TEL OFFSHORE TRUST (OTCMKTS:TELOZ) Files An 8-K Other Events

TEL OFFSHORE TRUST (OTCMKTS:TELOZ) Files An 8-K Other Events

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Item 8.01 Other Events.

Settlement of Probate Proceeding with Corporate
Trustee

As previously disclosed in the Current Report on Form8-K filed by
the TEL Offshore Trust (the Trust) with the Securities and
Exchange Commission (SEC) on April25, 2017, The Bank of New York
Mellon Trust Company, N.A. (the Corporate Trustee), Glenn M.
Karisch, the attorney ad litem (the Ad Litem) appointed by the
Probate Court of Travis County, Texas (the Court) in the
previously announced probate proceeding (the Probate Proceeding),
RNR Production Land and Cattle Co.,Inc. (RNR) and Albert and
Joyce Speisman (the Speismans, and together with RNR and the Ad
Litem, the Plaintiffs) agreed to a settlement of all claims
asserted against the Corporate Trustee to a Mediation Settlement
Agreement entered into by and among such parties. As previously
disclosed, a hearing was set for May15, 2017 before the Court to
consider all pending motions for approval of the settlement and
entry of a final judgment, objections thereto and related
matters.

On May5, 2017, the Ad Litem filed a Motion for Leave to Amend
Petition to file its Third Amended Petition as Realigned
Plaintiff, and the Corporate Trustee filed a Motion for Leave to
File Its Amended Counterclaim for Modification and Termination of
Trust as to Attorney Ad Litem, RNR, and the Speismans. The
petitions request that the Trust Agreement for the TEL Offshore
Trust (the Trust Agreement) be modified to (i)allow the Trust to
be terminated on a date to be established by the Court, and
(ii)establish a Trust termination date, which shall also serve as
the record date, at which time the Trusts transfer agent will
close the transfer books of the Trust and thereafter no further
transfers or transactions in the Trusts units will be registered
or effected. The Ad Litem also filed a Motion to Approve
Allocation Agreement. The Allocation Agreement is an agreement
among the Ad Litem, RNR and the Speismans that sets forth terms
for the distribution of the TEL Offshore Trust Qualified
Settlement Fund (the QSF) previously established by the Court and
provides that 20% of the QSF shall be distributed among unit
holders as of a date in 2014 to be approved by the Court and the
remainder will be distributed among unit holders as of the Trust
termination date as approved by the Court. The Corporate Trustee
is not a party to the Allocation Agreement and has no obligations
relating to any distributions from the QSF.

As discussed in the Quarterly Report on Form10-Q for the quarter
ending March31, 2017 filed by the Trust with the SEC, on May15,
2017, the Corporate Trustee, the Ad Litem, RNR and the Speismans
entered into a Settlement Agreement (the Corporate Trustee
Settlement Agreement). The Corporate Trustee Settlement Agreement
requires a payment by the Corporate Trustee of $4million into the
QSF on a date (the Settlement Payment Date) within five business
days after (i)the approval of the settlement by the Court and the
entry of a proposed final judgment (the Final Judgment as to
Corporate Trustee) dismissing with prejudice all claims against
the Corporate Trustee, as more particularly described below, and
(ii)the expiration of the time for appeal and exhaustion of all
appeals.

The Corporate Trustee Settlement Agreement provides that the
Plaintiffs and all current and former Unit holders who were
served by publication and did not answer or appear in the Probate
Proceeding that the Ad Litem was appointed to represent (the AAL
Parties) release all claims against the Corporate Trustee, as
well as its agents, representatives, counsel, insurers, heirs,
successors and assigns, except for any claims arising from debts
or extensions of credit by and between the Corporate Trustee and
the Plaintiffs, their agents, representatives, counsel, insurers,
heirs, successors and assigns or any Unit holders, unrelated to
the Trust or the Probate Proceeding. The Court has previously
ruled that all damages payable by the Corporate Trustee shall be
for the benefit of all Unit holders not just those who have sued
in the Probate Proceeding. The Corporate Trustee Settlement
Agreement provides that the Corporate Trustee is settling all
such claims and all such claims are released by virtue of the
Corporate Trustee Settlement Agreement and the Final Judgment to
be entered thereto. The Corporate Trustee, in return, releases
all claims against the Ad Litem, RNR, the Speismans, their
agents, representatives, counsel, insurers, heirs, successors and
assigns, and all current and former Unit holders, except for any
claims arising from any debts or extensions of credit by and
between the Corporate Trustee and the Plaintiffs, their agents,
representatives, counsel, insurers, heirs, successors and assigns
or any Unit holders, unrelated to the Trust or the Probate
Proceeding. The Final Judgment as to Corporate Trustee dismisses
all claims released in the Corporate Trustee Settlement
Agreement. The Corporate Trustee Settlement Agreement further
provides that the Corporate Trustee releases 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 Corporate Trustee Settlement Agreement and the Final Judgment
Modifying and Terminating the Trust provide for certain
modifications to the Trust Agreement, including the termination
of the Trust. The Final Judgment Modifying and Terminating the
Trust provides that the Trust shall terminate at 5:00p.m.Eastern
Daylight Saving Time on June30, 2017 (the Record Date and Time);
provided such date will be delayed in the event an appeal is
filed and may be delayed upon request of the Ad Litem or the
Corporate Trustee if necessary. Upon the Record Date and Time,
all rights of Unit holders in and under the Trust Agreement shall

terminate and all Units and any beneficial interests therein
shall cease to exist. The Final Judgment Modifying and
Terminating the Trust provides that as of the Record Date and
Time each Unit holder shall be limited to its rights with
respect to the QSF. The Final Judgment Modifying and
Terminating the Trust further provides that the Trusts transfer
books will be closed and that trading of Units shall not be
permitted after the Record Date and Time and the Trusts
transfer agent will stop processing any Unit transfers as of
the Record Date and Time.

At the hearing held on May15, 2017, the Court approved, among
other motions, the Corporate Trustee Settlement Agreement, the
Final Judgment as to Corporate Trustee and the Final Judgment
Modifying and Terminating the Trust. The Corporate Trustee
Settlement Agreement and the Order Approving Settlement
Agreement also require the Corporate Trustee to transfer into
the QSF all funds remaining in the segregated account on the
Settlement Payment Date. The Final Judgment Modifying and
Terminating the Trust provides that the Corporate Trustee will
have no liability for transferring the remaining funds in the
segregated account to the QSF. Once the settlement payment and
any remaining funds in the segregated account are paid to the
QSF and the Corporate Trustee has performed certain other
obligations under the Corporate Trustee Settlement Agreement,
(i)the Corporate Trustee shall have no further obligations or
duties under the Trust Agreement and the Corporate Trustee and
the individual trustees (the Trustees) are discharged and
released as Trustees of the Trust, and (ii)any Unit holders
sole rights by virtue of their status as a Unit holder or a
former Unit holder shall be their right to follow the claims
procedures established by the Court to make a claim to funds in
the QSF. 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 Unit holders according to the
Allocation Agreement entered into among the Plaintiffs. The
Court did not approve the Allocation Agreement at the May15,
2017 hearing but will consider it at a subsequent hearing. The
Final Judgment Modifying and Terminating the Trust effects the
modifications and the termination of the Trust as described
above.

At the hearing held on May15, 2017, the Court also approved a
fee application providing for the payment of fees in the
aggregate amount of $253,686.13 to the Ad Litem and the
Plaintiffs attorneys and experts. Following such payment, the
amount remaining in the segregated account is $834,194. Any
remaining funds in the segregated account on the Settlement
Payment Date will be transferred to the QSF.

The foregoing descriptions of the Settlement Agreement and the
Final Judgment Modifying and Terminating the Trust are not
complete and are qualified in their entirety by reference to
the full text thereof, copies of which are filed as Exhibits
99.1 and 99.2, respectively, to this Current Report on Form8-K
and incorporated herein by reference. Copies of the Settlement
Agreement, the orders and judgments entered in the May15, 2017
hearing will also be available at the website at
www.andrewskurth.com/teloffshoretrust.

Administration of QSF

to the Corporate Trustee Settlement Agreement and the Final
Judgment Modifying and Terminating the Trust, the Trustees have
no involvement or duties with the administration of the QSF or
the distribution of funds from the QSF. The Trustees have no
liability to any current or former owners of units regarding
the administration of the QSF or the distribution of funds from
the QSF, whatsoever. The QSF shall be administered by Karl
Johnson, the Administrator and Trustee of the QSF previously
appointed by the Court. Unit holders having questions regarding
the QSF and the claims procedures under the QSF should contact
Karl Johnson at (512) 482-9113 or by mail at the Law Office of
Karl G. Johnson,Jr., P.C., 704 West 9th Street, Austin, Texas
78701.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits

ExhibitNumber

Description

99.1

Settlement Agreement dated May15, 2017

99.2

Final Judgment Modifying and Terminating the Trust dated
May15, 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 up +0.190 at 0.550 with 63,404 shares trading hands.

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