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EXHIBIT 10.5
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement"), dated as of June 13, 1997,
is entered into by and among TNGC Holdings Corporation, a Delaware corporation
("TNGC"), and its subsidiaries listed on the signature pages.
TNGC currently has, among others, the following direct or indirect
subsidiaries: TransAmerican Natural Gas Corporation, a Texas corporation
("TransAmerican"); TransAmerican Energy Corporation, a Delaware corporation
("TEC"); TransAmerican Refining Corporation, a Texas corporation ("TARC");
TransTexas Gas Corporation, a Delaware corporation ("TransTexas"); and
TransTexas Drilling Services, Inc., a Delaware corporation ("TTXD"). TTXD is
currently a wholly owned subsidiary of TransTexas, which is anticipated to be
spun off to the stockholders of TransTexas. TNGC, TransAmerican, and the
subsidiaries of TransAmerican, other than TEC and its subsidiaries, TransTexas
and its subsidiaries, and, after it is spun off, TTXD and its subsidiaries, are
referred to in this Agreement as the "Parent Group." TEC and its subsidiaries,
including TARC, are referred to in this Agreement as the "TEC Group." The
Parent Group, TEC Group, and, after it is spun off, TTXD and its subsidiaries
(the "TTXD Group"), are referred to in this Agreement as the "Services Buyers."
The Services Buyers wish to retain TransTexas to render the services
described in Section 1.1 hereof (the "Services").
TEC, TARC, TransTexas, and TTXD wish to retain the services of John R.
Stanley ("Stanley") as chief executive officer of each company and to
compensate TransAmerican for various activities conducted and services provided
for their benefit.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
I
SERVICES
1.1 Services. Subject to the terms and provisions set forth
in this Agreement (collectively, the "Services"):
(a) TransTexas shall, at TransAmerican's request, provide
to the Parent Group, administrative, legal, accounting, including
accounts payable, accounts receivable, and purchasing services,
treasury, tax, human resources, and employee benefits services (the
"Parent Group Services").
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(b) TransTexas shall, at TEC's or TARC's request, provide
to the TEC Group administrative, legal, accounting, including accounts
payable, accounts receivable, and purchasing services, financial and
SEC reporting, investor relations, treasury, tax, human resources, and
employee benefits services (the "TEC Services").
(c) TransTexas shall, at TTXD's request after it is spun
off, provide to the TTXD Group administrative, legal, accounting,
including accounts payable and accounts receivable services, financial
and SEC reporting, investor relations, treasury, tax, and employee
benefits services (the "TTXD Services").
1.2 Personnel Matters. Without limiting the generality of
Section 1.1 of this Agreement, TransTexas shall provide all labor and
administrative, supervisory and other persons necessary to perform the
Services; provided that TransTexas shall have the right at its own expense to
use independent contractors in performing the Services as it shall deem
advisable in its reasonable judgment.
1.3 Performance of Services. TransTexas shall perform or cause to
be performed its duties under this Agreement in a manner consistent in all
material respects with then current applicable industry standards. TransTexas
shall, in connection with the performance of the Services hereunder, apply for,
and use its best efforts to obtain, all permits, licenses, certificates or
other administrative or regulatory authorizations as may be required by any
governmental authority from time to time as may be necessary or appropriate for
TransTexas' performance of its obligations under this Agreement, except for
such permits, licenses, certificates or other authorizations as the Services
Buyers are specifically required to procure by reason of applicable law.
1.4 Independent Contractor Status. TransTexas shall perform the
Services as an independent contractor. The number of employees, the selection
and retention of such employees, the hours of labor and the compensation for
services to be paid to any and all such employees of TransTexas shall be
determined by TransTexas. TransTexas or a supervisor, manager or officer of
TransTexas with whom the Services Buyers may consult concerning the Services
shall be available to the Services Buyers at all reasonable times. All
employees, agents, contractors and subcontractors hired by TransTexas to
perform services hereunder shall not be deemed to be the employees, agents,
contractors and subcontractors of the Services Buyers, and all salaries and
compensation payable to them shall be the exclusive responsibility of
TransTexas.
1.5 Necessary Information. The Services Buyers shall furnish
TransTexas with all information, programs, know-how, methods or methodology
within the Services Buyers' control as may be necessary or appropriate for the
performance of the Services by TransTexas.
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II
COMPENSATION
2.1 Compensation for Services.
(a) As compensation for the Services provided by
TransTexas pursuant to this Agreement, the Services Buyers shall pay
to TransTexas the following amounts (the "Services Fees"), in cash:
(i) As compensation for the Parent Group Services
performed hereunder, the Parent Group shall pay TransTexas
$20,000 per month, subject to an annual adjustment on each
anniversary date of this Agreement as calculated by the CPI
Formula (defined below).
(ii) As compensation for the TEC Services, the TEC
Group shall pay TransTexas $300,000 per month, subject to an
annual adjustment on each anniversary date of this Agreement
as calculated by the CPI Formula.
(iii) In connection with a spin-off of TTXD,
TransTexas and TTXD shall agree to the Services Fee to be paid
to TransTexas by the TTXD Group following the spin-off, which
will be approved by the boards of directors of both TransTexas
and TTXD.
(b) In addition to the Services Fees provided for in
Section 3.1(a) above, TransTexas shall be entitled to be reimbursed by
each Services Buyer for expense items paid by TransTexas to third
parties and directly attributable to Services provided to that
Services Buyer ("Reimbursable Expenses").
(c) The CPI Formula is equal to (i) the current rate per
month multiplied by (ii) the Consumer Price Index (all urban
consumers, all items) ("CPI") for April of the adjustment year divided
by (iii) CPI for April of the previous year.
(d) The members of each of the Parent Group, TEC Group,
and TTXD Group may allocate the obligation for payments under this
Agreement at their discretion, provided no such allocation shall
relieve any member of a group from liability to TransTexas to pay
TransTexas for services provided to such member.
III
PAYMENTS TO TRANSAMERICAN
3.1 TransAmerican Actions and Services. Contemporaneously
with the execution of this Agreement, TransAmerican is agreeing to contribute
to the capital of TEC 3.7 million shares of common stock of TransTexas. In
addition, TransAmerican is assuming primary responsibility for
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federal income and Texas franchise taxes attributable to the sale by TransTexas
of its subsidiary, TransTexas Transmission Corporation, and the costs, if any,
of prosecuting and defending the reporting position to be taken with respect to
that sale. TransAmerican incurs costs both for its employees and directors and
for consultants and other service providers that benefit, directly or
indirectly, the TEC Group and TransTexas. TransAmerican expects to continue
those activities and benefits. TransAmerican shall, during the term hereof,
provide the services of Stanley as chief executive officer of each of TEC,
TARC, TransTexas, and TTXD. Stanley shall devote substantially all of his
business time to the performance of these services and the responsibilities of
these offices and shall allocate time among such offices at his reasonable
discretion.
3.2 Payments to TransAmerican. In recognition of the acts
of TransAmerican described herein and of the benefits accrued and anticipated
to be received as a consequence of those acts and as compensation for the
advisory and other services and benefits provided by TransAmerican through
Stanley and, from time to time, employees or outside consultants, TEC and its
subsidiaries shall pay TransAmerican $2,500,000 in the aggregate per year. TEC,
TARC, TransTexas, and TTXD shall allocate this payment obligation on an
equitable basis taking into account the benefits and services provided to each.
IV
MISCELLANEOUS
4.1 Term. This Agreement shall become effective upon the date
first noted above and shall continue in effect until (i) terminated, with
respect to such party's rights and obligations hereunder, by any party hereto
upon 30 days written notice to the other parties or (ii) terminated, if an
Event of Default (as defined therein) occurs under that certain indenture dated
June 13, 1997, between TEC and Firstar Bank of Minnesota, N.A., as trustee,
pursuant to which TEC is issuing 11 1/2% Senior Secured Notes due 2002 and 13%
Senior Secured Discount Notes due 2002 (the "Indenture"), upon 30 days' notice
by the trustee under the Indenture to the parties hereto.
4.2 Amendments. This Agreement may be amended by an agreement
in writing signed by each of the parties affected by such amendment.
4.3 Notice. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, shall be deemed to have been duly given when delivered in person or
my mail or when dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) to the addressee at
the address specified below:
If to any member of the Parent Group:
c/o TransAmerican Natural Gas Corporation
1300 North Sam Houston Parkway East
Suite 300
Houston, Texas 77032
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If to TransTexas:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032
If to any member of the TEC Group:
c/o TransAmerican Energy Corporation
1300 North Sam Houston Parkway East
Suite 200
Houston, Texas 77032
If to TTXD:
TransTexas Drilling Services, Inc.
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032
or such other address as either party may from time to time designate
by like notice.
4.4 Limitations on Assignment. No party to this Agreement
shall assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties. Notwithstanding the
foregoing, nothing herein shall prohibit TransTexas from hiring any
subcontractors or agents to provide the Services; provided that such hiring
shall not relieve TransTexas of any of its obligations hereunder.
4.5 Governing Law. This Agreement shall be governed by the
internal laws of the State of Texas without regard to principles of conflicts
of law.
4.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed an original,
but all of such counterparts together shall constitute one and the same
instrument.
4.7 Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof.
4.8 Headings. The section headings of this Agreement are
only for the purpose of reference and shall not affect the meaning hereof.
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4.9 Termination of Existing Services Agreement. Upon execution
and delivery of this Agreement, the Services Agreement dated August 24, 1993,
as amended, among TransAmerican and certain of its subsidiaries is hereby
terminated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TNGC HOLDINGS CORPORATION
By:
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TRANSAMERICAN NATURAL GAS CORPORATION
By:
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TRANSTEXAS GAS CORPORATION
By:
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TRANSAMERICAN ENERGY CORPORATION
By:
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TRANSAMERICAN REFINING CORPORATION
By:
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TRANSTEXAS DRILLING SERVICES, INC.
By:
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