency proceedings or upon
the foreclosure, perfection or enforcement of any Lien in favor of
GulfTerra Partners or any such Restricted Subsidiary, in each case as to
debt owing to GulfTerra Partners or any of its Restricted Subsidiary that
arose in the ordinary course of business of GulfTerra Partners or any such
Restricted Subsidiary;
(9) any Investment in Hedging Obligations;
(10) any Investments in prepaid expenses, negotiable instruments held
for collection and lease, utility, workers' compensation and performance
and other similar deposits and prepaid expenses made in the ordinary course
of business;
(11) any Investments required to be made pursuant to any agreement or
obligation of GulfTerra Partners or any Restricted Subsidiary of GulfTerra
Partners in effect on the Issue Date and listed on a schedule to the
Indenture; and
(12) other Investments in any Person engaged in a Permitted Business
(other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (12) since
the Issue Date and existing at the time the Investment, which is the
subject of the determination, was made, not to exceed $5.0 million.
"Permitted Liens" means:
(1) Liens securing Indebtedness and other Obligations of the Issuers
and the Restricted Subsidiaries under Credit Facilities permitted to be
incurred under the Indenture that do not exceed $1.2 billion in the
aggregate;
(2) easements, rights-of-way, restrictions, minor defects and
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of GulfTerra Partners
or its Restricted Subsidiaries;
(3) Liens securing reimbursement Obligations of GulfTerra Partners or
a Restricted Subsidiary with respect to letters of credit encumbering only
documents and other property relating to such letters of credit and the
products and proceeds thereof;
(4) Liens encumbering deposits made to secure Obligations arising from
statutory, regulatory, contractual or warranty requirements of GulfTerra
Partners and its Restricted Subsidiaries;
(5) Liens in favor of GulfTerra Partners or any of the Restricted
Subsidiaries;
(6) any interest or title of a lessor in the property subject to a
Capital Lease Obligation;
(7) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with GulfTerra Partners or any
Restricted Subsidiary of GulfTerra Partners, provided that such Liens were
in existence prior to and were not obtained in contemplation of such merger
or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with GulfTerra Partners or such
Restricted Subsidiary (including proceeds thereof, accessions thereto and
upgrades thereof);
(8) Liens on property existing at the time of acquisition thereof by
GulfTerra Partners or any Restricted Subsidiary of GulfTerra Partners,
provided that such Liens were in existence prior to and were
66
not obtained in contemplation of such acquisition and relate solely to such
property (including proceeds thereof), accessions thereto and upgrades
thereof;
(9) Liens to secure the performance of tenders, bids, leases,
statutory obligations, surety or appeal bonds, government contracts,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business;
(10) Liens on any property or asset acquired, constructed, repaired or
improved by GulfTerra Partners or any Restricted Subsidiary (a "Purchase
Money Lien"), which (A) are in favor of the seller of such property or
assets, in favor of the Person constructing, repairing or improving such
asset or property, or in favor of the Person that provided the funding for
the acquisition, construction, repair or improvement of such asset or
property, (B) are created prior to, at the time of or within 360 days after
the date of acquisition, completion, construction, repair or improvement or
the commencement of full operations thereof (whichever is later), (C)
secure all or a portion of the purchase price or construction, repair or
improvement cost, as the case may be, of such asset or property (or debt
incurred prior to, at the time of, or within 360 days after such date
referred to in clause (B) to provide funds therefor plus fees and expenses
in connection with incurrence of such debt) and (D) are limited to the
asset or property so acquired, constructed, repaired or improved (including
proceeds thereof, accessions thereto and upgrades thereof);
(11) Liens to secure performance of Hedging Obligations of GulfTerra
Partners or a Restricted Subsidiary;
(12) Liens existing on the Issue Date and Liens on any extensions,
refinancing, renewal, replacement or defeasance of any Indebtedness or
other obligation secured thereby;
(13) Liens on and pledges of the Equity Interests of any Unrestricted
Subsidiary or any Joint Venture owned by GulfTerra Partners or any
Restricted Subsidiary to the extent securing either Non-Recourse Debt or
Indebtedness (other than Permitted Debt) otherwise permitted by the
Indenture;
(14) statutory Liens of landlords and warehousemen, carriers,
mechanics, suppliers, materialmen, repairmen, or other like Liens
(including contractual landlord's liens) arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
(15) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other similar types of social security, old age pension or public
liability obligations;
(16) Liens on pipelines or pipeline facilities that arise by operation
of law;
(17) Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil and gas leases, farmout agreements,
division orders, contracts for sale, transportation or exchange of oil and
natural gas, unitization and pooling declarations and agreements, area of
mutual interest agreements and other agreements arising in the ordinary
course of GulfTerra Partners' or any Restricted Subsidiary's business that
are customary in the Permitted Business;
(18) judgment and attachment Liens not giving rise to a Default or
Event of Default;
(19) Liens securing the Obligations of the Issuers under the notes and
the Indenture and of the Subsidiary Guarantors under the Guarantees;
(20) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
67
(21) Liens arising from protective filings made in the appropriate
offices for the filing of a financing statement in the applicable
jurisdiction(s) in connection with any lease, consignment or similar
transaction otherwise permitted hereby, which filings are made for the
purpose of perfecting the interest of the secured party in the relevant
items, if the transaction were subsequently classified as a sale and
secured lending arrangement;
(22) Liens arising out of consignment or similar arrangements for sale
of goods;
(23) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's Obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(24) Liens securing any Indebtedness which includes a covenant that
limits liens in a manner substantially similar to the covenant entitled
"Liens;"
(25) Liens with respect to Obligations that in the aggregate do not
exceed 10 percent of Consolidated Net Tangible Assets at any one time
outstanding;
(26) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of GulfTerra Partners or any of its Restricted Subsidiaries on
deposit with or in possession of such bank;
(27) Liens imposed by law or order as a result of any proceeding
before any court or regulatory body that is being contested in good faith,
and liens which secure a judgment or other court-ordered award or
settlement as to which GulfTerra Partners or the applicable Subsidiary have
not exhausted its appellate rights;
(28) any extension, renewal, refinancing, refunding or replacement, or
successive extensions, renewals, refinancing, refunding or replacements, of
Liens, in whole or in part, referred to in clauses (7), (8) or (10) above;
provided, however, that any extension, renewal, refinancing, refunding or
replacement Lien shall be limited to the property or assets covered by the
Lien extended, renewed, refinanced, refunded or replaced and that the
Obligations secured by any extension, renewal, refinancing, refunding or
replacement Lien shall be in an amount not greater than the amount of the
Obligations secured by the Lien extended, renewed, refinanced, refunded or
replaced and any expenses of GulfTerra Partners and our subsidiaries,
including any premium, incurred in connection with any extension, renewal,
refinancing, refunding or replacement; or
(29) any Lien resulting from the deposit of moneys or evidence of
Indebtedness in trust for the purpose of defeasing debt of GulfTerra
Partners or any Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of GulfTerra
Partners or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of GulfTerra Partners or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of necessary fees and expenses incurred in
connection therewith and any premiums paid on the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded);
(2) such Permitted Refinancing Indebtedness has a final maturity date
no earlier than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes or
the Guarantees, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment
68
to, the notes or the Guarantees, as the case may be, on terms at least as
favorable to the holders of notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(4) such Indebtedness is incurred either by GulfTerra Partners or by
the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Putable Debt Securities" means debt securities of either of the Issuers or
any of the Restricted Subsidiaries (excluding any guarantees thereof) that
provide rights of repurchase or redemption to the holders thereof upon a Change
of Control similar to those provided to holders of the Existing Senior
Subordinated Notes upon a Change of Control. Putable Debt Securities include the
Existing Senior Subordinated Notes but do not include Indebtedness under Credit
Facilities, the notes or any debt securities of either of the Issuers or any of
the Restricted Subsidiaries which, while providing rights of repurchase or
redemption to the holders thereof upon a Change of Control similar to those
provided to holders of the Existing Senior Subordinated Notes upon a Change of
Control, contain provisions that are equally or more likely to result in the
suspension or elimination of such rights as or than the Investment Grade
Suspension Provision is likely to result in the suspension or elimination of the
repurchase rights described under "-- Repurchase at the option of holders --
Change of Control."
"Rating Agency" means Standard & Poor's and Moody's, or if Standard &
Poor's or Moody's or both shall not make a rating on the notes publicly
available, a nationally recognized statistical rating agency or agencies, as the
case may be, selected by GulfTerra Partners (as certified by a resolution of the
Board of Directors) which shall be substituted for Standard & Poor's or Moody's,
or both, as the case may be.
"Ratings Downgrade" means, with respect to a Change of Control, a reduction
in the rating assigned to the notes by any Rating Agency that occurs (i) prior
to and as a result of, (ii) upon or (iii) within 30 days following, such Change
of Control.
"Reference Treasury Dealer" means (i) J.P. Morgan Securities Inc. (or an
Affiliate of thereof which is a Primary Treasury Dealer) and Credit Suisse First
Boston LLC (or an Affiliate thereof which is a Primary Treasury Dealer), and
their respective successors; provided, however, that if either of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), we will substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means the remaining scheduled payments of
the principal of the notes to be redeemed and interest thereon that would be due
after the related redemption date but for such redemption, provided, however,
that, if such redemption date is not an interest payment date, the amount of the
next succeeding scheduled interest payment thereon will be reduced by the amount
of interest accrued on such notes to such redemption date.
"Restricted Investment" means an Investment other than a Permitted
Investment or a Permitted Business Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referenced
Person that is not an Unrestricted Subsidiary. Notwithstanding anything in the
Indenture to the contrary, GulfTerra Finance shall be designated as a Restricted
Subsidiary of GulfTerra Partners.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act and the Exchange Act, as such Regulation is in
effect on the date hereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, Inc., or any
successor to the rating agency business thereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent Obligations to
repay,
69
redeem or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Subordinated Obligation" means any Indebtedness of GulfTerra Partners or
GulfTerra Finance (whether outstanding on the Issue Date or thereafter incurred)
which is subordinated or junior in right of payment to the notes pursuant to a
written agreement, including the Existing Senior Subordinated Notes.
"Subordinated Putable Debt Securities" means Putable Debt Securities that
are subordinated or junior in right of payment to the notes pursuant to a
written agreement, including the Existing Senior Subordinated Notes.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50 percent of the Voting Stock is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (whether general or limited), limited liability
company or joint venture (a) the sole general partner or the managing
general partner or managing member of which is such Person or a Subsidiary
of such Person, or (b) if there are more than a single general partner or
member, either (i) the only general partners or managing members of which
are such Person and/or one or more Subsidiaries of such Person (or any
combination thereof) or (ii) such Person owns or controls, directly or
indirectly, a majority of the outstanding general partner interests, member
interests or other Voting Stock of such partnership, limited liability
company or joint venture, respectively.
"Subsidiary Guarantors" means each of:
(1) Cameron Highway Pipeline GP, L.L.C., Cameron Highway Pipeline I,
L.P., Crystal Holding, L.L.C., First Reserve Gas, L.L.C., Flextrend
Development Company, L.L.C., GulfTerra Alabama Intrastate, L.L.C.,
GulfTerra Field Services, L.L.C., GulfTerra GC, L.P., GulfTerra Holding I,
L.L.C., GulfTerra Holding II, L.L.C., GulfTerra Holding III, L.L.C.,
GulfTerra Holding IV, L.P., GulfTerra Holding V, L.P., GulfTerra
Intrastate, L.P., GulfTerra NGL Storage, L.L.C., GulfTerra Oil Transport,
L.L.C., GulfTerra Operating Company, L.L.C., GulfTerra South Texas, L.P.,
GulfTerra Texas Pipeline, L.P., Hattiesburg Gas Storage Company,
Hattiesburg Industrial Gas Sales, L.L.C., High Island Offshore System,
L.L.C., Manta Ray Gathering Company, L.L.C., Petal Gas Storage, L.L.C., and
Poseidon Pipeline Company, L.L.C.; and
(2) any other Subsidiary that executes a Guarantee in accordance with
the provisions of the Indenture; and
(3) their respective successors and assigns.
Notwithstanding anything in the Indenture to the contrary, GulfTerra
Finance shall not be a Subsidiary Guarantor.
"Tender Condition" means, as of the time of expiration of the period during
which notes may be validly tendered for repurchase or redemption pursuant to a
Change of Control Offer, Subordinated Putable Debt Securities in an aggregate
principal amount of the greater of (a) $250 million and (b) 30 percent of the
aggregate principal amount of all Non-Putable Debt Securities outstanding at
such time, have been properly tendered and not withdrawn pursuant to a change of
control offer in respect of the Change of Control made in accordance with the
applicable indenture or other instrument or agreement governing such
Subordinated Putable Debt Securities.
"Treasury Rate" means, with respect to any redemption date of the notes,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue, expressed as a percentage of the principal amount, equal to the
Comparable Treasury Price for such redemption date.
70
"U.S. Government Obligations" means securities that are (i) direct
Obligations of the United States of America for the payment of which its full
faith and credit is pledged; (ii) Obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) above, are not callable or redeemable at the option of the
issuers thereof: or (iii) depository receipts issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a Depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such Depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation evidenced by such Depository receipt.
"Unrestricted Subsidiary" means any Subsidiary of GulfTerra Partners (other
than GulfTerra Finance) that is designated by the Board of Directors of the
General Partner as an Unrestricted Subsidiary pursuant to a Board Resolution,
provided that, at the time of such designation, (x) no portion of the
Indebtedness or other obligation of such Subsidiary, whether contingent or
otherwise and whether pursuant to the terms of such Indebtedness or the terms
governing the organization of such Subsidiary or by law, (A) is guaranteed by
GulfTerra Partners or any other Restricted Subsidiary, (B) is recourse to or
obligates GulfTerra Partners or any Restricted Subsidiary in any way (including
any "claw-back," "keep-well," "make-well" or other agreements, arrangements or
understandings to maintain the financial performance or results of operations of
such Subsidiary or to otherwise infuse or contribute cash to such Subsidiary),
or (C) subjects any property or assets of GulfTerra Partners or any Restricted
Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction of such Indebtedness, unless such Investment or Indebtedness is
permitted by the provisions of the Indenture described above under the captions
"-- Restricted payments" and "-- Incurrence of Indebtedness and issuance of
disqualified equity," (y) no Equity Interests of a Restricted Subsidiary are
held by such Subsidiary, directly or indirectly, and (z) the amount of GulfTerra
Partners' Investment, as determined at the time of such designation, in such
Subsidiary since the Issue Date to the date of designation is treated as of the
date of such designation as a Restricted Investment, Permitted Investment or
Permitted Business Investment, as applicable. Currently, EPN Arizona Gas,
L.L.C., Arizona Gas Storage, L.L.C. and Matagorda Island Area Gathering System
are designated as Unrestricted Subsidiaries. Notwithstanding anything in the
Indenture to the contrary, GulfTerra Finance shall not be, and shall not be
designated as, an Unrestricted Subsidiary.
Any designation of a Subsidiary of GulfTerra Partners as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolutions of the Board of Directors of the General
Partner giving effect to such designation and an Officers' Certificate
certifying that such designation compiled with the preceding conditions and was
permitted by the covenant described above under the caption
"-- Covenants -- Restricted payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of GulfTerra Partners as of
such date and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," GulfTerra Partners shall be in Default of such
covenant. The Board of Directors of the General Partner may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of GulfTerra Partners of any outstanding Indebtedness of
such Unrestricted Subsidiary and such designation shall only be permitted if (1)
such Indebtedness is permitted under the covenant described under the caption
"-- Covenants -- Incurrence of indebtedness and issuance of disqualified
equity," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Equity Interests of
such Person pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers, general partners or trustees of any Person (regardless of
whether, at the time,
71
Equity Interests of any other class or classes shall have, or might have, voting
power by reason of the occurrence of any contingency) or, with respect to a
partnership (whether general or limited), any general partner interest in such
partnership.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
The following is a discussion of material United States federal income tax
considerations applicable to initial investors who purchase the notes pursuant
to this offering at the note's initial offering price and hold the notes as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). This summary is based upon provisions of the
Code, regulations, rulings and decisions currently in effect, all of which are
subject to change, possibly with retroactive effect. The discussion does not
purport to deal with all aspects of the United States federal taxation that may
be relevant to particular investors in light of their particular circumstances
(for example, to persons holding notes as part of a conversion transaction or as
part of a hedge or hedging transaction, or as a position in a straddle for tax
purposes), nor does it discuss the United States federal income tax
considerations applicable to certain types of investors subject to special
treatment under the federal income tax laws (for example, insurance companies,
tax-exempt organizations and financial institutions). In addition, the
discussion does not consider the effect of any foreign, state, local or other
tax laws that may be applicable to a particular investor.
PROSPECTIVE INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT
THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used in this tax discussion, the term "United States holder" means a
beneficial owner of a note that is, for United States federal income tax
purposes,
- a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof,
- an estate, the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
The term also includes certain former citizens and certain former long-term
residents of the United States. If a partnership holds notes, the tax treatment
of a partner will generally depend on the status of the partner and on the
activities of the partnership. Partners of partnerships holding notes should
consult their tax advisors.
72
Interest on a note. The Series A notes were issued with no more than a de
minimus amount of original issue discount. Accordingly, interest on a note will
generally be taxable to a United States holder as ordinary interest income at
the time it accrues or is received in accordance with the United States holder's
method of accounting for United States federal income tax purposes.
Sale or retirement of a note. Upon the sale or retirement of a note, a
United States holder will recognize a taxable gain or loss equal to the
difference between the amount realized on the sale or retirement and the
holder's adjusted tax basis in the note. A holder's adjusted tax basis in a note
generally will be the cost for the note. This gain or loss generally will be
capital gain or loss and will be long-term capital gain or loss if the notes
have been held for more than one year. To the extent the amount realized
represents accrued but unpaid interest, that amount must be taken into account
as interest income, if it was not previously included in income of the holder.
Exchange offer. The exchange of the notes for exchange notes pursuant to
the Registration Rights Agreement will not result in any United States federal
income tax consequences to the United States holders. When a United States
holder exchanges a note for an exchange note pursuant to the Registration Rights
Agreement, the holder will have the same adjusted tax basis and holding period
in the exchange note as in the note immediately before the exchange.
Payments under registration rights agreement. We may be required to pay
Additional Interest to holders in the event we do not comply with certain
covenants. Although the matter is not free from doubt, we intend to take the
position that a holder should be required to report any Additional Interest as
ordinary income for United States federal income tax purposes at the time it
accrues or is received in accordance with the holder's regular method of
accounting. It is possible, however, that the Internal Revenue Service may take
a different position, in which case the timing and amount of income may be
different.
Backup withholding and information reporting. Information reporting will
apply to payments of principal, premium and interest on, and the proceeds of
disposition of, a note with respect to certain noncorporate United States
holders and backup withholding may also apply. Backup withholding will apply
only if the United States holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be his Social
Security number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest or dividends or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that it has not been notified by the IRS that it is
subject to backup withholding for failure to report interest and dividend
payments. The backup withholding rate is currently 28 percent. After December
31, 2010, the backup withholding rate will be increased to 31 percent. United
States holders should consult their tax advisors regarding their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
The amount of any backup withholding from a payment to a United States
holder will be allowed as a credit against the holder's United States federal
income tax liability and may entitle the holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used in this tax discussion, a non-United States holder means any
beneficial owner of a note that is not a United States holder. The rules
governing the United States federal income and estate taxation of a non-United
States holder are complex, and no attempt will be made herein to provide more
than a summary of those rules. Special rules may apply to a non-United States
holder if that holder is a controlled foreign corporation, passive foreign
investment company or foreign personal holding company and therefore subject to
special treatment under the Code. NON-UNITED STATES HOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS WITH REGARD TO AN INVESTMENT IN THE NOTES, INCLUDING ANY
REPORTING REQUIREMENTS.
Payment of interest. Generally, payment of interest on a note to a
non-United States holder will qualify for the "portfolio interest" exemption
and, therefore, will not be subject to United States federal income tax or
73
withholding tax, provided that this interest income is not effectively connected
with a United States trade or business of the non-United States holder and
provided that the non-United States holder:
- does not actually or constructively own 10 percent or more of the capital
or profits interest in any issuer or 10 percent or more of the combined
voting power of all classes of stock of any issuer entitled to vote,
- is not, for United States federal income tax purposes, a controlled
foreign corporation related to the issuer within the meaning of the Code,
- is not a bank receiving interest on a loan entered into in the ordinary
course of its business within the meaning of the Code and
- either:
(a) provides a Form W-8BEN or W-8IMY, as appropriate (or a suitable
substitute form), signed under penalties of perjury that includes its
name and address and certifies as to its non-United States holder status
in compliance with applicable law and regulations or
(b) holds its notes through a securities clearing organization,
bank or other financial institution that holds customers' securities in
the ordinary course of its trade or business and that provides a
statement signed under penalties of perjury in which it certifies to the
issuers or the issuers' agent that a Form W-8BEN or W-8IMY, as
appropriate (or suitable substitute), has been received by it from the
non-United States holder or qualifying intermediary and furnishes the
issuers or the issuers' agent with a copy thereof.
United States Treasury Regulations provide alternative methods for
satisfying these certification requirements. For example, in the case of notes
held by a foreign partnership, the regulations require that the certification
described above be provided by the partners rather than by the partnership and
that the partnership provide certain information, including a U.S. taxpayer
identification number. A look-through rule applies in the case of tiered
partnerships. Non-United States holders are urged to consult their own tax
advisors regarding these regulations.
Except to the extent that an applicable treaty otherwise provides, a
non-United States holder generally will be taxed in the same manner as a United
States holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the non-United States
holder. Effectively connected interest received by a corporate non-United States
holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 28 percent rate (or, if applicable, a lower treaty
rate). Even though this effectively connected interest is subject to income tax,
and may be subject to the branch profits tax, it is not subject to withholding
tax, unless derived through a partnership, if the non-United States holder
delivers IRS Form W-8ECI (or successor form) annually to the payor.
Interest income of a non-United States holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
withholding tax at a 28 percent rate unless that rate is reduced or eliminated
pursuant to an applicable tax treaty.
Sale, exchange or redemption of the notes. A non-United States holder of a
note will generally not be subject to United States federal income tax or
withholding tax on any gain realized on the sale, exchange, redemption or other
disposition of the note unless:
- the gain is effectively connected with a United States trade or business
of the non-United States holder,
- in the case of a non-United States holder who is an individual, the
holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition,
and either the holder has a "tax home" in the United States or the
disposition is attributable to an office or other fixed place of business
maintained by that holder in the United States or
74
- the non-United States holder is subject to tax pursuant to the provisions
of the Code applicable to certain United States expatriates.
U.S. federal estate tax considerations. A note beneficially owned by an
individual who is not a citizen or resident of the United States at the time of
death will generally not be includable in the decedent's gross estate for United
States federal estate tax purposes, provided that the beneficial owner did not
at the time of death actually or constructively own 10 percent or more of the
capital or profits interests in any issuer or 10 percent or more of the combined
voting power of all classes of stock of any issuer entitled to vote, and
provided that, at the time of the holder's death, payments with respect to that
note would not have been effectively connected with the holder's conduct of a
trade or business within the United States.
Information reporting and backup withholding tax. Information reporting
will generally apply to payments of interest and the amount of tax, if any,
withheld with respect to such payments to a non-United States holder. Copies of
the information returns reporting such interest payments and any withholding may
also be made available to the tax authorities in the country in which the
non-United States holder resides under the provisions of an applicable income
tax treaty. United States backup withholding tax generally will not apply to
payments of interest and principal on a note to a non-United States holder if
the statement described in "-- Payment of interest" is duly provided by the
holder or the holder otherwise establishes an exemption, provided that the
issuers do not have actual knowledge that the holder is a United States person.
In addition, backup withholding tax generally will not apply to any payment
of the proceeds of the sale of a note effected outside the United States by a
foreign office of a "broker" (as defined in applicable United States Treasury
Regulations). However, if the broker:
- is a United States person,
- derives 50 percent or more of its gross income from all sources for
certain periods from the conduct of a United States trade or business,
- is a controlled foreign corporation for United States tax purposes or
- is a foreign partnership in which one or more United States persons, in
the aggregate, own more than 50 percent the income or capital interests
in the partnership or a foreign partnership that is engaged in a trade or
business in the United States,
payment of the proceeds will be subject to information reporting requirements
unless the broker has documentary evidence in its records that the beneficial
owner is a non-United States holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption.
Payment of the proceeds of any sale of a note to or through the United
States office of a broker, whether foreign or United States, is subject to
information reporting and backup withholding requirements, unless the beneficial
owner of the note provides the statement described in "-- Payment of interest"
or otherwise establishes an exemption and the broker does not have actual
knowledge that the payee is a United States person or that the exemption
conditions are not satisfied.
Any amounts withheld from a payment to a non-United States holder under the
backup withholding rules will be allowed as a credit against the holder's United
States federal income tax liability and may entitle the non-United States holder
to a refund, provided that the required information is provided to the IRS.
United States Treasury Regulations provide certain presumptions under which
a non-United States holder is subject to backup withholding and information
reporting unless such holder provides a certification as to its non-United
States status. Non-United States holders should consult their own tax advisors
with respect to the impact of these regulations.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE,
75
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL
OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
exchange or purchase of the notes by employee benefit plans that are subject to
Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended
("ERISA"), plans, individual retirement accounts and other arrangements that are
subject to Section 4975 of the Code or provisions under any federal, state,
local, non-U.S. or other laws or regulations that are similar to such provisions
of ERISA or the Code (collectively, "Similar Laws"), and entities whose
underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements (each, a "Plan").
GENERAL FIDUCIARY MATTERS
ERISA and the Code impose certain duties on persons who are fiduciaries of
a Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA Plan")
and prohibit certain transactions involving the assets of an ERISA Plan and its
fiduciaries or other interested parties. Under ERISA and the Code, any person
who exercises any discretionary authority or control over the administration of
an ERISA Plan or the management or disposition of the assets of an ERISA Plan,
or who renders investment advice for a fee or other compensation to an ERISA
Plan, is generally considered to be a fiduciary of the ERISA Plan.
In considering the exchange offer or an investment in the notes of a
portion of the assets of any Plan, a fiduciary should determine whether the
investment is in accordance with the documents and instruments governing the
plan and the applicable provisions of ERISA, the Code or any Similar Law
relating to a fiduciary's duties to the Plan including, without limitation, the
prudence, diversification, delegation of control and prohibited transaction
provisions of ERISA, the Code and any other applicable Similar Laws.
Any insurance company proposing to invest assets of its general account in
the notes should consider the extent that such investment would be subject to
the requirements of ERISA in light of the U.S. Supreme Court's decision in John
Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and under any
subsequent legislation or other guidance that has or may become available
relating to that decision, including the enactment of Section 401(c) of ERISA by
the Small Business Job Protection Act of 1996 and the regulations promulgated
thereunder.
PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from
engaging in specified transactions involving plan assets with persons or
entities who are "parties in interest," within the meaning of ERISA, or
"disqualified persons," within the meaning of Section 4975 of the Code, unless
an exemption is available. A party in interest or disqualified person who
engages in a non-exempt prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code. In addition, the
fiduciary of the ERISA Plan that engages in such a non-exempt prohibited
transaction may be subject to penalties and liabilities under ERISA and the
Code.
The exchange, acquisition and/or holding of notes by an ERISA Plan with
respect to which the Issuers, the Initial Purchasers, the Subsidiary Guarantors,
or any of their respective affiliates is considered a party in interest or a
disqualified person may constitute or result in a direct or indirect prohibited
transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless
the investment is acquired and is held in accordance with an applicable
statutory, class or individual prohibited transaction exemption. In this regard,
the United States Department of Labor (the "DOL") has issued prohibited
transaction class exemptions, or "PTCEs," that may apply to the exchange,
acquisition and holding of the notes. These class exemptions include, without
limitation, PTCE 84-14 respecting transactions determined by independent
qualified professional asset managers, PTCE 90-1 respecting insurance company
pooled separate accounts, PTCE 91-38 respecting bank collective investment
funds, PTCE 95-60 respecting life insurance company general
76
accounts and PTCE 96-23 respecting transactions determined by in-house asset
managers, although there can be no assurance that all of the conditions of any
such exemptions will be satisfied.
Because of the foregoing, the notes should not be purchased or held by any
person investing "plan assets" of any Plan, unless such purchase and holding
will not constitute a non-exempt prohibited transaction under ERISA and the Code
or violation of any applicable Similar Laws.
PLAN ASSET ISSUES
ERISA and the Code do not define "plan assets." However, regulations (the
"Plan Assets Regulations") promulgated under ERISA by the DOL generally provide
that when an ERISA Plan acquires an "equity" interest in an entity that is
neither a "publicly-offered security" nor a security issued by an investment
company registered under the Investment Company Act of 1940, the ERISA Plan's
assets include both the equity interest and an undivided interest in each of the
underlying assets of the entity unless it is established either that equity
participation in the entity by "benefit plan investors" is not "significant"
(i.e., it is significant if 25 percent or more of any class of equity is held by
benefit plan investors) or that the entity is an "operating company," in each
case as defined in the Plan Assets Regulations.
It is not anticipated that (i) the notes will constitute "publicly-offered
securities" for purposes of the Plan Asset Regulations, (ii) the Issuers will be
an investment company registered under the Investment Company Act of 1940, (iii)
the Issuers will be in a position to monitor whether investment in the notes by
benefit plan investors will be "significant" for purposes of the Plan Assets
Regulations or (iv) GulfTerra Energy Finance Corporation will qualify as an
operating company within the meaning of the Plan Assets Regulations. It is
anticipated that GulfTerra Energy Partners, L.P. will qualify as an operating
company within the meaning of the Plan Assets Regulations, although no assurance
can be given in this regard.
The Plan Assets Regulations define an "equity interest" as any interest in
an entity other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. Although
there is little authority on the subject, we believe that the notes will be debt
rather than equity interests, regardless of whether or not the exchange offer is
accepted. However, there can be no assurance that the DOL or others would
characterize the notes as indebtedness on the date of issuance or at any given
time thereafter.
PLAN ASSETS CONSEQUENCES
If our assets were deemed to be "plan assets" under ERISA, this would
result, among other things, in (i) the application of the prudence and other
fiduciary responsibility standards of ERISA to investments made by us and (ii)
the possibility that certain transactions in which we might seek to engage could
constitute "prohibited transactions" under ERISA and the Code. (Whether or not
our assets are deemed to be "plan assets" under ERISA, see discussion under
Prohibited Transactions above).
REPRESENTATION
Accordingly, by its acceptance of a note, each purchaser and subsequent
transferee of a note (or any interest therein) will be deemed to have
represented and warranted that either (i) no portion of the assets used by such
purchaser or transferee to acquire and hold the notes (or any interest therein)
constitutes assets of any Plan or (ii) the purchase and holding of the notes (or
any interest therein) by such purchaser or transferee will not constitute a
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code or violation under any applicable Similar Laws.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons considering purchasing
the notes on behalf of, or with the assets of, any Plan, consult with their
counsel regarding the potential applicability of ERISA, Section 4975 of the Code
and any Similar Laws to such investment and whether an exemption would be
applicable to the purchase and holding of the notes.
77
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that you may freely transfer Series
B notes issued under the exchange offer in exchange for Series A notes, unless
you are:
- our "affiliate" within the meaning of Rule 405 under the Securities Act;
- a broker-dealer or an initial purchaser that acquired Series A notes
directly from us; or
- a broker-dealer that acquired Series A notes as a result of market-making
or other trading activities without compliance with the registration and
prospectus delivery provisions of the Securities Act;
provided that you acquire the Series B notes in the ordinary course of your
business and you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of the Series B notes. Broker-dealers receiving Series B notes in the exchange
offer in exchange for Series A notes that were acquired in market-making or
other trading activities will be subject to a prospectus delivery requirement
with respect to resales of the Series B notes.
To date, the staff of the SEC has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as this exchange offer,
other than a resale of an unsold allotment from the original sale of the Series
A notes, with the prospectus contained in the exchange offer registration
statement. Pursuant to the registration agreement, we have agreed to permit such
participating broker-dealers to use this prospectus in connection with the
resale of Series B notes.
If you wish to exchange your Series A notes for Series B notes in the
exchange offer, you will be required to make certain representations to us as
set forth in "The Exchange Offer -- Registration Rights" and "The Exchange Offer
- -Procedures for Tendering Series A Notes -- Determination of Validity" of this
prospectus, and in the letter of transmittal. In addition, if you are a
broker-dealer who receives Series B notes for your own account in exchange for
Series A notes that were acquired by you as a result of market-making activities
or other trading activities, you will be required to acknowledge that you will
deliver a prospectus in connection with any resale by you of those Series B
notes. See "The Exchange Offer -- Resale of the Series B notes; plan of
distribution".
We will not receive any proceeds from any sale of Series B notes by
broker-dealers. Broker-dealers who receive Series B notes for their own account
in the exchange offer may sell them from time to time in one or more
transactions in the over-the-counter market:
- in negotiated transactions;
- through the writing of options on the Series B notes or a combination of
such methods of resale;
- at market prices prevailing at the time of resale; or
- at prices related to the prevailing market prices or negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any Series B notes. Any
broker-dealer that resells Series B notes it received for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of Series B notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of Series B notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. Although the letter of
transmittal requires a broker-dealer to deliver a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act as a result of such delivery.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Series A notes, including any broker-
78
dealers, against certain liabilities, including liabilities under the Securities
Act, as set forth in the registration rights agreement.
VALIDITY OF THE SERIES B NOTES
The validity of the Series B notes being offered hereby will be passed upon
for us by Akin Gump Strauss Hauer & Feld LLP, Houston, Texas.
EXPERTS
The financial statements included in the Annual Report on Form 10-K of
GulfTerra Energy Partners, L.P. (formerly El Paso Energy Partners, L.P.) for the
year ended December 31, 2002 and the financial statements included in the
Current Report on Form 8-K dated April 8, 2003, of GulfTerra Energy Partners,
L.P., all incorporated by reference in this Registration Statement, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consent of Arthur Andersen LLP to the inclusion of its report regarding
the financial statements of Poseidon Oil Pipeline Company, L.L.C. with respect
to periods prior to 2001, incorporated by reference in this prospectus and
registration statement by reference to GulfTerra Partners' Annual Report on Form
10-K for the year ended December 31, 2000, is omitted pursuant to Securities Act
Rule 437a. We attempted to obtain the appropriate consent from Arthur Andersen
LLP, but the personnel responsible for the audit of Poseidon's financial
statements are no longer employed by Arthur Andersen LLP. Because Arthur
Andersen LLP has not consented to the inclusion of their report in this
prospectus, you will not be able to recover against Arthur Andersen LLP under
Section 11 of the Securities Act of 1933 for any untrue statement of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated therein. We have not
obtained a consent from Arthur Andersen LLP with respect to such financial
statements.
Information derived from the report of Netherland, Sewell & Associates,
Inc., independent petroleum engineers, with respect to GulfTerra Partners'
estimated oil and natural gas reserves incorporated in this prospectus and
registration statement by reference to GulfTerra Partners' Annual Report on Form
10-K for the year ended December 31, 2002, has been so incorporated in reliance
on the authority of said firm as experts with respect to such matters contained
in their report.
79
ANNEX A
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
6 1/4% SERIES A SENIOR NOTES DUE 2010
OF
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
PURSUANT TO THE PROSPECTUS DATED SEPTEMBER 26, 2003
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
OCTOBER 30, 2003 UNLESS EXTENDED BY GULFTERRA ENERGY
PARTNERS, L.P. AND GULFTERRA ENERGY FINANCE CORPORATION IN THEIR SOLE DISCRETION
(THE "EXPIRATION DATE"). TENDERS OF NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO
THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
WELLS FARGO BANK, N.A.
By Registered or By Overnight Delivery or
Certified Mail: Regular Mail:
Wells Fargo Bank, N.A. Wells Fargo Bank, N.A.
Corporate Trust Operations Corporate Trust Operations
MAC N9303-121 Sixth and Marquette
P.O. Box 1517 MAC N9303-121
Minneapolis, MN 55480-1517 Minneapolis, MN 55479
By Facsimile:
(612) 667-4927
Confirm by Telephone:
(800) 344-5128
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN
AS LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE SERIES B NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR SERIES A NOTES TO
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used by holders ("Holders") of 6 1/4%
Series A Senior Notes due 2010 (the "Series A Notes") of GulfTerra Energy
Partners, L.P. and GulfTerra Energy Finance Corporation (together, the
"Issuers") to receive 6 1/4% Series B Senior Notes due 2010 (the "Series B
Notes") if: (i) certificates representing Series A Notes are to be physically
delivered to the Exchange Agent herewith by such Holders; (ii) tender of Series
A Notes is to be made by book-entry transfer to the Exchange Agent's account at
The Depository Trust Company ("DTC") pursuant to the procedures set forth under
the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures" in the Prospectus dated (the
"Prospectus"); or (iii) tender of Series A Notes is to be made according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- Procedures for Tendering Series A Notes -- Guaranteed Delivery" in the
Prospectus, and, in each case, instructions are not being transmitted through
the DTC Automated Tender Offer Program ("ATOP"). The undersigned hereby
acknowledges receipt of the Prospectus. All capitalized terms used herein and
not defined shall have the meanings ascribed to them in the Prospectus.
Holders of Series A Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
exchange offer as set forth in the Prospectus and this Letter of Transmittal
(together, the "Exchange Offer") must transmit their acceptance to DTC which
will edit and verify the acceptance and execute a book-entry delivery to the
Exchange Agent's account at DTC. DTC will then send an Agent's Message to the
Exchange Agent for its acceptance. Delivery of the Agent's Message by DTC will
satisfy the terms of the Offer as to execution and delivery of a Letter of
Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a notice of
guaranteed delivery through ATOP.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Series A Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Series A Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, then such Holder must tender such Series A Notes
according to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Series A Notes -- Guaranteed
Delivery" in the Prospectus. See Instruction 2.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
TENDER OF SERIES A NOTES
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering
Institution: -----------------------------------------------------------
Account Number: -----------------------------------------------------------
Transaction Code Number: --------------------------------------------------
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ------------------------------------------
Window Ticker Number (if any): --------------------------------------------
Date of Execution of Notice of Guaranteed Delivery: -----------------------
Name of Eligible Institution that Guaranteed Delivery: --------------------
List below the Series A Notes to which this Letter of Transmittal relates.
The name(s) and address(es) of the registered Holder(s) should be printed, if
not already printed below, exactly as they appear on the Series A Notes tendered
hereby. The Series A Notes and the principal amount of Series A Notes that the
undersigned wishes to tender would be indicated in the appropriate boxes. If the
space provided is inadequate, list the certificate number(s) and principal
amount(s) on a separately executed schedule and affix the schedule to this
Letter of Transmittal.
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S) AGGREGATE TOTAL
(PLEASE FILL IN IF BLANK) CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
SEE INSTRUCTION 3. NUMBER(S)* REPRESENTED** TENDERED** OF SERIES A NOTES
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise specified, the entire aggregate principal amount represented by the Series A Notes described
above will be deemed to be tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to GulfTerra Energy Partners, L.P. and
GulfTerra Energy Finance Corporation (together, the "Issuers"), upon the terms
and subject to the conditions set forth in their Prospectus dated September 26,
2003 (the "Prospectus"), receipt of which is hereby acknowledged, and in
accordance with this Letter of Transmittal (which together constitute the
"Exchange Offer"), the principal amount of Series A Notes indicated in the
foregoing table entitled "Description of Series A Notes" under the column
heading "Principal Amount Tendered." The undersigned represents that it is duly
authorized to tender all of the Series A Notes tendered hereby which it holds
for the account of beneficial owners of such Series A Notes ("Beneficial
Owner(s)") and to make the representations and statements set forth herein on
behalf of such Beneficial Owner(s).
Subject to, and effective upon, the acceptance for purchase of the
principal amount of Series A Notes tendered herewith in accordance with the
terms and subject to the conditions of the Exchange Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Issuers, all
right, title and interest in and to all of the Series A Notes tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Issuers) with
respect to such Series A Notes, with full powers of substitution and revocation
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (i) present such Series A Notes and all evidences of transfer and
authenticity to, or transfer ownership of, such Series A Notes on the account
books maintained by DTC to, or upon the order of, the Issuers, (ii) present such
Series A Notes for transfer of ownership on the books of the Issuers, and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Series A Notes, all in accordance with the terms and conditions of the
Exchange Offer as described in the Prospectus.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that:
(1) the Series B Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being
acquired by the undersigned and any Beneficial Owner(s) in the ordinary
course of business of the undersigned and any Beneficial Owner(s),
(2) the undersigned and each Beneficial Owner are not participating,
do not intend to participate, and have no arrangement or understanding with
any person to participate, in the distribution of the Series B Notes,
(3) except as indicated below, neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), of the Issuers, and
(4) the undersigned and each Beneficial Owner acknowledge and agree
that (x) any person participating in the Exchange Offer with the intention
or for the purpose of distributing the Series B Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Series B Notes acquired by such
person with a registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Securities and
Exchange Commission (the "SEC") and cannot rely on the interpretation of
the Staff of the SEC set forth in the no-action letters that are noted in
the section of the Prospectus entitled "The Exchange Offer -- Registration
Rights" and (y) any broker-dealer that pursuant to the Exchange Offer
receives Series B Notes for its own account in exchange for Series A Notes
which it acquired for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of
such Series B Notes.
If the undersigned is a broker-dealer that will receive Series B Notes for
its own account in exchange for Series A Notes that were acquired as the result
of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Series B Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer shall not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned understands that tenders of Series A Notes may be withdrawn
by written notice of withdrawal received by the Exchange Agent at any time prior
to the Expiration Date in accordance with the Prospectus. In the event of a
termination of the Exchange Offer, the Series A Notes tendered pursuant to the
Exchange Offer will be returned to the tendering Holders promptly (or, in the
case of Series A Notes tendered by book-entry transfer, such Series A Notes will
be credited to the account maintained at DTC from which such Series A Notes were
delivered). If the Issuers make a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer or waives a material
condition of such Exchange Offer, the Issuers will disseminate additional
Exchange Offer materials and extend such Exchange Offer, if and to the extent
required by law.
The undersigned understands that the tender of Series A Notes pursuant to
any of the procedures set forth in the Prospectus and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Exchange Offer. The Issuers' acceptance for exchange of Series A Notes tendered
pursuant to any of the procedures described in the Prospectus will constitute a
binding agreement between the undersigned and the Issuers in accordance with the
terms and subject to the conditions of the Exchange Offer. For purposes of the
Exchange Offer, the undersigned understands that validly tendered Series A Notes
(or defectively tendered Series A Notes with respect to which the Issuers have,
or have caused to be, waived such defect) will be deemed to have been accepted
by the Issuers if, as and when the Issuers give oral or written notice thereof
to the Exchange Agent.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Series A Notes
tendered hereby, and that when such tendered Series A Notes are accepted for
purchase by the Issuers, the Issuers will acquire good title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or by the Issuers to be necessary or desirable to complete the sale,
assignment and transfer of the Series A Notes tendered hereby.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of the undersigned and any Beneficial Owner(s), and any obligation of the
undersigned or any Beneficial Owner(s) hereunder shall be binding upon the
heirs, executors, administrators, trustees in bankruptcy, personal and legal
representatives, successors and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned understands that the delivery and surrender of any Series A
Notes is not effective, and the risk of loss of the Series A Notes does not pass
to the Exchange Agent or the Issuers, until receipt by the Exchange Agent of
this Letter of Transmittal, or a manually signed facsimile hereof, properly
completed and duly executed, together with all accompanying evidences of
authority and any other required documents in form satisfactory to the Issuers.
All questions as to form of all documents and the validity (including time of
receipt) and acceptance of tenders and withdrawals of Series A Notes will be
determined by the Issuers, in their discretion, which determination shall be
final and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Series A Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Series A Notes tendered by book-entry
transfer, by credit to the account of DTC), and Series B Notes issued in
exchange for Series A Notes pursuant to the Exchange Offer be issued to the
undersigned. Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," the undersigned hereby requests that any Series A Notes
representing principal amounts not tendered or not accepted for exchange and
Series B Notes issued in exchange for Series A Notes pursuant to the Exchange
Offer be delivered to the undersigned at the address shown below the
undersigned's signature(s). In the event that the "Special Issuance
Instructions" box or the "Special Delivery Instructions" box is, or both are,
completed, the undersigned hereby requests that any Series A Notes representing
principal
amounts not tendered or not accepted for purchase be issued in the name(s) of,
certificates for such Series A Notes be delivered to, and Series B Notes issued
in exchange for Series A Notes pursuant to the Exchange Offer be issued in the
name(s) of, and be delivered to, the person(s) at the address(es) so indicated,
as applicable. The undersigned recognizes that the Issuers have no obligation
pursuant to the "Special Issuance Instructions" box or "Special Delivery
Instructions" box to transfer any Series A Notes from the name of the registered
Holder(s) thereof if the Issuers do not accept for exchange any of the principal
amount of such Series A Notes so tendered.
------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Series A Notes in a principal amount not
tendered or not accepted for exchange are to be issued in the name of, or
Series B Notes are to be issued in the name of, someone other than the
person(s) whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
'Description of Series A Notes' within this Letter of Transmittal.
Issue: [ ] Series A Notes [ ] Series B Notes
(check as applicable)
Name -------------------------------------------------
(PLEASE PRINT)
Address ----------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(ZIP CODE)
------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
------------------------------------------------------
------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Series A Notes in a principal amount not
tendered or not accepted for exchange or Series B Notes are to be sent to
someone other than the person(s) whose signature(s) appear(s) within this
Letter of Transmittal or to an address different from that shown in the
box entitled 'Description of Series A Notes' within this Letter of
Transmittal.
Issue: [ ] Series A Notes [ ] Series B Notes
(check as applicable)
Name -------------------------------------------------
(PLEASE PRINT)
Address ----------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(ZIP CODE)
------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF SERIES A NOTES
REGARDLESS OF WHETHER SERIES A NOTES ARE BEING
PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the registered Holder(s)
exactly as name(s) appear(s) on certificate(s) for Series A Notes or, if
tendered by a participant in DTC exactly as such participant's name appears on a
security position listing as owner of Series A Notes, or by the person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY
(SEE GUARANTEE REQUIREMENT BELOW)
Dated: ------------------------------------------------------------------------
Name(s): -----------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title): ------------------------------------------------
Address: -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.: ---------------------------------
Tax Identification or Social Security Number: -------------------------
COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9
SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
[PLACE SEAL HERE]
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Signature Guarantees. Signatures of this Letter of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Series A Notes tendered hereby are tendered
(i) by a registered Holder of Series A Notes (or by a participant in DTC whose
name appears on a security position listing as the owner of such Series A Notes)
that has not completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal, or (ii) for the account of an Eligible Institution. If the Series A
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, if Series A Notes not accepted for exchange or not
tendered are to be returned to a person other than the registered Holder or if
Series B Notes are to be issued in the name of or sent to a person other than
the registered Holder, then the signatures on this Letter of Transmittal
accompanying the tendered Series A Notes must be guaranteed by an Eligible
Institution as described above. See Instruction 5.
2. Delivery of Letter of Transmittal and Series A Notes. This Letter of
Transmittal is to be completed by Holders if (i) certificates representing
Series A Notes are to be physically delivered to the Exchange Agent herewith by
such Holders; (ii) tender of Series A Notes is to be made by book-entry transfer
to the Exchange Agent's account at DTC pursuant to the procedures set forth
under the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures" in the Prospectus; or (iii) tender of
Series A Notes is to be made according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Guaranteed Delivery" in the Prospectus. All physically delivered Series
A Notes, or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of all Series A Notes delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at one of its addresses set forth on the cover page hereto on or prior to the
Expiration Date, or the tendering Holder must comply with the guaranteed
delivery procedures set forth below. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If a Holder desires to tender Series A Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Series A Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, such Holder must tender such Series A Notes
pursuant to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Series A Notes -- Guaranteed
Delivery" in the Prospectus. Pursuant to such procedures, (i) such 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 provided
by the Issuers, or an Agent's Message with respect to guaranteed delivery that
is accepted by the Issuers, must be received by the Exchange Agent, either by
hand delivery, mail, telegram, or facsimile transmission, on or prior to the
Expiration Date; and (iii) the certificates for all tendered Series A Notes, in
proper form for transfer (or confirmation of a book-entry transfer or all Series
A Notes delivered electronically into the Exchange Agent's account at DTC
pursuant to the procedures for such transfer set forth in the Prospectus),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, or in the case of a book-entry transfer, a properly
transmitted Agent's Message, must be received by the Exchange Agent within three
New York Stock Exchange trading days after the date of the execution of the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SERIES A NOTES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE ELECTION AND
RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED
THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or a facsimile
thereof), waive any right to receive any notice of the acceptance of their
Series A Notes for exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the principal amount represented by Series A Notes
should be listed on separate signed schedule attached hereto.
4. Partial Tenders. (Not applicable to Holders who tender by book-entry
transfer). If Holders wish to tender less than the entire principal amount
evidenced by a Series A Note submitted, such Holders must fill in the principal
amount that is to be tendered in the column entitled "Principal Amount
Tendered." The minimum permitted tender is $1,000 in principal amount of Series
A Notes. All other tenders must be in integral multiples of $1,000 in principal
amount. In the case of a partial tender of Series A Notes, as soon as
practicable after the Expiration Date, new certificates for the remainder of the
Series A Notes that were evidenced by such Holder's old certificates will be
sent to such Holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal. The entire principal amount that is represented by Series
A Notes delivered to the Exchange Agent 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 Series A Notes tendered hereby, the signatures must correspond
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
is signed by a participant in DTC whose name is shown as the owner of the Series
A Notes tendered hereby, the signature must correspond with the name shown on
the security position listing as the owner of the Series A Notes.
If any of the Series A Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any of the Series A Notes 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 Series A Note or instrument of
transfer is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to the Issuers of such person's
authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered Holder(s) of
the Series A Notes listed herein and transmitted hereby, no endorsements of
Series A Notes or separate instruments of transfer are required unless Series B
Notes are to be issued, or Series A Notes not tendered or exchanged are to be
issued, to a person other than the registered Holder(s), in which case
signatures on such Series A Notes or instruments of transfer must be guaranteed
by an Eligible Institution.
IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED
HOLDER(s) OF THE SERIES A NOTES LISTED HEREIN, THE SERIES A NOTES 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 SERIES A
NOTES AND SIGNATURES ON SUCH SERIES A NOTES OR INSTRUMENTS OF TRANSFER ARE
REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION, UNLESS THE SIGNATURE
IS THAT OF AN ELIGIBLE INSTITUTION.
6. Special Issuance and Delivery Instructions. If certificates for Series B
Notes or unexchanged or untendered Series A Notes are to be issued in the name
of a person other than the signer of this Letter of
Transmittal, or if Series B Notes or such Series A Notes are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown herein, the appropriate boxes on this Letter of
Transmittal should be completed. All Series A Notes tendered by book-entry
transfer and not accepted for payment will be returned by crediting the account
at DTC designated herein as the account for which such Series A Notes were
delivered.
7. Transfer Taxes. Except as set forth in this Instruction 7, the Issuers
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Series A Notes to it, or to its order, pursuant to the Exchange Offer.
If Series B Notes, or Series A Notes not tendered or exchanged are to be
registered in the name of any persons other than the registered owners, or if
tendered Series A Notes are registered in the name of any persons other than the
persons signing this Letter of Transmittal, the amount of any transfer taxes
(whether imposed on the registered Holder or such other person) payable on
account of the transfer to such other person must be paid to the Issuers or the
Exchange Agent (unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted) before the Series B Notes will be issued.
8. Waiver of Conditions. The conditions of the Exchange Offer may be
amended or waived by the Issuers, in whole or in part, at any time and from time
to time in the Issuers' discretion, in the case of any Series A Notes tendered.
9. Substitute Form W-9. Each tendering owner of a Note (or other payee) is
required to provide the Exchange Agent with a correct taxpayer identification
number ("TIN"), generally the owner's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided hereafter under "Important Tax Information," and to
certify that the owner (or other payee) is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering owner (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31 percent federal income tax withholding. The box in Part 3
of the Substitute Form W-9 may be checked if the tendering owner (or other
payee) 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 and the Exchange
Agent is not provided with a TIN within 60 days of the date on the Substitute
Form W-9, the Exchange Agent will withhold 31 percent until a TIN is provided to
the Exchange Agent.
10. Broker-dealers Participating in the Exchange Offer. If no broker-dealer
checks the last box on page 3 of this Letter of Transmittal, the Issuers have no
obligation under the Registration Rights Agreement to allow the use of the
Prospectus for resales of the Series B Notes by broker-dealers or to maintain
the effectiveness of the Registration Statement of which the Prospectus is a
part after the consummation of the Exchange Offer.
11. Requests for Assistance or Additional Copies. Any questions or requests
for assistance or additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange
Agent at the telephone numbers and location listed above. A Holder or owner may
also contact such Holder's or owner's broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING THE SERIES A NOTES AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Series A Notes whose tendered
Series A Notes are accepted for exchange is required to provide the Exchange
Agent with such owner's current TIN on Substitute Form W-9 below. If such owner
is an individual, the TIN is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, the owner or other recipient of
Series B Notes may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, any interest on Series B Notes paid to such owner or other
recipient may be subject to 31 percent backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Forms W-8ECI, W-8BEN, W-8EXP or W-8IMY
(collectively, a "Form W-8"), signed under penalties of perjury, attesting to
that individual's exempt status. A Form W-8 can be obtained from the Exchange
Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional instructions.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the following form, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner is exempt
from withholding, (ii) the owner has not been notified by the Internal Revenue
Service that the owner is subject to backup withholding as a result of failure
to report all interest or dividends or (iii) the Internal Revenue Service has
notified the owner that the owner is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the Series A
Notes. If the Series A Notes are registered in more than one name or are not
registered in the name of the 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.
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ----------------------------
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE or
----------------------------
or Employer Identification
Number
-----------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 2 -- Certification -- Under penalties of
TAXPAYER IDENTIFICATION NO. perjury, I certify that: PART 3 --
("TIN") Awaiting TIN
(1) The number shown on this form is my correct
taxpayer identification number (or I am [ ]
waiting for a number to be issued to 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.
-----------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return.
- ----------------------------------------------------------------------------------------------------------------
Signature: ------------------ Date: ------------------ , 2003
- ----------------------------------------------------------------------------------------------------------------
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
PERCENT. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF 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 within 60 days of the date
in this form, 31 percent of all reportable cash payments made to me will be
withheld until I provide a taxpayer identification number.
Signature: ------------------ Date: ------------------ , 2003
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 hyphens: 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.
- ------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- ------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent
designated ward, minor or person(3)
incompetent person
7. a. A revocable savings trust The grantor
account (in which grantor trustee(1)
is also trustee)
b. Any "trust" account that The actual owner(1)
is not a legal or valid
trust under State law
- ------------------------------------------------------
- ------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- ------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity
pension (do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held in The partnership
13. Association, club, or other The organization
14. A broker or registered The broker or
nominee nominee
15. Account with the Department The public entity
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
- ------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) 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, the number will be
considered to be that of the first name listed.
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 do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), or Form W-7 for International Taxpayer
Identification Number (for alien individuals required to file U.S. tax returns),
at an office of the Social Security Administration or the Internal Revenue
Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part 1, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and will
continue until you furnish your taxpayer identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government or a political subdivision, agency or instrumentality
thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank issue.
- Unless otherwise noted herein, all reference below to section numbers or to
regulations are references to the Internal Revenue Code and the regulations
promulgated thereunder.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following.
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee
Payments of interest not generally subject to backup withholding include the
following.
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if (i) this interest is $600 or more, and (ii)
the interest is paid in the course of the payer's trade or business and
(iii) you have not provided your correct taxpayer identification number to
the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF 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 the regulations under sections 6041, 6041(a), 6045
and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipient are required to file
tax returns. Payers must generally withhold 31 percent of taxable interest,
dividends, 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20 percent is imposed on any portion of an underpayment attributable
to the failure.
(3) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- If you falsify
certifications or affirmations, you are subject to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
ANNEX B
NOTICE OF GUARANTEED DELIVERY
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
OFFER TO EXCHANGE
6 1/4% SERIES B SENIOR NOTES DUE 2010 FOR ANY AND ALL
OUTSTANDING 6 1/4% SERIES A SENIOR NOTES DUE 2010
As set forth in the Prospectus, dated September 26, 2003 (as the same may
be amended from time to time, the "Prospectus"), of GulfTerra Energy Partners,
L.P. and GulfTerra Energy Finance Corporation (together, the "Issuers"), under
the caption of "The Exchange Offer -- Procedures for Tendering Series A Notes --
Guaranteed Delivery," this form or one substantially equivalent hereto must be
used to accept the Issuers' offer (the "Exchange Offer") to exchange their
6 1/4% Series B Senior Notes due 2010 (the "Series B Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for an equal principal amount of their 6 1/4% Series A Senior Notes due 2010
(the "Series A Notes"), if (i) certificates representing the Series A Notes to
be exchanged are not lost but are not immediately available, or (ii) time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date. This form may be delivered by an eligible institution by mail
or hand delivery or transmittal, via facsimile, to the Exchange Agent at its
address set forth below not later than 5:00 p.m., New York City time, on October
30, 2003. All capitalized terms used herein but not defined herein shall have
the meanings ascribed to them in the Prospectus.
The Exchange Agent for the Exchange Offer is:
WELLS FARGO BANK, N.A.
By Registered or Certified Mail:
Wells Fargo Bank, N.A.
Corporate Trust Operations
MAC N9303-121
P.O. Box 1517
Minneapolis, MN 55480-1517
By Facsimile:
(612) 667-4927
Confirm by Telephone:
(800) 344-5128
By Overnight Delivery or Regular Mail:
Wells Fargo Bank, N.A.
Corporate Trust Operations
Sixth and Marquette
MAC N9303-121
Minneapolis, MN 55479
DELIVERY OR TRANSMISSION VIA FACSIMILE OF THIS NOTICE OF GUARANTEED
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tender(s) for exchange to the Issuers, upon the
terms and subject to the conditions set forth in the Prospectus and the Letter
of Transmittal, receipt of which is hereby acknowledged, the principal amount of
the Series A Notes as set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption of "The Exchange
Offer -- Procedures for Tendering Series A Notes -- Guaranteed Delivery."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on October 30, 2003, unless extended by
the Issuers. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuers.
All authority herein conferred or agreed to be conferred by the Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors and assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
SIGNATURES
Principal Amount of Series A Notes
Exchanged:
- -------------------------------------------- $
--------------------------------------------
Signature of Owner
Certificate Nos. of Series A Notes (if
available)
- -------------------------------------------- --------------------------------------------
Signature of Owner (if more than one)
Dated: -------------------------------------------------------------------, 2003
Name(s): -----------------------------------------------------------------------
(PLEASE PRINT)
Address: -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ---------------------------------------------------
Capacity (full title), if signing in a representative
capacity: ----------------------------------------------------------------------
Taxpayer Identification or Social Security
No.: ---------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States, or is
otherwise an "eligible guaranteed institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees
that, within three New York Stock Exchange trading days from the date of this
Notice of Guaranteed Delivery, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with certificates representing
the Series A Notes tendered hereby in proper form for transfer (or confirmation
of the book-entry transfer of such Series A Notes into the account of Wells
Fargo Bank, N.A. (the "Trust Company") at a Book-Entry Transfer Facility,
pursuant to the Trust Company's account at a Book-Entry Transfer Facility,
pursuant to the procedure for book-entry transfer set forth in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures"), and any other required documents will
be deposited by the undersigned with the Trust Company.
Name of Firm -------------------------------------------------------------------
Address ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name ---------------------------------------------------------------------------
Title --------------------------------------------------------------------------
Area Code and Telephone No: ----------------------------------------------------
Date: --------------------------------------------------------------------------
DO NOT SEND SERIES A NOTES WITH THIS FORM. ACTUAL SURRENDER OF SERIES A
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF
TRANSMITTAL.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our partnership agreement provides that we:
- will indemnify (1) our general partner (2) any departing general partner
and (3) any person who is or was an officer, director or other
representative of our general partner, any departing general partner or
us, to the fullest extent permitted by law; and
- may indemnify, to the fullest extent permitted by law, (1) any person who
is or was an affiliate of our general partner, any departing general
partner or us, (2) any person who is or was an employee, partner, agent
or trustee of our general partner, any departing general partner, us or
any such affiliate, or (3) any person who is or was serving at our
request as an officer, director, employee, partner, member, agent or
other representative of another corporation, partnership, joint venture,
trust, committee or other enterprise;
each, as well as any employee, partner, agent or other representative of our
general partner, any departing general partner, us or any of their or our
affiliates, which we refer to as "Partnership Indemnitee," from and against any
and all claims, damages, expenses and fines, whether civil, criminal,
administrative or investigative, in which any Partnership Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as (1) general partner, departing general partner, us or an affiliate
of either, (2) an officer, director, employee, partner, agent, trustee or other
representative of our general partner, any departing general partner, us or any
of their or our affiliates or (3) a person serving at our request in any other
entity in a similar capacity. Indemnification will be conditioned on the
determination that, in each case, the Partnership Indemnitee acted in good
faith, in a manner which such Partnership Indemnitee believed to be in, or not
opposed to, our best interests and, with respect to any criminal proceeding, had
no reasonable cause to believe its conduct was unlawful.
The above indemnification may result in indemnification of Partnership
Indemnitees for negligent acts, and may include indemnification for liabilities
under the Securities Act. We have been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. Any indemnification under these provisions
will be only out of our assets. We are authorized to purchase, or to reimburse
our general partner or its affiliates for the cost of, insurance against
liabilities asserted against and expenses incurred by such persons in connection
with our activities, whether or not we would have the power to indemnify such
person against such liabilities under the provisions described above.
Subject to any terms, conditions or restrictions set forth in our
partnership agreement, Section 17-108 of the Delaware Revised Uniform Limited
Partnership Act empowers a Delaware limited partnership to indemnify and hold
harmless any partner or other person from and against all claims and demands
whatsoever.
Section 18-108 of the Delaware Limited Liability Company Act (the "DLLCA")
permits a limited liability company to "indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever." The Limited Liability Company Agreement (the "GENERAL PARTNER
AGREEMENT") of GulfTerra Energy Company, L.L.C., our general partner, provides
that our general partner will indemnify, among other people, its members,
officers, directors, managers, employees and agents, as well as our officers,
directors, employees and agents (each indemnified person, an "INDEMNITEE"), to
the fullest extent permitted by law with respect to any and all damages, losses
and liabilities suffered by any Indemnitee by reason of its status, so long as
the Indemnitee acted in (1) "Good Faith" (as defined below) and (2) to the
extent the damages related to the Indemnitee's status as our officer, director,
employee, agent or other representative (or of our general partner), in a manner
that the Indemnitee reasonably believed to be in, or not opposed to, our best
interests.
II-1
The General Partner Agreement provides that an Indemnitee will be deemed to
have acted in "Good Faith" if he or she did not act in a manner intentionally
and specifically directed solely at harming our general partner. In so acting,
each Indemnitee is permitted to consider any interests or factors as that
Indemnitee desires with, except as expressly otherwise provided in the General
Partner Agreement, no duty (whether existing by statute, in equity at common law
or otherwise) to consider the interests of us, our general partner or any other
person or entity. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, will not create a presumption that the Indemnitee acted other than
in Good Faith.
Any indemnification under the General Partner Agreement will be made only
out of our general partner's assets. An Indemnitee will not be denied any
indemnification under the General Partner Agreement because the Indemnitee had
an interest in the transaction with respect to which the indemnification applies
if the General Partner Agreement otherwise permitted the transaction. The
indemnification provided by the General Partner Agreement will be in addition to
any other rights to which an Indemnitee may be entitled under any other
agreement, as a matter of law or otherwise.
To the fullest extent permitted by law, our general partner will advance
from the time to time expenses (including legal fees and expenses) incurred by
an Indemnitee who is indemnified under the General Partner Agreement in
defending any claim, demand, action, suit or proceeding, prior to the final
disposition of such claim, demand, action, suit or proceeding our general
partner receives an undertaking by or on behalf of the Indemnitee to repay these
expenses if it is determined that the Indemnitee is not entitled to
indemnification. Our general partner also may purchase and maintain insurance,
on behalf of such persons as its board of directors determines, against any
liability that may be asserted against, or expense that may be incurred by, such
person in connection with our general partner's activities, regardless of
whether our general partner would have the power to indemnify that person
against the relevant liability under the General Partner Agreement.
No Indemnitee will be liable for any damages or liabilities to our general
partner for losses sustained or liabilities incurred as a result of any act or
omission in connection with the conduct of the business of our general partner
if such Indemnitee acted in Good Faith.
Our general partner has entered into indemnification agreements with
certain of its current and past directors providing for indemnification to the
full extent permitted by the laws of the state of Delaware. These agreements
provide for specific procedures to assure the directors' rights to
indemnification, including procedures for directors to submit claims, for
determination of directors' entitlement to indemnification (including the
allocation of the burden of proof and selection of a reviewing party) and for
enforcement of directors' indemnification rights.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us or our general
partner pursuant to the foregoing, we and our general partner have been informed
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1.1** Purchase Agreement dated June 26, 2003 among GulfTerra
Energy Partners, L.P., GulfTerra Energy Finance Corporation,
the Subsidiary Guarantors listed on Schedule A thereto, J.P.
Morgan Securities Inc., Credit Suisse First Boston LLC,
Wachovia Securities, Inc., Banc One Capital Markets, Inc.,
BNP Paribas Securities Corp., Credit Lyonnais Securities
(USA) Inc., Fortis Investment Services LLC, Scotia Capital
(USA) Inc., Suntrust Capital Markets, Inc. and The Royal
Bank of Scotland plc.
4.A** Indenture dated July 3, 2003 among GulfTerra Energy
Partners, L.P., GulfTerra Energy Finance Corporation, the
Subsidiary Guarantors named therein and Wells Fargo Bank,
N.A. as Trustee (filed as Exhibit 4.L to our 2003 Second
Quarter Form 10-Q).
4.B** Form of 6 1/4% Note (contained in the Indenture filed as
Exhibit 4.A herein) (contained in the Indenture filed as
Exhibit 4.L to our 2003 Second Quarter Form 10-Q).
4.C** A/B Exchange Registration Rights Agreement dated as of July
3, 2003 between GulfTerra Energy Partners, GulfTerra Energy
Finance Corporation, the Subsidiary Guarantors listed on
Schedule A thereto, J.P. Morgan Securities Inc., Credit
Suisse First Boston LLC, Wachovia Securities, Inc., Banc One
Capital Markets, Inc., BNP Paribas Securities Corp., Credit
Lyonnais Securities (USA) Inc., Fortis Investment Services
LLC, Scotia Capital (USA) Inc., Suntrust Capital Markets,
Inc. and The Royal Bank of Scotland plc (filed as Exhibit
4.M to our 2003 Second Quarter Form 10-Q).
5.A* Opinion of Akin Gump Strauss Hauer & Feld LLP as to the
legality of the securities being offered.
12.A** Calculation of Earnings to Fixed Charges.
23.A* Consent of PricewaterhouseCoopers LLP.
23.B* Consent of Netherland, Sewell & Associates, Inc.
23.C* Consent of Akin Gump Strauss Hauer & Feld LLP (included in
its opinion filed as Exhibit 5.A hereto).
24.A** Power of attorney.
25.A** Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Wells Fargo Bank, N.A.
- ---------------
* Filed herewith.
** Previously filed.
Arthur Andersen LLP has not consented to the incorporation by reference of
their report in this registration statement, and we have dispensed with the
requirement to file their consent in reliance upon Rule 437(a) of the Securities
Act of 1933.
(b) Financial Statement Schedules
No financial statement schedules are included herein. All other schedules
for which provision is made in the applicable accounting regulation of the
Commission are not required under the related instructions, are inapplicable, or
the information is included in the consolidated financial statements, and have
therefore been omitted.
(c) Reports, Opinions, and Appraisals
None.
ITEM 22. UNDERTAKINGS
(a) Regulation S-K, Item 512 Undertakings
(1) The undersigned registrant hereby undertakes:
II-3
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) Registration on Form S-4 of Securities Offered for Resale.
(i) The undersigned hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form.
(ii) The registrant undertakes that every prospectus: (a) that is
filed pursuant to the paragraph immediately preceding, or (b) that
purports to meet the requirements of section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and
II-4
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this registration statement or amendment thereto to be signed on
their behalf by the undersigned, thereunto duly authorized, in the city of
Houston, state of Texas, on September 26, 2003.
GULFTERRA ENERGY PARTNERS, L.P.
By: /s/ KEITH B. FORMAN
------------------------------------
Keith B. Forman
Vice President and Chief Financial
Officer
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer September 26, 2003
- -------------------------------------- and Director (Principal
Robert G. Phillips Executive Officer)(1)
/s/ KEITH B. FORMAN Vice President and September 26, 2003
- -------------------------------------- Chief Financial Officer
Keith B. Forman (Principal Financial
Officer)(2)
* President and Director(3) September 26, 2003
- --------------------------------------
James H. Lytal
* Vice President and September 26, 2003
- -------------------------------------- Controller (Principal
Kathy A. Welch Accounting Officer)(4)
* Director(5) September 26, 2003
- --------------------------------------
Michael B. Bracy
* Director(6) September 26, 2003
- --------------------------------------
H. Douglas Church
* Director(7) September 26, 2003
- --------------------------------------
W. Matt Ralls
* Director(8) September 26, 2003
- --------------------------------------
Kenneth L. Smalley
* /s/ D. MARK LELAND
------------------------------
D. Mark Leland
Attorney-in-fact
- ---------------
(1) Robert G. Phillips has signed this registration statement in his capacity as
Chairman of the Board and Chief Executive Officer of GulfTerra Energy
Company, L.L.C. and GulfTerra Energy Finance Corporation, and Chief
Executive Officer of GulfTerra Energy Partners, L.P., in its individual
capacity
II-6
and in its capacity as sole member of High Island Offshore System, L.L.C.;
Cameron Highway Pipeline GP, L.L.C.; Cameron Highway Pipeline I, L.P.,
Crystal Holding, L.L.C.; GulfTerra Intrastate, L.P.; GulfTerra Operating
Company, L.L.C.; GulfTerra South Texas, L.P.; GulfTerra Texas Pipeline,
L.P.; GulfTerra Alabama Intrastate, L.L.C.; GulfTerra Field Services,
L.L.C.; GulfTerra Holding II, L.L.C.; GulfTerra Holding I, L.L.C.; GulfTerra
GC, L.P.; GulfTerra Holding V, L.P.; GulfTerra Holding IV, L.P.; GulfTerra
NGL Storage, L.L.C.; GulfTerra Holding III, L.L.C.; First Reserve Gas,
L.L.C., in its individual capacity and in its capacity as 50 percent general
partner of Hattiesburg Gas Storage Company; Flextrend Development Company,
L.L.C.; GulfTerra Oil Transport, L.L.C.; Hattiesburg Industrial Gas Sales,
L.L.C., in its individual capacity and in its capacity as 50 percent general
partner of Hattiesburg Gas Storage Company; Manta Ray Gathering Company,
L.L.C.; Petal Gas Storage, L.L.C.; and Poseidon Pipeline Company, L.L.C.;
and
(2) Keith B. Forman has signed this registration statement in his capacity as
Vice President and Chief Financial Officer of GulfTerra Energy Company,
L.L.C.; GulfTerra Energy Partners, L.P., in its individual capacity and in
its capacity as sole member of High Island Offshore System, L.L.C.;
GulfTerra Energy Finance Corporation; Cameron Highway Pipeline GP, L.L.C.;
Cameron Highway Pipeline I, L.P.; Crystal Holding, L.L.C.; GulfTerra
Intrastate, L.P.; GulfTerra Operating Company, L.L.C.; GulfTerra South
Texas, L.P.; GulfTerra Texas Pipeline, L.P.; GulfTerra Alabama Intrastate,
L.L.C.; GulfTerra Field Services, L.L.C.; GulfTerra Holding II, L.L.C.;
GulfTerra Holding I, L.L.C.; GulfTerra GC, L.P.; GulfTerra Holding V, L.P.;
GulfTerra Holding IV, L.P.; GulfTerra NGL Storage, L.L.C.; GulfTerra Holding
III, L.L.C.; First Reserve Gas, L.L.C., in its individual capacity and in
its capacity as 50 percent general partner of Hattiesburg Gas Storage
Company; Flextrend Development Company, L.L.C.; GulfTerra Oil Transport,
L.L.C.; Hattiesburg Industrial Gas Sales, L.L.C., in its individual capacity
and in its capacity as 50 percent general partner of Hattiesburg Gas Storage
Company; Manta Ray Gathering Company, L.L.C.; Petal Gas Storage, L.L.C.; and
Poseidon Pipeline Company, L.L.C.; and
(3) James H. Lytal has signed this registration statement in his capacity as
President and Director of GulfTerra Energy Company, L.L.C. and GulfTerra
Energy Finance Corporation, and President of GulfTerra Energy Partners,
L.P., in its individual capacity and in its capacity as sole member of High
Island Offshore System, L.L.C.; Cameron Highway Pipeline GP, L.L.C.; Cameron
Highway Pipeline I, L.P.; Crystal Holding, L.L.C.; GulfTerra Intrastate,
L.P.; GulfTerra Operating Company, L.L.C.; GulfTerra South Texas, L.P.;
GulfTerra Texas Pipeline, L.P.; GulfTerra Alabama Intrastate, L.L.C.;
GulfTerra Field Services, L.L.C.; GulfTerra Holding II, L.L.C.; GulfTerra
Holding I, L.L.C.; GulfTerra GC, L.P.; GulfTerra Holding V, L.P.; GulfTerra
Holding IV, L.P.; GulfTerra NGL Storage, L.L.C.; GulfTerra Holding III,
L.L.C.; First Reserve Gas, L.L.C., in its individual capacity and in its
capacity as 50 percent general partner of Hattiesburg Gas Storage Company;
Flextrend Development Company, L.L.C.; GulfTerra Oil Transport, L.L.C.;
Hattiesburg Industrial Gas Sales, L.L.C., in its individual capacity and in
its capacity as 50 percent general partner of Hattiesburg Gas Storage
Company; Manta Ray Gathering Company, L.L.C.; Petal Gas Storage, L.L.C.; and
Poseidon Pipeline Company, L.L.C.; and
(4) Kathy A. Welch has signed this registration statement in her capacity as
Vice President and Controller of GulfTerra Energy Company, L.L.C.; GulfTerra
Energy Partners, L.P., in its individual capacity and in its capacity as
sole member of High Island Offshore System, L.L.C.; GulfTerra Energy Finance
Corporation; Cameron Highway Pipeline GP, L.L.C.; Cameron Highway Pipeline
I, L.P.; Crystal Holding, L.L.C.; GulfTerra Intrastate, L.P.; GulfTerra Oil
Transport, L.L.C.; GulfTerra Operating Company, L.L.C.; GulfTerra South
Texas, L.P.; GulfTerra Texas Pipeline, L.P.; GulfTerra Alabama Intrastate,
L.L.C.; GulfTerra Field Services, L.L.C.; GulfTerra Holding II, L.L.C.;
GulfTerra Holding I, L.L.C.; GulfTerra GC, L.P.; GulfTerra Holding V, L.P.;
GulfTerra NGL Storage, L.L.C.; GulfTerra Holding III, L.L.C.; First Reserve
Gas, L.L.C., in its individual capacity and in its capacity as 50 percent
general partner of Hattiesburg Gas Storage Company; Flextrend Development
Company, L.L.C.; GulfTerra Oil Transport, L.L.C.; Hattiesburg Industrial Gas
Sales, L.L.C., in its individual capacity and in its capacity as 50 percent
general partner of Hattiesburg Gas Storage Company; Manta Ray Gathering
Company, L.L.C.; Petal Gas Storage, L.L.C.; and Poseidon Pipeline Company,
L.L.C.; and
II-7
(5) Michael B. Bracy has signed this registration statement in his capacity as a
Director of GulfTerra Energy Company, L.L.C., general partner of GulfTerra
Energy Partners, L.P.
(6) H. Douglas Church has signed this registration statement in his capacity as
a Director of GulfTerra Energy Company, L.L.C., general partner of GulfTerra
Energy Partners, L.P.
(7) W. Matt Ralls has signed this registration statement in his capacity as a
Director of GulfTerra Energy Company, L.L.C., general partner of GulfTerra
Energy Partners, L.P.
(8) Kenneth L. Smalley has signed this registration statement in his capacity as
a Director of GulfTerra Energy Company, L.L.C., general partner of GulfTerra
Energy Partners, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
By: /s/ KEITH B. FORMAN
------------------------------------
Keith B. Forman
Vice President and Chief Financial
Officer
II-8
SUBSIDIARY GUARANTORS:
CAMERON HIGHWAY PIPELINE GP, L.L.C.
CAMERON HIGHWAY PIPELINE I, L.P.
CRYSTAL HOLDING, L.L.C.
FIRST RESERVE GAS, L.L.C.
FLEXTREND DEVELOPMENT COMPANY, L.L.C.
GULFTERRA ALABAMA INTRASTATE, L.L.C.
(formerly known as EPN Alabama Intrastate, L.L.C.)
GULFTERRA FIELD SERVICES, L.L.C.
(formerly known as EPN Field Services, L.L.C.
GULFTERRA GC, L.P.
(formerly known as EPN Gulf Coast, L.P.)
GULFTERRA HOLDING I, L.L.C.
(formerly known as EPN GP Holding I, L.L.C.)
GULFTERRA HOLDING II, L.L.C.
(formerly known as EPN GP Holding, L.L.C.)
GULFTERRA HOLDING III, L.L.C.
(formerly known as EPN Pipeline GP Holding, L.L.C.)
GULFTERRA HOLDING IV, L.P.
(formerly known as EPN Holding Company, I, L.P.
GULFTERRA HOLDING V, L.P.
(formerly known as EPN Holding Company, L.P.)
GULFTERRA INTRASTATE, L.P.
(formerly known as El Paso Energy Intrastate, L.P.)
GULFTERRA NGL STORAGE, L.L.C.
(formerly known as EPN NGL Storage, L.L.C.)
GULFTERRA OIL TRANSPORT, L.L.C.
(formerly known as El Paso Energy Partners Oil Transport, L.L.C.)
GULFTERRA OPERATING COMPANY, L.L.C.
(formerly known as El Paso Energy Partners Operating Company, L.L.C.)
GULFTERRA SOUTH TEXAS, L.P.
(formerly known as El Paso South Texas, L.P.)
GULFTERRA TEXAS PIPELINE, L.P.
(formerly known as EPGT Texas Pipeline, L.P.)
HATTIESBURG GAS STORAGE COMPANY
By: FIRST RESERVE GAS, L.L.C.,
in its capacity as 50 percent general partner of Hattiesburg Gas Storage Company
By: HATTIESBURG INDUSTRIAL GAS SALES, L.L.C.,
in its capacity as 50 percent general partner of Hattiesburg Gas Storage Company
HATTIESBURG INDUSTRIAL GAS SALES, L.L.C.
HIGH ISLAND OFFSHORE SYSTEM, L.L.C.
II-9
By: GULFTERRA ENERGY PARTNERS, L.P.
(formerly El Paso Energy Partners, L.P.),
as sole member
MANTA RAY GATHERING COMPANY, L.L.C.
PETAL GAS STORAGE, L.L.C.
POSEIDON PIPELINE COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
--------------------------------------------------------
Keith B. Forman
Vice President and Chief Financial Officer
II-10
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1** Purchase Agreement dated June 26, 2003 among GulfTerra
Energy Partners, L.P., GulfTerra Energy Finance Corporation,
the Subsidiary Guarantors listed on Schedule A thereto, J.P.
Morgan Securities Inc., Credit Suisse First Boston LLC,
Wachovia Securities, Inc., Banc One Capital Markets, Inc.,
BNP Paribas Securities Corp., Credit Lyonnais Securities
(USA) Inc., Fortis Investment Services LLC, Scotia Capital
(USA) Inc., Suntrust Capital Markets, Inc. and The Royal
Bank of Scotland plc.
4.A** Indenture dated July 3, 2003 among GulfTerra Energy
Partners, L.P., GulfTerra Energy Finance Corporation, the
Subsidiary Guarantors named therein and Wells Fargo Bank,
N.A. as Trustee (filed as Exhibit 4.L to our 2003 Second
Quarter Form 10-Q).
4.B** Form of 6 1/4% Note (contained in the Indenture filed as
Exhibit 4.L to our 2003 Second Quarter Form 10-Q).
4.C** A/B Exchange Registration Rights Agreement dated as of July
3, 2003 between GulfTerra Energy Partners, L.P., GulfTerra
Energy Finance Corporation, the Subsidiary Guarantors listed
on Schedule A thereto, J.P. Morgan Securities Inc., Credit
Suisse First Boston LLC, Wachovia Securities, Inc., Banc One
Capital Markets, Inc., BNP Paribas Securities Corp., Credit
Lyonnais Securities (USA) Inc., Fortis Investment Services
LLC, Scotia Capital (USA) Inc., Suntrust Capital Markets,
Inc. and The Royal Bank of Scotland plc (filed as Exhibit
4.M to our 2003 Second Quarter Form 10-Q).
5.A* Opinion of Akin Gump Strauss Hauer & Feld LLP as to the
legality of the securities being offered.
12.A** Calculation of Earnings to Fixed Charges.
23.A* Consent of PricewaterhouseCoopers LLP.
23.B* Consent of Netherland, Sewell & Associates, Inc.
23.C* Consent of Akin Gump Strauss Hauer & Feld LLP (included in
its opinion filed as Exhibit 5.A hereto).
24.A** Power of attorney.
25.A** Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Wells Fargo Bank, N.A.
- ---------------
* Filed herewith.
** Previously filed.
EXHIBIT 5.A
[AKIN GUMP LETTERHEAD]
September 26, 2003
GulfTerra Energy Partners, L.P.
GulfTerra Energy Finance Corporation
4 Greenway Plaza
Houston, Texas 77046
Re: GulfTerra Energy Partners, L.P.
GulfTerra Energy Finance Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to GulfTerra Energy Partners, L.P., a Delaware limited
partnership, and GulfTerra Energy Finance Corporation, a Delaware corporation
(together, the "COMPANIES"), in connection with the registration, pursuant to a
registration statement on Form S-4, (as amended, restated, supplemented or
otherwise modified from time to time, the "REGISTRATION STATEMENT"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "ACT"), of (i) the proposed offer by the Companies to exchange (the
"EXCHANGE OFFER") all outstanding 6 1/4% Series A Senior Notes due 2010 ($250
million aggregate principal amount outstanding) (the "OUTSTANDING NOTES") of the
Companies for 6 1/4% Series B Senior Subordinated Notes due 2010 ($250 million
aggregate principal amount) (the "REGISTERED NOTES") of the Companies and (ii)
the guarantees (the "GUARANTEES") of the Subsidiary Guarantors listed in the
Registration Statement (the "GUARANTORS"). The Outstanding Notes have been, and
the Registered Notes will be, issued pursuant to an Indenture (the "INDENTURE")
dated as of July 3, 2003 among the Companies, the Subsidiary Guarantors named
therein, and Wells Fargo Bank, National Association, as trustee (the "TRUSTEE").
We have examined originals or certified copies of such corporate records of the
Companies and the Guarantors and other certificates and documents of officials
of the Companies and the Guarantors, public officials and others as we have
deemed appropriate for purposes of this letter. We have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, and the conformity to authentic original documents of all copies
submitted to us as conformed and certified or reproduced copies. We have also
assumed the legal capacity of natural persons, the corporate or other power of
all persons signing on behalf of the parties thereto other than the Companies,
the due authorization, execution and delivery of all documents
GulfTerra Energy Partners, L.P.
GulfTerra Energy Finance Corporation
Page 2
September 26, 2003
by the parties thereto other than the Companies, that the Registered Notes will
conform to the specimens examined by us and that the Trustee's certificate of
authentication of Registered Notes will be manually signed by one of the
Trustee's authorized officers.
Based upon the foregoing and subject to the assumptions, exceptions,
qualifications and limitations set forth hereinafter, we are of the opinion that
when (a) the Registration Statement has become effective under the Act, (b) the
Outstanding Notes have been exchanged in the manner described in the prospectus
forming a part of the Registration Statement, (c) the Registered Notes have been
duly executed, authenticated, issued and delivered in accordance with the terms
of the Indenture, against receipt of the Outstanding Notes surrendered in
exchange therefor, (d) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and (e) applicable provisions of "blue sky"
laws have been complied with,
1. the Registered Notes proposed to be issued pursuant to the
Exchange Offer, when duly executed, authenticated and delivered
by or on behalf of the Companies, will be valid and binding
obligations of the Companies and will be entitled to the benefits
of the Indenture; and
2. the Guarantees proposed to be issued pursuant to the Exchange
Offer will be valid and binding obligations of each Guarantor.
The opinions and other matters in this letter are qualified in their entirety
and subject to the following:
A. We express no opinion as to the laws of any jurisdiction other
than any published constitutions, treaties, laws, rules or
regulations or judicial or administrative decisions ("LAWS") of
the state of New York; the General Corporation Law, Limited
Liability Company Act, Revised Uniform Limited Partnership Act
and Revised Uniform Partnership Act of the state of Delaware.
B. This law firm is a registered limited liability partnership
organized under the laws of the state of Texas.
C. The matters expressed in this letter are subject to and qualified
and limited by: (i) applicable bankruptcy, insolvency, fraudulent
transfer and conveyance, reorganization, moratorium and similar
Laws affecting creditors' rights and remedies generally; (ii)
general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at
law or in equity); (iii) commercial reasonableness and
unconscionability and an implied covenant of good faith and fair
dealing; (iv) the power of the courts to award damages in lieu of
equitable remedies; (v) securities Laws and public policy
underlying such Laws with respect to rights to indemnification
and contribution; and (vi) limitations on the waiver of rights
under usury Laws.
We hereby consent to the filing of copies of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus forming a
part of the Registration Statement under the caption "Validity of the Series B
Notes." In giving this consent, we do not thereby admit that we are within the
category of persons whose consent is required under Section 7 of the Act and the
rules and regulations thereunder. This opinion speaks as of its date, and we
undertake no (and hereby disclaim any) obligation to update this opinion.
Very truly yours,
/s/ Akin, Gump, Strauss, Hauer & Feld, L.L.P.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
EXHIBIT 23.A
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement on Form S-4 of GulfTerra Energy Partners, L.P.
(formerly El Paso Energy Partners, L.P.) (the "Partnership"), GulfTerra Energy
Finance Corporation (formerly El Paso Energy Partners Finance Corporation) and
the Subsidiary Guarantors listed therein of (A)(i) our report dated March 24,
2003 relating to the consolidated financial statements and financial statement
schedule of the Partnership and subsidiaries, and (ii) our report dated March
24, 2003 relating to the financial statements of Poseidon Oil Pipeline Company,
L.L.C., each of which appears in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2002; and (B)(i) our report dated April 4, 2003
relating to the consolidated balance sheet of El Paso Energy Partners Company,
L.L.C. (formerly El Paso Energy Partners Company), and (ii) our report dated
April 4, 2003 relating to the balance sheets of GulfTerra Energy Finance
Corporation, each of which appears in the Partnership's Current Report on Form
8-K dated April 8, 2003. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
September 25, 2003
EXHIBIT 23.B
[NETHERLAND, SEWELL & ASSOCIATES, INC. LOGO]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the incorporation by reference into this Amendment No. 1 to
the Registration Statement on Form S-4 of GulfTerra Energy Partners, L.P.
(formerly known as El Paso Energy Partners, L.P.), GulfTerra Energy Partners
Finance Corporation (formerly known as El Paso Energy Partners Finance
Corporation), and the Subsidiary Guarantors listed therein of our reserve
reports dated as of December 31, 2000, 2001, and 2002, each of which is included
in the Annual Report on Form 10-K of GulfTerra Energy Partners, L.P. for the
year ended December 31, 2002. We also consent to the reference to us under the
heading of "Experts" in such Registration Statement.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ FREDERIC D. SEWELL
------------------------------------
Frederic D. Sewell
Chairman and Chief Executive Officer
Dallas, Texas
September 24, 2003
