TEL OFFSHORE TRUST (OTCMKTS:TELOZ) Files An 8-K Entry into a Material Definitive Agreement

TEL OFFSHORE TRUST (OTCMKTS:TELOZ) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01 Entry into a Material Definitive
Agreement.

The information contained in Item 8.01 regarding the Mediation
Settlement Agreement (as therein defined) is hereby incorporated
by referenced in this Item 1.01, as applicable.

Item 8.01 Other Events.

As previously disclosed, on July10, 2014, the trustees (the
Trustees) of the Trust filed a Petition for Modification and
Termination of the Trust with the Probate Court of Travis County,
Texas (the Court).

The probate proceeding (the Probate Proceeding) was set for trial
on January15, 2016. Prior to trial, Glenn M. Karisch, the
attorney ad litem appointed by the Court (the Ad Litem) filed a
Motion to Sever asking the Court to sever all matters related to
the requested modification of the Trust and the sale of Trust
assets into a separate cause to proceed to trial. The Ad Litem
also filed a Motion for Continuance requesting that the Court
continue the trial of all remaining matters, including the Ad
Litems request for an accounting and the issues concerning the
termination of the Trust, to a later date (the Remaining
Matters). Prior to calling the case to trial, the Court granted
the Ad Litems Motion to Sever and Motion for Continuance, severed
the matters related to the modification of the Trust and the sale
of Trust assets (Severed Proceeding), and continued the Remaining
Matters to a later date. The Severed Proceeding was assigned
Cause No.C-1-PB-16-000096 and is >In re TEL Offshore
Trust.

The Severed Proceeding proceeded to trial before the Court on
January15, 2016. At trial, the Court entered a final judgment
(the Final Judgment) granting the Trustees request that the Trust
Agreement be modified to permit the Trustees to direct the
Partnership to sell the remaining overriding royalty interest
held by the Partnership as soon as reasonably possible,
notwithstanding any requirements of the Trust Agreement to the
contrary. As previously disclosed, on June24, 2016 the TEL
Offshore Trust Partnership (the Partnership) completed the sale
of the Partnerships remaining overriding royalty interest to the
Final Judgment.

On August17, 2016, the Ad Litem filed a Second Amended Answer and
First Amended Counterclaim seeking an accounting and asserting,
among other causes of action, that the Trustees have breached
their fiduciary duties to the beneficiaries of the Trust.

The Remaining Matters were originally set for trial on November7,
2016. As previously disclosed, the Trustees filed a motion for
continuance of the Remaining Matters and a hearing for such
continuance occurred on September14, 2016. At the hearing, the
Court granted the Trustees motion for continuance of the
Remaining Matters and scheduled the trial for June12, 2017.

On October3, 2016, the trial judge realigned the parties, such
that the Ad Litem is now the plaintiff and the Trustees are the
defendants. The Ad Litem then filed an Original Petition as
Realigned Plaintiff (Petition) on October10, 2016, and a First
Amended Petition as Realigned Plaintiff (Amended Petition) on
October28, 2016, which continued to assert claims for breach of
fiduciary duties and other claims against the Trustees on behalf
of the beneficiaries. Another unitholder named RNR Production
Land and Cattle Co.,Inc. (RNR) also filed its own Petition on
October28, 2016, which asserted similar claims against the
Trustees as the Ad Litem had asserted. Two other unitholders,
Albert and Joyce Speisman (Speismans) also filed a counterclaim
on November15, 2016, adopting the claims of the Ad Litems
Petition. (The Ad Litem, RNR and Speismans are collectively
referred to as the Plaintiffs).

On December13, 2016, all parties in the Remaining Matters
attended a mediation. As a result of the mediation, the
individual trustees, Gary C. Evans, Jeffrey S. Swanson, and
Thomas H. Owen,Jr., and former trustee Daniel O. Conwill IV
(collectively, Individual Trustees) agreed to a settlement of the
Remaining Matters and a Settlement Agreement (the Individual
Trustees Settlement Agreement) was entered into on January17,
2017, among the Individual Trustees, the Ad Litem, RNR, and the
Speismans. On January20, 2017, the Court approved the Individual
Trustees Settlement Agreement and also signed the Final Judgment
as to the Individual Trustees. A summary of the Individual
Trustees Settlement Agreement is included in the Current Report
on Form8-K filed by the Trust with the Securities and Exchange
Commission (the SEC) on January17, 2017. A copy of the Order

Approving Settlement Agreement, which includes a copy of
Individual Trustees Settlement Agreement, is filed as an
exhibit to the Current Report on Form8-K filed by the Trust
with the SEC on January27, 2017.

On December30, 2016, the Court entered an order that The Bank
of New York Mellon Trust Company, N.A. (the Corporate Trustee)
had breached its fiduciary duties by paying itself compensation
in violation of the TEL Offshore Trust Trust Agreement. The
Court further found that the breach was intentional and a clear
and serious breach.

On April18, 2017, the Corporate Trustee, the Ad Litem, RNR and
the Speismans attended a mediation. As a result of the
mediation, and without admitting any liability or wrongdoing,
the Corporate Trustee has agreed to a settlement of all claims
asserted against the Corporate Trustee to a Mediation
Settlement Agreement (the Mediation Settlement Agreement) that
was signed April18, 2017 among the Corporate Trustee, the Ad
Litem, RNR and the Speismans. While the Mediation Settlement
Agreement is binding, it contemplates that the parties will
enter into a formal compromise and settlement agreement (the
Final Settlement Agreement) reflecting the terms of the
Mediation Settlement Agreement and providing for dismissal with
prejudice of the Remaining Matters. The Mediation Settlement
Agreement and final Settlement Agreement are conditioned upon
Court approval and the release of the Corporate Trustee shall
become effective upon the payment of the settlement amount
described below. A hearing has been set on May15, 2017 before
the Court to consider all pending motions, and it is expected
that the Mediation Settlement Agreement, and any objections
thereto, will be addressed by the Court at such hearing. Any
unitholder may appear at the hearing and object to the terms of
the Mediation Settlement Agreement.

The Mediation Settlement Agreement requires a payment by the
Corporate Trustee of $4million into the TEL Offshore Trust
Qualified Settlement Fund (the QSF), established under Cause
No.C-1-PB-17-000132 and >In re TEL Offshore Trust
Qualified Settlement Fund, within five business days after
the approval of the settlement by the Court and the entry of a
final judgment as to the Corporate Trustee (after expiration of
the time for appeal and the exhaustion of all appeals). The QSF
is administered by a person previously appointed by the Court
as administrator (Administrator). The QSF will be used as the
Court orders and approves, including the payment of the
Plaintiffs attorneys fees and expenses, the fees and expenses
of the Administrator, and the remainder, if any, distributed to
unitholders and/or former unitholders of the Trust according to
an agreement to be entered among the Plaintiffs allocating the
proceeds of the QSF, subject to the approval of the Court. The
Mediation Settlement Agreement provides that the Plaintiffs and
all current and former unitholders of the Trust who were served
by publication and did not answer or appear in the Remaining
Matters release all claims against the Corporate Trustee, as
well as counsel and insurers for the Corporate Trustee. The
Court has previously ruled that all damages payable by the
Corporate Trustee shall be for the benefit of all unitholders,
not just those who have sued in the Probate Proceeding. The
Mediation Settlement Agreement provides that the Corporate
Trustee is settling all such claims and all such claims are
released by virtue of the Mediation Settlement Agreement and
the final judgment entered thereto. The Corporate Trustee, in
return, agrees to release all claims against the Ad Litem, RNR,
the Speismans, and all current and former unit holders, as well
as the counsel for any such persons except for any claims
arising from any debts, extensions of credit by and between the
Corporate Trustee unrelated to the Trust or the Probate
Proceeding. The proposed final judgment would dismiss all
claims released in the Settlement. The Mediation Settlement
Agreement provides that the Corporate Trustee shall release any
claims for the repayment of loans or other extensions of credit
to the Trust by the Corporate Trustee or any affiliate thereof
and further provides that the Corporate Trustee shall withdraw
any application or claim for payment of funds out of the QSF or
the segregated account maintained by the Trust.

The Mediation Settlement Agreement provides that the Corporate
Trustee shall terminate the Trust. Any such termination shall
be done in a manner subject to the approval of the Court. The
foregoing is a summary of the Mediation Settlement Agreement
and is qualified in its entirety by reference to the full text
of the Mediation Settlement Agreement, a copy of which is filed
as Exhibit99.1 to this Current Report on Form8-K and
incorporated herein by reference. A copy of the Mediation
Settlement Agreement will also be available at a website
containing all filed pleadings at
www.andrewskurth.com/teloffshoretrust.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits

ExhibitNumber

Description

99.1

Mediation Settlement Agreement dated April18, 2017


About TEL OFFSHORE TRUST (OTCMKTS:TELOZ)

TEL Offshore Trust (the Trust) owns approximately 99.99% interest in the TEL Offshore Trust Partnership (Partnership). Chevron U.S.A., Inc. (Chevron) owns the remaining .01% interest in the Partnership. The Trust’s primary source of liquidity and capital is the royalty income received from its share of the net proceeds from the royalty properties. The Trust’s reserve report notes that there were approximately five productive royalty properties, which consist of Ship Shoal 182/183, South Timbalier 36, South Timbalier 37, Eugene Island 339 and Eugene Island 342.

TEL OFFSHORE TRUST (OTCMKTS:TELOZ) Recent Trading Information

TEL OFFSHORE TRUST (OTCMKTS:TELOZ) closed its last trading session 00.000 at 0.220 with 221 shares trading hands.

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