<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Panhandle Eastern Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[PANHANDLE EASTERN LOGO]
March 15, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Panhandle Eastern Corporation, on Wednesday, April 24, 1996, at 10:00 a.m., at
the J. W. Marriott Hotel, 5150 Westheimer, Houston, Texas.
Information about the business of the meeting is set forth in the formal
meeting notice and the Proxy Statement on the following pages. In addition,
there will be a discussion of the general operations of the Company, described
in the Company's 1995 Annual Report to Stockholders, and stockholders will be
offered an opportunity to ask questions.
We particularly call your attention to the proposed amendment to the
Company's Restated Certificate of Incorporation in order to change the name of
the Company to "PanEnergy Corp." Your Board of Directors, which supports and
recommends the proposed amendment, believes that the new name, under which the
Company has been doing business since January 2, 1996, reflects the Company's
increasing role in and expanding business focus on serving multiple energy
markets, including natural gas, natural gas liquids, electricity, crude oil, and
refined petroleum products.
There also will be considered a proposal to amend the Company's 1994 Long
Term Incentive Plan, which your Board of Directors supports, and three
stockholder proposals. The attached Proxy Statement contains a complete
description of each and the reasoning of the Board's recommendations in favor of
the first two proposals and against each of the last three proposals. We urge
that you read this material before completing your Proxy.
We encourage you to participate in this year's Annual Meeting in person or
by mailing your proxy. Regardless of the number of shares you hold, your
participation and representation in the Company's affairs is important.
Therefore, even if you cannot attend the meeting, please return your proxy to
the Company as soon as possible. To vote, simply place an "X" in the appropriate
box on the enclosed form of proxy, sign and date it, and mail it in the
self-addressed, postage-paid return envelope.
<TABLE>
<S> <C>
Sincerely, /s/ Paul M. Anderson
/s/ Dennis Hendrix PAUL M. ANDERSON
DENNIS HENDRIX President and
Chairman of the Board Chief Executive Officer
</TABLE>
<PAGE> 3
[PANHANDLE EASTERN LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1996
To the Stockholders of Panhandle Eastern Corporation:
The 1996 Annual Meeting of Stockholders of Panhandle Eastern Corporation
will be held at the J. W. Marriott Hotel, 5150 Westheimer, Houston, Texas, on
Wednesday, April 24, 1996, at 10:00 a.m., for the purposes of:
1. Electing four Directors, constituting the 1996 Class of the
Company's Board of Directors, for terms of three years, each to hold office
until the 1999 Annual Meeting or until a successor shall have been elected
and shall have qualified;
2. Considering and acting upon a proposal to amend Article FIRST of
the Company's Restated Certificate of Incorporation to change the name of
the Company to "PanEnergy Corp" (the Board of Directors supports this
proposal);
3. Considering and acting upon a proposal to amend the Panhandle
Eastern Corporation 1994 Long Term Incentive Plan (the Board of Directors
supports this proposal); and
4. Considering and acting upon other matters that properly come before
the meeting, such as voting on the three stockholder proposals which begin
on page 22 of the proxy statement (the Board of Directors opposes each of
these proposals).
Stockholders of record on February 29, 1995, are entitled to receive notice
of, and to vote at, the meeting or any adjournment or adjournments thereof. The
transfer books of the Company will not be closed. The list showing stockholders
entitled to vote at the meeting will be located in the office of the Secretary
at the Company's headquarters, 5400 Westheimer Court, Houston, Texas, for
examination for at least 10 days prior to the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert W. Reed
ROBERT W. REED
Secretary
Dated: March 15, 1996
Houston, Texas
<PAGE> 4
[PANHANDLE EASTERN LOGO]
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1996
------------------------
This statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Panhandle Eastern Corporation (the
"Company") of proxies for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, April 24, 1996, at 10:00 a.m., at the J. W.
Marriott Hotel, 5150 Westheimer, Houston, Texas, for the purposes set forth in
the accompanying Notice of Annual Meeting. Business at the Annual Meeting is
limited to matters properly brought before it.
Unless revoked prior to its exercise, any proxy given pursuant to this
solicitation will be voted at the Annual Meeting. A stockholder may revoke a
proxy at any time prior to the Annual Meeting by giving written notice of such
revocation addressed to the Secretary of the Company, P.O. Box 1642, Houston,
Texas 77251-1642. Also, a stockholder may attend the Annual Meeting and vote in
person, whether or not such stockholder has previously given a proxy. Proxy
material is being mailed to stockholders on or about March 15, 1996.
On February 29, 1996, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, the Company had outstanding
shares of Common Stock, par value $1.00 per share (the "Common Stock"). Each of
such shares is entitled to one vote at the Annual Meeting. Votes cast by proxy
or in person at the Annual Meeting will be tabulated by the independent election
inspectors appointed for the Annual Meeting. The holders of a majority of the
shares entitled to vote at the Annual Meeting, whether present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. Directors shall be elected by a plurality of the votes of
the shares present in person or by proxy at the Annual Meeting and entitled to
vote. The proposal to amend the Company's Restated Certificate of Incorporation
to change the name of the Company to "PanEnergy Corp" will require for approval
the affirmative vote of a majority of the outstanding shares entitled to vote at
the Annual Meeting. The stockholder proposal, which your Board opposes, to amend
the Bylaws of the Company to eliminate the classification of the Board, will
require for approval the affirmative vote of 75 percent of the outstanding
shares entitled to vote at the Annual Meeting. All other matters shall be
determined by the affirmative vote of the majority of the shares present in
person or represented by proxy at the meeting and entitled to vote. If no voting
direction is indicated on the proxy card, the shares will be considered votes
FOR the election of the nominees for Director, FOR the proposed amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company to "PanEnergy Corp", FOR the proposed amendment to the Panhandle Eastern
Corporation 1994 Long Term Incentive Plan, and AGAINST each of the three
stockholders proposals set forth in this Proxy Statement. Proxy cards that are
not signed or that are not returned are treated as not voted for any purposes.
If a broker indicates on a proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Abstentions with respect to any matter will be treated as shares present and
entitled to vote. Accordingly, with respect to the proposed amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company to "PanEnergy Corp" and the stockholder proposal to amend the Bylaws of
the Company to eliminate the classification of the Board, abstentions and broker
non-votes will have the same effect as voting against the proposals. With
respect to the other stockholder proposals described in this Proxy Statement and
the proposed amendment to the Panhandle Eastern Corporation 1994 Long Term
Incentive Plan, abstention from voting will have the same effect as voting
against such proposals and broker non-votes will be disregarded and have no
effect on the outcome of the vote. The Company knows of no proposals to be
considered at the Annual Meeting other than those set forth in the Notice of
Annual Meeting.
1
<PAGE> 5
The cost of preparing, assembling, and mailing the material in connection
with the solicitation of proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited by officers and other employees of
the Company personally, by telephone, or other means. To assist in the
solicitation of proxies, the Company has engaged Corporate Investor
Communications, Inc., for approximately $9,500. The Company will also request
brokerage houses and other nominees or fiduciaries to forward copies of its
proxy material and Annual Report to beneficial owners of Common Stock held in
their names, and the Company will reimburse them for reasonable out-of-pocket
expenses incurred in doing so.
STOCKHOLDER PROPOSALS
Stockholder proposals will be eligible for consideration for inclusion in
the Proxy Statement for the 1997 Annual Meeting if they are received by the
Secretary of the Company no later than November 15, 1996 at the address set
forth above.
A. ELECTION OF DIRECTORS
Currently, the Board consists of 12 Directors (nine of whom are not
employed by the Company) and two Advisory Directors (neither of whom is employed
by the Company). In accordance with the Company's By-Laws, the Directors have
been divided into three Classes of approximately equal size, with staggered
terms in office. At each Annual Meeting, Directors constituting one Class are
elected for three-year terms. Each Class is designated by the year in which its
current term ends. The members of the 1996 Class of Directors, Milton Carroll,
Robert Cizik, Harold S. Hook and Leo E. Linbeck, Jr., have been nominated for
re-election at this year's Annual Meeting. If re-elected, they will hold office
until the 1999 Annual Meeting or until successors shall have been elected and
shall have qualified. The terms of the Directors constituting the other two
Classes will continue as indicated below.
The proxy holders named on the proxy card will vote FOR the election of the
nominees listed below, unless otherwise instructed on proxy cards that have been
signed or returned. If you do not wish your shares to be voted for particular
nominees, please identify the exceptions on the proxy card. If any of these
nominees should be unable to serve, the proxies will be voted by the proxy
holders for the election of such other person as they shall determine, in
accordance with their judgment.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS (1996 CLASS)
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1996 CLASS
Milton Carroll............. Age 46. Chairman, President, and Chief Executive
Officer of Instrument Products, Inc., Houston,
Texas, a manufacturer of oilfield tools and other
precision products, since 1977. Director of the
Company since 1993. Director of the Federal Reserve
Bank of Dallas, Houston Industries, Inc., and
BlueCross BlueShield of Texas.
Robert Cizik............... Age 65. Chairman of the Board since 1983, and, from
1975 to 1995, Chief Executive Officer of Cooper
Industries, Inc. ("Cooper"), Houston, Texas, a
diversified, international manufacturing company.
Director of the Company since 1991. Director of
Cooper, Cooper Cameron Corporation, Temple-Inland,
Inc. ("Temple-Inland"), Harris Corporation, and Air
Products and Chemicals, Inc.
Harold S. Hook............. Age 65. Chairman and Chief Executive Officer of
American General Corporation ("American General"),
Houston, Texas, a diversified financial services
organization, for more than five years. Director of
the Company since 1978. Director of American
General, American General Finance, Inc., Chemical
Banking Corporation, Chemical Bank, Cooper, and
Sprint Corporation ("Sprint").
2
<PAGE> 6
Leo E. Linbeck, Jr......... Age 62. Chairman, President and Chief Executive
Officer of Linbeck Corporation, Houston, Texas, a
holding company of five construction-related firms
since 1990, and Chairman, President, and Chief
Executive Officer of Linbeck Construction
Corporation, Houston, Texas, a client-focused
organization whose expertise is the planning and
building of facilities, since 1975. Director of the
Company since 1986. Director of Daniel Industries,
Inc., and a Director and Trustee of thirty-three
investment companies managed by John Hancock
Advisers, Inc.
INFORMATION REGARDING DIRECTORS CONTINUING IN OFFICE
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1997 CLASS
Paul M. Anderson........... Age 51. Chief Executive Officer of the Company
since April 1995, President of the Company since
December 1993 and Director of the Company since
December 1992. Executive Vice President of the
Company from March 1991 to December 1993. President
and Chief Executive Officer of Panhandle Eastern
Pipe Line Company ("PEPL") from April 1991 to
January 1994, a Director of PEPL since 1991, and
Chairman of the Board since January 1994. Director
of Texas Eastern Transmission Corporation ("TETCO")
since April 1991 and Chairman of the Board since
January 1994. Vice President, Finance and Chief
Financial Officer, Inland Steel Industries Inc.,
1990-1991. Director of Temple-Inland and of Texas
Eastern Products Pipeline Company ("TEPPCO"), a
wholly-owned subsidiary of the Company and the
general partner of TEPPCO Partners, L.P., a
publicly traded master limited partnership.
William T. Esrey........... Age 56. Chairman since April 1990 and Chief
Executive Officer since April 1985 of Sprint,
Westwood, Kansas, a diversified telecommunications
holding company, since April 1990. President of
Sprint from April 1985 to April 1990. Director of
the Company since 1985. Director of Sprint,
Equitable Life Assurance Society of the United
States, General Mills, Inc., and Everen Capital
Corporation.
Ann Maynard Gray........... Age 51. Since 1991, President, Diversified
Publishing Group of Capital Cities/ABC, Inc., New
York, New York, involved in television, radio, and
publishing, and Corporate Vice President since
1986. Senior Vice President -- Finance, ABC
Television Network from 1988 to 1991. Director of
the Company since 1994. Director of Cyprus Amax
Minerals Company.
George L. Mazanec.......... Age 60. Vice Chairman of the Board of Directors of
the Company since December 1993 and a Director
since December 1992. Executive Vice President of
the Company from March 1991 to December 1993.
Director since January 1990, Vice Chairman of the
Board since January 1994, and President and Chief
Executive Officer from January 1991 to January
1994, of TETCO. Director of PEPL since January 1990
and Vice Chairman of the Board of PEPL since
January 1994. From 1989 to 1991, Group Vice
President of the Company. Director of Associated
Electric and Gas Insurance Services and of TEPPCO.
1998 CLASS
Charles W. Duncan, Jr...... Age 70. Engaged in private investments in Houston,
Texas, since 1981. Deputy Secretary of the United
States Department of Defense, January
3
<PAGE> 7
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1977 to August 1979; Secretary of the United States
Department of Energy, August 1979 until January
1981. Director of the Company since 1990. Director
of American Express Company, The Coca-Cola Company,
Chemical Banking Corporation, Newfield Exploration
Company, and United Technologies Corporation.
Harry E. Ekblom............ Age 68. Vice Chairman of A. T. Hudson & Co., Inc.,
Oradell, New Jersey, a management consulting firm,
since 1985, and President of Harry E. Ekblom & Co.,
Inc., Osterville, Massachusetts, a financial
consulting firm, since January 1984. Director of
the Company since 1971. Director of Harris & Harris
Group, Inc., and The Commercial Bank of New York.
Dennis R. Hendrix.......... Age 56. Chairman of the Board of the Company since
November 1990 and Chief Executive Officer from
November 1990 to April 1995. President of the
Company from November 1990 to December 1993.
Director of PEPL and TETCO since November 1990,
Chairman of the Board from November 1990 to January
1994 and Chief Executive Officer from November 1990
to April 1991, of PEPL and TETCO, and President of
TETCO from November 1990 to January 1994. Director
of TECO Energy, Inc., and TEPPCO.
Ralph S. O'Connor.......... Age 70. For more than five years, principally
engaged in investments as Chairman and Chief
Executive Officer of Ralph S. O'Connor &
Associates, Houston, Texas. Director of the Company
since 1991.
B. ADDITIONAL INFORMATION
BOARD OF DIRECTORS RETIREMENT POLICY
In January 1996, the Board amended its policy regarding the retirement of
Nonemployee Directors to provide for the retirement of a Nonemployee Director at
the Annual Meeting of Stockholders next following the Nonemployee Director's
seventy-second birthday. Previously, the policy provided that the Nonemployee
Director would retire at the next Board meeting following the Nonemployee
Director's seventieth birthday.
INFORMATION REGARDING ADVISORY DIRECTORS
In January 1996, the Board elected two Advisory Directors, Senator Lloyd M.
Bentsen and Mr. Cortland S. Dietler, to their second one-year terms. Mr. Max R.
Lents, who in January 1996 completed his eleventh term as an Advisory Director,
did not stand for re-election. An Advisory Director has no voting rights but
attends meetings of the Board and certain Board committees in an advisory
capacity. In January 1996, the Board decided to phase out the use of Advisory
Directors over the next several years. Information regarding the Advisory
Directors is as follows:
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
Lloyd M. Bentsen........... Age 75. Shareholder of the law firm of Verner,
Liipfert, Bernhard, McPherson and Hand, Houston,
Texas. United States Senator from Texas from 1971
to 1993. Secretary of the Treasury of the United
States from January 1993 to December 1994. Advisory
Director of the Company since January 1995.
Director of IVAX Corporation and American
International Group, Inc.
Cortland S. Dietler........ Age 75. Until the December 1994 merger with the
Company, Chairman of the Board and Chief Executive
Officer of Associated Natural Gas Corporation,
Denver, Colorado, a marketer, gatherer, and
processor of natural gas, for more than five years.
Advisory Director of the Company since January
1995.
4
<PAGE> 8
MEETINGS OF THE BOARD AND ITS COMMITTEES
During 1995, the Board met eight times. Each Director attended at least 75
percent of the aggregate number of the Board meetings and the meetings of Board
committees on which he or she served.
The Board has six committees, which are the Audit Committee, the
Compensation & Organization Committee ("Compensation Committee"), the Committee
on Directors, the Executive Committee, the Finance Committee and the Public
Responsibilities Committee. With the exception of the Executive Committee, all
Committees are composed solely of Nonemployee Directors.
Mr. Cizik is Chairman, and Ms. Gray and Messrs. Carroll, Hook, O'Connor,
and Dietler, are members, of the Audit Committee. The Audit Committee recommends
the appointment of independent auditors and reviews the plan, scope, and results
of the audit and monitors the fees for audit and other services; reviews the
recommendations resulting from such audit and management responses thereto; and
reviews the Company's accounting principles, policies, internal accounting
controls, and the internal auditing department plans and procedures. The Audit
Committee also reviews the Company's annual financial statements and recommends
accounting and internal auditing policies which, in the Audit Committee's
judgment, should receive the attention of the Board. The Audit Committee met
three times in 1995.
Mr. Duncan is Chairman of the Compensation Committee and Messrs. Cizik,
Ekblom, Esrey, Linbeck and O'Connor are members. The Compensation Committee
establishes the compensation policies for the Chief Executive Officer and other
senior officers; approves the salaries and certain remuneration arrangements of
senior officers; recommends the adoption of compensation plans in which officers
and certain key employees are eligible to participate; and approves, appoints a
subcommittee that approves, or recommends awards pursuant thereto, including
bonuses, stock option grants, and other awards. The Compensation Committee acts
on management recommendations for the election of officers, recommends the
election of a Chief Executive Officer when appropriate, and reviews management
succession plans. The Compensation Committee met four times in 1995.
Mr. Esrey is Chairman of the Committee on Directors and Messrs. Carroll,
Cizik, Dietler, Duncan, Ekblom and Hook are members. The Committee on Directors
identifies and recommends candidates to fill Board vacancies and considers
nominees for election as Directors at the Annual Meeting; considers the removal
of Directors; reviews the Board's retirement policy and policies pertaining to
Board membership; advises the Board on matters pertaining to Board tenure and
compensation; and considers and makes recommendations pertaining to corporate
governance matters. In addition, the Committee on Directors will consider
stockholders' suggestions of nominees for Director that are submitted in writing
to it, in care of the Secretary of the Company. The Committee on Directors met
three times in 1995.
The Finance Committee is chaired by Mr. Hook and the members are Ms. Gray,
Senator Bentsen, and Messrs. Duncan, Ekblom and Linbeck. The Finance Committee
reviews the Company's financial needs and approves the Company's financing
plans, represents the Board in discharging administrative responsibilities with
respect to employee benefit plans, reviews the performance of the investment
managers of the Retirement Income Plan of Panhandle Eastern Corporation and
Participating Affiliates ("Retirement Income Plan"), monitors the Company's risk
management activities, and reviews the Board's dividend policy. The Finance
Committee met three times in 1995.
Mr. Linbeck is Chairman, and Senator Bentsen, Messrs. Carroll, Esrey, and
O'Connor and Ms. Gray are members, of the Public Responsibilities Committee.
This Committee reviews and considers the Company's policies and practices
related to public issues important to the Company and the industry, including:
safety; environmental affairs; governmental relations; community relations;
employee participation in civic and charitable affairs; civic, charitable, and
philanthropic contributions; and equal opportunity policies and programs. The
Public Responsibilities Committee met twice in 1995.
Mr. Hendrix is Chairman, and Senator Bentsen and Messrs. Anderson, Carroll,
Cizik, Duncan, Hook, Linbeck, Mazanec and O'Connor are members, of the Executive
Committee, which reviews and, where appropriate, authorizes corporate action
with respect to the conduct of the business of the Company between
5
<PAGE> 9
Board meetings. Actions taken by the Executive Committee are regularly submitted
to the Board for review and ratification at the next meeting. The Executive
Committee did not meet in 1995.
SECURITY OWNERSHIP OF MANAGEMENT
As of December 31, 1995, all Directors and executive officers of the
Company as a group owned beneficially, or had the right to acquire within 60
days of December 31, 1995, under the 1982 Key Employee Stock Option Plan, as
amended (the "1982 Plan"), the 1989 Nonemployee Directors Stock Option Plan (the
"1989 Plan"), the 1990 Long Term Incentive Plan (the "1990 LTIP"), and the 1994
Long Term Incentive Plan (the "1994 LTIP"), less than 1 percent of the presently
issued and outstanding Common Stock.
The following table shows the number of shares of Common Stock beneficially
owned as of December 31, 1995, or as to which there was a right to acquire
beneficial ownership within 60 days of such date, by each Director or nominee
for Director, each executive officer of the Company named in the Summary
Compensation Table on page 10 ("Named Executive Officers"), and all Directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER
NUMBER OF
OF SHARES
SHARES WHICH
BENEFICIALLY MAY BE
OWNED(1) ACQUIRED(2)
------------ -----------
<S> <C> <C>
Paul M. Anderson.................................... 27,632 190,666
Milton Carroll...................................... 500 6,000
Robert Cizik........................................ 1,322 8,000
Charles W. Duncan, Jr............................... 7,767(3) 9,000
Harry E. Ekblom..................................... 4,276(4) 10,000
William T. Esrey.................................... 2,500 10,000
Ann Maynard Gray.................................... 500 5,000
Dennis R. Hendrix................................... 362,100 --
James B. Hipple..................................... 13,192(5) 16,935
Harold S. Hook...................................... 5,600 10,000
Carl B. King........................................ 31,850 21,667
Leo E. Linbeck, Jr.................................. 1,216 10,000
George L. Mazanec................................... 27,368 193,552
Ralph S. O'Connor................................... 34,701(6) 8,000
All Directors, nominees for Director, and ten
executive officers as a group, including those
named above....................................... 566,492 566,746
</TABLE>
- ---------------
(1) Included are beneficially owned and undistributed shares of Common Stock
held as of December 31, 1995, in the Panhandle Eastern Corporation Dividend
Reinvestment and Stock Purchase Plan and shares held as of December 31,
1995, in, and allocable to the individual under, the Employees' Savings Plan
of Panhandle Eastern Corporation and Participating Affiliates.
(2) Shares of Common Stock which the Directors or executive officers of the
Company have the right to acquire, within 60 days of December 31, 1995,
pursuant to options outstanding under the 1982 Plan, the 1989 Plan, the 1990
LTIP, and the 1994 LTIP. Nonemployee Directors do not participate in the
1982 Plan, the 1990 LTIP, or the 1994 LTIP and Employee Directors do not
participate in the 1989 Plan.
(3) Includes 4,531 shares held by Duncan Investors Partnership, a partnership in
which Mr. Duncan is a general partner.
(4) Includes 2,000 shares held by Mrs. Ekblom.
(5) Includes 48 shares held by Mrs. Hipple.
(6) Includes 4,502 shares of Common Stock held by three trusts of which Mr.
O'Connor is co-trustee and as to all of which Mr. O'Connor disclaims
beneficial ownership.
6
<PAGE> 10
Texas Eastern Products Pipeline Company, a wholly owned subsidiary of the
Company, is the general partner of TEPPCO Partners, L.P. ("TEPPCO"), a publicly
traded master limited partnership. The following table shows the number of units
of limited partnership interests in TEPPCO beneficially owned as of December 31,
1995, or as to which there was a right to acquire beneficial ownership within 60
days of such date, by each Director or nominee for Director, each of the Named
Executive Officers, and all Directors and executive officers of the Company as a
group. As of December 31, 1995, the percentage of units beneficially owned by
all Directors and executive officers as a group does not exceed 1 percent of the
presently issued and outstanding units.
<TABLE>
<CAPTION>
NUMBER
OF
NUMBER UNITS
OF WHICH
UNITS MAY
BENEFICIALLY BE
OWNED ACQUIRED
------------ --------
<S> <C> <C>
Paul M. Anderson........................................ 2,000 --
Milton Carroll.......................................... -- --
Robert Cizik............................................ -- --
Charles W. Duncan, Jr. ................................. -- --
Harry E. Ekblom......................................... -- --
William T. Esrey........................................ -- --
Ann Maynard Gray........................................ -- --
Dennis R. Hendrix....................................... 13,500 --
James B. Hipple......................................... 1,000 --
Harold S. Hook.......................................... 2,000 --
Carl B. King............................................ -- --
Leo E. Linbeck, Jr. .................................... -- --
George L. Mazanec....................................... 1,000 --
Ralph S. O'Connor....................................... 1,000 --
All Directors, nominees for Director, and ten executive
officers as a group, including those named above...... 20,500 --
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock held by
beneficial owners of more than 5 percent of the Common Stock as of December 31,
1995, and the percentage of the total outstanding shares of Common Stock as of
that date.
<TABLE>
<CAPTION>
NUMBER PERCENT
OF OF
SHARES OUTSTANDING
NAME AND ADDRESS BENEFICIALLY SHARES
OF BENEFICIAL OWNER OWNED OWNED
------------------- ------------ -----------
<S> <C> <C>
Sonatrach Petroleum Investment Corp., B.V.
Sloterkade 138D
1058 HM Amsterdam, The Netherlands.................. 7,700,000 5.13
Employees' Savings Plan of
Panhandle Eastern Corporation and Participating
Affiliates
5400 Westheimer Ct.,
Houston, Texas 77056................................ 9,676,146 6.44
</TABLE>
Sonatrach Petroleum Investment Corp., B.V., is a Dutch corporation owned by
two shareholders: Sonatrach (the national oil and gas company of Algeria), which
owns a 99.9 percent interest, and Banque Algerienne du Commerce Exterieur
("BACE"), a Swiss bank, which owns a 0.1 percent interest. The principal
executive offices of Sonatrach are located at 10, Rue du Sahara, Hydra, Algiers
(Algeria), and the principal executive offices of BACE are located at
Schutzengasse 4, Postfach, 8023 Zurich, Switzerland. Sonatrach and BACE are
wholly owned by the government of Algeria.
7
<PAGE> 11
The Company and Sonatrach, directly and through subsidiaries, are parties
to agreements entered into in 1987 providing for the importation of liquefied
natural gas ("LNG") over a period of up to 20 years at volumes and prices and
upon other terms to be agreed upon from time to time. The agreements provide
that if LNG is purchased by the Company from Sonatrach, Sonatrach will receive
an f.o.b. payment equal to approximately 63 percent of the average gross selling
price of an equivalent quantity of regasified LNG, with the Company receiving
the balance. For the year ended December 31, 1995, payments to Sonatrach under
this program for LNG and shipping were approximately $8.7 million.
Employees' Savings Plan of Panhandle Eastern Corporation and Participating
Affiliates("ESP"), holds shares of Common Stock for the account of participants,
who are employees of the Company and participating affiliates. Generally, the
ESP passes through to participants the right to direct the voting of shares of
Common Stock allocable to their accounts and to direct the tender of such shares
in response to a tender or exchange offer for Common Stock. The ESP is
administered by an administrative committee whose members are H. D. Church,
Senior Vice President of TETCO; Paul F. Ferguson, Jr., Senior Vice President and
Chief Financial Officer of the Company; D. R. Hennig, Vice President of PEPL,
TETCO, and Trunkline Gas Company ("Trunkline"); Bruce A. Williamson, Treasurer
of the Company; Theopolis Holeman, Vice President of PEPL; Sandra P. Meyer, Vice
President and Controller of the Company; Michael J. Bradley, Vice President of
PanEnergy Services, Inc., a subsidiary of the Company; and P. J. Hester, Vice
President and General Counsel, of Algonquin Gas Transmission Company.
COMPENSATION OF DIRECTORS
As employees of the Company, Messrs. Anderson, Hendrix, and Mazanec receive
no fees for their service as Directors, for attendance at Board and Committee
meetings, or for chairing Board Committees. Nonemployee Directors and Advisory
Directors receive an annual retainer fee of $30,000, and $1,000 for each Board
meeting and each Committee meeting attended. Nonemployee Committee Chairmen
receive an additional annual retainer of $4,000. Nonemployee Directors and
Advisory Directors are reimbursed for expenses incurred in attending Board and
Committee meetings.
In addition to the foregoing, the Company maintains, or formerly
maintained, the following plans for Nonemployee Directors:
1. The 1982 Directors' Deferred Compensation Plan permits Nonemployee
Directors to elect, on a year-to-year basis, to defer either 50 percent or
100 percent of their Directors' fees. As amended in January 1995, the
annual interest rate applicable to deferred amounts is equal to Moody's
seasoned Baa Corporate Bond Yield Index for the week ending with the final
Friday of the previous November, as reported in the Federal Reserve
statistical release No. 15 or its successor. Amounts accrued are payable
either in a lump sum or over a period of five or 10 years, as elected by
the Nonemployee Director, commencing on January 15th of the year next
succeeding the year in which the Nonemployee Director either ceases to be a
Director or upon the attainment of the age the Nonemployee Director
previously elected. For the year ended December 31, 1995, amounts deferred
under this Plan and interest accrued relative to such deferrals were
$290,459 for the five participating Nonemployee Directors as a group.
2. The 1989 Nonemployee Directors' Stock Option Plan ("1989 Plan")
provides for the granting of non-qualified options for the purchase of
shares of Common Stock to each Nonemployee Director. Stock appreciation
rights ("SARs") are not permitted. All options are granted at the fair
market value of the Common Stock on the date of grant. On May 1, 1989, each
Nonemployee Director was granted an option to purchase 5,000 shares of
Common Stock, and any new Nonemployee Director is granted an option to
purchase 5,000 shares of Common Stock effective on the May 1 next following
election to the Board. Additional options to purchase 1,000 shares of
Common Stock are granted to each Nonemployee Director on May 1 of each
year, through and including May 1, 1998. On May 1, 1995, options to
purchase a total of 9,000 shares of Common Stock were granted under the
1989 Plan at an exercise price of $23.875 per share. Options granted under
the 1989 Plan become exercisable one year from the date of grant and expire
on the tenth anniversary of the date of grant. Accordingly, the options
granted on May 1,
8
<PAGE> 12
1995, are not reflected in the table on page 6 hereof. No options were
exercised during 1995 under the 1989 Plan. There are nine Nonemployee
Directors participating in the 1989 Plan.
3. The Nonemployee Directors' Retirement Plan provides an annual
unfunded retirement benefit for each Nonemployee Director of the Company
upon the later to occur of the Director's retirement date or the attainment
of age 65. A retired Nonemployee Director with 10 years or more of service
on the Board will receive annually for life (a guaranteed minimum of 10
years) an amount equal to 60 percent of the annual retainer fee in effect
on the Director's retirement date. For a Nonemployee Director retiring with
less than 10 years of service, the annual benefit accrues at a rate of 6
percent of the annual retainer fee in effect on the Director's retirement
date for each year of service, not to exceed a total of 60 percent of such
annual retainer fee. In the event of a "change of control" (as defined), a
Nonemployee Director shall be deemed to have served as such until the
earlier of the tenth anniversary of the Director's service on the Board or
attainment of retirement age. There are also certain pre-retirement
supplemental death benefits provided under this plan.
4. At the time it was acquired by the Company in 1989, Texas Eastern
Corporation ("TEC") maintained an unfunded plan, the TEC Directors'
Retirement Plan, which provided an annual benefit payable for 10 years
following a Nonemployee Director's retirement from active service on the
TEC Board of Directors. Upon the Nonemployee Director's death following
retirement, any unpaid installments will be paid to the named beneficiary.
Under this plan, Messrs. Duncan and O'Connor have vested rights to annual
benefits for 10 years of $18,000 commencing January 1, 1999.
5. The Directors' Deferred Compensation Plan of Panhandle Eastern
Corporation ("Nonemployee Directors' Plan") was available until December
31, 1986, to Nonemployee Directors and permitted deferral of up to 100
percent of each participating Nonemployee Director's annual retainer fee.
Benefit payment amounts related to retainer fees deferred, to interest
accrued at seniority-based rates, and to age at the time of deferral. For
the year ended December 31, 1995, interest accrued for the four
participating Nonemployee Directors relative to amounts deferred under the
Nonemployee Directors Plan was $30,968.
9
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table and notes present the cash and certain other
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company ("Named Executive Officers"), as of December
31, 1995, for the years ended December 31, 1993, 1994, and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------------------------------------
AWARDS
-------------------------
SECURITIES PAYOUTS ALL OTHER
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ------- COMPEN-
PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/SARS LTIP SATION
POSITION(1) YEAR ($) ($) ($)(2) AWARD(S)($)(3) (#)(4) PAYOUTS($) ($)(5)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul M.
Anderson....... 1995 455,417 333,540 -- -- -- -- 105,725
1994 340,000 191,964 -- -- -- -- 69,424
1993 337,917 160,153 -- -- 250,000 -- 61,066
Dennis R.
Hendrix........ 1995 -- -- 24,921 -- -- -- 42,091
1994 -- -- 19,411 -- -- -- 49,451
1993 -- -- 23,578 6,525,000 -- -- 55,532
George L.
Mazanec........ 1995 372,083 215,259 -- -- -- 149,231 126,227
1994 340,000 189,414 -- -- -- 198,413 97,111
1993 336,667 177,710 -- -- 250,000 203,644 76,851
James B.
Hipple......... 1995 321,250 136,247 -- -- -- 105,841 143,389
1994 277,917 125,910 -- -- -- 64,998 71,682
1993 253,750 113,016 -- -- -- 66,644 63,104
Carl B. King..... 1995 261,875 115,689 -- -- 20,000 13,028 40,639
1994 255,000 135,333 -- -- 15,000 64,998 33,714
1993 253,833 103,709 -- -- -- 67,744 31,485
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) The principal positions of Messrs. Hendrix, Anderson, and Mazanec are
described on pages 3 and 4. Mr. King is Senior Vice President and General
Counsel of the Company. Until September 1, 1995, Mr. Hipple was Senior Vice
President and Chief Financial Officer of the Company, PEPL and TETCO. From
that date until his retirement on December 31, 1995, Mr. Hipple was Senior
Vice President of such companies.
(2) Pursuant to rules on executive and director compensation disclosure adopted
by the Securities and Exchange Commission (the "SEC"), Other Annual
Compensation is reportable if, in the aggregate, the components thereof
exceed the lesser of $50,000 or 10 percent of the sum of the Named Executive
Officer's salary and bonus. Each component thereof that exceeds 25 percent
of the total for each Named Executive Officer for whom disclosure is
required must be identified. Accordingly, the amounts reported in column (e)
include for Mr. Hendrix the following amounts for use of company aircraft:
1993 -- $19,203; 1994 -- $15,980; 1995 -- $21,065.
(3) In November 1990, Mr. Hendrix and the Company entered into an agreement
whereby he would receive no salary for 1991, 1992, and 1993. Instead, Mr.
Hendrix was awarded 300,000 shares of restricted Common Stock under the
terms of the 1990 LTIP as compensation for that period. Mr. Hendrix received
dividends payable to holders of record of Common Stock on the restricted
shares. These shares were initially restricted as to the transfer of
ownership, with such restrictions being removed on 25,000 shares every three
months, beginning in February 1991 and continuing through November 1993. The
value of the 300,000 restricted shares, based on the fair market value of
the Company's Common Stock as reported on The New York Stock Exchange
Composite Reporting System on November 12, 1990, which
10
<PAGE> 14
was $11.00 per share, was $3,300,000. Based on the December 29, 1995, fair
market value of $28.06 per share, the 300,000 restricted shares would be
valued at $8,418,000. Effective February 24, 1993, the agreement with Mr.
Hendrix was amended to extend the term through November 1996 and to award
him an additional 300,000 shares of restricted Common Stock in lieu of
salary for the period November 1993 through November 1996. The restrictions,
and the removal thereof, were the same as for the 1990 award, and Mr.
Hendrix receives dividends payable to holders of record of Common Stock on
these restricted shares. In December 1993 this award was amended to provide
for the accelerated removal of restrictions in that month on 200,000 shares.
It was provided that the restrictions on the remaining 100,000 shares would
be removed as follows: 36,000 shares in quarterly installments of 9,000
shares each in 1994, 34,000 shares in quarterly installments of 8,500 shares
each in 1995, and 30,000 shares in quarterly installments of 7,500 shares
each in 1996. The full amount reported in the table for 1993 represents the
value of the 300,000 restricted shares based on the fair market value of the
Company's Common Stock on February 24, 1993, which was $21.75. Based on the
December 29, 1995, fair market value, these 300,000 shares also would be
valued at $8,418,000 and Mr. Hendrix's aggregate remaining ownership of
restricted stock was 30,000 shares, with a fair market value of $841,800.
(4) In December 1991, the Compensation Committee granted 126 executives and
management employees, including Messrs. Anderson, Mazanec, King, and Hipple,
options to purchase 778,500 shares of Common Stock, together with an
equivalent amount of EPS Performance Units. Stock options for 40,500 shares
of Common Stock, together with an equivalent number of EPS Performance
Units, were also granted in April 1992 to seven executives and management
employees; 12,000 options and EPS Performance Units were granted to one
executive in July 1992; 41,000 options and EPS Performance Units were
granted to eight management employees in January 1993; in December 1993,
Messrs. Anderson and Mazanec each were granted options to purchase 250,000
shares of Common Stock, together with an equivalent number of EPS
Performance Units; in January 1994, 129 executive and management employees,
including Mr. King, were granted options to purchase 324,300 shares,
together with an equivalent number of EPS Performance Units; and in January
1995, 847,000 options and EPS Performance Units were granted to 178
executives and management employees, including Mr. King. Each EPS
Performance Unit creates a credit to an employee's EPS Performance Unit
account when earnings per share exceed a threshold, which was $0.80 per
share for awards made in 1991 and 1992, $1.10 for awards made in January
1993, $1.50 for awards made in December 1993 and January 1994, and $1.61 for
awards made in January 1995. When earnings for a calendar year (exclusive of
certain special items) exceed the threshold, the excess amount is credited
to the employee's EPS Performance Unit account. The balance in the account
may be used to exercise stock options granted in connection with the EPS
Performance Units or shall be paid two years after the underlying options
expire, usually 10 years from the date of grant. Under the agreements for
such stock options, the options become exercisable in equal installments
over periods of one, two, and three years from the date of grant. Options
may also be exercised by normal means once vesting requirements are met.
(5) Pursuant to rules on executive and director compensation disclosure adopted
by the SEC, all other compensation reported for the last completed fiscal
year is required to be identified and quantified in a footnote. Accordingly,
amounts reported for 1995 include (a) amounts credited by the Company for
the Named Executive Officers under the ESP and under the Panhandle Eastern
Corporation Key Employees Deferred Compensation Plan ("KED"), an unfunded,
defined contribution plan that allows eligible employees, including Messrs.
Anderson, Mazanec, Hipple and King, to elect deferral of base salary and
bonus, and receive matching Company contributions and interest credits,
whenever, and to the extent that, their participation in the ESP is limited
by provisions of the Internal Revenue Code, (b) that portion of interest
credits on deferred compensation amounts that are considered, pursuant to
rules promulgated by the SEC, to be at above-market rates, (c) the value of
EPS Performance Units credited to EPS Performance Unit accounts of the Named
Executive Officers in 1995, (d) the imputed value of premiums paid by the
Company for insurance on the Named Executive Officers' lives (none of the
Named Executive Officers has any cash value rights related to such
insurance) and (e) amounts paid to
11
<PAGE> 15
Mr. Hipple in connection with his December 31, 1995, retirement from the
Company (1995 unused vacation -- $25,000, 1996 earned vacation -- $31,250,
accumulated sick pay benefits -- $12,500).
<TABLE>
<CAPTION>
INTEREST VALUE OF PAYMENTS IN
AT ABOVE VALUE OF EPS LIFE INSURANCE CONNECTION WITH
ESP/KED MARKET RATES PERFORMANCE UNITS PREMIUMS RETIREMENT
-------- ------------ ----------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Mr. Anderson............... $42,727 $ 8,863 $51,800 $ 2,335 $ --
Mr. Hendrix................ -- 27,806 -- 14,285 --
Mr. Mazanec................ 30,882 33,949 51,800 9,596 --
Mr. Hipple................. 29,513 18,393 16,195 10,538 68,750
Mr. King................... 19,162 899 17,850 2,728 --
</TABLE>
STOCK OPTION/SAR GRANTS IN 1995
The following table shows all grants of stock options to the Named
Executive Officers in 1995. No SARs were granted to any Named Executive Officer
in 1995 nor were the exercise prices on stock options previously awarded to any
of them amended or adjusted.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
GRANT DATE
INDIVIDUAL GRANTS VALUE
- -----------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS GRANTED GRANT DATE
UNDERLYING TO EMPLOYEES EXERCISE OR PRESENT
OPTIONS/SARS IN BASE PRICE EXPIRATION VALUE(2)
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE $
(A) (B) (C) (D) (E) (F)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Anderson................... -- -- -- N/A --
Mr. Hendrix.................... -- -- -- N/A --
Mr. Mazanec.................... -- -- -- N/A --
Mr. Hipple..................... -- -- -- N/A --
Mr. King....................... 20,000(1) 5 $ 20.875 1-24-05 130,485
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) On January 25, 1995, the Board of Directors granted stock options to
purchase 847,000 shares to 178 management employees, including Mr. King, at
an exercise price of $20.875, which was the fair market value of the Common
Stock on the date of grant. The options, including those granted to Mr.
King, were nonqualified stock options vesting in annual increments of
one-third commencing one year from the date of grant. The options have a ten
year term. The grants include the award of an equivalent number of EPS
Performance Units, but do not include SARs. Each EPS Performance Unit
creates a credit to the grantee's EPS Performance Unit account when the
Company's earnings per share, exclusive of certain special items, exceed a
threshold. For the January 25, 1995 grant, the threshold is $1.61. When
earnings for a calendar year, beginning with 1995, exceed the threshold, the
excess amount is credited to the grantee's EPS Performance Unit account. The
balance of the account may be used to exercise the stock options or it shall
be paid two years after the expiration of the options. The options may also
be exercised by normal means once vesting requirements are met.
(2) Grant date present values are based on the Black-Scholes option valuation
model. The key input variables used in valuing the options were: risk-free
interest rate - 7.9 percent; dividend yield - 4.09 percent; stock price
volatility - .28; option term - ten years. The Standard and Poor's Compustat
Database was used and the volatility variable reflected 36 months of stock
price trading data. No adjustments for non-transferability or risk of
forfeiture were made. The grant date value is set out for illustrative
purposes and, therefore, is not intended to forecast future financial
performance or possible future appreciation, if any, in the price of the
Company's Common Stock.
12
<PAGE> 16
EXERCISES OF STOCK OPTIONS IN 1995 AND YEAR-END OPTION VALUES
The following table provides information concerning stock options exercised
by each of the Named Executive Officers during 1995 and the value of unexercised
stock options to the Named Executive Officers as of December 29, 1995. The value
assigned to each unexercised, "in the money" stock option is based on the
positive spread between the exercise price of such stock option and the fair
market value of the Common Stock on December 29, 1995. The fair market value is
the average of the high and low prices of a share of Common Stock on that date
as reported on The New York Stock Exchange, Inc., Composite Transactions
Reporting System. In assessing the value, it should be kept in mind that no
matter what theoretical value is placed on a stock option on a particular date,
its ultimate value will be dependent on the market value of the Company's Common
Stock at a future date. That future value will depend in part on the efforts of
the Named Executive Officers to foster the future success of the Company for the
benefit of all stockholders.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE* UNEXERCISABLE
(A) (B) (C) (D) (E)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Anderson................... 2,800 6,331 190,666/83,334 1,401,437/562,296
Mr. Hendrix.................... -- -- --/-- --/--
Mr. Mazanec.................... -- -- 193,552/83,334 1,438,742/562,296
Mr. Hipple..................... 989 10,389 16,935/-- 197,885/--
Mr. King....................... -- -- 21,667/20,000 135,054/143,700
- -----------------------------------------------------------------------------------------------
</TABLE>
* Future exercisability of currently unexercisable stock options depends on the
grantee remaining employed by the Company throughout the vesting period of the
options, subject to provisions applicable at retirement, death, or total
disability. The unexercisable options vest and become exercisable on the
following schedule:
<TABLE>
<CAPTION>
JANUARY 25, DECEMBER 1, JANUARY 25, JANUARY 25,
1996 1996 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mr. Anderson......................... -- 83,334 -- --
Mr. Mazanec.......................... -- 83,334 -- --
Mr. King............................. 6,666 -- 6,667 6,667
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS
In November 1990, Mr. Hendrix and the Company entered into a five-year
employment agreement pursuant to which Mr. Hendrix received no salary for the
first three years of his employment. Instead, he was awarded 300,000 shares of
Common Stock under the terms of the 1990 LTIP, which shares were initially
restricted as to the transfer of ownership. Such restriction was removed on
25,000 shares every three months, beginning in February 1991 and continuing
through November 1993. Mr. Hendrix received dividends on the restricted shares.
The restriction would have terminated early as to all of the restricted shares
in the event of death or disability, involuntary termination by the Company for
any reason other than cause (as defined), or change in control of the Company.
Effective February 24, 1993, the employment agreement with Mr. Hendrix was
amended to extend the term through November 1996. The amendment provided that
Mr. Hendrix would continue to receive no salary for the three years from
November 1993 through November 1996. Instead, Mr. Hendrix was awarded an
additional 300,000 shares of Common Stock on the same terms and subject to the
same restrictions as those described above, with restrictions being removed at
the rate of 25,000 shares every three months, beginning in February 1994. Mr.
Hendrix began receiving dividends on the additional shares in December 1993.
13
<PAGE> 17
On January 1, 1994, the Omnibus Budget Reconciliation Act of 1993 (the
"Budget Act") became effective. Certain provisions of the Budget Act would have
denied to the Company a tax deduction for a substantial portion of compensation
expenses related to Mr. Hendrix in 1994, 1995, and 1996. In order to preserve
the deduction, on December 20, 1993, the agreement was amended again to provide
for the restrictions on 200,000 shares to be removed immediately and for the
restrictions on the remaining shares to be removed over the next 36 months.
Based on certain assumptions as to stock price, preserving the deduction was
estimated to result in tax savings to the Company of approximately $1.8 million.
In addition to the restricted shares, Mr. Hendrix participates in the
welfare plans available to employees generally; however, to the extent permitted
by law, Mr. Hendrix has waived and relinquished his right to participate in the
ESP, the Retirement Income Plan, and certain other plans available to Company
employees and executives.
The Company and Mr. Mazanec entered into a five-year employment agreement
in November 1989 which set a minimum base salary of $250,000 per year. In
addition to maintaining certain non-qualified retirement benefits to which Mr.
Mazanec was entitled as an executive of TEC, the agreement provides Mr. Mazanec
a supplemental lump sum cash benefit of $750,000 plus 8 percent interest
compounded semi-annually from November 1, 1989, payable within 30 days of his
termination from the Company for any reason. If Mr. Mazanec terminates
employment due to a material breach of the agreement by the Company which is not
remedied within 30 days after written notice by Mr. Mazanec, or if the Company
terminates the agreement without cause, the Company also will pay Mr. Mazanec,
in a lump sum, base pay and incentive compensation projected through the
employment period, as well as providing him an extension of welfare plan
benefits through the employment period. Effective November 1, 1992, the Company
and Mr. Mazanec entered into an amendment to the employment agreement, extending
the period of employment covered by the agreement through October 31, 1996.
On March 1, 1991, the Company and Mr. Anderson entered into an employment
agreement, the primary term of which originally was to expire on December 31,
1993. Unless either party serves notice of termination, on December 31 of each
year, the term is automatically extended for an additional one-year period. On
December 31 of each year from 1991 through 1995 the primary term was
automatically extended and currently is extended through December 31, 1998. The
Company may terminate the agreement for cause, death, or disability. Under such
circumstances, or if Mr. Anderson terminates the agreement for other than good
reason (as defined), Mr. Anderson or his estate will be paid base pay and
incentive compensation earned for that fraction of the year which he was
actually employed. If the agreement is terminated by Mr. Anderson for good
reason, or by the Company for reasons other than cause, death, or disability,
Mr. Anderson will receive in a lump sum the present value of his base pay and
incentive compensation projected through the employment period, as well as an
extension of welfare plan benefits through the employment period.
Effective March 1, 1991, Mr. Anderson was awarded 40,000 shares of
restricted Common Stock under the terms of the 1990 LTIP. These shares were
initially restricted as to the transfer of ownership, with such restriction
being removed on 10,000 shares on March 1 of each year, beginning on March 1,
1992, and continuing through March 1, 1995, provided Mr. Anderson remained in
the employ of the Company during that period. The restriction would have
terminated early as to all of the restricted shares in the event of death or
disability, involuntary termination by the Company for any reason other than
"cause" (as defined), or change in control of the Company. Mr. Anderson received
dividends payable to holders of record of Common Stock on the restricted shares.
The Company's Executive Severance Program ("Program"), which during 1995
covered four executive officers of the Company, including Messrs. Hipple and
King, provides that in the event of a "change in control," as defined in the
agreements entered into between the Company and the participants in the Program,
such participants will have certain benefits provided to them in the event of
the termination of their employment within three years of the effective date of
such change in control. Such benefits are provided unless such termination of
employment is (i) because of the death or retirement of the participant, (ii) by
the Company or its subsidiaries for "cause" (as defined) or disability, or (iii)
by the participant other than for "good reason" (as defined). Generally,
benefits include a lump-sum cash payment equal to two and one-half
14
<PAGE> 18
times the average of the participant's annual compensation for the five years
preceding the change in control (including deferred amounts, bonuses, and
employer contributions to the ESP); cash payment for the participant's account
in the ESP; a continuation of various medical, insurance, and certain other
benefits for a period of two and one-half years; and a lump-sum cash payment, at
termination, equal to the present value of the additional retirement benefits
the participant would have received as a result of two and one-half years
additional service. The aggregate of each participant's benefits, when combined,
will not exceed three times the "base amount" (as defined in the Internal
Revenue Code). In consideration of these benefits, the participant agrees, in
the event a person seeks to effect a change in control, not to leave the employ
of the Company, and to continue to render services commensurate with the
participant's position, until such person has abandoned or terminated efforts or
the change in control has occurred. The participant also agrees to retain in
confidence all of the confidential business information of the Company or its
subsidiaries known to the participant.
The Company's Change in Control Severance Pay Plan ("Severance Plan") is
available for all employees of the Company and certain of its subsidiaries,
except those employees covered by an agreement under the Executive Severance
Program or a collective bargaining agreement. The Severance Plan provides a
number of severance benefits for eligible employees, which would be triggered by
certain specific events occurring subsequent to a "change in control" (as
defined) of the Company. In addition to the variable cash payments provided for
in the Severance Plan, eligible employees and dependents would receive, at no
cost to the employee, six months' continuation of medical and dental benefits at
the current benefit level, or at the benefit level immediately prior to the
change in control, whichever is greater. As of December 31, 1995, no benefits
had been provided under the Severance Plan.
PENSION PLAN
The Company's qualified retirement plan provides, with respect to
participants employed by certain participating subsidiary companies, benefits,
expressed in the form of a single life annuity commencing at normal retirement
date (age 65, or, if later, the fifth anniversary of participation in the
retirement plan), based on a benefit formula that, in part, uses final five-year
average pay, which considers the regular compensation of the participant,
including overtime payments, bonus payments, and some forms of deferred
compensation. The retirement plan also provides, on and after January 1, 1995,
with respect to participants employed by certain other participating subsidiary
companies, benefits, expressed in the form of a cash balance, based on a benefit
formula that uses annual regular compensation accruals and interest accruals.
Qualified retirement plan benefits may be subject to statutory limitations
if the participant receives compensation in excess of a maximum, is covered by
other qualified plans, if benefits are paid before social security retirement
age, if the participant has less than 10 years of plan participation, or if
benefits are paid in a more valuable form than a single life annuity. When
qualified plan benefits are limited by statute, non-qualified plans restore
certain benefits for participants covered by the non-qualified plans to a level
which would have been available if such statutory limits did not exist.
15
<PAGE> 19
The table below shows the estimated annual benefits payable at age 65 under
the qualified and non-qualified retirement plans at various levels of final
average compensation and assuming various years of benefit accrual service:
PENSION PLAN TABLE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------
REMUNERATION 15 20 25 30 35
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 200..................................... $ 46 $ 62 $ 77 $ 92 $108
300..................................... 70 94 117 140 164
400..................................... 94 126 157 188 220
500..................................... 118 158 197 236 276
600..................................... 142 190 237 284 332
800..................................... 190 254 317 380 444
1,000..................................... 238 318 397 476 556
</TABLE>
The years of benefit accrual service for each Named Executive Officer,
except Mr. Hendrix, who does not participate in the plan, are as follows: Paul
M. Anderson, 17; Carl B. King, 5; James B. Hipple, 38; and George L. Mazanec, 8.
The covered compensation is the sum of the salary and bonus reported in the
Summary Compensation Table on page 10.
In connection with the 1989 acquisition of TEC by the Company, the TEC
Retirement Plan was amended to offer enhanced early retirement benefits to
active employees age 50 or older whose primary work location was in the
headquarters office. Mr. Hipple was among those employees eligible for these
enhanced retirement benefits. The Company entered into a contract with Mr.
Hipple in 1989 under which, in consideration of his agreement to remain in the
employ of the Company through December 1992, the Company agreed to pay him the
actuarial equivalent of the enhanced retirement benefits which he lost by not
exercising his option to retire early. During 1992, the Board of Directors
extended the effectiveness of this contract until Mr. Hipple's retirement, which
occurred as of December 31, 1995.
C. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed exclusively of Nonemployee
Directors, is responsible for, among other things, the Company's executive
compensation programs. The following is the report of the Compensation Committee
on compensation policies regarding executive officers and the basis of
compensation actions it has taken.
The objective of the Company's executive compensation programs is to offer
compensation opportunities which attract and retain talented executive officers
and key employees and which motivates such employees to enhance shareholder
value. Base pay, annual incentives and long term incentives are structured so as
to deliver competitive pay opportunities, reward individual performance and
encourage executives to manage from the perspective of owners with an equity
stake in the Company. The executive compensation programs are intended to
provide total compensation (consisting of base salaries, annual cash incentive
opportunities, and long-term incentive opportunities) that is competitive with
the average total compensation offered other executives employed by companies of
similar size, complexity, and line of business. To determine competitive
compensation levels, the Committee considers data from surveys, proxy
statements, independent compensation consultants, and those peer group companies
listed in the Stockholder Return Comparison in Section D, below. The achievement
of both corporate and individual annual performance goals determine the payouts
from the annual incentive compensation plans in which executive officers and key
employees participate. Long term incentive compensation awards are designed to
make a significant portion of total pay directly linked to long term financial
performance and the creation of stockholder value.
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<PAGE> 20
DESCRIPTION OF THE CURRENT EXECUTIVE COMPENSATION PROGRAM
Base Salaries. Salaries are reviewed annually and established by the
Compensation Committee based upon the executive's job responsibilities, level of
experience, individual performance and contributions to the business, and
competitive data obtained from surveys. At the Compensation Committee's December
1995 meeting, base pay adjustments were approved for certain key employees,
including Mr. Anderson, in accordance with these criteria.
Annual Cash Incentive Opportunities. The Compensation Committee administers
the Annual Cash Bonus Plan ("ACBP") which permits the granting of cash incentive
compensation awards. The ACBP requires the Compensation Committee annually to
establish administrative guidelines to define employees who are entitled to earn
an incentive award, what performance is required to earn it, and how much may be
earned. Guidelines effective for 1995 called for the Chief Executive Officer to
recommend, and the Compensation Committee to approve, an annual bonus
opportunity for each participant. This opportunity, or "target," is expressed as
a percentage of base salary and is determined by the Compensation Committee's
judgement of the direct or indirect impact each individual could have on the
Company's performance, as measured by earnings before interest and taxes
("EBIT"). Further, the guidelines provided that the half of the bonus
attributable to the EBIT performance would not be paid unless the Company's
earnings per share goal of $2.00 was achieved. Depending upon performance,
participants could receive up to 125% of the bonus target. Of the ten executive
officers of the Company in 1995, nine were participants in the ACBP; Mr. Hendrix
was not a participant.
Each of the executive officers, in consultation with the Chief Executive
Officer, established six to ten specific personal objectives, which were
primarily directed toward development of new services, market expansion, cost
control, increasing returns on capital employed and advancing the Company's
non-jurisdictional business segments. Fifty percent of each executive officer's
1995 bonus was determined by the degree to which, in the opinion of the Chief
Executive Officer and the Compensation Committee, the executive officer achieved
his or her personal objectives. Further, each business unit established, and the
Compensation Committee approved, EBIT objectives. If any one business unit
failed to reach a minimum level of earnings established in the guidelines, the
executive officer would receive no compensation for the portion of the bonus
contingent upon that business unit's results. In 1995, five business units met
or exceeded target EBIT objectives and three did not. Nine of ten participating
executive officers scored in excess of 100 percent on personal objectives.
Long Term Incentive Opportunities. Through the 1990 LTIP and 1994 LTIP,
which were approved by the stockholders in April 1990 and 1994, respectively,
the Compensation Committee has the flexibility to structure long-term awards to
meet particular business needs. To date, four types of awards have been made
under the 1990 LTIP and three types of awards have been made under the 1994
LTIP.
1. 1990 LTIP
a. Restricted Stock. Since 1990 the Compensation Committee has awarded
715,000 shares of stock that is restricted as to transferability to three
executive officers. Mr. Hendrix received grants of 300,000 shares of restricted
stock both in 1990 and 1993 in lieu of salary, bonus and certain employee
benefits. Mr. Anderson received a grant of 40,000 shares of restricted stock in
1991, which vested in four equal installments on the first through fourth
anniversaries of the grant date. In January 1996, an award of 75,000 shares of
restricted stock were granted to James T. Hackett, who joined the Company at
that time as Executive Vice President. The terms of Mr. Hackett's award provide
that restrictions will be removed on 15,000 shares on each of five consecutive
anniversaries of his employment.
b. Conditional Stock. This form of award was employed in November 1990 and
January and April 1991 when the Company's management team was being assembled
following the merger of the Company and TEC and in conjunction with the
Company's reorganization into distinct business units. The awards, made to
grantees that included Messrs. Mazanec, Hipple, and King, as well as other
officers of the Company, were for the purpose of focusing the recipients'
attention on long-term objectives by adding, through the ownership of Common
Stock, a meaningful long-term incentive opportunity. The November 1990 and
January 1991
17
<PAGE> 21
conditional stock awards vested and were distributed in four scheduled annual
installments ending in 1994. The April 1991 conditional stock awards vest and
are distributed in scheduled annual installments over a six year term.
Recipients of conditional stock awards are paid dividend equivalents in cash on
unvested, undistributed shares. These awards were designed for a unique purpose
and time, and the Compensation Committee has no plans to make additional
conditional stock awards.
c. Stock Options. Stock options have been granted to executive officers and
others by the Compensation Committee at various times since the inception of the
1990 LTIP, as a vehicle for providing long-term incentive opportunities to
executives officers. The number of stock options granted was determined through
a process which, first, utilized survey data to determine the annualized value
of long term incentive grants made to other executives and management employees
in the Company's compensation data base ("target value"). Next, the
Black-Scholes stock option pricing model was used to calculate a ratio which,
when multiplied by the exercise price of a option, produced an expected present
value of the option. Finally, the number of options required to make a
competitive long-term grant was calculated by dividing the target value by the
expected present value of a single option plus the expected present value of an
EPS Performance Unit (described below), if an EPS Performance Unit was granted
in connection with an option. The result of this equation, expressed as a number
of options, could be adjusted by the Compensation Committee depending upon the
recipient's individual performance, the size of stock option grants awarded the
recipient in the past, and expectations of future contributions. No options have
been granted under the 1990 LTIP since January 1994, when 129 executive and
management employees, including Mr. King, were granted options to purchase
324,300 shares.
d. EPS Performance Units. The Compensation Committee granted EPS
Performance Units in conjunction with stock options to further encourage stock
ownership by executive officers and key employees and to strengthen the linkage
among financial performance, stockholder return, and long-term incentives.
Beginning in 1991 and ending with grants made in 1995 under the 1994 LTIP, one
EPS Performance Unit was granted in conjunction with each stock option awarded.
Each EPS Performance Unit creates a credit to the grantee's EPS Performance Unit
account when the Company's earnings per share has exceeded a threshold
established by the Compensation Committee based on EPS for the year preceding
the grant due. When earnings for a calendar year, exclusive of certain special
items, exceed the threshold, the excess amount is credited to the grantee's EPS
Performance Unit account. The balance in the account may be used to exercise
stock options granted in connection with the EPS Performance Units or will be
paid to the grantee, without interest, two years after the underlying options
expire, usually ten years from the date of grant. Options may also be exercised
by normal means once vesting requirements are met.
2. 1994 LTIP
a. Stock Options. In January 1995, 178 executive and management employees
were granted options under the 1994 LTIP to purchase 847,000 shares. In June
1995, 36 executive and management employees were granted options to purchase
58,350 shares, and in July 1995, one executive was granted an award of 5,000
shares. In January 1996, 146 executives and key employees were awarded options
to purchase 324,900 shares. The method used to determine the number of stock
options granted and the present value of the options was the same as described
for stock option grants under the 1990 LTIP.
b. EPS Performance Units. The Compensation Committee granted to each
participant who received a 1995 stock option grant, a number of EPS Performance
Units equal to the number of stock options granted. The threshold for
calculating credit to the grantee's EPS Performance Unit account was $1.61 per
share for these grants. No EPS units were awarded in connection with the January
1996 grants.
c. Performance-Vested Restricted Stock. At its January 1996 meeting, the
Compensation Committee elected to replace EPS Performance Units by awarding
grants of performance-vested restricted stock ("PVRS") totalling 110,700 shares
to 200 executives and key employees. With the assistance of an outside
compensation consultant, the Compensation Committee determined how many shares
of PVRS in addition to stock options granted to any employee would have a
combined value which approximates a competitive long-term incentive grant. The
Compensation Committee believes that shares of PVRS establish an opportunity for
18
<PAGE> 22
increased share ownership and dividend income by executive management and key
employees and encourages management decision making from the perspective of an
investor in the Company.
The terms of the PVRS awards granted in 1996 provide that one-sixth of the
shares awarded any participant will vest when total shareholder return, measured
from the grant date, equals or exceeds fifteen percent. Another one-third of the
award will vest when total shareholder return measured from the grant date
equals or exceeds thirty percent, and the final one-half of the award will vest
when total shareholder return equals or exceeds forty-five percent. Total
shareholder return is defined as accumulated dividends plus market appreciation
of Common Stock when measured over a ten consecutive trading day period. No
shares may vest before the first anniversary of the award unless there is a
change in control. If the shareholder return targets are not met and the PVRS
awards do not vest within five years, they will be forfeited.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Hendrix, who served as CEO until the appointment of Mr. Anderson as CEO
at the annual meeting of shareholders in April, 1995, continues to be
compensated under the terms of his amended employment agreement under which he
received only restricted stock and no salary or bonus. In 1995, Mr. Hendrix had
the restrictions removed on a total of 34,000 shares of restricted stock under
the terms of the agreement. In 1996, the last year of the agreement, Mr. Hendrix
will have restrictions removed on the final 30,000 shares.
Upon Mr. Anderson's appointment to the position of CEO, the Committee
approved a salary of $500,000 and a bonus opportunity of 60% of base pay. At its
December meeting, the Committee received an analysis by the compensation
consultants of total compensation opportunities available to CEO's in the
competitive marketplace. The consultants advised that the appropriate salary
range for the CEO is $560,000 to $840,000 with a mid-point of $700,000. After
considering this, the Committee adjusted Mr. Anderson's salary to $600,000
annually. The results of the consultants' study also indicated that a target
bonus opportunity for the CEO should be 70%, rather than 60%, of base pay in
1996. Accordingly, the Committee increased Mr. Anderson's bonus opportunity to
70 percent.
At its January 24, 1996 meeting, the Committee reviewed Mr. Anderson's
personal objectives, established in early 1995, and his performance on each, and
discussed the bonus to be paid to Mr. Anderson pursuant to the 1995 ACBP. His
objectives included: 1) advancing non-jurisdictional businesses, including
established a power services unit; 2) developing a strategy to better utilize
underperforming assets; 3) increasing focus on, and improving return on, capital
employed; 4) advancing major market projects such as Sable Island, Winternet and
the Integrated Transportation Project; and 5) achieving various objectives to
position the Company for the year 2000. After thorough discussion, the Committee
rated Mr. Anderson at 109 percent of his target objectives and awarded the bonus
indicated in the Summary Compensation Table.
Section 162(m) of the Internal Revenue Code imposes a limitation on the
deductibility from income tax by the Company on annual compensation in excess of
$1 million paid to certain employees, generally, the Chief Executive Officer and
the four other highest compensated employees ("Covered Employees"). The
Committee intends to structure compensation that rewards performance while
preserving maximum deductibility of all compensation awards. It is not
anticipated that compensation realized by any executive officer under programs
now in effect will, in the immediate future, result in a material loss of tax
deductions.
THE COMPENSATION AND ORGANIZATION COMMITTEE
<TABLE>
<S> <C>
Charles W. Duncan, Jr., Chairman William T. Esrey
Robert Cizik Leo E. Linbeck, Jr.
Harry E. Ekblom Ralph S. O'Connor
</TABLE>
D. STOCKHOLDER RETURN COMPARISON
SEC rules require that the Company include in this Proxy Statement a line
graph presentation comparing cumulative, five-year stockholder returns on an
indexed basis with the S&P 500 Stock Index and either a
19
<PAGE> 23
nationally recognized industry standard or an index of peer companies selected
by the Company. This information is set forth on the graph below, which covers
the period from year-end 1990 through year-end 1995. The Company has chosen the
Dow Jones Pipeline Group for its peer comparison. The Dow Jones Pipeline Group
includes Coastal Corp., El Paso Natural Gas Company, Enron Corp., Enserch Corp.,
Sonat, Inc., Williams Companies, and the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN* AMONG PANHANDLE EASTERN CORPORATION,
S&P 500 STOCK INDEX, AND DOW JONES PIPELINE GROUP
(* Total return assumes quarterly reinvestment of dividends)
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
Measurement Period Panhandle Dow Jones
(Fiscal Year Covered) Eastern Pipelines S&P 500
<S> <C> <C> <C>
12/90 100.0 100.0 100.0
12/91 135.0 97.5 130.5
12/92 155.7 120.5 140.4
12/93 228.7 151.7 154.6
12/94 197.4 150.8 156.6
12/95 289.1 208.4 215.5
</TABLE>
There can be no assurance that the Company's cumulative total return will
continue into the future with the same or similar trends depicted in the graphs
above.
E. COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
To the Company's knowledge, based on information furnished to it and
contained in the reports filed pursuant to Rule 16a-3 of the Securities Exchange
Act of 1934, as well as written representations that no other reports were
required, all applicable Section 16(a) filing requirements were complied with
during the year ended December 31, 1995.
F. AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The Board has proposed an amendment to the Company's Restated Certificate
of Incorporation in order to change the Company's name to "PanEnergy Corp." The
proposed name change reflects the Company's expanding scope of its energy
services. While the Company began doing business as PanEnergy Corp on January 2,
1996, amendment of the Restated Certificate of Incorporation to officially
change the name
20
<PAGE> 24
requires stockholder approval. The amendment will have no substantive effect on
the Company or its stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION. APPROVAL THEREOF WILL REQUIRE THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK ENTITLED TO VOTE AT THE MEETING.
G. AMENDMENT TO PANHANDLE EASTERN CORPORATION 1994 LONG TERM INCENTIVE PLAN
The 1994 LTIP was approved by the stockholders by an 80 percent affirmative
vote at the 1994 Annual Meeting of Stockholders. The provisions of Section 5 of
the 1994 LTIP, which for information purposes are set forth in Exhibit 1 hereto,
were intended to meet the requirements of Section 162(m) of the Internal Revenue
Code, which imposes a limitation on the deductibility by the Company for federal
income tax purposes of annual compensation paid to Covered Employees.
Compensation in excess of $1 million is not deductible unless it constitutes
"qualified performance-based compensation," as defined by Section 162(m).
On December 15, 1995, final regulations implementing Section 162(m) were
issued. Such regulations effectively disapproved the "salary referenced
maximums" that were set forth in Section 5. Therefore, if any Covered Employee
were to be paid annual compensation, including compensation received pursuant to
the 1994 LTIP, in excess of $1 million, the Company would be unable to deduct
such excess.
Accordingly, in order to conform the provisions of Section 5 to the final
regulations and enable otherwise qualifying compensation paid pursuant to the
1994 LTIP to constitute "qualified performance-based compensation" which would
be deductible by the Company, the Board has proposed that the 1994 LTIP be
amended to revise Section 5 in its entirety. In addition, the amendment would
add accumulated dividends to the list of available subjects for performance
targets and delete net income from the list, substituting instead, "income".
Under the proposed amendment, which is set forth in its entirety in Exhibit
1, the Compensation Committee may, but shall not be required to, delegate to a
subcommittee which it appoints ("Subcommittee") and which would consist of two
or more "outside directors", as defined under Section 162(m), the authority to
grant and administer awards under the 1994 LTIP to employees who are likely to
be Covered Employees. Except as otherwise provided in the event of a "change in
control", compensation shall result from an award made by the Subcommittee to a
Covered Employee only upon the attainment of performance targets established by
the Subcommittee with respect to the Company's earnings per share, return on
equity, income, stock price or accumulated dividends or business unit net income
or market share, or any combination thereof. During the term of the 1994 LTIP,
no Covered Employee may be granted incentive stock option, non-qualified stock
option, SAR and restricted stock awards by the Subcommittee that cover an
aggregate of more than one million shares. In the case of incentive stock option
and non-qualified stock option awards, compensation resulting from an award will
be equal to the difference between the amount the Covered Employee is required
to pay for the Common Stock that is the basis of the award, which amount is
determined by the Subcommittee and which may not be less than the fair market
value of such Common Stock as of grant of the award, and the fair market value
of such Common Stock as of the exercise of the award. In the case of awards of
SARs, compensation resulting from an award will be equal to the difference
between the fair market value of the Common Stock which is the basis of the
award as of the grant of the award and the fair market value of such Common
Stock as of the exercise of the award. In the case of restricted stock awards,
compensation resulting from an award will be equal to the difference between the
amount the Covered Employee is required to pay for the Common Stock that is the
basis of the award, which amount is determined by the Subcommittee and which may
be zero, and the fair market value of such Common Stock at the time the
forfeiture restrictions lapse. Further, compensation resulting to any Covered
Employee during any calendar year from all other types of awards granted by the
Subcommittee is limited to a maximum value of $2,500,000.
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<PAGE> 25
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE
PANHANDLE EASTERN CORPORATION 1994 LONG TERM INCENTIVE PLAN. APPROVAL THEREOF
WILL REQUIRE THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE SHARES PRESENT IN
PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE.
H. STOCKHOLDER PROPOSALS
Set forth below is information concerning three proposals received by the
Company from stockholders for inclusion in this Proxy Statement in accordance
with the rules of the SEC. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE AGAINST EACH
OF THE STOCKHOLDER PROPOSALS.
1. STOCKHOLDER PROPOSAL REGARDING ELIMINATION OF THE CLASSIFICATION OF THE BOARD
Donald L. Smith, Rural Route 3, Box 3036, Pittsfield, Illinois 62363, who
has represented to the Company that he is the owner of at least 603 shares of
Common Stock of the Company, has advised the Company of his intent to present
the following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the classification of the Board of Directors of
Panhandle Eastern Corporation (the "Company") be eliminated (such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected) by amending Section 3.1 of Article III of
the By-Laws of the Company to read in its entirety as follows:
'3.1. The property and business of this Corporation shall be managed by its
Board of Directors, consisting of such number of directors, not less than
three, as may be determined from time to time by the Board. Except as
otherwise provided in the Certificate of Incorporation, each director shall
be elected at the annual meeting of shareholders to serve until the next
annual meeting of shareholders. Except as otherwise provided in the
Certificate of Incorporation, newly created directorships and all other
vacancies may be filled at any time by a majority vote of the directors
then in office, although less than a quorum. A director elected by the
directors to fill a newly created directorship or any other vacancy shall
hold office until the next election of directors. Unless he resigns, dies
or is removed prior thereto, each director shall continue to hold office
until the expiration of his term and until his successor has been elected
and has qualified. Resignations of directors must be in writing and shall
be effective upon the date of receipt thereof by the Secretary or upon an
effective date specified therein, whichever date is later, unless
acceptance is made a condition of the resignation, in which event it shall
be effective upon acceptance of the Board.' "
STOCKHOLDER'S SUPPORTING STATEMENT
"This proposal is submitted in order to urge the Board to eliminate the
classified Board in favor of electing all directors at each annual meeting. The
stagger system now in place serves to keep directors in office for three-year
terms and thus prevents the stockholders from voting on the full Board each
year. This purely defensive measure, designed to protect management against the
threat of takeovers by making it more difficult for a would-be acquiror to gain
a majority of Board seats, results in a Board that is less accountable to the
stockholders.
"I urge the stockholders to VOTE FOR this proposal in order to establish
fairness and accountability in the way that directors of the Corporation are
elected."
STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board has reviewed the proposal and its implications and believes the
proposal is not in the best interests of the Company or its stockholders for a
number of reasons. The Board urges stockholders to vote AGAINST the proposal.
The staggered election of Directors has been in place since 1946 when the
Company's stockholders considered and approved an amendment to the By-Laws of
PEPL (the predecessor parent company) to provide for the classification of the
Board into three classes, each to serve for terms of three years, with one class
being elected each year.
22
<PAGE> 26
The Board believes that the classified Board and staggered election of
Directors provides important benefits to the Company, which include:
(a) At any given time at least two-thirds of the Board will have
significant prior experience as Directors of the Company. Accordingly,
there will be greater continuity and stability of the Company's business
strategies and policies.
(b) In the event of sudden and disruptive attempts by individuals or
entities to take over or restructure the Company, the classified Board
would permit the Company time to negotiate with the sponsor, to consider
alternative proposals and to assure that stockholder value is maximized.
(c) The Company's classified Board may cause a person seeking to
acquire control of the Company to initiate such action through arm's length
negotiations with management and the Board, which is in a position to
negotiate a transaction that is fair to all of the Company's stockholders,
rather than through a proxy contest.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL. APPROVAL THEREOF WILL REQUIRE THE AFFIRMATIVE
VOTE OF 75 PERCENT OF THE OUTSTANDING SHARES ENTITLED TO VOTE AT THE MEETING.
2. STOCKHOLDER PROPOSAL REGARDING SEVERANCE BENEFITS UPON A CHANGE IN CONTROL
Richard M. Sipe, 606 North 8th Street, Concordia, Missouri 64020, who has
represented to the Company that he is the owner of at least 347 shares of Common
Stock of the Company, has advised the Company of his intent to present the
following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the shareholders of Panhandle Eastern Corporation
(the "Company") request that the Board of Directors in the future refrain from
entering into agreements providing executive compensation contingent upon a
change in control of the Company, unless such agreements or arrangements are
specifically submitted to the shareholders for approval."
STOCKHOLDER'S SUPPORTING STATEMENT
"The Company has agreements (the "Agreements") with certain executive
officers which provide special severance compensation contingent upon a change
in control of the Company. Commonly known as "golden parachutes," the Agreements
provide that if an officer resigns or is fired under certain circumstances
within three years after a change in control of the Company, the officer will
receive a lump sum cash payment equal to two and one-half (2 1/2) times his
average "total annual compensation" for the five years preceding the change in
control, in addition to other compensation such as retirement benefits, life and
health insurance benefits, stock ownership or stock options, disability
benefits, etc. The Agreements define a change in control of the Company as
occurring when an entity acquires 30% or more of the Company's common stock or
all or substantially all of the Company's assets, or when a majority of the
board members fail to win re-election.
"If the Company were to become the target of a takeover, these golden
parachutes would introduce a personal consideration for managers that
potentially conflicts with their fiduciary responsibility to share-
holders. Although the Company's board maintains that the Agreements permit
executives to evaluate potential business combinations involving the Company
"without concern that [they] might be distracted by the personal uncertainties
and risks created by such a proposal," we believe that the golden parachutes may
have just the opposite effect -- faced with the possibility of a windfall,
managers may be inclined to encourage a takeover, regardless of whether it
maximizes shareholder value.
"We believe that the issue of whether the Company should, in the future,
provide management with golden parachutes is of such importance that
shareholders should approve this decision. We believe shareholder approval is
one of the best ways available to address potential conflicts of interest that
may arise between the board and top executives on one hand, and shareholders on
the other hand, when a change of control is threatened.
"IF YOU AGREE, WE URGE YOU TO VOTE FOR THIS PROPOSAL."
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<PAGE> 27
STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board believes that contractual arrangements that provide reasonable
severance benefits for key executives following a change in control of the
Company can be an important and entirely appropriate element of an executive
compensation program, although the Company has not included such provisions in
any executive employment agreement it has entered into since 1990. The Board
believes such arrangements may provide the means of ensuring the stability of
certain of the executive management team during a period when such may be
jeopardized by a threatened hostile takeover. Such stability is believed to be
in the best interest of all stockholders.
The Board of Directors disagrees with the proponent's assertion that
severance agreements create a potential conflict of interest between management
and stockholders. In fact, the Board believes that exactly the opposite may be
the case and that reasonable severance agreements serve to further align the
interests of management with those of the Company and its stockholders. The
Company's existing agreements are designed to help keep executives' undivided
attention focused on their duties, at precisely the time when such attention is
needed most.
The Board believes that reasonable severance agreements related to a change
in control can also inure to the benefit of the Company by enhancing its ability
to recruit, retain and motivate executives. Such severance arrangements related
to a change in control for executives are a standard part of many compensation
programs at other companies. In the view of the Board, it is important for it to
retain the flexibility to offer such severance arrangements in order to recruit
top executives, unless the Company were willing to make other employment
arrangements that might well be more costly to it.
Further, the Board believes that stockholder approval of such arrangements
is not in the best interests of the Company and its stockholders since the
imposition of such a requirement would, as a practical matter, make its
extremely difficult to timely implement compensation arrangements suited to
particular situations and circumstances. Compensation arrangements with
executives, including severance agreements, continue to be the responsibility of
the Board, which is in the best position to evaluate the performance of each
executive and, with the assistance of independent benefit consultants, to assess
competitive compensation practices. In addition, the Company's existing
employment and severance agreements with Company officers have been reviewed and
approved by the Compensation Committee, which Committee is composed exclusively
of Nonemployee Directors.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL.
3. STOCKHOLDER PROPOSAL REGARDING ARTICLE SEVENTH OF THE COMPANY'S CERTIFICATE
OF INCORPORATION
Paul K. Merrill, 1105 Columbia, Sweet Springs, Missouri 65351, who has
represented to the Company that he is the owner of at least 2,555 shares of
Common Stock of the Company, has advised the Company of his intent to present
the following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the stockholders of Panhandle Eastern Corporation
(the "Company") request that the Board of Directors adopt, declare advisable and
submit for consideration by the stockholders a resolution deleting Article
SEVENTH of the Restated Certificate of Incorporation of the Company in its
entirety."
STOCKHOLDER'S SUPPORTING STATEMENT
"Article SEVENTH of the Company's charter is a defensive measure that was
adopted in 1983, before the enactment of Delaware's so-called "anti-takeover
statute" in 1987. Ostensibly put in place to protect shareholders against
coercive, two-tier tender offers, the provisions of Article SEVENTH are designed
to force potential acquirors deemed "hostile" by management to negotiate with
the Board of Directors instead of submitting their offer directly to the
shareholders. As a result, Article SEVENTH makes management less accountable to
the Company's shareholders, which we believe may adversely affect shareholder
value. To the extent that the "protections" provided by Article SEVENTH may have
been warranted in the 1980s, they are
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no longer required today in light of the Delaware statute and the virtual
disappearance of coercive, two-tier tender offers in the 1990s.
"Article SEVENTH of the Restated Certificate of Incorporation requires that
certain "business transactions" between the Company and certain "related
persons" (i.e., any person who is the beneficial owner of more than 10% of the
Company's common stock) be approved by the holders of at least 80% of the voting
stock unless (i) the transaction is approved by two-thirds of the "continuing
directors" (i.e., the directors in office on the date the "related person"
became such) or (ii) the transaction is a merger in which the stockholders of
the Company receive the highest price paid by the "related person" in specified
instances. For purposes of Article SEVENTH, the term "business transaction"
includes a merger, a sale of all or substantially all of the Company's assets,
the adoption of a plan of dissolution of the Company and recapitalizations and
reclassifications of the Company's securities.
"Euphemistically characterized by management as a "fair price" provision,
Article SEVENTH is actually an anti-takeover device frequently adopted by
corporation boards to prevent shareholders from responding directly to outside
offers for their shares. Like the Company's "poison pill" rights plan, Article
SEVENTH is a defensive measure that has the practical effect of entrenching
management and thereby reducing their accountability to the shareholders, which
we believe may adversely affect shareholder value. In any event, Section 203 of
the Delaware General Corporation Law, which prohibits certain business
combinations between a Delaware corporation and its "interested" stockholders,
makes the provisions of Article SEVENTH superfluous. (Note, however, that
Article SEVENTH goes further than Section 203 in certain respects; for example,
Article SEVENTH requires 80% supermajority approval of certain business
transactions while Section 203 requires only 66 2/3%.)
"For the reasons stated above, we urge you to VOTE FOR this proposal."
STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
At the April 27, 1983 Annual Meeting of Stockholders, the Company's
stockholders approved adoption of the provision now contained in Article SEVENTH
of the Company's Restated Certificate of Incorporation. Article SEVENTH is
intended to help ensure the Company's stockholders receive a fair price in the
event the Company enters into certain mergers or consolidations.
The Board believes the considerations which led stockholders to adopt this
Article in 1983 are equally compelling today. In particular, the Board disagrees
with the assertion by the proponent of the proposal that Section 203 of the
Delaware General Corporation Law makes the provisions of Article SEVENTH
superfluous. First, Section 203 would not apply to any transaction with an
acquiror who obtains 85 percent or more of the outstanding shares of the
Company's voting stock in the same transaction in which such acquiror acquires
in excess of 15 percent of such outstanding shares and, thus, would not provide
any protection to the Company's minority stockholders remaining after such
transaction. Article SEVENTH, however, would continue to provide to minority
stockholders protection against a "freeze out" transaction at a lower price
following a tender offer for 86 percent of the outstanding shares of the
Company's Common Stock. In addition, Article SEVENTH applies to transactions
between the Company and a beneficial owner of more than 10 percent of the
Company's Common Stock while Section 203 applies only to transactions between
the Company and holders of 15 percent of the Company's Common Stock. Moreover,
Article SEVENTH applies to certain transactions which may have a coercive effect
on, or otherwise disadvantage, minority stockholders (such as a liquidation or
dissolution of the Company or certain purchases by the Company of assets from a
Related Person) to which Section 203 may not apply. As a result, Article SEVENTH
affords protection to the Company's stockholders in certain situations in which
Section 203 would not apply.
Under Article SEVENTH, the approval of 80 percent of the Company's Voting
Stock (as defined) is required, not for all mergers, but only for certain
Business Transactions (as defined) with a Related Person which (i) have not been
approved by two-thirds of the Company's Continuing Directors and (ii) fail to
meet certain conditions, including the condition that the Business Transaction
is a merger or consolidation in which the amount paid per share to the holders
of the Company's Common Stock is equal to or greater than the highest amount
paid per share by the Related Person for a share of Common Stock during a
specified period.
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<PAGE> 29
Article SEVENTH does not preclude the Board from either opposing or
approving a future takeover proposal. Nor does Article SEVENTH prevent any
tender offer followed by a second-step merger which complies with the minimum
price requirements of the Article or has been approved by two-thirds of the
Continuing Directors in accordance with the Article.
Instead, Article SEVENTH is designed to protect the Company's stockholders
against "two-tiered" or "front-end loaded" tender offers in which the potential
acquiror first makes an unsolicited partial cash tender offer, usually at a
premium over the current market price, for just enough of a company's
outstanding voting securities to acquire control of the company. After taking
control, the acquiring party then proceeds to "freeze out" the remaining public
stockholders in a second-step merger (usually using some form of stock or debt
securities) at a price lower than that paid in the first-step cash tender offer.
The Board believes such offers would be unfair to stockholders since they are
designed to coerce stockholders into tendering their shares in the first-step
tender offer out of fear that, if they do not, they will be required to accept
less consideration in the second-step merger.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL.
I. OTHER MATTERS
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("Peat Marwick") served as the Company's independent
auditor during 1995, and was again appointed by the Board to serve in that
capacity for 1996. Representatives of Peat Marwick will be present at the Annual
Meeting to respond to appropriate questions from stockholders and to make a
statement if they desire to do so.
OTHER MATTERS BEFORE THE MEETING
The Company does not expect any other matters to come before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying form of proxy to
vote such proxy in accordance with their judgment on such matters.
It is important that the proxies be returned promptly. All stockholders,
whether or not they expect to attend the Annual Meeting in person, are urged to
mark, sign, date, and return the accompanying form of proxy in the enclosed
pre-addressed envelope, which requires no postage if mailed in the United
States.
BY ORDERS OF THE BOARD OF DIRECTORS,
/s/ ROBERT W. REED
ROBERT W. REED
Secretary
Dated: March 15, 1996
Houston, Texas
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<PAGE> 30
EXHIBIT 1
A. CURRENT SECTION 5 OF THE PANHANDLE EASTERN CORPORATION 1994 LONG TERM
INCENTIVE PLAN:
5. AWARDS TO COVERED EMPLOYEES
The Committee may determine that any Award granted hereunder for any
Plan Year to a Participant who is a Covered Employee shall be made and
administered by a subcommittee consisting solely of two or more "outside
directors" (as defined in Treasury regulations promulgated under Section
162(m) of the Code) appointed by the Committee (the "Subcommittee"). Any such
Award may be determined solely on the basis of (a) the achievement by the
Company of a specified target earnings per share, return on equity or net
income, all as adjusted to exclude items that the Subcommittee determines to
be inappropriate for purposes of the Award, (b) the Company's stock price,
(c) the achievement by a business unit of the Company of a specified target
net income as adjusted to exclude items that the Subcommittee determines to
be inappropriate for purposes of the Award, or market share, or (d) any
combination of the goals set forth in (a) through (c) above. If an Award is
made on such basis, the Subcommittee shall establish such goals prior to the
beginning of the Plan Year (or such later date as may be prescribed by the
Internal Revenue Service for purposes of Section 162(m) of the Code). Amounts
received for each Plan Year pursuant to Awards granted under Sections 4(d)
through 4(h) of this Plan, or any combination thereof, to each Covered
Employee shall be limited to a maximum value of 500% of the Covered
Employee's annual salary at the rate in effect on the first day of such Plan
Year. In no event may the cumulative amounts paid pursuant to Awards granted
in any Plan Year under Sections 4(d) through 4(h) of this Plan, or any
combination thereof, to any Covered Employee exceed 500% of the Covered
Employee's annual salary at the rate in effect on the first day of such Plan
Year. For purposes of the two preceding sentences, if a Covered Employee does
not receive a salary, the Covered Employee shall be deemed to have an annual
salary of $500,000. Any payment of an Award granted under this Section 5,
other than Awards referred to in Sections 4(a), 4(b) or 4(c) of this Plan or
any combination thereof, shall be conditioned on the written certification of
the Subcommittee that the goals used as the basis for any such Award, and any
other material terms, were in fact satisfied.
B. PROPOSED AMENDMENT AND RESTATEMENT OF SECTION 5:
5. AWARDS TO COVERED EMPLOYEES
The Committee may determine that any Award granted hereunder for any
Plan Year to a Participant who is Covered Employee shall be made and
administered by a subcommittee consisting solely of two or more "outside
directors" (as defined in Treasury regulations promulgated under Section
162(m) of the Code) appointed by the Committee (the "Subcommittee"). Except
as otherwise permitted by Section 8 of this Plan, compensation resulting from
any Award made by the Subcommittee shall be paid solely on the attainment of
performance goals established in writing by the Subcommittee with reference
to (a) the achievement by the Company of a specified target earnings per
share, return on equity or net income, (b) the Company's stock price, (c)
accumulated dividends paid on the Company's stock, (d) the achievement by a
business unit of the Company of a specified target income or market share, or
(e) any combination of the goals set forth in (a) through (d) above. With
respect to any Award made by the Subcommittee, the Subcommittee shall
establish such performance goals prior to the beginning of the Plan Year for
which the Award is granted (or such later date as may be prescribed by the
Internal Revenue Service for purposes of Section 162(m) of the Code). No more
than one million (1,000,000) shares of common stock shall be cumulatively
available for Awards made by the Subcommittee and granted under Sections 4(a)
through 4(d) of this Plan to any Covered Employee, and compensation resulting
to any Covered Employee during any Plan Year from Awards made by the
Subcommittee and granted under Sections 4(e) through 4(h) of this Plan, shall
be limited to a maximum value of $2,500,000. Any payment of compensation to a
Covered Employee resulting from an Award made by the Subcommittee upon
attainment of related performance goals, other than Awards granted under
Sections 4(a) through 4(c) of this Plan, shall be conditioned upon the
written certification of the Subcommittee that the performance goals, and all
other material conditions and terms, relating to such Award have, in fact,
been satisfied.
<PAGE> 31
proxy
[PANHANDLE EASTERN CORPORATION LOGO]
-----------------------------------
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1996, 10:00 A.M.
As evidenced by the signature(s) on the reverse side hereof, the
undersigned hereby appoints Paul F. Ferguson, Jr., Carl B. King, and Robert W.
Reed, and any one of them, as Proxies, each with full power of substitution, to
represent and vote all shares of the Common Stock of Panhandle Eastern
Corporation (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held at the J.W. Marriott Hotel, 5150 Westheimer, Houston , Texas, on April 24,
1996, at 10:00 A.M., and at any adjournments thereof, with all power the
undersigned would possess if personally present. This card also provides voting
instructions for shares, if any, held in the Company's Dividend Reinvestment
and Stock Purchase Plan and, if applicable, shares held in the various employee
benefit plans.
The shares represented by this proxy will be voted as directed by the
stockholder. IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED "FOR" ITEMS 1, 2,
AND 3 AND "AGAINST" ITEMS 4, 5 AND 6.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3 AND PLEASE MARK VOTES / / OR /X/
AGAINST ITEMS 4, 5, AND 6.
Item 1--Election of duly Item 2--Proposal to Amend the Item 3--Proposal to amend Sec- Item 4--Proposal to amend the
nominated Directors Company's Restated Certificate tion 5 of the Panhandle Eastern By-laws of the Company to elimi-
(Three year terms). of Incorporation to change the Corporation 1994 Long Term nate the classification of the
Nominees: Milton Carroll, Company's name to "PanEnergy Incentive Plan. Board of Directors.
Robert Cizik, Harold S. Hook, Corp."
and Leo E. Linbeck, Jr.
FOR all nominees Witheld
(except as marked (as to all
to the contrary nominees)
as provided)
/ / / / For Against Abstain For Against Abstain For Against Abstain
To withhold authority to / / / / / / / / / / / / / / / / / /
vote for any individual
nominee write that nominee's
name on space provided below.
- -----------------------------
Item 5--Proposal regarding Item 6--Proposal to delete Item 7--On any other matters
Severance Benefits Upon A Article SEVENTH of the that may properly come before
Change in Control of the Company's Restated the meeting.
Company. Certificate of
Incorporation.
For Against Abstain For Against Abstain
/ / / / / / / / / / / /
P Dated __________________________________, 1996
R _____________________________________________________
Signature(s) of Stockholder(s)
O
_____________________________________________________
X Signature(s) of Stockholder(s)
Y When signing as attorney, executor, administrator,
trustee or guardian or in other representative
capacities, please give your full title as such.
Please date, sign and mail this proxy as your name A Proxy for shares held in joint ownership should be
appears above and return in the enclosed envelope. signed by EACH owner.
</TABLE>
