AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 2003.
REGISTRATION NOS. 333-106613, 333-106613-02, 333-106613-03,
333-106613-04, 333-106613-05, 333-106613-06,
333-106613-07, 333-106613-08, 333-106613-09,
333-106613-10, 333-106613-11, 333-106613-12,
333-106613-13, 333-106613-14, 333-106613-15,
333-106613-16, 333-106613-17, 333-106613-20,
333-106613-21, 333-106613-22, 333-106613-23,
333-106613-27, 333-106613-28, 333-106613-29,
333-106613-31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
GULF TERRA ENERGY PARTNERS, L.P.
GULF TERRA ENERGY FINANCE CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 1311 76-0605880
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
4 GREENWAY PLAZA PEGGY A. HEEG, ESQ.
HOUSTON, TX 77046 EL PASO BUILDING
(832) 676-4853 1001 LOUISIANA STREET, 30TH FLOOR
(Address, including Zip Code, and Telephone Number, HOUSTON, TX 77002
Including Area Code, of Registrant's Principal (713) 420-2600
Executive Offices) (Name, Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Agent For Service)
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
JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION IDENTIFICATION
EXACT NAME OF REGISTRANT GUARANTOR(1) OR 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
GulfTerra Intrastate, L.P. (formerly known as El Paso Energy
Intrastate, L.P.)......................................... Delaware N/A
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
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 Holding II, L.L.C. (formerly known as EPN GP
Holding, L.L.C.) ......................................... Delaware 76-0396023
GulfTerra Holding I, L.L.C. (formerly known as EPN GP
Holding I, L.L.C.)........................................ Delaware 76-0396023
GulfTerra GC, L.P. (formerly known as EPN Gulf Coast,
L.P.)..................................................... Delaware N/A
GulfTerra Holding V, L.P. (formerly known as EPN Holding
Company, L.P.)............................................ Delaware N/A
GulfTerra Holding IV, L.P. (formerly known as EPN Holding
Company I, L.P.).......................................... Delaware N/A
GulfTerra NGL Storage, L.L.C. (formerly known as EPN NGL
Storage, 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
First Reserve Gas, L.L.C. .................................. Delaware 76-0396023
Flextrend Development Company, 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
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.
We may not exchange these notes until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these notes, and it is not soliciting an offer to buy these notes, in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 28, 2003
$300,000,000
GULF TERRA ENERGY PARTNERS, L.P.
GULF TERRA ENERGY FINANCE CORPORATION
OFFER TO EXCHANGE
8 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2010
FOR ANY AND ALL OUTSTANDING 8 1/2% SERIES A
SENIOR SUBORDINATED NOTES DUE 2010
CUSIP: 28368QAH2 AND U5325MAD7
(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 $300,000,000 aggregate principal amount of new 8 1/2% Series B
senior subordinated notes due 2010, which we call the Series B notes, which will
be freely transferable, for any and all outstanding 8 1/2% Series A senior
subordinated notes due 2010, which we call the Series A notes, issued in a
private offering on March 24, 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 10 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 , 2003.
TABLE OF CONTENTS
Summary..................................................... 1
The Exchange Offer.......................................... 6
Ratio of Earnings to Fixed Charges.......................... 9
Risk Factors................................................ 10
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................... 10
An active trading market for the notes may not develop...... 10
Federal and state statutes would allow courts, under
specific circumstances, to subordinate further or void the
notes and the related guarantees and require holders of
notes to return payments received from us................. 11
We may not be able to satisfy our obligation to repurchase
notes upon a change of control............................ 12
Your rights to receive payments will be unsecured and
contractually subordinated to most of our existing
indebtedness and, possibly, any additional indebtedness we
incur. Further, the guarantees of the notes will be junior
to all the guarantors' existing indebtedness and possibly
to all their future borrowings............................ 12
The notes will be effectively subordinated to indebtedness
and liabilities of our subsidiaries that are not
guarantors................................................ 13
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
---------------------
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special 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, 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 quarter ended March 31, 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 and July 14, 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
ii
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.
iii
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 10 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., formerly known as El Paso
Energy Partners, L.P., 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 seven 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;
1
- sharing capital costs and risks through joint ventures/strategic
alliances; and
- 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 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 benefits 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. In July 2003 Valero Energy Corporation, one of the
top refining and marketing companies in the United States, became our partner in
our Cameron Highway Oil Pipeline project.
In 2002, our cash outlay for investments of midstream energy infrastructure
assets totaled $1.7 billion. Assets acquired from El Paso Corporation and third
parties totaled $1.5 billion and $19 million, and funds expended for the
construction of assets totaled $228 million.
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 $2.9 billion in capital expenditures while reducing our financial
leverage and increasing our financial flexibility through, among other things,
seven previous 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, 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
The market is requesting that public companies institute dramatic
governance changes designed to achieve independence, qualitatively and
quantitatively. Some of the more immediate and fundamental proposed changes
establish and require a higher standard for determining director independence
and require a greater percentage of the members of the board to be independent.
For example, under rules recently proposed by the NYSE:
- at least a majority of the members of the board of a listed company must
be "independent directors;"
- each public company board must form several specific committees -- audit,
governance and compensation -- that must be comprised entirely of
independent directors; and
- the chairperson of the audit committee must be a "financial expert."
The Securities and Exchange Commission and the NYSE have developed
definitions and other guidance to help establish minimum qualifications for
"independent directors" and "financial experts." We are in compliance with all
of these rules, regulations and standards that apply to our general partner.
We continually strive to improve our corporate governance model. 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;
- received a letter of credit from El Paso Merchant Energy North America
totaling $5.1 million regarding our existing customer/contractual
relationships with them;
- changed our name to GulfTerra Energy Partners, L.P. (NYSE: GTM);
- 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) increase the required third-party common unit
vote to remove the general partner from 55 percent to 67 percent; and (3)
require a 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, effectively converting our general partner into a
Delaware limited liability company that is not permitted to have:
3
- 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.
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.
- is a significant stakeholder in us -- it owns approximately 23.4 percent,
or 11,674,245, of our common units (decreased from 26.5 percent as a
result of our common unit offerings during the second quarter of 2003),
all 10,937,500 of our Series C units, which we issued in November 2002
for $350 million, all 124,014 of our outstanding Series B preference
units after adjustment for the May and June contributions of Series B
preference units associated with the May and June common unit offerings
(with a liquidation value at May 31, 2003 of $162 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.
- 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.
- has in the past publicly announced its intention to use us as its primary
vehicle for growth and development of its midstream energy business;
however, El Paso Corporation is neither contractually nor legally bound
to use us as its primary vehicle for growth and development of midstream
energy assets, and may reconsider its relationship with us at any time,
without notice.
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
4
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;
- 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.
We have publicly disclosed our efforts to further distinguish ourselves
from El Paso Corporation. As a result of this announcement, various parties have
expressed an interest in purchasing all or a portion of our general partner. We
have publicly acknowledged that we are meeting with parties interested in
acquiring an equity stake in the general partner but cannot confirm that such
interest will result in firm proposals or, if such firm proposals are received,
that El Paso Corporation will consider such proposals. El Paso Corporation has
the sole responsibility of determining the ultimate ownership status of the
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. To further our Independence Initiatives, El Paso
Corporation has publicly announced its intent to sell up to 10 percent of our
general partner to an unrelated party.
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
Cameron Highway Oil Pipeline System. On July 14, 2003, we announced the
completion of agreements to form a 50/50 joint venture with Valero Energy
Corporation in the $458 million Cameron Highway Oil Pipeline System project. 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 the major refining areas of
5
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 major 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 $51 million at closing,
representing 50 percent of the capital investment expended through that date for
the pipeline project. In addition, Valero will pay a total of $35 million in
participation fees to us for developing the project, $19 million of which was
paid at closing, $5 million to be paid once the system is completed and the
remaining $11 million by the end of 2006.
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 June 2003, we completed a public offering of
1,150,000 common units for net cash proceeds of approximately $40.3 million,
including the underwriter's overallotment, which we used to temporarily reduce
indebtedness under our $600 million revolving credit facility.
In May 2003, we issued 1,118,881 common units and 80 Series F convertible
units in a registered offering to a large institutional investor for $40
million. We used the net proceeds of approximately $38.3 million, excluding any
proceeds we may receive upon the conversion of any Series F convertible units,
for general partnership purposes.
In April 2003, we completed a public offering of 3,450,000 common units. We
used the net proceeds of approximately $103 million to temporarily reduce
indebtedness under our $600 million credit facility.
In connection with these offerings, our general partner contributed
approximately $1.8 million of our Series B preference units to us in order to
maintain its one percent general partner interest.
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.
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 $300 million in aggregate principal
amount of Series A notes to J.P. Morgan
Securities Inc., Goldman, Sachs & Co., UBS
Warburg LLC and Wachovia Securities Inc., 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 March 24, 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, $300 million aggregate principal
amount of the Se-
6
ries 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.
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 , 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.
7
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 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................ JPMorgan Chase Bank 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."
8
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------------------
MARCH 31, 2003 2002 2001 2000 1999 1998
- ------------------ ---- ---- ---- ---- ----
1.98 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.
9
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.
10
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 FURTHER 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 further 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.
11
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 otherwise
agree, we would be required to repay the amounts outstanding under our credit
facilities and to offer to repurchase our outstanding senior subordinated notes
and possibly our senior notes at 101 percent of the principal amount, plus
accrued and unpaid interest to the date of repurchase, including any outstanding
notes issued to you. 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. We have publicly disclosed our efforts to further
distinguish ourselves from El Paso Corporation. As a result of this
announcement, various parties have expressed an interest in purchasing all or a
portion of our general partner. El Paso Corporation has publicly announced that
it would consider selling up to 10 percent of its general partner interest. El
Paso Corporation has the sole responsibility for determining the ultimate
ownership status of the general partner interest. We have publicly acknowledged
that we are meeting with parties interested in acquiring an entity stake in the
general partner but cannot confirm that such interest will result in firm
proposals or, if such firm proposals are received, that El Paso Corporation will
pursue such proposals.
YOUR RIGHTS TO RECEIVE PAYMENTS WILL BE UNSECURED AND CONTRACTUALLY
SUBORDINATED TO MOST OF OUR EXISTING INDEBTEDNESS AND, POSSIBLY, ANY
ADDITIONAL INDEBTEDNESS WE INCUR. FURTHER, THE GUARANTEES OF THE NOTES WILL BE
JUNIOR TO ALL THE GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL THEIR
FUTURE BORROWINGS.
The notes and the related subsidiary guarantees will rank behind most of
our and the subsidiary guarantors' existing senior indebtedness (other than
trade payables and certain other indebtedness) and possibly all additional
senior indebtedness (other than trade payables) we incur unless, and to the
extent, that additional indebtedness expressly provides that it ranks equal
with, or junior in right of payment to, the notes and the related guarantees.
In addition, all payments on the notes and the related guarantees may be
blocked in the event of a payment default or in the event of certain non-payment
defaults on our senior indebtedness.
In the event of a bankruptcy, liquidation, reorganization or similar
proceeding relating to us, any subsidiary guarantors or our property, our assets
or the assets of the subsidiary guarantors would be available to pay obligors
under the notes only after all payments had been made on our or the guarantors'
senior indebtedness. Our creditors and the subsidiary guarantors' creditors
holding claims which are not subordinated to any applicable senior indebtedness
will in all likelihood be entitled to payments before all of our or the
subsidiary guarantors' senior indebtedness has been paid in full. Therefore,
holders of the notes will participate with trade creditors and all other holders
of our and the guarantors' unsubordinated indebtedness in the assets remaining
after we and the guarantors have paid all of the senior indebtedness. However,
because the notes indenture may require that amounts otherwise payable to
holders of the notes in a bankruptcy, liquidation, reorganization or similar
proceeding be paid to holders of senior indebtedness instead, holders of the
notes may receive less, ratably, than holders of trade payables and other
creditors in any such proceeding. In any of these cases, we and the subsidiary
guarantors may not have sufficient funds to pay all of our creditors and,
therefore, holders of notes would receive less, ratably, than the holders of
senior indebtedness.
12
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 Energy 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 Energy 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 Energy 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
Energy Partners or any of the affiliates of GulfTerra Energy 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 liquidated damages 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 liquidated damages 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 liquidated damages of $0.50
per week per $1,000 in principal amount of Transfer Restricted Securities. We
shall not be required to pay liquidated damages for more than one Registration
Default at any given time. Upon curing all Registration Defaults, liquidated
damages will cease to accrue.
A Registration Default will be cured and liquidated damages 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 liquidated damages 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 , 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.
17
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 , 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 two
business 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
JPMorgan Chase Bank, 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:
JPMorgan Chase Bank
Attn: Mr. Cary Gilliam
700 Lavaca
Fifth Floor
Austin, TX 78701
By Facsimile:
(512) 479-2553
Attention: Mr. Cary Gilliam
Confirm by Telephone:
(512) 479-2575
Attention: Mr. Cary Gilliam
By Hand:
JPMorgan Chase Bank
Attn: Mr. Cary Gilliam
700 Lavaca
Fifth Floor
Austin, TX 78701
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.
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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, 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
, 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
25
cannot be reissued. Accordingly, issuance of the Series B notes will not result
in any increase in our indebtedness.
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 Energy Partners and GulfTerra Energy Finance and not to any of their
subsidiaries and any reference to "GulfTerra Energy 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 March 24, 2003, among the Issuers, the Subsidiary Guarantors and
JPMorgan Chase Bank, 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 Energy Partners. 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 obligations of the Issuers;
- subordinated in right of payment to all existing and future Senior Debt
of the Issuers, including borrowings under the Partnership Credit
Facility;
- senior or equal in right of payment to any future subordinated
Indebtedness of the Issuers and equal in right of payment to our existing
senior subordinated notes; and
- unconditionally guaranteed 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 Energy Partners:
- Cameron Highway Pipeline GP, L.L.C.
- Cameron Highway Pipeline I, L.P.
- Crystal Holding, L.L.C.
- GulfTerra Intrastate, L.P. (formerly known as El Paso Energy Intrastate,
L.P.)
- 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.)
- 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 Holding II, L.L.C. (formerly known as EPN GP Holding, L.L.C.)
- GulfTerra Holding I, L.L.C. (formerly known as EPN GP Holding I, L.L.C.)
- GulfTerra GC, L.P. (formerly known as EPN Gulf Coast, L.P.)
- GulfTerra Holding V, L.P. (formerly known as EPN Holding Company, L.P.)
- GulfTerra Holding IV, L.P. (formerly known as EPN Holding Company I,
L.P.)
- GulfTerra NGL Storage, L.L.C. (formerly known as EPN NGL Storage, L.L.C.)
- GulfTerra Holding III, L.L.C. (formerly known as EPN Pipeline GP Holding,
L.L.C.)
- First Reserve Gas, L.L.C.
- Flextrend Development Company, L.L.C.
- GulfTerra Oil Transport, L.L.C. (formerly known as El Paso Energy
Partners Oil Transport, L.L.C.)
- 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 obligation of that Subsidiary Guarantor;
- is subordinated in right of payment to all existing and future Senior
Debt of that Subsidiary Guarantor; and
- is senior or equal in right of payment to any future subordinated
Indebtedness of that Subsidiary Guarantor.
As of May 31, 2003, the Issuers and the Subsidiary Guarantors would have
had total Senior Debt and Guarantor Senior Debt of approximately $747 million,
although the Indenture will allow us to incur at least
27
$1.2 billion of Senior Debt. As indicated above and as discussed in detail below
under the subheading "Subordination," payments on the notes and the Guarantees
will be subordinated to the payment of Senior Debt and Guarantor Senior Debt,
respectively. The Indenture will permit the Issuers and the Subsidiary
Guarantors to incur additional Senior Debt and Guarantor Senior Debt. The
Guarantee of each Subsidiary Guarantor will be subordinated to all Senior Debt
of that Subsidiary Guarantor. In addition, payments on the notes will be
effectively subordinated to claims of creditors (other than GulfTerra Energy
Partners) of our subsidiaries that are not guarantors of the notes. As of May
31, 2003, our non-guarantor subsidiaries had no indebtedness.
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,
L.L.C., Arizona Gas Storage, L.L.C. and Matagorda Island Area Gathering System
are the only Unrestricted Subsidiaries. In addition, GulfTerra Energy Partners
has invested, and may invest in the future, in Joint Ventures. The rights of
GulfTerra Energy Partners to receive assets from any Subsidiary that is not a
Subsidiary Guarantor or from any Joint Venture that are attributable to
GulfTerra Energy 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 $300 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 8 1/2% per
annum and will be payable semi-annually in arrears on June 1 and December 1,
commencing on June 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 March 24, 2003 or, if
interest has already been paid, from the date it was most recently paid.
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 Liquidated Damages, 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.
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.
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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.
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, and other Obligations on, the notes, including upon the
acceleration or redemption of the notes, will be subordinated to the prior
payment in full in cash of all Senior Debt of the Issuers.
The holders of Senior Debt of the Issuers and the holders of Guarantor
Senior Debt of the Subsidiary Guarantors will be entitled to receive payment in
full in cash of all Obligations due in respect of Senior Debt and Guarantor
Senior Debt (including interest after the commencement of any of the following
specified proceedings at the rate specified in the applicable Senior Debt,
whether or not such interest would be an allowed claim in such proceeding), as
applicable, before the holders of notes will be entitled to receive any payment
or distribution with respect to the notes (except that holders of notes may
receive and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal defeasance and covenant defeasance," provided that the
funding of such trust was permitted), in the event of any payment or
distribution to creditors of an Issuer:
(1) in a liquidation or dissolution of that Issuer;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to that Issuer or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of that Issuer's assets and liabilities.
Neither of the Issuers may make any payment or distribution (whether by
redemption, purchase, defeasance or otherwise) in respect of the notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
defeasance and covenant defeasance") if:
(1) a default in the payment of principal, premium or interest (and
other Obligations in the case of the Credit Facilities) on Designated
Senior Debt occurs and is continuing; or
(2) any other default occurs and is continuing on Designated Senior
Debt that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Issuers or the holders of any Designated Senior
Debt (or their representative).
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived and 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
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No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 120 days. If the Trustee or
any holder receives payment that violates the above, such payment shall be held
in trust by the Trustee or such holder for the benefit of, and upon written
request shall be paid to, the holder of Designated Senior Debt. Holders of the
notes shall have subrogation rights.
The Issuers must promptly notify holders of Senior Debt if payment of the
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of GulfTerra Energy Partners or
GulfTerra Finance, holders of these notes may recover less ratably than
creditors of the Issuers who are holders of Senior Debt. See "Risk Factors."
THE GUARANTEES
To the extent that any of our Restricted Subsidiaries guarantees any of our
indebtedness or any indebtedness of any other Restricted Subsidiary, such
Subsidiary will be required to guarantee our obligations under the notes and the
Indenture.
The Subsidiary Guarantors will jointly and severally guarantee the Issuers'
obligations under these notes. Each Guarantee and the related obligations will
be subordinated to the prior payment in full of all Senior Debt of that
Subsidiary Guarantor. 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."
The Obligations of each Subsidiary Guarantor with respect to the notes
under its Guarantee will be subordinated to its Guarantor Senior Debt on the
same basis as the notes are subordinated to Senior Debt.
No Subsidiary Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Guarantor Senior Debt of such Subsidiary Guarantor and
senior in any respect in right of payment to such Subsidiary Guarantor's
Guarantee.
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 Energy Partners or any Subsidiary Guarantor, however, may be
merged or consolidated with or into any one or more Subsidiary Guarantors or
GulfTerra Energy 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 Energy Partners applies the
Net Proceeds of that sale or other disposition in accordance with the
applicable provisions of the Indenture; or
(2) in connection with any sale or other disposition of all of the
Equity Interests of a Subsidiary Guarantor, if GulfTerra Energy 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 Energy Partners designates any Restricted Subsidiary
that is a Subsidiary Guarantor as an Unrestricted Subsidiary; or
30
(4) at such time as such Subsidiary Guarantor ceases to guarantee any
other Indebtedness of GulfTerra Energy 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 Energy Partners' general
partner.
OPTIONAL REDEMPTION
Prior to June 1, 2006, the Issuers may on any one or more occasions redeem
up to 33 percent of the aggregate principal amount of notes originally issued
under the Indenture at a redemption price of 108.500 percent of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the redemption date, with the net cash proceeds of one or more Equity
Offerings. However, at least 67 percent of the aggregate principal amount of
notes must remain outstanding immediately after the occurrence of such
redemption (excluding notes held by GulfTerra Energy Partners, GulfTerra Finance
and our Restricted Subsidiaries). Any redemption must occur within 90 days of
the date of the closing of such Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at the Issuers' option prior to June 1, 2007.
On or after June 1, 2007, the Issuers may redeem all or a part of these
notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon, if any, and Liquidated Damages, if any, to
the applicable redemption date, if redeemed during the 12-month period beginning
on June 1st of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2007........................................................ 104.250%
2008........................................................ 102.125%
2009 and thereafter......................................... 100.0%
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
Liquidated Damages, if applicable, cease to accrue on notes or portions of them
called for redemption unless the Issuers default in making such redemption
payment.
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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. In the Change of Control Offer, the Issuers will offer 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 Liquidated Damages, 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 on or 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 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:
(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
Energy 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.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Issuers will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of notes required by this covenant.
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.
GulfTerra Energy Partners' outstanding Partnership Credit Facility
currently prohibits GulfTerra Energy Partners from purchasing any notes, and
also provides that certain change of control events with respect to GulfTerra
Energy Partners would constitute a default under the agreements governing such
Senior Debt. Any future credit agreements or other agreements relating to Senior
Debt to which GulfTerra Energy Partners becomes a party may contain similar
restrictions and provisions. Moreover, the exercise by the holders of their
right to require the Issuers to repurchase the notes could cause a default under
such Senior Debt, even if the Change of Control does not, due to the financial
effect of such a repurchase on GulfTerra Energy Partners. If a Change of Control
occurs at a time when GulfTerra Energy Partners is prohibited from purchasing
notes, GulfTerra Energy Partners could seek the consent of its senior lenders to
the purchase of notes or could
32
attempt to refinance the borrowings that contain such prohibition. If GulfTerra
Energy Partners does not obtain such a consent or repay such borrowings,
GulfTerra Energy Partners will remain prohibited from purchasing notes. In such
case, GulfTerra Energy 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 such Senior Debt. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments to
the holders of notes. Finally, the Issuers' ability to pay cash to the holders
upon a repurchase may be limited by GulfTerra Energy 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 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 Energy 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 Energy 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 Energy 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 Energy Partners'
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) GulfTerra Energy 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 Energy Partners if the value is less than $10.0 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 $10.0 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 therefor received by
GulfTerra Energy 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 Energy 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 by the transferee of any such assets
pursuant to a customary novation agreement that releases GulfTerra
Energy Partners or such Restricted Subsidiary from further liability;
and
b. any securities, notes or other obligations received by GulfTerra
Energy 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 Energy Partners or a Restricted Subsidiary may apply (or enter into a
definitive agreement for such application within such 360-
33
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 Debt of GulfTerra Energy Partners and/or its
Restricted Subsidiaries (or to make an offer to repurchase or redeem Senior
Debt, provided that such repurchase or redemption closes within 45 days
after the end of such 360-day period) 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 $10.0 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 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
Liquidated Damages 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 Energy 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 (a)
ownership interests in any Subsidiary or Joint Venture and (b) in the case
of an exchange or contribution for tangible assets, up to 25 percent in the
form of cash, Cash Equivalents, accounts receivable or other current
assets), owned by GulfTerra Energy 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 (not more than 25
percent of which consists of cash, Cash Equivalents, accounts receivables
or other current 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 are 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 Energy 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;
(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
34
Energy Partners or any Restricted Subsidiary, which sale, transfer or other
disposition is made by GulfTerra Energy 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 Energy Partners' or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving
GulfTerra Energy Partners or any of its Restricted Subsidiaries) or to the
direct or indirect holders of GulfTerra Energy 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
Energy Partners (other than Disqualified Equity) and other than
distributions or dividends payable to GulfTerra Energy 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 Energy Partners or any of its
Restricted Subsidiaries (other than any such Equity Interests owned by
GulfTerra Energy 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 Indebtedness that is pari passu with or
subordinated to the notes or the Guarantees (other than the notes or the
Guarantees), 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 Energy Partners or a Restricted Subsidiary owned
by GulfTerra Energy 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 Energy 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 Energy 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 Energy Partners from any
Person (other than a Restricted Subsidiary of GulfTerra Energy 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 Energy 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 Energy Partners that have been converted into or exchanged for
such Equity Interests (other than Disqualified Equity), (iii) to the
extent that any Restricted 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
35
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 Energy 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 Energy 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 Energy 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 Energy Partners and its Restricted Subsidiaries during the
quarter in which such Restricted Payment is made, is less than the sum,
without duplication, of:
a. $60.0 million less the aggregate amount of all Restricted
Payments made by GulfTerra Energy 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 Energy 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 Energy 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 Indebtedness of GulfTerra
Energy Partners or any of its Restricted Subsidiaries or of any Equity
Interests of GulfTerra Energy 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 Energy
Partners or such Restricted Subsidiary from any Person (other than
GulfTerra Energy 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) (other than to a Restricted Subsidiary of GulfTerra
Energy Partners) of (i) Equity Interests (other than Disqualified Equity)
of GulfTerra Energy 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,
repurchase, retirement, defeasance or other acquisition of pari passu or
subordinated Indebtedness (W) is subordinated to the same extent as such
refinanced subordinated Indebtedness, (X) has a Weighted Average Life to
Maturity of at least the remaining Weighted Average Life to Maturity of the
refinanced subordinated Indebtedness, (Y) is for the same principal amount
as either such refinanced subordinated Indebtedness plus original issue
discount to the extent not reflected therein or the redemption or purchase
price of such Equity Interests
36
(plus reasonable expenses of refinancing and any premiums paid on such
refinanced subordinated Indebtedness) and (Z) is incurred by GulfTerra
Energy 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 Indebtedness of GulfTerra Energy 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 Energy 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 Energy Partners or any
Restricted Subsidiary of GulfTerra Energy Partners held by any member of
the General Partner's or GulfTerra Energy 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 Energy 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 Energy 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 Energy
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 Energy 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 Energy 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
Energy Partners and any Restricted Subsidiary may incur Indebtedness (including
Acquired Debt), and GulfTerra Energy Partners and the Restricted Subsidiaries
may issue Disqualified Equity, if the Fixed Charge Coverage Ratio for GulfTerra
Energy 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 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.
37
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 Energy 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 Energy 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
Indebtedness under a Credit Facility that have been made by GulfTerra
Energy 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 Energy Partners and its Restricted
Subsidiaries of Existing Indebtedness;
(3) the incurrence by GulfTerra Energy Partners and the Subsidiary
Guarantors of Indebtedness represented by the notes and the Guarantees and
the related Obligations;
(4) the incurrence by GulfTerra Energy 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 Energy Partners or such
Restricted Subsidiary, in an aggregate principal amount not to exceed $20.0
million at any time outstanding;
(5) the incurrence by GulfTerra Energy 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 Energy Partners or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among
GulfTerra Energy Partners and any of its Restricted Subsidiaries; provided,
however, that:
a. if GulfTerra Energy 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 Energy 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 Energy 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 Energy Partners or a Restricted Subsidiary thereof,
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by GulfTerra Energy Partners or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (6);
(7) the incurrence by GulfTerra Energy 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 Energy Partners or any Restricted Subsidiary or interest rate
risk with respect to any floating rate Indebtedness of GulfTerra Energy
Partners or any Restricted Subsidiary that is permitted by the terms of
this Indenture to be outstanding or commodities pricing risks of GulfTerra
Energy Partners or any Restricted Subsidiary in respect of hydrocarbon
production from properties in which GulfTerra Energy Partners or any of its
Restricted Subsidiaries owns an interest;
(8) the guarantee by GulfTerra Energy Partners or any of the
Restricted Subsidiaries of Indebtedness of GulfTerra Energy Partners or a
Restricted Subsidiary that was permitted to be incurred by another
provision of this covenant;
38
(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 Energy 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 $20.0 million;
(11) the incurrence by GulfTerra Energy 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 Energy 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 Energy Partners as so
accrued, accredited or amortized; and
(13) Indebtedness incurred by GulfTerra Energy Partners or any of its
Restricted Subsidiaries arising from agreements or their respective bylaws
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 Energy 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.
LIMITATION ON LAYERING
The Issuers will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of either Issuer and senior in any respect in right
of payment to the notes. No Subsidiary Guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt of such Subsidiary
Guarantor and senior in any respect in right of payment to such Subsidiary
Guarantor's Guarantee.
LIENS
GulfTerra Energy 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, Attributable Debt or
trade payables on any asset now owned or hereafter acquired, except Permitted
Liens, without making effective 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 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 Energy 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 Energy Partners or any of GulfTerra Energy 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 Energy Partners or any of the other Restricted Subsidiaries;
39
(2) make loans or advances to or make other investments in GulfTerra
Energy Partners or any of the other Restricted Subsidiaries; or
(3) transfer any of its properties or assets to GulfTerra Energy
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 Energy 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 Energy 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 Energy Partners or any Restricted
40
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);
(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 Energy 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 suspended during any period in which we
and our Restricted Subsidiaries are not subject to the Suspended
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.
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Notwithstanding the foregoing paragraph, GulfTerra Energy 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 Energy
Partners into a form of entity other than a limited partnership formed
under Delaware law;
(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 Energy 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 Energy 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 Energy 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 Energy 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 Energy Partners or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by
GulfTerra Energy Partners or such Restricted Subsidiary with an unrelated
Person; and
(2) GulfTerra Energy 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 $25.0 million, an Officers'
Certificate certifying that such Affiliate Transaction complies with
this covenant and that such
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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
$25.0 million, (A) a resolution of the Board of Directors of the 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 Energy
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 Energy 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 Energy Partners or any Restricted Subsidiary
and third parties or, if none of GulfTerra Energy 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 Energy Partners or any of its Restricted Subsidiaries
and any Affiliate thereof in which GulfTerra Energy Partners
beneficially owns 50 percent or less of the Voting Stock and one or more
Persons not Affiliated with GulfTerra Energy 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 Energy
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 Energy Partners or any of its Restricted
Subsidiaries in the ordinary course of business and, as applicable,
consistent with the past practice of GulfTerra Energy Partners or such
Restricted Subsidiary;
(3) transactions between or among GulfTerra Energy 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 Energy Partners
or a Restricted Subsidiary, including reimbursement or advancement of
out-of-pocket expenses and provisions of officers' and directors' liability
insurance; and
43
(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 Energy 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 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 Energy 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, unless such other Indebtedness is Senior Debt, in which case the
guarantee of the notes may be subordinated to the guarantee of such Senior Debt
to the same extent as the notes are subordinated to such Senior Debt.
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 Energy 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,
if at the time of such designation such Subsidiary is a Subsidiary Guarantor,
after giving effect to such designation, GulfTerra Energy 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 Energy 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 Energy 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
44
Energy 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.
SALE AND LEASE-BACK TRANSACTIONS
GulfTerra Energy Partners will not, and will not permit any of its
Restricted Subsidiaries to, enter into any sale and lease-back transaction;
provided that GulfTerra Energy Partners or any Restricted Subsidiary that is a
Subsidiary Guarantor may enter into a sale and lease-back transaction if:
(1) GulfTerra Energy 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 suspended during any period in which we and our Restricted
Subsidiaries are not subject to the Suspended 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 Energy Partners applies the proceeds of such
transaction in compliance with, the covenant described above under the
caption "-- Repurchase at the option of holders -- Asset sales."
BUSINESS ACTIVITIES
GulfTerra Energy Partners will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses.
PAYMENTS FOR CONSENT
GulfTerra Energy 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 Energy 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 Energy 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 Energy 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 Energy 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 Energy Partners were required to file such
reports.
If as of the end of any such quarterly or annual period GulfTerra Energy
Partners has designated any of its Subsidiaries as Unrestricted Subsidiaries,
then GulfTerra Energy Partners shall deliver (promptly after
45
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 condition and results of operations of
GulfTerra Energy 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 Energy Partners.
In addition, whether or not required by the SEC, GulfTerra Energy Partners
will make such information available to securities analysts, investors and
prospective investors upon request.
SUSPENDED COVENANTS
During any period when the notes have an Investment Grade Rating from both
Rating Agencies and no Default has occurred and is continuing under the
Indenture, we and our Restricted Subsidiaries will not be subject to the
provisions of the Indenture described above under the following headings under
the caption "-- Covenants":
- "-- Incurrence of indebtedness and issuance of disqualified equity,"
- "-- Restricted payments,"
- "-- Dividend and other payment restrictions affecting subsidiaries,"
- "-- Asset sales,"
- "-- Transactions with affiliates,"
- "-- Sale -- Leaseback transactions" (only to the extent set forth in that
covenant), and
- "-- Merger, consolidation or sale of assets" (only to the extent set
forth in that covenant)
(collectively, the "Suspended Covenants"); provided, however, that the
provisions of the Indenture described above under the caption "-- Change of
control," and described above under the following headings:
- "-- Liens,"
- "-- Additional subsidiary guarantees,"
- "-- Reports,"
- "-- Business activities,"
- "-- Payments for consent," and
- "-- Limitation on layering"
will not be so suspended; and provided further, that if we and our Restricted
Subsidiaries are not subject to the Suspended Covenants for any period of time
as a result of the preceding portion of this sentence and, subsequently, either
of the Rating Agencies withdraws its ratings or downgrades the ratings assigned
to the notes below the Investment Grade Ratings so that the notes do not have an
Investment Grade Rating from both Rating Agencies, or a Default (other than with
respect to the Suspended Covenants) occurs and is continuing, we and our
Restricted Subsidiaries will thereafter again be subject to the Suspended
Covenants, subject to the terms, conditions and obligations set forth in the
Indenture (each such date of reinstatement being the "Reinstatement Date").
Compliance with the Suspended Covenants with respect to Restricted Payments made
after the Reinstatement Date will be calculated in accordance with the terms of
the covenant described under "-- Restricted payments" as though such covenants
had been in effect during the entire period of time from which the notes are
issued. As a result, during any period in which we and our Restricted
Subsidiaries are not subject to the Suspended Covenants, the notes will be
entitled to substantially reduced covenant protection.
46
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
Liquidated Damages with respect to, the notes, whether or not prohibited by
the subordination provisions of the Indenture;
(2) default in payment when due of the principal of or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the Indenture;
(3) failure by GulfTerra Energy 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 Energy 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");
(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 Energy
Partners' Restricted Subsidiaries (or the payment of which is guaranteed by
GulfTerra Energy 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 $20.0 million or
more;
(6) failure by an Issuer or any of GulfTerra Energy Partners'
Restricted Subsidiaries to pay final judgments aggregating in excess of
$10.0 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 Energy 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
47
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 Liquidated Damages, 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.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
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.
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 Energy 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 Energy Partners must specify whether the notes are being defeased
to maturity or to a particular redemption date;
48
(2) in the case of Legal Defeasance, GulfTerra Energy Partners shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that (a) GulfTerra Energy 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 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 Energy 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
Energy Partners or any of its Restricted Subsidiaries is a party or by
which GulfTerra Energy Partners or any of its Restricted Subsidiaries is
bound;
(6) GulfTerra Energy 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 Energy Partners must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by GulfTerra Energy
Partners with the intent of preferring the holders of notes over the other
creditors of GulfTerra Energy Partners with the intent of defeating,
hindering, delaying or defrauding other creditors of GulfTerra Energy
Partners; and
(8) GulfTerra Energy 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 non-consenting 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
49
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;
(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).
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination that adversely affects the rights of the
holders of the notes will require the consent of the holders of at least 75
percent in aggregate principal amount of notes then outstanding.
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
50
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 Energy
Partners at 4 Greenway Plaza, Houston, Texas, 77046, Attention: Investor
Relations.
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 Banking, societe anonyme ("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 may be held only through Euroclear or Clearstream, and, pursuant to
DTC's procedures, Indirect Participants that hold a beneficial interest in the
Regulation S Global note will not be able to transfer such interest to a person
that takes 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.
51
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.
DEPOSITARY PROCEDURES
DTC has advised GulfTerra Energy 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 Energy 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
52
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
Liquidated Damages, 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 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
53
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 Energy 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 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 holds an interest in the Regulation S Global Note through
Euroclear or Clearstream will not 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. 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.
54
Prior to 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 will not be permitted to transfer its interests to any person that
takes 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.
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 Liquidated Damages, 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 Liquidated Damages, 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.
55
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
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 Energy
Partners or GulfTerra Energy 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 Energy
Partners' Restricted Subsidiaries or the sale by GulfTerra Energy 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 Energy Partners and its Restricted
Subsidiaries of less than $5.0 million;
(2) a transfer of assets between or among GulfTerra Energy Partners
and its Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to
GulfTerra Energy 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."
56
"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.
"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 Energy
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 Energy 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 Energy Partners, or
members of the El Paso Group cease to serve as the only general partners of
GulfTerra Energy Partners.
Notwithstanding the foregoing, a conversion of GulfTerra Energy 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
57
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.
"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
Energy 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 Energy Partners shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of GulfTerra Energy
Partners only to the extent that a corresponding amount would be permitted at
the date of determination to be dividended or distributed to GulfTerra Energy
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.
58
"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 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 Energy 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.
"Designated Senior Debt" means any Indebtedness under the Partnership
Credit Facility and any Senior Debt permitted under the Indenture the principal
amount of which is $25.0 million or more and that has been designated by
GulfTerra Energy Partners as "Designated Senior Debt."
"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 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 Energy 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 Energy Partners or Restricted Subsidiary may
not repurchase or redeem any such Equity Interests pursuant to
59
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.
"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).
"Equity Offering" means any sale for cash of Equity Interests of GulfTerra
Energy Partners (excluding sales made to any Restricted Subsidiary and excluding
sales of Disqualified Equity).
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of GulfTerra Energy Partners and its Restricted Subsidiaries in
existence on the Issue Date.
"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,
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 Energy 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 Energy
Partners (other
60
than Disqualified Equity) or to GulfTerra Energy Partners or a
Restricted Subsidiary of GulfTerra Energy 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;
(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.
61
"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 Senior Debt" of a Subsidiary Guarantor means all Obligations
with respect to any Indebtedness of such Subsidiary Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall be on a parity with or subordinated in
right of payment to such Subsidiary Guarantor's Guarantee. Without limiting the
generality of the foregoing, (x) "Guarantor Senior Debt" shall include the
principal of, premium, if any, and interest on all Obligations of every nature
of such Subsidiary Guarantor from time to time owed to the lenders under the
Partnership Credit Facility, including, without limitation, principal of and
interest on, and all fees, indemnities and expenses payable by such Subsidiary
Guarantor under, the Partnership Credit Facility, and (y) in the case of amounts
owing by such Subsidiary Guarantor under the Partnership Credit Facility and
guarantees of Designated Senior Indebtedness, "Guarantor Senior Debt" shall
include interest accruing thereon subsequent to the occurrence of any bankruptcy
Event of Default specified in the Indenture relating to such Subsidiary
Guarantor, whether or not the claim for such interest is allowed under any
applicable Bankruptcy Law. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the notes or the
Guarantees, (ii) Indebtedness that is expressly subordinate or junior in right
of payment to any other Indebtedness of such Subsidiary Guarantor, (iii) any
liability for federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (vi) Indebtedness of such Subsidiary Guarantor to
GulfTerra Energy Partners or a Subsidiary of GulfTerra Energy Partners or any
other Affiliate of GulfTerra Energy Partners, (vii) any trade payables of such
Subsidiary Guarantor, and (viii) any Indebtedness which is incurred by such
Subsidiary Guarantor in violation of the Indenture.
"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;
62
(7) representing Disqualified Equity; or
(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
Energy Partners or any of its Restricted Subsidiaries of Indebtedness incurred
by GulfTerra Energy 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.
"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.
"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 the portion
(proportionate to GulfTerra Energy Partners' Equity Interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of GulfTerra Energy
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 Energy
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
63
GulfTerra Energy 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 Energy Partners or any Restricted
Subsidiary of GulfTerra Energy Partners sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of GulfTerra
Energy Partners such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of GulfTerra Energy Partners,
GulfTerra Energy 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 March 24, 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.
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"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:
a. any Asset Sale; or
b. 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 Energy 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 Energy Partners or
any of its Restricted Subsidiaries until such time as such reserve is reversed
or such escrow arrangement is terminated, in which case Net Proceeds shall
include only the amount of the reserve so
64
reversed or the amount returned to GulfTerra Energy Partners or its Restricted
Subsidiaries from such escrow arrangement, as the case may be.
"Non-Recourse Debt" means Indebtedness as to which:
(1) neither GulfTerra Energy 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 Energy 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 Energy 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 Energy Partners
or any of its Restricted Subsidiaries, provided that GulfTerra Energy 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., amended and restated
effective as of August 31, 2000, as such may be amended, modified or
supplemented from time to time.
"Partnership Credit Facility" means (1) the Sixth Amended and Restated
Credit Agreement among GulfTerra Energy Partners, GulfTerra Finance, the lenders
from time to time party thereto and JPMorgan Chase Bank, as administrative
agent, 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 and (2) the Amended
and Restated Credit Agreement among GulfTerra Holding V, L.P., the lenders from
time to time party thereto and JPMorgan Chase Bank, as administrative agent,
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 Energy Partners' annual audited consolidated financial statements.
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"Permitted Business Investments" means Investments by GulfTerra Energy
Partners or any of its Restricted Subsidiaries in any Unrestricted Subsidiary of
GulfTerra Energy Partners or in any Person that does not constitute a direct or
indirect Subsidiary of GulfTerra Energy Partners (a "Joint Venture"), provided
that:
(1) either (a) at the time of such Investment and immediately
thereafter, GulfTerra Energy 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 Energy Partners and its
Restricted Subsidiaries or (b) any such Indebtedness of such Unrestricted
Subsidiary or Joint Venture that is recourse to GulfTerra Energy Partners
or any of its Restricted Subsidiaries (which shall include all Indebtedness
of such Unrestricted Subsidiary or Joint Venture for which GulfTerra Energy
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 Energy 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., Copper
Eagle Gas Storage, L.L.C., Coyote Gas Treating, LLC, Deepwater Gateway, L.L.C.,
Poseidon Oil Pipeline Company, L.L.C., and Cameron Highway Oil Pipeline Company
and none of Atlantis Offshore, Copper Eagle Gas Storage, Coyote Gas Treating,
Deepwater Gateway, 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 Energy 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, Copper Eagle Gas Storage, Coyote Gas Treating, Deepwater Gateway, 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 Energy Partners;
(2) any Investment in GulfTerra Energy Partners or in a Restricted
Subsidiary of GulfTerra Energy Partners (excluding redemptions, purchases,
acquisitions or other retirements of Equity Interests in GulfTerra Energy
Partners) at any one time outstanding;
(3) any Investment in cash or Cash Equivalents;
(4) any Investment by GulfTerra Energy Partners or any Restricted
Subsidiary of GulfTerra Energy Partners in a Person if as a result of such
Investment:
a. such Person becomes a Restricted Subsidiary of GulfTerra Energy
Partners; or
b. 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 Energy Partners or a Restricted Subsidiary of
GulfTerra Energy Partners;
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(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;"
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Equity) of GulfTerra Energy
Partners;
(7) payroll advances in the ordinary course of business and other
advances and loans to officers and employees of GulfTerra Energy 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 Energy 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 Energy Partners or any such Restricted Subsidiary, in each case
as to debt owing to GulfTerra Energy Partners or any of its Restricted
Subsidiary that arose in the ordinary course of business of GulfTerra
Energy 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 Energy Partners or any Restricted Subsidiary of
GulfTerra Energy 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 Junior Securities" means: (1) nonmandatorily redeemable Equity
Interests in GulfTerra Energy Partners or any Subsidiary Guarantor, as
reorganized or readjusted; or (2) debt securities of GulfTerra Energy Partners
or any Subsidiary Guarantor as reorganized or readjusted that are subordinated
to all Senior Debt and Guarantor Senior Debt and any debt securities issued in
exchange for Senior Debt and Guarantor Senior Debt to substantially the same
extent as, or to a greater extent than, the notes and the Guarantees are
subordinated to Senior Debt and Guarantor Senior Debt pursuant to the Indenture,
provided that the rights of the holders of Senior Debt and Guarantor Senior Debt
under the Partnership Credit Facility are not altered or impaired by such
reorganization or readjustment.
"Permitted Liens" means:
(1) Liens on the assets of GulfTerra Energy Partners and any
Subsidiary securing Senior Debt and Guarantor Senior Debt;
(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 Energy
Partners or its Restricted Subsidiaries;
(3) Liens securing reimbursement obligations of GulfTerra Energy
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
Energy Partners and its Restricted Subsidiaries;
(5) Liens in favor of GulfTerra Energy Partners or any of the
Restricted Subsidiaries;
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(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 Energy Partners or any
Restricted Subsidiary of GulfTerra Energy Partners, provided that such
Liens were in existence prior to the 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 Energy Partners or such
Restricted Subsidiary;
(8) Liens on property existing at the time of acquisition thereof by
GulfTerra Energy Partners or any Restricted Subsidiary of GulfTerra Energy
Partners, provided that such Liens were in existence prior to the
contemplation of such acquisition and relate solely to such property,
accessions thereto and the proceeds 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 or improved
by GulfTerra Energy 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 or improving such asset or
property, or in favor of the Person that provided the funding for the
acquisition, construction or improvement of such asset or property, (B) are
created within 360 days after the date of acquisition, construction or
improvement, (C) secure the purchase price or construction or improvement
cost, as the case may be, of such asset or property in an amount up to 100
percent of the fair market value (as determined by the Board of Directors
of the General Partner) of such acquisition, construction or improvement of
such asset or property, and (D) are limited to the asset or property so
acquired, constructed or improved (including proceeds thereof, accessions
thereto and upgrades thereof);
(11) Liens to secure performance of Hedging Obligations of GulfTerra
Energy 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 Energy Partners or any
Restricted Subsidiary to the extent securing Non-Recourse Debt or
Indebtedness (other than Permitted Debt) otherwise permitted by the first
paragraph under "-- Incurrence of indebtedness and issuance of disqualified
equity;"
(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 Energy 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;
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(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;
(21) Liens arising from protective filings made in the appropriate
office(s) 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 incurred in the ordinary course of business of GulfTerra
Energy Partners or any Restricted Subsidiary of GulfTerra Energy Partners
with respect to obligations that do not exceed $10.0 million at any one
time outstanding; and
(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 Energy Partners or any of its Restricted
Subsidiaries on deposit with or in possession of such bank.
"Permitted Refinancing Indebtedness" means any Indebtedness of GulfTerra
Energy 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 Energy 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 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 Energy Partners
or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
69
"Rating Agency" means each of 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 the Issuer (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.
"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 Energy Partners.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all
Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by GulfTerra
Energy Partners and the Restricted Subsidiaries under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the notes; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any Indebtedness that is expressly subordinate or junior in right
of payment to any Indebtedness of GulfTerra Energy Partners or any
Subsidiary Guarantor;
(2) Indebtedness evidenced by the notes or the Guarantees;
(3) any liability for federal, state, local or other taxes owed or
owing by GulfTerra Energy Partners or any Restricted Subsidiary of
GulfTerra Energy Partners;
(4) any Indebtedness of GulfTerra Energy Partners or any of its
Subsidiaries to any of its Subsidiaries or other Affiliates;
(5) any trade payables; or
(6) any Indebtedness that is incurred in violation of the Indenture.
"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, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"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
70
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) as of the date of this prospectus, 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.; Flextrend
Development Company, L.L.C.; GulfTerra Oil Transport, L.L.C.; 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.
"Suspended Covenants" has the meaning given to such term under the caption
"-- Suspended covenants."
"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 Energy 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 Energy Partners or any other Restricted Subsidiary, (B) is recourse to
or obligates GulfTerra Energy 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 Energy
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 Energy 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
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Investment, Permitted Investment or Permitted Business Investment, as
applicable. Currently, GulfTerra 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 Energy 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 Energy 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 Energy 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 Energy 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, 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.
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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.
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
liquidated damages 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 liquidated damages 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
73
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
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.
74
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
- 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
75
- is a foreign partnership in which one or more United States persons, in
the aggregate, own more than 50 percent of 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, 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.
76
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 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
77
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.
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,
78
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 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-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 in this prospectus and registration
statement by reference to GulfTerra Energy 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.
79
Information derived from the report of Netherland, Sewell & Associates,
Inc., independent petroleum engineers, with respect to GulfTerra Energy
Partners' estimated oil and natural gas reserves incorporated in this prospectus
and registration statement by reference to GulfTerra Energy 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.
80
ANNEX A
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
8 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2010
OF
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
PURSUANT TO THE PROSPECTUS DATED , 2003
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 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:
JPMORGAN CHASE BANK
By Mail: By Facsimile: By Hand:
JPMorgan Chase Bank (512) 479-2553 JPMorgan Chase Bank
Attention: Mr. Cary Gilliam Attention: Mr. Cary Gilliam Attention: Mr. Cary Gilliam
700 Lavaca 700 Lavaca
Fifth Floor Fifth Floor
Austin, TX 78701 Austin, TX 78701
Confirm by Telephone:
(512) 479-2575
Attention: Mr. Cary Gilliam
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 8 1/2%
Series A Senior Subordinated Notes due 2010 (the "Series A Notes") of GulfTerra
Energy Partners, L.P. and GulfTerra Energy Finance Corporation (together, the
"Issuers") to receive 8 1/2% Series B Senior Subordinated 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
A-1
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:
----------------------
A-2
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
- ------------------------------------------------------------------------------------------------------------
TOTAL
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) PRINCIPAL PRINCIPAL AMOUNT OF
(PLEASE FILL IN IF BLANK) CERTIFICATE AMOUNT AMOUNT SERIES A
SEE INSTRUCTION 3. NUMBER(S)* REPRESENTED** TENDERED** 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 ,
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.
A-3
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
A-4
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.
A-5
================================================================================
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)
================================================================================
A-6
================================================================================
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]
================================================================================
A-7
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 two
business 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
A-8
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
A-9
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% 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% 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 6 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% backup withholding tax.
A-10
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.
A-11
======================================================================================================
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number or
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number
SIGNING AND DATING BELOW.
-------------------------------------
----------------------------------------------------------------------------
DEPARTMENT OF THE PART 2 -- CERTIFICATION -- Under PART 3 -- Awaiting TIN [ ]
TREASURY penalties of perjury, I certify that:
INTERNAL REVENUE SERVICE (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
PAYER'S REQUEST FOR (2) I am not subject to backup withholding
TAXPAYER IDENTIFICATION because: (a) I am exempt from backup
NO. ("TIN") 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:
---------------------------------- -----------------------
======================================================================================================
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%.
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% of all reportable cash payments made to me will be withheld
until I provide a taxpayer identification number.
Signature: Date:
-------------------------------------- ---------------------------
================================================================================
A-12
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.
- ----------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL SECURITY
NUMBER OF --
- ----------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) 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 the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor or
incompetent person
7. a. A revocable savings trust The grantor-trustee(1)
account (in which grantor
is also trustee) The actual owner(1)
b. Any "trust" account that
is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- ----------------------------------------------------------
- ----------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL SECURITY
NUMBER OF --
- ----------------------------------------------------------
9. A valid trust, estate, or The legal entity (do
pension 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
the name of the business
13. Association, club, or other The organization
tax-exempt 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.
A-13
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% 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% 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.
A-14
ANNEX B
NOTICE OF GUARANTEED DELIVERY
GULFTERRA ENERGY PARTNERS, L.P.
GULFTERRA ENERGY FINANCE CORPORATION
OFFER TO EXCHANGE
8 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 FOR ANY AND ALL
OUTSTANDING 8 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2010
As set forth in the Prospectus, dated , 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
8 1/2% Series B Senior Subordinated 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 8 1/2% Series A Senior
Subordinated 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 , 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:
JPMORGAN CHASE BANK
By Mail: By Facsimile:
JPMorgan Chase Bank (512) 479-2553
700 Lavaca Attention: Mr. Cary Gilliam
Fifth Floor
Austin, TX 78701 Confirm by Telephone:
Attention: Mr. Cary Gilliam (512) 479-2575
Attention: Mr. Cary Gilliam
------------------------
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.
B-1
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 , 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.:
--------------------------------------------
================================================================================
B-2
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 JPMorgan Chase Bank (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.
B-3
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.
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
II-1
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 March 19, 2003 among GulfTerra
Energy Partners, L.P., GulfTerra Energy Finance Corporation,
the Subsidiaries listed on Schedule A thereto, J.P. Morgan
Securities Inc., Goldman, Sachs & Co., UBS Warburg LLC and
Wachovia Securities, Inc.
4.A** Indenture dated March 24, 2003 among GulfTerra Energy
Partners, L.P., GulfTerra Energy Finance Corporation, the
Subsidiary Guarantors named therein and JPMorgan Chase Bank,
as Trustee (filed as Exhibit 4.K to our 2003 First Quarter
Form 10-Q).
4.B** Form of 8 1/2% Note (contained in the Indenture filed as
Exhibit 4.K to our 2003 First Quarter Form 10-Q).
4.C** A/B Exchange Registration Rights Agreement dated as of March
24, 2003 between GulfTerra Energy Partners, GulfTerra Energy
Finance Corporation, the Subsidiary Guarantors listed on
Schedule A thereto, J.P. Morgan Securities Inc., Goldman,
Sachs & Co., UBS Warburg LLC and Wachovia Securities, Inc.
(filed as Exhibit 4.J to our 2003 First 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.
24.A* Power of attorney (included in the signature page).
25.A* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of JPMorgan Chase Bank.
- ---------------
* 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.
II-3
ITEM 22. UNDERTAKINGS
(a) Regulation S-K, Item 512 Undertakings
(1) The undersigned registrant hereby undertakes:
(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% 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
II-4
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 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 July 28, 2003.
GULFTERRA ENERGY PARTNERS, L.P.
By: /s/ KEITH B. FORMAN
------------------------------------
Keith B. Forman
Vice President and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures
appear below, constitute and appoint D. Mark Leland and Peggy A. Heeg, and each
of them as their true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for them and in their names, places and
steads, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and the other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his or
her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates as indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT G. PHILLIPS Chief Executive Officer and Director July 28, 2003
- -------------------------------------- (Principal Executive Officer)(1)
Robert G. Phillips
/s/ KEITH B. FORMAN Vice President and Chief Financial July 28, 2003
- -------------------------------------- Officer (Principal Financial
Keith B. Forman Officer)(2)
/s/ JAMES H. LYTAL President and Director(3) July 28, 2003
- --------------------------------------
James H. Lytal
/s/ KATHY A. WELCH Vice President and Controller July 28, 2003
- -------------------------------------- (Principal Accounting Officer)(4)
Kathy A. Welch
/s/ MICHAEL B. BRACY Director(5) July 28, 2003
- --------------------------------------
Michael B. Bracy
/s/ H. DOUGLAS CHURCH Director(6) July 28, 2003
- --------------------------------------
H. Douglas Church
II-6
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. MATT RALLS Director(7) July 28, 2003
- --------------------------------------
W. Matt Ralls
/s/ KENNETH L. SMALLEY Director(8) July 28, 2003
- --------------------------------------
Kenneth L. Smalley
- ---------------
(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 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% 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% 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% 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% 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% 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% 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,
II-7
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% 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% 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
(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.
GULFTERRA INTRASTATE, L.P. (formerly known as El Paso Energy Intrastate, L.P.)
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.)
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 HOLDING II, L.L.C. (formerly known as EPN GP Holding, L.L.C.)
GULFTERRA HOLDING I, L.L.C. (formerly known as EPN GP Holding I, L.L.C.)
GULFTERRA GC, L.P. (formerly known as EPN Gulf Coast, L.P.)
GULFTERRA HOLDING V, L.P. (formerly known as EPN Holding Company, L.P.)
GULFTERRA HOLDING IV, L.P. (formerly known as EPN Holding Company, I, L.P.
GULFTERRA NGL STORAGE, L.L.C. (formerly known as EPN NGL Storage, L.L.C.)
GULFTERRA HOLDING III, L.L.C. (formerly known as EPN Pipeline GP Holding,
L.L.C.)
FIRST RESERVE GAS, L.L.C.
FLEXTREND DEVELOPMENT COMPANY, L.L.C.
GULFTERRA OIL TRANSPORT, L.L.C. (formerly known as El Paso Energy Partners Oil
Transport, L.L.C.)
HATTIESBURG GAS STORAGE COMPANY
By: FIRST RESERVE GAS, L.L.C.,
in its capacity as 50% general partner of Hattiesburg Gas Storage Company
By: HATTIESBURG INDUSTRIAL GAS SALES, L.L.C.,
in its capacity as 50% general partner of Hattiesburg Gas Storage Company
HATTIESBURG INDUSTRIAL GAS SALES, L.L.C.
HIGH ISLAND OFFSHORE SYSTEM, L.L.C.
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-9
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* Purchase Agreement dated March 19, 2003 among GulfTerra
Energy Partners, L.P., GulfTerra Energy Finance Corporation,
the Subsidiaries listed on Schedule A thereto, J.P. Morgan
Securities Inc., Goldman, Sachs & Co., UBS Warburg LLC and
Wachovia Securities, Inc.
4.A** Indenture dated March 24, 2003 among GulfTerra Energy
Partners, L.P., GulfTerra Energy Finance Corporation, the
Subsidiary Guarantors named therein and JPMorgan Chase Bank,
as Trustee (filed as Exhibit 4.K to our 2003 First Quarter
Form 10-Q).
4.B** Form of 8 1/2% Note (contained in the Indenture filed as
Exhibit 4.K to our 2003 First Quarter Form 10-Q).
4.C** A/B Exchange Registration Rights Agreement dated as of March
24, 2003 between GulfTerra Energy Partners, GulfTerra Energy
Finance Corporation, the Subsidiary Guarantors listed on
Schedule A thereto, J.P. Morgan Securities Inc., Goldman,
Sachs & Co., UBS Warburg LLC and Wachovia Securities, Inc.
(filed as Exhibit 4.J to our 2003 First 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.
24.A* Power of attorney (included in the signature page).
25.A* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of JPMorgan Chase Bank.
- ---------------
* Filed herewith.
** Previously filed.
EXHIBIT 1.1
EL PASO ENERGY PARTNERS, L.P.
EL PASO ENERGY PARTNERS FINANCE CORPORATION
as Issuers
and
THE SUBSIDIARIES LISTED ON SCHEDULE A
as Subsidiary Guarantors
$300,000,000
8 1/2% Series A Senior Subordinated Notes due 2010
Purchase Agreement
March 19, 2003
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
UBS WARBURG LLC
WACHOVIA SECURITIES, INC.
as Initial Purchasers
$300,000,000
8 1/2% Series A Senior Subordinated Notes due 2010
of
EL PASO ENERGY PARTNERS, L.P.
and
EL PASO ENERGY PARTNERS FINANCE CORPORATION
Purchase Agreement
March 19, 2003
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
UBS WARBURG LLC
WACHOVIA SECURITIES, INC.
c/o J.P. Morgan Securities Inc.
270 Park Avenue, 5th Floor
New York, New York 10017
Ladies and Gentlemen:
El Paso Energy Partners, L.P., a Delaware limited partnership (the
"Partnership"), and El Paso Energy Partners Finance Corporation, a Delaware
corporation ("El Paso Finance" and together with the Partnership, the
"Issuers"), propose to issue and sell to J.P. Morgan Securities Inc., Goldman,
Sachs & Co., UBS Warburg LLC and Wachovia Securities, Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers") an aggregate of
$300,000,000 in principal amount of its 8 1/2% Series A Senior Subordinated
Notes due 2010 (the "Series A Notes"), subject to the terms and conditions set
forth herein. The Series A Notes are to be issued pursuant to the provisions of
an indenture, to be dated as of March 24, 2003 (the "Indenture"), among the
Issuers, the Guarantors (as defined below) and JPMorgan Chase Bank, as trustee
(the "Trustee"). The Series A Notes and the Series B Notes (as defined below)
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Series A Notes will be guaranteed pursuant to guarantees (the
"Series A Guarantees") by each of the entities listed on Schedule A hereto
(each, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors").
The Series A Guarantees and the Series B Guarantees (as defined below) are
collectively referred to herein as the "Guarantees".
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended
(the "Act"). The Issuers and the Subsidiary Guarantors have prepared an
offering memorandum, dated March 19, 2003 (the
"Offering Memorandum"), relating to the Series A Notes and the
Guarantees. Any reference herein to the Offering Memorandum shall be
deemed to include the documents and other information incorporated by
reference therein.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUERS
OF THIS NOTE THAT: (A) THIS NOTE MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO EL PASO ENERGY
PARTNERS, L.P., EL PASO ENERGY PARTNERS FINANCE CORPORATION,
OR ANY SUBSIDIARY OF EL PASO ENERGY PARTNERS, L.P., (II) IN
THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (V) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (VI)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (VI) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE
2
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to
the terms and conditions contained herein, the Issuers agree to issue
and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Issuers, the principal
amounts of Series A Notes set forth opposite the name of such Initial
Purchaser on Schedule B hereto at a purchase price equal to 98% of the
principal amount thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the Issuers that
the Initial Purchasers will make offers (the "Exempt Resales") of the
Series A Notes purchased hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely to (i) persons
whom the Initial Purchasers reasonably believe to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBs")
and (ii) persons permitted to purchase the Series A Notes in offshore
transactions in reliance upon Regulation S under the Act (each, a
"Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The
Initial Purchasers will offer the Series A Notes to Eligible Purchasers
initially at a price equal to 100% of the principal amount thereof.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated as of the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Issuers
and the Subsidiary Guarantors will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to the Issuers' 8 1/2% Series B Senior
Subordinated Notes due 2010 (the "Series B Notes"), and the guarantees thereof
by each of the Subsidiary Guarantors (the "Series B Guarantees") to be offered
in exchange for the Series A Notes and the Series A Guarantees thereof (such
offer to exchange being referred to as the "Exchange Offer") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Series A Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer. This Agreement, the Indenture, the Notes, the Guarantees and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
4. Delivery and Payment.
3
(a)Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1900 Pennzoil Place South Tower, 711 Louisiana Street,
Houston, TX 77002, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on March 24, 2003 or at such other time on the same
date or such other date as shall be agreed upon by the Initial
Purchasers and the Issuers in writing. The time and date of such
delivery and the payment for the Series A Notes are herein called the
"Closing Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), having an aggregate principal amount
corresponding to the aggregate principal amount of the Series A Notes
(collectively, the "Global Note"), shall be delivered by the Issuers to
the Initial Purchasers (or as the Initial Purchasers direct) in each
case with any transfer taxes thereon duly paid by the Issuers against
payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Partnership. The Global
Note shall be made available to the Initial Purchasers for inspection
not later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. Agreements of the Issuers and the Subsidiary Guarantors. Each of the
Partnership, El Paso Finance and the Subsidiary Guarantors hereby
agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, to confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any
Series A Notes for offering or sale in any jurisdiction designated by
the Initial Purchasers pursuant to Section 5(e) hereof, or the
initiation of any proceeding by any state securities commission or any
other federal or state regulatory authority for such purpose and (ii)
of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the
Offering Memorandum untrue or that requires any additions to or changes
in the Offering Memorandum in order to make the statements therein not
misleading. The Issuers and the Subsidiary Guarantors shall use their
best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws, the Issuers
and the Subsidiary Guarantors shall use their best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Issuers as many copies of the Offering
Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request for the time period specified in
Section 5(c). Subject to the Initial Purchasers' compliance with its
representations and warranties and agreements set forth in Section 7
hereof, the Issuers
4
consent to the use of the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchasers
in connection with Exempt Resales;
(c) At any time prior to the completion of the initial offering of the
Series A Notes and in connection with market-making activities of the
Initial Purchasers for so long as any Series A Notes are outstanding,
(i) not to make any amendment or supplement to the Offering Memorandum
of which the Initial Purchasers shall not previously have been advised
or to which the Initial Purchasers shall reasonably object after being
so advised, provided, that this clause (i) shall not apply to any
filing by the Partnership of an Annual Report on Form 10-K, Quarterly
Report on Form 10-Q or Current Report on Form 8-K with respect to
matters unrelated to the Series A Notes and the offering or exchange
thereof, and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering
Memorandum which may be necessary or advisable in connection with such
Exempt Resales or such market-making activities;
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchasers, it becomes necessary to
amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not
misleading, or if, in the opinion of counsel to the Initial Purchasers,
it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare, subject to
Section 5(c), an appropriate amendment or supplement to such Offering
Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum will
comply with applicable law, and to furnish to the Initial Purchasers
and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably
request;
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration
or qualification of the Series A Notes for offer and sale to the
Initial Purchasers and pursuant to Exempt Resales under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may
request and to continue such registration or qualification in effect so
long as required for Exempt Resales and to file such consents to
service of process or other documents as may be necessary in order to
effect such registration or qualification; provided, however, that
neither the Issuers nor any Subsidiary Guarantor shall be required in
connection therewith to qualify as a foreign partnership, limited
liability company, trust or corporation in any jurisdiction in which it
is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to
matters and transactions relating to the Offering Memorandum or Exempt
Resales, in any jurisdiction in which it is not now so subject;
(f) For so long as the Series A Notes are outstanding, to furnish or
make available to the Initial Purchasers copies of any annual reports,
quarterly reports and current reports filed
5
by the Partnership with the Commission on Forms 10-K, 10-Q and 8-K, and
such other documents, reports and information as shall be furnished by
the Company to the Trustee or to the holders of Series A Notes, in each
case pursuant to the Indenture;
(g) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of the obligations of the
Issuers and the Subsidiary Guarantors under this Agreement, including:
(i) the fees, disbursements and expenses of counsel to
the Issuers and the Subsidiary Guarantors and accountants of
the Issuers and the Subsidiary Guarantors in connection with
the sale and delivery of the Series A Notes to the Initial
Purchasers and pursuant to Exempt Resales, and all other fees
and expenses in connection with the preparation, printing,
filing and distribution of the Offering Memorandum and all
amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivery of
copies thereof to the Initial Purchasers and persons
designated by them in the quantities specified herein,
(ii) all costs and expenses related to the transfer and
delivery of the Series A Notes to the Initial Purchasers and
pursuant to Exempt Resales, including any transfer or other
taxes payable thereon,
(iii) all costs of printing or producing this Agreement,
the other Operative Documents and any other agreements or
documents in connection with the offering, purchase, sale or
delivery of the Series A Notes,
(iv) all expenses in connection with the registration or
qualification of the Series A Notes and the Series A
Guarantees for offer and sale under the securities or Blue Sky
laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda
in connection therewith (including the filing fees and fees
and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and
memoranda relating thereto),
(v) the cost of printing certificates representing the
Series A Notes and the Series A Guarantees,
(vi) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the
National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System - PORTAL ("PORTAL"),
(vii) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture, the Notes
and the Guarantees,
(viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC),
6
(ix) any fees charged by rating agencies for the rating of
the Notes,
(x) all costs and expenses of the Exchange Offer and any
Registration Statement, as set forth in the Registration
Rights Agreement, and
(xi) all other costs and expenses incident to the
performance of the obligations of the Issuers and the
Subsidiary Guarantors hereunder for which provision is not
otherwise made in this Section;
(h) To use its best efforts to effect the inclusion of the Series A
Notes in PORTAL and to maintain the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding;
(i) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the
representation letters of the Issuers and the Subsidiary Guarantors to
DTC relating to the approval of the Notes by DTC for "book-entry"
transfer;
(j) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of each of the
Issuers or any Subsidiary Guarantor or any warrants, rights or options
to purchase or otherwise acquire debt securities of the Issuers or any
Subsidiary Guarantor substantially similar to the Notes and the
Guarantees (other than (i) the Notes and the Guarantees, (ii)
commercial paper issued in the ordinary course of business and (iii)
the incurrence of debt in connection with the Credit Facility, the EPN
Holding Term Loan and the San Juan Acquisition Loan) without the prior
written consent of J.P. Morgan Securities Inc. As used herein, the term
"Credit Facility" means the Sixth Amended and Restated Credit Agreement
among the Partnership, El Paso Finance, the several lenders from time
to time parties thereto, Credit Lyonnais New York Branch and Wachovia
Bank, National Association, as Co-Syndication Agents, Fleet National
Bank and Fortis Capital Corp., as Co-Documentation Agents, and JPMorgan
Chase Bank, as Administrative Agent, dated as of March 23, 1995, as
amended and restated through October 10, 2002, and the collateral
documents related thereto. As used herein, the term "EPN Holding Term
Loan" means the Amended and Restated Credit Agreement among EPN Holding
Company, L.P., the Lenders party thereto, Banc One Capital Markets,
Inc. and Wachovia Bank, National Association, as Co-Syndication Agents,
Fleet National Bank and Fortis Capital Corp., as Co-Documentation
Agents, and JPMorgan Chase Bank, as Administrative Agent, dated as of
April 8, 2002, as amended and restated through October 10, 2002, and
the related collateral documents. As used herein, the term "San Juan
Acquisition Loan" means the Senior Secured Acquisition Term Loan Credit
Agreement among the Partnership, El Paso Finance, the Lenders from time
to time parties thereto, Goldman Sachs Credit Partners L.P., as
Documentation Agent, UBS Warburg LLC and Wachovia Bank, National
Association, as Co-Syndication Agents and JP Morgan Chase Bank, as
Administrative Agent, dated as of November 27, 2002.
7
(k) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would
be integrated with the sale of the Series A Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require
the registration of any such sale of the Series A Notes under the Act;
(l) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes
and the related Guarantees;
(m) To comply with all of its agreements set forth in the Registration
Rights Agreement;
(n) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to
the Closing Date and to satisfy all conditions precedent to the
delivery of the Series A Notes and the Series A Guarantees; and
(o) Promptly following the Closing Date, apply the proceeds from the
issuance and sale of the Series A Notes as described in the Offering
Memorandum under "Use of Proceeds."
6. Representations, Warranties and Agreements of the Partnership, El Paso
Finance and the Subsidiary Guarantors. As of the date hereof, each of
the Partnership, El Paso Finance and the Subsidiary Guarantors
represents and warrants to, and agrees with, the Initial Purchasers as
to the following:
(a) the Offering Memorandum does not, and any supplement or amendment
to it will not, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties contained in this paragraph (a) shall not apply to
statements in or omissions from the Offering Memorandum (or any
supplement or amendment thereto) based upon information relating to the
Initial Purchasers furnished to the Issuers in writing by the Initial
Purchasers expressly for use therein. The parties hereto acknowledge
and agree that for purposes of this Agreement, including this Section
6(a) and Section 8(b) hereof, the only information furnished to the
Issuers in writing by the Initial Purchasers expressly for use in the
Offering Memorandum (or any amendment or supplement to it) is the
information set forth in the [third paragraph, the fifth and sixth
sentences in the ninth paragraph, and the eleventh paragraph] under the
caption "Plan of Distribution" in the Offering Memorandum. Furthermore,
the parties hereto acknowledge that for purposes of this Agreement,
including this Section 6(a) and Section 8(b) hereof, the Initial
Purchasers shall not be deemed to have provided any information (and
therefore are not responsible for any statements or omissions)
pertaining to any arrangement or agreement with respect to any party
other than the Initial Purchasers. No stop order preventing the use of
the Offering Memorandum, or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has
been issued.
8
(b) Each of the Partnership and its Restricted Subsidiaries (as defined
in the Offering Memorandum) and El Paso Finance, as applicable, has
been duly formed or incorporated, is validly existing as a partnership,
corporation, business trust or limited liability company in good
standing under the laws of their respective jurisdictions of formation
or incorporation and has the partnership, corporate, trust or limited
liability company power and authority to carry on their respective
businesses as described in the Offering Memorandum and to own, lease
and operate their respective properties, and each (other than the
general partnerships) is duly qualified and is in good standing as a
foreign limited partnership, corporation, business trust or limited
liability company authorized to do business in each jurisdiction in
which the nature of each of their businesses or their ownership or
leasing of property requires such qualification, except where the
failure to be so qualified could reasonably be expected not to have a
material adverse effect on the business, financial condition or results
of operations of the Partnership, its subsidiaries and El Paso Finance,
taken as a whole (a "Material Adverse Effect").
(c) El Paso Energy Partners Company, a Delaware corporation, (the
"General Partner") has been duly incorporated and is validly existing
in good standing under the laws of the State of Delaware with full
corporate power and authority to carry on its businesses; to own, lease
and operate its properties; and to act as the general partner of the
Partnership in all material respects as described in the Offering
Memorandum. The General Partner is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its businesses or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified could reasonably be expected not to (i) have
a Material Adverse Effect, or (ii) subject the limited partners of the
Partnership to any material liability or disability.
(d) All of the issued and outstanding shares of capital stock of the
General Partner have been duly and validly authorized and issued and
are fully paid and nonassessable, and are owned by DeepTech
International Inc. ("DeepTech") free and clear of any lien, adverse
claim, security interest equity or other encumbrance (each, a "Lien"),
except for any Permitted Encumbrances. DeepTech is a wholly-owned
subsidiary of El Paso Corporation. As used herein "Permitted
Encumbrances" means any lien or adverse claim established by or under
(i) the Credit Facility, (ii) the credit agreement to which Poseidon
Oil Pipeline Company, L.L.C., a Delaware limited liability company in
which a Subsidiary of the Partnership owns a 36% membership interest,
is party, and the collateral documents related thereto, (iii) the
credit agreement to which Deepwater Gateway, L.L.C., a Delaware limited
liability company in which a Subsidiary of the Partnership owns a 50%
membership interest, is party, and the collateral documents related
thereto, (iv) the financing arrangements to which Sabine I or Sabine II
(each as defined below) or El Paso Corporation or any other
subsidiaries of El Paso Corporation are or will be parties, and the
collateral documents related thereto, (v) the EPN Holding Term Loan,
(vi) the Acquisition Term Loan, (vii) the indenture into which the
Partnership entered on May 27, 1999, as amended and supplemented,
(viii) the indenture into which the Partnership entered on May 17,
2001, as amended and supplemented, (ix) the indenture into which the
Partnership entered on November 27, 2002, as amended and supplemented,
and (x) the Indenture, as amended and supplemented.
9
(e) All outstanding shares of capital stock or partnership interests of
El Paso Finance or the Partnership, as applicable, have been duly
authorized and validly issued and are fully paid, non-assessable
(except, in the case of the partnership interests of the Partnership,
to the extent set forth in Section 17-303 of the Delaware Revised
Uniform Limited Partnership Act (the "DRULPA")) and not subject to any
preemptive or similar rights except as otherwise set forth in the
Partnership Agreement and disclosed in the Offering Memorandum.
(f) The entities listed on Schedule C hereto are the only subsidiaries,
direct or indirect, of the Partnership. All of the outstanding shares
of capital stock, limited partner interests, general partner interests
or limited liability company interests or other equity interests of
each of the Partnership's subsidiaries have been duly authorized and
validly issued and are fully paid and (except (i) as required to the
contrary by the Delaware Limited Liability Company Act and DRULPA and
(ii) with respect to any general partner interests) non-assessable, and
except as otherwise set forth in the Offering Memorandum (exclusive of
any supplement or amendment) or on Schedule C are owned by the
Partnership, directly or indirectly through one or more wholly-owned
subsidiaries or the General Partner, free and clear of any Lien, other
than Permitted Encumbrances.
(g) The General Partner is the sole general partner of the Partnership
with a 1.0% general partner interest in the Partnership, and such
general partner interest is duly authorized and validly issued to the
General Partner in accordance with the Second Amended and Restated
Agreement of Limited Partnership of El Paso Energy Partners, L.P. dated
as of February 19, 1993 as amended and restated effective as of August
31, 2000 (as amended, the "Partnership Agreement"). The Partnership
Agreement has been duly authorized, executed and delivered by the
General Partner and is a valid and legally binding agreement of the
General Partner, enforceable against the General Partner in accordance
with its terms, except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. The General Partner owns such general partner interest
free and clear of any Lien, other than Permitted Encumbrances.
(h) The General Partner, El Paso Field Services Holding Company ("EPFS
Holding"), Sabine River Investors I, L.L.C. ("Sabine I") and Sabine
River Investors II, L.L.C. ("Sabine II") own limited partner interests
in the Partnership represented by 11,674,245 common units ("Common
Units"); all of such Common Units and the limited partner interests
represented thereby have been duly authorized and validly issued and
are fully paid (to the extent required by the Partnership Agreement)
and nonassessable (except (i) as required to the contrary by DRULPA and
(ii) as such nonassessablility may be affected by matters described in
the Offering Memorandum); and the General Partner and its affiliates
own such limited partner interests free and clear of any Lien, other
than Permitted Encumbrances.
(i) This Agreement has been duly authorized, executed and delivered by
each of the Issuers and each of the Subsidiary Guarantors and
constitutes a valid and binding obligation of each of the Issuers and
each of the Subsidiary Guarantors, enforceable in
10
accordance with its terms, except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability.
(j) The Indenture has been duly authorized by each of the Issuers and
each of the Subsidiary Guarantors and, on the Closing Date, will have
been validly executed and delivered by each of the Issuers and each of
the Subsidiary Guarantors and will be a valid and binding agreement of
each of the Issuers and each of the Subsidiary Guarantors, enforceable
against each of the Issuers and each of the Subsidiary Guarantors in
accordance with its terms, except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. The Indenture conforms in all
material respects to the requirements of the Trust Indenture Act of
1939, as amended (the "TIA"), and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
(k) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by each of the
Issuers. When the Series A Notes have been issued, executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Series A Notes will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Issuers, enforceable in accordance with their terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date,
the Series A Notes will conform as to legal matters to the description
thereof contained in the Offering Memorandum.
(l) On the Closing Date, the Series B Notes will have been duly
authorized by each of the Issuers. When the Series B Notes are issued,
executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Series B Notes will be entitled to the
benefits of the Indenture and will be the valid and binding obligations
of the Issuers, enforceable against the Issuers in accordance with
their terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(m) The Series A Guarantee to be endorsed on the Series A Notes by each
Subsidiary Guarantor has been duly authorized by such Subsidiary
Guarantor and, on the Closing Date, will have been duly executed and
delivered by each such Subsidiary Guarantor. When the Series A Notes
have been issued, executed and authenticated in accordance with the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Series A Guarantee of
each Subsidiary Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and
11
binding obligation of such Subsidiary Guarantor, enforceable against
such Subsidiary Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date,
the Series A Guarantees to be endorsed on the Series A Notes will
conform as to legal matters to the description thereof contained in the
Offering Memorandum.
(n) The Series B Guarantee to be endorsed on the Series B Notes by each
Subsidiary Guarantor has been duly authorized by such Subsidiary
Guarantor and, when issued, will have been duly executed and delivered
by each such Subsidiary Guarantor. When the Series B Notes have been
issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Series B Guarantee of each
Subsidiary Guarantor endorsed thereon will be entitled to the benefits
of the Indenture and will be the valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms, except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. When the Series B Notes are
issued, authenticated and delivered, the Series B Guarantees to be
endorsed on the Series B Notes will conform as to legal matters to the
description thereof in the Offering Memorandum.
(o) The Registration Rights Agreement has been duly authorized by each
of the Issuers and each of the Subsidiary Guarantors and, on the
Closing Date, will have been duly executed and delivered by each of the
Issuers and each of the Subsidiary Guarantors. When the Registration
Rights Agreement has been duly executed and delivered, the Registration
Rights Agreement will be a valid and binding agreement of each of the
Issuers and each of the Subsidiary Guarantors, enforceable against each
of the Issuers and each of the Subsidiary Guarantors in accordance with
its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Registration Rights Agreement
will conform as to legal matters to the description thereof in the
Offering Memorandum.
(p) Neither the Issuers nor any of their subsidiaries is in violation
of its respective limited partnership agreement, limited liability
company agreement, charter, by-laws or similar organizational document
or in default in the performance of any obligation, agreement, covenant
or condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Issuers
and their subsidiaries, taken as a whole, to which the Issuers or any
of their subsidiaries is a party or by which the Issuers or any of
their subsidiaries or their respective property is bound, except with
respect to any such indenture, loan agreement, mortgage, lease or other
agreement or instrument, any default which could reasonably be expected
not to have a Material Adverse Effect.
12
(q) The execution, delivery and performance of this Agreement and the
other Operative Documents by each of the Issuers and each of the
Subsidiary Guarantors, compliance by each of the Issuers and each of
the Subsidiary Guarantors with all provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby
did not and will not (i) require any consent, approval, authorization,
filing with or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states or, with respect to
the proposed offer to exchange the Exchange Notes for the Notes, the
federal securities laws), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the limited
partnership agreement, limited liability company agreement, charter,
by-laws or similar organizational document of the Partnership or any of
its Restricted Subsidiaries or El Paso Finance (collectively, the
"Organizational Documents") or any existing indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to
the Partnership and its Restricted Subsidiaries and El Paso Finance,
taken as a whole, to which the Partnership or any of its Restricted
Subsidiaries or El Paso Finance is a party or by which the Partnership
or any of its Restricted Subsidiaries or El Paso Finance or their
respective property is bound, (iii) violate or conflict with any
applicable existing law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having
jurisdiction over the Partnership or any of its Restricted Subsidiaries
or El Paso Finance or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a
Lien under, any existing agreement or instrument to which the
Partnership or any of its Restricted Subsidiaries or El Paso Finance is
a party or by which the Partnership or any of its Restricted
Subsidiaries or El Paso Finance or their respective property is bound
or (v) result in the termination, suspension or revocation of any
existing Authorization (as defined below) of the Partnership or any of
its Restricted Subsidiaries or El Paso Finance, or result in any other
impairment of the rights of the holder of any such Authorization,
except (other than in the case of clause (ii) above with respect to
Organizational Documents) to the extent they could reasonably be
expected not to have a Material Adverse Effect.
(r) No action, suit or governmental proceedings by or before any court
or governmental agency, authority or body is pending or, to our
knowledge, threatened to which the Partnership or any of its Restricted
Subsidiaries or El Paso Finance is or could be a party or to which any
of their respective property is or could be subject, except for such
proceedings which, singly or in the aggregate, could reasonably be
expected not to result in a Material Adverse Effect and except as set
forth in the Offering Memorandum.
(s) The Partnership, its Restricted Subsidiaries and El Paso Finance
are (i) in compliance with any and all foreign, federal, state or local
law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received
and are in compliance with all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) have not received notice of any actual
or potential liability under the Environmental Laws, in the case of (i)
through (iii), except where such non-compliance or liability, singly or
in the aggregate, could reasonably be expected not to result in a
Material Adverse Effect. None
13
of the Partnership, its Restricted Subsidiaries or El Paso Finance has
been named as a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended ("CERCLA"). The Partnership, its Restricted Subsidiaries and El
Paso Finance are not in violation of any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, could reasonably be expected not to result
in a Material Adverse Effect.
(t) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any Authorization, any related constraints
on operating activities and any potential liabilities to third parties)
which, singly or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
(u) Each of the Partnership and its Restricted Subsidiaries and El Paso
Finance has such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals (each, an "Authorization") of, and
has made all filings with and notices to, all governmental or
regulatory authorities and self-regulatory organizations and all courts
and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate
its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or
notice could, singly or in the aggregate, reasonably be expected not to
have a Material Adverse Effect. Each such Authorization is valid and in
full force and effect and each of the Partnership and its Restricted
Subsidiaries and El Paso Finance is in compliance with all the terms
and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to
the Partnership or any of its Restricted Subsidiaries or El Paso
Finance; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction could, singly or in the aggregate,
reasonably be expected not to have a Material Adverse Effect.
(v) Each of the Partnership and its Restricted Subsidiaries and El Paso
Finance owns or leases all such properties as are necessary to the
conduct of its operations as presently conducted, except where the lack
of ownership or leasing would not, individually or in the aggregate,
have a Material Adverse Effect.
(w) Each of the Partnership and its Restricted Subsidiaries and El Paso
Finance has, or at the Closing Date will have, such consents,
easements, rights-of-way or licenses from any person ("rights-of-way")
as are necessary to conduct its business in the manner described in the
Offering Memorandum, subject to such qualifications as may be set forth
in the
14
Offering Memorandum and except for such rights-of-way which, if not
obtained, could, singly or in the aggregate, reasonably be expected not
to have a Material Adverse Effect; each of the Partnership and its
subsidiaries and El Paso Finance has, or at the Closing Date will have,
fulfilled and performed all its material obligations with respect to
such rights-of-way and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof
or would result in any impairment of the rights of the holder of any
such rights-of-way, except for such revocations, terminations and
impairments that could reasonably be expected not to have a Material
Adverse Effect, subject in each case to such qualifications as may be
set forth in the Offering Memorandum; and except as described in the
Offering Memorandum, none of such rights-of-way contains any
restriction that is materially burdensome to the Partnership and its
subsidiaries and El Paso Finance considered as a whole.
(x) The accountants, PricewaterhouseCoopers LLP, that have certified
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants with respect to the
Issuers, the Subsidiary Guarantors and Poseidon Oil Pipeline Company,
L.L.C., as required by the Act and the Exchange Act. The historical
financial statements, together with related schedules and notes, set
forth in the Offering Memorandum comply as to form in all material
respects with the requirements applicable to registration statements on
Form S-3 under the Act.
(y) The historical financial statements, together with related
schedules and notes, forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of the Partnership and its subsidiaries (including El Paso
Finance) on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein;
and the other financial and statistical information and data set forth
in the Offering Memorandum (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and
records of the Partnership and El Paso Finance.
(z) The pro forma financial statements included in the Offering
Memorandum have been prepared on a basis consistent with the historical
financial statements of the Partnership and its subsidiaries and El
Paso Finance and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly the
historical transactions described therein; and such pro forma financial
statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-3 under the Act. The other pro forma
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the pro forma financial statements.
(aa) Neither of the Issuers nor any of the Partnership's Restricted
Subsidiaries is or, after giving effect to the offering and sale of the
Series A Notes and the application of the
15
net proceeds thereof as described in the Offering Memorandum,
neither of the Issuers, will be, an "investment company," as such term
is defined in the Investment Company Act of 1940, as amended or a
"holding company" within the meaning of, or subject to regulation
under, the Public Utility Holding Company Act of 1935, as amended, and
the rules and regulations promulgated by the Commission thereunder.
(bb) There are no contracts, agreements or understandings between the
Issuers or any Subsidiary Guarantor, on the one hand, and any person,
on the other hand, granting such person the right to require the
Issuers or such Subsidiary Guarantor to file a registration statement
under the Act with respect to any securities of the Issuers or such
Subsidiary Guarantor other than the rights (i) of the General Partner
and its affiliates in Section 6.14 of the Partnership Agreement and in
the registration rights agreement executed in connection with the
November 2002 acquisition by the Partnership of the San Juan assets
(the "Series C RRA"); (ii) of EPEC Deepwater Gathering Company ("EPEC")
and its successors pursuant to a registration rights agreement between
EPEC and the Partnership executed in connection with the acquisition by
the Partnership of an additional interest in Viosca Knoll Gathering
Company; (iii) of Crystal Gas Storage, Inc. pursuant to the
registration rights agreement between Crystal Gas Storage, Inc. and the
Partnership which was executed in connection with the acquisition by
the Partnership of the Crystal storage facilities; provided, however,
that with respect to (i), (ii) and (iii) above, the General Partner,
EPEC, Sabine I, Sabine II and Crystal Gas Storage, Inc. have agreed not
to exercise their rights with respect to such securities in connection
with the offering of the Notes for 90 days hereafter pursuant to letter
agreements of even date herewith; (iv) granted under the Credit
Facility, EPN Holding Term Loan, the San Juan Acquisition Loan and
related agreements; and (v) granted under the Registration Rights
Agreement. There are no contracts, agreements or understandings between
the Issuers or any Subsidiary Guarantor, on the one hand, and any
person, on the other hand, granting such person the right to require
the Issuers or such Subsidiary Guarantor to include such securities
with the Notes and Guarantees registered pursuant to any Registration
Statement, other than the rights of the General Partner and its
affiliates in Section 6.14 of the Partnership Agreement (which rights
have been waived in connection with any Registration Statement filed
pursuant to the Registration Rights Agreement).
(cc) Neither the Partnership nor any of its subsidiaries nor El Paso
Finance nor any agent thereof acting on the behalf of them has taken,
and none of them will take, any action that might cause this Agreement
or the issuance or sale of the Series A Notes to violate Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X
(12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve
System.
(dd) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Issuers or any Subsidiary Guarantor that
it is considering imposing) any condition (financial or otherwise) on
the Issuers' or any Subsidiary Guarantor's retaining any rating
assigned to the Issuers or any Subsidiary Guarantor, any securities of
the Issuer or any Subsidiary Guarantor or (ii) has indicated to the
Issuers or any Subsidiary Guarantor that it is considering (a) the
downgrading, suspension, or withdrawal of, or any review for a
16
possible change that does not indicate the direction of the possible
change in, any rating so assigned or (b) any change in the outlook for
any rating of the Issuers, any Subsidiary Guarantor or any securities
of the Issuers or any Subsidiary Guarantor, other than, in the case of
this cause (ii), any such downgrading, suspension, withdrawal, review
or change that has been publicly announced by such organization as of
the time of the execution of this Agreement.
(ee) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material
adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Partnership and its
subsidiaries and El Paso Finance, taken as a whole, (ii) there has not
been any material adverse change or any development involving a
prospective material adverse change in the capital stock, limited
liability company interests or partnership units, as applicable, or in
the long-term debt of the Partnership or any of its subsidiaries or El
Paso Finance and (iii) neither the Partnership, any of its subsidiaries
nor El Paso Finance has incurred any material liability or obligation,
direct or contingent.
(ff) The Offering Memorandum, as of its date, contains all the
information specified in, and meets all of the requirements of, Rule
144A(d)(4) under the Act.
(gg) The Offering Memorandum, as of its date, contains all of the
information specified in, and complies in all material respects with,
the applicable requirements of the Act as if such document were filed
using a registration statement on Form S-3.
(hh) Upon execution and delivery by the parties thereto, the Indenture
will comply as to form in all material respects with the requirements
of the TIA, and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder. It is not necessary in
connection with the offer, sale and delivery of the Series A Notes to
the Initial Purchasers in the manner contemplated by this Agreement or
in connection with the initial placement of the Series A Notes by the
Initial Purchasers in the manner contemplated by the Offering
Memorandum pursuant to Exempt Resales to qualify the Indenture under
the TIA.
(ii) The statements under the captions "Description of Notes,"
"Description of Other Indebtedness," "United States Federal Income and
Estate Tax Considerations" and "Plan of Distribution" in the Offering
Memorandum, insofar as such statements purport to constitute a summary
of the legal matters, documents or proceedings referred to therein,
fairly present in all material respects such legal matters, documents
and proceedings.
(jj) When the Series A Notes and the Series A Guarantees are issued and
delivered pursuant to this Agreement, neither the Series A Notes nor
the Series A Guarantees will be of the same class (within the meaning
of Rule 144A under the Act) as any security of the Issuers or the
Subsidiary Guarantors that is listed on a national securities exchange
17
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated inter-dealer quotation system.
(kk) No form of general solicitation or general advertising (as defined
in Regulation D under the Act) was used by the Issuers, the Subsidiary
Guarantors or any of their respective representatives (other than the
Initial Purchasers, as to whom the Issuers and the Subsidiary
Guarantors make no representation) in connection with the offer and
sale of the Series A Notes contemplated hereby, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. No securities of the
same class as the Series A Notes have been issued and sold by the
Issuers within the six-month period immediately prior to the date
hereof.
(ll) None of the Issuers, the Subsidiary Guarantors nor any of their
respective affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Issuers and the
Subsidiary Guarantors make no representation) has engaged or will
engage in any directed selling efforts within the meaning of Regulation
S under the Act ("Regulation S") with respect to the Series A Notes or
the Series A Guarantees.
(mm) The Issuers, the Subsidiary Guarantors and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchasers, as to whom the Issuers and the Subsidiary
Guarantors make no representation) have complied with and will comply
with the offering restrictions requirements of Regulation S in
connection with the offering of the Series A Notes outside the United
States and, in connection therewith, the Offering Memorandum will
contain the disclosure required by Regulation S.
(nn) The Partnership is a "reporting issuer," as defined in Rule 902
under the Act.
(oo) The Series A Notes offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
(pp) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the
Act.
(qq) No registration under the Act of the Series A Notes or the Series
A Guarantees is required for the sale of the Series A Notes and the
Series A Guarantees to the Initial Purchasers as contemplated hereby or
for the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7
hereof.
(rr) Each certificate signed by any officer of the Issuers or any
Subsidiary Guarantor and delivered to the Initial Purchasers or counsel
for the Initial Purchasers shall be deemed to be a representation and
warranty by the Issuers or such Subsidiary Guarantor to the Initial
Purchasers as to the matters covered thereby.
(ss) Except as otherwise set forth in the Offering Memorandum or such
as are not material to the business, prospects, financial condition or
results of operations of the Partnership
18
and its subsidiaries (taken as a whole), and except for liens created
by operation and maintenance agreements, space lease agreements and
other similar types of agreements ordinary and customary to the
operations of the General Partner, the Partnership and its
subsidiaries, the Partnership and the Subsidiary Guarantors have good
and defensible title to their interests in their oil and gas
properties.
(tt) The information which was supplied by the Partnership to
Netherland, Sewell & Associates, Inc. ("Netherland & Sewell"),
independent petroleum engineers, for purposes of evaluating the oil and
gas reserves of the Partnership and the Subsidiary Guarantors as of
December 31, 2001, including, without limitation, production, costs of
operation and development, current prices for production, agreements
relating to current and future operations and sales of production, was
true and correct in all material respects on the dates such estimates
were made and such information was supplied and was prepared in
accordance with customary industry practices, as indicated in the
letter of Netherland & Sewell dated January 28, 2002 (the "Netherland &
Sewell Letter"); Netherland & Sewell was, as of the date of the
Netherland & Sewell Letter, and is, as of the date hereof, independent
with respect to the Partnership and the Subsidiary Guarantors; other
than normal production of the reserves and intervening spot market
product price fluctuations, the Partnership is not aware of any facts
or circumstances that would result in a materially adverse change in
the reserves, or the present value of future net cash flows therefrom,
as described in the Offering Memorandum and as reflected in the
Netherland & Sewell Letter and the reserve report referenced therein;
estimates of such reserves and present values as described in the
Offering Memorandum and reflected in the Netherland & Sewell Letter and
the reserve report referenced therein comply in all material respects
to the applicable requirements of Regulation S-X and Industry Guide 2
under the Securities Act.
(uu) The Partnership and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; and neither the Partnership nor
any of its subsidiaries (i) has received notice from any insurer or
agent of such insurer that substantial capital improvements or other
material expenditures will have to be made in order to continue such
insurance or (ii) has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers at a cost that
could reasonably be expected not to have a Material Adverse Effect;
(vv) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Partnership or any of
its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Partnership or any of its
subsidiaries, on the other hand, which would be required by the Act to
be described in the Offering Memorandum if the Offering Memorandum were
a prospectus included in a registration statement on Form S-1 filed
with the Commission.
(ww) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the
Partnership or any of its subsidiaries before the National Labor
Relations Board or any state or local labor relations board, (ii)
strike,
19
labor dispute, slowdown or stoppage pending or threatened against the
Partnership or any of its subsidiaries or (iii) union representation
question existing with respect to the employees of the Partnership or
any of its subsidiaries, except in the case of clauses (i), (ii) and
(iii) for such actions which, singly or in the aggregate, could
reasonably be expected not to have a Material Adverse Effect. To the
best knowledge of the Partnership, no collective bargaining organizing
activities are taking place with respect to the Partnership or any of
its subsidiaries.
(xx) The Issuers and each of their subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(yy) All material tax returns required to be filed by the Issuers and
each of their subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material
taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Issuers or any of their
subsidiaries have been paid, other than those being contested in good
faith and for which adequate reserves have been provided. There are no
transfer taxes or other similar fees or charges under Federal law or
the laws of any state, or any political subdivision thereof, required
to paid in connection with the execution and delivery of this Agreement
or the issuance and sale of the Notes.
(zz) All indebtedness of the Partnership that will be repaid with the
proceeds of the issuance and sale of the Series A Notes was incurred,
and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good faith and each of the Issuers
and the Subsidiary Guarantors was, at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance
and sale of the Series A Notes, and will be on the Closing Date (after
giving effect to the application of the proceeds from the issuance of
the Series A Notes) solvent, and had at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance
and sale of the Series A Notes and will have on the Closing Date (after
giving effect to the application of the proceeds from the issuance of
the Series A Notes) sufficient capital for carrying on their respective
business and were, at the time of the incurrence of such indebtedness
that will be repaid with the proceeds of the issuance and sale of the
Series A Notes, and will be on the Closing Date (after giving effect to
the application of the proceeds from the issuance of the Series A
Notes) able to pay their respective debts as they mature.
(aaa) No action has been taken and no law, statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency
or body which prevents the execution, delivery and performance of any
of the Operative Documents, or the issuance
20
of the Series A Notes or the Series A Guarantees, or suspends the sale
of the Series A Notes or the Series A Guarantees in any jurisdiction
referred to in Section 5(e); and no injunction, restraining order or
other order or relief of any nature by a federal or state court or
other tribunal of competent jurisdiction has been issued with respect
to the Issuers or any of their subsidiaries which would prevent or
suspend the issuance or sale of the Series A Notes or the Series A
Guarantees in any jurisdiction referred to in Section 5(e).
The Issuers acknowledge that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Issuers and the Subsidiary Guarantors and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to each
of the Issuers and the Subsidiary Guarantors, and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate
the merits and risks of an investment in the Series A Notes;
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes with
a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that
would violate the Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering
and reselling the Series A Notes only to (x) QIBs in reliance on the
exemption from the registration requirements of the Act provided by
Rule 144A, and (y) in offshore transactions in reliance upon Regulation
S under the Act;
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the
Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A
Notes pursuant hereto, including, but not limited to, articles, notices
or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising;
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to,
Eligible Purchasers. Each Initial Purchaser further agrees that it will
offer to sell the Series A Notes only to, and will solicit offers to
buy the Series A Notes only from (A) Eligible Purchasers that the
Initial Purchaser reasonably believes are QIBs, and (B) Regulation S
Purchasers, in each case, that will be deemed to have agreed that (x)
the Series A Notes purchased by them may be offered, resold, pledged or
otherwise transferred, only (i) to the Partnership, El Paso Finance, or
any subsidiary of the Partnership, (ii) in the United States to a
person whom the seller reasonably believes is a Qualified Institutional
Buyer (as defined in Rule 144A under the Securities Act) in a
21
transaction meeting the requirements of Rule 144A, (iii) outside the
United States in an offshore transaction in accordance with Rule 904
under the Securities Act, (iv) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder
(if available) or (v) pursuant to an effective registration statement
under the Securities Act, in each of cases (i) through (v) in
accordance with any applicable securities laws of any state of the
United States, and (y) they will deliver to each person to whom such
Series A Notes or an interest therein is transferred a notice
substantially to the effect of the foregoing;
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Series A Guarantees;
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions;
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Act;
(h) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Series A Notes in the United States or to,
or for the benefit or account of, a U.S. Person (other than a
distributor), in each case, as defined in Rule 902 under the Act (i) as
part of its distribution at any time and (ii) otherwise until 40 days
after the later of the commencement of the offering of the Series A
Notes pursuant hereto and the Closing Date, other than in accordance
with Regulation S of the Act or another exemption from the registration
requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day restricted period, it will not cause any advertisement with
respect to the Series A Notes (including any "tombstone" advertisement)
to be published in any newspaper or periodical or posted in any public
place and will not issue any Memorandum relating to the Series A Notes,
except such advertisements as are permitted by and include the
statements required by Regulation S;
(i) Such Initial Purchaser agrees that, at or prior to confirmation of
a sale of Series A Notes by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the
40-day restricted period referred to in Rule 903(b) under the Act, it
will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Series A Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of your distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the Offering and the Closing Date, except in either case in
accordance with Regulation S under the Securities Act (or Rule
144A or to institutional accredited investors as defined in
Rule 501(a)(1), (2), (3)
22
or (7) under the Securities Act, in transactions that are
exempt from the registration requirements of the Securities
Act), and in connection with any subsequent sale by you of the
Series A Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer
or person receiving a selling concession, fee or other
remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned
to them in Regulation S."; and
(j) Such initial purchaser:
(i) has not offered or sold and, prior to the date six
months after the date of issuance of the Series A Notes, will
not offer or sell any notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities
Regulations 1995 (as amended);
(ii) has only communicated or caused to be communicated
and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the Financial Services
and Markets Act 2000 received by it in connection with the
issue or sale of any Series A Notes in circumstances in which
Section 21(1) of the Financial Services and Markets Act 2000
does not apply to us or the guarantors; and
(iii) has complied and will comply with all applicable
provisions of the Financial Services and Markets Act 2000 with
respect to anything done by it in relation to the Series A
Notes in, from or otherwise involving the United Kingdom.
Each Initial Purchaser acknowledges that the Issuers and the Subsidiary
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Issuers and the
Subsidiary Guarantors and counsel to the Initial Purchasers will rely upon the
accuracy and truth of the foregoing representations and the Initial Purchasers
hereby consent to such reliance.
8. Indemnification.
(a) Each of the Issuers and each Subsidiary Guarantor agree, jointly
and severally, to indemnify and hold harmless the Initial Purchasers,
their directors, affiliates, their officers and each person, if any,
who controls such Initial Purchasers within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages, liabilities and judgments (including,
without limitation, any legal or other expenses incurred in connection
with investigating or defending any matter, including any action, that
could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto)
23
or any information provided by the Issuers or any Subsidiary Guarantor
to any holder or prospective purchaser of Series A Notes pursuant to
Section 5(f), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any
such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchasers
furnished in writing to the Issuers by such Initial Purchaser (and not
with respect to the information provided by any other Initial
Purchaser).
(b) The Initial Purchasers agree, severally and not jointly, to
indemnify and hold harmless the Issuers and the Subsidiary Guarantors,
and their respective directors and officers and each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Issuers or the Subsidiary Guarantors, to the
same extent as the foregoing indemnity from the Issuers and the
Subsidiary Guarantors to the Initial Purchasers but only with reference
to information relating to the Initial Purchaser furnished in writing
to the Issuers by such Initial Purchaser expressly for use in the
Offering Memorandum and not with respect to the information provided by
any other Initial Purchaser.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "indemnified party"), the indemnified party shall promptly
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party shall
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case
of any action in respect of which indemnity may be sought pursuant to
both Sections 8(a) and 8(b), the Initial Purchasers shall not be
required to assume the defense of such action pursuant to this Section
8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided
below, shall be at the expense of the Initial Purchasers). Any
indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified
party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party shall have been advised
by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by J.P. Morgan Securities
24
Inc., in the case of the parties indemnified pursuant to Section 8(a),
and by the Issuers, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless
the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without
its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at
the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement
or compromise of, or consent to the entry of judgment with respect to,
any pending or threatened action in respect of which the indemnified
party is or could have been a party and indemnity or contribution may
be or could have been sought hereunder by the indemnified party, unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability on claims that are
or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers and the
Subsidiary Guarantors, on the one hand, and the Initial Purchasers on
the other hand from the offering of the Series A Notes or (ii) if the
allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also
the relative fault of the Issuers and the Subsidiary Guarantors, on the
one hand, and the Initial Purchasers, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers
and the Subsidiary Guarantors, on the one hand and the Initial
Purchasers, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Series A
Notes (after discounts and commissions received by the Initial
Purchasers, but before deducting expenses) received by the Issuers, and
the total discounts and commissions received by the Initial Purchasers
bear to the total price to investors of the Series A Notes, in each
case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Issuers and the Subsidiary
Guarantors, on the one hand, and the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Issuers or the Subsidiary Guarantors, on
the one hand, or the Initial Purchasers, on the other hand, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
25
The Issuers and the Subsidiary Guarantors, and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant
to this Section 8(d) were determined by pro rata allocation, even if
the Initial Purchasers were treated as one entity for such purpose, or
by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with
investigating or defending any matter, including any action, that could
have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the
Initial Purchasers shall not be required to contribute any amount in
excess of the amount by which the total discounts and commissions
received by such Initial Purchasers exceeds the amount of any damages
which each Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the
respective principal amount of Series A Notes purchased by each of the
Initial Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available
to any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The obligations of each
of the Initial Purchasers to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Issuers and the
Subsidiary Guarantors contained in this Agreement shall be true and
correct in all material respects on the Closing Date with the same
force and effect as if made on and as of the Closing Date, provided
that the representations and warranties qualified by "materiality"
shall be true and correct on the Closing Date;
(b) On or after the date hereof, there shall not have occurred (i) any
downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or
withdrawal of, or of any review (or of any potential or intended
review) for a possible change that either does not indicate the
direction of the possible change or indicates a negative change in, any
rating of the Issuers or any Subsidiary Guarantor or any securities of
the Issuers or any Subsidiary Guarantor (including, without limitation,
the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain
or negative direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act, (ii) any change, nor shall any notice have been given of
any potential or intended change, in the outlook for any rating of the
Issuers or any Subsidiary Guarantor or any securities of the Issuers or
any
26
Subsidiary Guarantor by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which
the Notes were marketed; (iv) any change in U.S. or international
financial, political or economic conditions or currency exchange rates
or exchange controls as would, in the judgment of J.P. Morgan
Securities Inc., be likely to prejudice materially the success of the
proposed issue, sale or distribution of the Notes, whether in the
primary market or in respect of dealings in the secondary market; (v)
any material suspension or material limitation of trading in securities
generally on the New York Stock Exchange or any setting of minimum
prices for trading on such exchange, or any suspension of trading of
any securities of the Issuers on any exchange or in the
over-the-counter market; (vi) any banking moratorium declared by U.S.
Federal or New York authorities; (vii) any major disruption of
settlements of securities or clearance services in the United States or
(viii) any attack on, outbreak or escalation of hostilities or act of
terrorism involving the United States, any declaration of war by
Congress or any other national or international calamity or emergency
if, in the judgment of J.P. Morgan Securities Inc., the effect of any
such attack, outbreak, escalation, act, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with
completion of the offering or sale of and payment for the Series A
Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change
or any development involving a prospective change in the condition,
financial or otherwise, or the earnings, business, management or
operations of the Partnership and its subsidiaries and El Paso Finance,
taken as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock,
limited liability company interests or partnership units, as
applicable, or in the long-term debt of the Issuers or any of their
subsidiaries and (iii) neither the Issuers nor any of their
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause
9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is material and
adverse and, in your judgment, makes it or impracticable or inadvisable
to proceed with the completion of the offering and sale and payment for
market the Series A Notes on the terms and in the manner contemplated
in the Offering Memorandum;
(d) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President or a Senior Vice President and
the Chief Financial Officer of the Partnership and El Paso Finance and
each of the Subsidiary Guarantors, confirming the matters set forth in
Sections 6(cc), 9(a) and 9(b)(i), (ii) and (iii) and stating that each
of the Issuers and the Subsidiary Guarantors has complied with all the
agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied on or prior to the Closing
Date;
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchasers), dated the
Closing Date, of Akin, Gump, Strauss,
27
Hauer & Feld, L.L.P., counsel for the Issuers and the Subsidiary
Guarantors, to the effect that:
(i) Each of the Partnership and its Restricted
Subsidiaries (other than any business trust) and El Paso
Finance, as applicable, has been duly formed or incorporated
and is validly existing as a partnership, corporation or
limited liability company and in good standing (other than any
general partnership) under the laws of its jurisdiction of
formation or incorporation and has the partnership, corporate
or limited liability company power and authority to conduct
its business and to own, lease and operate its properties, in
each case as described in the Offering Memorandum;
(ii) Each of the Partnership and its Restricted
Subsidiaries (other than general partnerships) and El Paso
Finance, as applicable, is duly qualified or registered to do
business as a foreign limited partnership, corporation,
limited liability company or business trust, as the case may
be, and, based solely on the various certificates from public
officials of Texas, Louisiana, Mississippi, New Mexico,
Massachusetts, Nevada and Alabama (the "Good Standing
Certificates"), is in good standing as a foreign limited
partnership, corporation, limited liability company or
business trust authorized to do business in the respective
jurisdictions listed on Schedule D hereto;
(iii) The General Partner has been duly incorporated and is
validly existing in good standing under the laws of the State
of Delaware with full corporate power and authority to carry
on its businesses; to own, lease and operate its properties;
and to act as the general partner of the Partnership in all
material respects as described in the Offering Memorandum. The
General Partner is duly qualified and, based solely on the
Good Standing Certificates, is in good standing as a foreign
corporation authorized to do business in the jurisdictions
listed on Schedule D hereto;
(iv) The General Partner is the sole general partner of
the Partnership and owns (of record) a 1.0% general partner
interest in the Partnership;
(v) the Series A Notes have been duly authorized by each
of the Issuers and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, will be entitled to the benefits
of the Indenture and will be valid and binding obligations of
the Issuers, enforceable in accordance with their terms except
as may be 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; and (v)
28
securities laws and public policy underlying such laws with
respect to rights to indemnification and contribution (the
"General Exceptions");
(vi) The Series A Guarantees have been duly authorized
and, when the Series A Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Series A Guarantees endorsed
by the notations on the Series A Notes will be entitled to the
benefits of the Indenture and will be valid and binding
obligations of the Subsidiary Guarantors, enforceable in
accordance with their terms except as may be limited by the
General Exceptions;
(vii) The Series B Guarantees have been duly authorized
and, when the Series B Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Series B Guarantees endorsed
by the notations on the Series B Notes will be entitled to the
benefits of the Indenture and will be valid and binding
obligations of the Subsidiary Guarantors, enforceable in
accordance with their terms except as may be limited by the
General Exceptions;
(viii) The Indenture has been duly authorized, executed and
delivered by each of the Issuers and each Subsidiary Guarantor
and is a valid and binding agreement of each of the Issuers
and each Subsidiary Guarantor, enforceable against each of the
Issuers and each Subsidiary Guarantor in accordance with its
terms except as may be limited by the General Exceptions;
(ix) This Agreement has been duly authorized, executed and
delivered by each of the Issuers and the Subsidiary
Guarantors;
(x) The Registration Rights Agreement has been duly
authorized, executed and delivered by each of the Issuers and
the Subsidiary Guarantors and is a valid and binding agreement
of each of the Issuers and each Subsidiary Guarantor,
enforceable against each of the Issuers and each Subsidiary
Guarantor in accordance with its terms, except as may be
limited by the General Exceptions;
(xi) The Series B Notes have been duly authorized by each
of the Issuers;
(xii) The statements under the captions "Description of
Notes," "Description of Other Indebtedness," "United States
Federal Income and Estate Tax Considerations" and "Plan of
Distribution" in the Offering Memorandum, insofar as such
statements purport to constitute a summary of the legal
matters, documents or proceedings referred to therein, fairly
present in all material respects such legal matters, documents
and proceedings;
(xiii) To the knowledge of such counsel, neither the
Partnership nor any of its Restricted Subsidiaries nor El Paso
Finance is in violation of its respective partnership
agreement, limited liability company agreement, charter or
by-laws or
29
other organizational documents, as applicable and, neither the
Partnership nor any of its subsidiaries nor El Paso Finance is
in default in the performance of any obligation, agreement,
covenant or condition contained in any of the material
agreements attached as exhibits to the Partnership's 2001
Annual Report on Form 10-K or any Current Report on Form 8-K
or Quarterly Report on Form 10-Q filed since January 1, 2002
(the "Material Agreements");
(xiv) The execution, delivery and performance of this
Agreement and the other Operative Documents by each of the
Issuers and each of the Subsidiary Guarantors, the compliance
by each of the Issuers and each of the Subsidiary Guarantors
with all provisions hereof and thereof and the consummation by
the Issuers and the Subsidiary Guarantors, of the transactions
contemplated by this Agreement and the other Operative
Documents will not, to the knowledge of such counsel, (i)
require any consent, approval, authorization, filing with or
other order of, or qualification with, any court or
governmental body or agency (except (x) such as may be
required under the securities or Blue Sky laws of the various
states or, with respect to the proposed offer to exchange the
Exchange Notes for the Notes, the federal securities laws or
the TIA, (y) routine corporate, partnership and limited
liability company filings required after the date thereof, and
(z) routine filings under the Exchange Act), (ii) conflict
with or constitute a breach of any of the terms or provisions
of, or a default under, the partnership agreement, limited
liability company agreement, charter or by-laws or other
organizational documents, as applicable, of the Partnership or
any of its Restricted Subsidiaries or El Paso Finance or any
Material Agreement, or (iii) result in the imposition or
creation of (or the obligation to create or impose) a Lien
under any Material Agreement; and except that such counsel
need express no opinion regarding antifraud provisions of
federal or state securities or blue sky laws with respect to
clause (i) of this paragraph (xiii);
(xv) Neither of the Issuers is and, after giving effect to
the offering and sale of the Series A Notes, the application
of the net proceeds thereof as described in the Offering
Memorandum, neither of the Issuers will be, an "investment
company" as such term is defined in the Investment Company Act
of 1940, as amended;
(xvi) To the knowledge of such counsel, there are no
contracts, agreements or understandings between the
Partnership, El Paso Finance, any Subsidiary Guarantor and any
person granting such person the right to require the
Partnership, El Paso Finance or such Subsidiary Guarantor to
file a registration statement under the Act with respect to
any securities of the Partnership, El Paso Finance or such
Subsidiary Guarantor (other than the rights (i) of the General
Partner and its affiliates in Section 6.14 of the Partnership
Agreement and in the Series C RRA; (ii) of EPEC and its
successors pursuant to a registration rights agreement between
EPEC and the Partnership executed in connection with the
acquisition by the Partnership of an additional interest in
Viosca Knoll Gathering Company; (iii) of Crystal Gas Storage,
Inc. pursuant to the registration rights agreement between
Crystal Gas Storage, Inc. and the Partnership which was
executed in connection with the acquisition by the Partnership
of the Crystal
30
storage facilities; provided, however, that with respect to
(i), (ii) and (iii) above, the General Partner, EPEC, Sabine
I, Sabine II and Crystal Gas Storage, Inc. have agreed not to
exercise their rights with respect to such securities in
connection with the offering of the Notes for 90 days
hereafter pursuant to letter agreements of even date herewith;
(iv) granted under the Credit Facility, the EPN Holding Term
Loan, the San Juan Acquisition Loan and related agreements;
and (v) granted under the Registration Rights Agreement); and
to the knowledge of such counsel there are no contracts,
agreements or understandings between the Partnership, El Paso
Finance or any Subsidiary Guarantor and any person granting
such person the right to require the Partnership, El Paso
Finance or such Subsidiary Guarantor include such securities
with the Notes and Guarantees registered pursuant to any
Registration Statement other than the rights of the General
Partner and its affiliates in Section 6.14 of the Partnership
Agreement and in the Series C RRA (which rights have been
waived in connection with any Registration Statement filed
pursuant to the Registration Rights Agreement).
(xvii) The Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which
is qualified thereunder. It is not necessary in connection
with the offer, sale and delivery of the Series A Notes to the
Initial Purchasers in the manner contemplated by this
Agreement or in connection with the initial placement of the
Series A Notes by the Initial Purchasers in the manner
contemplated by the Offering Memorandum pursuant to Exempt
Resales to qualify the Indenture under the TIA (it being
understood that such counsel need express no opinion as to any
other offer or sale);
(xviii) No registration under the Act of the Series A Notes
is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming that (i) each Initial Purchaser is a QIB, or
a Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements
contained in Section 7 of this Agreement and (iii) the
accuracy of the representations and agreements of each of the
Issuers and the Subsidiary Guarantors set forth in Sections
5(f) and (k) and 6(dd), (gg), (hh), (jj), (kk), (ll) and (mm)
of this Agreement;
(xix) The Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, complied as
to form in all material respects with the applicable
requirements of Rule 144A(d)(4) of the Act (it being
understood that such counsel need express no opinion with
respect to this paragraph (xix) regarding the financial
statements and the notes thereto, oil and gas reserve
information and the schedules and other financial data
included in the Offering Memorandum);
(xx) A court applying Texas conflict of laws rules in a
properly presented and argued case should give effect to the
express choice of law provisions contained in the Operative
Documents to the extent that such provisions provide that the
31
laws of the State of New York are to govern issues under the
Operative Documents.
In addition, such counsel shall include a statement in such opinion
letter to the effect that although such counsel has not undertaken,
except as otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the accuracy
or completeness of the statements in the Offering Memorandum, such
counsel has participated in the preparation of the Offering Memorandum
and any amendments or supplements thereto, including review and
discussion of the contents thereof, and nothing has come to the
attention of such counsel that has caused them to believe that, as of
the date of the Offering Memorandum or as of the Closing Date, the
Offering Memorandum, as amended or supplemented, if applicable,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading (it being understood that such counsel
need express no opinion with respect to the financial statements and
notes thereto, oil and gas reserve information and the schedules and
other financial data included in the Offering Memorandum).
The opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. described in
Section 9(e) above (i) may be subject to customary qualifications,
assumptions and limitations and (ii) shall be rendered to you at the
request of the Issuers and the Subsidiary Guarantors and shall so state
therein.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Gregory W. Jones, counsel for the
Partnership, to the effect that: (i) except as set forth in the
Offering Memorandum, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Partnership
or any of its Restricted Subsidiaries or El Paso Finance is a party or
to which any of their respective property is subject, except for those
which, singly or in the aggregate, could reasonably be expected not to
result in a Material Adverse Effect;
(ii) The execution, delivery and performance of this
Agreement and the other Operative Documents by each of the
Issuers and each of the Subsidiary Guarantors, the compliance
by each of the Issuers and each of the Subsidiary Guarantors
with all provisions hereof and thereof and the consummation by
the Issuers and the Subsidiary Guarantors, of the transactions
contemplated by this Agreement and the other Operative
Documents will not, to the knowledge of such counsel, (i)
violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the
Partnership, any of its Restricted Subsidiaries or El Paso
Finance or their respective property or (ii) result in the
termination, suspension or revocation of any Authorization of
the Partnership or any of its Restricted Subsidiaries or El
Paso Finance or result in any other impairment of the rights
of the holder of any such Authorization, except for those
which, singly or in the aggregate, could reasonably be
expected not to result in a Material Adverse Effect; and
except that such counsel need express no opinion regarding
antifraud
32
provisions of federal or state securities or blue sky laws
with respect to clause (i) of this paragraph (ii);
(iii) To the knowledge of such counsel, (A) each of the
Partnership and its Restricted Subsidiaries and El Paso
Finance has such Authorizations of, and has made all filings
with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts
and other tribunals, including without limitation, under any
applicable Environmental Laws, as are necessary to own, lease,
license and operate its respective properties and to conduct
its business, except where the failure to have any such
Authorization or to make any such filing or notice could,
singly or in the aggregate, reasonably be expected not to have
a Material Adverse Effect; (B) each such Authorization known
to us is valid and in full force and effect and, to the
knowledge of such counsel, each of the Partnership and its
Restricted Subsidiaries and El Paso Finance is in compliance
with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; (C) no event has occurred
(including the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time
or both, would allow, revocation, suspension or termination of
any such Authorization or results or, after notice or lapse of
time or both, would result in any other material impairment of
the rights of the holder of any such Authorization; and (D)
such Authorizations contain no restrictions that are
materially burdensome to the Partnership or any of its
Restricted Subsidiaries or El Paso Finance; except in the case
of (A) through (D) above those which could reasonably be
expected not to, singly or in the aggregate, have a Material
Adverse Effect; and
(iv) Neither the General Partner nor the Partnership is a
"holding company" or, after giving effect to the offering and
sale of the Series A Notes and the application of the proceeds
thereof as described in the Offering Memorandum will be a
"holding company," within the meaning of, or subject to
regulation under, the Public Holding Utility Company Act of
1935, as amended, and the rules and regulations promulgated by
the Commission thereunder.
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Simpson Thacher & Bartlett, counsel
for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(h) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers containing the information and
statements of the type ordinarily included in accountants' "comfort
letters" to the Initial Purchasers from PricewaterhouseCoopers LLP,
independent public accountants, with respect to the financial
statements of the Issuers and their subsidiaries, and certain financial
information contained in the Offering Memorandum.
33
(i) The Initial Purchasers shall have received, at the time of this
Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers from Netherland & Sewell.
(j) The Series A Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(k) The Issuers, the Subsidiary Guarantors and the Trustee shall have
executed the Indenture.
(l) The Issuers and the Subsidiary Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have
received an original copy thereof, duly executed by the Issuers and the
Subsidiary Guarantors.
(m) Neither the Issuers nor the Subsidiary Guarantors shall have failed
at or prior to the Closing Date to perform or comply with any of the
agreements herein contained and required to be performed or complied
with by each of the Issuers or the Subsidiary Guarantors, as the case
may be, at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Issuers if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in any of the
Initial Purchasers' judgment, is material and adverse and, in any of the Initial
Purchasers' judgment, makes it impracticable or inadvisable to proceed with the
completion of the offering and sale and payment for the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Issuers or any Subsidiary
Guarantor on any exchange or in the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations of
the Issuers and their subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or
34
Initial Purchasers, as the case may be, agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of the Series A
Notes to be purchased on such date by all Initial Purchasers, each
non-defaulting Initial Purchaser shall be obligated severally, in the proportion
which the principal amount of the Series A Notes set forth opposite its name in
Schedule B bears to the aggregate principal amount of the Series A Notes which
all the non-defaulting Initial Purchasers, as the case may be, have agreed to
purchase, or in such other proportion as you may specify, to purchase the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase on such date; provided
that in no event shall the aggregate principal amount of the Series A Notes
which any Initial Purchaser has agreed to purchase pursuant to Section 2 hereof
be increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of the Series A Notes without the consent of such Initial
Purchaser. If on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase the Series A Notes and the aggregate principal
amount of the Series A Notes with respect to which such default occurs is more
than one-tenth of the aggregate principal amount of the Series A Notes to be
purchased by all Initial Purchasers and arrangements satisfactory to the Initial
Purchasers and the Issuers for purchase of such Series A Notes are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Initial Purchaser and the Issuers.
In any such case which does not result in termination of this Agreement, either
you or the Issuers shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Offering Memorandum or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of any such Initial Purchaser
under this Agreement.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Issuers by written notice to the Initial Purchasers if, there is a
failure to obtain any consent or waiver under, or amendment of, the Credit
Facility, that is required in order for the issuance of the Notes to not
constitute a default thereunder.
11. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement shall be
addressed as follows:
(i) if to the Issuers or any Subsidiary Guarantor, to:
El Paso Energy Partners, L.P.
4 Greenway Plaza
Houston, Texas 77046
Attention: Chief Financial Officer;
With a copy to (which shall not constitute notice):
Akin Gump Strauss Hauer & Feld, LLP
1900 Pennzoil Place, South Tower
711 Louisiana Street
35
Houston, Texas 77002
Attention: J. Vincent Kendrick
(ii) if to the Initial Purchasers, to:
J.P. Morgan Securities Inc.
270 Park Avenue
New York, New York 10017
Attention: Lawrence Landry
or in any case to such other address as the person to be notified may
have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements of the Issuers, the
Subsidiary Guarantors and the Initial Purchasers, set forth in or made
pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchasers, the
officers or directors of the Initial Purchasers, any person controlling
the Initial Purchasers, the Issuers, any Subsidiary Guarantor, the
officers or directors of the Issuers or any Subsidiary Guarantor, or
any person controlling the Issuers or any Subsidiary Guarantor, (ii)
acceptance of the Series A Notes and payment for them hereunder and
(iii) termination of this Agreement.
(c) If for any reason the Series A Notes are not delivered by or on
behalf of the Issuers as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Issuers and
each Subsidiary Guarantor, jointly and severally, agree to reimburse
the Initial Purchasers for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding
any termination of this Agreement, the Issuers shall be liable for all
expenses which they have agreed to pay pursuant to Section 5(i) hereof.
Each of the Issuers and each Subsidiary Guarantor also agrees, jointly
and severally, to reimburse each of the Initial Purchasers and its
officers, directors and each person, if any, who controls such Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act for any and all fees and expenses (including without
limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).
(d) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Partnership, El
Paso Finance, the Subsidiary Guarantors, the Initial Purchasers, each
of the Initial Purchasers' affiliates, directors and officers, any
controlling persons referred to herein, the directors of the Issuers
and the Subsidiary Guarantors and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Series A Notes from the Initial Purchasers
merely because of such purchase.
36
(e) This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
(f) This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
(Signatures Page Follows)
37
Please confirm that the foregoing correctly sets forth the agreement
among the Partnership, El Paso Finance, the Subsidiary Guarantors and the
Initial Purchasers.
Very truly yours,
Issuers:
EL PASO ENERGY PARTNERS, L.P.
By: /s/ Keith Forman
----------------
Name: Keith Forman
Title: Vice President and Chief Financial Officer
EL PASO PARTNERS FINANCE CORPORATION
By: /s/ Keith Forman
----------------
Name: Keith Forman
Title: Vice President and Chief Financial Officer
38
Subsidiary Guarantors:
CRYSTAL HOLDING, L.L.C.*
CHACO LIQUIDS PLANT TRUST
By: EL PASO ENERGY PARTNERS OPERATING
COMPANY, L.L.C., in its capacity as trustee of the
Chaco Liquids Plant Trust*
EL PASO ENERGY INTRASTATE, L.P.*
EL PASO ENERGY PARTNERS OIL TRANSPORT, L.L.C.*
EL PASO ENERGY PARTNERS OPERATING
COMPANY, L.L.C.*
EL PASO ENERGY WARWINK I COMPANY, L.P.*
EL PASO ENERGY WARWINK II COMPANY, L.P.*
EL PASO OFFSHORE GATHERING & TRANSMISSION, L.P.*
EL PASO SOUTH TEXAS, L.P.*
EPGT TEXAS PIPELINE, L.P.*
EPN ALABAMA INTRASTATE, L.L.C.*
EPN FIELD SERVICES, L.L.C.*
EPN GATHERING AND TREATING COMPANY, L.P.*
EPN GATHERING AND TREATING GP HOLDING, L.L.C.*
EPN GP HOLDING, L.L.C.*
EPN GP HOLDING I, L.L.C.*
EPN GULF COAST, L.P.*
EPN HOLDING COMPANY, L.P.*
EPN HOLDING COMPANY I, L.P.*
EPN NGL STORAGE, L.L.C.*
EPN PIPELINE GP HOLDING, L.L.C.*
FIRST RESERVE GAS, L.L.C.*
FLEXTREND DEVELOPMENT COMPANY, L.L.C.*
HATTIESBURG GAS STORAGE COMPANY*
By: FIRST RESERVE GAS, L.L.C., in its capacity as 50%
general partner of Hattiesburg Gas Storage Company*
By: HATTIESBURG INDUSTRIAL GAS SALES, L.L.C., in its
capacity as 50% general partner of Hattiesburg Gas
Storage Company*
HATTIESBURG INDUSTRIAL GAS SALES, L.L.C.*
HIGH ISLAND OFFSHORE SYSTEM, L.L.C.
By: EL PASO ENERGY PARTNERS, L.P.,
its sole member*
MANTA RAY GATHERING COMPANY, L.L.C.*
PETAL GAS STORAGE, L.L.C.*
POSEIDON PIPELINE COMPANY, L.L.C.*
WARWINK GATHERING AND TREATING COMPANY*
By: EL PASO ENERGY WARWINK I COMPANY, L.P., in its
capacity as 99% general partner of Warwink Gathering
and Treating Company*
39
By: EL PASO ENERGY WARWINK II COMPANY, L.P., in its
capacity as 1% general partner of Warwink Gathering
and Treating Company*
*By: /s/Keith Forman
---------------
Name: Keith Forman
Title: Vice President and Chief Financial Officer
40
Initial Purchasers:
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
UBS WARBURG LLC
WACHOVIA SECURITIES, INC.
By: J.P. MORGAN SECURITIES INC.
By: /s/ Adam Bernard
----------------
Title: Vice President
41
SCHEDULE A
SUBSIDIARY GUARANTORS
Chaco Liquids Plant Trust
Crystal Holding, L.L.C.
El Paso Energy Intrastate, L.P.
El Paso Energy Partners Oil Transport, L.L.C.
El Paso Energy Partners Operating Company, L.L.C
El Paso Energy Warwink I Company, L.P.
El Paso Energy Warwink II Company, L.P.
El Paso Offshore Gathering & Transmission, L.P.
El Paso South Texas, L.P.
EPGT Texas Pipeline, L.P.
EPN Alabama Intrastate, L.L.C.
EPN Field Services, L.L.C.
EPN Gathering and Treating Company, L.P.
EPN Gathering and Treating GP Holding, L.L.C.
EPN GP Holding, L.L.C.
EPN GP Holding I, L.L.C.
EPN Gulf Coast, L.P.
EPN Holding Company, L.P.
EPN Holding Company I, L.P.
EPN NGL Storage, L.L.C.
EPN Pipeline GP Holding, L.L.C.
First Reserve Gas, L.L.C.
Flextrend Development Company, L.L.C.
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.
Warwink Gathering and Treating Company
Schedule A - Page 1
SCHEDULE B
Principal Amount
Initial Purchaser of Notes
----------------- ----------------
J.P. Morgan Securities Inc............................. $ 85,000,000
Goldman, Sachs & Co.................................... 85,000,000
UBS Warburg LLC........................................ 85,000,000
Wachovia Securities, Inc............................... 45,000,000
Total.................................................. $ 300,000,000
=============
Schedule B - Page 1
SCHEDULE C
JURISDICTION OF
ENTITY NAME FORMATION OWNERSHIP
----------- --------------- ---------
Chaco Liquids Plant Trust Massachusetts 100%
Crystal Holding, L.L.C. Delaware 100%
El Paso Energy Intrastate, L.P. Delaware 100%
El Paso Energy Partners Oil Transport, L.L.C. Delaware 100%
El Paso Energy Partners Operating Company, L.L.C. Delaware 100%
El Paso Energy Warwink I Company, L.P. Delaware 100%
El Paso Energy Warwink II Company, L.P. Delaware 100%
El Paso Offshore Gathering and Transmission, L.P. Delaware 100%
El Paso South Texas, L.P. Delaware 100%
EPGT Texas Pipeline, L.P. Delaware 100%
EPN Alabama Intrastate, L.L.C. Delaware 100%
EPN Field Services, L.L.C. Delaware 100%
EPN Gathering and Treating Company, L.P. Delaware 100%
EPN Gathering and Treating GP Holding, L.L.C. Delaware 100%
EPN GP Holding, L.L.C. Delaware 100%
EPN GP Holding I, L.L.C. Delaware 100%
EPN Gulf Coast, L.P. Delaware 100%
EPN Holding Company, L.P. Delaware 100%
EPN Holding Company I, L.P. Delaware 100%
EPN NGL Storage, L.L.C. Delaware 100%
EPN Pipeline GP Holding, L.L.C. Delaware 100%
First Reserve Gas, L.L.C. Delaware 100%
Flextrend Development Company, L.L.C. Delaware 100%
Hattiesburg Gas Storage Company Delaware 100%
Hattiesburg Industrial Gas Sales, L.L.C. Delaware 100%
High Island Offshore System, L.L.C. Delaware 100%
Manta Ray Gathering Company, L.L.C. Delaware 100%
Petal Gas Storage, L.L.C. Delaware 100%
Poseidon Pipeline Company, L.L.C. Delaware 100%
Warwink Gathering and Treating Company Texas 100%
Schedule C - Page 1
SCHEDULE D
JURISDICTION OF FOREIGN QUALIFICATION
ENTITY NAME FORMATION JURISDICTIONS
----------- --------------- -----------------------
El Paso Energy Partners, L.P. Delaware Texas, Louisiana
El Paso Energy Partners Company Delaware Texas, Louisiana
Chaco Liquids Plant Trust Massachusetts --
Crystal Holding, L.L.C. Delaware --
El Paso Energy Intrastate, L.P. Delaware Texas, Louisiana
El Paso Energy Partners Finance Corporation Delaware Texas
El Paso Energy Partners Oil Transport, L.L.C. Delaware Texas, Louisiana, Alabama
El Paso Energy Partners Operating Company, L.L.C. Delaware Texas, Louisiana,
Massachusetts, New Mexico
El Paso Energy Warwink I Company, L.P. Delaware Texas
El Paso Energy Warwink II Company, L.P. Delaware Texas
El Paso Offshore Gathering & Transmission, L.P. Delaware Texas
El Paso South Texas, L.P. Delaware Texas
EPGT Texas Pipeline, L.P. Delaware Texas
EPN Alabama Intrastate, L.L.C. Delaware --
EPN Field Services, L.L.C. Delaware Texas, Louisiana, New
Mexico
EPN Gathering and Treating Company, L.P. Delaware Texas, New Mexico
EPN Gathering and Treating GP Holding, L.L.C. Delaware Texas
EPN GP Holding, L.L.C. Delaware Texas
EPN GP Holding I, L.L.C. Delaware Texas
EPN Gulf Coast, L.P. Delaware Texas, Louisiana,
Alabama, New Mexico
EPN Holding Company, L.P. Delaware Texas
EPN Holding Company I, L.P. Delaware Texas
EPN NGL Storage, L.L.C. Delaware Mississippi, Nevada
EPN Pipeline GP Holding, L.L.C. Delaware Texas
First Reserve Gas, L.L.C. Delaware Mississippi
Flextrend Development Company, L.L.C. Delaware Texas, Louisiana,
Alabama
Hattiesburg Gas Storage Company Delaware --
Hattiesburg Industrial Gas Sales, L.L.C. Delaware Mississippi
High Island Offshore System, L.L.C. Delaware Texas, Louisiana
Schedule D - Page 1
Manta Ray Gathering Company, L.L.C. Delaware Texas, Louisiana
Petal Gas Storage, L.L.C. Delaware Mississippi
Poseidon Pipeline Company, L.L.C. Delaware Texas
Warwink Gathering and Treating Company Texas --
Schedule D - Page 2
EXHIBIT A
Registration Rights Agreement
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 (Amendment No. 1) 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 GulfTerra
Energy 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
July 28, 2003
EXHIBIT 23.B
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 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
July 28, 2003
EXHIBIT 25.A
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
JPMORGAN CHASE BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
WILLIAM H. MCDAVID
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 270-2611
(Name, address and telephone number of agent for service)
(1) GULFTERRA ENERGY PARTNERS, L.P.
(2) GULFTERRA ENERGY FINANCE CORPORATION
(Exact name of obligor as specified in its charter)
SEE TABLE OF ADDITIONAL REGISTRANT GUARANTORS BELOW
(1) DELAWARE (1) 76-0396023
(2) DELAWARE (2) 76-0605880
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(Address of principal executive offices) (Zip Code)
--------------------------------------------------
8 1/2% SERIES B SENIOR SUBORDINATED NOTES DUE 2010
--------------------------------------------------
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE
NUMBER, INCLUDING AREA
STATE OR OTHER CODE, OF REGISTRANT
JURISDICTION OF IRS EMPLOYER GUARANTOR'S PRINCIPAL
NAME INCORPORATION ID NO. EXECUTIVE OFFICE
---- --------------- ------------ ----------------------
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 *
GulfTerra Intrastate, L.P. Delaware N/A *
(f/k/a El Paso Energy Intrastate, L.P.)
GulfTerra Operating Company, L.L.C. Delaware 76-0396023 *
(f/k/a El Paso Energy Partners
Operating Company, L.L.C.)
GulfTerra South Texas, L.P. Delaware 04-3714142 *
(f/k/a El Paso South Texas, L.P.)
GulfTerra Texas Pipeline, L.P. Delaware N/A *
(f/k/a EPGT Texas Pipeline, L.P.)
GulfTerra Alabama Intrastate, L.L.C. Delaware 76-0396023 *
(f/k/a EPN Alabama Intrastate, L.L.C.)
GulfTerra Field Services, L.L.C. Delaware 76-0396023 *
(f/k/a EPN Field Services, L.L.C.)
GulfTerra Holding II, L.L.C. Delaware 76-0396023 *
(f/k/a EPN GP Holding, L.L.C.)
GulfTerra Holding I, L.L.C. Delaware 76-0396023 *
(f/k/a/ EPN GP Holding I, L.L.C.)
GulfTerra GC, L.P. Delaware N/A *
(f/k/a/ EPN Gulf Coast, L.P.)
ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE
NUMBER, INCLUDING AREA
STATE OR OTHER CODE, OF REGISTRANT
JURISDICTION OF IRS EMPLOYER GUARANTOR'S PRINCIPAL
NAME INCORPORATION ID NO. EXECUTIVE OFFICE
---- --------------- ------------ ----------------------
GulfTerra Holding V, L.P. Delaware N/A *
(f/k/a/ EPN Holding Company, L.P.)
GulfTerra Holding IV, L.P. Delaware N/A *
(f/k/a EPN Holding Company I, L.P.)
GulfTerra NGL Storage, L.L.C. Delaware 76-0396023 *
(f/k/a EPN NGL Storage, L.L.C.)
GulfTerra Holding III, L.L.C. Delaware 76-0396023 *
(f/k/a EPN Pipeline GP Holding, L.L.C.)
First Reserve Gas. L.L.C. Delaware 76-0396023 *
Flextrend Development Company, L.L.C. Delaware 76-0396023 *
GulfTerra Oil Transport, L.L.C. Delaware 76-0396023 *
(f/k/a El Paso Energy Partners
Oil Transport, L.L.C.)
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 *
* The address for each Additional Registrant Guarantor is 4 Greenway Plaza,
Houston, Texas 77046, and the telephone number for each is (832) 676-2600.
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551.
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR AND GUARANTORS.
IF THE OBLIGOR OR ANY GUARANTOR IS AN AFFILIATE OF THE TRUSTEE,
DESCRIBE EACH SUCH AFFILIATION.
None.
ITEMS 3 THROUGH 15, INCLUSIVE, ARE NOT APPLICABLE BY VIRTUE OF T-1 GENERAL
INSTRUCTION B.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
ITEM 16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A copy of the Restated Organization Certificate of the Trustee dated
March 25, 1997 and the Certificate of Amendment dated October 22, 2001 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-76894, which exhibit is incorporated by reference.)
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which exhibit is incorporated by reference). On November
11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan
Guaranty Trust Company of New York, the surviving corporation was renamed
JPMorgan Chase Bank.
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-76894, which exhibit
is incorporated by reference.)
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which exhibit is incorporated by reference). On November 11, 2001, in
connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust
Company of New York, the surviving corporation was renamed JPMorgan Chase Bank.
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, JPMorgan Chase Bank, a corporation organized and existing under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Houston and State of Texas, on the 28th day of July, 2003.
JPMORGAN CHASE BANK
By: /s/ REBECCA A. NEWMAN
--------------------------------------
Rebecca A. Newman
Vice President and Trust Officer
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO.2
CONSOLIDATED REPORT OF CONDITION OF
JPMorgan Chase Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 2003, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act
ASSETS
Dollar Amounts
in Millions
--------------
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .................................................... $ 21,415
Interest-bearing balances ............................................ 6,882
Securities:
Held to maturity securities .............................................. 334
Available for sale securities ............................................ 80,076
Federal funds sold and securities purchased under
agreements to resell
Federal funds sold in domestic offices ............................... 14,044
Securities purchased under agreements to resell ...................... 73,060
Loans and lease financing receivables:
Loans and leases held for sale ....................................... 25,832
Loans and leases, net of unearned income ............................. $ 161,345
Less: Allowance for loan and lease losses ............................ 3,823
Loans and leases, net of unearned income and
allowance ............................................................ 157,522
Trading Assets ........................................................... 189,427
Premises and fixed assets (including capitalized leases) ................. 6,186
Other real estate owned .................................................. 131
Investments in unconsolidated subsidiaries and
associated companies ................................................. 691
Customers' liability to this bank on acceptances
outstanding .......................................................... 225
Intangible assets
Goodwill ............................................................. 2,180
Other Intangible assets .............................................. 3,314
Other assets ............................................................. 40,377
TOTAL ASSETS ............................................................. $ 621,696
==============
LIABILITIES
Deposits
In domestic offices ............................................... $ 174,351
Noninterest-bearing ............................... $ 70,991
Interest-bearing .................................. 103,360
In foreign offices, Edge and Agreement
subsidiaries and IBF's ............................................ 125,789
Noninterest-bearing .................................. $ 7,531
Interest-bearing .................................. 118,258
Federal funds purchased and securities sold
under agreements to repurchase:
Federal funds purchased in domestic offices ....................... 5,929
Securities sold under agreements to repurchase .................... 113,903
Trading liabilities ....................................................... 116,329
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases) ......................... 10,758
Bank's liability on acceptances executed and outstanding .................. 225
Subordinated notes and debentures ......................................... 8,306
Other liabilities ......................................................... 29,735
TOTAL LIABILITIES ......................................................... 585,325
Minority Interest in consolidated subsidiaries ............................ 97
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................. 0
Common stock .............................................................. 1,785
Surplus (exclude all surplus related to preferred stock) .................. 16,304
Retained earnings ......................................................... 17,228
Accumulated other comprehensive income .................................... 957
Other equity capital components ........................................... 0
TOTAL EQUITY CAPITAL ...................................................... 36,274
------------
TOTAL LIABILITIES, MINORITY INTEREST, AND EQUITY CAPITAL .................. $ 621,696
============
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WILLIAM B. HARRISON, JR. )
HELENE L. KAPLAN ) DIRECTORS
WILLIAM H. GRAY, III )
