<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
EL PASO NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE
(State or other jurisdiction 4922 74-0608280
of incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification No.)
</TABLE>
ONE PAUL KAYSER CENTER
100 NORTH STANTON STREET
EL PASO, TEXAS 79901
(915) 541-2600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
BRITTON WHITE, JR.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
EL PASO NATURAL GAS COMPANY
ONE PAUL KAYSER CENTER
100 NORTH STANTON STREET
EL PASO, TEXAS 79901
(915) 541-2600
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
<TABLE>
<S> <C>
GARY P. COOPERSTEIN, ESQ. DALLAS R. PARKER, ESQ.
FRIED, FRANK, HARRIS, BROWN, PARKER & LEAHY, L.L.P.
SHRIVER & JACOBSON 1200 SMITH, SUITE 3600
ONE NEW YORK PLAZA HOUSTON, TEXAS 77002
NEW YORK, NEW YORK 10004 (713) 654-8111
(212) 859-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(1) PER SHARE(2) PRICE(2) FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, $3.00 par value... 1,184,763 Shares $25.90 $30,683,121 $10,580.39
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</TABLE>
(1) Also includes associated Preferred Stock Purchase Rights. See "Comparative
Rights of Stockholders -- Stockholder Rights Plan".
(2) The registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on the average of the high and
low prices for shares of the common stock of Eastex Energy Inc. as reported
on the NASDAQ -- National Market System on August 11, 1995 ($4.2188) and
the maximum number of such shares (7,272,950 shares) that may be exchanged
for the securities being registered. The proposed maximum offering price
per share has been determined by dividing the maximum aggregate offering
price by the number of shares being registered. $6,130.58 of the
registration fee was paid upon filing with the Securities and Exchange
Commission of the preliminary proxy materials of Eastex Energy Inc. on June
9, 1995.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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.
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<PAGE> 2
EL PASO NATURAL GAS COMPANY
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
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ITEM NUMBER AND CAPTION OF FORM S-4 LOCATION IN PROSPECTUS
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<C> <C> <S> <C>
A. Information About The Transaction
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Available Information; Documents
Incorporated by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................. Summary; Information Concerning
the Companies; The Special
Meeting; The Merger
4. Terms of the Transaction............................ Summary; The Merger; The Merger
Agreement; Comparative Rights
of Stockholders
5. Pro Forma Financial Information..................... Not Applicable
6. Material Contacts with the Company Being Acquired... The Merger; The Merger Agreement;
Certain Agreements
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters..... Not Applicable
8. Interests of Named Experts and Counsel.............. Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... Not Applicable
B. Information About The Registrant
10. Information with Respect to S-3 Registrants......... Not Applicable
11. Incorporation of Certain Information by Reference... Documents Incorporated by
Reference
12. Information with Respect to S-2 or S-3
Registrants....................................... Not Applicable
13. Incorporation of Certain Information by Reference... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ Not Applicable
C. Information About The Company Being Acquired
15. Information with Respect to S-3 Companies........... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.... Documents Incorporated by
Reference
17. Information with Respect to Companies Other Than S-3
or S-2 Companies.................................. Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................... Cover Page of Proxy
Statement/Prospectus; Documents
Incorporated by Reference;
Summary; The Special Meeting;
The Merger; Security Ownership
of Management and Certain
Beneficial Owners
19. Information of Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer...... Not Applicable
</TABLE>
<PAGE> 3
LOGO
1100 FIRST INTERSTATE BANK PLAZA, 1000 LOUISIANA
HOUSTON, TEXAS 77002
August 14, 1995
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Eastex Energy Inc. ("Eastex") to be held on September 12, 1995 at 10:00 a.m.,
Central Daylight Savings time in the fourth floor auditorium of the First
Interstate Bank Plaza, 1000 Louisiana, Houston, Texas. The purpose of the
Special Meeting will be to consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger, dated as of May 8, 1995 (the "Merger
Agreement"), between El Paso Natural Gas Company ("EPG"), El Paso Acquisition
Company, a wholly owned subsidiary of EPG ("EPG Sub"), and Eastex, providing
for, among other things, the merger of Eastex with and into EPG Sub (the
"Merger"). As a result of the Merger, each of the then outstanding shares of
common stock, $.01 par value, of Eastex ("Eastex Common Stock"), other than
shares held by Eastex as treasury stock or by EPG, EPG Sub or any other
subsidiary of EPG, will be converted into the right to receive, subject to the
election procedures described in the accompanying Proxy Statement/Prospectus,
either (i) a fraction of a share of common stock, $3.00 par value, of EPG ("EPG
Common Stock") equal to the result obtained by dividing $4.50 by the average of
the closing sales prices of a share of EPG Common Stock on the New York Stock
Exchange over the ten business days immediately preceding the closing of the
Merger, but in any event not less than .1485 and not more than .1629 of a share
of EPG Common Stock or (ii) $4.50 in cash.
Because the maximum cash component of the consideration to be paid to
holders of Eastex Common Stock (including cash paid in respect of outstanding
Eastex stock options and warrants and cash paid in lieu of fractional shares)
pursuant to the Merger Agreement is limited to 49% of the aggregate merger
consideration, the extent to which elections by holders of Eastex Common Stock
will be accommodated will depend upon the respective numbers of Eastex
stockholders who elect cash ("Cash Election") and stock (or make no election).
Accordingly, if the number of shares of Eastex Common Stock covered by Cash
Elections exceeds the maximum number of shares of Eastex Common Stock that may
be converted into the right to receive cash pursuant to the Merger (the "Cash
Conversion Number"), then the number of shares of Eastex Common Stock covered by
each Cash Election to be converted into the right to receive cash will be
determined by multiplying the total number of shares of Eastex Common Stock
covered by such Cash Election by a fraction, the numerator of which is the Cash
Conversion Number and the denominator of which is the total number of shares of
Eastex Common Stock with respect to which effective Cash Elections were made.
All shares of Eastex Common Stock covered by a cash election and not converted
into the right to receive cash will be converted into the right to receive EPG
Common Stock in the Merger. An illustration of the cash election allocation is
set forth in the Proxy Statement/Prospectus. Holders of shares of Eastex Common
Stock which are converted into the right to receive shares of EPG Common Stock
pursuant to the Merger will receive, together with each share of EPG Common
Stock issued in the Merger, one associated preferred stock purchase right of EPG
(a "Right"). The Rights are currently attached to certificates for shares of EPG
Common Stock, are not separately tradeable and become exercisable only upon
certain conditions. In the event that, without the prior consent of the Board of
Directors of EPG, any person or group acquires beneficial ownership of 15% or
more of the voting power of all outstanding voting securities of EPG, each Right
(other than Rights held by such acquiring person or group) will entitle the
holder to purchase, at the then-current exercise price of the Right, a number of
shares of EPG Common Stock having a value of twice the exercise price of the
Right.
<PAGE> 4
The Merger Agreement contains a number of conditions and other terms, which
are summarized, along with certain financial and other information, in the
accompanying Proxy Statement/Prospectus. PLEASE READ AND CONSIDER THE PROXY
STATEMENT/PROSPECTUS CAREFULLY.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received a written opinion from its
investment advisor, Rauscher Pierce Refsnes, Inc. (a copy of which is included
with the accompanying Proxy Statement/Prospectus), that the consideration to be
received by the stockholders of Eastex in the Merger is fair, from a financial
point of view, to the Eastex stockholders. YOUR BOARD OF DIRECTORS BELIEVES THAT
THE PROPOSED MERGER IS IN THE BEST INTERESTS OF EASTEX AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
The affirmative vote of the holders of a majority of the outstanding shares
of Eastex Common Stock is required to approve and adopt the Merger Agreement, so
failure to vote will have the same effect as a vote against the Merger
Agreement. Accordingly, you are urged to complete, sign, date and return the
enclosed proxy card, whether or not you plan to attend the Special Meeting. If
you attend the Special Meeting, you may vote in person, if you wish, and revoke
any previously submitted proxy card. Your vote is important.
Sincerely,
EASTEX ENERGY INC.
/s/ ROBERT G. PHILLIPS
Robert G. Phillips
Chairman of the Board and
Chief Executive Officer
<PAGE> 5
LOGO
1100 First Interstate Bank Plaza, 1000 Louisiana
Houston, Texas 77002
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on September 12, 1995
To the Stockholders of Eastex Energy Inc.:
Notice is hereby given that a Special Meeting of Stockholders of Eastex
Energy Inc. ("Eastex") will be held in the fourth floor auditorium of the First
Interstate Bank Plaza, 1000 Louisiana, Houston, Texas, on September 12, 1995, at
10:00 a.m., Central Daylight Savings time, to consider and act upon the
following matters:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger dated as of May 8, 1995 (the "Merger Agreement") between El
Paso Natural Gas Company ("EPG"), El Paso Acquisition Company, a wholly owned
subsidiary of EPG ("EPG Sub"), and Eastex, providing for, among other things,
the merger of Eastex with and into EPG Sub (the "Merger"). As a result of the
Merger, each of the then outstanding shares of common stock, $.01 par value, of
Eastex ("Eastex Common Stock"), other than shares held by Eastex as treasury
stock or by EPG, EPG Sub or any other subsidiary of EPG, will be converted into
the right to receive, subject to the election procedures described in the
attached Proxy Statement/Prospectus, either (i) a fraction of a share of common
stock, $3.00 par value, of EPG ("EPG Common Stock") equal to the result obtained
by dividing $4.50 by the average of the closing sales prices of a share of EPG
Common Stock on the New York Stock Exchange over the ten business days
immediately preceding the closing of the Merger, but in any event not less than
.1485 and not more than .1629 of a share of EPG Common Stock or (ii) $4.50 in
cash. Holders of shares of Eastex Common Stock which are converted into the
right to receive shares of EPG Common Stock pursuant to the Merger will receive,
together with each share of EPG Common Stock issued in the Merger, one
associated preferred stock purchase right of EPG. The terms of the Merger
Agreement are more fully described in the attached Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The Board of Directors of Eastex has fixed the close of business on July
14, 1995 as the record date for the determination of stockholders entitled to
notice of and to vote at the Special Meeting or any adjournment or postponement
thereof. Only holders of record of Eastex Common Stock at the close of business
on the record date will be entitled to notice of and to vote on matters at the
Special Meeting and any adjournment thereof. A list of stockholders will be
available at the Special Meeting and, during the ten day period prior to the
Special Meeting, at the offices of Eastex, 1100 First Interstate Bank Plaza,
1000 Louisiana, Houston, Texas 77002, during ordinary business hours.
By Order of the Board of Directors,
LOGO
Jo Anne Sheriff
Assistant Secretary
Houston, Texas
August 14, 1995
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
OUTSTANDING SHARES OF EASTEX COMMON STOCK IS REQUIRED TO APPROVE AND ADOPT THE
MERGER AGREEMENT. YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN
PERSON, IF YOU WISH, AND REVOKE ANY PREVIOUSLY SUBMITTED PROXY CARD.
<PAGE> 6
EASTEX ENERGY INC.
PROXY STATEMENT FOR A SPECIAL MEETING
OF STOCKHOLDERS OF EASTEX ENERGY INC.
TO BE HELD ON SEPTEMBER 12, 1995
------------------------
EL PASO NATURAL GAS COMPANY
PROSPECTUS
------------------------
GENERAL INFORMATION
This Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") is
furnished in connection with the solicitation of proxies by the Board of
Directors of Eastex Energy Inc., a Delaware corporation ("Eastex"), for use in
connection with a Special Meeting of Stockholders of Eastex (the "Special
Meeting"), which is to be held on September 12, 1995, at 10:00 a.m., in the
fourth floor auditorium of the First Interstate Bank Plaza, 1000 Louisiana,
Houston, Texas, or any adjournment(s) or postponement(s) thereof.
At the Special Meeting, the stockholders of Eastex will be asked to
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of May 8, 1995 (the "Merger Agreement"), between El Paso
Natural Gas Company, a Delaware corporation ("EPG"), El Paso Acquisition
Company, a Delaware corporation and a wholly owned subsidiary of EPG ("EPG
Sub"), and Eastex, pursuant to which, among other things, Eastex will be merged
with and into EPG Sub (the "Merger"). As a result of the Merger, each of the
then outstanding shares of common stock, $.01 par value, of Eastex ("Eastex
Common Stock"), other than shares held by Eastex as treasury stock or by EPG,
EPG Sub or any other subsidiary of EPG, will be converted into the right to
receive, subject to the election procedures described herein, either (i) a
fraction of a share of common stock, $3.00 par value, of EPG ("EPG Common
Stock") equal to the result obtained by dividing $4.50 by the average of the
closing sales prices of a share of EPG Common Stock on the New York Stock
Exchange (the "NYSE") over the ten business days immediately preceding the
closing of the Merger, but in any event not less than .1485 and not more than
.1629 of a share of EPG Common Stock (the "Exchange Ratio") or (ii) $4.50 in
cash.
Because the maximum cash component of the consideration to be paid to
holders of Eastex Common Stock (including cash paid in respect of outstanding
Eastex stock options and warrants and cash paid in lieu of fractional shares)
pursuant to the Merger Agreement is limited to 49% of the aggregate merger
consideration, the extent to which elections by holders of Eastex Common Stock
will be accommodated will depend upon the respective numbers of Eastex
stockholders who elect cash ("Cash Election") and stock (or make no election).
Accordingly, if the number of shares of Eastex Common Stock covered by Cash
Elections exceeds the maximum number of shares of Eastex Common Stock that may
be converted into the right to receive cash pursuant to the Merger (the "Cash
Conversion Number"), then the number of shares of Eastex Common Stock covered by
each Cash Election to be converted into the right to receive cash will be
determined by multiplying the total number of shares of Eastex Common Stock
covered by such Cash Election by a fraction, the numerator of which is the Cash
Conversion Number and the denominator of which is the total number of shares of
Eastex Common Stock with respect to which effective Cash Elections were made.
All shares of Eastex Common Stock covered by a Cash Election and not converted
into the right to receive cash will be converted into the right to receive EPG
Common Stock in the Merger. See "The Merger Agreement -- Exchange
Procedures -- Illustration of Cash Elections Allocation." Holders of shares of
Eastex Common Stock which are converted into the right to receive shares of EPG
Common Stock pursuant to the Merger will receive, together with each share of
EPG Common Stock issued in the Merger, one associated preferred stock purchase
right of EPG (a "Right"). The Rights are currently attached to certificates for
shares of EPG Common Stock, are not separately tradeable and become exercisable
only upon certain conditions. In the event that, without the prior consent of
the Board of Directors of EPG, any person or group acquires beneficial ownership
of 15% or more of the voting power of all outstanding voting securities of EPG,
each Right (other than Rights held by such acquiring person or group) will
entitle the holder to purchase, at the then-current exercise price of the Right,
a number of shares of EPG Common Stock having a value of twice the exercise
price of the Right. Holders of shares of Eastex Common Stock which are converted
into the right to receive shares of EPG Common Stock pursuant to the Merger will
receive cash in lieu of any fractional shares of EPG Common Stock which would
otherwise be issuable to such holders in the Merger. Shares of Eastex Common
Stock held at the Effective Time (as defined in the Merger Agreement) by Eastex
as treasury stock or by EPG, EPG Sub or any other subsidiary of EPG will be
canceled pursuant to the Merger Agreement.
This Proxy Statement/Prospectus also constitutes a prospectus of EPG with
respect to the shares of EPG Common Stock (including the Rights) to be issued
pursuant to the Merger. The shares of EPG Common Stock issuable pursuant to the
Merger will be listed on the New York Stock Exchange ("NYSE").
On August 11, 1995, the closing price of EPG Common Stock on the NYSE
Composite Tape was $27.75, and the closing price of Eastex Common Stock as
reported by the NASDAQ - National Market System ("NASDAQ") was $4.25. Holders of
Eastex Common Stock may call EPG's transfer agent, First National Bank of
Boston, at (800) 736-3001 toll-free at any time prior to the Special Meeting to
obtain information as to the fraction of a share of EPG Common Stock which would
be received in respect of a share of Eastex Common Stock converted into the
right to receive EPG Common Stock, if the Exchange Ratio were determined based
upon the closing price of EPG Common Stock for the then most recent ten trading
days.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to the stockholders of Eastex on or about August 14, 1995.
------------------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is August 14, 1995.
<PAGE> 7
AVAILABLE INFORMATION
EPG and Eastex are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials can also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. The shares of EPG
Common Stock are listed on the New York Stock Exchange and the shares of Eastex
Common Stock are quoted on NASDAQ and, as a result, the periodic reports, proxy
statements and other information filed by EPG and Eastex with the Commission can
be inspected at the offices of the New York Stock Exchange at 20 Broad Street,
New York, New York 10005, or of NASDAQ at 1735 K Street, N.W., Washington, D.C.
20006, respectively.
EPG has filed a Registration Statement on Form S-4, together with all
amendments, supplements and exhibits thereto (the "Registration Statement"),
with the Commission under the Securities Act of 1933, as amended, with respect
to the shares of EPG Common Stock to be issued in connection with the Merger.
This Proxy Statement/Prospectus also constitutes the Prospectus of EPG filed as
part of the Registration Statement. This Proxy Statement/Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement is available for inspection and copying
as set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO EPG AND EASTEX WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
DOCUMENTS RELATING TO EPG (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, FROM EL PASO NATURAL
GAS COMPANY, ONE PAUL KAYSER CENTER, 100 NORTH STANTON STREET, EL PASO, TEXAS
79901, ATTENTION: STACY J. JAMES, CORPORATE SECRETARY, TELEPHONE: (915)
541-2600. DOCUMENTS RELATING TO EASTEX (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE
TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE,
FROM EASTEX ENERGY INC., 1100 FIRST INTERSTATE BANK PLAZA, 1000 LOUISIANA,
HOUSTON, TEXAS 77002, ATTENTION: LISA A. KELL, SECRETARY, TELEPHONE: (713)
650-6255. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST
SHOULD BE MADE BY SEPTEMBER 5, 1995. COPIES OF DOCUMENTS SO REQUESTED WILL BE
SENT BY FIRST CLASS MAIL, POSTAGE PAID WITHIN ONE BUSINESS DAY OF THE RECEIPT OF
SUCH REQUEST.
(ii)
<PAGE> 8
The following EPG documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995
and June 30, 1995.
3. The description of EPG Common Stock set forth in the Registration
Statement on Form 8-A dated February 13, 1992.
4. The description of the Rights under the Shareholder Rights Agreement,
dated as of July 7, 1992, between EPG and The First National Bank of
Boston set forth in the Registration Statement on Form 8-A dated July
7, 1992.
5. Current Report on Form 8-K filed May 23, 1995.
The following Eastex documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1994 (as
amended by Amendments No. 1 and 2 on Form 10-K/A dated April 30, 1995
and August 14, 1995, respectively) (the "1994 Eastex 10-K").
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
All documents filed by EPG or Eastex with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this Proxy Statement/Prospectus shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
This Proxy Statement/Prospectus is accompanied by copies of the 1994 Eastex
10-K and Eastex's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY FROM ANY PERSON, IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS
PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF EPG OR EASTEX SINCE THE DATE OF
THIS PROXY STATEMENT/PROSPECTUS.
(iii)
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GENERAL INFORMATION................................................................... (i)
AVAILABLE INFORMATION................................................................. (ii)
DOCUMENTS INCORPORATED BY REFERENCE................................................... (ii)
SUMMARY............................................................................... 1
INFORMATION CONCERNING THE COMPANIES.................................................. 11
EPG................................................................................. 11
EPG Sub............................................................................. 11
Eastex.............................................................................. 11
THE SPECIAL MEETING................................................................... 11
Purpose............................................................................. 11
Date, Time and Place................................................................ 11
Record Date and Outstanding Shares.................................................. 12
Quorum.............................................................................. 12
Vote Required....................................................................... 12
Proxies............................................................................. 12
Revocability of Proxies............................................................. 12
No Dissenters' Rights............................................................... 13
Solicitation of Proxies............................................................. 13
THE MERGER............................................................................ 13
General............................................................................. 13
Background of the Merger............................................................ 14
Reasons for the Merger; Recommendation of Eastex Board.............................. 18
Opinion of Financial Advisor to Eastex.............................................. 19
Interests of Certain Persons in the Merger.......................................... 24
Accounting Treatment................................................................ 25
Certain Federal Income Tax Consequences............................................. 25
Regulatory Approval................................................................. 27
Resale Restrictions................................................................. 27
THE MERGER AGREEMENT.................................................................. 27
The Merger.......................................................................... 27
Exchange Procedures................................................................. 30
Representations and Warranties...................................................... 33
Certain Covenants................................................................... 33
No Solicitation of Transactions..................................................... 34
Indemnification and Insurance....................................................... 35
Conditions.......................................................................... 35
Termination......................................................................... 36
Termination Fee..................................................................... 36
Expenses............................................................................ 37
Amendment and Waiver................................................................ 37
CERTAIN AGREEMENTS.................................................................... 37
RECENT EASTEX LITIGATION.............................................................. 39
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS........................................................... 39
</TABLE>
(iv)
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 40
General............................................................................. 40
Size of the Board of Directors...................................................... 40
Election and Classification of the Board of Directors............................... 41
Removal of Directors; Filling Vacancies............................................. 41
Stockholder Action by Written Consent; Special Meetings of Stockholders............. 41
Fair Price Provisions............................................................... 41
Cumulative Voting................................................................... 43
Preemptive Rights................................................................... 43
Amendment of Certificate of Incorporation........................................... 43
Limitation of Liability of Directors................................................ 43
Indemnification of Directors and Officers........................................... 43
Stockholder Rights Plan............................................................. 44
LEGAL MATTERS......................................................................... 44
EXPERTS............................................................................... 45
EASTEX STOCKHOLDER PROPOSALS.......................................................... 45
OTHER MATTERS......................................................................... 45
Appendix A Agreement and Plan of Merger.............................................. A-1
Appendix B Opinion of Rauscher Pierce Refsnes, Inc................................... B-1
</TABLE>
(v)
<PAGE> 11
SUMMARY
The following summary of certain information contained elsewhere in this
Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") does not
purport to be complete and is qualified in its entirety by reference to the full
text, including the Appendices attached hereto. STOCKHOLDERS ARE URGED TO READ
CAREFULLY THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE APPENDICES HERETO, AND
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, IN THEIR ENTIRETY.
THE COMPANIES
EPG
El Paso Natural Gas Company ("EPG"), incorporated in Delaware in 1928, owns
and operates one of the nation's largest mainline natural gas transmission and
gathering systems, connecting natural gas supply regions in New Mexico, Texas,
Oklahoma, and Colorado to markets in California, Nevada, Arizona, New Mexico,
Texas, and northern Mexico. EPG is directly connected to three of the nation's
most prolific gas producing areas -- the San Juan, Permian and Anadarko Basins.
During 1994, EPG delivered 1.3 trillion cubic feet of natural gas, accounting
for approximately 6% of estimated total 1994 United States consumption. EPG's
principal executive offices are located at One Paul Kayser Center, 100 North
Stanton Street, El Paso, Texas 79901. Its telephone number is (915) 541-2600.
EPG SUB
El Paso Acquisition Company ("EPG Sub"), incorporated in Delaware in 1994,
is a wholly owned subsidiary of EPG which has not engaged in any business except
in connection with the transactions contemplated by the Merger Agreement (as
defined below). EPG Sub's principal executive offices are located at One Paul
Kayser Center, 100 North Stanton Street, El Paso, Texas 79901. Its telephone
number is (915) 541-2600.
EASTEX
Eastex Energy Inc. ("Eastex"), incorporated in Delaware in 1987, is an
independent natural gas merchant providing gas supplies and gas management
services to its customers through (i) direct end user gas sales, (ii) merchant
trading and (iii) gas inventory optimization services. Eastex offers a full line
of sales services to its customers and owns and operates a gas storage and
pipeline hub facility to enhance its marketing and trading activities. Eastex is
one of the few remaining independent natural gas merchants which holds a
significant national market presence. Eastex's principal executive offices are
located at 1100 First Interstate Bank Plaza, 1000 Louisiana, Houston, Texas
77002. Its telephone number is (713) 650-6255.
THE SPECIAL MEETING
PURPOSE
At the special meeting of stockholders of Eastex described herein (the
"Special Meeting"), the holders of common stock, $.01 par value, of Eastex (the
"Eastex Common Stock") will be asked to consider and vote upon the proposal to
approve and adopt the Agreement and Plan of Merger, dated as of May 8, 1995 (the
"Merger Agreement"), between EPG, EPG Sub and Eastex, a copy of which is
attached as Appendix A to this Proxy Statement/Prospectus.
DATE, TIME AND PLACE
The Special Meeting will be held on September 12, 1995, at 10:00 a.m.,
Central Daylight Savings time, in the fourth floor auditorium of the First
Interstate Bank Plaza, 1000 Louisiana, Houston, Texas.
1
<PAGE> 12
RECORD DATE
The Board of Directors of Eastex (the "Eastex Board") has fixed the close
of business on July 14, 1995 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. Each holder of Eastex Common Stock is entitled to one vote on each
matter coming before the stockholders. As of the Record Date, there were
6,627,950 shares of Eastex Common Stock outstanding, held by approximately 168
holders of record.
VOTE REQUIRED
The favorable vote of the holders of a majority of the outstanding shares
of Eastex Common Stock is required for the approval and adoption of the Merger
Agreement. Any Eastex stockholder who is present (including broker non-votes) at
the Special Meeting, but who abstains from voting, shall be counted for purposes
of determining whether a quorum exists; an abstention (or broker non-vote) with
respect to any proposal has the same effect as a vote against the proposal. As
of July 14, 1995, directors and executive officers of Eastex and their
affiliates were beneficial owners of approximately 37.3% of the outstanding
shares of Eastex Common Stock (excluding 548,579 shares which may be acquired
upon exercise of options or other rights which are exercisable within 60 days of
July 14, 1995).
Pursuant to certain agreements described herein, (i) Robert G. Phillips,
the Chairman of the Board and Chief Executive Officer of Eastex, has agreed,
among other things, to vote the 2,393,000 shares of Eastex Common Stock owned by
him in favor of the Merger (as defined below), and (ii) three employees of Heath
Petra Resources, Inc., a wholly owned subsidiary of Eastex, have agreed, among
other things, to vote an aggregate of 300,000 shares of Eastex Common Stock in
favor of the Merger. The foregoing shares collectively represent approximately
40.6% of the shares of Eastex Common Stock outstanding as of the Record Date
and, accordingly, the affirmative vote of an additional 620,976 shares
(approximately 9.4% of the shares of Eastex Common Stock outstanding as of the
Record Date) is required for the approval and adoption of the Merger Agreement.
PROXIES
Shares of Eastex Common Stock represented by properly executed proxies
received prior to or at the Special Meeting will, unless such proxies shall have
been revoked, be voted in accordance with the instructions indicated therein. IF
NO INSTRUCTIONS ARE INDICATED ON A PROPERLY EXECUTED PROXY, THE SHARES OF EASTEX
COMMON STOCK REPRESENTED BY THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE
AND ADOPT THE MERGER AGREEMENT. See "The Special Meeting -- Proxies."
THE MERGER
CONVERSION OF SECURITIES
Upon consummation of the transactions contemplated by the Merger Agreement,
(a) Eastex will be merged with and into EPG Sub (the "Merger") and (b) each
issued and outstanding share of Eastex Common Stock will be converted into the
right to receive, subject to the election procedures described herein, either
(i) a fraction of a share of common stock, $3.00 par value, of EPG (the "EPG
Common Stock") (subject to the Exchange Ratio described below) or (ii) $4.50 in
cash, without interest (the "Cash Amount") (provided that, as described under
"The Merger Agreement -- Exchange Procedures," the amount of cash paid in
connection with the Merger to acquire Eastex Common Stock and warrants and upon
cancellation of outstanding stock options to purchase Eastex Common Stock shall
not exceed 49% of the total consideration paid in connection with the Merger).
Each share of Eastex Common Stock issued and held in Eastex's treasury at the
Effective Time (as defined below) or owned by EPG, EPG Sub or any other
subsidiary of EPG will, by virtue of the Merger, cease to be outstanding and
will be canceled and retired without payment of any consideration therefor.
The number of shares of EPG Common Stock to be issued in exchange for each
share of Eastex Common Stock in the Merger will be determined by dividing $4.50
by the Average Price (as defined below)
2
<PAGE> 13
of a share of EPG Common Stock, but in any event not less than .1485 and not
more than .1629 of a share of EPG Common Stock (the "Exchange Ratio"). The
"Average Price" of a share of EPG Common Stock shall be the average, rounded to
four decimal places, of the closing sales prices thereof on the New York Stock
Exchange ("NYSE") (as reported by The Wall Street Journal or, if not reported
thereby, by another authoritative source) over the ten business days immediately
preceding the date of the closing of the Merger (the "Closing Date"). Holders of
shares of Eastex Common Stock converted into EPG Common Stock will also receive,
together with each share of EPG Common Stock issued in the Merger, one
associated preferred stock purchase right (a "Right") in accordance with the
Shareholder Rights Agreement, dated as of July 7, 1992, between EPG and The
First National Bank of Boston. The Rights are currently attached to certificates
for shares of EPG Common Stock, are not separately tradeable and become
exercisable only upon certain conditions. In the event that, without the prior
consent of the Board of Directors of EPG, any person or group acquires
beneficial ownership of 15% or more of the voting power of all outstanding
voting securities of EPG, each Right (other than Rights held by such acquiring
person or group) will entitle the holder to purchase, at the then-current
exercise price of the Right, a number of shares of EPG Common Stock having a
value of twice the exercise price of the Right.
No fractional shares of EPG Common Stock will be issued in the Merger. Cash
adjustments will be paid to holders in respect of any fractional share of EPG
Common Stock that would otherwise be issuable.
EXCHANGE OF EASTEX STOCK CERTIFICATES
EPG will prepare a form (the "Form of Election") which will permit each
holder of Eastex Common Stock to make an election as to: (i) the number of
shares of Eastex Common Stock owned by such holder which such holder desires to
have converted into the right to receive the Cash Amount in the Merger (a "Cash
Election"); and (ii) the number of shares of Eastex Common Stock owned by such
holder which such holder desires to have converted into the right to receive EPG
Common Stock in the Merger. Any Cash Election may be conditioned on all of the
shares of Eastex Common Stock covered thereby being converted into the right to
receive the Cash Amount. Because the maximum cash component of the consideration
to be paid to holders of Eastex Common Stock pursuant to the Merger Agreement
(including cash paid in respect of outstanding Eastex stock options and warrants
and cash paid in lieu of fractional shares) is limited to 49% of the aggregate
merger consideration, the extent to which elections by holders of Eastex Common
Stock will be accommodated will depend upon the respective numbers of Eastex
stockholders who elect cash and stock (or make no election). Accordingly, if the
number of shares of Eastex Common Stock covered by Cash Elections exceeds the
maximum number of shares of Eastex Common Stock to be converted into the right
to receive cash pursuant to the Merger (the "Cash Conversion Number"), then the
number of shares of Eastex Common Stock covered by each Cash Election to be
converted into the right to receive cash will be determined by multiplying the
total number of shares of Eastex Common Stock covered by such Cash Elections by
a fraction, the numerator of which is the Cash Conversion Number and the
denominator of which is the total number of shares of Eastex Common Stock with
respect to which effective Cash Elections were made. All shares of Eastex Common
Stock covered by a Cash Election and not converted into the right to receive
cash will be converted into the right to receive EPG Common Stock in the Merger.
See "The Merger Agreement -- The Merger -- Illustration of Cash Elections
Allocation." Holders of Eastex Common Stock who do not timely submit valid Forms
of Election will be deemed to have elected to receive solely EPG Common Stock.
An election to receive cash or stock will be properly made only if the
exchange agent in the Merger at its office designated in the Form of Election
has received by 5:00 p.m. local time in the city in which such Exchange Agent is
located on the Election Date (defined below), a properly completed and signed
Form of Election (with the signature or signatures thereon guaranteed if
required by the Form of Election), accompanied, to the extent required by the
Form of Election, by certificate(s) representing all of the shares of Eastex
Common Stock owned by such holder, duly endorsed or otherwise acceptable for
transfer, or by an appropriate guaranty of delivery in the form customarily used
in transactions of this nature from a member of a national securities exchange
or a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States. As used herein "Election
Date" means the date
3
<PAGE> 14
announced by EPG, in a news release delivered to the Dow Jones News Service, as
the last day on which Forms of Election will be accepted; provided, that such
day will be a business day no earlier than five business days prior to the
Effective Time (as defined below) and no later than the date on which the
Effective Time occurs and will be at least five business days following the date
of such news release. EASTEX STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE A FORM OF ELECTION.
RECOMMENDATION OF THE EASTEX BOARD
The Eastex Board has approved the Merger Agreement and unanimously
recommends that stockholders of Eastex vote FOR approval and adoption of the
Merger Agreement. The Eastex Board's recommendation is based upon a number of
factors described in this Proxy Statement/Prospectus. See "The Merger -- Reasons
for the Merger; Recommendation of Eastex Board."
TERMINATION
The Merger Agreement is subject to termination at the option of either
Eastex or EPG if the Effective Time (as defined below) has not occurred at or
before December 31, 1995, and prior to such time upon the occurrence of certain
events. Eastex is required to pay EPG a fee in the amount of $1 million and to
reimburse EPG's expenses up to a maximum of $750,000 if the Merger Agreement is
terminated under certain circumstances. See "The Merger
Agreement -- Termination" and "The Merger Agreement -- Termination Fee."
OPINION OF FINANCIAL ADVISOR TO EASTEX
Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce"), Eastex's financial
advisor, has delivered its written opinion, dated May 8, 1995, and has confirmed
such opinion by delivery of its written opinion dated as of the date hereof
(which is substantially identical to the opinion dated May 8, 1995), to the
effect that, based upon and subject to the matters set forth in its opinion, the
consideration to be paid to holders of Eastex Common Stock in the Merger is fair
to such stockholders from a financial point of view. The full text of the
Rauscher Pierce opinion, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is attached as Appendix B
to this Proxy Statement/Prospectus. Eastex stockholders are urged to read the
Rauscher Pierce opinion in its entirety. See "The Merger -- Opinion of Financial
Advisor to Eastex."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Eastex Board with respect to the
Merger Agreement, stockholders should be aware that certain members of Eastex
management and the Eastex Board have certain interests in the Merger that are in
addition to the interests of stockholders of Eastex generally. See "The
Merger -- Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The obligations of Eastex, EPG and EPG Sub to effect the Merger are subject
to the fulfillment or (where permissible) waiver of certain conditions,
including, among others, (i) obtaining Eastex stockholder approval, (ii) the
expiration or termination of the waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, (iii) the absence of any injunction prohibiting consummation of the
Merger, and (iv) the receipt of an opinion of counsel with respect to the tax
consequences of the Merger. See "The Merger Agreement -- Conditions."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the Delaware General Corporation Law or at such later time which the parties to
the Merger Agreement shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time"). Subject to the satisfaction
(or waiver) of the other
4
<PAGE> 15
conditions to the obligations of EPG, EPG Sub and Eastex to effect the Merger,
it is currently expected that the Merger will be effected on September 12, 1995
or as soon thereafter as such conditions are satisfied.
DISSENTERS' RIGHTS
No holder of Eastex Common Stock will have any dissenters' rights in
connection with, or as a result of, the matters to be acted upon at the Special
Meeting. See "The Special Meeting -- No Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned upon the receipt by each of EPG
and Eastex of an opinion of Fried, Frank, Harris, Shriver & Jacobson, special
counsel to EPG (the "Fried Frank Opinion"), to the effect that on the basis of
facts, representations and qualifications set forth in such opinion, for federal
income tax purposes the Merger will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that EPG and Eastex will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. If the Merger
is treated as a "reorganization," no gain or loss will be recognized by Eastex,
EPG or EPG Sub, or by Eastex stockholders upon the conversion of their Eastex
Common Stock by reason of the Merger (except to the extent that Eastex
stockholders receive cash). Eastex stockholders are urged to consult their tax
advisor as to the specific tax consequences to them of the Merger. See "The
Merger -- Certain Federal Income Tax Consequences of the Merger." The discussion
set forth above may not be applicable to persons who acquired Eastex Common
Stock pursuant to the exercise of employee stock options or rights or otherwise
as compensation.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" as such term is used under
generally accepted accounting principles.
RESALE RESTRICTIONS
All shares of EPG Common Stock received in the Merger by stockholders of
Eastex will be freely transferable, except that shares of EPG Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
for purposes of Rule 145 under the Securities Act of 1933, as amended) of Eastex
at the time of the Special Meeting may be resold by such persons only in certain
permitted circumstances. See "The Merger -- Resale Restrictions."
CERTAIN AGREEMENTS
In connection with the execution of the Merger Agreement, on May 8, 1995,
EPG and EPG Sub entered into stockholder agreements with Robert G. Phillips,
Chairman of the Board and Chief Executive Officer of Eastex (the "Phillips
Stockholder Agreement"), and RIMCO Associates, Inc., as General Partner on
behalf of RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P.
III and RIMCO Partners, L.P. IV (collectively, the "RIMCO Entities" and,
together with Mr. Phillips, the "Stockholders") (the "RIMCO Stockholder
Agreement" and, together with the Phillips Stockholder Agreement, the
"Stockholder Agreements"). The Phillips Stockholder Agreement provides, among
other things, for the grant by Mr. Phillips to EPG Sub of an option to purchase
the 2,393,000 shares of Eastex Common Stock owned by him at an exercise price of
$4.50 per share in cash. The RIMCO Stockholder Agreement provides, among other
things, for the grant by the RIMCO Entities to EPG Sub of an option to purchase
warrants to purchase 647,500 shares of Eastex Common Stock at an exercise price
per warrant equal to the excess of (x) $4.50 (or such higher cash price per
share as may be paid pursuant to the Merger Agreement) over (y) the exercise
price per share of Eastex Common Stock of each such warrant ($2.00 in the case
of 487,500 warrants and $4.00 in the case of 160,000 warrants), multiplied by
the number of shares of Eastex Common Stock covered by such warrant. As
disclosed in the Eastex Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, incorporated by reference herein, the RIMCO Entities
purchased $5.0 million of Eastex's 12% Senior Secured Notes in February 1990,
and $4.5 million of its Increasing Rate Notes in April 1993. The RIMCO Entities
5
<PAGE> 16
acquired the warrants mentioned above pursuant to these prior transactions.
Except for such transactions, there is no affiliation or other relationship
between any of the RIMCO Entities, RIMCO Associates, Inc., or any controlling
person of RIMCO Associates, Inc., and Eastex.
Under the Stockholder Agreements, among other things, each Stockholder has
agreed that, during the time the applicable Stockholder Agreement is in effect,
at any meeting of the stockholders of Eastex, however called, and in any action
by written consent of the stockholders of Eastex, such Stockholder will (a) vote
all shares of voting stock of Eastex, including all shares acquired or received
pursuant to warrants, options or other securities or rights exercisable for,
exchangeable for or convertible into shares of Eastex Common Stock
(collectively, "Equity Securities"), of such Stockholder in favor of the Merger,
and (b) vote all voting Equity Securities of such Stockholder against any action
or agreement which would impede, interfere with or attempt to discourage the
Merger. In addition, pursuant to certain agreements, three employees of Heath
Petra Resources, Inc., a wholly owned subsidiary of Eastex, have agreed, among
other things, to vote an aggregate of 300,000 shares of Eastex Common Stock in
favor of the Merger. See "Certain Agreements."
RECENT EASTEX LITIGATION
A petition was filed on July 28, 1995, in the 129th Judicial District Court
of Harris County, Texas against NIPSCO Industries, Inc., certain other named
subsidiaries of NIPSCO (collectively, the "NIPSCO entities"), Eastex, Robert G.
Phillips, Chairman of the Board and Chief Executive Officer of Eastex (in his
individual capacity) and certain individuals associated with NIPSCO
(collectively, the "Defendants"), by certain minority shareholders of Triumph
Natural Gas, Inc. ("Triumph") (collectively, the "Plaintiffs"). The petition
alleges, among other things and insofar as it relates to Eastex and Mr.
Phillips, that Eastex and Mr. Phillips wrongfully interfered with Triumph's
business and/or contractual relations with the NIPSCO entities with the
intention of harming Triumph and its stockholders, and that all of the
Defendants conspired to deprive Triumph of valuable business opportunities for
their own benefit. In early March 1994, Eastex and certain of the NIPSCO
entities entered into an Agreement (the "Agreement"), whereby Eastex was to
acquire the majority interest in Triumph owned by one of the NIPSCO entities,
subject to certain conditions, including approval by the Triumph board of the
transfer of the Triumph equity interest owned by NIPSCO to Eastex. In late March
1994, Triumph's board, a majority of whom were independent of the NIPSCO
entities and Eastex, determined not to approve the proposed transfer.
Accordingly, the transactions contemplated in the Agreement were not consummated
and negotiations related thereto promptly ceased. See "The Merger -- Background
of the Merger." The Plaintiffs have alleged lost profits and other damages
against all of the Defendants in a range of $20 to $30 million, as well as
punitive damages. Management of Eastex believes that the litigation is without
merit and intends to vigorously defend the claims asserted against it.
6
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA
Set forth below are selected historical financial data of EPG and Eastex.
The following data should be read in conjunction with the respective
consolidated financial statements incorporated by reference in this Proxy
Statement/Prospectus.
EPG
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1995 1994 1994 1993(F) 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues........................... $ 204,131 $ 221,945 $ 869,872 $ 908,928 $ 802,812 $ 735,196 $ 851,750
Depreciation and amortization...... 16,805 16,229 65,037 54,051 73,229 61,300 67,098
Litigation special charge(a)....... -- 15,062 15,062 -- -- -- --
Operating income................... 56,213 47,797 222,295 229,245 184,910 184,919 190,012
Income from continuing operations
before income taxes.............. 36,525 34,706 148,076 150,826 123,289 140,500 128,481
Income taxes....................... 14,555 13,591 58,463 59,153 46,963 51,956 44,847
Income from continuing
operations....................... 21,970 21,115 89,613 91,673 76,326 88,544 83,634
Earnings per common share --
continuing operations............ .62 .57 2.45 2.46 2.12 2.82 2.66
Average common shares
outstanding...................... 35,156 36,892 36,632 37,212 36,049 31,422 31,422
Cash dividends declared per common
share(b)......................... .33 .30 1.21 1.10 .75 -- --
Balance Sheet Data (end of period):
Total assets(c).................... 2,303,803 2,273,593 2,331,771 2,269,663 2,050,729 2,301,932 3,817,896
Payable to Burlington Resources
Inc., including current
portion(d)....................... -- -- -- -- -- 624,804 --
Long-term debt(e).................. 775,462 792,495 779,097 795,783 637,074 249,942 848,633
Stockholders' equity(c)............ 705,518 718,841 709,636 707,548 668,992 814,878 1,828,261
</TABLE>
---------------
(a) Litigation special charge related to a March 29, 1994 decision in the case
of El Paso Natural Gas Company and Meridian Oil Gathering Inc. v. Amoco
Production Company, filed in Delaware Chancery Court on May 8, 1991.
(b) Represents dividends declared subsequent to the initial public offering of
the EPG Common Stock (the "Offering").
(c) In May 1991, EPG declared and paid a dividend of $175 million to its then
parent company, The El Paso Company ("TEPCO"). In September 1991, EPG
declared a dividend of all its Oil and Gas Operations Segment to TEPCO. The
total amount of that dividend was $925 million. In addition, EPG declared
and paid dividends to Burlington Resources Inc. ("BR") totaling $55 million
in 1991 and $274 million prior to the Offering in 1992.
(d) Until 1992, BR was the parent company of EPG.
(e) Excludes current maturities.
(f) Mojave Pipeline Company, a general partnership wholly owned by EPG, was
consolidated for May 1993 through December 1993 and thereafter.
7
<PAGE> 18
EASTEX
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues...................................... $118,164 $100,029 $366,768 $356,091 $174,929 $134,070 $132,963
Cost of sales(1).............................. 115,448 98,341 361,991 348,095 165,636 126,370 128,680
Gas storage and operating expenses............ 116 166 535 556 615 785 1,078
------- ------- ------- ------- ------- ------- -------
Gross profit.................................. 2,600 1,522 4,242 7,440 8,678 6,915 3,205
General and administrative expenses........... 1,653 1,704 7,208 5,157 3,493 2,894 3,392
Depreciation, depletion and amortization(2)... 420 463 1,779 1,455 1,132 1,371 1,498
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations................. 527 (645) (4,745) 828 4,053 2,650 (1,685)
Interest income (expense) and other, net...... (201) (211) (659) (687) (422) (490) (355)
------- ------- ------- ------- ------- ------- -------
Income (loss) before federal and state income
taxes and minority interest................. 326 (856) (5,404) 141 3,631 2,160 (2,040)
Provision (benefit) for federal and state
income taxes................................ 127 (273) (1,759) 77 1,260 771 (617)
Minority interest............................. -- -- -- -- (9) 24 (226)
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................. $ 199 $ (583) $ (3,645) $ 64 $ 2,380 $ 1,365 $ (1,197)
======= ======= ======= ======= ======= ======= =======
Income (loss) per share of common stock and
common stock equivalents:
Primary..................................... $ 0.03 $ (0.09) $ (0.58) $ 0.01 $ 0.50 $ 0.32 $ (0.25)
Fully diluted............................... 0.03 (0.09) (0.58) 0.01 0.48 -- --
Average shares of common stock and common stock
equivalents outstanding:
Primary..................................... 6,512 6,393 6,295 5,778 4,753 4,327 4,786
Fully diluted............................... 6,637 6,393 6,295 5,788 4,914 -- --
Cash dividends declared per common share...... -- -- -- -- -- -- --
Balance Sheet Data (end of period):
Working capital............................... $ 13,045 $ 16,866 $ 12,721 $ 17,232 $ 7,236 $ 4,955 $ 2,594
Total assets.................................. 81,805 81,072 88,233 92,224 52,712 42,661 46,666
Long-term debt, net of current portion........ 8,612 9,825 8,893 9,854 5,468 5,740 6,055
Stockholders' equity.......................... 22,022 25,146 21,809 25,947 16,035 13,940 12,878
</TABLE>
---------------
(1) Cost of sales consists of the cost of gas purchases and transportation
expense.
(2) Depreciation, depletion and amortization consists of depreciation, depletion
and amortization of property, intangible assets and goodwill.
Eastex made certain acquisitions of assets, companies and partnership
interests during the periods presented in the table above. In November 1992,
Eastex completed its purchase of 100% of the outstanding partnership interests
relating to its Rotherwood Gas Storage Facility, thus eliminating the minority
interest. In April 1993, Eastex acquired Health Petra Resources, Inc. In
November 1993, Eastex acquired substantially all the assets of Paragon Gas
Corporation.
8
<PAGE> 19
SELECTED HISTORICAL COMPARATIVE AND UNAUDITED PRO FORMA COMBINED PER SHARE DATA
The following table sets forth selected historical comparative per share
data of Eastex and EPG, certain unaudited pro forma combined per share data and
the Eastex equivalent unaudited pro forma combined per share data, at the dates
and for the periods indicated. The unaudited pro forma combined per share data
were derived after giving effect to the Merger under the purchase method of
accounting as if the Merger had been consummated at the beginning of the
earliest year presented for sales and income data and as of the date presented
for balance sheet data. The unaudited pro forma combined per share data and the
Eastex equivalent unaudited pro forma combined per share data are presented for
illustrative purposes only and are not necessarily indicative of the operating
results that would have been achieved had the transaction been effected as of
the beginning of the periods presented and should not be construed as
representative of future operations. The following financial data should be read
in conjunction with the historical consolidated financial statements, including
the notes thereto, of Eastex and EPG included in documents incorporated by
reference in this Proxy Statement/Prospectus. See "Documents Incorporated By
Reference."
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
EASTEX -- HISTORICAL PER EASTEX COMMON SHARE:
Net income (loss)....................................... $ .03 $ (.58)
Cash dividends declared................................. -- --
Book value.............................................. 3.49 3.48
EPG -- HISTORICAL PER EPG COMMON SHARE:
Net income.............................................. $ .62 $ 2.45
Cash dividends declared................................. .33 1.21
Book value.............................................. 20.12 19.96
UNAUDITED PRO FORMA COMBINED PER SHARE DATA(1)(2):
Net income.............................................. $ .61 $ 2.28
Cash dividends declared................................. .33 1.21
Book value.............................................. 20.29 20.00
EASTEX EQUIVALENT UNAUDITED PRO FORMA COMBINED PER SHARE
DATA(2)(3):
Net income.............................................. $ .10 $ .37
Cash dividends declared................................. .05 .20
Book value.............................................. 3.31 3.26
</TABLE>
---------------
(1) The EPG unaudited pro forma combined per share data assume that 24.5% of the
aggregate merger consideration is paid in cash (i.e., one-half of the
maximum cash consideration of 49% of the aggregate merger consideration).
(2) The closing price per share of EPG Common Stock on May 8, 1995 was used to
calculate the assumed EPG Common Stock issued.
(3) The Eastex equivalent unaudited pro forma combined per share data are
calculated by multiplying the unaudited pro forma combined per share data by
the Exchange Ratio of .1629, which is calculated based on the closing price
per share of EPG Common Stock on May 8, 1995.
9
<PAGE> 20
COMPARATIVE PER SHARE MARKET PRICE DATA
Eastex Common Stock is quoted on the NASDAQ - National Market System
("NASDAQ") under the symbol "ETEX." EPG Common Stock is traded on the NYSE under
the symbol "EPG."
The following table sets forth, for the calendar quarters indicated, the
high and low sales prices per share of Eastex Common Stock and EPG Common Stock
as reported on NASDAQ and on the NYSE Composite Transaction Reporting System
("NYSE System"), respectively, and cash dividends declared per share of EPG
Common Stock. Eastex has not declared or paid any cash dividends during the
quarters listed below.
<TABLE>
<CAPTION>
EASTEX EPG COMMON STOCK
COMMON STOCK ---------------------------------
----------------- CASH
HIGH LOW HIGH LOW DIVIDENDS
------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C>
1993:
First Quarter............................ $6.250 $3.500 $38.000 $30.250 $0.2750
Second Quarter........................... 6.250 4.250 40.250 35.250 0.2750
Third Quarter............................ 7.875 5.250 40.375 36.125 0.2750
Fourth Quarter........................... 7.125 4.000 39.500 33.750 0.2750
1994:
First Quarter............................ $4.625 $3.500 $41.875 $35.250 $0.3025
Second Quarter........................... 3.750 2.250 39.000 31.500 0.3025
Third Quarter............................ 3.000 2.125 35.375 31.625 0.3025
Fourth Quarter........................... 2.625 2.000 34.750 29.875 0.3025
1995:
First Quarter............................ $3.688 $2.063 $32.500 $28.000 $0.3300
Second Quarter........................... 4.375 3.375 29.875 26.875 0.3300
Third Quarter (through August 11,
1995)................................. 4.313 4.000 28.875 24.750 --
</TABLE>
The following table sets forth the closing price per share of Eastex Common
Stock and EPG Common Stock as reported on NASDAQ and on the NYSE System,
respectively, and the equivalent per share price (as explained below) of Eastex
Common Stock, on May 8, 1995, the last trading day preceding public announcement
of the Merger, and on August 11, 1995, the last practicable day prior to the
mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EASTEX EPG EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE PRICE
------------ ------------ --------------
<S> <C> <C> <C>
May 8, 1995....................................... $3.531 $ 27.625 $4.500
August 11, 1995................................... $4.250 $27.75 $4.500
</TABLE>
The equivalent per share price of a share of Eastex Common Stock represents
the closing price of a share of EPG Common Stock on each such date multiplied by
the applicable Exchange Ratio (calculated based on the closing price of a share
of EPG Common Stock on such date).
BECAUSE THE MARKET PRICE OF EPG COMMON STOCK THAT HOLDERS OF EASTEX COMMON
STOCK WILL RECEIVE IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO THE MERGER,
STOCKHOLDERS OF EASTEX ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS.
Following the Merger, EPG Common Stock will continue to be traded on the
NYSE. Following the Merger, Eastex Common Stock will cease to be outstanding,
will be canceled and retired and will cease to exist.
10
<PAGE> 21
INFORMATION CONCERNING THE COMPANIES
EPG
El Paso Natural Gas Company ("EPG"), incorporated in Delaware in 1928, owns
and operates one of the nation's largest mainline natural gas transmission and
gathering systems, connecting natural gas supply regions in New Mexico, Texas,
Oklahoma, and Colorado to markets in California, Nevada, Arizona, New Mexico,
Texas, and northern Mexico. EPG is directly connected to three of the nation's
most prolific gas producing areas -- the San Juan, Permian and Anadarko Basins.
During 1994, EPG delivered 1.3 trillion cubic feet of natural gas, accounting
for approximately 6% of estimated total 1994 United States consumption.
EPG SUB
El Paso Acquisition Company ("EPG Sub"), incorporated in Delaware in 1994,
is a wholly owned subsidiary of EPG which has not engaged in any business except
in connection with the transactions contemplated by the Merger Agreement (as
defined in "The Special Meeting -- Purpose").
EASTEX
Eastex Energy Inc. ("Eastex"), incorporated in Delaware in 1987, is an
independent natural gas merchant providing gas supplies and gas management
services to its customers through (i) direct end user gas sales, (ii) merchant
trading and (iii) gas inventory optimization services. Eastex offers a full line
of sales services to its customers and owns and operates a gas storage and
pipeline hub facility to enhance its marketing and trading activities. Eastex is
one of the few remaining independent natural gas merchants which holds a
significant national market presence.
THE SPECIAL MEETING
PURPOSE
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being
furnished to holders of shares of common stock, $.01 par value, of Eastex
("Eastex Common Stock") in connection with the solicitation of proxies by the
Eastex Board of Directors (the "Eastex Board") for use at the special meeting of
stockholders of Eastex (the "Special Meeting") to consider and vote upon the
proposal to approve and adopt the Agreement and Plan of Merger, dated as of May
8, 1995 (the "Merger Agreement"), between EPG, EPG Sub and Eastex, pursuant to
which Eastex will be merged with and into EPG Sub (the "Merger"), and to
transact such other business as may properly come before the Special Meeting or
any adjournments or postponements thereof. A copy of the Merger Agreement is
attached as Appendix A to this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus is also being furnished by EPG to holders
of shares of Eastex Common Stock as a prospectus in connection with the issuance
by EPG of the shares of EPG Common Stock (and the associated preferred stock
purchase rights) pursuant to the Merger Agreement. Each copy of this Proxy
Statement/Prospectus mailed to Eastex stockholders is accompanied by a form of
proxy for use at the Special Meeting.
The Eastex Board is not aware of any business to be acted upon at the
Special Meeting other than as described herein. If, however, other matters are
properly brought before the Special Meeting, or any adjournments or
postponements thereof, the person appointed as proxy will have discretion to
vote or act thereon according to his best judgment.
DATE, TIME AND PLACE
The Special Meeting will be held on September 12, 1995, at 10:00 a.m.,
Central Daylight Savings time, in the fourth floor auditorium of First
Interstate Bank Plaza, Houston, Texas.
11
<PAGE> 22
RECORD DATE AND OUTSTANDING SHARES
The Eastex Board has fixed the close of business on July 14, 1995 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of and to vote at the Special Meeting. Only holders of record of
Eastex Common Stock on the close of business on the Record Date will be entitled
to receive notice of and vote at the Special Meeting. Each holder of Eastex
Common Stock is entitled to one vote on each matter coming before the
stockholders. As of the Record Date, there were 6,627,950 shares of Eastex
Common Stock outstanding, held by approximately 168 holders of record.
QUORUM
A majority of the outstanding shares of Eastex Common Stock entitled to
vote must be represented in person or by proxy at the Special Meeting in order
for a quorum to be present at the Special Meeting. Abstentions and "broker
non-votes" (i.e., proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owners or other persons
entitled to vote shares as to a matter with respect to which the brokers or
nominees do not have discretionary power to vote) will be treated as present for
purposes of determining the presence of a quorum.
VOTE REQUIRED
The favorable vote of the holders of a majority of the outstanding shares
of Eastex Common Stock is required for the approval and adoption of the Merger
Agreement. Any Eastex stockholder present (including broker non-votes) at the
Special Meeting, but who abstains from voting, shall be counted for purposes of
determining whether a quorum exists; an abstention (or broker non-vote) with
respect to any proposal has the same effect as a vote against the proposal. As
of July 14, 1995, directors and executive officers of Eastex and their
affiliates were beneficial owners of approximately 37.3% of the outstanding
shares of Eastex Common Stock (excluding 548,579 shares which may be acquired
upon exercise of options or other rights which are exercisable within 60 days of
July 14, 1995). See "Security Ownership of Certain Beneficial Owners and
Management." Such persons have indicated to Eastex that they intend to vote all
of such shares in favor of approval and adoption of the Merger Agreement.
Pursuant to certain agreements described herein, (i) Robert G. Phillips,
the Chairman of the Board and Chief Executive Officer of Eastex, has agreed,
among other things, to vote all of the 2,393,000 shares of Eastex Common Stock
he owns in favor of the Merger and (ii) three employees of Heath Petra
Resources, Inc., a wholly owned subsidiary of Eastex ("HPRI"), have agreed,
among other things, to vote an aggregate of 300,000 shares of Eastex Common
Stock in favor of the Merger. The foregoing shares represent in the aggregate
approximately 40.6% of the shares of Eastex Common Stock outstanding as of the
Record Date and, accordingly, the affirmative vote of an additional 620,976
shares (approximately 9.4% of the shares of Eastex Common Stock outstanding as
of the Record Date) is required for the approval and adoption of the Merger
Agreement. See "Certain Agreements."
PROXIES
Shares of Eastex Common Stock represented by properly executed proxies
received prior to or at the Special Meeting will, unless such proxies shall have
been revoked, be voted in accordance with the instructions indicated therein. IF
NO INSTRUCTIONS ARE INDICATED ON A PROPERLY EXECUTED PROXY, THE SHARES OF EASTEX
COMMON STOCK REPRESENTED BY THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE
AND ADOPT THE MERGER AGREEMENT.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person or otherwise revoking a proxy. Attendance at
the Special Meeting will not in and of itself constitute revocation of a proxy.
A stockholder may revoke a proxy at any time prior to its exercise by delivering
to Eastex, 1000 Louisiana, Suite 1100, Houston, Texas 77002, Attention: Lisa A.
Kell, Secretary, a duly executed revocation or a proxy bearing a later date or
by voting in person at the Special Meeting.
12
<PAGE> 23
NO DISSENTERS' RIGHTS
Pursuant to the Delaware General Corporation Law (the "DGCL"), no holder of
Eastex Common Stock will have any dissenters' rights in connection with, or as a
result of, the matters to be acted upon at the Special Meeting.
SOLICITATION OF PROXIES
Eastex will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Eastex may solicit proxies from stockholders of Eastex by telephone
or telegram or in person. Such persons will not be additionally compensated, but
will be reimbursed for reasonable out-of-pocket expenses incurred in connection
with such solicitation. Arrangements will also be made with brokerage firms,
nominees, fiduciaries and other custodians, for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons, and
Eastex will reimburse such persons for their reasonable out-of-pocket expenses
in connection therewith. EASTEX STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
THE MERGER
GENERAL
The Merger Agreement provides for a merger of Eastex with and into EPG Sub.
Upon consummation of the transactions contemplated by the Merger Agreement, each
issued and outstanding share of Eastex Common Stock will be converted into the
right to receive, subject to the election procedures described in "The Merger
Agreement -- Exchange Procedures," either (i) a fraction of a share of common
stock, $3.00 par value (the "EPG Common Stock"), of EPG equal to the result
obtained by dividing $4.50 by the average of the closing sales prices of a share
of EPG Common Stock on the New York Stock Exchange (the "NYSE") over the ten
business days immediately preceding the closing of the Merger, but in any event
not less than .1485 and not more than .1629 of a share of EPG Common Stock or
(ii) $4.50 in cash, without interest. Because the maximum cash component of the
consideration to be paid to holders of Eastex Common Stock pursuant to the
Merger Agreement (including cash paid in respect of outstanding Eastex stock
options and warrants and cash paid in lieu of fractional shares) is limited to
49% of the aggregate merger consideration, the extent to which elections by
holders of Eastex Common Stock will be accommodated will depend upon the
respective numbers of Eastex stockholders who elect cash and stock (or make no
election). Accordingly, if the number of shares of Eastex Common Stock covered
by Cash Elections (as defined in "The Merger Agreement -- Exchange Procedures")
exceeds the maximum number of shares of Eastex Common Stock to be converted into
the right to receive cash pursuant to the Merger (the "Cash Conversion Number"),
then the number of shares of Eastex Common Stock covered by each Cash Election
to be converted into the right to receive cash will be determined by multiplying
the total number of shares of Eastex Common Stock covered by such Cash Election
by a fraction, the numerator of which is the Cash Conversion Number and the
denominator of which is the total number of shares of Eastex Common Stock with
respect to which effective Cash Elections were made. All shares of Eastex Common
Stock covered by a Cash Election and not converted into the right to receive
cash will be converted into the right to receive EPG Common Stock in the Merger.
See "The Merger Agreement -- The Merger -- Illustration of Cash Elections
Allocation." Holders of shares of Eastex Common Stock which are converted into
the right to receive shares of EPG Common Stock pursuant to the Merger will
receive, together with each share of EPG Common Stock issued in the Merger, one
associated preferred stock purchase right of EPG (a "Right"). The Rights are
currently attached to certificates for shares of EPG Common Stock, are not
separately tradeable and become exercisable only upon certain conditions. In the
event that, without the prior consent of the Board of Directors of EPG, any
person or group acquires beneficial ownership of 15% or more of the voting power
of all outstanding voting securities of EPG, each Right (other than Rights held
by such acquiring person or group) will entitle the holder to purchase, at the
then-current exercise price of the Right, a number of shares of EPG Common Stock
having a value of twice the exercise price of the Right. The transaction will be
treated as a purchase for accounting purposes and as a tax-free reorganization
for federal income tax purposes.
13
<PAGE> 24
BACKGROUND OF THE MERGER
During the past several years, the natural gas industry has undergone
significant changes resulting primarily from new regulations which were designed
to stimulate competition within the natural gas markets by "unbundling"
traditional pipeline services. Additionally, the influence of financial markets
has provided a vehicle for natural gas to become a commodity characterized by
established and growing short-term trading markets, price volatility and
significantly increased capital and credit standards. To effectively compete in
this changing industry, natural gas companies are now required to offer a broad
range of merchant services to their customers and to maintain higher levels of
cash liquidity and credit capacity to support their operations.
These regulatory and commercial changes, and the effects of increased
competition from well capitalized gas merchants which are affiliated with
pipelines, producers and utilities, have caused companies in the gathering,
transportation and marketing segment of the industry to consolidate in recent
years. To address these changes many of Eastex's independent gas merchant
competitors have consolidated with larger organizations which offer greater
capital and operating resources. Others have sought joint ventures and strategic
alliances with major pipelines, producers or utilities to expand market share
and provide new products and services.
In early 1994, in response to this growing trend, Eastex entered into an
agreement to acquire from Northern Indiana Public Service Company ("NIPSCO") its
51% equity interest in Triumph Natural Gas, Inc. ("Triumph"). The acquisition
was subject to, among other things, approval by the Board of Directors of
Triumph, a majority of whose members were not affiliated with NIPSCO. Eastex
believed the acquisition would have effectively provided Eastex an expanded
market share in the Midcontinent region of the United States and, to some
extent, an increase in available working capital and credit for future growth.
In March 1994, the Board of Directors of Triumph voted not to approve the
acquisition by Eastex of NIPSCO's equity interest and, accordingly, Eastex's
ceased efforts to consummate the acquisition. For a description of certain
litigation against Eastex relating to Triumph, see "Recent Eastex Litigation."
Following termination of the efforts to acquire NIPSCO's interests in
Triumph, Eastex's management, in conjunction with the Eastex Board, evaluated
several alternative strategies to expand Eastex's market share in light of the
growing financial requirements. Among these alternative strategies were:
expanded lines of credit with its suppliers; the acquisition of or merger with
other independent gas merchants; a joint venture with, or the sale of equity to,
a large independent oil and gas production company; and the acquisition of
gathering and transmission assets.
In September 1994, Eastex had reached an agreement to acquire an intrastate
pipeline to support its expanding natural gas services. Eastex sought funding
for the acquisition from lenders, financial partners/ investors and industry
partners. In the course of these discussions regarding the pipeline financing,
certain industry participants expressed an interest in acquiring a significant
equity interest in Eastex. None of these discussions led to a proposal to
acquire an interest in Eastex; and the pipeline acquisition was placed on
indefinite hold. Nevertheless, the discussions focused the attention of the
Eastex Board on the need for a significant capital infusion or access to a
significant source of capital to support Eastex's business plans and to
capitalize on future asset acquisition opportunities. Ultimately, this
experience, coupled with the factors discussed below, led Eastex to consider,
with the assistance of its financial advisor, various expansion and capital
alternatives.
As of December 31, 1994, Eastex's working capital declined to approximately
$12.7 million from $17.2 million at December 31, 1993. Correspondingly, the
Company's sales volumes increased from an average of 568 Mmcf/d during the third
quarter 1994, to an average of 670 Mmcf/d in the fourth quarter 1994, and to an
average of 888 Mmcf/d in the first quarter 1995. This expanding market share
combined with an industrywide acceleration of contract settlements of current
month obligations, higher storage inventory levels, greater margin requirements
attributable to futures contracts used to hedge price risk and increased letter
of credit requirements of suppliers and transporters emphasized Eastex's need
for additional capital.
In view of these increasing capital requirements and with a desire to
enhance stockholder value and continue the growth of Eastex's business, the
Eastex Board retained Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce") on March
13, 1995, to investigate the various capitalization and strategic alternatives
14
<PAGE> 25
available to Eastex. Rauscher Pierce was selected by Eastex after interviews of
several investment banking firms with expertise in the natural gas industry.
Rauscher Pierce was asked to explore a number of strategic and capital finance
alternatives including potential sources of equity investment or other forms of
access to capital from industry or financial partners/investors, strategic
alliances or joint ventures which would allow for access to capital, and
acquisitions of gathering, processing, transmission or marketing operations and
financing alternatives for any such transaction.
On March 20, 1995, Robert G. Phillips, Chairman of the Board and Chief
Executive Officer of Eastex, was contacted by representatives of Rodman &
Renshaw, Inc. ("Rodman & Renshaw"), on behalf of EPG. The representatives
conveyed that EPG was interested in acquiring an interest in a gas marketing
company and that various members of the senior management of EPG were in the
process of interviewing gas marketing companies. At EPG's request, Eastex agreed
to a meeting on March 28, 1995, between Eastex's senior management and the
senior management of EPG. The meeting included representatives from Rauscher
Pierce and Rodman & Renshaw. At the meeting, the parties generally discussed
their business strategies, recent performance, capital requirements and growth
opportunities. The meeting was concluded without specific discussion of the
potential interests of the parties in a transaction. On March 31, 1995, Mr.
Phillips informed the Eastex Board of the preliminary meeting with EPG.
On April 5, 1995, representatives of Rodman & Renshaw again contacted Mr.
Phillips and expressed that EPG was interested in a transaction with Eastex and
inquired whether there was any interest on the part of Eastex. Representatives
of Rodman & Renshaw requested information regarding Eastex, which was provided
pursuant to a confidentiality agreement executed by the parties on April 11,
1995. The information provided by Eastex to representatives of Rodman & Renshaw
included (i) a general overview of Eastex and the natural gas marketing
industry, (ii) information regarding Eastex's business segments, subsidiaries
and strategies, and (iii) an overview of Eastex's historical and projected
financial and operating results. On April 12, 1995, Mr. Phillips met with
William A. Wise, Chairman of the Board, President and Chief Executive Officer of
EPG, to discuss the business of Eastex, as well as various issues affecting the
non-regulated natural gas market segment. On April 17, 1995, Mr. Phillips held a
telephone conference with Mr. Wise and Luino Dell'Osso, then Vice Chairman and
Chief Operating Officer of EPG, to continue the discussions relating to Eastex
and the natural gas industry and to confirm Eastex's interest in considering a
transaction between the parties. These discussions continued on April 18, 1995,
in a telephone conference between Messrs. Phillips and Dell'Osso, and included
consideration of the potential benefits to Eastex stockholders, as well as the
strategic benefits, that could result from a potential transaction between EPG
and Eastex. Subsequent to these telephone conversations, Mr. Phillips informed
James Winfrey and Merrell Athon, who with Mr. Phillips comprise all the members
of the Executive Committee of the Eastex Board, regarding the status of
discussions with EPG. In addition, during this period, at Eastex's direction,
Rauscher Pierce continued to investigate other strategic alternatives for Eastex
(and continued to do so until Eastex's execution of the Merger Agreement). These
activities consisted of obtaining and evaluating certain publicly available
information concerning other potential strategic partners and sources of
financing, monitoring the progress of other industry transactions, and
conducting exploratory discussions with potential strategic partners. The
results of such investigations failed to yield any competitive alternative to
the proposal submitted by EPG. Mr. Phillips requested, during this period, that
in addition to its continuing investigations with respect to alternative
transactions, Rauscher Pierce continue to evaluate all publicly available
information regarding EPG and provide such information and Rauscher Pierce's
analysis thereof to Eastex for its review.
On April 24, 1995, Mr. Phillips met with Mr. Dell'Osso and H. Brent Austin,
then Senior Vice President and Chief Financial Officer of EPG, and discussed
various issues including Eastex's capital needs, its long-term growth
opportunities and the strategic market outlook for Eastex.
On April 25, 1995, Mr. Phillips and other representatives of the senior
management of Eastex attended a meeting with senior management of EPG.
Representatives of Eastex and EPG requested that their respective financial
advisors and legal counsel attend this meeting. Representatives of EPG presented
a proposal whereby Eastex would be merged with and into a subsidiary of EPG.
During the meeting, certain principal terms of the proposed merger were
discussed including (i) the exchange value of the proposed merger of $4.50 per
share of Common Stock, (ii) structuring the proposed transaction as a tax-free
merger, (iii) EPG's requirement that if
15
<PAGE> 26
a merger agreement were entered into and was subsequently terminated as the
result of certain events Eastex would be obligated to pay EPG's out-of-pocket
expenses plus a termination fee of $1 million, and (iv) EPG's requirement that
upon the execution of a merger agreement Eastex refrain from seeking a competing
transaction, subject to an exception that would enable the Eastex Board to carry
out its fiduciary duties. The Eastex Board also discussed a proposed timetable
for further negotiations, due diligence and negotiation of the contemplated
transactions.
A special meeting of the Eastex Board was held on April 26, 1995, for the
purpose of considering the merger proposal. In attendance at the meeting were
representatives of Rauscher Pierce and legal counsel for Eastex. Rauscher Pierce
responded to questions from the Eastex Board regarding EPG's current financial
condition and other possible alternatives to the EPG merger offer. Eastex's
legal counsel responded to various questions regarding the directors' fiduciary
obligations in considering the merger proposal and responded to questions
regarding various aspects of the proposal. Further, legal counsel for Eastex
presented a summary of the proposed merger agreement which had been provided by
EPG's counsel.
After discussion the Eastex Board concluded that the proposed merger with
EPG should be further analyzed and agreed to meet on April 28, 1995, to further
discuss the transaction.
Subsequent to the special meeting of the Eastex Board and also on April 26,
1995, Mr. Phillips met with Mr. Wise to discuss the Eastex Board's initial
reaction to the proposal by EPG and certain strategic matters relevant to the
proposed combination of the companies' businesses. Mr. Wise discussed EPG's
long-term business prospects and the role that Eastex would play in the
development of EPG's non-regulated gas marketing operations. El Paso Gas
Marketing Company, a wholly owned subsidiary of EPG, currently markets
approximately 300 million cubic feet of natural gas per day to customers
primarily in the Southwestern United States. Mr. Wise noted that combining El
Paso Gas Marketing's existing operations with Eastex would result in a four-fold
increase in EPG's average gas marketing volume to over 1.2 billion cubic feet of
natural gas per day, and there would be a complementary geographic fit between
El Paso Gas Marketing's activities in the Southwest and Eastex's activities in
the Southeast, Northeast and Midwest.
On April 28, 1995, the Eastex Board again met at a special meeting to
review the proposal. As part of the review, Rauscher Pierce provided the Eastex
Board with its preliminary opinion that the proposed terms of the merger would
be fair to the stockholders of Eastex from a financial point of view. Rauscher
Pierce further provided a detailed review of the strategic objectives of Eastex
and EPG as well as a financial analysis of the value of comparable transactions
from a cash flow, net income and book value basis; the relative contributions of
the two companies; and the acquisition premium represented by the proposed
Exchange Ratio. In addition to the financial analyses described elsewhere
herein, Rauscher Pierce reviewed for the Eastex Board certain additional
relevant information, including the background of the transaction; the proposed
merger terms; various strategic considerations, including natural gas industry
conditions, operating synergies and potential consolidation cost efficiencies;
the potential stock market reaction to the EPG proposal; other potential
strategic alternatives and Rauscher Pierce's recommendations regarding the
proposed merger. Rauscher Pierce also informed the Eastex Board that the results
to date of its continuing investigation of alternative transactions indicated
that it could provide no assurances that the pursuit of other alternatives would
result in an outcome for Eastex's stockholders as favorable as or more favorable
than the proposed merger with EPG. After discussion, the Eastex Board concluded
that the proposed merger with EPG warranted further consideration and analysis.
Moreover, the Eastex Board, including without limitation Mr. Phillips,
determined, given the significant stock ownership position of Mr. Phillips and
his positions as an officer and employee of Eastex, that a separate review by
the independent nonemployee directors of Eastex of the proposed merger, its
financial and legal terms and its merit to the nonaffiliated stockholders of
Eastex would be in the best interests of the stockholders of Eastex.
On April 27 and 28, 1995, representatives of EPG commenced a due diligence
investigation of Eastex's public information and principal contracts and files.
Senior management of Eastex participated in the due diligence discussions, which
included representatives from EPG, Rodman & Renshaw and Coopers & Lybrand
L.L.P., independent accountants for EPG. On May 1, 1995, a representative of EPG
visited Eastex's storage and pipeline operations at its Rotherwood Gas Storage
Facility.
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On May 1, 1995, representatives of Eastex, its legal counsel and Rauscher
Pierce met with senior management of EPG at EPG's headquarters in El Paso,
Texas, to continue Eastex's due diligence investigation of EPG.
On May 2, 1995, the non-employee, independent directors of Eastex met
separately with representatives of Rauscher Pierce and the legal counsel for
Eastex to review the terms of the merger proposal and the draft Merger
Agreement. After discussion of hypothetical alternative transactions, such as a
joint venture, strategic alliance or other business combination with another
pipeline, producer or utility and a review of recent comparable transactions in
the natural gas merchant industry, the independent directors concluded that
Eastex should proceed with the negotiation of the Merger Agreement and related
documents. In arriving at their decision, the independent directors considered
all the information available to them regarding the proposed transaction with
EPG and possible alternative transactions. Additionally the independent
directors considered the probability of the occurrence of alternative
transactions and of the EPG transaction. The independent directors believed, at
the conclusion of such deliberations, that the proposed transaction with EPG
appeared to be the prospect with the greatest potential value to Eastex's
stockholders and that Eastex should continue to pursue the EPG proposal.
Throughout the week of May 1 through 5, 1995, legal counsel for each of
Eastex and EPG met and negotiated the terms of the Merger Agreement. With the
involvement of representatives of senior management of both EPG and Eastex, the
remaining issues in the Merger Agreement were resolved. In the course of these
negotiations, EPG agreed to a number of modifications to the terms of the
proposed Merger Agreement, including: (i) providing Eastex stockholders the
opportunity to elect between stock and cash, subject to a cap on the cash
consideration of 49% of the aggregate merger consideration; (ii) replacing a
fixed exchange ratio with a floating exchange ratio, subject to a maximum and
minimum exchange ratio of .1629 and .1485, respectively; (iii) narrowing the
circumstances in which EPG would be entitled to receive a termination fee and
reimbursement of its expenses, and limiting the total amount of such termination
fee and expenses; and (iv) expanding the scope of EPG's representations and
warranties and the related conditions to the obligation of Eastex to close the
Merger, to include, among other things, representations as to the absence of any
material adverse change, material litigation or undisclosed liabilities
affecting EPG. These modifications were sought by the Eastex Board for the
following reasons: (i) the cash election option was sought to provide greater
flexibility to Eastex stockholders both in their tax and portfolio planning,
while the 49% cash cap was sought to help the transaction to qualify as a
tax-free reorganization to the extent of EPG shares received in the Merger; (ii)
the floating exchange ratio was sought to provide a degree of protection to
Eastex stockholders, as to the number of shares of EPG Common Stock to be
received in the Merger, to the extent the average trading price of the EPG
shares varies within the range of approximately $27.625 and $30.300 per share,
(iii) the changes with respect to the termination fee were sought to limit the
circumstances in which the fee would be payable and to establish a cap on
reimbursable out-of-pocket expenses of EPG in the event the fee were to become
payable; and (iv) the additional EPG representations were sought because Eastex
believed such representations were relevant to an assessment of an investment in
EPG Common Stock and that Eastex should not be obligated to proceed with the
Merger in the event of material, unfavorable developments with respect to the
matters covered by such representations. Each member of the Eastex Board was
provided with a draft of the Merger Agreement dated May 4, 1995, a summary of
the significant terms of the Merger Agreement and an analysis and preliminary
opinion of Rauscher Pierce.
On May 5, 1995, at a special meeting of the Eastex Board, the final form of
the Merger Agreement and results of due diligence by management were presented
to the Eastex directors and reviewed in detail. Further, Rauscher Pierce
presented to the Eastex Board the results of its financial due diligence and its
opinion that the terms of the merger were fair to Eastex's stockholders from a
financial point of view, which opinion was confirmed in writing on May 8, 1995.
See "The Merger -- Opinion of Financial Advisor to Eastex." After extensive
discussion, the Eastex Board (including all of the independent directors)
unanimously approved the proposed merger and the Merger Agreement.
On May 8, 1995, at a special meeting of the Board of Directors of EPG, the
EPG Board of Directors unanimously approved the Merger Agreement.
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Following such approvals, EPG, EPG Sub and Eastex executed the definitive
Merger Agreement on May 8, 1995.
REASONS FOR THE MERGER; RECOMMENDATION OF EASTEX BOARD
Eastex Reasons For Merger. In approving the Merger Agreement with EPG, the
Eastex Board considered the following:
(a) The premium over the market price of Eastex Common Stock
represented by the value of the consideration to be received by the Eastex
stockholders in connection with the Merger, which compares favorably to
median percentage premiums paid in all publicly disclosed energy industry
transactions with values greater than $10 million since 1991, and to the
median percentage premiums paid in seven comparable natural gas industry
transactions in 1994 and 1995. See "The Merger -- Opinion of Financial
Advisor to Eastex, Merger Premium Analysis";
(b) The opinion of Rauscher Pierce that the consideration to be
received by the Eastex stockholders pursuant to the Merger Agreement is
fair, from a financial point of view, to such stockholders;
(c) The opportunity for Eastex stockholders to maintain a continuing
equity interest in the combined operations of Eastex and EPG;
(d) The increase in market capitalization and liquidity, as well as
the opportunity to receive dividends, afforded by the receipt of EPG Common
Stock by Eastex stockholders as a result of the Merger;
(e) The expectation that the Merger will be treated as a tax-free
reorganization to Eastex stockholders for United States federal income tax
purposes, to the extent such stockholders receive EPG Common Stock;
(f) The terms of the Merger Agreement, including that (i) Eastex
stockholders may elect between cash and EPG Common Stock, subject to a cap
on the cash consideration of 49% of the aggregate merger consideration,
(ii) the Exchange Ratio is floating rather than fixed, subject to the
maximum and minimum Exchange Ratio of .1629 and .1485, (iii) the conditions
to consummation of the Merger are relatively limited, including the absence
of any financing condition, (iv) although Eastex is not permitted actively
to solicit other acquisition proposals, Eastex is permitted in good faith
if required by its fiduciary duties to enter into discussions or
negotiations with persons who make unsolicited bona fide proposals to
acquire Eastex, and (v) under certain circumstances, EPG has the right to
receive a termination fee of $1,000,000 plus reimbursement of its
out-of-pocket expenses which are limited to $750,000;
(g) The shares of Eastex Common Stock held by Mr. Phillips, which
represent approximately 38% of the outstanding shares of Eastex Common
Stock, will be treated identically with all other shares of Eastex Common
Stock in the Merger, and Mr. Phillips has committed to vote such shares in
favor of the Merger; furthermore, the Eastex Board believed, based on
discussions with Mr. Phillips, that Mr. Phillips is likely to elect to
receive EPG Common Stock for the majority of his Eastex Common Stock, thus
increasing the amount of cash available to Eastex stockholders who elect to
receive cash;
(h) The terms of the arrangements described under "The
Merger -- Interests of Certain Persons in the Merger," including the
commitments by Mr. Phillips and the RIMCO Entities (as defined herein) to
vote in favor of the Merger and the grant by Mr. Phillips and the RIMCO
Entities to EPG Sub of options to purchase the shares of Eastex Common
Stock and warrants held by them, which the Eastex Board considered
significant as it indicated the support of the proposed transaction by
Eastex's two largest stockholders;
(i) Under the DGCL, Eastex stockholders are not entitled to
dissenters' rights in connection with the Merger, which the Eastex Board
considered as a factor in requesting the cash election element of the
merger consideration;
(j) The financial condition, results of operations and prospects of
Eastex on a stand-alone basis, including the uncertainties regarding
Eastex's future growth potential as an independent gas merchant in
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the increasingly competitive natural gas market and its future ability to
locate capital and financing sources;
(k) The prospects for transactions, whether in the form of joint
ventures, mergers or other acquisition transactions, between Eastex and
other suitable industry participants offering comparable or superior
benefits to Eastex and its stockholders, as reported to Eastex by its
financial advisors; and
(l) The financial condition, results of operations and prospects of
EPG, the financial resources and future growth prospects which would result
from a combination of Eastex and EPG, the enhanced opportunities for
operating efficiency and marketing and asset synergies expected to result
from the Merger and the respective contributions of the parties in a
combined entity.
For the reasons set forth above and in "The Merger -- Background of the
Merger," the Eastex Board believes that the Merger Agreement is fair to, and in
the best interests of, the stockholders of Eastex. At a special meeting held on
May 5, 1995, the Eastex Board unanimously voted to approve the Merger Agreement.
The Eastex Board unanimously recommends that the stockholders of Eastex vote FOR
the proposal to approve and adopt the Merger Agreement.
EPG Reasons for the Merger. EPG is engaging in the Merger in order to
acquire the entire equity interest in Eastex. EPG believes that Eastex's gas
marketing operations will complement EPG's existing gas marketing business. The
Merger will significantly increase EPG's gas marketing volume and will broaden
the geographic scope of EPG's gas marketing activities by combining EPG's
activities in the Southwest with Eastex's activities in the Southeast, Northeast
and Midwest. Moreover, the acquisition of Eastex affords an opportunity for EPG
to continue the growth of its non-regulated operations.
OPINION OF FINANCIAL ADVISOR TO EASTEX
Rauscher Pierce has acted as financial advisor to Eastex in connection with
the Merger Agreement and assisted Eastex in the negotiations with respect
thereto. The Eastex Board directed Rauscher Pierce, in its role as financial
advisor, to evaluate the fairness of the terms of the Merger to the stockholders
of Eastex from a financial point of view and, in such regard, to conduct such
investigations as Rauscher Pierce deemed appropriate for such purpose. No
limitations were placed by the Eastex Board or management with respect to the
investigations made or the procedures followed by Rauscher Pierce in preparing
and rendering its opinion.
Rauscher Pierce is an investment banking firm with substantial energy
industry expertise and experience in transactions similar to the Merger and is
familiar with Eastex and its business. As part of its investment banking
business, Rauscher Pierce is continually engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Rauscher Pierce delivered its written opinion to the Eastex Board on May 8,
1995, to the effect that, as of such date, the terms of the Merger Agreement are
fair to the stockholders of Eastex from a financial point of view. Rauscher
Pierce confirmed that opinion with a written opinion dated as of the date
hereof. In arriving at this opinion, Rauscher Pierce reviewed the Merger
Agreement, the Proxy Statement/Prospectus of Eastex and EPG dated August 14,
1995, filed as a part of the Registration Statement on Form S-4 of EPG, and
certain publicly available information concerning Eastex and EPG. In addition,
Rauscher Pierce reviewed certain internal analyses and forecasts for Eastex
prepared by its management. Rauscher Pierce also met with the managements of
Eastex and EPG to discuss the business and prospects of the respective companies
(as described above under "The Merger -- Reasons for the Merger; Recommendation
of Eastex Board") and considered certain long-term strategic benefits, both
operational and financial, that were described to it by the senior managements
of Eastex and EPG.
In rendering its opinion, Rauscher Pierce reviewed the terms of the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volume of the Eastex Common Stock and the EPG Common Stock;
the respective companies' cash flow, net income and book value per share; the
capitalization and financial condition of Eastex and EPG; the pro forma
financial impact of the Merger on Eastex and EPG, including the potential
relative ownership of the EPG Common Stock after the Merger by
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the current stockholders of Eastex and EPG; and, to the extent publicly
available, the terms of recent merger and acquisition transactions involving
comparable companies. In addition, Rauscher Pierce reviewed the merger premiums
paid in recent cash and stock acquisitions of public companies generally, and
energy industry companies in particular. Rauscher Pierce also analyzed certain
financial, stock market and other publicly available information relating to the
business of other public companies whose operations they considered comparable
to the operations of Eastex and EPG. In addition to the foregoing, Rauscher
Pierce also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria as it deemed relevant
in arriving at its opinion.
In connection with making its presentations to the Eastex Board, issuing
its opinion dated May 8, 1995, and issuing its opinion as of the date hereof,
Rauscher Pierce performed a variety of financial and comparative analyses,
including those described below. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances. Accordingly, such an opinion is not readily susceptible to
summary description. The following summary does not purport to be a complete
description of the presentations by Rauscher Pierce to the Eastex Board or of
the analyses performed by Rauscher Pierce in this regard.
In rendering its opinion, Rauscher Pierce did not render any opinion as to
the value of the EPG Common Stock or make any recommendation to the stockholders
of Eastex with respect to the advisability of disposing of or retaining shares
of EPG Common Stock to be received pursuant to the Merger.
The following is a summary of certain of the analyses performed by Rauscher
Pierce in connection with its opinion.
Stock Trading History Analysis. Rauscher Pierce reviewed the performance of
the per share market prices of Eastex Common Stock and EPG Common Stock over the
period from March 13, 1992 (the initial date shares of EPG Common Stock were
publicly traded) through May 2, 1995. Rauscher Pierce calculated the ratio of
the per share market price of Eastex Common Stock to the per share market price
of EPG Common Stock over the period. This analysis was utilized to provide
historical perspective for the manner in which the public trading market had
valued Eastex and EPG in absolute terms and relative to each other.
Comparable Company Trading Analysis. Using publicly available information,
Rauscher Pierce compared, based upon market trading values as of May 5, 1995
(the last business day preceding the execution of the Merger Agreement),
multiples of certain financial criteria, such as net income, projected net
income (as represented by the median earnings per share estimates for fiscal
year 1995 reported by Institutional Brokers Estimate System, except for
estimated fiscal year 1995 earnings for Eastex, which were based on estimates
provided to Rauscher Pierce by the management of Eastex), EBIT (earnings before
interest and taxes), EBITDA (earnings before interest, taxes, depreciation and
amortization), Cash Flow from Operations (net income plus depreciation, deferred
taxes, and other non-cash expenses, but not including changes in working capital
accounts), revenues and the tangible book value of common equity of Eastex to
certain other companies which, in Rauscher Pierce's judgment, were comparable to
Eastex for the purpose of this analysis. The factors Rauscher Pierce considered
in selecting companies for comparison included size, particularly equity market
capitalization, financial condition and scope of business operations. For
Eastex, the group of companies used in the comparison included Aquila Gas
Pipeline Corporation, Hadson Corporation, K N Energy, Inc., NGC Corp., Tejas Gas
Corporation, Tejas Power Corporation, USX-Delhi Group, and Western Gas
Resources, Inc. Rauscher Pierce noted that these eight companies were generally
significantly larger and more asset-intensive than Eastex, and that larger
companies with extensive networks of natural gas gathering and processing assets
generally traded at higher multiples than did smaller companies within the
comparable group. In addition, Rauscher Pierce used publicly available
information, based upon market trading values as of May 5, 1995, to compare
certain financial criteria (including multiples of historical and projected net
income, latest twelve months EBITDA, dividend yields, and debt to book
capitalization ratios), among a group of natural gas pipeline companies which
Rauscher Pierce considered to be comparable to EPG. For purposes of analysis,
this group was composed of The Coastal Corporation, Enron Corp., Panhandle
Eastern Corp., Sonat Inc., and The Williams Companies, Inc.
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For the group of comparable gas gathering, processing and marketing
companies, the range, median and mean for equity market value as a multiple of
each of the indicated statistics were as follows: (a) latest twelve months net
income -- 17.3x to 49.4x, with a median of 43.6x and a mean of 35.7x; and (b)
latest twelve months Cash Flow from Operations -- 7.1x to 17.7x, with a median
of 10.3x and a mean of 11.3x. The range, median and mean for Net Market
Capitalization (defined as equity market value plus the book value of debt and
preferred stock less cash and cash equivalents) as a multiple of latest twelve
months EBITDA was 7.5x to 15.2x, with a median of 10.4x and a mean of 11.0x. The
range, median and mean for Net Market Capitalization as a multiple of latest
twelve months EBIT was 11.3x to 26.6x, with a median of 18.4x and a mean of
19.0x. Rauscher Pierce was unable to calculate meaningful mathematical
comparisons between these comparable company multiples and corresponding
multiples for Eastex because Eastex generated negative net income, Cash Flow
from Operations, EBITDA and EBIT for the latest twelve month period ended
December 31, 1994. Rauscher Pierce applied its subjective professional judgment
in evaluating the consideration contemplated by the Merger in relation to
Eastex's results of operations for the latest twelve month period. In addition,
Rauscher Pierce examined certain other market valuation criteria. The comparable
companies' range, median and mean for equity market value as a multiple of each
of these additional criteria were as follows: (a) projected 1995 net
income -- 13.6x to 42.7x, with a median of 20.7x and a mean of 22.3x, which
compared to 20.6x for Eastex; (b) projected 1995 Cash Flow from
Operations -- 3.1x to 10.8x, with a median of 6.7x and a mean of 7.4x, which
compared to 15.1x for Eastex; and (c) tangible book value of common
equity -- 1.0x to 3.5x, with a median of 2.0x and a mean of 2.1x, which compared
to 1.5x for Eastex. Net Market Capitalization as a multiple of projected 1995
EBITDA was 4.9x to 10.3x, with a median of 8.0x and a mean of 7.8x, which
compared to 5.3x for Eastex.
For the group of natural gas pipeline companies, the range, median and mean
for equity market value as a multiple of latest twelve months net income were as
follows: 15.1x to 21.9x, with a median of 17.3x and a mean of 17.0x, which
compared to 11.1x for EPG. The range, median and mean for equity market value as
a multiple of projected 1995 net income were as follows: 13.3x to 19.3x, with a
median of 13.4x and a mean of 14.2x, which compared to 9.9x for EPG. The range,
median and mean for Net Market Capitalization as a multiple of latest twelve
months EBITDA were as follows: 7.0x to 11.0x, with a median of 8.5x and a mean
of 8.5x, which compared to 6.3x for EPG. The range, median and mean for dividend
yields were as follows: 1.3% to 3.8%, with a median of 3.4% and a mean of 3.2%,
which compared to 4.9% for EPG. The range, median and mean for debt to book
capitalization were as follows: 45.9% to 61.7%, with a median of 54.7% and a
mean of 54.3%, which compared to 55.7% for EPG.
The comparable company trading analysis is a valuation technique used by
Rauscher Pierce to determine whether Eastex and EPG were reasonably valued by
the public trading market, at existing market prices, in relation to the public
trading market's valuation of similar companies. Rauscher Pierce did not
establish any specific valuation for Eastex or EPG in connection with this
analysis.
No public company utilized as a comparison is identical to Eastex, EPG or
the business segment for which a comparison is being made. An analysis of the
results of such a comparison is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies to which Eastex and EPG
were being compared.
Comparable Acquisitions Analysis. Rauscher Pierce conducted a comparable
acquisitions analysis whereby it examined the terms of recent acquisitions of
businesses and assets related to the natural gas gathering, processing and
marketing industry. Rauscher Pierce reviewed the terms of 60 such transactions
which had either been completed in 1994 and 1995, or which were pending at the
time Rauscher Pierce delivered its opinion. With respect to the significant
majority of these transactions, public disclosure regarding purchase price and
target financial results was insufficient to permit Rauscher Pierce to draw
conclusions regarding value. Sufficient data did exist with respect to seven
transactions (the "Selected Transactions") which Rauscher Pierce considered
reasonably comparable to the Merger: (Acquiror/Target) Valero Energy
Corp./Valero Natural Gas Partners, L.P.; Associated Natural Gas Corp./Grand
Valley Gas Company; K N Energy, Inc./American Oil & Gas Corp.; Panhandle Eastern
Corp./Associated Natural Gas Corp; Natural Gas Clearinghouse/Trident NGL
Holding, Inc.; The Williams Companies/Transco Energy Com-
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pany; and LG&E Energy Corp./Hadson Corporation. Rauscher Pierce noted that, with
the exception of Associated Natural Gas Corp.'s acquisition of Grand Valley Gas
Company, the purchase prices paid in the Selected Transactions were
significantly larger than the aggregate consideration to be paid in the Merger.
Rauscher Pierce also noted that, with the exception of Grand Valley Gas Company,
the target companies in the Selected Transactions owned and operated significant
natural gas gathering, transportation and processing assets. For the Selected
Transactions, the range, median and mean for the total transaction value as a
multiple of latest twelve months EBITDA were as follows: 6.8x to 11.9x, with a
median of 9.5x and a mean of 9.1x. The range, median and mean for total
transaction value as a multiple of latest twelve months EBIT were as follows:
10.5x to 19.3x, with a median of 14.8x and a mean of 15.1x. Rauscher Pierce was
unable to calculate meaningful mathematical comparisons between these comparable
acquisitions multiples and the consideration being paid for Eastex pursuant to
the Merger because Eastex generated negative EBITDA and EBIT for the latest
twelve month period. Rauscher Pierce applied its subjective professional
judgment in evaluating the consideration contemplated by the Merger in relation
to Eastex's results of operations for the latest twelve month period. In
addition, Rauscher Pierce examined multiples of tangible book value paid in the
Selected Transactions. For the Selected Transactions, the range, median and mean
for total consideration paid for the equity of the target company as a multiple
of the target company's tangible book value of equity were as follows: 1.4x to
3.5x, with a median of 2.1x and a mean of 2.3x. Eastex's equity valuation, based
upon the consideration of $4.50 per share of Eastex Common Stock contemplated by
the Merger, as a multiple of Eastex's tangible book value on the December 31,
1994 balance sheet was 1.9x. Rauscher Pierce advised the Eastex Board that,
based upon its professional experience as a financial advisor to participants in
the domestic natural gas industry, acquisition prices as a multiple of EBITDA,
EBIT and tangible book value paid for companies which owned and operated
relatively more significant natural gas gathering, transportation and processing
assets were generally higher than those paid for companies such as Eastex which
focused primarily on natural gas marketing and did not own or operate more
extensive physical assets.
Relative Contribution Analysis. Rauscher Pierce performed a relative
contribution analysis to examine the relationship between the percentage
ownership of EPG that the Eastex stockholders would receive pursuant to the
Merger, and the relative contribution of Eastex to certain financial measures on
a pro forma combined basis. For purposes of this analysis, Rauscher Pierce
assumed that all Eastex stockholders would elect to receive EPG Common Stock
pursuant to the Merger. Based upon this assumption, and applying the treasury
stock method to reflect the exercise of outstanding options and warrants to
purchase shares of Eastex Common Stock, Rauscher Pierce determined that,
pursuant to the Merger, the Eastex stockholders would, in the aggregate, receive
between approximately 2.8% and 3.0% of the shares of EPG Common Stock to be
outstanding following the Merger, at Exchange Ratios of 0.1485 and 0.1629,
respectively. Based upon projected income statements for Eastex and EPG for
fiscal 1995, Rauscher Pierce determined that Eastex's contribution to the
combined entity on a pro forma basis would be 1.6% of EBITDA, 1.2% of EBIT, 1.5%
of net income and 1.8% of Cash Flow from Operations. Based upon a review of
balance sheets as of December 31, 1994 for Eastex and EPG, Rauscher Pierce
calculated that Eastex's contribution to the combined entity on a pro forma
basis would be 3.7% of total assets and 3.0% of stockholders' equity. Rauscher
Pierce also considered the relative size, financial strength and diversification
of Eastex and EPG. Furthermore, Rauscher Pierce noted that, based on an Exchange
Ratio range of 0.1485 to 0.1629 and assuming that EPG's annual dividend
continues at $1.32 per share, Eastex's stockholders would receive an annual
dividend of between $0.20 and $0.22 for each share of Eastex Common Stock
exchanged for EPG Common Stock pursuant to the Merger. The Eastex Common Stock
does not presently pay a dividend.
Merger Premium Analysis. Rauscher Pierce examined median percentage
premiums paid in all publicly-disclosed cash-and-stock transactions with
transaction values greater than $10 million since 1991. The analysis indicated
median percentage premiums to the target company's stock price one day, one week
and four weeks prior to announcement, and to the target company's average stock
price for the 30-day and 60-day periods prior to announcement, of 35.1%, 40.4%,
47.7%, 45.1% and 48.0%, respectively. Rauscher Pierce also examined median
percentage premiums paid in all publicly disclosed energy industry transactions
with values greater than $10 million since 1991. This analysis indicated median
percentage premiums to the target company's stock price one day, one week and
four weeks prior to announcement, and to the target company's average stock
price for the 30-day and 60-day periods prior to announcement, of 26.3%, 25.6%,
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30.8%, 28.0% and 30.6%, respectively. In addition, Rauscher Pierce examined
median percentage premiums paid in seven natural gas industry transactions in
1994 and 1995. This analysis indicated median percentage premiums to the target
company's stock price one day, one week and four weeks prior to announcement,
and to the target company's average stock price for the 30-day and 60-day
periods prior to announcement, of 13.9%, 23.3%, 26.3%, 21.7% and 25.2%,
respectively, Rauscher Pierce determined that the target valuation of $4.50 per
share of Eastex Common Stock pursuant to the Merger represented premiums to the
market price of Eastex Common Stock one day, one week and four weeks prior to
announcement, and to the average market prices of Eastex Common Stock for the
30-day and 60-day periods prior to announcement, of 28.6%, 20.0%, 32.7%, 26.3%
and 32.4%, respectively.
In connection with its review, Rauscher Pierce did not independently verify
any of the foregoing information, and relied upon it being complete and accurate
in all material respects. Rauscher Pierce assumed that the financial forecasts
provided to it and discussed with it were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Eastex as to the future financial performance of Eastex. In
addition, Rauscher Pierce did not make an independent evaluation or appraisal of
the assets of Eastex or EPG, nor was it furnished with such appraisals. In
rendering its opinion, Rauscher Pierce assumed that in the course of obtaining
necessary regulatory and governmental approvals for the Merger, no restriction
will be imposed that will have a material adverse effect on the contemplated
benefits of the Merger. Rauscher Pierce's opinion is based upon circumstances
existing and disclosed to it as of the date of such opinion.
Rauscher Pierce confirmed its May 8, 1995 written opinion by delivery of
its written opinion dated as of the date hereof, that the terms of the Merger
are fair to the stockholders of Eastex from a financial point of view. In
rendering such confirmation, Rauscher Pierce performed procedures to update
certain of its analyses made in connection with its earlier opinion and reviewed
the assumptions on which such analyses were based and the factors considered in
connection therewith. Rauscher Pierce considered, among other things, Eastex's
and EPG's recent financial performance and recent market conditions and
developments based on the foregoing. THE FULL TEXT OF THE OPINION OF RAUSCHER
PIERCE DATED AS OF THE DATE HEREOF IS ATTACHED AS ANNEX B AND SHOULD BE READ IN
ITS ENTIRETY BY THE HOLDERS OF EASTEX COMMON STOCK. The text of this opinion is
substantially identical to the opinion dated May 8, 1995.
Rauscher Pierce was selected to serve as the Eastex Board's financial
advisor in connection with its strategic planning activities on the basis of
Rauscher Pierce's experience with mergers and acquisitions in the energy
industry generally and the natural gas gathering, processing and marketing
industry in particular. Eastex paid Rauscher Pierce a financial advisory fee of
$75,000 upon the execution of its engagement letter and an additional $100,000
at the time Rauscher Pierce delivered its fairness opinion to the Eastex Board.
Eastex also has agreed to reimburse Rauscher Pierce for its reasonable
out-of-pocket expenses not to exceed $25,000 and to indemnify Rauscher Pierce
and its controlling persons against certain liabilities and expenses relating to
or arising out of the consummation of the Merger, including certain liabilities
under U.S. Federal securities laws. If the Merger is consummated, Rauscher
Pierce will receive a fee of 1.75 percent of the "transaction value," less the
$175,000 in fees previously paid by Eastex. The "transaction value" is defined
as (i) in the event of a cash transaction, the aggregate amount of cash received
by the Eastex shareholders for their shares of Common Stock of Eastex; (ii) in
the event of a stock transaction, the aggregate value of the stock or other
securities received by the Eastex shareholders in exchange for their Common
Stock as reflected in the average trading prices for such securities during the
10 trading days immediately following the consummation of the transaction; or
(iii) in the event of a combination cash and stock transaction, the sum of the
cash portion as defined in (i) and the aggregate value of the stock portion as
defined in (ii).
Rauscher Pierce in the normal course of its business may trade the
securities of Eastex and EPG for its own account and for the accounts of its
customers and, accordingly, may hold a long or short position in such securities
at any time.
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<PAGE> 34
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Eastex Board with respect to the
Merger, Eastex stockholders should be aware that certain directors and officers
of Eastex have certain direct or indirect interests separate from their
interests as stockholders of Eastex, including those referred to herein. After
the time at which the Merger becomes effective (the "Effective Time"), the
officers of Eastex will become officers of the surviving corporation and,
further, Mr. Phillips, the Chairman of the Board and Chief Executive Officer of
Eastex, will become an executive officer of EPG. Mr. Phillips will also be a
director of EPG Sub following the Merger. As a condition to the consummation of
the Merger and subject to consummation of the Merger, Mr. Phillips and Mark A.
Searles, President and Chief Operating Officer of Eastex, have agreed to amend
their employment agreements with Eastex as of the Effective Time to provide for
compensation and benefits comparable to similarly situated EPG officers. These
amendments extended the terms of the employment agreements of Messrs. Phillips
and Searles to July 31, 1998, and May 31, 1998, respectively. The existing
employment and non-competition agreements of Messrs. Phillips and Searles will
be amended to significantly reduce their base salaries, in consideration of
participation in EPG's incentive based compensation plans, and to expand the
terms and conditions of the covenants not to compete contained in those
agreements.
In connection with the execution of the Merger Agreement and at the request
of EPG, Mr. Phillips and RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO
Partners, L.P., III and RIMCO Partners, L.P. IV (collectively, the "RIMCO
Entities") entered into stockholder agreements (the "Stockholder Agreements")
pursuant to which they (i) granted options to EPG Sub to purchase all of the
shares of Eastex Common Stock and warrants owned, beneficially or otherwise, by
such parties and (ii) agreed (a) to vote all shares of Eastex Common Stock and
all warrants, options or other securities or rights exercisable for,
exchangeable for or convertible into Eastex Common Stock, which such parties own
(collectively, "Equity Securities") in favor of the Merger; (b) not to vote any
voting Equity Securities in any manner that would breach in any material respect
a covenant, representation or warranty of Eastex under the Merger Agreement; and
(c) to vote all voting Equity Securities against any action or agreement which
would impede or interfere with the Merger. Mr. Phillips and the RIMCO Entities
also each agreed to grant to EPG Sub an irrevocable proxy with respect to the
Equity Securities owned by them. See "Certain Agreements" for a more detailed
discussion of the Stockholder Agreements. As of the date of this Proxy
Statement/Prospectus, Mr. Phillips owned 2,393,000 shares of Eastex Common Stock
and the RIMCO Entities beneficially hold warrants immediately exercisable for
the purchase of 647,500 shares of Eastex Common Stock.
Pursuant to the terms of the Merger Agreement, Eastex has agreed to use its
reasonable best efforts to cancel all employee and director options granted and
outstanding pursuant to the Eastex Second Amended and Restated 1987 Employee
Stock Option Plan, 1987 Non-Employee Director Stock Option Plan and the 1994
Executive Long-Term Stock Option Plan or any other incentive compensation or
stock option plan of Eastex (collectively the "Eastex Option Plans") on or
before the Effective Time. The Eastex Option Plans contain provisions which
permit Eastex to cancel the options outstanding under the Eastex Option Plans as
of the Effective Time, so long as the holders of such options are allowed the
opportunity to exercise the options, without regard to vesting provisions, for a
period of thirty days within the sixty day period immediately preceding the
Effective Time. Pursuant to the Merger Agreement, Eastex has agreed to redeem
all outstanding options underlying the Eastex Option Plans for cash in an amount
equal to the appreciated value of the option (i.e., the merger exchange value of
$4.50 per share less the exercise price of such options times the number of
shares underlying the option). The Merger Agreement provides that options
representing the right to acquire 325,000 shares, including options granted to
Mr. Searles in connection with his initial employment by Eastex in 1994, to
purchase an aggregate of 250,000 shares of Eastex Common Stock at an exercise
price of $2.50 per share, will be converted as of the Effective Time into
options to acquire EPG Common Stock on substantially the same terms and
conditions as the original options, provided that the exercise price and the
number of shares will be adjusted to reflect the conversion of the underlying
shares at the Exchange Ratio.
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<PAGE> 35
ACCOUNTING TREATMENT
Upon consummation of the Merger, the transaction will be accounted for as a
"purchase" as such term is used under generally accepted accounting principles,
and all of the assets and liabilities of Eastex will be recorded in EPG's
consolidated financial statements at their fair value at the Effective Time. The
amount, if any, by which the purchase price paid by EPG exceeds the fair value
of the net assets acquired by EPG through the Merger will be recorded as
goodwill and is expected to be amortized on a straight-line basis over an
appropriate period not to exceed 40 years.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned upon, among other things, receipt
by EPG and Eastex of an opinion (the "Fried Frank Opinion") from Fried, Frank,
Harris, Shriver & Jacobson, special counsel to EPG ("Fried Frank"), dated as of
the date of the closing of the Merger, substantially to the effect that for
federal income tax purposes the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
("Code"), and that Eastex and EPG will each be a party to the reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinion,
Fried Frank will require and rely upon representations contained in certificates
of officers of Eastex, EPG, EPG Sub and others. The conclusions in the Fried
Frank Opinion cannot be relied upon if the facts or assumptions stated in the
opinion, or any of the representations in the officers' certificates, are or
later become inaccurate. Moreover, the opinion will not be binding upon the
Internal Revenue Service (the "IRS") or the courts.
The following discussion summarizes the material federal income tax
consequences of the Merger to the Eastex stockholders, assuming the Merger is
treated as a "reorganization." The federal income tax consequences of the Merger
to an Eastex stockholder will differ depending primarily upon whether such
stockholder receives for his Eastex stock solely cash, solely EPG Common Stock
(except for cash received in lieu of fractional shares of EPG Common Stock) or
both cash and EPG Common Stock. The following discussion describes generally the
federal income tax consequences to Eastex stockholders in each of these
categories. The discussion is based on the assumption that the Eastex shares
constitute a capital asset in the hands of the stockholders. The federal income
tax discussion set forth below may not be applicable to certain classes of
taxpayers, including insurance companies, securities dealers, financial
institutions, foreign persons and persons who acquired shares of Eastex Common
Stock pursuant to the exercise of employee stock options or rights or otherwise
as compensation.
Tax Consequences to Eastex Stockholders Who Receive Solely Cash for their
Shares in the Merger. The exchange by an Eastex stockholder of all his Eastex
shares solely for cash in the Merger will be a taxable transaction for federal
income tax purposes. Such a stockholder will recognize gain or loss measured by
the difference between the tax basis for his Eastex shares and the amount of
cash received (unless the receipt of cash is treated as a dividend, as described
below). In general, such gain or loss will be computed separately for each block
of stock held by the stockholder and will be capital gain or loss. In certain
circumstances, the receipt of solely cash by an Eastex stockholder for all his
Eastex shares could be treated as a dividend (to the extent of the stockholder's
ratable share of applicable earnings and profits) if the stockholder
constructively also owns shares of Eastex Common Stock that are exchanged for
EPG Common Stock in the Merger or if the stockholder owns EPG Common Stock,
actually or constructively, after the Merger (other than EPG shares received in
the Merger). The receipt of solely cash by an Eastex stockholder in exchange for
all his Eastex stock will not be treated as a dividend if such exchange or
receipt results in a "meaningful" reduction or a "substantially
disproportionate" reduction in the stockholder's ownership interest (defined
generally as a 20% or greater diminution) or results in a "complete termination"
of the stockholder's interest, taking into account, in each case, constructive
ownership. Generally, any reduction in interest of a small, minority shareholder
in a publicly held corporation (who exercises no control with respect to
corporate affairs) will be treated as a "meaningful" reduction, thus ensuring
capital gain or loss treatment.
Tax Consequences to Eastex Stockholders Who Receive Solely EPG Common Stock
in the Merger. An Eastex stockholder will recognize neither gain nor loss on the
exchange of all his Eastex shares solely for EPG Common Stock in the Merger. The
tax basis of the EPG Common Stock received in the Merger by such an
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<PAGE> 36
Eastex stockholder will be equal to the stockholder's tax basis for the Eastex
stock exchanged therefor, and such stockholder will include the period during
which the Eastex stock surrendered was held in his holding period for the EPG
Common Stock received in exchange therefor. Eastex stockholders who receive cash
in lieu of fractional shares of EPG Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of the
exchange and then redeemed by EPG. These cash payments will be treated as having
been received in full payment in exchange for the amount of EPG Common Stock so
redeemed. The stockholders generally will recognize capital gain or loss equal
to the difference between the cash received and the basis of the fractional
share interest that would have been issued.
Tax Consequences to Eastex Stockholders Who Receive Both Cash and EPG
Common Stock in the Merger. Under the election procedures, it is possible that a
beneficial owner of Eastex Common Stock could receive both cash (in addition to
cash received in lieu of fractional shares of EPG Common Stock) and EPG Common
Stock in exchange for shares of Eastex Common Stock. Eastex stockholders who
receive cash in exchange for some of their shares of Eastex Common Stock, and
who realize a gain upon the exchange (with gain or loss computed separately for
each block of Eastex Common Stock exchanged and measured by the excess of the
fair market value of the total consideration received over the tax basis of the
Eastex stock exchanged), will recognize income only to the extent of the lesser
of such gain realized or the cash received with respect to such shares. An
analysis similar to the analysis relating to Eastex stockholders who receive
solely cash for their shares in the Merger will apply to determine if the
receipt of cash by the stockholder will be treated as the receipt of a dividend
(rather than a capital gain). No loss will be recognized by an Eastex
stockholder who realizes a loss with respect to the exchange (with loss computed
as described above) of some of his Eastex shares for cash, but also receives EPG
Common Stock in exchange for other shares of Eastex stock. An Eastex stockholder
who receives both cash and EPG Common Stock in the Merger will have a tax basis
in the EPG Common Stock received equal to the stockholder's tax basis in the
Eastex stock exchanged therefor, decreased by any money received and increased
by any gain recognized, and such stockholder will include the period during
which the Eastex stock surrendered was held in his holding period for the EPG
Common Stock received therefor. An Eastex stockholder who receives both EPG
Common Stock and cash in the Merger may accelerate the payment of federal income
taxes in comparison to an Eastex stockholder who makes a Conditional Cash
Election, receives solely EPG Common Stock and after the Merger sells a portion
of the EPG Common Stock for cash.
Backup Withholding. Unless an exemption applies under the applicable law
and regulations, the exchange agent in the Merger (the "Exchange Agent") will be
required to withhold 31% of any cash payments to which an Eastex stockholder or
other payee is entitled pursuant to the Merger unless the stockholder or other
payee provides its taxpayer identification number (social security number or
employer identification number) and certifies that such number is correct. Each
stockholder and, if applicable, each other payee should complete and sign the
substitute Form W-9 included as part of the transmittal letter that accompanies
the Election Form, so as to provide the information and certification necessary
to avoid backup withholding, unless an applicable exemption exists and is
established in a manner satisfactory to the Exchange Agent.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT DOES
NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION AND THE OPINIONS DESCRIBED ABOVE ARE BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING TREASURY REGULATIONS THEREUNDER AND CURRENT
ADMINISTRATIVE RULINGS AND COURT DECISIONS. THE OPINIONS DESCRIBED ABOVE ARE NOT
BINDING UPON THE IRS, AND NO RULINGS OF THE IRS WILL BE SOUGHT OR OBTAINED.
THERE IS NO ASSURANCE THAT THE IRS WILL AGREE WITH THE FOREGOING DISCUSSION OR
THE OPINIONS DESCRIBED ABOVE. ALL OF THE FOREGOING IS SUBJECT TO CHANGE AND ANY
SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION AND THE
OPINIONS. BECAUSE OF THE COMPLEXITIES OF THE TAX LAWS IN GENERAL, AND THE
COMPLEXITIES AND UNCERTAINTIES OF THE TAX CONSEQUENCES ASSOCIATED WITH THE
RECEIPT OF CASH IN THE MERGER IN PARTICULAR, EACH EASTEX STOCKHOLDER SHOULD CON-
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<PAGE> 37
SULT HIS OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO HIM, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN
TAX LAWS.
REGULATORY APPROVAL
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting-period requirements have been satisfied. EPG and Eastex filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division on May 31, 1995 and on June 1, 1995, respectively. The required waiting
period under the HSR Act expired at 11:59 p.m. on July 1, 1995. The requirements
of the HSR Act will be satisfied if the Merger is consummated within one year
from the expiration of the waiting period.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of EPG
or Eastex.
RESALE RESTRICTIONS
All shares of EPG Common Stock received by Eastex stockholders in the
Merger will be freely transferable, except that shares of EPG Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Eastex prior to the Merger may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the Securities Act (or Rule 144 in the case of such persons who become
affiliates of EPG) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of Eastex or EPG generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal stockholders of such party. The Merger Agreement
requires Eastex to deliver or cause to be delivered to EPG from each of its
affiliates an Affiliate Letter in the form attached to the Merger Agreement to
the effect that such person has been advised that he may not sell, transfer or
otherwise dispose of the shares of EPG Common Stock issued to such person in the
Merger unless (a) such sale, transfer or other disposition has been registered
under the Securities Act, (b) such sale, transfer or other disposition is made
in conformity with Rule 145 under the Securities Act or (c) in the opinion of
counsel reasonably acceptable to EPG, or a "no action" letter obtained by such
person from the staff of the Securities and Exchange Commission (the
"Commission"), such sale, transfer or other disposition is otherwise exempt from
registration under the Securities Act.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT, A
COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS AND
IS INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT.
THE MERGER
Pursuant to the Merger Agreement, subject to the terms and conditions
thereof, at the Effective Time, Eastex will be merged with and into EPG Sub. The
Merger will have the effects specified in the DGCL.
Upon the fulfillment or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated, EPG, EPG Sub and
Eastex will cause a Certificate of Merger to be properly executed and filed with
the Secretary of State of the State of Delaware in accordance with Section 251
of the DGCL (the "Certificate of Merger").
As a result of the Merger and without any action on the part of the holders
thereof, each share of Eastex Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into the
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<PAGE> 38
right to receive either (i) a fraction of a share of EPG Common Stock (subject
to the Exchange Ratio described below) or (ii) $4.50 in cash, without interest
(the "Cash Amount") (provided that the amount of cash paid in connection with
the Merger to acquire Eastex Common Stock and warrants and upon cancellation of
outstanding stock options to purchase Eastex Common Stock shall not exceed 49%
of total consideration paid in connection with the Merger, as described below)
and will cease to be outstanding and will be canceled and retired and will cease
to exist. Each holder of a certificate representing any such shares of Eastex
Common Stock (a "Certificate") will thereafter cease to have any rights with
respect to such shares of Eastex Common Stock, except the right to receive,
without interest, shares of EPG Common Stock and/or cash upon the surrender of
such Certificate. Each share of Eastex Common Stock issued and held in Eastex's
treasury at the Effective Time or owned by EPG, EPG Sub or any other subsidiary
of EPG will, by virtue of the Merger, cease to be outstanding and will be
canceled and retired without payment of any consideration therefor.
The number of shares of EPG Common Stock to be issued in exchange for each
share of Eastex Common Stock in the Merger will be determined by dividing $4.50
by the Average Price (as defined below) of a share of EPG Common Stock, but in
any event not less than .1485 and not more than .1629 of a share of EPG Common
Stock (the "Exchange Ratio"). The "Average Price" of a share of EPG Common Stock
shall be the average, rounded to four decimal places, of the closing sales
prices thereof on the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, by another authoritative source) over the ten business days
immediately preceding the date of the closing of the Merger (the "Closing
Date"). Holders of shares of Eastex Common Stock converted into EPG Common Stock
will also receive, together with each share of EPG Common Stock issued in the
Merger, one Right in accordance with the Shareholder Rights Agreement, dated as
of July 7, 1992, between EPG and The First National Bank of Boston. The Rights
are currently attached to certificates for shares of EPG Common Stock, are not
separately tradeable and become exercisable only upon certain conditions. In the
event that, without the prior consent of the Board of Directors of EPG, any
person or group acquires beneficial ownership of 15% or more of the voting power
of all outstanding voting securities of EPG, each Right (other than Rights held
by such acquiring person or group) will entitle the holder to purchase, at the
then-current exercise price of the Right, a number of shares of EPG Common Stock
having a value of twice the exercise price of the Right. References herein to
the shares of EPG Common Stock issuable in the Merger shall be deemed to include
the associated Rights.
The following table sets forth examples of the number of shares of, and
dollar value of, EPG Common Stock to be received by holders of Eastex Common
Stock who receive EPG Common Stock in the Merger based on a range of
hypothetical Average Prices.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF DOLLAR VALUE OF
AVERAGE PRICE EPG COMMON STOCK EPG COMMON STOCK
------------- ---------------- ----------------
<S> <C> <C>
$24.0000 .1629 $3.91
$25.0000 .1629 $4.07
$26.0000 .1629 $4.24
$27.48751 .1629 $4.48
$27.6243 .1629 $4.50
$27.75002 .1622 $4.50
$29.0000 .1552 $4.50
$30.3030 .1485 $4.50
</TABLE>
---------------
1. Equal to the average of the closing sales prices of EPG Common Stock on the
NYSE for the ten trading days ending on August 11, 1995.
2. Equal to the closing sales price of EPG Common Stock on the NYSE on August
11, 1995, the last trading day prior to the date of this Proxy
Statement/Prospectus.
Because the minimum and maximum Exchange Ratio are fixed at .1485 and .1629,
respectively, if the Average Price is $30.3030 or more, the Exchange Ratio will
be .1485, and if the Average Price is $27.6243 or less, the Exchange Ratio will
be .1629.
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THE FOREGOING TABLE IS INCLUDED FOR PURPOSES OF ILLUSTRATION ONLY AND IS
NOT INTENDED AS A PREDICTION OF FUTURE TRADING PRICES OF EPG COMMON STOCK OR THE
ACTUAL AVERAGE PRICE, WHICH MAY BE MORE OR LESS THAN THE EXAMPLES SHOWN. BECAUSE
THE EXCHANGE RATIO WILL BE FIXED BASED ON AN AVERAGE OF CLOSING SALES PRICES
OVER THE 10 BUSINESS DAYS IMMEDIATELY PRECEDING THE CLOSING DATE, THE MARKET
VALUE AT THE EFFECTIVE TIME OF THE FRACTION OF A SHARE OF EPG COMMON STOCK TO BE
RECEIVED IN EXCHANGE FOR EACH SHARE OF EASTEX COMMON STOCK CONVERTED INTO THE
RIGHT TO RECEIVE EPG COMMON STOCK MAY BE MORE OR LESS THAN THE $4.50 PER SHARE
IN CASH TO BE RECEIVED IN EXCHANGE FOR EACH SHARE OF EASTEX COMMON STOCK
CONVERTED INTO THE RIGHT TO RECEIVE CASH, AND SUCH MARKET VALUE ON THE LAST DAY
OF THE ELECTION PERIOD MAY BE MORE OR LESS THAN $4.50 PER SHARE.
Holders of Eastex Common Stock may call EPG's transfer agent, First
National Bank of Boston, at (800) 736-3001 toll-free at any time prior to the
Special Meeting to obtain information as to the fraction of a share of EPG
Common Stock which would be received in respect of a share of Eastex Common
Stock converted into the right to receive EPG Common Stock, if the Exchange
Ratio were determined based upon the closing price of EPG Common Stock for the
then most recent ten trading days.
In the event that, subsequent to May 8, 1995 but prior to the Effective
Time, EPG or Eastex changes the number of shares of EPG Common Stock or Eastex
Common Stock, respectively, issued and outstanding as a result of a stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, the Exchange Ratio shall be appropriately adjusted.
The portion of the aggregate consideration paid or deemed paid pursuant to
the Merger (the "Aggregate Merger Consideration") which shall be paid other than
in the form of EPG Common Stock (which shall be deemed to include, without
limitation, cash paid upon the acquisition by EPG or any of its subsidiaries of
Eastex Common Stock or warrants to purchase Eastex Common Stock, whether
pursuant to the Merger, the Stockholder Agreement, dated May 8, 1995, between
EPG, EPG Sub and certain stockholders of Eastex, in open market or private
transactions as permitted by the Merger Agreement, or otherwise, cash paid in
lieu of fractional shares and cash paid upon the cancellation of Stock Options)
(the "Cash Consideration") shall not exceed 49% of the Aggregate Merger
Consideration (the "Maximum Cash Consideration"). For the purpose of determining
the Maximum Cash Consideration, a share of EPG Common Stock shall be valued at
the lowest of (x) the closing trading price of a share of EPG Common Stock on
the NYSE Composite Tape on the date of the Effective Time, (y) the median,
rounded to four decimal places, of the high and low trading price of a share of
EPG Common Stock on the NYSE Composite Tape on the date of the Effective Time
and (z) the Average Price.
Immediately prior to the Effective Time, except as provided below, all
options (individually, a "Stock Option" and collectively, the "Stock Options")
then outstanding under the Eastex Option Plans, whether or not then exercisable,
will be canceled and each holder of a Stock Option will be entitled to receive
from Eastex, for each share of Eastex Common Stock subject to a Stock Option, an
amount in cash equal to the excess, if any, of the Cash Amount over the per
share exercise price of such Stock Option. Eastex agreed that from and after May
8, 1995, no additional options will be granted by Eastex or its subsidiaries
under the Eastex Option Plans or otherwise.
Stock Options with respect to (i) 250,000 shares of Eastex Common Stock
held by Mark A. Searles, President and Chief Operating Officer of Eastex and
(ii) an aggregate of 75,000 additional shares of Eastex Common Stock held by
certain employees of HPRI will not be canceled at the Effective Time, but will
remain outstanding, and will be assumed by EPG and converted into an option to
purchase EPG Common Stock (each, a "Converted Stock Option") as set forth below.
Each Converted Stock Option (i) will be subject to the same terms and conditions
that applied to the corresponding Stock Option prior to conversion (without
regard to any acceleration of exercisability that may occur in connection with
the Merger, so that the vesting and exercisability of all Converted Stock
Options will be determined as if the Merger had not occurred), (ii) will be
exercisable for that whole number of shares of EPG Common Stock (rounded
downward to the nearest whole share) equal to the number of shares of EPG Common
Stock subject to such Stock Option immediately prior to the Effective Time,
multiplied by the Exchange Ratio, and (iii) will have an exercise price per
share of EPG Common Stock equal to the exercise price per share of such Stock
Option immediately prior to the Effective Time, divided by the Exchange Ratio
(the exercise price per share of EPG Common Stock, as so determined, being
rounded upward to the nearest full cent).
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Each of the stock-related performance shares and performance units
outstanding as of the Effective Time under (i) Eastex's Incentive Compensation
Plan, (ii) the Heath Petra Resources, Inc. Incentive Compensation Plan and (iii)
the proposed amendment to certain employment agreements and related agreements
set forth in the term sheet relating thereto described in Exhibit B to the
Merger Agreement (each, a "Terminated Performance Unit") will be assumed by EPG
and converted into a performance share unit relating to EPG Common Stock (each,
a "Converted Performance Unit") as set forth below. Each Converted Performance
Unit (i) will be subject to terms and conditions which, as nearly as
practicable, duplicate the terms and conditions of the corresponding Terminated
Performance Unit prior to conversion (without regard to any acceleration of
vesting or payment that may occur in connection with the Merger, so that the
vesting and payment of all Converted Performance Units will be determined as if
the Merger had not occurred) and (ii) will be denominated in that whole number
of performance share units of Eastex Common Stock subject to such Terminated
Performance Unit immediately prior to the Effective Time, multiplied by the
Exchange Ratio.
EXCHANGE PROCEDURES
General. EPG will authorize a person (which will be either EPG's transfer
agent or another person reasonably satisfactory to Eastex) to receive Elections
(defined below) and to act as Exchange Agent. EPG will prepare a form (the "Form
of Election") pursuant to which each record holder of Eastex Common Stock at the
close of business on the day on which the Effective Time occurs may make an
election (the "Election"), which Form of Election will be mailed to record
holders of Eastex Common Stock at such time as to permit holders of Eastex
Common Stock to exercise their right to make an Election.
The Form of Election will permit each holder of Eastex Common Stock to
request: (i) the number of shares of Eastex Common Stock owned by such holder
which such holder shall desire to have converted into the right to receive the
Cash Amount in the Merger (a "Cash Election"); and (ii) the number of shares of
Eastex Common Stock owned by such holder which such holder shall desire to have
converted into the right to receive EPG Common Stock in the Merger (a "Stock
Election"). Any Cash Election may be conditioned on all of the shares of Eastex
Common Stock covered thereby being converted into the right to receive the Cash
Amount (a "Conditional Cash Election"). If the proration provisions described
below are applicable to the Merger (or would be applicable but for the
provisions relating to Conditional Cash Elections), all shares of Eastex Common
Stock covered by a Conditional Cash Election will be converted into the right to
receive solely EPG Common Stock in the Merger.
The manner in which each share of Eastex Common Stock (other than shares of
Eastex Common Stock issued and held in Eastex's treasury or owned by EPG, EPG
Sub or any other subsidiary of EPG) will be converted at the Effective Time into
either the Cash Amount or EPG Common Stock is as follows:
(a) If Cash Elections are received for a number of shares of Eastex
Common Stock which is equal to or less than the Cash Conversion Number
(defined below), each share of Eastex Common Stock covered by a Cash
Election shall be converted into the right to receive the Cash Amount in
the Merger.
(b) If Cash Elections are received for a number of shares of Eastex
Common Stock which is more than the Cash Conversion Number, (i) all shares
of Eastex Common Stock covered by a Conditional Cash Election shall be
converted into the right to receive EPG Common Stock in the Merger and (ii)
if, after subtracting all shares of Eastex Common Stock covered by
Conditional Cash Elections, (x) the number of shares of Eastex Common Stock
covered by Cash Elections is equal to or less than the Cash Conversion
Number, the provisions of paragraph (a) above shall apply, or (y) the
number of shares of Eastex Common Stock covered by Cash Elections is more
than the Cash Conversion Number, such Elections will be subject to the
allocation procedures described below under "The Merger Agreement --
Exchange Procedures -- Cash Elections Allocation."
(c) Each share of Eastex Common Stock for which Stock Elections have
been made and Non-Electing Shares (as defined below) shall be converted
into the right to receive EPG Common Stock in the Merger.
The Cash Conversion Number shall be determined by (x) subtracting from the
Maximum Cash Consideration all consideration paid or deemed paid pursuant to the
Merger other than in the form of EPG Common Stock (other than payments of the
Cash Amount for shares of Eastex Common Stock covered by Cash Elections) and (y)
dividing the result by the Cash Amount.
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Cash Elections Allocation. If the number of shares of Eastex Common Stock
covered by Cash Elections is more than the Cash Conversion Number after
subtracting all shares of Eastex Common Stock covered by Conditional Cash
Elections, then the shares of Eastex Common Stock for which Cash Elections have
been received (excluding shares covered by Conditional Cash Elections) shall be
converted into the right to receive the Cash Amount and EPG Common Stock in the
following manner:
(a) A cash proration factor (the "Cash Proration Factor") will be
determined by dividing the Cash Conversion Number by the total number of
shares of Eastex Common Stock with respect to which effective Cash
Elections were made.
(b) The number of shares of Eastex Common Stock covered by each Cash
Election to be converted into the right to receive the Cash Amount will be
determined by multiplying the Cash Proration Factor by the total number of
Shares of Eastex Common Stock covered by such Cash Election, rounded to the
next lowest integer.
(c) Each share of Eastex Common Stock covered by a Cash Election and
not converted into the right to receive the Cash Amount as set forth above
will be converted into the right to receive EPG Common Stock in the Merger.
Because the maximum cash component of the consideration to be paid to
holders of Eastex Common Stock pursuant to the Merger Agreement is limited to
49% of the aggregate merger consideration, the extent to which elections by
holders of Eastex Common Stock will be accommodated will depend upon the
respective numbers of Eastex stockholders who elect cash and stock (or make no
election). Accordingly, an Eastex stockholder who elects to receive cash may
instead receive shares of EPG Common Stock in exchange for all or a portion of
his Eastex Common Stock. An Eastex stockholder who receives both EPG Common
Stock and cash in the Merger may accelerate the payment of federal income taxes
in comparison to an Eastex stockholder who makes a Conditional Cash Election,
receives solely EPG Common Stock and after the Merger sells a portion of the EPG
Common Stock for cash.
Non-Electing Shares. Outstanding shares of Eastex Common Stock (other than
shares of Eastex Common Stock issued and held in Eastex's treasury at the
Effective Time or owned by EPG, EPG Sub or any other subsidiary of EPG, which
will be canceled pursuant to the Merger Agreement) as to which an Election is
not in effect and effective on the Election Date shall be called "Non-Electing
Shares." If EPG shall determine for any reason that any Election was not
properly made with respect to shares of Eastex Common Stock, such Election shall
be deemed to be not in effect and shares of Eastex Common Stock covered by such
Election shall, for the purpose hereof, be deemed to be Non-Electing Shares.
Each Non-Electing Share shall be converted into the right to receive EPG Common
Stock in the Merger.
Fractional Shares. No fractional shares of EPG Common Stock shall be issued
in the Merger. In lieu of the issuance of any fractional share of EPG Common
Stock, cash adjustments will be paid to holders in respect of any fractional
share of EPG Common Stock that would otherwise be issuable, and the amount of
such cash adjustment shall be equal to such fractional proportion of the Average
Price of a share of EPG Common Stock.
Procedure for Submitting Forms of Election. An election to receive cash or
stock will be properly made only if the Exchange Agent at its office designated
in the Form of Election has received by 5:00 p.m. local time in the city in
which such Exchange Agent is located, on the Election Date (defined below), a
properly completed and signed Form of Election (with the signature or signatures
thereon guaranteed if required by the Form of Election), accompanied, to the
extent required by the Form of Election, by Certificate(s) representing all of
the shares of Eastex Common Stock owned by such holder, duly endorsed or
otherwise acceptable for transfer, or by an appropriate guaranty of delivery in
the form customarily used in transactions of this nature from a member of a
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States. "Election Date" is defined as the date announced by EPG, in a news
release delivered to the Dow Jones News Service, as the last day on which Forms
of Election will be accepted; provided, that such day will be a business day no
earlier than five business days prior to the Effective Time and no later than
the date on which the Effective Time occurs
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and will be at least five business days following the date of such news release.
EASTEX STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
FORM OF ELECTION.
Any Form of Election may be revoked or changed by the person submitting
such Form of Election by written notice to the Exchange Agent, provided such
notice is received by the Exchange Agent at or prior to the Election Date. All
Forms of Election will be deemed revoked if the Exchange Agent is notified in
writing by EPG or Eastex that the Merger Agreement has been terminated. The
certificates representing Eastex Common Stock relating to any revoked Form of
Election will be returned without charge to the person submitting such Form of
Election to the Exchange Agent.
EPG has the right to make rules not inconsistent with the terms of the
Merger Agreement governing the validity of the Forms of Election, the manner and
extent to which Elections are to be taken into account in making the
determinations prescribed by the Merger Agreement, the issuance and delivery of
certificates for EPG Common Stock into which Eastex Common Stock is converted in
the Merger and the payment for shares of Eastex Common Stock converted into the
right to receive the Cash Amount in the Merger. All such rules and
determinations thereunder shall be final and binding on all holders of Eastex
Common Stock.
Payment of Cash and Exchange of Shares of Eastex Common Stock. As soon as
practicable after EPG has made available to the Exchange Agent sufficient cash
and EPG Common Stock to be distributed to the holders of Eastex Common Stock
pursuant to the terms of the Merger Agreement, (i) the Exchange Agent will
distribute to holders of shares of Eastex Common Stock whose shares are to be
converted into the right to receive the Cash Amount in accordance with the
Merger Agreement, upon surrender to the Exchange Agent (to the extent not
previously surrendered with a Form of Election) of one or more Certificates for
such shares of Eastex Common Stock for cancellation, a bank check for an amount
equal to the Cash Amount for each share of Eastex Common Stock so converted, and
(ii) each holder of shares of Eastex Common Stock converted into the right to
receive shares of EPG Common Stock pursuant to the terms of the Merger Agreement
upon surrender to the Exchange Agent (to the extent not previously surrendered
with a Form of Election) of one or more Certificates for such shares of Eastex
Common Stock for cancellation, will be entitled to receive certificates
representing the number of shares of EPG Common Stock to be issued in respect of
the aggregate number of such shares of Eastex Common Stock previously
represented by the Certificates surrendered, based upon the Exchange Ratio.
Illustration of Cash Elections Allocation. Based upon the 6,627,950 shares
of Eastex Common Stock outstanding as of the date of this Proxy
Statement/Prospectus plus 967,500 shares issuable upon the exercise of
outstanding Stock Options and warrants (but not including Converted Stock
Options), and assuming (solely for the purpose of determining the Maximum Cash
Consideration) that (i) the value of the fraction of a share of EPG Common Stock
to be received in exchange for each share of Eastex Common Stock pursuant to the
Merger is $4.00 and (ii) that the average exercise price of the outstanding
Stock Options and warrants is $2.50, the Aggregate Merger Consideration would be
$28,446,800 (i.e. 6,627,950 times $4.00 plus 967,500 times $2.00 (i.e., the Cash
Amount of $4.50 less $2.50)). The Maximum Cash Consideration (which shall be
deemed to include cash paid upon the acquisition by EPG of warrants to purchase
Eastex Common Stock, cash paid in lieu of fractional shares and cash paid upon
cancellation of outstanding Stock Options) would be 49% of $28,446,800 or
$13,938,932. Assuming, solely for purposes of this illustration, that $1,935,000
(or 967,500 times $2.00) is paid upon the acquisition of warrants and upon
cancellation of Stock Options pursuant to the Merger and $40,000 is paid in
respect of fractional shares, the portion of the Maximum Cash Consideration
payable to holders of shares of Eastex Common Stock pursuant to the Merger
(other than in respect of fractional shares) would be $11,963,932. Accordingly,
the Cash Conversion Number would be $11,963,932 divided by $4.50, or 2,658,652.
The Cash Proration Factor, if any, would be determined by dividing the Cash
Conversion Number by the total number of shares of Eastex Common Stock with
respect to which effective Cash Elections were made. Therefore, if effective
Cash Elections were made with respect to 6,627,950 shares of Eastex Common Stock
(or 100% of the shares outstanding as of the date of this Proxy
Statement/Prospectus), the Cash Proration Factor would be .401 (i.e., 401 out of
each 1,000 shares with respect to which Cash Elections were made would be
converted into the right to receive the Cash Amount and the balance of such
shares would be converted into the right to receive EPG Common Stock). Based
upon the
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assumptions set forth above, if effective Cash Elections were made with respect
to 4,970,963 shares of Eastex Common Stock (or 75% of the shares outstanding as
of the date of this Proxy Statement/Prospectus), the Cash Proration Factor would
be .535.
THE FOREGOING EXAMPLE IS PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT
A PREDICTION AS TO THE ACTUAL NUMBER OF SHARES OF EASTEX COMMON STOCK WITH
RESPECT TO WHICH CASH ELECTIONS WILL BE MADE OR AS TO THE ACTUAL CASH PRORATION
FACTOR. THE ACTUAL CASH PRORATION FACTOR WILL DEPEND UPON A VARIETY OF FACTORS
WHICH CANNOT BE CONTROLLED BY EPG OR EASTEX, INCLUDING THE NUMBER OF SHARES OF
EASTEX COMMON STOCK WITH RESPECT TO WHICH CASH ELECTIONS ARE MADE AND THE EXTENT
TO WHICH HOLDERS OF STOCK OPTIONS OR WARRANTS ELECT TO EXERCISE SUCH STOCK
OPTIONS OR WARRANTS PRIOR TO THE EFFECTIVE TIME.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (a) the due organization, power and standing of
Eastex, EPG and EPG Sub and similar corporate matters; (b) the authorization,
execution, delivery and enforceability of the Merger Agreement; (c) the capital
structure of Eastex; (d) subsidiaries of Eastex; (e) investment interests of
Eastex; (f) conflicts under charters or bylaws, violations of any instruments or
law and required consents or approvals; (g) certain documents filed by each of
Eastex and EPG with the Commission and the accuracy of information contained
therein; (h) litigation; (i) conduct of business in the ordinary course and the
absence of certain changes or material adverse effects; (j) taxes of Eastex; (k)
retirement and other employee benefit plans of Eastex; (l) labor matters
relating to Eastex; (m) brokers' and finders' fees with respect to the Merger;
(n) receipt of a fairness opinion by Eastex; (o) environmental matters relating
to Eastex; (p) related party transactions by Eastex; and (q) the shares of EPG
Common Stock to be issued in connection with the Merger and the Merger
Agreement.
CERTAIN COVENANTS
Prior to the Effective Time, except as specifically contemplated by the
Merger Agreement, unless EPG consents in writing thereto, Eastex has agreed,
among other things: (a) to, and to cause each of its subsidiaries to, conduct
its operations according to its usual, regular and ordinary course in
substantially the same manner as theretofore conducted; (b) to use its
reasonable efforts, and to cause each of its subsidiaries to use its reasonable
efforts, to preserve intact its business organization and goodwill, keep
available the services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships with it; (c) to
confer on a regular basis with representative(s) of EPG to report operational
matters of materiality and any proposals to engage in material transactions; (d)
not to amend its organizational documents; (e) to promptly notify EPG of (i) any
material emergency or other material change in the condition (financial or
otherwise) of Eastex's or any subsidiary's business, properties, assets,
liabilities, prospects or the normal course of its businesses, or in the
operation of its properties, (ii) any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or (iii) the breach in any
material respect of any representation or warranty or covenant contained in the
Merger Agreement; (f) to promptly deliver to EPG true and correct copies of any
report, statement or schedule filed by Eastex with the Commission subsequent to
May 8, 1995; (g) not to (i) except pursuant to the exercise of certain options,
warrants, conversion rights and other contractual rights existing on May 8,
1995, issue any shares of its capital stock, effect any stock split or otherwise
change its capitalization as it existed on May 8, 1995, (ii) grant, confer or
award any option, warrant, conversion right or other right not existing on May
8, 1995 to acquire any shares of Eastex's capital stock, (iii) increase any
compensation or enter into or amend any employment, severance, termination or
similar agreement with any of its present or future officers or directors,
except for normal increases in compensation to employees consistent with past
practice and the payment of cash bonuses to employees pursuant to and consistent
with existing plans or programs, or (iv) adopt any new employee benefit plan or
amend any existing employee benefit plan in any material respect, except for
changes less favorable to participants in such plans or as may be required by
applicable law; (h) not to declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock;
(i) not to, and not permit any of its subsidiaries to, sell, lease or otherwise
dispose of any of its assets (including capital stock of its subsidiaries) which
are
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material, individually or in the aggregate, except in the ordinary course of
business; (j) not to (i) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of credit
in the ordinary course of business; (ii) except for obligations of wholly owned
subsidiaries of Eastex, assume, guaranty, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practices in an amount not material to Eastex and its
subsidiaries, taken as a whole; (iii) other than to wholly owned subsidiaries of
Eastex, make any loans, advances or capital contributions to, or investments in,
any other person; (iv) modify in any manner adverse to Eastex or any of its
subsidiaries any outstanding indebtedness or obligation of Eastex or any of its
subsidiaries; (v) pledge or otherwise encumber shares of capital stock of Eastex
or its subsidiaries; or (vi) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to be created any material mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect to
such asset; (k) not to acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which in the aggregate are material to
Eastex and its subsidiaries taken as a whole, or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practices which would be material to Eastex and its subsidiaries taken as a
whole; (l) not to change any of the accounting principles or practices used by
Eastex; (m) not to (i) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice which would be material to Eastex and its subsidiaries taken as a
whole; (iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $50,000 or, in the aggregate, are in excess of
$150,000; provided, that none of the foregoing shall limit any capital
expenditure within the aggregate amount previously authorized by the Eastex
Board for capital expenditures, written evidence of which has been previously
provided to EPG; or (iv) enter into or amend any contract, agreement, commitment
or arrangement providing for the taking of any action which would be prohibited
under the terms of the Merger Agreement; (n) not to make any tax election or
settle or compromise any income tax liability material to Eastex and its
subsidiaries taken as a whole; (o) not to pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected, reserved against or
disclosed in the consolidated financial statements (or the notes thereto) of
Eastex and its subsidiaries or incurred in the ordinary course of business
consistent with past practice; (p) not to settle or compromise any pending or
threatened suit, action or claim relating to the transactions contemplated by
the Merger Agreement; or (q) not to take, or agree in writing or otherwise to
take, any of the actions described in subparagraphs (a) through (p) of this
paragraph or any action that would make any of the representations and
warranties of Eastex contained in the Merger Agreement untrue or incorrect as of
the date when made.
Both Eastex and EPG have agreed to cooperate in the prompt preparation and
filing of certain documents under federal and state securities laws and with
applicable government entities.
NO SOLICITATION OF TRANSACTIONS
Prior to the Effective Time, Eastex has agreed (a) that neither Eastex nor
any of its subsidiaries will, and Eastex will direct and use its best efforts to
cause its officers, directors, employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, Eastex
or any of its subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
Eastex has agreed to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to the
date of the Merger Agreement with respect to any of the foregoing and to take
the necessary steps to inform the individuals or entities referred to above of
these obligations. Eastex has also agreed to notify EPG immediately if any such
inquiries or proposals are
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received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with it; provided, however,
that the Eastex Board may (i) furnish information to, or enter into discussions
or negotiations with, any person or entity that makes an unsolicited bona fide
written proposal to acquire Eastex pursuant to a merger, consolidation, share
exchange, business combination or other similar transaction, if, and only to the
extent that, (A) the Eastex Board determines in good faith, based as to legal
matters on the written opinion of outside legal counsel, that such action is
required for the Eastex Board to comply with its fiduciary duties to
stockholders imposed by law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, Eastex
provides written notice to EPG to the effect that it is furnishing information
to, or entering into discussions or negotiations with, such person or entity and
provides EPG with a copy of any such written proposal, and (C) Eastex keeps EPG
informed of the status and the terms of any such discussions or negotiations;
and (ii) to the extent applicable, comply with Rule 14e-2 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") with regard to
an Acquisition Proposal.
INDEMNIFICATION AND INSURANCE
EPG will cause the surviving corporation to keep in effect provisions in
its Certificate of Incorporation and By-laws providing for exculpation of
director and officer liability and indemnification of the indemnified parties
under Eastex's Restated Certificate of Incorporation and By-laws (the
"Indemnified Parties") to the fullest extent permitted under the DGCL, which
provisions may not be amended except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification.
For a period of three years after the Effective Time, EPG will cause to be
maintained officers' and directors' liability insurance covering the parties who
are currently covered, in their capacities as officers and directors, by
Eastex's existing officers' and directors' liability insurance policies on terms
substantially no less advantageous to such parties than such existing insurance;
provided, however, that EPG will not be required, in order to maintain or
procure such coverage, to pay premiums in excess of $250,000 in the aggregate
over such three year period (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by paying an
amount in excess of the Cap, EPG will only be required to obtain such coverage
for such three-year period as can be obtained by paying aggregate premiums equal
to the Cap.
CONDITIONS
The respective obligations of Eastex, EPG and EPG Sub to effect the Merger
are subject to the fulfillment at or prior to the Closing Date of the following
conditions: (a) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated; (b) none of the parties
to the Merger Agreement shall be subject to any order or injunction of a court
of competent jurisdiction which prohibits the consummation of the transactions
contemplated by the Merger Agreement; (c) the Merger Agreement and the Merger
shall have been approved by the stockholders of Eastex in accordance with the
DGCL and Eastex's Restated Certificate of Incorporation and By-laws; (d) each of
EPG and Eastex shall have received the Fried Frank Opinion; except that the
delivery of the Fried Frank Opinion will not be a condition to Eastex's
obligation to effect the Merger if at the Closing Date Eastex shall not have
fulfilled any of the conditions set forth in subparagraph (c) or (f) of the next
succeeding paragraph.
The obligations of EPG and EPG Sub to effect the Merger are also subject to
the fulfillment at or prior to the Closing Date of the following conditions: (a)
Eastex shall have performed its agreements contained in the Merger Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of Eastex contained in the Merger Agreement shall be true and
correct in all material respects as of the date when made and (unless made as of
a specified date) as of the Closing Date, and EPG shall have received a
certificate of Eastex, dated the Closing Date, certifying to such effect; (b)
all necessary governmental and third party consents required in connection with
the transactions contemplated by the Merger Agreement shall have been obtained
and there shall be no action, suit or proceeding pending or threatened against
Eastex, EPG or any of their subsidiaries which would or would reasonably be
expected to prevent or delay the transactions contemplated by the Merger
Agreement or result in material damages in
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connection with such transactions; (c) EPG shall have received from each
affiliate of Eastex within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act an Affiliate Letter in the form required by
the Merger Agreement; (d) the employment agreements and the amendments to
employment agreements described under "The Merger -- Interests of Certain
Persons in the Merger" shall have been executed and delivered, be in full force
and effect, and constitute valid and binding obligations of the parties thereto;
(e) working capital of Eastex and its subsidiaries as of the close of business
on the business day preceding the Closing Date shall be at least $12,000,000
computed on a consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis; and (f) EPG shall have
received from an officer of Eastex an Officer's Certificate containing standard
representations on which Fried Frank will rely in rendering its tax opinion. The
obligation of Eastex to effect the Merger is also subject to the fulfillment at
or prior to the Closing Date of the condition that EPG shall have performed its
agreements contained in the Merger Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of EPG and EPG
Sub contained in the Merger Agreement shall be true and correct in all material
respects as of the date when made and (unless made as of a specified date) as of
the Closing Date, and Eastex shall have received a certificate of EPG, dated the
Closing Date, certifying to such effect.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Closing Date: (a) by the mutual consent of Eastex and EPG;
(b) by Eastex or EPG if (i) the Merger shall not have been consummated by
December 31, 1995, or (ii) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; provided that the party seeking to terminate the Merger
Agreement pursuant to this clause (b) shall have used all efforts required by
the Merger Agreement to remove such injunction, order or decree; (c) by Eastex,
if there has been a breach by EPG or EPG Sub of any representation or warranty
contained in the Merger Agreement which would cause EPG or EPG Sub to fail to
satisfy any condition to closing of the Merger and such condition shall not have
been waived by Eastex; or (d) by EPG, if there has been a breach by Eastex of
any representation or warranty contained in the Merger Agreement which would
cause Eastex to fail to satisfy any condition to closing of the Merger and such
condition shall not have been waived by EPG. In the event of the termination of
the Merger Agreement, nothing in the Merger Agreement shall prejudice the
ability of the non-breaching party to seek damages from any other party for any
breach of the Merger Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity.
TERMINATION FEE
In the event of a termination of the Merger Agreement for any reason other
than a material breach by EPG or EPG Sub and (i) the Eastex Board shall have
withdrawn its recommendation of (or encouraged the Eastex stockholders not to
approve) the Merger or shall have recommended (or encouraged the Eastex
stockholders to support) any Acquisition Proposal, or shall have resolved to do
any of the foregoing (and such withdrawal, recommendation or encouragement is
not the result of a material breach by EPG or EPG Sub of any representation,
warranty or obligation under the Merger Agreement), (ii) prior to such
termination, Eastex shall have received any Acquisition Proposal which the
Eastex Board has determined is more favorable to the Eastex stockholders than
the transactions contemplated by the Merger Agreement, or (iii)(A) at any time
prior to the termination of the Merger Agreement either (I) the Eastex
stockholders shall have failed to approve the Merger Agreement at the
stockholders meeting provided for in the Merger Agreement or (II) any person
(other than EPG or any of its subsidiaries) shall have publicly announced any
Acquisition Proposal and (B), at any time on or prior to one year after the date
of the Merger Agreement, any person (other than EPG or any of its subsidiaries)
shall either (I) become the beneficial owner of 40% or more of the outstanding
shares of Eastex Common Stock or (II) consummate an Acquisition Proposal, then
Eastex shall promptly, but in no event later than two business days after the
first of such events to occur, (x) pay EPG the sum of $1,000,000 in cash and (y)
reimburse EPG for all documented out of pocket costs and expenses incurred by
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<PAGE> 47
EPG or EPG Sub or on their behalf in connection with the Merger Agreement or the
transactions contemplated thereby, up to a maximum of $750,000.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such expenses, except as otherwise
provided in the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto by an instrument
in writing signed by or on behalf of each of the parties thereto. At any time
prior to the Closing Date, any party to the Merger Agreement may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
in the Merger Agreement or in any document delivered pursuant thereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained therein.
CERTAIN AGREEMENTS
In connection with the execution of the Merger Agreement, on May 8, 1995,
EPG and EPG Sub entered into Stockholder Agreements with Mr. Phillips (the
"Phillips Stockholder Agreement") and the RIMCO Entities (the "RIMCO Stockholder
Agreement"; Mr. Phillips and the RIMCO Entities are collectively referred to as
the "Stockholders"). The Phillips Stockholder Agreement provides, among other
things, for the grant by Phillips to EPG Sub of an option to purchase 2,393,000
shares of Eastex Common Stock at an exercise price of $4.50 per share in cash.
The RIMCO Stockholder Agreement provides, among other things, for the grant by
the RIMCO Entities to EPG Sub of an option to purchase warrants to purchase
647,500 shares of Eastex Common Stock at an exercise price per warrant equal to
the excess of (x) $4.50 (or such higher cash price per share as may be paid
pursuant to the Merger Agreement) over (y) the exercise price per share of
Eastex Common Stock of each such warrant ($2.00 in the case of 487,500 warrants
and $4.00 in the case of 160,000 warrants), multiplied by the number of shares
of Eastex Common Stock covered by such warrant. Each of the foregoing options is
hereinafter referred to as an "Option" and the shares of Eastex Common Stock and
warrants covered by the Options are hereinafter referred to as the "Optioned
Securities."
Pursuant to each of the Stockholder Agreements, EPG Sub may exercise the
Option granted pursuant to such Stockholder Agreement in whole but not in part
at any time after all waiting periods under the HSR Act applicable to the
exercise of such Option have expired or been terminated, by written notice
specifying a date and time for the closing not later than ten business days from
the date of such notice (which date and time may be one day after the delivery
of such notice or earlier if reasonably practicable), but only if (x) the Merger
Agreement shall have been terminated and (y) either (i) the stockholders of
Eastex shall have failed to approve the Merger at the stockholders' meeting
contemplated by Section 7.3 of the Merger Agreement (the "Stockholders'
Meeting"), (ii) the Stockholders' Meeting shall not have occurred (other than by
reason of a breach by EPG or EPG Sub of its obligations under the Merger
Agreement), or (iii) the termination fee contemplated by Section 9.5(b) of the
Merger Agreement shall have become due and payable.
Except as provided below, the Option granted pursuant to the Phillips
Stockholder Agreement expires on the earliest of (a) the Closing Date or (b)
twelve months after the termination of the Merger Agreement, and the Option
granted pursuant to the RIMCO Stockholder Agreement expires on the earliest of
(a) the Closing Date, (b) twelve months after termination of the Merger
Agreement (but in any event not later than December 31, 1996) or (c) 60 days
after receipt by EPG of the termination fee contemplated by Section 9.5(b) of
the Merger Agreement. However, if either Option cannot be exercised prior to the
earliest date described above by reason of any applicable injunction, decree,
order or similar restraint issued by a court, such Option will expire on the
later of such earliest date or the tenth business day after such impediment to
exercise shall have been removed or when such injunction, decree, order or
similar restraint shall have become
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<PAGE> 48
permanent and no longer subject to appeal, as the case may be (the expiration
date of each Option described in this paragraph is referred to herein as the
"Expiration Date").
Pursuant to the RIMCO Stockholder Agreement, provided that all conditions
to the obligations of the parties under the Merger Agreement shall have been
satisfied or waived, immediately prior to the Effective Time, EPG will purchase
(and the RIMCO Entities will sell) all outstanding warrants to purchase shares
of Eastex Common Stock held by the RIMCO Entities, at a purchase price per
warrant in cash equal to the excess, if any, of $4.50 (or such higher cash price
per share of Eastex Common Stock as may be paid by EPG pursuant to the Merger
Agreement) over the exercise price per share of Eastex Common Stock covered by
such warrant, multiplied by the number of shares of Eastex Common Stock covered
by such warrant. Concurrently with such purchase, each RIMCO Entity will assign
to EPG all outstanding 12% Senior Secured Notes and Increasing Rate Secured
Notes of Eastex (the "Notes") held by such RIMCO Entity, together with all
rights of such RIMCO Entity with respect to any collateral therefor, and EPG
will pay to such RIMCO Entity an amount in cash equal to the sum of (i) the
aggregate outstanding unpaid principal amount of the Notes being assigned by
such RIMCO Entity and (ii) all accrued and unpaid interest thereon.
Each Stockholder has agreed that (a) during the period from the date of the
applicable Stockholder Agreement until the Expiration Date thereof, except in
accordance with the provisions of the Stockholder Agreement, each Stockholder
will not: (i) sell, transfer, pledge, hypothecate, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, hypothecation, assignment or other
disposition of, any Optioned Securities owned by him; (ii) deposit any Optioned
Securities into a voting trust, or grant any proxies or enter into a voting
agreement with respect to any Optioned Securities; or (iii) initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any Acquisition Proposal or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; except that any
Stockholder who is a member of the Eastex Board may discuss such proposals at
meetings of the Eastex Board and, solely to the extent permitted by Section 7.1
of the Merger Agreement, any Stockholder who is a member of the Eastex Board or
an officer of Eastex may engage in discussions or negotiations with, or provide
confidential information or data to third parties (other than EPG Sub, its
affiliates, permitted assigns or representatives) in connection with an
Acquisition Proposal; (b) any additional Equity Securities acquired by the
Stockholder will become subject to the applicable Stockholder Agreement and
will, for all purposes of such Stockholder Agreement, be considered Optioned
Securities; and (c) such Stockholder will not engage in any action or omit to
take any action which would have the effect of preventing or disabling such
Stockholder from delivering his Optioned Securities to EPG Sub or otherwise
performing such Stockholder's obligations under the applicable Stockholder
Agreement.
Under the Stockholder Agreements, each Stockholder has agreed that, during
the time the applicable Stockholder Agreement is in effect, at any meeting of
the stockholders of Eastex, however called, and in any action by written consent
of the stockholders of Eastex, such Stockholder will (a) vote all voting Equity
Securities of such Stockholder in favor of the Merger; (b) not vote any voting
Equity Securities in favor of any action or agreement which would result in a
breach in any material respect of any covenant, representation or warranty or
any other obligation of Eastex under the Merger Agreement; and (c) vote all
voting Equity Securities of such Stockholder against any action or agreement
which would impede, interfere with or attempt to discourage the Merger,
including, but not limited to: (i) any Acquisition Proposal (other than the
Merger) involving Eastex or any of its subsidiaries; (ii) any change in the
management of the Eastex Board, except as otherwise agreed to in writing by EPG
Sub; (iii) any material change in the present capitalization or dividend policy
of Eastex; or (iv) any other material change in Eastex's corporate structure or
business.
In addition, pursuant to the terms of the Stockholder Agreements, at the
request of EPG Sub, each Stockholder has agreed to execute and deliver to EPG
Sub an irrevocable proxy and irrevocably appoint EPG Sub or its designees, its
attorney and proxy to vote all voting Equity Securities of such Stockholder, for
all purposes whatsoever, with full power of substitution. Any such proxy will
terminate upon the termination of the applicable Stockholder Agreement.
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<PAGE> 49
In connection with the Merger Agreement, and as a condition to the
amendment of certain agreements between Eastex, HPRI and three employees of
HPRI, such employees agreed to vote an aggregate of 300,000 shares of Eastex
Common Stock in favor of the Merger.
RECENT EASTEX LITIGATION
A petition was filed on July 28, 1995, in the 129th Judicial District Court
of Harris County, Texas against NIPSCO Industries, Inc., certain other named
subsidiaries of NIPSCO (collectively, the "NIPSCO entities"), Eastex, Robert G.
Phillips, Chairman of the Board and Chief Executive Officer of Eastex (in his
individual capacity) and certain individuals associated with NIPSCO
(collectively, the "Defendants"), by certain minority shareholders of Triumph
(collectively, the "Plaintiffs"). The petition alleges, among other things and
insofar as it relates to Eastex and Mr. Phillips, that Eastex and Mr. Phillips
wrongfully interfered with Triumph's business and/or contractual relations with
the NIPSCO entities with the intention of harming Triumph and its stockholders,
and that all of the Defendants conspired to deprive Triumph of valuable business
opportunities for their own benefit. In late March 1994, Triumph's board, a
majority of whom were independent of the NIPSCO entities and Eastex, determined
not to approve the proposed transfer. Accordingly, the transactions contemplated
in the Agreement were not consummated and negotiations related thereto promptly
ceased. See "The Merger -- Background of the Merger." The Plaintiffs have
alleged lost profits and other damages against all of the Defendants in a range
of $20 to $30 million, as well as punitive damages. Management of Eastex
believes that the litigation is without merit and intends to vigorously defend
the claims asserted against it.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 14, 1995, the Record Date,
certain information regarding the ownership of Eastex Common Stock (which is the
only class of voting securities of Eastex) by (i) each director of Eastex, (ii)
each of the most highly compensated executive officers of Eastex and (iii) all
directors and executive officers of Eastex as a group. Except as otherwise
indicated herein, each individual has sole voting and investment power over the
shares listed below.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS(A) BENEFICIALLY OWNED(B)(C) OF CLASS
------------------------------------------------------ ------------------------ --------
<S> <C> <C>
Robert G. Phillips(d)................................. 2,393,000 36.1%
Mark A. Searles....................................... 309,040 4.5%
David H. Eargle....................................... 143,800 2.1%
R. Cris Sherman....................................... 10,076 *
Merrell A. Athon...................................... 21,000 *
James E. Haynes....................................... 60,000 *
James N. Winfrey...................................... 50,000 *
All directors and executive officers as a group (9
persons)(e)......................................... 3,025,829 45.7%
</TABLE>
---------------
* Represents less than 1%.
(a) The address of each listed individual is First Interstate Bank Plaza, 1000
Louisiana, Houston, Texas 77002.
(b) Beneficial ownership includes shares which are outstanding and which such
person has the right to acquire ownership of within 60 days of July 14,
1995, upon the exercise of outstanding options or warrants or otherwise.
(c) Includes the following shares underlying options granted under the Eastex
Option Plans and an option granted to Mr. Searles as an inducement to enter
into employment with Eastex: Mr. Searles -- 250,000 shares; Mr.
Eargle -- 135,000 shares; Mr. Sherman -- 9,666 shares; Mr. Athon -- 20,000
shares; Mr. Haynes -- 50,000 shares; and Mr. Winfrey -- 50,000 shares.
(d) Mr. Phillips may be deemed to share voting power and investment power with
respect to these shares with EPG Sub pursuant to the Phillips Stockholder
Agreement. See "Certain Agreements."
(e) Includes an aggregate of 548,579 shares underlying options held by directors
and executive officers of Eastex.
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<PAGE> 50
No one (or group within the meaning of Section 13(d)(3) of the Exchange
Act) was known by Eastex to own beneficially more than 5% of the outstanding
shares of Eastex Common Stock on July 14, 1995, except as shown in the following
table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF SHARES
--------------------------------------------------------- ------------------ ----------
<S> <C> <C>
El Paso Natural Gas Company.............................. 3,340,000(1) 46.0%*
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
RIMCO Entities........................................... 647,500(2) 8.9%*
22 Waterville Road
Avon, Connecticut 06001
Robert G. Phillips....................................... 2,393,000(3) 36.1%
1000 Louisiana, Suite 1100
Houston, Texas 77002
</TABLE>
---------------
* Assumes the exercise of warrants to purchase 647,500 shares of Eastex Common
Stock but no other warrants or options to purchase Eastex Common Stock
outstanding as of July 14, 1995.
(1) The amount consists of (i) 2,393,000 shares of Eastex Common Stock owned by
Robert G. Phillips that EPG Sub has the right to acquire under the terms of
the Phillips Stockholder Agreement, with respect to which EPG Sub may be
deemed to share voting and investment power with Mr. Phillips, (ii) 647,500
shares of Eastex Common Stock owned by the RIMCO Entities that EPG has the
right to acquire through the purchase of warrants under the terms of the
RIMCO Stockholder Agreement, with respect to which EPG Sub may be deemed to
share voting and investment power with the RIMCO Entities, and (iii) 300,000
shares of Eastex Common Stock, with respect to which EPG Sub may be deemed
to share voting power with the owners of such shares. See "Certain
Agreements."
(2) The beneficial owner has the right to acquire all these shares within 60
days of July 14, 1995. See clause (ii) of footnote (1).
(3) See clause (i) of footnote (1).
COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
As a result of the Merger, holders of Eastex Common Stock who make a Stock
Election (and, under certain conditions, holders of Eastex Common Stock who make
a Cash Election) will become stockholders of EPG and the rights of all such
former Eastex stockholders will thereafter be governed by the Restated
Certificate of Incorporation of EPG (the "EPG Certificate"), the By-laws of EPG
(the "EPG By-laws") and the DGCL. The rights of the holders of Eastex Common
Stock are presently governed by the Restated Certificate of Incorporation of
Eastex (the "Eastex Certificate"), the By-laws of Eastex (the "Eastex By-laws")
and the DGCL. The following summary, which does not purport to be a complete
statement of the general differences among the rights of the stockholders of EPG
and Eastex, sets forth certain differences between the EPG Certificate and the
Eastex Certificate and between the EPG By-laws and Eastex By-laws. This summary
is qualified in its entirety by reference to the full text of each of such
documents and the DGCL. For information as to how such documents may be
obtained, see "Available Information."
SIZE OF THE BOARD OF DIRECTORS
EPG. The EPG By-laws provide for the number of directors to be not less
than one and permit the EPG Board to fix the number of directors by resolution.
The EPG Board currently consists of 7 directors.
Eastex. The Eastex By-laws provide for the number of directors to be not
less than one nor more than seven and permit the Eastex Board by resolution and
the stockholders of Eastex at the annual meeting of stockholders to fix the
number of directors. The Eastex Board currently consists of 6 directors.
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<PAGE> 51
ELECTION AND CLASSIFICATION OF THE BOARD OF DIRECTORS
EPG. The entire EPG Board is elected by the stockholders of EPG at each
annual meeting of stockholders for a term of one year.
Eastex. The entire Eastex Board is elected at the annual meeting of the
stockholders of Eastex.
REMOVAL OF DIRECTORS; FILLING VACANCIES
The DGCL provides that any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors unless the corporation has a
classified board or has cumulative voting. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote as a single class
may be filled by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director.
EPG. The EPG By-laws provide that any director of EPG may be removed, with
or without cause, at any special meeting of the stockholders called for that
purpose, by the affirmative vote of the holders of a majority in the number of
shares of EPG entitled to vote for the election of such director, and the
vacancy in the Board caused by any such removal may be filled by the
stockholders at such a meeting. The ability of the stockholders of EPG to remove
directors, however, is limited because the stockholders cannot call a special
meeting and no action by stockholders of EPG may be taken by written consent.
Eastex. The Eastex By-laws provide that any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS OF STOCKHOLDERS
EPG. The EPG Certificate provides that any action by the stockholders will
be taken at a meeting of stockholders and no action may be taken by written
consent of stockholders entitled to vote on such action. The EPG By-laws provide
that special meetings of the stockholders for any purpose(s) may be called only
by a majority of the EPG Board, the Chairman of the Board, the President and
Chief Executive Officer or the Vice Chairman of the Board.
The provisions of the EPG Certificate prohibiting stockholder action by
written consent may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting of stockholders. These provisions would
also prevent the holders of a majority of the voting power of the EPG Common
Stock from unilaterally using the written consent procedure to take stockholder
action. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the Chairman of the Board, the President, the
Chief Executive Officer and the EPG Board by calling a special meeting of
stockholders prior to the time the Chairman of the Board, the President, the
Chief Executive Officer or the EPG Board believes such consideration to be
appropriate.
Eastex. The Eastex By-laws provide that any action required to, or which
may, be taken at any annual or special meeting of stockholders of Eastex, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Special meetings of
stockholders for any purpose(s) may be called by the Chairman of the Board or
the President and shall be called by the Chairman of the Board, the President or
the Secretary at the request in writing of a majority of the Board of Directors,
or at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote.
FAIR PRICE PROVISIONS
EPG. The EPG Certificate provides that in addition to any affirmative vote
otherwise required, the affirmative vote of not less than fifty-one percent of
the Voting Stock, excluding the Voting Stock of an
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<PAGE> 52
Interested Stockholder who is a party to the Business Combination, shall be
required for the adoption or authorization of a Business Combination, unless the
Disinterested Directors determine that:
(a) The Interested Stockholder is the beneficial owner of not less
than eighty percent of the Voting Stock and has declared its intention to
vote in favor of or to approve such Business Combination; or
(b) (i) The fair market value of the consideration per share to be
received or retained by the holders of each class or series of stock of EPG
in a Business Combination is equal to or greater than the consideration per
share (including brokerage commissions and soliciting dealer's fees) paid
by such Interested Stockholder in acquiring the largest number of shares of
such class of stock previously acquired in any one transaction or series of
related transactions, whether before or after the Interested Stockholder
became an Interested Stockholder and (ii) the Interested Stockholder shall
not have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance provided by EPG, whether in
anticipation of or in connection with such Business Combination or
otherwise.
For the purposes of this provision, certain terms are defined below:
(a) "Affiliate" and "beneficial owner" are used herein as defined in
Rule 12b-2 and Rule 13d-3, respectively, under the Securities Exchange Act
of 1934 as in effect on January 1, 1992. The term "Affiliate" as used
herein excludes EPG, but includes the definition of "Associate" as
contained in Rule 12b-2.
(b) An "Interested Stockholder" is a Person other than EPG who is (A)
the beneficial owner of ten percent or more of the stock of EPG entitled to
vote for the election of directors ("Voting Stock") or (B) an Affiliate of
EPG which (1) at any time within a two-year period prior to the record date
for the vote on a Business Combination was the beneficial owner of ten
percent or more of the Voting Stock, or (2) at the completion of the
Business Combination will be the beneficial owner of ten percent or more of
the Voting Stock.
(c) A "Person" is a natural person or a legal entity of any kind,
together with any Affiliate of such person or entity, or any person or
entity with whom such person, entity or any Affiliate has any agreement or
understanding relating to acquiring, voting or holding Voting Stock.
(d) A "Disinterested Director" is a member of the EPG Board (other
than the Interested Stockholder) who was a director prior to the time the
Interested Stockholder became an Interested Stockholder, or any director
who was recommended for election by the Disinterested Directors. Any action
to be taken by the Disinterested Directors shall require the affirmative
vote of at least two-thirds of the Disinterested Directors.
(e) A "Business Combination" is (i) a merger or consolidation of EPG
or any of its subsidiaries with an Interested Stockholder; (ii) the sale,
lease, exchange, pledge, transfer or other disposition (A) by EPG or any of
its subsidiaries of all or a Substantial Part of EPG's Assets to an
Interested Stockholder, or (B) by an Interested Stockholder of any of its
assets, except in the ordinary course of business, to EPG or any of its
subsidiaries; (iii) the issuance of stock or other securities of EPG or any
of its subsidiaries to an Interested Stockholder, other than on a pro rata
basis to all holders of Voting Stock of the same class held by the
Interested Stockholder pursuant to a stock split, stock dividend or
distribution of warrants or rights; (iv) the adoption of any plan or
proposal for the liquidation or dissolution of EPG proposed by or on behalf
of an Interested Stockholder; (v) any reclassification of securities,
recapitalization, merger or consolidation or other transaction which has
the effect, directly or indirectly, of increasing the proportionate share
of any Voting Stock beneficially owned by an Interested Stockholder; or
(vi) any agreement, contract or other arrangement providing for any of the
foregoing transactions.
(f) A "Substantial Part of EPG's Assets" shall mean assets of EPG or
any of its subsidiaries in an amount equal to twenty percent or more of the
fair market value, as determined by the Disinterested Directors, of the
total consolidated assets of EPG and its subsidiaries taken as a whole as
of the end of its most recent fiscal year ended prior to the time the
determination is made.
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<PAGE> 53
The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against certain takeover bids. Notwithstanding the
foregoing, the provision could also have the effect of discouraging a third
party from making a tender or exchange offer for EPG, even though such an offer
might be beneficial to EPG and its stockholders.
Eastex. The Eastex Certificate contains no "fair price" provision.
CUMULATIVE VOTING
Under both the EPG Certificate and the Eastex Certificate, cumulative
voting is not permitted.
PREEMPTIVE RIGHTS
Under both the EPG Certificate and the Eastex Certificate, stockholders do
not have preemptive rights.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL provides that amendments to certificates of incorporation must be
approved by the affirmative vote of the holders of a majority of the voting
power of the corporation entitled to vote thereon, unless the certificate
requires a greater percentage.
EPG. The EPG Certificate contains a provision requiring the affirmative
vote of not less than fifty-one percent of the Voting Stock, excluding the
Voting Stock of any Interested Stockholder, to amend (i) the "fair price"
provision described above and (ii) the provision prohibiting action by
stockholders by written consent. These provisions make it more difficult for
stockholders to make changes to the EPG Certificate, including changes designed
to facilitate the exercise of control over EPG.
Eastex. The Eastex Certificate has no such provision requiring more than
the affirmative vote of a majority of the outstanding stock entitled to vote, as
required by the DGCL.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of the
director's fiduciary duty, subject to certain limitations. Each of the EPG
Certificate and the Eastex Certificate includes such a provision to the maximum
extent permitted by law.
While these provisions provide directors with protection from awards of
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of the corporation only if he or she is a director of the corporation
and is acting in his or her capacity as director, and do not apply to officers
of the corporation who are not directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may advance expenses
of defense (upon receipt of an undertaking to reimburse the corporation if
indemnification is not appropriate) and must reimburse a successful defendant
for expenses, including attorney's fees, actually and reasonably incurred. The
DGCL provides that indemnification may not be made for any claim, issue or
matter as to which a person had been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation, unless and only to the extent a court determines that the person is
entitled to indemnity for such expenses as the court deems proper.
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<PAGE> 54
The EPG By-laws contains substantially similar language, and the Eastex
By-laws permit indemnification to the extent permitted by the DGCL.
STOCKHOLDER RIGHTS PLAN
EPG. EPG adopted a stockholder rights plan that is designed to protect EPG
stockholders from coercive or unfair takeover tactics. To implement the plan, in
July 1992, EPG's Board of Directors declared a dividend distribution of one
Right for each share of Common Stock then outstanding. All shares of Common
Stock issued subsequently also include these Rights. One Right will be issued
with respect to each share of EPG Common Stock issued pursuant to the Merger.
Under certain conditions, each Right may be exercised to purchase from EPG one
one-hundredth of a share of a series of EPG's Preferred Stock, designated as
Series A Junior Participating Preferred Stock, $.01 par value, at a price of $75
per one one-hundredth of a share, subject to adjustment.
The Rights are exercisable only if, without the prior consent of the EPG
Board, a person or group becomes the beneficial owner of 15% or more of the
voting power of all outstanding voting securities of EPG (any such person or
group, an "Acquiring Person") or commences or announces a tender or exchange
offer which would result in such person or group becoming an Acquiring Person.
In the event that a person or group becomes an Acquiring Person, or, during such
time as there is an Acquiring Person, there shall be any reclassification of
securities, or recapitalization of EPG, or any merger or consolidation of EPG
with any of its subsidiaries or any other transaction or series of transactions
which has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of EPG or any of its subsidiaries which is directly or indirectly owned by
Acquiring Person, then each Right not owned by the Acquiring Person will entitle
its holder to purchase, at the Right's then-current exercise price, shares of
EPG Common Stock (or in certain circumstances other equity securities of EPG
with at least the same economic value as EPG Common Stock) having a market value
of twice the Right's then-current exercise price. If, after the Rights become
exercisable, EPG is involved in a merger or other business combination
transaction in which the EPG Common Stock is exchanged or changed, or it sells
50% or more of its assets or earning power, each Right will entitle the holder
to purchase, at the Right's then-current exercise price, common stock of the
acquiring company having a value of twice the exercise price of the Right. The
Rights, which have no voting rights, expire no later than July 7, 2002. The
Rights may be redeemed by EPG under certain circumstances prior to their
expiration date at a purchase price of $.01 per Right. It is possible that the
existence of the Rights may have the effect of delaying, deterring or preventing
a takeover of EPG.
Eastex. Eastex does not have a stockholder rights plan.
LEGAL MATTERS
The validity of the issuance of the shares of EPG Common Stock being
offered hereby will be passed upon for EPG by Britton White, Jr., Senior Vice
President and General Counsel of EPG. As of the date of this Proxy
Statement/Prospectus, Mr. White owned approximately 16,000 shares and held stock
options to purchase 69,067 shares of EPG Common Stock. Certain federal income
tax consequences in connection with the Merger will be passed upon by Fried,
Frank, Harris, Shriver & Jacobson, New York, New York.
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<PAGE> 55
EXPERTS
The audited consolidated financial statements and related financial
statement schedules of EPG, incorporated by reference in this Proxy
Statement/Prospectus, have been audited by Coopers & Lybrand L.L.P., independent
auditors, as set forth in their report with respect thereto. Such audited
financial statements and schedules have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The audited consolidated financial statements of Eastex incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the registration
statement to the extent and for the periods indicated in their report have been
audited by Arthur Andersen, LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports. Reference is made to said report which includes an explanatory
paragraph that describes the litigation discussed in Note 12 to the financial
statements.
Representatives of Arthur Andersen, LLP are expected to be present at the
Special Meeting, where they will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
EASTEX STOCKHOLDER PROPOSALS
If the Merger is not consummated, any proposals of stockholders of Eastex
intended to be presented at the next annual meeting of stockholders of Eastex
must be received by Eastex a reasonable time before the solicitation by
management of proxies with respect to such meeting, in order to be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Eastex Board has no knowledge of any business to be presented for
consideration at the Special Meeting other than as described in this Proxy
Statement/Prospectus. Should any such other matters properly come before the
Special Meeting or any adjournment thereof, the person named in the enclosed
Proxy will have discretionary authority to vote such Proxy in accordance with
his best judgment on such other matters and with respect to matters incident to
the conduct of the Special Meeting.
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<PAGE> 56
APPENDIX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
EL PASO NATURAL GAS COMPANY,
EL PASO ACQUISITION COMPANY
AND
EASTEX ENERGY INC.
DATED AS OF MAY 8, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
1. The Merger................................................................ A-1
1.1. The Merger................................................................ A-1
1.2. The Closing............................................................... A-1
1.3. Effective Time............................................................ A-1
2. Certificate of Incorporation and By-laws of the Surviving Corporation..... A-1
2.1. Certificate of Incorporation.............................................. A-1
2.2. By-laws................................................................... A-2
3. Directors and Officers of the Surviving Corporation....................... A-2
3.1. Directors................................................................. A-2
3.2. Officers.................................................................. A-2
4. Conversion of Company Stock............................................... A-2
4.1. Conversion of Company Stock............................................... A-2
4.2. Election Procedures....................................................... A-4
4.3. Selection of Company Common Stock......................................... A-5
4.4. Parent to Make Cash and Certificate Available; Transfer Taxes............. A-6
4.5. Adjustment of Exchange Ratio.............................................. A-7
5. Representations and Warranties of the Company............................. A-8
5.1. Existence; Good Standing; Corporate Authority; Compliance With Law........ A-8
5.2. Authorization, Validity and Effect of Agreements.......................... A-8
5.3. Capitalization............................................................ A-8
5.4. Subsidiaries.............................................................. A-9
5.5. Other Interests........................................................... A-9
5.6. No Violation.............................................................. A-9
5.7. SEC Documents............................................................. A-9
5.8. Litigation................................................................ A-10
5.9. Absence of Certain Changes................................................ A-10
5.10. Taxes..................................................................... A-10
5.11. Certain Employee Plans.................................................... A-11
5.12. Labor Matters............................................................. A-11
5.13. No Brokers................................................................ A-11
5.14. Fairness Opinion.......................................................... A-12
5.15. Environmental Matters..................................................... A-12
5.16. Related Party Transactions................................................ A-13
6. Representations and Warranties of Parent and Merger Sub................... A-13
6.1. Existence; Good Standing; Corporate Authority; Compliance with Law........ A-13
6.2. Authorization, Validity and Effect of Agreements.......................... A-13
6.3. No Violation.............................................................. A-14
6.4. No Brokers................................................................ A-14
6.5. Capitalization............................................................ A-14
6.6. SEC Documents............................................................. A-14
6.7. Litigation................................................................ A-15
6.8. Absence of Certain Changes................................................ A-15
6.9. Parent Common Stock....................................................... A-15
7. Covenants................................................................. A-15
7.1. Acquisition Proposals..................................................... A-15
7.2. Conduct of Businesses..................................................... A-16
7.3. Meeting of Stockholders................................................... A-17
7.4. Filings; Other Action..................................................... A-17
7.5. Inspection of Records; Access............................................. A-18
7.6. Publicity................................................................. A-18
</TABLE>
(i)
<PAGE> 58
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
7.7. Registration Statement.................................................... A-18
7.8. Listing Application....................................................... A-19
7.9. Agreements by Affiliated Stockholders of the Company...................... A-19
7.10. Further Action............................................................ A-19
7.11. Expenses.................................................................. A-19
7.12. Indemnification and Insurance............................................. A-19
7.13. Certain Benefits.......................................................... A-20
7.14. Reorganization............................................................ A-20
7.15. Purchase of Company Common Stock.......................................... A-20
7.16. Headquarters of the Surviving Corporation; Operations..................... A-20
7.17. Merger of Subsidiaries of the Company..................................... A-20
8. Conditions................................................................ A-20
8.1. Conditions to Each Party's Obligation to Effect the Merger................ A-20
8.2. Conditions to Obligation of the Company to Effect the Merger.............. A-21
8.3. Conditions to Obligation of Parent and Merger Sub to Effect the Merger.... A-21
9. Termination............................................................... A-22
9.1. Termination by Mutual Consent............................................. A-22
9.2. Termination by Either Parent or the Company............................... A-22
9.3. Termination by the Company................................................ A-22
9.4. Termination by Parent..................................................... A-22
9.5. Effect of Termination and Abandonment..................................... A-22
9.6. Extension; Waiver......................................................... A-23
10. General Provisions........................................................ A-23
10.1. Survival of Representations and Warranties................................ A-23
10.2. Notices................................................................... A-23
10.3. Assignment; Binding Effect; Benefit....................................... A-23
10.4. Entire Agreement.......................................................... A-24
10.5. Amendment................................................................. A-24
10.6. Governing Law............................................................. A-24
10.7. Counterparts.............................................................. A-24
10.8. Headings.................................................................. A-24
10.9. Interpretation............................................................ A-24
10.10. Waivers................................................................... A-24
10.11. Severability.............................................................. A-24
10.12. Enforcement of Agreement.................................................. A-24
</TABLE>
(ii)
<PAGE> 59
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 8, 1995,
between El Paso Natural Gas Company, a Delaware corporation ("Parent"), El Paso
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Eastex Energy Inc., a Delaware corporation (the
"Company").
RECITALS
A. The Boards of Directors of Parent, Merger Sub and the Company, and
Parent as the sole stockholder of Merger Sub, each have approved the merger of
the Company with and into Merger Sub (the "Merger"), upon the terms and subject
to the conditions set forth herein.
B. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
C. The Company has received a fairness opinion relating to the transactions
contemplated hereby as more fully described herein.
D. Parent, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. The Merger.
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), the Company shall be merged with
and into Merger Sub in accordance with this Agreement and the separate corporate
existence of the Company shall thereupon cease. Merger Sub shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"). The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2. The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, at 9:00 a.m., local time, on the first business day immediately following
the day on which the last to be fulfilled or waived of the conditions set forth
in Article 8 shall be fulfilled or waived in accordance herewith, or at such
other time, date or place as Parent and the Company may agree. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date."
1.3. Effective Time. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
ARTICLE 2
2. Certificate of Incorporation and By-laws of the Surviving Corporation.
2.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly
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amended in accordance with applicable law, except that the name of Merger Sub
shall be changed to Eastex Energy Inc.
2.2. By-laws. The By-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
3. Directors and Officers of the Surviving Corporation.
3.1. Directors. The directors of the Surviving Corporation as of the
Effective Time shall be the directors of Merger Sub immediately prior to the
Effective Time and Robert G. Phillips.
3.2. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
ARTICLE 4
4. Conversion of Company Stock.
4.1. Conversion of Company Stock.
(a) At the Effective Time, each share of the common stock, $1.00 par
value, of Merger Sub outstanding immediately prior to the Effective Time
shall remain outstanding and shall represent one share of common stock,
$1.00 par value, of the Surviving Corporation.
(b) (i) At the Effective Time, each share of the common stock, $.01
par value (the "Company Common Stock"), of the Company issued and
outstanding immediately prior to the Effective Time which, under the terms
of this Article 4, is to be converted into the right to receive common
stock, $3.00 par value (the "Parent Common Stock"), of Parent, shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (as the same may be
adjusted as hereinafter provided) a number of shares of Parent Common
Stock, rounded to four decimal places, determined by dividing $4.50 by the
"Average Price" of a share of Parent Common Stock, but in any event not
less than .1485 and not more than .1629 (the "Exchange Ratio"). The
"Average Price" of a share of Parent Common Stock shall be the average,
rounded to four decimal places, of the closing sales prices thereof on The
New York Stock Exchange (the "NYSE") (as reported by The Wall Street
Journal or, if not reported thereby, by another authoritative source) over
the ten business days immediately preceding the Closing Date. Holders of
shares of Company Common Stock converted into Parent Common Stock shall
also have the right to receive, together with each share of Parent Common
Stock issued in the Merger, one associated preferred stock purchase right
(a "Right") in accordance with the Shareholder Rights Agreement dated as of
July 7, 1992, between Parent and The First National Bank of Boston (the
"Parent Rights Agreement"). References herein to the shares of Parent
Common Stock issuable in the Merger shall be deemed to include the
associated Rights.
(ii) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time which, under the
terms of this Article 4, is to be converted into the right to receive cash
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive $4.50 in cash,
without interest (the "Cash Amount").
(iii) The consideration payable in respect of each share of Company
Common Stock pursuant to Section 4.1(b)(i) or 4.1(b)(ii) hereof (including
cash for fractional shares of Parent Common Stock in accordance with
Section 4.4(e)) is hereinafter referred to as the "Merger Consideration."
(c) As a result of the Merger and without any action on the part of
the holder thereof, all shares of Company Common Stock shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist,
and each holder of a certificate (a "Certificate") representing any shares
of Company Common Stock shall thereafter cease to have any rights with
respect to such shares of Company Common Stock,
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except the right to receive, without interest, the Merger Consideration
payable with respect thereto in accordance with Sections 4.1(b) and 4.4(e)
upon the surrender of such Certificate.
(d) Each share of Company Common Stock issued and held in the
Company's treasury at the Effective Time or owned by Parent or any of its
Subsidiaries (as defined in Section 10.9) shall, by virtue of the Merger,
cease to be outstanding and shall be cancelled and retired without payment
of any consideration therefor.
(e) Immediately prior to the Effective Time, except as provided in
Section 4.1(f) and (g), all options (individually, an "Option" and
collectively, the "Options") then outstanding under the Company's 1987
Nonemployee Director Stock Option Plan, Second Amended and Restated 1987
Stock Option Plan, 1994 Executive Long-Term Stock Option Plan or any other
incentive compensation or stock option plan of the Company (the "Option
Plans"), whether or not then exercisable, shall be canceled and each holder
of an Option will be entitled to receive from the Company, for each share
of Company Common Stock subject to an Option, an amount in cash equal to
the excess, if any, of the Cash Amount over the per share exercise price of
such Option. The Company will use its reasonable best efforts to obtain any
necessary consents from holders of Options to the cancellation and payment
provided for in this Section 4.1(e). From and after the date of this
Agreement, no additional options shall be granted by the Company or its
Subsidiaries (as defined in Section 10.9 hereof) under the Option Plans or
otherwise.
(f) Notwithstanding anything to the contrary contained herein or
otherwise, each of the Options listed on Schedule 4.1(f) shall not be
canceled pursuant to Section 4.1(e) above, but shall instead remain
outstanding at the Effective Time and, shall by virtue of the Merger and
without any action on the part of the holder thereof, be assumed by Parent
and converted into an option to purchase Parent Common Stock (each a
"Converted Option") as set forth below. Each Converted Option (i) shall be
subject to the same terms and conditions that applied to the corresponding
Option prior to conversion (including the terms and conditions relating to
exercisability, but without regard to any acceleration of exercisability
that may occur in connection with the Merger, so that the vesting and
exercisability of all Converted Options will be determined as if the Merger
had not occurred), (ii) shall be exercisable for that whole number of
shares of Parent Common Stock (rounded downward to the nearest whole share)
equal to the number of shares of Company Common Stock subject to such
Option immediately prior to the Effective Time, multiplied by the Exchange
Ratio, and (iii) shall have an exercise price per share of Parent Common
Stock equal to the exercise price per share of Company Common Stock under
the corresponding Option immediately prior to the Effective Time, divided
by the Exchange Ratio (the exercise price per share of Parent Common Stock,
as so determined, being rounded upward to the nearest full cent). The
Company will use its reasonable best efforts to obtain any necessary
consents from the holders of the Options listed on Schedule 4.1(f) to the
conversion of such Options as set forth above.
(g) Notwithstanding anything to the contrary contained herein or
otherwise, each of the stock-related performance shares and performance
units outstanding as of the Effective Time under (i) the Company's
Incentive Compensation Plan, (ii) the Heath Petra Resources, Inc. Incentive
Compensation Plan and (iii) the proposed amendment to certain employment
agreements and related agreements set forth in the term sheet relating
thereto described in item 3 of Exhibit B hereto (each a "Terminated
Performance Unit") shall by virtue of the Merger and without any action on
the part of the holder thereof, be assumed by Parent and converted into a
performance share unit relating to Parent Common Stock (each a "Converted
Performance Unit") as set forth below. Each Converted Performance Unit (i)
shall be subject to terms and conditions which, as nearly as practicable,
duplicate the terms and conditions that applied to the corresponding
Terminated Performance Unit prior to conversion (including the terms and
conditions relating to vesting and payment, but without regard to any
acceleration of vesting or payment that may occur in connection with the
Merger, so that the vesting and payment of all Converted Performance Units
will be determined as if the Merger had not occurred) and (ii) shall be
denominated in that whole number of performance share units of Company
Common Stock subject to such Terminated Performance Unit immediately prior
to the Effective Time, multiplied by the Exchange Ratio. The Company will
use its reasonable best efforts to obtain any necessary consent from the
holders of the Terminated Performance Units to the conversion of such Units
as set forth above.
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4.2. Election Procedures. Each holder of Company Common Stock (other than
holders of Company Common Stock to be cancelled as set forth in Section 4.1(d))
shall have the right to submit a request, in accordance with the following
procedures, specifying the number of shares of his Company Common Stock which he
desires to have converted into the right to receive Parent Common Stock in the
Merger and the number of shares of his Company Common Stock which he desires to
have converted into the right to receive the Cash Amount in the Merger in
accordance with the following procedure.
(a) Each holder of Company Common Stock may specify in a request made
in accordance with the provisions of this Section (herein called an
"Election"):
(i) the number of shares of Company Common Stock owned by such
holder which such holder shall desire to have converted into the right
to receive the Cash Amount in the Merger (a "Cash Election"); and
(ii) the number of shares of Company Common Stock owned by such
holder which such holder shall desire to have converted into the right
to receive Parent Common Stock in the Merger (a "Stock Election").
Any Cash Election may be conditioned on all of the shares of Company
Common Stock covered thereby being converted into the right to receive the
Cash Amount (a "Conditional Cash Election"). If the proration provisions of
Section 4.3(d) are applicable to the Merger (or would be applicable but for
this sentence), all shares of Company Common Stock covered by a Conditional
Cash Election shall be converted into the right to receive Parent Common
Stock in the Merger.
(b) Parent shall authorize a person (which shall be Parent's transfer
agent or another person reasonably satisfactory to the Company) to receive
Elections and to act as Exchange Agent hereunder (the "Exchange Agent").
(c) Parent shall prepare a form (the "Form of Election") pursuant to
which each holder of Company Common Stock at the close of business on the
day on which the Effective Time occurs may make an Election, which Form of
Election shall be mailed to holders of Company Common Stock at such time as
to permit holders of Company Common Stock to exercise their right to make
an Election. As used herein, "Election Date" means the date announced by
Parent, in a news release delivered to the Dow Jones News Service, as the
last day on which Forms of Election will be accepted; provided, that such
day shall be a business day no earlier than five business days prior to the
Effective Time and no later than the date on which the Effective Time
occurs and shall be at least five business days following the date of such
news release.
(d) Any Election shall have been properly made only if the Exchange
Agent at its office designated in the Form of Election shall have received,
by 5:00 p.m. local time in the city in which such Exchange Agent is
located, on the Election Date, a Form of Election properly completed and
signed (with the signature or signatures thereon guaranteed if required by
the Form of Election), accompanied either by the Certificate or
Certificates representing all of the shares of Company Common Stock owned
by such holder, duly endorsed or otherwise acceptable for transfer, or by
an appropriate guaranty of delivery in the form customarily used in
transactions of this nature from a member of a national securities exchange
or a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States. Failure to deliver
shares covered by such a guaranty of delivery within the time set forth on
such guaranty shall be deemed to invalidate any otherwise properly made
Election.
(e) Any holder of Company Common Stock may at any time prior to the
Election Date change his Election by written notice received by the
Exchange Agent at or prior to the Election Date accompanied by a properly
completed, revised Form of Election (with such other documents as are
required as contemplated by subsection (d) above).
(f) Any holder of Company Common Stock may at any time prior to the
Election Date revoke his Election by written notice received by the
Exchange Agent at or prior to the Election Date or by
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withdrawal prior to the Election Date of his Certificates for Company
Common Stock or of the guaranty of delivery of such Certificates,
previously deposited with the Exchange Agent.
(g) As used in this Agreement, "holders" of Company Common Stock shall
mean record holders of Company Common Stock. Record holders who are
nominees only may submit a separate Form of Election for each beneficial
owner for whom any such record holder is a nominee; provided, however, that
at the request of Parent, such record holder shall certify to the
satisfaction of Parent that such record holder holds such shares as nominee
for the beneficial owner thereof. For purposes of this Agreement, each
beneficial owner for which a Form of Election is submitted will be treated
as a separate holder of shares.
(h) Parent shall have the right to make rules not inconsistent with
the terms of this Agreement governing the validity of the Forms of
Election, the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Section 4.3, the
issuance and delivery of certificates for Parent Common Stock into which
Company Common Stock is converted in the Merger and the payment for shares
of Company Common Stock converted into the right to receive the Cash Amount
in the Merger. All such rules and determinations thereunder shall be final
and binding on all holders of Company Common Stock.
(i) If this Agreement is terminated, Parent will cause the Exchange
Agent to return to the holders of Company Common Stock any Certificates
delivered by such holders to the Exchange Agent.
4.3. Selection of Company Common Stock. The manner in which each share of
Company Common Stock (other than shares of Company Common Stock to be cancelled
as set forth in Section 4.1(d)) shall be converted at the Effective Time into
either the Cash Amount or Parent Common Stock shall be as set forth below in
this Section 4.3.
(a) The portion of the aggregate consideration paid or deemed paid
pursuant to the Merger (the "Aggregate Merger Consideration") which shall
be paid other than in the form of Parent Common Stock (which shall be
deemed to include, without limitation, cash paid upon the acquisition by
Parent or any of its Subsidiaries of Company Common Stock or warrants to
purchase Company Common Stock, whether pursuant to the Merger, the
Stockholder Agreement, Section 7.15 or otherwise, cash paid in lieu of
fractional shares and cash paid upon the cancellation of Options) (the
"Cash Consideration") shall not exceed 49% of the Aggregate Merger
Consideration (the "Maximum Cash Consideration"). For the purpose of
determining the Maximum Cash Consideration, a share of Parent Common Stock
shall be valued at the lowest of (x) the closing trading price of a share
of Parent Common Stock on the NYSE Composite Tape on the date of the
Effective Time, (y) the median, rounded to four decimal places, of the high
and low trading price of a share of Parent Common Stock on the NYSE
Composite Tape on the date of the Effective Time and (z) the Average Price.
(b) The maximum number of shares of Company Common Stock to be
converted into the right to receive cash pursuant to the Merger shall be
determined by (x) subtracting from the Maximum Cash Consideration all
consideration paid or deemed paid pursuant to the Merger other than in the
form of Parent Common Stock (other than payments of the Cash Amount for
shares of Company Common Stock covered by Cash Elections) and (y) dividing
the result by the Cash Amount (the "Cash Conversion Number").
(c) If Cash Elections are received for a number of shares of Company
Common Stock which is equal to or less than the Cash Conversion Number,
each share of Company Common Stock covered by a Cash Election shall be
converted into the right to receive the Cash Amount in the Merger.
(d) If Cash Elections are received for a number of shares of Company
Common Stock which is more than the Cash Conversion Number, (i) all shares
of Company Common Stock covered by a Conditional Cash Election shall be
converted into the right to receive Parent Common Stock in the Merger and
(ii) if, after subtracting all shares of Company Common Stock covered by
Conditional Cash Elections, (x) the number of shares of Company Common
Stock covered by Cash Elections is equal to or
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less than the Cash Conversion Number, the provisions of paragraph (c) above
shall apply, or (y) the number of shares of Company Common Stock covered by
Cash Elections is more than the Cash Conversion Number, the shares of
Company Common Stock for which Cash Elections have been received (excluding
shares covered by Conditional Cash Elections) shall be converted into the
right to receive the Cash Amount and Parent Common Stock in the following
manner:
(i) A cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Cash Conversion Number by the total number of
shares of Company Common Stock with respect to which effective Cash
Elections were made.
(ii) The number of shares of Company Common Stock covered by each
Cash Election to be converted into the right to receive the Cash Amount
shall be determined by multiplying the Cash Proration Factor by the
total number of Shares of Company Common Stock covered by such Cash
Election, rounded to the next lowest integer.
(iii) Each share of Company Common Stock covered by a Cash Election
and not converted into the right to receive the Cash Amount as set forth
above shall be converted into the right to receive Parent Common Stock
in the Merger.
(e) Each share of Company Common Stock for which Stock Elections have
been made shall be converted into the right to receive Parent Common Stock
in the Merger.
(f) For the purposes of this Section 4.3, outstanding shares of
Company Common Stock (other than shares of Company Common Stock to be
cancelled as set forth in Section 4.1(d)) as to which an Election is not in
effect and effective on the Election Date shall be called "Non-Electing
Shares." If Parent shall determine for any reason that any Election was not
properly made with respect to shares of Company Common Stock, such Election
shall be deemed to be not in effect and shares of Company Common Stock
covered by such Election shall, for the purpose hereof, be deemed to be
Non-Electing Shares. Each Non-Electing Share shall be converted into the
right to receive Parent Common Stock in the Merger.
4.4. Parent To Make Cash and Certificates Available; Transfer Taxes.
(a) Parent shall make available to the Exchange Agent promptly after
the Election Date (the "Allocation Date"), an amount in cash equal to the
cash to be paid in exchange for shares of Company Common Stock in the
Merger, including amounts to be paid in lieu of fractional shares, and
sufficient shares of Parent Common Stock to permit the Exchange Agent to
make the distributions of cash and Parent Common Stock provided for
hereunder (such cash and Parent Common Stock, collectively, the "Exchange
Fund"). The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to such shares held by it from time to
time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares for the
account of the persons entitled thereto.
(b) As soon as practicable after the Allocation Date, the Exchange
Agent shall distribute to holders of shares of Company Common Stock whose
shares are to be converted into the right to receive the Cash Amount in
accordance with Section 4.1(b)(ii), upon surrender to the Exchange Agent
(to the extent not previously surrendered with a Form of Election) of one
or more Certificates for such shares of Company Common Stock for
cancellation, a bank check for an amount equal to the Cash Amount for each
share of Company Common Stock so converted. In no event shall the holder of
any such surrendered Certificates be entitled to receive interest on any of
the funds to be received in the Merger. If such check is to be sent to a
person other than the person in whose name the certificates for shares of
Company Common Stock surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of
the delivery of such check to a person other than the registered holder of
the certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
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(c) As soon as practicable after the Allocation Date, each holder of
shares of Company Common Stock converted into the right to receive shares
of Parent Common Stock pursuant to Section 4.1(b)(i) upon surrender to the
Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more Certificates for such shares of Company Common
Stock for cancellation, will be entitled to receive certificates
representing the number of shares of Parent Common Stock to be issued in
respect of the aggregate number of such shares of Company Common Stock
previously represented by the Certificates surrendered based upon the
Exchange Ratio.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates for
shares of Parent Common Stock and cash in lieu of fractional shares, if
any, deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article 4. Certificates
surrendered for exchange for shares of Parent Common Stock by any person
constituting an "affiliate" of the Company for purposes of Rule 145(c)
under the Securities Act of 1933, as amended (the "Securities Act"), shall
not be exchanged until Parent has received a written agreement from such
person as provided in Section 7.9.
(e) No fractional shares of Parent Common Stock shall be issued in the
Merger. In lieu of the issuance of any fractional share of Parent Common
Stock pursuant to Section 4.1(b)(i), cash adjustments will be paid to
holders in respect of any fractional share of Parent Common Stock that
would otherwise be issuable, and the amount of such cash adjustment shall
be equal to such fractional proportion of the Average Price of a share of
Parent Common Stock.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any certificates representing shares of Parent
Common Stock) that remains unclaimed by the former stockholders of the
Company one (1) year after the Effective Time shall be delivered to the
Surviving Corporation. Any former stockholders of the Company who have not
theretofore complied with this Article 4 shall thereafter look only to the
Surviving Corporation for payment of the Cash Amount or the shares of
Parent Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions on the Parent Common Stock, as the case may be,
deliverable in respect of each share of Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(g) None of Parent, the Surviving Corporation, the Exchange Agent or
any other person shall be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Cash Amount or the shares of Parent
Common Stock and cash in lieu of fractional shares, and unpaid dividends
and distributions on shares of Parent Common Stock, as the case may be,
deliverable in respect thereof pursuant to this Agreement.
4.5. Adjustment of Exchange Ratio. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, Parent or the Company
changes the number of shares of Parent Common Stock or Company Common Stock,
respectively, issued and outstanding as a result of a stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction, the
Exchange Ratio shall be appropriately adjusted.
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ARTICLE 5
5. Representations and Warranties of the Company.
Except as set forth in the disclosure letter delivered by or on behalf of
the Company to Parent and Merger Sub at or prior to the execution hereof (the
"Company Disclosure Letter"), the Company represents and warrants to Parent and
Merger Sub as follows:
5.1. Existence; Good Standing; Corporate Authority; Compliance With
Law. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware. The Company is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not be material to the Company and its Subsidiaries taken as a
whole. The Company has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted.
Each of the Company's Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not be material to the Company and its Subsidiaries taken as a whole.
Neither the Company nor any of its Subsidiaries is in violation of any order of
any court, governmental authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which the Company or any of its
Subsidiaries or any of their respective properties or assets is subject, except
where such violation, individually or in the aggregate, is not and would not
reasonably be expected to be material to the Company and its Subsidiaries taken
as a whole. The Company and its Subsidiaries have obtained all licenses, permits
and other authorizations and have taken all actions required by applicable law
or governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action,
individually or in the aggregate, is or would reasonably be expected to be
material to the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries is an "electric utility company" or "gas
utility company" within the meaning of the Public Utility Holding Company Act of
1935, as amended. The copies of the Company's Restated Certificate of
Incorporation and By-laws previously delivered to Parent are true and correct.
5.2. Authorization, Validity and Effect of Agreements. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of Company Common Stock, the
consummation by the Company of the transactions contemplated hereby has been
duly authorized by all requisite corporate action. The Board of Directors has
approved each of this Agreement, the Merger and the Stockholder Agreement, dated
the date hereof (the "Stockholder Agreement"), between Parent, Merger Sub and
certain stockholders of the Company for the purposes of Section 203 of the DGCL.
This Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
5.3. Capitalization. The authorized capital stock of the Company consists
of 15,000,000 shares of Company Common Stock, and 1,000,000 shares of preferred
stock, par value $.01 per share (the "Company Preferred Stock"). As of May 8,
1995, there were 6,313,950 shares of Company Common Stock issued and outstanding
and no shares of Company Preferred Stock issued and outstanding. Since such
date, no additional shares of capital stock of the Company have been issued,
except pursuant to the Option Plans set forth on Schedule 5.3 of the Company
Disclosure Letter. Except for the warrants (the "Warrants") issued pursuant to
the warrant agreements listed in the Company Disclosure Letter, the Company has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into
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or exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. All such issued and outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Other than as contemplated by this Agreement or the
Option Plans set forth on Schedule 5.3 of the Company Disclosure Letter and
except for the Warrants, there are no options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company or any of its Subsidiaries to issue, transfer or sell any
shares of capital stock of the Company or any of its Subsidiaries or any
securities exercisable for, exchangeable for or convertible into such capital
stock. After the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of capital stock of the Company
or the Surviving Corporation pursuant to any Company Benefit Plan (as defined in
Section 5.11).
5.4. Subsidiaries. The Company owns directly or indirectly each of the
outstanding shares of capital stock of each of its Subsidiaries. Each of the
outstanding shares of capital stock of each of the Company's Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances other than liens imposed by
local law which are not material to the Company and its Subsidiaries taken as a
whole. The following information for each Subsidiary of the Company has been
previously provided to Parent, if applicable: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock or equity
capital; and (iii) the number of issued and outstanding shares of capital stock
or equity capital.
5.5. Other Interests. Except for interests in its Subsidiaries, neither the
Company nor any of its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity.
5.6. No Violation. Neither the execution and delivery by the Company of
this Agreement nor the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof will: (i) conflict with
or result in a breach of any provisions of the Restated Certificate of
Incorporation or By-laws of the Company; (ii) except as disclosed in the Company
Reports (as defined in Section 5.7), result in a breach or violation of, a
default under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under, any of the Option Plans, or any grant
or award made under any of the foregoing; (iii) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the triggering of any
payments or obligations under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of the
Company or its Subsidiaries under, or result in being declared void, voidable,
or without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their properties is bound
or affected, except for any of the foregoing matters which, individually or in
the aggregate, are not and would not reasonably be expected to be material to
the Company and its Subsidiaries taken as a whole; or (iv) other than the
filings provided for in Article 1, certain federal, state and local regulatory
filings, filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act or applicable state securities and "Blue
Sky" laws or filings in connection with the maintenance of qualification to do
business in other jurisdictions (collectively, the "Regulatory Filings"),
require any consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would be material to the Company and its
Subsidiaries taken as a whole. The Company has waived any and all rights of the
Company which may arise under the Buy-Sell Agreement, dated April 8, 1991, by
and among the Company and Robert G. Phillips by virtue of the transactions
contemplated by this Agreement or the Stockholder Agreement.
5.7. SEC Documents. The Company has delivered to Parent each registration
statement, report, proxy statement or information statement prepared by it since
December 31, 1992, each in the form (including exhibits and any amendments
thereto) filed with the Securities and Exchange Commission (the "SEC")
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(collectively, the "Company Reports"). As of their respective dates, the Company
Reports (i) were prepared in all material respects in accordance with the
applicable requirements of the Securities Act, the Exchange Act, and the
respective rules and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presents the consolidated financial position of Company and the Company
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of the Company included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Except as and to
the extent set forth on the consolidated balance sheet of the Company and its
Subsidiaries at December 31, 1994, including all notes thereto, or as set forth
in the Company Reports, neither the Company nor any of its Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except liabilities arising in the ordinary course of
business since such date.
5.8. Litigation. Except as disclosed in the Company Reports filed with the
SEC prior to the date of this Agreement, there are no actions, suits or
proceedings pending against the Company or any of its Subsidiaries or, to the
actual knowledge of the executive officers of the Company, threatened against
the Company or any of its Subsidiaries, at law or in equity, or before or by any
federal or state commission, board, bureau, agency or instrumentality, that,
individually or in the aggregate, are or would reasonably be expected to be
material to the Company and its Subsidiaries taken as a whole.
5.9. Absence of Certain Changes. Except as disclosed in the Company Reports
filed with the SEC prior to the date of this Agreement, since December 31, 1994,
the Company has conducted its business only in the ordinary course of such
business consistent with past practice and there has not been (i) any event or
events which, individually or in the aggregate, have or would reasonably be
expected to have a material adverse effect on the business, financial condition,
results of operations, assets, liabilities or prospects of the Company and its
Subsidiaries taken as a whole, (ii) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or any
redemption or repurchase of any shares of its capital stock, (iii) any material
change in its accounting principles, practices or methods, (iv) any increase in
the salaries or other compensation payable to any officer, director or employee
of the Company or any of its Subsidiaries (except for normal increases in the
ordinary course of business consistent with past practice) or any increase in,
or addition to, other benefits to which any officer, director or employee may be
entitled (except as required by the terms of plans as in effect on the date of
this Agreement or as required by law), (v) any incurrence of indebtedness for
borrowed money (except in the ordinary course of business consistent with past
practice), (vi) any material adverse change or threat of a material adverse
change in the Company's or any of its Subsidiaries' relations with, or any loss
or threat of loss of, any of the Company's important suppliers or customers,
(vii) any termination, cancellation or waiver of any contract or other right
material to the operation of the business of the Company and its Subsidiaries
taken as a whole or (viii) any material damage, destruction or loss, whether or
not covered by insurance, adversely affecting the properties, business or
prospects of the Company and its Subsidiaries taken as a whole, or any
deterioration in the operating condition of the assets of the Company and its
Subsidiaries which would be material to the Company and its Subsidiaries taken
as a whole.
5.10. Taxes. The Company and each of its Subsidiaries (i) have timely filed
all material federal, state and foreign tax returns required to be filed by any
of them for tax years ended prior to the date of this Agreement or requests for
extensions have been timely filed and any such request shall have been granted
and not expired and all such returns are complete in all material respects, (ii)
have paid or accrued all taxes that may be due and payable with respect to such
returns, (iii) have properly accrued in all material respects all
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such taxes for such periods subsequent to the periods covered by such returns,
and (iv) have "open" years for federal income tax returns only as set forth in
the Company Reports.
5.11. Certain Employee Plans.
(a) Each employee benefit or compensation plan or arrangement,
including each "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
maintained by the Company or any of its Subsidiaries (the "Company Benefit
Plans") complies, and has been administered, in all material respects in
accordance with all applicable requirements of law, and no "reportable
event" or "prohibited transaction" (as such terms are defined in ERISA) or
termination has occurred with respect to any Company Benefit Plan under
circumstances which present a risk of liability by the Company or any of
its Subsidiaries to any governmental entity or other person, including a
Company Benefit Plan, which liability would be material to the Company and
its Subsidiaries taken as a whole. The Company Benefit Plans are listed on
Schedule 5.11(a) and copies or descriptions of all material Company Benefit
Plans have previously been provided to Parent.
(b) Each Company Benefit Plan intended to qualify under Section 401(a)
of the Code is so qualified and a determination letter has been issued by
the Internal Revenue Service ("IRS") with respect to the qualification of
each Company Benefit Plan and no circumstances exist which would adversely
affect such qualification. Each Company Benefit Plan which is subject to
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code has
been maintained in compliance with the minimum funding standards of ERISA
and the Code and no such Company Benefit Plan has incurred any "accumulated
funding deficiency" (as defined in Section 412 of the Code and Section 302
of ERISA), whether or not waived. Neither the Company nor any of its
Subsidiaries has sought or received a waiver of its minimum funding
requirements with respect to any Company Benefit Plan. Neither Company nor
any of its Subsidiaries has incurred, nor reasonably expects to incur, any
liability in respect of any Company Benefit Plan under Title IV of ERISA
(other than with respect to the payment of premiums), which liability would
be material to the Company and its Subsidiaries taken as a whole. Neither
the Company nor any of its Subsidiaries has incurred any material
withdrawal liability under any "multiemployer plan" within the meaning of
Section 3(37) of ERISA which has not been satisfied in full nor do any of
them reasonably expect to incur such liability.
(c) Except as required by applicable law or as set forth on Schedule
5.11(c), neither the Company nor any of its Subsidiaries provides any
health, welfare or life insurance benefits to any of their former or
retired employees.
(d) Except as disclosed on Schedule 5.11(d), no payment or benefit
which will or may be made by the Company or any of its Subsidiaries will be
characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
5.12. Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the actual
knowledge of the executive officers of the Company, threatened against the
Company or its Subsidiaries relating to their business, except for any such
proceeding which, individually or in the aggregate, is not and would not
reasonably be expected to be material to the Company and its Subsidiaries taken
as a whole. To the actual knowledge of the executive officers of the Company,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries.
5.13. No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that the Company has retained Rauscher Pierce Refsnes, Inc., the
arrangements with which have been disclosed in writing to Parent prior to the
date hereof. Other than the foregoing arrangements, the Company is not aware of
any claim for
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payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.14. Fairness Opinion. The Company has received the opinion of Rauscher
Pierce Refsnes, Inc., to the effect that, as of the date of this Agreement, the
Merger Consideration is fair to the holders of Company Common Stock.
5.15. Environmental Matters.
(a) For the purposes of this Agreement:
"Environmental Matters" means any matter arising out of, relating
to or resulting from pollution, protection of the environment and human
health or safety, health or safety of employees, sanitation, and any
matters relating to emissions, discharges, releases or threatened
releases of Hazardous Materials or otherwise arising out of, resulting
from or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials.
"Environmental Costs" means, without limitation, any actual or
potential cleanup costs, remediation, removal, or other response costs,
investigation costs, losses, liabilities or obligations, payments,
damages, civil or criminal fines or penalties, judgments, and amounts
paid in settlement arising out of or relating to or resulting from any
Environmental Matter.
"Environmental Laws" means, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
sec.sec. 9601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. sec.sec. 11001 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. sec.sec. 6901 et seq.,
the Toxic Substances Control Act, 15 U.S.C. sec.sec. 2601 et seq., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
sec.sec. 136 et seq., the Clean Air Act, 42 U.S.C. sec.sec. 7401 et
seq., the Clean Water Act (Federal Water Pollution Control Act), 33
U.S.C. sec.sec. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C.
sec.sec. 300f et seq., the Occupational Safety and Health Act, 29 U.S.C.
sec.sec. 641 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. sec.sec. 1801 et seq., as any of the above statutes have been or
may be amended from time to time, all rules and regulations promulgated
pursuant to any of the above statutes, and any other foreign, federal,
state or local law, statute, ordinance, rule or regulation governing
Environmental Matters, as the same have been or may be amended from time
to time, including any common law cause of action providing any right or
remedy with respect to Environmental Matters, and all applicable
judicial and administrative decisions, orders, and decrees relating to
Environmental Matters.
"Hazardous Materials" means any pollutants, contaminants, or
hazardous or toxic substances, materials, wastes, constituents or
chemicals that are regulated by, or form the basis for liability under,
any Environmental Laws.
(b) (i) The Company and each of its Subsidiaries is in compliance in
all material respects with all applicable Environmental Laws.
(ii) The Company and each of its Subsidiaries has obtained, and is in
compliance in all material respects with, all permits, licenses,
authorizations, registrations and other governmental consents
("Environmental Permits") required to be obtained by it by applicable
Environmental Laws for the use, storage, treatment, transportation,
release, emission and disposal of raw materials, by-products, wastes and
other substances used or produced by or otherwise relating to its business.
(iii) All such Environmental Permits are in all material respects in
full force and effect, and the Company and each of its Subsidiaries has
made all appropriate filings for issuance or renewal of such Environmental
Permits.
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(iv) There are no Hazardous Materials in amounts required to be
remediated under applicable Environmental Laws at, on, under or within any
real property owned, leased or occupied by the Company or any of its
Subsidiaries.
(v) There are no material claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings pending or threatened that are based on or related to any
Environmental Matters or the failure to have any required Environmental
Permits.
(vi) Neither the Company nor any of its Subsidiaries has used any
waste disposal site, or otherwise disposed of, transported, or arranged for
the transportation of, any Hazardous Materials to any place or location, in
violation of any Environmental Laws.
(vii) There are no underground storage tanks or surface impoundments
at, on, under or within any of real property owned, leased or occupied by
the Company or any of its Subsidiaries, or any portion thereof.
(viii) None of the Company or its Subsidiaries has received any notice
asserting that it may be a potentially responsible party at any waste
disposal site or other location used for the disposal of any Hazardous
Materials.
5.16. Related Party Transactions. There are no contracts, arrangements or
transactions in effect between the Company or any of its Subsidiaries, on the
one hand, and any officer, director or 5% stockholder of the Company, or any
affiliate or immediate family member of any of the foregoing persons, on the
other hand, except as set forth in the Company Disclosure Letter.
ARTICLE 6
6. Representations and Warranties of Parent and Merger Sub.
Except as set forth in the disclosure letter delivered by or on behalf of
Parent or Merger Sub to the Company at or prior to the execution hereof (the
"Parent Disclosure Letter"), Parent and Merger Sub represent and warrant to the
Company as follows:
6.1. Existence; Good Standing; Corporate Authority; Compliance with
Law. Each of Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not be material to
Parent and its Subsidiaries taken as a whole. Parent has all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted. Neither Parent nor any of its Subsidiaries is in
violation of any order of any court, governmental authority or arbitration board
or tribunal, or any law, ordinance, governmental rule or regulation to which
Parent or any of its Subsidiaries or any of their respective properties or
assets is subject, except where such violation, individually or in the
aggregate, is not and would not reasonably be expected to be material to Parent
and its Subsidiaries taken as a whole. Parent and its Subsidiaries have obtained
all licenses, permits and other authorizations and have taken all actions
required by applicable law or governmental regulations in connection with their
business as now conducted, where the failure to obtain any such item or to take
any such action, individually or in the aggregate, is or would reasonably be
expected to be material to Parent and its Subsidiaries taken as a whole.
6.2. Authorization, Validity and Effect of Agreements. Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby. The
consummation by Parent and Merger Sub of the transactions contemplated hereby
has been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of Parent and Merger Sub, enforceable
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in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
6.3. No Violation. Neither the execution and delivery by Parent and Merger
Sub of this Agreement, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Certificate of
Incorporation or By-laws of Parent or Merger Sub; (ii) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the material
properties of Parent or its Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Parent or any of its Subsidiaries
is a party, or by which Parent or any of its Subsidiaries or any of their
properties is bound or affected, except for any of the foregoing matters which
would not reasonably be expected to be material to Parent and its Subsidiaries
taken as a whole; or (iii) other than the Regulatory Filings, require any
material consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would be material to Parent and its Subsidiaries
taken as a whole.
6.4. No Brokers. Neither Parent nor any of its Subsidiaries has entered
into any contract, arrangement or understanding with any person or firm which
may result in the obligation of the Company or Parent to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Parent has retained Rodman & Renshaw, Inc.
Other than the foregoing arrangements, Parent is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.5. Capitalization. The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 25,000,000 shares of preferred
stock, $.01 par value (the "Parent Preferred Stock"). As of April 30, 1995,
there were 35,004,939 shares of Parent Common Stock issued and outstanding (not
including 430,000 shares of Parent Common Stock deposited in Parent's Benefits
Protection Trust) and no shares of Parent Preferred Stock issued and
outstanding. Other than as contemplated by this Agreement or as set forth in the
Parent Reports (as defined in Section 6.6) or on Schedule 6.5 of the Parent
Disclosure Letter, as of the date of this Agreement, there are no options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate Parent or any of its Subsidiaries to
issue any shares of capital stock of Parent or any securities exercisable for,
exchangeable for or convertible into such capital stock.
6.6. SEC Documents. Parent has delivered to the Company each registration
statement, report, proxy statement or information statement prepared by it since
December 31, 1992, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Parent Reports"). As of their
respective dates, the Parent Reports (i) were prepared in all material respects
in accordance with the applicable requirements of the Securities Act, the
Exchange Act, and the respective rules and regulations thereunder and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets included in or incorporated
by reference into the Parent Reports (including the related notes and schedules)
fairly presents the consolidated financial position of Parent and the Parent
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows included in or incorporated by reference into
the Parent Reports (including any related notes and schedules) fairly presents
the results of operations, retained earnings or cash flows, as the case may be,
of Parent and the Parent Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. As of the date of
this Agreement, except as and to the extent set forth on the consolidated
balance sheet of Parent and its
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Subsidiaries at December 31, 1994, including all notes thereto, or as set forth
in the Parent Reports, neither Parent nor any of its Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except liabilities arising in the ordinary course of
business since such date.
6.7. Litigation. Except as disclosed in the Parent Reports filed with the
SEC prior to the date of this Agreement, there are no actions, suits or
proceedings pending against Parent or any of its Subsidiaries or, to the actual
knowledge of the executive officers of Parent, threatened against Parent or any
of its Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that, individually or in
the aggregate, are or would reasonably be expected to be material to Parent and
its Subsidiaries taken as a whole.
6.8. Absence of Certain Changes. Since December 31, 1994, there has not
been any event or events which, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations, assets or liabilities of Parent and its Subsidiaries taken as a
whole (other than changes resulting from general economic, industry or market
conditions or business combinations proposed, announced or consummated after the
date of this Agreement).
6.9. Parent Common Stock. The issuance and delivery by Parent of shares of
Parent Common Stock in connection with the Merger and this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
Parent. The shares of Parent Common Stock to be issued in connection with the
Merger and this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
ARTICLE 7
7. Covenants.
7.1. Acquisition Proposals. Prior to the Effective Time, the Company agrees
(a) that neither the Company nor any of its Subsidiaries shall, and the Company
shall direct and use its best efforts to cause its officers, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (c) that it will notify Parent
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
Company from (i) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
written proposal to acquire the Company pursuant to a merger, consolidation,
share exchange, business combination or other similar transaction, if, and only
to the extent that, (A) the Board of Directors of the Company determines in good
faith, based as to legal matters on the written opinion of outside legal
counsel, that such action is required for the Board of Directors to comply with
its fiduciary duties to stockholders imposed by law, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, the Company provides written notice to Parent to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity and provides Parent with a copy of any
such written proposal, and (C) the Company keeps Parent informed of the status
and the terms of any such discussions or negotiations; and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
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Nothing in this Section 7.1 shall (x) permit the Company to terminate this
Agreement, (y) permit the Company to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement or any other agreement
with any person that provides for, or in any way facilitates, an Acquisition
Proposal, or (z) affect any other obligation of any party under this Agreement.
7.2. Conduct of Businesses. Prior to the Effective Time, except as
specifically set forth in the Company Disclosure Letter or as contemplated by
any other provision of this Agreement, unless Parent has consented in writing
thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to its usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause each of its
respective Subsidiaries to use its reasonable efforts, to preserve intact
its business organization and goodwill, keep available the services of its
officers and employees and maintain satisfactory relationships with those
persons having business relationships with it;
(c) shall confer on a regular basis with one or more representatives
of Parent to report operational matters of materiality and any proposals to
engage in material transactions;
(d) shall not amend its organizational documents;
(e) shall promptly notify Parent of (i) any material emergency or
other material change in the condition (financial or otherwise) of the
Company's or any Subsidiary's business, properties, assets, liabilities,
prospects or the normal course of its businesses or in the operation of its
properties, (ii) any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that
the same may be contemplated), or (iii) the breach in any material respect
of any representation or warranty or covenant contained herein;
(f) shall promptly deliver to Parent true and correct copies of any
report, statement or schedule filed by the Company with the SEC subsequent
to the date of this Agreement;
(g) shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the
date of this Agreement and disclosed in the Company Disclosure Letter,
issue any shares of its capital stock, effect any stock split or otherwise
change its capitalization as it exists on the date of this Agreement, (ii)
grant, confer or award any option, warrant, conversion right or other right
not existing on the date hereof to acquire any shares of its capital stock
from the Company, (iii) increase any compensation or enter into or amend
any employment, severance, termination or similar agreement with any of its
present or future officers or directors, except for normal increases in
compensation to employees consistent with past practice and the payment of
cash bonuses to employees pursuant to and consistent with existing plans or
programs, or (iv) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are
less favorable to participants in such plans or as may be required by
applicable law;
(h) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock; (ii) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or capital stock of any of its
Subsidiaries, or make any commitment for any such action or (iii) split,
combine or reclassify any of its capital stock;
(i) shall not, and shall not permit any of its Subsidiaries to sell,
lease or otherwise dispose of any of its assets (including capital stock of
Subsidiaries) which are material, individually or in the aggregate, except
in the ordinary course of business;
(j) shall not (i) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business; (ii) except for obligations of
wholly owned Subsidiaries of the Company, assume, guaranty, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations
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of any other person except in the ordinary course of business consistent
with past practices in an amount not material to the Company and its
Subsidiaries, taken as a whole; (iii) other than wholly owned Subsidiaries
of the Company, make any loans, advances or capital contributions to, or
investments in, any other person; (iv) modify in any manner adverse to the
Company or any of its Subsidiaries any outstanding indebtedness or
obligation of the Company or any of its Subsidiaries; (v) pledge or
otherwise encumber shares of capital stock of the Company or its
Subsidiaries; or (vi) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to create any material
mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect to such asset;
(k) shall not acquire, sell, lease or dispose of any assets outside
the ordinary course of business or any assets which in the aggregate are
material to the Company and its Subsidiaries taken as a whole, or enter
into any commitment or transaction outside the ordinary course of business
consistent with past practices which would be material to the Company and
its Subsidiaries taken as a whole;
(l) shall not change any of the accounting principles or practices
used by the Company;
(m) shall not (i) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (ii) enter
into any contract or agreement other than in the ordinary course of
business consistent with past practice which would be material to the
Company and its Subsidiaries taken as a whole; (iii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$50,000 or, in the aggregate, are in excess of $150,000; provided, that
none of the foregoing shall limit any capital expenditure within the
aggregate amount previously authorized by the Company's Board of Directors
for capital expenditures, written evidence of which has been previously
provided to Parent; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action which
would be prohibited hereunder;
(n) shall not make any tax election or settle or compromise any income
tax liability material to the Company and its Subsidiaries taken as a
whole;
(o) shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected, reserved against or
disclosed in the consolidated financial statements (or the notes thereto)
of the Company and its Subsidiaries or incurred in the ordinary course of
business consistent with past practice;
(p) shall not settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby; or
(q) shall not take, or agree in writing or otherwise to take, any of
the actions described in Section 7.2(a) through 7.2(p) or any action that
would make any of the representations and warranties of the Company
contained in this Agreement untrue or incorrect as of the date when made.
7.3. Meeting of Stockholders. The Company will take all action necessary in
accordance with applicable law and its Restated Certificate of Incorporation and
By-laws to convene a meeting of its stockholders as promptly as practicable to
consider and vote upon the approval of this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company shall recommend such
approval and the Company shall take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy Statement/Prospectus (as
defined in Section 7.7); provided, however, that such recommendation or
solicitation is subject to any action taken by, or upon authority of, the Board
of Directors of the Company in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law.
7.4. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Parent shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) promptly determining which filings are required to be made prior
to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
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governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to promptly consummate and make effective the
transactions contemplated by this Agreement. Each of Parent and the Company will
use all reasonable efforts to resolve such objections, if any, as may be
asserted with respect to the Merger under the HSR Act or other antitrust laws.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors of Parent and the Company shall take all such necessary action.
7.5. Inspection of Records; Access. From the date of this Agreement to the
Effective Time, the Company shall allow all designated officers, attorneys,
accountants and other representatives of Parent ("Parent's Representatives")
access at all reasonable times to all employees, plants, offices, warehouses,
transmission facilities and other facilities and to the records and files,
correspondence, audits and properties, as well as to all information relating to
commitments, contracts, titles and financial position, or otherwise pertaining
to the business and affairs, of the Company and its Subsidiaries; provided,
however, that Parent's Representatives shall use their reasonable best efforts
to avoid unreasonably interfering with, hindering or otherwise disrupting the
employees of the Company in the execution of their employment duties during any
visit to, or inspection of, the Company's facilities. From the date of this
Agreement to the Effective Time, but not more frequently than once in any 30-day
period, Parent shall allow all designated officers, attorneys, accountants, and
other representatives of the Company access during regular business hours upon
reasonable notice to Parent's officers and, to the extent relevant thereto, to
the records and files of Parent and its Subsidiaries, for the purpose of
confirming the accuracy of the representations and warranties of Parent and
Merger Sub set forth in this Agreement.
7.6. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter the Company and Parent shall, subject to
their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.
7.7. Registration Statement. Parent and the Company shall cooperate and
promptly prepare and Parent shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Parent Common Stock issuable in connection with the
transactions contemplated by this Agreement, a portion of which Registration
Statement shall also serve as the proxy statement with respect to the meeting of
the stockholders of the Company in connection with the Merger (the "Proxy
Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Parent shall use all reasonable
efforts, and the Company will cooperate with Parent, to have the Form S-4
declared effective by the SEC as promptly as practicable. Parent shall use its
best efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. Parent agrees that the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of the mailing thereof and at
the time of the meeting of stockholders of the Company, or, in the case of the
Form S-4 and each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply to
the extent that any such untrue statement of a material fact or omission to
state a material fact was made by Parent in reliance upon and in conformity with
written information concerning the Company furnished to Parent by the Company
specifically for use in the Proxy Statement/Prospectus or the Form S-4. The
Company agrees that the information provided by it for inclusion in the Proxy
Statement/Prospectus and
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each amendment or supplement thereto, at the time of mailing thereof and at the
time of the meeting of stockholders of the Company, or, in the case of
information provided by the Company for inclusion in the Form S-4 or any
amendment or supplement thereto, at the time it is filed or becomes effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No amendment or supplement to the Proxy Statement/Prospectus will be
made by Parent or the Company without the approval of the other party. Parent
will advise the Company, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
the Parent Common Stock issuable in connection with the transactions
contemplated by this Agreement for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the Form
S-4 or comments thereon and responses thereto or requests by the SEC for
additional information.
7.8. Listing Application. Parent shall promptly prepare and submit to the
NYSE a listing application covering the shares of Parent Common Stock (and
associated Rights) issuable in connection with the transactions contemplated by
this Agreement, and shall use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent Common Stock (and associated
Rights), subject to official notice of issuance.
7.9. Agreements by Affiliated Stockholders of the Company. At least 30 days
prior to the Closing Date, the Company shall deliver to Parent a list of names
and addresses of those persons who were, in the Company's reasonable judgment,
at the record date for its stockholders' meeting to approve the Merger,
"affiliates" (each such person, an "Affiliate") of the Company within the
meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act ("Rule 145"). The Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall deliver or cause to be delivered to Parent, prior to the
Closing Date, from each of the Affiliates of the Company identified in the
foregoing list, an Affiliate Letter in the form attached hereto as Exhibit A.
Parent shall be entitled to place legends as specified in such Affiliate Letters
on the certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such Affiliate Letters.
7.10. Further Action. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
7.11. Expenses. Whether or not the Merger is consummated, except as
provided in Section 9.5(b), all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
7.12. Indemnification and Insurance.
(a) Parent shall cause the Surviving Corporation to keep in effect
provisions in its Certificate of Incorporation and By-laws providing for
exculpation of director and officer liability and indemnification of the
indemnified parties under the Company's Restated Certificate of
Incorporation and By-laws (the "Indemnified Parties") to the fullest extent
permitted under the DGCL, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that
would enlarge the Indemnified Parties' right of indemnification.
(b) The provisions of this Section shall survive the consummation of
the Merger and expressly are intended to benefit each of the Indemnified
Parties.
(c) For a period of three years after the Effective Time, Parent shall
cause to be maintained officers' and directors' liability insurance
covering the parties who are currently covered, in their capacities as
officers and directors, by the Company's existing officers' and directors'
liability insurance policies on terms substantially no less advantageous to
such parties than such existing insurance; provided, however, that Parent
shall not be required, in order to maintain or procure such coverage, to
pay premiums in
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excess of $250,000 in the aggregate over such three year period (the
"Cap"); and provided, further, that if equivalent coverage cannot be
obtained, or can be obtained only by paying an amount in excess of the Cap,
Parent shall only be required to obtain such coverage for such three-year
period as can be obtained by paying aggregate premiums equal to the Cap.
7.13. Certain Benefits.
(a) From and after the Effective Time, subject to applicable law,
Parent and its Subsidiaries will honor in accordance with their terms, all
Company Benefit Plans; provided, however, that nothing herein shall
preclude any change effected on a prospective basis in any Company Benefit
Plan.
(b) The Surviving Corporation shall employ at the Effective Time all
employees of the Company and its Subsidiaries who are employed on the
Closing Date on terms consistent with the Company's current employment
practices and at comparable levels of compensation and positions. Subject
to the obligations of the Surviving Corporation under the employment
agreements and amendments to employment agreements described in Section
8.3(d), such employment shall be at will and Parent and the Surviving
Corporation shall be under no obligation to continue to employ any
individuals.
7.14. Reorganization. From and after the date hereof and until the
Effective Time, neither Parent nor the Company nor any of their respective
subsidiaries or other affiliates shall knowingly take any action, or knowingly
fail to take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or enter into
any contract, agreement, commitment or arrangement with respect to the
foregoing. Following the Effective Time, Parent shall use its best efforts to
conduct its business in a manner that would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
7.15. Purchase of Company Common Stock. The Company acknowledges and agrees
that, subject to Section 7.14, nothing in this Agreement shall restrict Parent
or Merger Sub from acquiring shares of Company Common Stock in open market or
private transactions between the date of this Agreement and the Closing Date.
7.16. Headquarters of the Surviving Corporation; Operations. Parent intends
that, following the Effective Time, the headquarters of the Surviving
Corporation will be located in Houston, Texas. In addition, Parent intends that,
following the Effective Time, the gas marketing operations of Parent and its
Subsidiaries, on the one hand, and the Company and its Subsidiaries, on the
other hand, will be operated as a single business unit.
7.17. Merger of Subsidiaries of the Company. Prior to the Effective Time,
the Company will take all necessary action to cause Eastex Gas Storage and
Exchange, Inc. to be merged with Eastex Hydrocarbons, Inc. in a manner which
will not result in the incurrence of any liability, cost or expense by Parent,
the Company or any of their respective Subsidiaries (other than expenses of
preparation and filing of the merger documents relating to such merger and legal
expenses of preparation of any documents evidencing third-party consents
required to effect such merger).
ARTICLE 8
8. Conditions.
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
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(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement.
(c) This Agreement and the Merger shall have been approved by the
stockholders of the Company in accordance with the DGCL and the Company's
Restated Certificate of Incorporation and By-laws.
(d) The Form S-4 shall have become effective and no stop order with
respect thereto shall be in effect.
(e) Each of the Parent and the Company shall have received the opinion
of Fried, Frank, Harris, Shriver & Jacobson, special counsel to Parent,
dated the Closing Date, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that the Company and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code; except that the delivery of such opinion shall not be a condition to
the Company's obligation to effect the Merger if at the Closing Date the
Company shall not have fulfilled any of the conditions set forth in Section
8.3(c) or 8.3(f).
8.2. Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the condition that Parent shall
have performed its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and correct
in all material respects as of the date when made and (unless made as of a
specified date) as of the Closing Date, and the Company shall have received a
certificate of the President or a Vice President of Parent, dated the Closing
Date, certifying to such effect.
8.3. Conditions to Obligation of Parent and Merger Sub to Effect the
Merger. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects as of the date when made
and (unless made as of a specified date) as of the Closing Date, and Parent
shall have received a certificate of the Company, dated the Closing Date,
certifying to such effect.
(b) All necessary governmental and third party consents required in
connection with the transactions contemplated by this Agreement shall have
been obtained and there shall be no action, suit or proceeding pending or
threatened against the Company, Parent or any of their Subsidiaries which
would or would reasonably be expected to prevent or delay the transactions
contemplated by this Agreement or result in material damages in connection
herewith or therewith.
(c) Parent shall have received from each Affiliate of the Company an
Affiliate Letter in the form attached hereto as Exhibit A.
(d) The employment agreements and the amendments to employment
agreements listed in Exhibit B hereto shall have been executed and
delivered by the employee specified in each such amendment, shall be in
full force and effect, and shall constitute valid and binding obligations
of each such employee.
(e) Working capital of the Company and its Subsidiaries as of the
close of business on the business day preceding the Closing Date shall be
at least $12,000,000 computed on a consolidated basis in accordance with
generally accepted accounting principles applied on a consistent basis;
provided however that any obligations of or payments by the Company
pursuant to Section 4.1 (e) of this Agreement shall not be treated as a
reduction of working capital for the purpose of this Section 8.3(e).
(f) Parent shall have received from an officer of the Company an
Officer's Certificate containing standard representations on which Fried,
Frank, Harris, Shriver & Jacobson will rely in rendering its tax opinion.
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ARTICLE 9
9. Termination.
9.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual consent of Parent and the Company.
9.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by Parent or the Company if (a) the
Merger shall not have been consummated by December 31, 1995, or (b) a United
States federal or state court of competent jurisdiction or United States federal
or state governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (b) shall have used all efforts required by
this Agreement to remove such injunction, order or decree.
9.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by the Company,
if there has been a breach by Parent or Merger Sub of any representation or
warranty contained in this Agreement which would cause Parent or Merger Sub to
fail to satisfy any condition to Closing and such condition shall not have been
waived by the Company.
9.4. Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by Parent, if there has
been a breach by the Company of any representation or warranty contained in this
Agreement which would cause the Company to fail to satisfy any condition to
Closing and such condition shall not have been waived by Parent.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 9, all obligations of the parties
hereto shall terminate, except the obligations of the parties pursuant to
this Section 9.5 and Sections 7.11, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8,
10.9, 10.10 and 10.11 and the Confidentiality Agreement referred to in
Section 10.4. Moreover, in the event of termination of this Agreement,
nothing herein shall prejudice the ability of the non-breaching to seek
damages from any other party for any breach of this Agreement, including
without limitation, attorneys' fees and the right to pursue any remedy at
law or in equity.
(b) In the event of a termination of this Agreement for any reason
other than a material breach by Parent or Merger Sub and (i) the Board of
Directors of the Company shall have withdrawn its recommendation of (or
encouraged stockholders not to approve) the Merger or shall have
recommended (or encouraged stockholders to support) any Acquisition
Proposal, or shall have resolved to do any of the foregoing (and such
withdrawal, recommendation or encouragement is not the result of a material
breach by Parent or Merger Sub of any representation, warranty or
obligation under this Agreement), (ii) prior to such termination, the
Company shall have received any Acquisition Proposal which the Board of
Directors has determined is more favorable to the Company's stockholders
than the transactions contemplated by this Agreement, or (iii)(A) at any
time prior to the termination of this Agreement either (I) the stockholders
of the Company shall have failed to approve this Agreement at the
stockholders meeting provided for in Section 7.3 or (II) any person (other
than Parent or any of its Subsidiaries) shall have publicly announced any
Acquisition Proposal and (B), at any time on or prior to one year after the
date of this Agreement, any person (other than Parent or any of its
Subsidiaries) shall either (I) become the beneficial owner of 40% or more
of the outstanding shares of Company Common Stock or (II) consummate an
Acquisition Proposal, then the Company shall promptly, but in no event
later than two business days after the first of such events to occur, (x)
pay Parent the sum of $1,000,000 in cash and (y) reimburse Parent for all
documented out of pocket costs and expenses (including, without limitation,
all documented legal, investment banking, printing and related fees and
expenses) incurred by Parent or Merger Sub or on their behalf in connection
with this Agreement or the transactions contemplated hereby, up to a
maximum of $750,000.
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9.6. Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by or on behalf of the party granting such extension or waiver.
ARTICLE 10
10. General Provisions.
10.1. Survival of Representations and Warranties. Unless this Agreement is
terminated pursuant to Article 9, the representations and warranties and
covenants made in this Agreement shall terminate at the Closing, except that any
covenant herein which by its terms contemplates performance after the Closing
Date shall survive the Closing Date for the period contemplated thereby.
10.2. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
<TABLE>
<S> <C>
If to the Company: If to Parent or Merger Sub:
Eastex Energy Inc. El Paso Natural Gas Company
1000 Louisiana One Paul Kayser Center
Suite 1100 100 North Stanton Street
Houston, Texas 77002 El Paso, Texas 79901
Attention: Robert G. Phillips, Attention: H. Brent Austin
Chairman of the Board and Executive Vice President
Chief Executive Officer and Chief Financial Officer
Facsimile: (713) 650-1107 Facsimile: (915) 541-5008
With a copy to: With a copy to:
Dallas Parker, Esq. Gary P. Cooperstein, Esq.
Brown, Parker & Leahy, L.L.P. Fried, Frank, Harris,
3600 Citicorp Center Shriver & Jacobson
1200 Smith Street One New York Plaza
Houston, TX 77002 New York, NY 10004
Facsimile: (713) 654-1871 Facsimile: (212) 747-1526
</TABLE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that Parent may assign
this Agreement to any of its Subsidiaries whether or not such Subsidiaries exist
at the date hereof; provided, further, that no such assignment shall relieve
Parent of any of its obligations hereunder. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Section 7.12, which are expressly intended to be enforceable by the
beneficiaries thereof, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
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10.4. Entire Agreement. This Agreement, the Company Disclosure Letter, the
Parent Disclosure Letter and the Confidentiality Agreement dated April 10, 1995
between the Company and Parent constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings (oral and written) among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed by or on behalf of each of the parties hereto.
10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its rules of
conflict of laws.
10.7. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies of this
Agreement, each of which may be signed by less than all of the parties hereto,
but together all such copies are signed by all of the parties hereto.
10.8. Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. As used in this Agreement, the word "Subsidiary" when used with respect
to any party means any corporation or other organization, whether incorporated
or unincorporated, of which such party directly or indirectly owns or controls
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization, or any organization of which such party is a general partner.
10.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or otherwise affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
10.12. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which they may be entitled at law or in equity.
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<PAGE> 83
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the day and year first written
above.
EL PASO NATURAL GAS COMPANY
By: /s/ WILLIAM A. WISE
--------------------------------------
Name: William A. Wise
Title: Chairman of the Board,
President and
Chief Executive Officer
EL PASO ACQUISITION COMPANY
By: /s/ H. BRENT AUSTIN
--------------------------------------
Name: H. Brent Austin
Title: Vice President and Treasurer
EASTEX ENERGY INC.
By: /s/ ROBERT G. PHILLIPS
--------------------------------------
Name: Robert G. Phillips
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE> 84
EXHIBIT A
FORM OF AFFILIATE LETTER
El Paso Natural Gas Company
100 North Stanton Street
El Paso, Texas 79901
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Eastex Energy Inc., a Delaware corporation (the "Company"),
as the term "affiliate" is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan
of Merger dated as of May 8, 1995 (the "Agreement"), between El Paso Natural Gas
Company, a Delaware corporation ("Parent"), El Paso Acquisition Company, a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
the Company, pursuant to which the Company will be merged with and into Merger
Sub (the "Merger").
As a result of the Merger, I may receive shares of common stock, par value
$3.00 per share, of Parent (the "Parent Securities") in exchange for shares
owned by me of Common Stock, par value $.01 per share, of the Company.
I represent, warrant and covenant to Parent that in the event I receive any
Parent Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Parent Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Parent Securities to
the extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of
the Company and the distribution by me of the Parent Securities has not
been registered under the Act, I may not sell, transfer or otherwise
dispose of the Parent Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition has been registered under the Act, (ii)
such sale, transfer or under other disposition is made in conformity with
Rule 145 promulgated by the Commission under the Act, or (iii) in the
opinion of counsel reasonably acceptable to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Securities by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Securities and that
there will be placed on the certificates for the Parent Securities issued
to me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AS OF MAY 8, 1995
BETWEEN THE REGISTERED HOLDER HEREOF AND EL PASO
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<PAGE> 85
NATURAL GAS COMPANY, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF EL PASO NATURAL GAS COMPANY."
F. I also understand that unless the transfer by me of my Parent
Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) two years shall have elapsed from the date the
undersigned acquired the Parent Securities received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) three
years shall have elapsed from the date the undersigned acquired the Parent
Securities received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Parent,
or a "no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Act no longer apply to the undersigned.
G. [FOR ROBERT PHILLIPS ONLY] I have no plan or intention to sell, transfer
or otherwise dispose of, or enter into an agreement to sell, transfer or
otherwise dispose of, any Parent Securities (or any interest therein); and for
one year from the date hereof, I will not sell, transfer or otherwise dispose
of, or enter into an agreement to sell, transfer or otherwise dispose of, more
than 30,000 shares of Parent Securities.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
______________________________________
Name:
Accepted this _____ day of
________ , 1995 by
EL PASO NATURAL GAS COMPANY
By:____________________________________________
Name:_____________________________________
Title:____________________________________
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<PAGE> 86
EXHIBIT B
1. Amended Employment Agreements with the following individuals:
(i) Robert G. Phillips
(ii) Mark A. Searles
(iii) R. Cristian Sherman
(iv) Jerry L. Pendleton
2. Employment Agreements, in the form initialed by Company, Parent and Merger
Sub, with the following individuals:
(i) David H. Eargle
(ii) Patrick J. Bhirdo
(iii) Jeffrey D. Hunter
(iv) Larry B. Leverett
(v) Terry L. Morrison
3. Amendments to Employment Agreements and Related Agreements, as set forth in
the term sheet dated May 5, 1995 entitled "Revised Proposed Amendment to
Employment Agreements and Related Agreements between Heath Petra Resources,
Inc. and Brian Heath, Doug Morgan and Scott Gaddis dated April 23, 1993" as
modified and initialed by the Company, Parent and Merger Sub.
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<PAGE> 87
APPENDIX B
August 14, 1995
The Board of Directors
Eastex Energy Inc.
1100 First Interstate Bank Plaza
1000 Louisiana
Houston, TX 77002
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Eastex Energy Inc., a Delaware corporation
("Eastex"), of the terms of the proposed merger as set forth in the Agreement
and Plan of Merger, dated May 8, 1995 (the "Agreement"), by and among Eastex, El
Paso Natural Gas Company, a Delaware corporation ("EPG"), and El Paso
Acquisition Company, a Delaware corporation and wholly-owned subsidiary of EPG
("EPG Sub"). Pursuant to the Agreement, the separate existence of Eastex will
cease and Eastex will be merged with and into EPG Sub (the "Merger"), and each
outstanding share of Eastex common stock, $0.01 par value (the "Eastex Common
Stock") shall be converted into the right to receive consideration (the
"Consideration") consisting of (a) $4.50 in cash (the "Cash Consideration") or
(b) a portion of a share of common stock, $3.00 par value, of EPG and an
equivalent portion of an associated preferred stock purchase right (together,
"EPG Common Stock") (the "Stock Consideration"). The Stock Consideration is that
portion of a share of EPG Common Stock equal to the quotient of $4.50 divided by
the Average Price (as defined in the Agreement) of EPG Common Stock (the
"Exchange Ratio"). The Exchange Ratio shall not be less than 0.1485 and not more
than 0.1629. The Agreement further provides that holders of Eastex Common Stock
shall be entitled to elect to receive the Cash Consideration, the Stock
Consideration or express no preference, and the Cash Consideration and the Stock
Consideration will be allocated among holders of Eastex Common Stock in
accordance with such elections, subject to allocation and proration procedures
ensuring that the aggregate Cash Consideration (including, without limitation,
cash paid by EPG or any of its subsidiaries for shares of Eastex Common Stock or
warrants to purchase shares of Eastex Common Stock, cash paid in lieu of
fractional shares of EPG Common Stock, and cash paid upon the cancellation of
options to purchase shares of Eastex Common Stock) shall not exceed 49% of the
aggregate Consideration paid pursuant to the Merger.
In arriving at our opinion, we have reviewed the Agreement, the Proxy
Statement/Prospectus of Eastex and EPG dated August 14, 1995, filed as a part of
the Registration Statement on Form S-4 of EPG, and certain publicly available
business and financial information concerning Eastex and EPG. In addition, we
have reviewed certain internal analyses and forecasts for Eastex prepared by its
management. We have also met with the managements of Eastex and EPG to discuss
the businesses and prospects of Eastex and EPG. In addition, we have considered
certain long-term strategic benefits of the Merger, both operational and
financial, that were described to us by the senior managements of Eastex and
EPG.
We have reviewed the terms of the Merger in relation to, among other
things: current and historical market prices and trading volume of the Eastex
Common Stock and the EPG Common Stock; the respective companies' cash flow, net
income and book value per share; the capitalization and financial condition of
Eastex and EPG; the pro forma financial impact of the Merger on Eastex and EPG,
including the potential relative ownership of the EPG Common Stock after the
Merger by the current shareholders of Eastex and EPG; and, to the extent
publicly available, the terms of the recent merger and acquisition transactions
involving comparable companies. In addition, we have reviewed the merger
premiums paid in recent cash and stock acquisitions of public companies
generally, and energy industry companies in particular. We have also analyzed
certain financial, stock market and other publicly available information
relating to the business of other public companies whose operations we consider
comparable to the operations of Eastex and EPG. In
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<PAGE> 88
addition to the foregoing, we have considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as we deemed relevant in arriving at our opinion.
In connection with our review, we have not independently verified any of
the foregoing information, and we have relied upon such information being
complete and accurate in all material respects. We have assumed that the
financial forecasts provided to us and discussed with us have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of Eastex as to the expected future performance of
Eastex. In addition, we have not made an independent evaluation or appraisal of
the assets of Eastex or EPG, nor have we been furnished with such appraisals. In
rendering our opinion, we have assumed that in the course of obtaining the
necessary regulatory and governmental approvals for the proposed Merger, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the proposed Merger. Our opinion is based upon
circumstances existing and disclosed to us as of the date hereof.
Rauscher Pierce Refsnes, Inc., as part of its investment banking business,
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. We are familiar with
Eastex, having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. In the
ordinary course of our business, we may actively trade the securities of Eastex
and EPG for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short positions in such securities.
It is understood that this letter is intended solely for the benefit and
use of the Board of Directors and is not to be used for any other purpose, or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor shall any public references to Rauscher Pierce Refsnes,
Inc. be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work described above and other factors we deemed relevant, we are
of the opinion that the terms of the Merger are fair to the stockholders of
Eastex from a financial point of view.
Very truly yours,
RAUSCHER PIERCE REFSNES, INC.
/s/ JOSEPH P. CUNNINGHAM
By: Joseph P. Cunningham
Managing Director
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<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement in connection with specified actions, suits, or
proceedings, whether civil, criminal, administrative, or investigative (other
than action by or in the right of the corporation -- a "derivative action"), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement, or otherwise.
Article X of the By-laws of El Paso Natural Gas Company ("EPG") requires
indemnification to the full extent permitted under Delaware law as from time to
time in effect. Subject to any restrictions imposed by Delaware law, the By-laws
of EPG provide an unconditional right to indemnification for all expense,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid in settlement) actually and reasonably
incurred or suffered by any person in connection with any actual or threatened
proceeding (including, to the extent permitted by law, any derivative action) by
reason of the fact that such person is or was serving as a director, officer, or
employee of EPG, or that, being or having been such a director or officer or an
employee of EPG, such person is or was serving at the request of EPG as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, including an employee benefit plan. The
By-laws of EPG also provide that EPG may, by action of its Board of Directors,
provide indemnification to its agents with the same scope and effect as the
foregoing indemnification of directors and officers.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
payment of unlawful dividends or unlawful stock purchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit.
Article 10 of EPG's Restated Certificate of Incorporation, as amended,
provides that to the full extent that the Delaware General Corporation Law, as
it now exists or may hereafter be amended, permits the limitation or elimination
of the liability of directors, a director of EPG shall not be liable to EPG or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Any amendment to or repeal of such Article 10 shall not adversely
affect any right or protection of a director of EPG for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
EPG maintains directors' and officers' liability insurance which provides
for payment, on behalf of the directors and officers of EPG and its
subsidiaries, or certain losses of such persons (other than matters uninsurable
under law) arising from claims, including claims arising under the Act, for acts
or omissions by such persons while acting as directors or officers of EPG and/or
its subsidiaries, as the case may be.
II-1
<PAGE> 90
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
2 -- Agreement and Plan of Merger, dated as of May 8, 1995, between EPG,
El Paso Acquisition Company and Eastex Energy Inc. (attached as
Appendix A to Proxy Statement/Prospectus).
3(i) -- Restated Certificate of Incorporation of EPG dated January 22, 1992
(Form 10-K, No. 1-2700, filed January 29, 1992); Certificate of
Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock of EPG, dated July 7, 1992 (Form 10-K, No. 1-2700,
filed February 3, 1993).
3(ii) -- By-laws of EPG, as amended September 1, 1994 (Form 10-K, No. 1-2700,
filed January 26, 1995).
4A -- Specimen Certificate for shares of Common Stock, $3.00 par value, of
EPG (Form 8-A, No. 1-2700, filed February 13, 1992).
4.B.1 -- Indenture, dated as of March 1, 1987, between EPG and Citibank, N.A.,
Trustee, with respect to EPG's 8 5/8% Debentures due 2012 (Form S-3,
No. 33-34284, filed April 20, 1990); Supplemental Indenture, dated
December 24, 1991 (Form 10-K, No. 1-2700, filed January 29, 1992).
4.B.2 -- Indenture, dated as of August 1, 1987, between EPG and Citibank,
N.A., Trustee, with respect to EPG's 9.45% Notes due 1999 (Form S-3,
No. 33-34284, filed April 20, 1990); Supplemental Indenture, dated
December 24, 1991 (Form 10-K, No. 1-2700, filed January 29, 1992).
4.B.3 -- Indenture, dated as of January 1, 1992, between EPG and Citibank,
N.A., Trustee, with respect to EPG's 6.90% Notes due 1997, 7 3/4%
Notes due 2002 and 8 5/8% Debentures due 2022 (Form 10-K, No. 1-2700,
filed January 29, 1992).
4.C -- Shareholder Rights Plan (Form 10-Q, No. 1-2700, filed November 12,
1992).
*5 -- Opinion of Britton White, Jr., Senior Vice President and General
Counsel of EPG, regarding the issuance of the shares.
10.A -- Mojave Pipeline General Partnership Agreement by and among El Paso
Mojave Pipeline Co., HNG Mojave, Inc., and Pacific Interstate Mojave
Company, dated as of March 26, 1985 (Form 10-Q, No. 1-2700, filed May
15, 1985); Amendment No. 1 to General Partnership Agreement, dated as
of September 29, 1986 (Form 10-Q, No. 1-2700, filed May 13, 1988);
Amendment No. 2 to General Partnership Agreement, dated as of
September 30, 1991 (Form 10-Q, No. 1-2700, filed November 14, 1991).
10.B -- Lease, dated May 27, 1982, between EPG and First Capital Kayser
Center (Form 10-Q, No. 1-2700, filed November 14, 1991).
10.C -- Transportation Service Agreement as Amended and Restated, effective
November 1, 1993, between EPG and Pacific Gas and Electric Company
(Form 10-K, No. 1-2700, filed January 26, 1995).
10.D -- Transportation Service Agreement as Amended and Restated, effective
July 16, 1993, between EPG and Southern California Gas Company (Form
10-K, No. 1-2700, filed January 26, 1995).
10.E -- Transportation Service Agreement, dated August 9, 1991, and effective
September 1, 1991, between EPG and Southwest Gas Corporation for
service to Arizona; Transportation Service Agreement, dated August 9,
1991, and effective September 1, 1991, between EPG and Southwest Gas
Corporation for service to Nevada (Form 10-Q, No. 1-2700, filed
November 14, 1991); Amendatory Agreement and replacement of Exhibit B
to Transportation Service Agreement, dated August 9, 1991, and
effective May 8, 1992, between EPG and Southwest Gas Corporation for
service to Nevada (Form 10-K, No. 1-2700, filed February 3,
</TABLE>
II-2
<PAGE> 91
<TABLE>
<S> <C>
1993); Exhibit B to the Transportation Service Agreement, dated
August 9, 1991, and effective March 1, 1994, between EPG and
Southwest Gas Corporation for service to Arizona (Form 10-K, No.
1-2700, filed January 26, 1995).
10.F -- Credit Agreement among Mojave Pipeline Company and Deutsche Bank AG,
New York Branch, and Swiss Bank Corporation, New York Branch,
individually and as Agents, and the Banks named therein, dated as of
September 30, 1991, and the following documents related thereto:
Sponsor Performance Agreement among EPG and Deutsche Bank AG, New
York Branch, as Collateral Agent and Deutsche Bank AG, New York
Branch and Swiss Bank Corporation, New York Branch, as Agents, dated
as of September 30, 1991; Partner Performance Agreement among El Paso
Mojave Pipeline Co. and Deutsche Bank AG, New York Branch, as
Collateral Agent and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch, as Agents, dated as of September 30,
1991; Pledge Agreement made by El Paso Mojave Pipeline Co. with and
to Deutsche Bank AG, New York Branch (as Collateral Agent) for the
Secured Creditors, dated as of September 30, 1991; $90,000,000 Note
dated September 30, 1991, executed by Mojave Pipeline Company and
payable to Deutsche Bank AG, New York Branch; $90,000,000 Note dated
September 30, 1991, executed by Mojave Pipeline Company and payable
to Swiss Bank Corporation, New York Branch (Form 10-Q, No. 1-2700,
filed November 14, 1991); Syndication and replacement of Notes with a
$52,750,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Swiss Bank Corporation, New York
Branch; a $40,000,000 Note dated September 30, 1991, executed by
Mojave Pipeline Company and payable to Deutsche Bank AG, New York
Branch; a $30,000,000 Note dated September 30, 1991, executed by
Mojave Pipeline Company and payable to Banque Indosuez; a $20,000,000
Note dated September 30, 1991, executed by Mojave Pipeline Company
and payable to the Sumitomo Bank, Limited, Houston Agency; a
$20,000,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to the Bank of Nova Scotia; a
$17,250,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Credit Lyonnais Cayman Islands Branch
(Form 10-K, No. 1-2700, filed January 29, 1992). First Amendment to
Credit Agreement, dated as effective December 23, 1992, among Mojave
Pipeline Company and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch; Amendment to Sponsor and Partner
Performance Agreements entered into effective as of December 23,
1992; Syndication and replacement of Note for $52,750,000 payable to
Swiss Bank Corporation, New York Branch and Note for $17,250,000
payable to Credit Lyonnais Cayman Islands Branch with a $40,000,000
Note dated September 30, 1991, executed by Mojave Pipeline Company
and payable to Swiss Bank Corporation, New York Branch; and a
$30,000,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Credit Lyonnais Cayman Islands
Branch. Second Amendment to Credit Agreement, dated as effective June
1, 1993, among Mojave Pipeline Company and Deutsche Bank AG, New York
Branch and Swiss Bank Corporation, New York Branch; Amended and
Restated Sponsor Performance Agreement dated as effective June 1,
1993, among EPG and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch; Amendment and Ratification of Partner
Documents dated as effective June 1, 1993, among EPNG Mojave, Inc.
and El Paso Mojave Pipeline Co. and Deutsche Bank AG, New York Branch
and Swiss Bank Corporation, New York Branch (Form 10-Q, No. 1-2700,
filed August 16, 1993). Replacement of $30,000,000 Note dated
September 30, 1991, executed by Mojave Pipeline Company and payable
to Banque Indosuez with a $30,000,000 Note dated
</TABLE>
II-3
<PAGE> 92
<TABLE>
<S> <C>
September 30, 1991, executed by Mojave Pipeline Company and payable
to Bank of Scotland (Form 10-Q, No. 1-2700, filed May 13, 1994).
10.G -- Master Separation Agreement and documents related thereto, dated
January 15, 1992, by and among Burlington Resources Inc., EPG and
Meridian Oil Holding Inc., including Exhibits (Form 10-K, No. 1-2700,
filed January 29, 1992).
10.H -- Revolving Credit and Competitive Advance Facility Agreement, dated as
of August 10, 1994, between EPG, Chemical Bank and certain other
banks (Form 10-Q, No. 1-2700, filed November 14, 1994).
10.I -- Omnibus Compensation Plan, dated as of January 1, 1992 (Amendment No.
1 to Form S-2, No. 33-45369, filed February 27, 1992).
10.J -- 1995 Incentive Compensation Plan, effective as of January 13, 1995
(Form S-8, No. 33-57553, filed February 2, 1995); Amendment No. 1 to
EPG's 1995 Incentive Compensation Plan, effective as of July 21, 1995
(Form 10-Q, No. 1-2700, filed July 21, 1995).
10.K -- 1995 Compensation Plan for Non-Employee Directors, effective as of
January 13, 1995 (Form S-8, No. 33-57553, filed February 2, 1995).
10.L -- Stock Option Plan for Non-Employee Directors, dated as of January 1,
1992 (Amendment No. 1 to Form S-2, No. 33-45369, filed February 27,
1992).
10.M -- Supplemental Benefits Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.N -- Senior Executive Survivor Benefit Plan, effective January 1, 1992
(Amendment No. 1 to Form S-2, No. 33-45369, filed February 27, 1992).
10.O -- Deferred Compensation Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.P -- Retirement Income Plan for Non-Employee Directors, Amended and
Restated Effective as of January 13, 1995 (Form 10-K, No. 1-2700,
filed January 26, 1995).
10.Q -- Key Executive Severance Protection Plan, Amended and Restated
Effective as of January 13, 1995 (Form 10-K, No. 1-2700, filed
January 26, 1995).
10.R -- Director Charitable Award Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.S -- Receivables Purchase and Sale Agreement, dated as of January 14,
1992, between EPG, CIESCO L.P., Corporate Asset Funding Company, Inc.
and Citicorp North America, Inc. (Form 10-K, No. 1-2700, filed
February 3, 1993).
10.T -- Employment Agreement, dated July 31, 1992, between EPG and William A.
Wise (Form 10-K, No. 1-2700, filed February 3, 1993).
10.U -- Letter Agreement, dated February 22, 1991, between EPG and Britton
White, Jr. (Form 10-K, No. 1-2700, filed February 3, 1993).
10.V -- Letter Agreement, dated January 13, 1995, between EPG and William A.
Wise (Form 10-K, No. 1-2700, filed January 26, 1995).
10.W -- Participation and Credit Agreement, dated as of February 9, 1995,
among EPG, El Paso New Chaco Company, State Street Bank and Trust
Company, as Trustee, Chemical Bank, as Agent, the Note Holders
Signatories and the Certificate Holders Signatories (without exhibits
and schedules, except for the schedule of defined terms), and the
following documents related thereto: Lease Agreement, dated as of
February 9, 1995, between State Street Bank and Trust Company and El
Paso New Chaco Company; Support Agreement, dated as of February 9,
1995, between El Paso New Chaco Company and State Street Bank and
Trust Company; Guaranty Agreement by EPG in favor of Chemical Bank,
as Agent, and each of the
</TABLE>
II-4
<PAGE> 93
<TABLE>
<S> <C>
Participants as of February 9, 1995; Sponsor Agreement by EPG in
favor of State Street Bank and Trust Company as of February 9, 1995;
Mortgage, Assignment, Security Agreement and Financing Statement,
executed February 7, 1995, between State Street Bank and Trust
Company (Mortgagor) and Chemical Bank (Mortgagee); and Security
Agreement among State Street Bank and Trust Company and Chemical
Bank, as Agent, dated February 9, 1995 (Form 10-Q, No. 1-2700, filed
April 28, 1995).
10.X -- 1995 Omnibus Compensation Plan, effective as of January 13, 1995
(Form S-8, No. 33-57553, filed February 2, 1995); Amendment No. 1 to
EPG's 1995 Omnibus Compensation Plan, effective as of July 21, 1995
(Form 10-Q, No. 1-2700, filed July 21, 1995).
21 -- Subsidiaries of EPG (Form 10-K, No. 1-2700, filed January 26, 1995).
*23.A -- Consent of Rauscher Pierce Refsnes, Inc.
*23.B -- Consent of Britton White, Jr. (contained in Exhibit 5).
*23.C -- Consent of Fried, Frank, Harris, Shriver & Jacobson.
*23.D -- Consent of Arthur Andersen, L.L.P. with respect to Eastex.
*23.E -- Consent of Coopers & Lybrand L.L.P. with respect to EPG.
*24 -- Power of Attorney (See page II-7)
*99 -- Form of Proxy
</TABLE>
Each exhibit identified on this Exhibit List is filed as a part of this
Registration Statement. Exhibits not incorporated by reference to a prior filing
are designated by an asterisk; all exhibits not so designated are incorporated
herein by reference to a prior filing as indicated.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) 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.
(2) That prior to any public reoffering of the securities registered
hereunder through 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.
(3) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and
II-5
<PAGE> 94
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.
(5) 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.
(6) 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-6
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of El Paso,
State of Texas, on August 14, 1995.
EL PASO NATURAL GAS COMPANY
By: /s/ WILLIAM A. WISE
William A. Wise
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes H.
Brent Austin and Britton White, Jr. and each of them as attorneys-in-fact, with
full power of substitution, to execute in the name and on behalf of such person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------- ------------------------------------------------
<S> <C> <C>
/s/ WILLIAM A. WISE Chairman of the Board, August 14, 1995
William A. Wise President, Chief Executive
Officer and Director
/s/ H. BRENT AUSTIN Executive Vice President and August 14, 1995
H. Brent Austin Chief Financial Officer
/s/ THOMAS E. RICKS Vice President, Chief August 14, 1995
Thomas E. Ricks Accounting Officer and
Controller
/s/ BYRON ALLUMBAUGH Director August 14, 1995
Byron Allumbaugh
/s/ EUGENIO GARZA LAGUERA Director August 14, 1995
Eugenio Garza Laguera
/s/ JAMES F. GIBBONS Director August 14, 1995
James F. Gibbons
/s/ BEN F. LOVE Director August 14, 1995
Ben F. Love
/s/ KENNETH L. SMALLEY Director August 14, 1995
Kenneth L. Smalley
/s/ MALCOLM WALLOP Director August 14, 1995
Malcolm Wallop
</TABLE>
II-7
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
----------------------------------------------------------------------------------------------
<S> <C> <C>
2 -- Agreement and Plan of Merger, dated as of May 8, 1995, between EPG,
El Paso Acquisition Company and Eastex Energy Inc. (attached as
Appendix A to Proxy Statement/Prospectus).
3(i) -- Restated Certificate of Incorporation of EPG dated January 22, 1992
(Form 10-K, No. 1-2700, filed January 29, 1992); Certificate of
Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock of EPG, dated July 7, 1992 (Form 10-K, No. 1-2700,
filed February 3, 1993).
3(ii) -- By-laws of EPG, as amended September 1, 1994 (Form 10-K, No. 1-2700,
filed January 26, 1995).
4A -- Specimen Certificate for shares of Common Stock, $3.00 par value, of
EPG (Form 8-A, No. 1-2700, filed February 13, 1992).
4.B.1 -- Indenture, dated as of March 1, 1987, between EPG and Citibank, N.A.,
Trustee, with respect to EPG's 8 5/8% Debentures due 2012 (Form S-3,
No. 33-34284, filed April 20, 1990); Supplemental Indenture, dated
December 24, 1991 (Form 10-K, No. 1-2700, filed January 29, 1992).
4.B.2 -- Indenture, dated as of August 1, 1987, between EPG and Citibank,
N.A., Trustee, with respect to EPG's 9.45% Notes due 1999 (Form S-3,
No. 33-34284, filed April 20, 1990); Supplemental Indenture, dated
December 24, 1991 (Form 10-K, No. 1-2700, filed January 29, 1992).
4.B.3 -- Indenture, dated as of January 1, 1992, between EPG and Citibank,
N.A., Trustee, with respect to EPG's 6.90% Notes due 1997, 7 3/4%
Notes due 2002 and 8 5/8% Debentures due 2022 (Form 10-K, No. 1-2700,
filed January 29, 1992).
4.C -- Shareholder Rights Plan (Form 10-Q, No. 1-2700, filed November 12,
1992).
*5 -- Opinion of Britton White, Jr., Senior Vice President and General
Counsel of EPG, regarding the issuance of the shares.
10.A -- Mojave Pipeline General Partnership Agreement by and among El Paso
Mojave Pipeline Co., HNG Mojave, Inc., and Pacific Interstate Mojave
Company, dated as of March 26, 1985 (Form 10-Q, No. 1-2700, filed May
15, 1985); Amendment No. 1 to General Partnership Agreement, dated as
of September 29, 1986 (Form 10-Q, No. 1-2700, filed May 13, 1988);
Amendment No. 2 to General Partnership Agreement, dated as of
September 30, 1991 (Form 10-Q, No. 1-2700, filed November 14, 1991).
10.B -- Lease, dated May 27, 1982, between EPG and First Capital Kayser
Center (Form 10-Q, No. 1-2700, filed November 14, 1991).
10.C -- Transportation Service Agreement as Amended and Restated, effective
November 1, 1993, between EPG and Pacific Gas and Electric Company
(Form 10-K, No. 1-2700, filed January 26, 1995).
10.D -- Transportation Service Agreement as Amended and Restated, effective
July 16, 1993, between EPG and Southern California Gas Company (Form
10-K, No. 1-2700, filed January 26, 1995).
10.E -- Transportation Service Agreement, dated August 9, 1991, and effective
September 1, 1991, between EPG and Southwest Gas Corporation for
service to Arizona; Transportation Service Agreement, dated August 9,
1991, and effective September 1, 1991, between EPG and Southwest Gas
Corporation for service to Nevada (Form 10-Q, No. 1-2700, filed
November 14, 1991); Amendatory
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
----------------------------------------------------------------------------------------------
<S> <C> <C>
Agreement and replacement of Exhibit B to Transportation Service
Agreement, dated August 9, 1991, and effective May 8, 1992, between
EPG and Southwest Gas Corporation for service to Nevada (Form 10-K,
No. 1-2700, filed February 3, 1993); Exhibit B to the Transportation
Service Agreement, dated August 9, 1991, and effective March 1, 1994,
between EPG and Southwest Gas Corporation for service to Arizona
(Form 10-K, No. 1-2700, filed January 26, 1995).
10.F -- Credit Agreement among Mojave Pipeline Company and Deutsche Bank AG,
New York Branch, and Swiss Bank Corporation, New York Branch,
individually and as Agents, and the Banks named therein, dated as of
September 30, 1991, and the following documents related thereto:
Sponsor Performance Agreement among EPG and Deutsche Bank AG, New
York Branch, as Collateral Agent and Deutsche Bank AG, New York
Branch and Swiss Bank Corporation, New York Branch, as Agents, dated
as of September 30, 1991; Partner Performance Agreement among El Paso
Mojave Pipeline Co. and Deutsche Bank AG, New York Branch, as
Collateral Agent and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch, as Agents, dated as of September 30,
1991; Pledge Agreement made by El Paso Mojave Pipeline Co. with and
to Deutsche Bank AG, New York Branch (as Collateral Agent) for the
Secured Creditors, dated as of September 30, 1991; $90,000,000 Note
dated September 30, 1991, executed by Mojave Pipeline Company and
payable to Deutsche Bank AG, New York Branch; $90,000,000 Note dated
September 30, 1991, executed by Mojave Pipeline Company and payable
to Swiss Bank Corporation, New York Branch (Form 10-Q, No. 1-2700,
filed November 14, 1991); Syndication and replacement of Notes with a
$52,750,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Swiss Bank Corporation, New York
Branch; a $40,000,000 Note dated September 30, 1991, executed by
Mojave Pipeline Company and payable to Deutsche Bank AG, New York
Branch; a $30,000,000 Note dated September 30, 1991, executed by
Mojave Pipeline Company and payable to Banque Indosuez; a $20,000,000
Note dated September 30, 1991, executed by Mojave Pipeline Company
and payable to the Sumitomo Bank, Limited, Houston Agency; a
$20,000,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to the Bank of Nova Scotia; a
$17,250,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Credit Lyonnais Cayman Islands Branch
(Form 10-K, No. 1-2700, filed January 29, 1992). First Amendment to
Credit Agreement, dated as effective December 23, 1992, among Mojave
Pipeline Company and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch; Amendment to Sponsor and Partner
Performance Agreements entered into effective as of December 23,
1992; Syndication and replacement of Note for $52,750,000 payable to
Swiss Bank Corporation, New York Branch and Note for $17,250,000
payable to Credit Lyonnais Cayman Islands Branch with a $40,000,000
Note dated September 30, 1991, executed by Mojave Pipeline Company
and payable to Swiss Bank Corporation, New York Branch; and a
$30,000,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Credit Lyonnais Cayman Islands
Branch. Second Amendment to Credit Agreement, dated as effective June
1, 1993, among Mojave Pipeline Company and Deutsche Bank AG, New York
Branch and Swiss Bank Corporation, New York Branch; Amended and
Restated Sponsor Performance Agreement dated as effective June 1,
1993, among EPG and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch; Amendment and Ratification of Partner
Documents dated as
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
----------------------------------------------------------------------------------------------
<S> <C> <C>
effective June 1, 1993, among EPNG Mojave, Inc. and El Paso Mojave
Pipeline Co. and Deutsche Bank AG, New York Branch and Swiss Bank
Corporation, New York Branch (Form 10-Q, No. 1-2700, filed August 16,
1993). Replacement of $30,000,000 Note dated September 30, 1991,
executed by Mojave Pipeline Company and payable to Banque Indosuez
with a $30,000,000 Note dated September 30, 1991, executed by Mojave
Pipeline Company and payable to Bank of Scotland (Form 10-Q, No.
1-2700, filed May 13, 1994).
10.G -- Master Separation Agreement and documents related thereto, dated
January 15, 1992, by and among Burlington Resources Inc., EPG and
Meridian Oil Holding Inc., including Exhibits (Form 10-K, No. 1-2700,
filed January 29, 1992).
10.H -- Revolving Credit and Competitive Advance Facility Agreement, dated as
of August 10, 1994, between EPG, Chemical Bank and certain other
banks (Form 10-Q, No. 1-2700, filed November 14, 1994).
10.I -- Omnibus Compensation Plan, dated as of January 1, 1992 (Amendment No.
1 to Form S-2, No. 33-45369, filed February 27, 1992).
10.J -- 1995 Incentive Compensation Plan, effective as of January 13, 1995
(Form S-8, No. 33-57553, filed February 2, 1995); Amendment No. 1 to
EPG's 1995 Incentive Compensation Plan, effective as of July 21, 1995
(Form 10-Q, No. 1-2700, filed July 21, 1995).
10.K -- 1995 Compensation Plan for Non-Employee Directors, effective as of
January 13, 1995 (Form S-8, No. 33-57553, filed February 2, 1995).
10.L -- Stock Option Plan for Non-Employee Directors, dated as of January 1,
1992 (Amendment No. 1 to Form S-2, No. 33-45369, filed February 27,
1992).
10.M -- Supplemental Benefits Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.N -- Senior Executive Survivor Benefit Plan, effective January 1, 1992
(Amendment No. 1 to Form S-2, No. 33-45369, filed February 27, 1992).
10.O -- Deferred Compensation Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.P -- Retirement Income Plan for Non-Employee Directors, Amended and
Restated Effective as of January 13, 1995 (Form 10-K, No. 1-2700,
filed January 26, 1995).
10.Q -- Key Executive Severance Protection Plan, Amended and Restated
Effective as of January 13, 1995 (Form 10-K, No. 1-2700, filed
January 26, 1995).
10.R -- Director Charitable Award Plan, Amended and Restated Effective as of
January 13, 1995 (Form 10-K, No. 1-2700, filed January 26, 1995).
10.S -- Receivables Purchase and Sale Agreement, dated as of January 14,
1992, between EPG, CIESCO L.P., Corporate Asset Funding Company, Inc.
and Citicorp North America, Inc. (Form 10-K, No. 1-2700, filed
February 3, 1993).
10.T -- Employment Agreement, dated July 31, 1992, between EPG and William A.
Wise (Form 10-K, No. 1-2700, filed February 3, 1993).
10.U -- Letter Agreement, dated February 22, 1991, between EPG and Britton
White, Jr. (Form 10-K, No. 1-2700, filed February 3, 1993).
10.V -- Letter Agreement, dated January 13, 1995, between EPG and William A.
Wise (Form 10-K, No. 1-2700, filed January 26, 1995).
10.W -- Participation and Credit Agreement, dated as of February 9, 1995,
among EPG, El Paso New Chaco Company, State Street Bank and Trust
Company, as Trustee,
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
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<S> <C> <C>
Chemical Bank, as Agent, the Note Holders Signatories and the
Certificate Holders Signatories (without exhibits and schedules,
except for the schedule of defined terms), and the following
documents related thereto: Lease Agreement, dated as of February 9,
1995, between State Street Bank and Trust Company and El Paso New
Chaco Company; Support Agreement, dated as of February 9, 1995,
between El Paso New Chaco Company and State Street Bank and Trust
Company; Guaranty Agreement by EPG in favor of Chemical Bank, as
Agent, and each of the Participants as of February 9, 1995; Sponsor
Agreement by EPG in favor of State Street Bank and Trust Company as
of February 9, 1995; Mortgage, Assignment, Security Agreement and
Financing Statement, executed February 7, 1995, between State Street
Bank and Trust Company (Mortgagor) and Chemical Bank (Mortgagee); and
Security Agreement among State Street Bank and Trust Company and
Chemical Bank, as Agent, dated February 9, 1995 (Form 10-Q, No.
1-2700, filed April 28, 1995).
10.X -- 1995 Omnibus Compensation Plan, effective as of January 13, 1995
(Form S-8, No. 33-57553, filed February 2, 1995); Amendment No. 1 to
EPG's 1995 Omnibus Compensation Plan, effective as of July 21, 1995
(Form 10-Q, No. 1-2700, filed July 21, 1995).
21 -- Subsidiaries of EPG (Form 10-K, No. 1-2700, filed January 26, 1995).
*23.A -- Consent of Rauscher Pierce Refsnes, Inc.
*23.B -- Consent of Britton White, Jr. (contained in Exhibit 5).
*23.C -- Consent of Fried, Frank, Harris, Shriver & Jacobson.
*23.D -- Consent of Arthur Andersen, L.L.P. with respect to Eastex.
*23.E -- Consent of Coopers & Lybrand L.L.P. with respect to EPG.
*24 -- Power of Attorney (See page II-7)
*99 -- Form of Proxy
</TABLE>
Each exhibit identified on this Exhibit List is filed as a part of this
Registration Statement. Exhibits not incorporated by reference to a prior filing
are designated by an asterisk; all exhibits not so designated are incorporated
herein by reference to a prior filing as indicated.
<PAGE> 1
EXHIBIT 5
August 9, 1995
Eastex Energy Inc.
1100 First Interstate Bank Plaza
1000 Louisiana
Houston, Texas 77002
Re: El Paso Natural Gas Company's Registration Statement on Form S-4
Ladies and Gentlemen:
As Senior Vice President and General Counsel of El Paso Natural Gas
Company, a Delaware corporation (the "Company"), I am providing this legal
opinion in connection with the preparation and filing with the Securities and
Exchange Commission of a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended, (the "Act"). The
Registration Statement relates to shares of the Company's common stock, $3 par
value (the "Shares"), which are to be issued pursuant to the Agreement and Plan
of Merger, dated May 8, 1995, by and among this Company, El Paso Acquisition
Company and Eastex Energy Inc. (the "Merger Agreement") pursuant to which Eastex
Energy Inc. ("Eastex") stockholders will receive either Shares and/or cash
(subject to certain limitations described in the Merger Agreement) and Eastex
will be merged into El Paso Acquisition Company. Each Share will have attached
an associated right to purchase shares of preferred stock, $.01 par value, of
the Company in accordance with the Shareholder Rights Agreement between the
Company and The First National Bank of Boston, dated as of July 7, 1992 (the
"Shareholder Rights Agreement") (each a "Right").
I have examined the Registration Statement, the Merger Agreement, the
Shareholder Rights Agreement and such other corporate records, certificates and
other documents and instruments, and have made such investigations of law, as I
have considered necessary or appropriate for the purposes of this opinion.
Based upon and subject to the foregoing, I am of the opinion that the
Shares, when executed by the Company, countersigned by a transfer agent, duly
registered by a registrar for the Shares and issued in accordance with the
resolutions of the Board of Directors of the Company and the terms and
provisions of the Merger Agreement, will be validly issued, fully paid and
nonassessable.
In rendering the foregoing opinion, I have relied as to certain matters on
information obtained from public officials and other sources believed by me to
be responsible, and have assumed that the signatures on all documents examined
by me are genuine, assumptions which I have not independently verified.
This opinion may be filed as an exhibit to the Registration Statement.
Consent is also given to the reference to me under the caption "Legal Matters"
in the Proxy Statement and Prospectus included in the Registration Statement as
having passed upon the validity of the issuance of the Shares. In giving this
consent, I do not hereby admit that I come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
This opinion is being rendered solely for your benefit in connection with
the issuance of the Shares and Rights in accordance with the Merger Agreement.
Very truly yours,
/s/ BRITTON WHITE, JR.
Britton White, Jr.
<PAGE> 1
EXHIBIT 23.A
CONSENT OF RAUSCHER PIERCE REFSNES, INC.
CONCERNING USE OF OPINION
We hereby consent to the use of our opinion as set forth in Annex B to the
Proxy Statement/Prospectus and to the use of our name under the caption "The
Merger -- Background of the Merger," "-- Reasons for the Merger; Recommendation
of Eastex Board" and "-- Opinion of Financial Advisor to Eastex."
RAUSCHER PIERCE REFSNES, INC.
Houston, Texas
August 14, 1995
<PAGE> 1
EXHIBIT 23.C
August 14, 1995
(202) 639-7073
El Paso Natural Gas Company
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
Eastex Energy Inc.
1000 Louisiana
Suite 1100
Houston, Texas 77002
Re: Federal Income Tax Consequences of Merger of Eastex
Energy Inc. with and into El Paso Acquisition Company
Gentlemen:
We hereby consent to the references to this firm under the captions
"Summary -- The Merger," "The Merger -- Certain Federal Income Tax Consequences"
and "Legal Matters" in the Registration Statement on Form S-4 of El Paso Natural
Gas Company filed the date hereof. In giving such consent, we do not thereby
admit that we are in the category of such persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ ALAN S. KADEN
Alan S. Kaden
<PAGE> 1
EXHIBIT 23.D
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
August 14, 1995
<PAGE> 1
EXHIBIT 23.E
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 30, 1995
(except with respect to the matter discussed in Note 12, as to which the date is
August 11, 1995) included in Eastex Energy Inc.'s Form 10-K, as amended, for the
year ended December 31, 1994 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
August 11, 1995
<PAGE> 1
<TABLE>
<S> <C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE AGREEMENT AND
PLAN OF MERGER AND, IN THE DISCRETION OF THE PROXY, ON ANY OTHER BUSINESS.
FOR AGAINST ABSTAIN
1. Approval and adoption of the Agreement and Plan of Merger dated May 8, / / / / / /
1995, between El Paso Natural Gas Company ("EPG"), El Paso Acquisition Corp.,
a wholly owned subsidiary of EPG ("EPGSub"), and Eastex pursuant to which
Eastex will merge with and into EPG Sub which shall be the surviving
corporation and which will remain a wholly owned subsidiary of EPG:
2. In his discretion, the Proxy are authorized to vote upon such other / / / / / /
business as may properly come before the meeting or any adjournment(s) or
postponement(s) thereof.
/ / I plan to attend
the meeting
SIGNATURE (S) ______________________________________________ DATE _____________ PLEASE SIGN, DATE AND RETURN THIS PROXY
IMPORTANT: Please date this proxy and sign exactly as your name or names PROMPTLY IN THE ACCOMPANYING POSTPAID ENVELOPE.
appear thereon. If stock is held jointly, all holders must execute this proxy.
Executors, administrators, trustees, guardians and others signing in a
representative capacity, please so indicate when signing.
</TABLE>
EASTEX ENERGY INC.
PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
Special Meeting of Stockholders
September 12, 1995
The undersigned hereby (a) acknowledges receipt of the Notice of Special
Meeting of Stockholders of Eastex Energy Inc. ("Eastex") to be held on September
12, 1995, at 10:00 a.m., and the Proxy Statement/Prospectus in connection
therewith, each dated August 14, 1995; (b) appoints Robert G. Phillips as Proxy
with full power of substitution, (c) authorizes the Proxy to represen t and
vote, as designated below, all the shares of Common Stock of Eastex, held of
record by the undersigned on July 14, 1995, at such special meeting and at any
adjournment(s) or postponements thereof; and (d) revokes any proxies heretofore
given.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
