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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 28, 1994
PANHANDLE EASTERN CORPORATION
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 1-8157 74-2150460
________________________________________________________________________________
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
5400 Westheimer Court, P.O. Box 1642, Houston, Texas 77251-1642
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (713) 627-5400
____________________________
N/A
________________________________________________________________________________
(Former name or former address, if changed since last report)
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Item 5. Other Events
____________
Panhandle Eastern Corporation (the "Company") issued a press release on
November 28, 1994, announcing the settlement of certain litigation relating to
the transactions contemplated by the Agreement and Plan of Merger dated as of
October 9, 1994, among the Company, a wholly-owned subsidiary of the Company
and Associated Natural Gas Corporation. A copy of the press release and the
Amendment to the Merger Agreement, the Amendment to the Stock Option Agreement
and the Stipulation and Agreement of Compromise, Settlement & Release
governing the settlement described therein are attached hereto as Exhibits 99.1
through 99.4, respectively, and are incorporated herein by reference.
Item 7(c). Exhibits.
_________
99.1. Press Release dated November 28, 1994.
99.2. Amendment to Agreement and Plan of Merger among the Company,
Panhandle Acquisition Two, Inc. and Associated Natural Gas
Corporation, dated as of November 28, 1994.
99.3. Amendment to Stock Option Agreement between the Company and
Associate Natural Gas Corporation, dated as of November 28, 1994.
99.4. Stipulation and Agreement of Compromise, Settlement & Release dated
November 28, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PANHANDLE EASTERN CORPORATION
By: /s/ Carl B. King
_________________________________
Name: Carl B. King
Title: Senior Vice President and
General Counsel
Dated: November 29, 1994
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EXHIBIT INDEX
EXHIBIT
_______
99.1. Press Release dated November 28, 1994.
99.2. Amendment to Agreement and Plan of Merger
among the Company, Panhandle Acquisition Two, Inc.
and Associated Natural Gas Corporation, dated
as of November 28, 1994.
99.3. Amendment to Stock Option Agreement between
the Company and Associated Natural Gas Corporation,
dated as of November 28, 1994.
99.4. Stipulation and Agreement of Compromise, Settlement & Release
dated November 28, 1994.
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EXHIBIT 99.1
Release: November 28, 1994
Contact: Media Relations -- John P. Barnett, (713) 627-4072
Investor Relations -- Gregg E. McBride, (713) 627-4600
or (800) 347-3636
PANHANDLE EASTERN CORPORATION
AND ASSOCIATED NATURAL GAS CORPORATION
SETTLE SHAREHOLDER LAWSUIT
HOUSTON, November 28 - Panhandle Eastern Corporation (NYSE:PEL) and
Associated Natural Gas Corporation (NYSE:NGA) today announced a proposed
settlement of litigation brought by certain Associated stockholders with
respect to the previously announced proposed merger of a Panhandle Eastern
subsidiary with Associated.
Under the settlement proposal, which is subject to court approval,
Panhandle Eastern and Associated have amended the merger agreement. As an
additional condition for completion of the merger, Associated will be required
to receive an updated written opinion of its financial advisor that as of Dec.
15, the scheduled date of both companies' stockholders' meetings, the merger
consideration is fair to Associated stockholders from a financial point of
view. The companies also amended a stock option agreement granted by
Associated to Panhandle Eastern to reduce the spread between the market value
of Associated common stock and the exercise price of the option from a maximum
of $3.50 per share to a maximum of $2.00 per share upon exercise of the option.
Associated Natural Gas Corporation is one of the largest independent
gatherers, purchasers, transporters and marketers of natural gas, natural gas
liquids and crude oil.
Panhandle Eastern Corporation, America's natural gas transportation
company, operates one of the nation's largest interstate natural gas pipeline
systems, providing natural gas transportation and related services to the
Midwest and Northeast markets.
# # #
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EXHIBIT 99.2
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger, dated as of November
28, 1994 (this "Amendment"), is by and among Panhandle Eastern Corporation, a
Delaware corporation ("PEC"), Panhandle Acquisition Two, Inc., a Delaware
corporation and wholly owned subsidiary of PEC ("Merger Sub"), and Associated
Natural Gas Corporation, a Delaware corporation ("ANGC").
WHEREAS, the parties hereto are parties to that certain Agreement and
Plan of Merger dated as of October 9, 1994 (the "Merger Agreement");
WHEREAS, PEC and ANGC are parties to that certain Stock Option
Agreement dated as of October 9, 1994 (the "PEC Option Agreement");
WHEREAS, pursuant to Section 8.03 of the Merger Agreement, the parties
desire to amend the Merger Agreement;
WHEREAS, pursuant to the terms of the PEC Option Agreement, the parties
thereto are, as of the date hereof, entering into an amendment to the PEC
Option Agreement (which PEC Option Agreement, as amended by such amendment, is
referred to herein as the "Amended PEC Option Agreement"); and
WHEREAS, the respective Boards of Directors of each of the parties
have approved this Amendment;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Capitalized terms used in this Amendment without definition are
defined in the Merger Agreement and are used herein with the same meanings
ascribed to such terms in the Merger Agreement.
2. Section 7.03 of the Merger Agreement is hereby amended by adding
the following subsection thereto:
"(g) Dillon, Read & Co. Inc. shall have delivered to ANGC its
written opinion (which may be in the form of a confirmation, as of
the date of the ANGC Stockholders Meeting, of its opinion referred
to in Section 3.25 hereof) to the effect that, as of the date of
the ANGC Stockholders Meeting, the Merger Consideration to be
received by the holders of ANGC Common Stock in the Merger is fair,
from a financial point of view, to such holders."
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3. Section 8.01 of the Merger Agreement is hereby amended by deleting
the word "or" at the end of subsection (h) thereof, by deleting the period at
the end of subsection (i) thereof and substituting the phrase "; or" in the
place of such period, and by adding the following subsection to Section 8.01:
"(j) by ANGC, if the condition set forth in Section 7.03 (g)
hereof shall not have been satisfied as of the date of the ANGC
Stockholders Meeting; provided, that ANGC shall not have taken any
action, or omitted to take any action, which would prevent such
condition from being satisfied."
4. Section 8.05(c) of the Merger Agreement is hereby amended by
deleting the word "or" at the end of clause (iv) thereof, by adding the word
"or" at the end of clause (v) thereof, and by adding the following clause (vi)
immediately following such clause (v):
"(vi) Section 8.01(j) and at the time of the ANGC Stockholders
Meeting there shall exist a Competing Transaction;"
5. All references to the PEC Option Agreement contained in the Merger
Agreement shall, unless the context otherwise requires, be deemed to be
references to the Amended PEC Option Agreement.
6. The Merger Agreement, as amended by this Amendment, shall remain in
full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
PANHANDLE EASTERN CORPORATION
By: /s/ Paul M. Anderson
__________________________________
PANHANDLE ACQUISITION TWO, INC.
By: /s/ Paul M. Anderson
__________________________________
ASSOCIATED NATURAL GAS CORPORATION
By: /s/ Donald H. Anderson
__________________________________
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EXHIBIT 99.3
AMENDMENT TO STOCK OPTION AGREEMENT
This Amendment to Stock Option Agreement dated as of November 28, 1994
(this "Amendment"), is by and between Panhandle Eastern Corporation, a Delaware
corporation ("PEC"), and Associated Natural Gas Corporation, a Delaware
corporation ("ANGC").
WHEREAS, the parties hereto are parties to that certain Stock Option
Agreement dated as of October 9, 1994 (the "PEC Option Agreement");
WHEREAS, the parties hereto, together with Panhandle Acquisition Two,
Inc., a Delaware corporation and wholly owned subsidiary of PEC, are parties to
that certain Agreement and Plan of Merger dated as of October 9, 1994 (the
"Merger Agreement");
WHEREAS, pursuant to Section 8.4 of the PEC Option Agreement, the
parties desire to amend the PEC Option Agreement;
WHEREAS, pursuant to the terms of the Merger Agreement, the parties
thereto are, as of the date hereof, entering into an amendment to the Merger
Agreement (which Merger Agreement, as amended by such amendment, is referred to
herein as the "Amended Merger Agreement"); and
WHEREAS, the respective Boards of Directors of each of the parties
have approved this Amendment;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Capitalized terms used in this Amendment without definition are
defined in the PEC Option Agreement and are used herein with the same meanings
ascribed to such terms in the PEC Option Agreement.
2. Section 1 of the PEC Option Agreement is hereby amended by
deleting the second sentence thereof and substituting in its place the
following sentence:
"As used herein, the term "Exercise Price" shall mean $39.00 per
share; provided, however, if as of the Exercise Date the Closing
Price (as defined below) is more than $2.00 in excess of the Exercise
Price, then the Exercise Price shall be increased to an amount equal
to the Closing Price less $2.00."
3. All references to the Merger Agreement contained in the PEC
Option Agreement shall, unless the context otherwise requires, be deemed to be
references to
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the Amended Merger Agreement.
4. The PEC Option Agreement, as amended by this Amendment, shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
PANHANDLE EASTERN CORPORATION
By: /s/ Paul M. Anderson
_______________________________
ASSOCIATED NATURAL GAS CORPORATION
By: /s/ Donald H. Anderson
_______________________________
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EXHIBIT 99.4
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE ASSOCIATED NATURAL GAS ) CONSOLIDATED
CORPORATION SHAREHOLDERS ) C.A. No. 13791
LITIGATION )
STIPULATION AND AGREEMENT
OF COMPROMISE, SETTLEMENT & RELEASE
The parties to the above-captioned action, by and through
their respective attorneys, have entered into and propose the following
Stipulation and Agreement of Compromise, Settlement & Release (the
"Stipulation") for the approval of the Court:
WHEREAS,
A. Panhandle Eastern Corporation ("Panhandle") is a
Delaware corporation with its principal executive offices located at 5400
Westheimer Court, P.O. Box 1642, Houston, Texas 77251-1642. Panhandle is a
holding company whose subsidiaries are engaged primarily in the transportation
of natural gas in interstate commerce and related services.
B. Panhandle Acquisition Two, Inc. ("Merger Sub") is a
wholly-owned subsidiary of Panhandle incorporated in Delaware on July 27, 1994.
Merger Sub conducted no business prior to entering into the Agreement and Plan
of Merger dated October 9, 1994 among Panhandle, Merger Sub and Associated
Natural Gas Corporation (the "Merger Agreement").
C. Associated Natural Gas Corporation ("ANGC") is a
Delaware corporation with its principal executive offices located at 370 17th
Street, Suite 900, Denver, Colorado 80202. ANGC is a holding company whose
subsidiaries are
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engaged in the business of purchasing, gathering, processing and transporting
natural gas, natural gas liquids and crude oil and marketing those products to
industrial end-users, local distribution companies, liquid petroleum gas
wholesalers and retailers and refiners.
D. On May 13, 1993, during general discussions with
respect to the nature of the post-Order 636 natural gas industry,(1)
representatives of Panhandle and ANGC had informal discussions regarding a
possible combination of the two companies' non-jurisdictional gathering,
processing and marketing activities. From November 1993 until January 1994,
the parties continued these discussions. As a result of a number of factors,
however, the parties chose not to pursue the discussions at that time.
E. On August 10, 1994, in response to ongoing
consolidation activities in the natural gas industry, a representative of
Dillon Read met with officers of ANGC and, jointly with ANGC, identified
certain companies (including Panhandle) that they considered might be
interested in pursuing a business combination with ANGC. Subsequent to that
date, at the request of ANGC management, Dillon Read contacted seven companies
(other than Panhandle) that were determined to be appropriate candidates for
discussions concerning a possible business combination.
________________________
(1) Order 636 required interstate natural gas pipelines like Panhandle to
unbundle their services of natural gas gathering, processing, storage,
transportation and marketing with the result that customers could choose and
pay for only those individual services offered by the pipeline which they
desired to use.
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F. Also, during the summer of 1994, Panhandle had resumed
its study of a possible business combination with ANGC. On August 11, 1994, a
representative of Panhandle informed a representative of ANGC that Panhandle
was interested in revisiting the possibility of a business combination. On
August 18, 1994, an officer of Panhandle met with an officer of ANGC in Denver
to discuss the possibility of a business combination and to express Panhandle's
interest in pursuing further discussions with ANGC. On August 23 and 24, 1994,
Panhandle and ANGC management met in Houston to discuss the synergies that
could result from a possible business combination. During the remainder of
August, there were several additional conversations between representatives of
Panhandle and ANGC with respect to a possible business combination.
G. The Board of Directors of ANGC was kept generally
informed of various discussions concerning possible business combinations, and
was briefed on the status of those discussions at its regularly scheduled
quarterly meeting on September 6, 1994.
H. On September 8, 1994, Panhandle and ANGC entered into a
Confidentiality Agreement that included a two-year standstill provision.
Pursuant to the Confidentiality Agreement, the two companies began exchanging
confidential information to determine the advisability of a combination of the
two companies. On September 9, 1994, an officer from Panhandle met with an
officer of ANGC to further discuss a possible business combination and the
process necessary to determine the desirability of a combination.
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I. On September 12 and 13, 1994, several representatives
of each company met and engaged in extensive discussions regarding the business
operations of both companies. Numerous conversations regarding the businesses
of the two companies, as well as a possible business combination, occurred
during the remainder of the month of September.
J. On September 28, 1994, Panhandle's Board of Directors
met to receive and consider presentations by Panhandle management and its
advisors concerning a business combination between Panhandle and ANGC. The
Board authorized continued discussions with ANGC and a due diligence
investigation of ANGC. On September 28 and 29, 1994, an officer of Panhandle
met with officers of ANGC in Denver to discuss various business issues relating
to the possible combination and to present ANGC with preliminary drafts of a
merger agreement, stock option agreement and irrevocable proxy that set forth
the basic structure of a business combination but did not include certain
material business terms related to the combination.
K. For various reasons, including price, only two of the
seven companies (other than Panhandle) contacted by Dillon Read expressed
sufficient interest in a business combination with ANGC to merit further
discussions and due diligence. During the last two weeks of September and the
first week of October, 1994, those two companies conducted due diligence with
respect to ANGC at its headquarters in Denver, Colorado.
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L. From October 3 through October 7, 1994, representatives
of Panhandle and its advisors conducted due diligence with respect to ANGC. On
October 4, 1994, representatives of Panhandle, ANGC and their respective
advisors met to discuss business and legal issues related to the combination.
Conversations between representatives of each party continued on October 5,
1994.
M. On October 6, 1994, ANGC's Board of Directors met and
discussed the possibility of a business combination with either Panhandle or
one of the two other companies that had conducted due diligence with respect to
ANGC. ANGC's Board of Directors decided not to pursue a transaction with
either of the two other companies because such companies' expressions of
interest were unacceptable for various reasons, including price and uncertainty
with respect to timing. ANGC's Board of Directors reviewed the material terms
of the business combination that representatives of Panhandle and ANGC had
discussed to that point, including the material terms of the draft Merger
Agreement and a draft Stock Option Agreement, which would grant Panhandle an
option to purchase a percentage of the common stock, $.05 par value per share,
of ANGC ("ANGC Common Stock") upon termination of the Merger Agreement under
certain circumstances. The Board requested ANGC management to negotiate
further certain of such terms with Panhandle. Dillon Read made a presentation
to the Board on a valuation of ANGC using various methods. ANGC's legal
counsel also
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made a presentation to the Board concerning the Board's fiduciary duties to
ANGC's stockholders in connection with a business combination.
N. On October 7, 1994, representatives of ANGC and its
advisors met with representatives of Panhandle and its advisors in Houston.
The parties negotiated the terms of the Merger Agreement, the Stock Option
Agreement and other transaction documents, discussed the details of the
proposed business combination and, late that day, agreed to present to their
respective Boards of Directors the terms relating to a business combination,
including a draft Merger Agreement and Stock Option Agreement. Also during
October 7, 1994, representatives of ANGC and their advisors conducted due
diligence with respect to Panhandle at Panhandle's headquarters in Houston.
During the afternoon and evening of October 7, the parties completed the
schedules to the Merger Agreement.
O. On October 8, 1994, Panhandle's Board of Directors
met. After reviewing the results of Panhandle's due diligence with respect to
ANGC, reviewing the material terms of the Merger Agreement, the Stock Option
Agreement and other transaction documents and receiving an oral opinion from
Merrill, Lynch, Pierce, Fenner & Smith ("Merrill, Lynch") that, as of such
date, the Exchange Ratio (as defined below) was fair to Panhandle's
stockholders from a financial point of view, Panhandle's Board authorized the
execution and delivery of the Merger Agreement, the Stock Option Agreement and
other transaction documents. After the meeting,
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an officer of Panhandle communicated the results of the meeting to an officer
of ANGC.
P. On October 9, 1994, ANGC's Board of Directors met.
After reviewing the results of ANGC's due diligence investigation of Panhandle,
reviewing the material terms of the Merger Agreement, the Stock Option
Agreement and the other transaction documents and receiving an oral opinion
from Dillon Read & Co. Inc. ("Dillon Read") that, as of such date, the
consideration to be received by the holders of ANGC Common Stock in the Merger
was fair, from a financial point of view, to the stockholders of ANGC, ANGC's
Board authorized the execution and delivery of the Merger Agreement, the Stock
Option Agreement and the other transaction documents.
Q. On the evening of October 9, 1994, the Merger
Agreement, the Stock Option Agreement and other transaction documents were
executed and delivered. Before the commencement of trading on October 10,
1994, Panhandle and ANGC each issued a press release announcing that they had
entered into the definitive agreements.
R. Subsequent to October 9, 1994, Merrill Lynch delivered
its written opinion to the Board of Directors of Panhandle that, as of October
8, 1994, the Exchange Ratio was fair to the holders of common stock, $1.00 par
value per share, of Panhandle ("Panhandle Common Stock") from a financial point
of view.
S. Subsequent to October 9, 1994, Dillon Read delivered
its written opinion to the Board of Directors of ANGC that, as of October 9,
1994, the
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consideration to be received by the holders of ANGC Common Stock pursuant to
the Merger Agreement was fair, from a financial point of view, to the holders
of ANGC Common Stock.
T. Pursuant to the Merger Agreement, Merger Sub will merge
with and into ANGC, with ANGC being the surviving corporation and a
wholly-owned subsidiary of Panhandle (the "Merger"). Each outstanding share of
ANGC Common Stock (other than shares held directly or indirectly by Panhandle
or ANGC) will be converted into the right to receive between 1.5725 and 1.8750
shares of Panhandle Common Stock (the "Exchange Ratio"), determined by dividing
$39.00 by the Average Daily Price of Panhandle Common Stock.(2) If the Average
Daily Price of Panhandle Common Stock is less than $20.80, the Exchange Ratio
will be 1.8750, and if the Average Daily Price of Panhandle Common Stock is
greater than $24.80, the Exchange Ratio will be 1.5725.
U. The Merger Agreement provides that ANGC will not
initiate, solicit or encourage any inquiries or the making of any proposal
relating to any Competing Transaction,(3) or enter into discussions or
negotiations with any person
________________________
(2) The "Average Daily Price of Panhandle Common Stock" means the average
of the closing prices (or, if Panhandle Common Stock should not trade on any
trading day, the average of the bid and asked prices therefor on such day),
regular way, per share of Panhandle Common Stock as reported on the New York
Stock Exchange Composite Tape during the fifteen consecutive trading days
ending on (but excluding) the third trading day prior to the special meeting of
ANGC stockholders at which the ANGC stockholders will be asked to consider and
vote upon a proposal to approve the Merger Agreement (the "ANGC Special
Meeting").
(3) A "Competing Transaction" is defined to mean any of the following
(other than
(continued)
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in furtherance of a Competing Transaction, or agree to endorse a Competing
Transaction; provided, however, that ANGC may furnish information or enter into
discussions or negotiations with respect to an unsolicited bona fide proposal
in writing to acquire ANGC pursuant to a merger, consolidation, share exchange,
business combination or similar transaction or to acquire a substantial portion
of the assets of ANGC if, and only to the extent that, the Board of Directors
of ANGC, after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is necessary for such Board
to comply with its fiduciary duties to stockholders under applicable law.
Further, the Board of Directors of ANGC may determine not to solicit proxies in
favor of the approval and adoption of the Merger Agreement if such Board
determines in good faith, after consultation with and based upon the advice of
independent legal counsel, that other action is necessary due to applicable
duties of the directors of ANGC.
________________________
(3) (continued)
the transactions contemplated by the Merger Agreement) involving ANGC or any of
its subsidiaries: (i) any merger, consolidation, share exchange, business
combination or similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 20% or more of the assets of ANGC and
its subsidiaries, taken as a whole; (iii) any tender offer or exchange offer
for 20% or more of the outstanding shares of capital stock of ANGC or the
filing of a registration statement under the Securities Act of 1933, as
amended, in connection therewith; (iv) any person having acquired beneficial
ownership of, or any group (as such term is defined under Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder) having been formed which beneficially
owns or has the right to acquire beneficial ownership of, 20% or more of the
outstanding shares of capital stock of ANGC; or (v) any public announcement of
a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
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V. The Merger Agreement also provides that ANGC will pay
to Panhandle a fee equal to $20,000,000 (the "termination fee"), which amount
will be inclusive of all of Panhandle's expenses, if the Merger Agreement is
terminated in accordance with its terms: (a) by Panhandle after a wilful
breach by ANGC, if ANGC shall have had contacts or entered into negotiations
after the date of the Merger Agreement regarding a Competing Transaction, and
within twelve months of the termination of the Merger Agreement ANGC
consummates a Business Combination(4) or enters into a definitive agreement
providing for a Business Combination with any person with whom such contacts
had been made; (b) by either Panhandle or ANGC if the Merger Agreement fails to
receive the requisite vote for approval and adoption by the stockholders of
ANGC at the ANGC Special Meeting, and at the time of such meeting there shall
exist a Competing Transaction; (c) by Panhandle if the Board of Directors of
ANGC withdraws, modifies or changes its recommendation of the Merger Agreement
or the Merger in a manner adverse to Panhandle (or resolves to do so) and, at
such time, there exists a Competing Transaction; (d) by Panhandle, if the Board
of Directors of
________________________
(4) The Merger Agreement defines "Business Combination" as (i) a merger,
consolidation, share exchange, business combination or similar transaction
involving ANGC, (ii) a sale, lease, exchange, transfer or other disposition of
20% or more of the assets of ANGC and its subsidiaries, taken as a whole, in a
single transaction or a series of transactions, or (iii) the acquisition, by a
person (other than Panhandle or any affiliate thereof) or group (as such term
is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of 20% or more of the ANGC Common Stock whether by tender or
exchange offer or otherwise.
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ANGC shall recommend any Competing Transaction to ANGC's stockholders (or
resolves to do so); (e) by Panhandle, if a tender or exchange offer for 20% or
more of the capital stock of ANGC is commenced, and ANGC's Board of Directors
does not recommend that its stockholders not tender their shares into such
tender offer or exchange offer; or (f) by ANGC, if the Board of Directors of
ANGC (i) fails to recommend (or withdraws its recommendation of) approval and
adoption by its stockholders of the Merger and the Merger Agreement and there
exists a Competing Transaction, or (ii) recommends a Competing Transaction, in
each case upon a determination in good faith, after consultation with and based
on the advice of independent legal counsel, that such action is necessary for
such Board to comply with its fiduciary duties under applicable law.
W. In connection with, and as consideration for,
Panhandle's and Merger Sub's execution of the Merger Agreement, Panhandle and
ANGC also entered into a Stock Option Agreement. Under the Stock Option
Agreement, ANGC granted to Panhandle an irrevocable option to purchase up to
3,007,948 shares (19.9%) of ANGC Common Stock for an exercise price of $39.00
per share, except that if the average of the New York Stock Exchange closing
prices per share of ANGC Common Stock on the five days immediately preceding
exercise of the option (the "Closing Price") is more than $3.50 in excess of
$39, the exercise price is the Closing Price less $3.50. The option is
exercisable if the Merger Agreement is terminated for any of the reasons which
would obligate ANGC to pay to Panhandle the termination fee.
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X. In consideration for Panhandle's and Merger Sub's
execution of the Merger Agreement, each of the directors and certain executive
officers and key employees of ANGC executed an irrevocable proxy appointing
Panhandle as his proxy to vote any shares of ANGC Common Stock owned by such
person in favor of the Merger and adoption of the Merger Agreement, and against
any business combination proposal or other matter that may interfere with or be
inconsistent with the Merger or Merger Agreement (including any Competing
Transaction), at any meeting of stockholders of ANGC (or consent in lieu
thereof) and any adjournment(s) thereof. The proxies currently cover an
aggregate of 1,469,483 shares of ANGC Common Stock, or approximately 9.7% of
the shares entitled to vote at the ANGC Special Meeting.
Y. Certain of the executive officers and certain key
employees of ANGC, including Messrs. Anderson, Logan and Quigley, who are also
directors of ANGC, have entered into two-year employment agreements with ANGC
which provide that, from and after the effective time of the Merger until the
second anniversary of the effective time, upon a termination of the employment
agreement for any reason other than for "Cause" (as defined thereon), such
employee will be paid an amount equal to one-half of such employee's base
salary and minimum bonus set forth in such employment agreement for the
remainder of what would otherwise have been the term of the employment
agreement (but in no event for more than one year). The employment agreements
contain a covenant not to compete with ANGC and its affiliates during the term
of the agreement and during
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the period after termination that the employee is receiving payments
thereunder. The base salaries and minimum bonuses of the employees under such
agreements approximate the salaries and bonuses of such employees paid by ANGC
on the date the Merger Agreement was executed.
Z. A special meeting of stockholders of Panhandle (the
"Panhandle Special Meeting") will be held on Thursday, December 15, 1994, at
the Sheraton Grand Hotel, 2525 West Loop South, Houston, Texas, commencing at
10:00 A.M. local time. At the Panhandle Special Meeting, holders of record of
shares of Panhandle Common Stock at the close of business on November 11, 1994
will be entitled to vote upon a proposal to approve, as required by the rules
of the New York Stock Exchange (the "NYSE"), the issuance and reservation for
issuance of up to 30,413,568 shares of Panhandle Common Stock pursuant to the
Merger Agreement. Under the rules of the NYSE, the affirmative vote of the
holders of a majority of the outstanding shares of Panhandle Common Stock
present and entitled to vote thereon at the Panhandle Special Meeting is
required to approve the proposal, provided that the total vote cast thereon
represents over 50% of the total number of shares of Panhandle Common Stock
entitled to vote on the proposal.
AA. The ANGC Special Meeting will be held on Thursday,
December 15, 1994, at the Brown Palace Hotel, 321 17th Street, Denver,
Colorado, commencing at 9:00 A.M. local time. At the ANGC Special Meeting,
holders of record of shares of ANGC Common Stock at the close of business on
November
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<PAGE> 14
11, 1994 will be entitled to vote upon a proposal to approve and adopt the
Merger Agreement. The affirmative vote of the holders of a majority of the
shares of ANGC Common Stock outstanding and entitled to vote thereon at the
ANGC Special Meeting is required to approve and adopt the Merger Agreement.
AB. On October 11, 1994, two putative class actions were
filed in the Court of Chancery of the State of Delaware in and for New Castle
County (the "Court") on behalf of holders of ANGC Common Stock other than
defendants and their affiliates. These actions were styled Glatzer v. Dietler,
et al., C.A. No. 13791, and 7547 Partners v. Dietler, et al., C.A. No. 13796,
(collectively, the "Class Actions"). Named as defendants in one or both of the
Class Actions were ANGC, Panhandle and the following directors and/or executive
officers of ANGC: Cortlandt S. Dietler, Donald H. Anderson, Wayne T. Biddle,
Frederick R. Mayer, Harold R. Logan, Jr., Michael J. Quigley and John A.
Redding.
AC. Plaintiffs in the Class Actions allege that the
individual defendants breached their fiduciary (and other common law) duties to
ANGC stockholders because, among other things: (1) ANGC agreed to the
termination fee and Stock Option Agreement solely to discourage any competing
bidders who might otherwise seek to acquire ANGC at a better price and upon
better terms; (2) those directors and officers of ANGC granting the irrevocable
proxy to Panhandle did so either to protect their compensation and positions
with ANGC or to ensure completion of the Merger; (3) the consideration to be
paid to ANGC stockholders in the Merger is unfair; (4) the ANGC Board approved
the Merger without
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<PAGE> 15
undertaking steps to ascertain accurately ANGC's value through open bidding or
a "market check" mechanism; (5) the ANGC Board approved the Merger to protect
and enhance the compensation and positions of the individual defendants with
ANGC; (6) the ANGC Board did not appoint any truly independent person or entity
to negotiate on behalf of ANGC's public stockholders; (7) the Merger Agreement
does not protect ANGC stockholders against a severe decline in the price of
Panhandle stock; and (8) ANGC's public shareholders have not received complete
and adequate information relating to the Merger. In addition, plaintiffs
allege that Panhandle aided and abetted the breaches of fiduciary duty
committed by the individual defendants by, among other things, offering them
the opportunity to maintain and enhance their positions in the combined entity.
AD. Plaintiffs in the Class Actions seek: (1) to enjoin
the Merger, as well as payment of the termination fee and the exercise of the
stock option; (2) to require the individual defendants to place ANGC up for
auction or to conduct a market check; (3) to require disclosure of all material
facts to ANGC stockholders before completion of the acquisition; (4) to rescind
the Merger, if it is completed prior to final judgment; and (5) to obtain
monetary damages, attorneys' fees, costs and other unspecified relief.
AE. By order of the Court, the Class Actions were
consolidated into a single proceeding for all purposes, captioned In re
Associated Natural Gas Corporation Shareholders Litigation, Consolidated C.A.
No. 13791 (the "Consolidated Action").
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<PAGE> 16
AF. During the period between the filing of the Class
Actions and entry into this Stipulation, counsel for defendants and counsel for
plaintiffs ("Class Counsel") held discussions directed toward resolving their
differences without further litigation. As a result of these discussions, the
parties have arrived at the terms and conditions of the settlement provided for
in this Stipulation (the "Settlement").
AG. In exchange for plaintiffs' agreement to the
Settlement, ANGC has agreed to obtain from Dillon Read an updated opinion dated
as of December 15, 1994 (the date of the ANGC Special Meeting) that the
consideration to be received by the holders of ANGC Common Stock pursuant to
the Merger Agreement is fair, from a financial point of view, to the holders of
ANGC Common Stock. In addition, the Stock Option Agreement will be amended so
that the maximum excess of the Closing Price over the exercise price of the
option is reduced from $3.50 per share to $2.00 per share. ANGC and Panhandle
have agreed to issue a joint press release announcing the foregoing changes in
the transaction documents promptly upon execution of this Stipulation.
Finally, ANGC has agreed to pay plaintiffs' attorneys' fees in an amount not to
exceed $400,000.00 and actual expenses not to exceed $35,000.00.
AH. Before entering into this Stipulation, Class Counsel
examined the substance of the allegations in the complaints in the Class
Actions and the Consolidated Action and the applicable law. The investigation
conducted by Class Counsel included analysis of thousands of documents obtained
through publicly
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<PAGE> 17
available sources and documents produced by the defendants and non-parties, as
well as the depositions of Paul M. Anderson, President of Panhandle, Donald H.
Anderson, the President and Chief Operating Officer of ANGC, Frederick R.
Mayer, a director of ANGC, Richard K. Gordon of Merrill Lynch, and James H.
Brandi of Dillon Read.
AI. Having made such investigation, Class Counsel have
concluded that the terms and conditions of the Settlement are fair, reasonable,
adequate, and in the best interests of the plaintiffs and the class of
stockholders contemplated in the Consolidated Action.
AJ. Plaintiffs enter into this Stipulation after taking
into account (i) the benefits to the members of the Class (as hereinafter
defined), (ii) the risks of continued litigation, (iii) the desirability of
permitting the Settlement to be consummated as provided by the terms of this
Stipulation, and (iv) the conclusion of Class Counsel that the terms and
conditions of the Settlement are fair, reasonable, adequate, and in the best
interests of plaintiffs and the Class. Plaintiffs and Class Counsel have
agreed to the terms of the Settlement because, in their view, the Settlement
achieves plaintiffs' objective in the litigation, which was to ensure that ANGC
stockholders receive fair consideration for their shares of ANGC Common Stock.
AK. The defendants in the Class Actions have denied and
continue to deny that any of them has committed or has threatened to commit any
violations of law or breaches of duty to the plaintiffs or the members of the
Class, but they
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<PAGE> 18
consider it desirable that the Consolidated Action be settled and dismissed,
subject to the terms and conditions herein, because the Settlement will (i)
halt the substantial expense, inconvenience and distraction of continued
litigation of plaintiffs' claims; (ii) finally put to rest those claims; and
(iii) dispel any uncertainty that may exist as a result of this litigation.
Defendants, however, acknowledge that the communications by Class Counsel and
the pendency of the Class Actions were the factors in defendants' decision to
obtain an updated fairness opinion from Dillon Read and to amend the Stock
Option Agreement.
NOW, THEREFORE, IT IS STIPULATED AND AGREED, in consideration
of the benefits to the Class described above, subject to consummation of the
Merger and the approval of the Chancery Court, pursuant to Chancery Court Rule
23, that any and all claims, rights, demands, actions, causes of action, suits,
damages, losses, obligations, matters and issues, whether known or unknown,
contingent or absolute, suspected or unsuspected, disclosed or undisclosed,
hidden or concealed, material or immaterial, which have been, could have been
or in the future can or might be asserted in the Class Actions or the
Consolidated Action or in any court or proceeding (including, without
limitation, claims arising under the federal securities laws) by or on behalf
of plaintiffs or any member of the Class, whether individual, class,
derivative, representative, legal, equitable or of any other type or in any
other capacity which have been or could have been asserted in the Consolidated
Action or, against defendants or any of their families, affiliates, associates
and subsidiaries, and each of their respective present or former officers,
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<PAGE> 19
directors, stockholders, agents, employees, attorneys, representatives,
financial and other advisors, trustees, general and limited partners and
partnerships, heirs, executors, personal representatives, estates,
administrators, predecessors, successors and assigns, and any other person or
entity acting for or on behalf of any defendant (collectively, the "Released
Persons") which arise out of or relate in any manner whatsoever, directly or
indirectly, to any of the allegations, facts, events, transactions,
occurrences, acts, representations, misrepresentations or omissions, or any
series thereof, involved, embraced, set forth or referred to in the Class
Actions, the Consolidated Action, the Merger or any public filing or statement
by defendants or their representatives concerning the Class Actions, the
Consolidated Action or the Merger (collectively, the "Settled Claims") shall be
fully, finally and forever compromised, settled, released and dismissed with
prejudice pursuant to the terms and conditions set forth herein.
1. Within ten days after the execution of the Stipulation,
the parties hereto shall jointly apply to the Court for an order in the form
attached hereto as Exhibit A (the "Scheduling Order"). Among other things, the
Scheduling Order shall:
a. for purposes of the Settlement only,
conditionally certify a class pursuant to Chancery Court Rules
23(b)(1) and (b)(2), consisting of all record and beneficial
owners of shares of ANGC Common Stock on October 7, 1994,
through and including the date of the closing of the Merger,
including their
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<PAGE> 20
successors in interest, legal representatives, heirs, assigns or
transferees, immediate and remote (other than defendants and
their affiliates) (the "Class");
b. for purposes of the Settlement only,
conditionally provide that plaintiffs Jay Glatzer and 7547
Partners, a Florida partnership, will fairly and adequately
protect the interests of the Class;
c. direct that a settlement hearing (the "Settlement
Hearing") be held: (i) to determine whether the Court should
approve the Settlement pursuant to Chancery Court Rule 23(e) as
fair, reasonable, and adequate and in the best interests of the
Class, dismiss the Consolidated Action with prejudice and on the
merits, each party to bear its own costs (except as provided herein)
and extinguish and release any and all Settled Claims as against all
Released Persons; (ii) to pass upon the application of Class Counsel
for an allowance of fees and reimbursement of expenses in the event
that the Court approves the Settlement; and (iii) to hear such other
matters as the Court may deem necessary and appropriate;
d. provide that a copy of the Notice of Pendency of
Class Action, Proposed Settlement of Class Action and Settlement
Hearing (the "Notice"), substantially in the form attached
hereto as Exhibit B, be mailed by first class mail, postage
prepaid, by ANGC no later than 30 days prior to the date of the
Settlement Hearing, to all members of the Class as shown on
the stock records maintained by or on behalf of ANGC; and
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<PAGE> 21
e. pending final approval of the Stipulation, enjoin
plaintiffs and all members of the Class, or any of them, from
commencing or prosecuting any action in any forum asserting any
claims, either directly, representatively, derivatively or in any
other capacity, against any of the defendants or any other persons
or entities, including all Released Persons, which have been or
could have been asserted, or which arise out of, or relate in any
way to, the Settled Claims.
2. ANGC shall pay all costs and expenses of providing the
Notice to the Class, regardless of whether the Settlement is approved by the
Court.
3. If the Settlement is approved by the Court, the parties
shall promptly request the Court to enter a final order and judgment (the
"Final Order"), in the form attached hereto as Exhibit C, that, among other
things:
a. approves the Settlement, adjudging the terms
thereof to be fair, reasonable, adequate, and in the best interests
of the Class, directing the performance of the acts set forth in the
Stipulation and reserving jurisdiction to supervise the consummation
of the Settlement;
b. determines that the requirements of Rule 23 of the
Chancery Court Rules and due process have been satisfied; and
c. dismisses the Consolidated Action with prejudice
on the merits, extinguishing, discharging and releasing any
and all Settled Claims as against any and all Released Persons,
and permanently barring the parties, including plaintiffs
and all members of the Class, from asserting, commencing,
prosecuting or continuing, either directly, individually,
representatively, derivatively
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<PAGE> 22
or in any other capacity any of the Settled Claims as against
any and all Released Persons.
4. At the Settlement Hearing, or at some time thereafter,
Class Counsel will apply to the Court for an aggregate award of attorneys' fees
in an amount not to exceed $400,000.00, and actual expenses not to exceed
$35,000.00 (collectively, the "Fees and Expenses"). Defendants agree that they
will not oppose such application by Class Counsel, but defendants retain the
right to oppose any other application for fees or expenses by Class Counsel or
any other person. Subject to the terms and conditions of this Stipulation and
provided the Merger has been consummated, ANGC shall pay such Fees and Expenses
to Rosenthal, Monhait, Gross & Goddess or as the Court otherwise may direct
within ten (10) days after the latest of (a) the date on which the time for an
appeal from the Final Order approving the Settlement has expired without any
notice of appeal having been filed, (b) if there is an appeal of the Final
Order, the date of final affirmation thereof, (c) if separately ordered, the
date on which the time for appeal from the order awarding the Fees and Expenses
has expired without any notice of appeal having been filed, or (d) if there is
an appeal of such order, the date of final affirmation thereof. No other
Released Person shall have any obligation to pay the Fees and Expenses or any
other fees, expenses, costs or damages.
5. When the Final Order approving the Settlement becomes
final and is no longer subject to appeal, whether by the passage of time,
affirmance on appeal or otherwise, and subject to the contingencies contained
herein, each
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<PAGE> 23
member of the Class shall be deemed to release and forever discharge each of
the Released Persons from the Settled Claims.
6. Each of the parties shall have the option to withdraw
from and terminate the Settlement in the event that the Scheduling Order or the
Final Order referred to in paragraphs 1 and 3 hereof are not entered
substantially in the form specified therein, including with such modifications
thereto as may be ordered by the Court with the consent of the parties;
provided, however, that a disallowance or modification of the Fees and Expenses
by the Court or on appeal shall not permit any party to withdraw from and
terminate the Settlement.
7. In order to exercise any option a party may have to
withdraw from and terminate this Settlement, a party must provide, within five
(5) days of the event giving rise to such option, written notice of such
withdrawal and the grounds thereof to all signatories to this Stipulation.
8. In the event (a) the Merger is not consummated, (b) the
Settlement proposed herein is not approved by the Court, (c) the Court approves
the Stipulation but such approval is reversed or vacated on appeal and such
order reversing or vacating the Settlement becomes final by lapse of time or
otherwise, or (d) if any of the other conditions to such Settlement are not
fulfilled, then with the exception of paragraphs 2, 9, 10, and 11 (and this
paragraph 8) of this Stipulation, the Settlement proposed herein shall be of no
further force or effect and the Stipulation and any amendment thereof shall be
null and void and without
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<PAGE> 24
prejudice to any party hereto, and each party shall be restored to his or its
respective position as it existed prior to the execution of the Stipulation.
9. The Defendants specifically disclaim any liability
whatsoever relating to any of the Settled Claims, expressly deny having engaged
in any wrongful or illegal activity, or having violated any law or regulation
or duty, or that any person or entity has suffered any harm or damages as a
result of the Settled Claims, and are making this Settlement solely to avoid
continued litigation. The Court has made no finding that any of the defendants
engaged in any wrongdoing or wrongful conduct or otherwise acted improperly or
in violation of any law or regulation or duty in any respect.
10. The provisions contained in this Stipulation shall not
be deemed a presumption, concession or admission by any defendant of any fault,
liability or wrongdoing as to any facts or claims alleged or asserted in the
Class Actions, the Consolidated Action or any other actions or proceedings and
shall not be interpreted, construed, deemed, invoked, offered or received in
evidence or otherwise used by any person in the Consolidated Action or any
other actions or proceedings, civil, criminal or administrative, except in a
proceeding to enforce the terms or conditions of the Stipulation.
11. If the Settlement is terminated for any reason
whatsoever, all negotiations, proceedings, agreements, documents, and
statements made in connection herewith shall not be deemed or construed to be
evidence or an admission by any party of any act, matter or proposition and
shall not be used in
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<PAGE> 25
any manner or for any purpose in any subsequent proceeding in the Consolidated
Action or in any other action or proceeding.
12. The fairness, reasonableness, and adequacy of the
Settlement may be considered and ruled upon by the Court independently of any
award of fees or disbursements requested by Class Counsel.
13. Each of the attorneys executing this Stipulation on
behalf of one or more parties hereto warrants and represents that he or she has
been duly authorized and empowered to execute the Stipulation on behalf of his
or her respective client. By signing this Stipulation, Delaware Liaison
Counsel for plaintiffs represents that they have authority to act on behalf of
all plaintiffs and their counsel in the Consolidated Action.
14. Without further order of this Court, the parties may
agree to reasonable extensions of time to carry out any of the provisions of
this Stipulation.
15. This Stipulation constitutes the entire agreement among
the parties with respect to the subject matter hereof, and may not be amended
or any of its provisions waived except by a writing executed by all of the
parties hereto.
16. This Stipulation, upon becoming operative, shall be
binding upon and inure to the benefit of the parties hereto (and in the case of
the benefits, all Released Persons) and their respective legal representatives,
heirs, transferees, successors in interest and assigns and upon any
corporation, partnership or other entity into or with which any party may merge
or consolidate.
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<PAGE> 26
17. All of the exhibits hereto are incorporated herein by
reference as if set forth herein verbatim, and the terms of all exhibits are
expressly made part of this Stipulation.
18. This Stipulation shall be interpreted according to
Delaware law, without regard to conflict of law principles.
19. The waiver by any party of any breach of this
Stipulation shall not be deemed or construed as a waiver of any other
breach, whether prior, subsequent, or contemporaneous, of this Stipulation.
20. The parties hereto and their attorneys agree to
cooperate fully with one another in seeking the Court's approval of this
Stipulation and the Settlement and to use their best efforts to effect the
confirmation of this Stipulation and the Settlement.
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<TABLE>
<CAPTION>
Of Counsel: _________________________________
<S> <C>
Joseph A. Rosenthal
Bernstein, Liebhard & Lifshitz Rosenthal Monhait Gross & Goddess
274 Madison Avenue First Federal Plaza
New York, NY 10016 P.O. Box 1070
(212) 779-1414 Wilmington, DE 19899
Co-Lead Counsel for Plaintiffs (302) 656-4433
Delaware Liaison Counsel for
Wechsler Skirnick Harwood Plaintiffs
Halebian & Feffer
555 Madison Avenue
New York, NY 10022
(212) 935-7400
Co-Lead Counsel for Plaintiffs
Of Counsel: _________________________________
Allen M. Terrell, Jr.
Charles W. Schwartz Richards, Layton & Finger
Vinson & Elkins L.L.P. One Rodney Square
2300 First City Tower P.O. Box 551
1001 Fannin Wilmington, DE 19899
Houston, TX 77002-6760 (302) 651-7732
(713) 758-3852 Attorneys for Defendant Panhandle
Eastern Corporation
Of Counsel: _________________________________
Michael Hanrahan
Boyd N. Boland Prickett, Jones, Elliot, Kristol
Holme Roberts & Owen L.L.C. & Schnee
1700 Lincoln Street 1310 King Street
Suite 4100 P.O. Box 1328
Denver, CO 80203 Wilmington, DE 19899
(303) 861-7000 (302) 888-6513
Attorneys for Individual Defendants
Of Counsel: _________________________________
Vernon R. Proctor
Erik B. Carlson Bayard Handelman & Murdoch
Richard J. Gognat 902 Market Street, #1300
Associated Natural Gas Corporation P.O. Box 25130
900 Republic Plaza Wilmington, DE 19899
370 Seventeenth Street (302) 429-4202
Denver, CO 80202 Attorneys for Defendant Associated
Natural Gas Corporation
</TABLE>
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