<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1994
REGISTRATION NO. 33-53121
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASSOCIATED NATURAL GAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4920 84-1006841
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION)
370 17TH STREET, SUITE 900
DENVER, COLORADO 80202
(303) 595-3331
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ERIK B. CARLSON
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
ASSOCIATED NATURAL GAS CORPORATION
370 17TH STREET, SUITE 900
DENVER, COLORADO 80202
(303) 595-3331
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOSEPH W. MORRISEY, JR. T. MARK KELLY
HOLME ROBERTS & OWEN LLC VINSON & ELKINS L.L.P.
1700 LINCOLN, SUITE 4100 1001 FANNIN, SUITE 2500
DENVER, COLORADO 80203 HOUSTON, TEXAS
(303) 861-7000 77002-6760 (713) 758-2222
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: Upon consummation of the merger (the "Merger") as described in the
Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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ASSOCIATED NATURAL GAS CORPORATION
CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) OF THE SECURITIES ACT OF 1933 AND
ITEM 501(B) OF REGULATION S-K, SHOWING THE LOCATION OR HEADING IN THE PROXY
STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
A. INFORMATION ABOUT THE TRANSACTION
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1. Forepart of Registration
Statement and Outside Front Cover
Page of Prospectus............... Facing Page of Registration Statement;
Cross Reference Sheet; Cover Page of
2. Inside Front and Outside Back Proxy Statement/Prospectus
Cover Pages of Prospectus........
Available Information; Incorporation
of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Summary
4. Terms of the Transaction......... Summary; The Merger; The Merger
Agreement; Comparison of Stockholder
Rights; Incorporation of Certain
Documents by Reference
5. Pro Forma Financial Information.. Unaudited Pro Forma Combined Financial
Information
6. Material Contacts with the
Company Being Acquired........... Summary; The Merger; The Merger
Agreement
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters..................... Not Applicable
8. Interests of Named Experts and
Counsel.......................... The Merger; Legal Matters; Experts
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants...................... Incorporation of Certain Documents by
11. Incorporation of Certain Reference; Business of ANGC
Information by Reference......... Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2
or S-3 Registrants............... Not Applicable
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information With Respect to
Registrants Other Than S-3 or S-2
Registrants...................... Not Applicable
</TABLE>
<PAGE>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<TABLE>
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<C> <S> <C>
15. Information With Respect to S-3
Companies......................... Not Applicable
16. Information With Respect to S-2 or
S-3 Companies..................... Incorporation of Certain Documents by
Reference; Business of Grand Valley
17. Information With Respect to
Companies Other Than S-2 or S-3
Companies......................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents
or Authorizations are to be
Solicited......................... Incorporation of Certain Documents by
Reference; Summary; The Special
19. Information if Proxies, Consents Meeting; The Merger
or Authorizations are not to be
Solicited, or in an Exchange
Offer............................. Not Applicable
</TABLE>
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[LOGO OF "GRAND VALLELY GAS COMPANY" APPEARS HERE]
May 27, 1994
Dear Grand Valley Gas Company Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Grand Valley Gas Company, which will be held on June 30, 1994, at 10 a.m.,
local time, at the Red Lion Hotel, 255 South West Temple, Salt Lake City,
Utah. At the meeting you will be asked to consider and vote upon a Restated
Agreement and Plan of Merger (the "Merger Agreement") providing for the merger
of Grand Valley Gas Company into Associated Natural Gas, Inc., a wholly-owned
subsidiary of Associated Natural Gas Corporation (the "Merger").
Under the terms of the Merger Agreement, each outstanding share of Grand
Valley Gas Company ("Grand Valley") common stock will be converted into .25
shares of Associated Natural Gas Corporation ("ANGC") common stock.
On February 18, 1994, the last full trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the
closing sales price of ANGC common stock was $34.75 per share on the NYSE
Composite Tape and the closing sales price of Grand Valley common stock was
$7.25 as reported by NASDAQ-NM. Based upon .25 shares of ANGC common stock for
each share of Grand Valley common stock, the equivalent per share market value
of Grand Valley common stock was $8.69 on such date.
On May 20, 1994, the closing sales price of ANGC common stock was $37.00 per
share on the NYSE Composite Tape, and the closing sales price of Grand Valley
common stock as reported by NASDAQ-NM was $8.50. Based upon .25 shares of ANGC
common stock for each share of Grand Valley common stock, the equivalent per
share market value of Grand Valley common stock was $9.25 on May 20, 1994.
Because the market price of ANGC common stock is subject to fluctuation, the
market value of the shares of ANGC common stock that holders of Grand Valley
common stock will receive in the Merger may increase or decrease prior to the
Merger. Grand Valley shareholders are urged to obtain a current market
quotation for ANGC common stock and Grand Valley common stock.
The attached Proxy Statement/Prospectus is intended to provide you with a
summary of the proposed Merger and additional related information which you
should read carefully before voting on the proposed Merger Agreement. A copy
of the Merger Agreement is attached to the Proxy Statement/Prospectus as Annex
A.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT, BELIEVES THAT THE
PROPOSED TRANSACTION IS FAIR AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
GRAND VALLEY GAS COMPANY AND UNANIMOUSLY RECOMMENDS APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
The Board of Directors of Grand Valley Gas Company retained the investment
banking firm of Rauscher Pierce Refsnes Inc. to advise it with respect to the
consideration to be received in the Merger. Rauscher Pierce Refsnes Inc. has
advised the Board that, in its opinion, the consideration to be received by
the Grand Valley Gas Company shareholders pursuant to the Merger Agreement is
fair from a financial point of view. A copy of the opinion is attached to this
Proxy Statement/Prospectus as Annex B.
The Merger Agreement must be approved and adopted by the holders of a
majority of the outstanding shares of Grand Valley Gas Company Common Stock.
Therefore, an abstention or the failure to vote is the equivalent of a vote
against adoption of the Merger Agreement. Accordingly, your vote on this
matter is very important. We urge you to carefully review the enclosed
material and to return your proxy promptly.
Whether or not you plan to attend the meeting, PLEASE SIGN AND PROMPTLY
RETURN YOUR PROXY CARD in the enclosed postage-paid envelope. If you attend
the meeting, you may revoke your proxy and vote your shares in person.
Sincerely,
/s/ Jeff J. Fishman
Jeff J. Fishman
President
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[LOGO OF "GRAND VALLEY GAS COMPANY" APPEARS HERE]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 30, 1994
To the Shareholders of Grand Valley Gas Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Grand Valley Gas Company ("Grand Valley") will be held on June 30,
1994 at the Red Lion Hotel at 255 South West Temple, Salt Lake City, Utah,
commencing at 10:00 a.m., local time, to consider and act upon the following
matters, all of which are further described in the attached Proxy
Statement/Prospectus:
1. To consider and vote upon a proposal to adopt and approve a Restated
Agreement and Plan of Merger (the "Merger Agreement"), which provides for
the merger of Grand Valley into Associated Natural Gas, Inc., a Colorado
corporation that is a wholly-owned subsidiary of Associated Natural Gas
Corporation, a Delaware corporation ("ANGC"), and pursuant to which each
outstanding share of Grand Valley common stock, par value $.0125 per share,
will be converted into 0.25 shares of ANGC common stock, par value $.05 per
share, as more fully set forth in the accompanying Proxy
Statement/Prospectus and in the Merger Agreement, a copy of which is
attached thereto as Annex A.
2. To transact such other business as may properly come before the
Special Meeting, or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on May 16, 1994, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Special Meeting or any adjournment thereof. Only shareholders of
record at the close of business on such date will be entitled to vote at the
Special Meeting. The approval and adoption by Grand Valley shareholders of the
Merger Agreement will require the affirmative vote of the holders of a majority
of the outstanding shares of Grand Valley common stock entitled to vote
thereon.
The merger is expected to become effective on or about June 30, 1994, subject
to the approval of Grand Valley's shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Michael D. Fowler
Michael D. Fowler
Secretary
Salt Lake City, Utah
May 27, 1994
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING
SHARES OF GRAND VALLEY COMMON STOCK IS REQUIRED FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL
MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED MAY 27, 1994
PROSPECTUS
ASSOCIATED NATURAL GAS CORPORATION
-----------
PROXY STATEMENT
GRAND VALLEY GAS COMPANY
-----------
This Proxy Statement/Prospectus is being furnished to holders of common stock
of Grand Valley Gas Company, a Utah corporation ("Grand Valley"), in connection
with the solicitation of proxies by the Grand Valley Board of Directors for use
at the special meeting of Grand Valley shareholders (the "Special Meeting") to
be held on June 30, 1994, at the Red Lion Hotel at 255 South West Temple, Salt
Lake City, Utah, commencing at 10:00 a.m., local time, and at any adjournment
or postponement thereof.
At the Special Meeting, shareholders of record of Grand Valley as of the
close of business on May 16, 1994, will consider and vote upon a proposal to
adopt and approve the Restated Agreement and Plan of Merger, dated as of
February 21, 1994 (the "Merger Agreement"), by and among Associated Natural Gas
Corporation, a Delaware corporation ("ANGC"), Grand Valley and Associated
Natural Gas, Inc., a Colorado corporation ("ANGI"), which is a wholly-owned
subsidiary of ANGC, pursuant to which Grand Valley will be merged with and into
ANGI (the "Merger"). Upon consummation of the Merger, each issued and
outstanding share of Grand Valley common stock will be converted into the right
to receive 0.25 shares (the "Conversion Number") of ANGC common stock.
This Proxy Statement/Prospectus constitutes a prospectus of ANGC, with
respect to up to 1,642,442 shares of ANGC common stock to be issued in the
Merger (as defined below) in exchange for outstanding shares of Grand Valley
common stock.
The Board of Directors of Grand Valley has unanimously determined that the
proposed Merger is desirable and in the best interests of the shareholders and
unanimously recommends that Grand Valley shareholders vote FOR the proposal to
approve and adopt the Merger Agreement.
HOLDERS OF GRAND VALLEY COMMON STOCK ARE NOT ENTITLED TO DISSENTERS' RIGHTS
UNDER UTAH LAW IN CONNECTION WITH THE MERGER BECAUSE UTAH LAW DOES NOT PROVIDE
FOR DISSENTERS' RIGHTS WHERE THE MERGING CORPORATION'S STOCK AND THE STOCK TO
BE RECEIVED IN THE MERGER IS HELD BY MORE THAN 2,000 PERSONS OR IS TRADED ON
NASDAQ OR A NATIONAL EXCHANGE. THE STOCK OF GRAND VALLEY IS TRADED ON NASDAQ-NM
AND THE STOCK OF ANGC IS TRADED ON THE NYSE.
This Proxy Statement/Prospectus and the accompanying form of proxy are being
mailed to shareholders of Grand Valley on or about May 27, 1994.
-----------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Proxy Statement/Prospectus is May 27, 1994.
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ANGC, GRAND VALLEY OR ANY OTHER PERSON. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES OFFERED HEREBY
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ANGC OR GRAND VALLEY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
ANGC and Grand Valley are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, New York, New York 10048, and Suite
1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies
of such material also can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
In addition, material filed by ANGC can be inspected at the offices of the New
York Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York 10005,
on which ANGC Common Stock is listed. Material filed by Grand Valley can be
inspected at the offices of the National Association of Securities Dealers,
Inc. ("NASD"), Reports Section, 1735 K Street N.W., Washington, D.C. 20006.
ANGC has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
securities to be issued pursuant to the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be inspected and copied
at the aforementioned facilities of the Commission in Washington, D.C.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in its
entirety by such reference. All references herein to "ANGC" and to "Grand
Valley" include such company and its wholly-owned subsidiaries.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by ANGC and Grand Valley
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
ANGC
1. ANGC's Annual Report on Form 10-K for the year ended September 30, 1993
filed December 15, 1993, Registration No. 1-10381 (the "ANGC 1993 10-K");
2. ANGC's Proxy Statement for the Annual Meeting of Stockholders held on
February 10, 1994, filed December 28, 1993, Registration No. 1-10381;
2
<PAGE>
3. ANGC's Quarterly Report on Form 10-Q for the quarter ended December 31,
1993, filed February 14, 1994, Registration No. 1-10381;
4. ANGC's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994,
filed May 13, 1994, Registration No. 1-10381 (the "ANGC Second Quarter 10-Q");
5. ANGC's Current Report on Form 8-K dated January 13, 1994, filed February
8, 1994, Registration No. 1-10381;
6. ANGC's Current Report on Form 8-K dated February 23, 1994, filed February
25, 1994, Registration No. 1-10381;
7. ANGC's Current Report on Form 8-K dated May 6, 1994, filed May 6, 1994,
Registration No. 1-10381.
GRAND VALLEY
1. Grand Valley's Annual Report on Form 10-K for the year ended May 31, 1993,
filed August 11, 1993, Registration No. 0-17260, as amended by Form 10-K/A
filed September 28, 1993 (the "Grand Valley 1993 10-K");
2. Grand Valley's Proxy Statement for the Annual Meeting of Shareholders held
on December 9, 1993, filed October 22, 1993, Registration No. 0-17260;
3. Grand Valley's Quarterly Report on Form 10-Q for the quarter ended August
31, 1993, filed October 15, 1993, Registration No. 0-17260;
4. Grand Valley's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, filed January 14, 1994, Registration No. 0-17260;
5. Grand Valley's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1994, filed April 14, 1994, Registration No. 0-17260 (The "Grand
Valley Third Quarter 10-Q");
6. Grand Valley's Current Report on Form 8-K dated February 21, 1994, filed
February 23, 1994, Registration No. 0-17260.
The Grand Valley 1993 10-K and the Grand Valley Third Quarter 10-Q are being
delivered to Grand Valley shareholders with this Proxy Statement/Prospectus.
All documents and reports subsequently filed with the Commission by ANGC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement/Prospectus and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the date of filing of such
documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference documents which are
not presented herein or delivered herewith. Copies of these documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any
beneficial owner, to whom this Proxy Statement/Prospectus is delivered, on
written or oral request, without charge, in the case of documents relating to
ANGC, directed to Harold R. Logan, Jr., Senior Vice President/Finance,
Associated Natural Gas Corporation, 370 17th Street, Suite 900, Denver,
Colorado 80202 (telephone number: (303) 595-3331), or, in the case of documents
relating to Grand Valley, directed to Michael D. Fowler, Vice President,
Treasurer and Secretary, Grand Valley Gas Company, 50 West Broadway, Tenth
Floor, Salt Lake City, Utah 84101 (telephone number: (801) 531-4400). In order
to ensure timely delivery of the documents, any requests should be made by June
23, 1994.
3
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
SUMMARY.................................................................... 5
COMPARATIVE PER SHARE DATA................................................. 13
COMPARATIVE MARKET PRICE DATA.............................................. 14
THE SPECIAL MEETING........................................................ 15
General.................................................................. 15
Record Date; Voting at the Special Meeting............................... 15
Proxies.................................................................. 15
THE MERGER................................................................. 17
General Description of the Merger........................................ 17
Background of the Merger................................................. 17
Reasons for the Merger................................................... 19
Recommendation of Grand Valley's Board of Directors...................... 22
Opinion of Financial Advisor............................................. 22
Interests of Certain Persons in the Merger............................... 26
Accounting Treatment..................................................... 27
Certain Federal Income Tax Consequences.................................. 27
Regulatory Approvals..................................................... 28
Federal Securities Law Consequences...................................... 29
Stock Exchange Listing................................................... 29
No Dissenters' Rights.................................................... 29
THE MERGER AGREEMENT....................................................... 29
The Merger............................................................... 29
Surrender of Share Certificates.......................................... 30
Representations and Warranties........................................... 30
Certain Covenants ....................................................... 30
No Solicitation of Transactions.......................................... 31
Termination Fee.......................................................... 31
Indemnification.......................................................... 32
Conditions to Each Party's Obligations................................... 32
Benefit Plans............................................................ 33
Termination.............................................................. 33
Expenses................................................................. 33
Amendment and Waiver..................................................... 33
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION......................... 34
BUSINESS OF ASSOCIATED NATURAL GAS CORPORATION............................. 42
BUSINESS OF GRAND VALLEY GAS COMPANY....................................... 43
COMPARISON OF STOCKHOLDER RIGHTS........................................... 44
DESCRIPTION OF ANGC CAPITAL STOCK.......................................... 46
LEGAL MATTERS.............................................................. 47
EXPERTS.................................................................... 47
SHAREHOLDERS' PROPOSALS.................................................... 48
ANNEX A--RESTATED AGREEMENT AND PLAN OF MERGER............................. A-1
ANNEX B--OPINION OF FINANCIAL ADVISOR...................................... B-1
</TABLE>
4
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained, or incorporated by
reference, in this Proxy Statement/Prospectus and the Annexes hereto. Unless
otherwise defined herein, capitalized terms used in this summary have the
respective meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. Shareholders are urged to read this Proxy
Statement/Prospectus and the Annexes hereto in their entirety.
THE COMPANIES
ANGC...................... Associated Natural Gas Corporation ("ANGC") is en-
gaged in the business of purchasing, gathering,
processing, transporting and marketing natural
gas, natural gas liquids ("NGLs") and crude oil to
industrial end-users, local distribution compa-
nies, liquid petroleum gas wholesalers and retail-
ers and refiners. See "Business of ANGC." The
principal executive offices of ANGC are located at
370 17th Street, Suite 900, Denver, Colorado
80202, telephone number (303) 595-3331.
ANGI...................... Associated Natural Gas, Inc. ("ANGI") is a wholly-
owned subsidiary of ANGC and is engaged in the
construction, acquisition and operation of natural
gas gathering and processing facilities and mar-
keting of both system supply and third-party sup-
plies of natural gas to industrial end-users and
local distribution companies.
Grand Valley.............. Grand Valley Gas Company ("Grand Valley") is pri-
marily engaged in the business of marketing natu-
ral gas to industrial end-users and local distri-
bution companies from the West Coast of the United
States and Canada through the Rocky Mountain and
Midwest regions of the United States. Grand Valley
also owns and operates natural gas gathering,
processing and storage facilities. See "Business
of Grand Valley." The principal executive offices
of Grand Valley are located at 50 West Broadway,
Tenth Floor, Salt Lake City, Utah 84101, telephone
number (801) 531-4400.
THE SPECIAL MEETING
Time, Date and Place...... The Special Meeting will be held on June 30, 1994,
at the Red Lion Hotel at 255 South West Temple,
Salt Lake City, Utah, commencing at 10:00 a.m.,
local time.
Record Date; Shares
Entitled to Vote......... Holders of record of shares of Grand Valley common
stock, $.0125 par value ("Grand Valley Common
Stock"), at the close of business on May 16, 1994,
are entitled to notice of and to vote at the Spe-
cial Meeting. On May 16, 1994, there were
6,335,944 shares of Grand Valley Common Stock out-
standing, each of which will be entitled to one
vote on each matter to be acted upon or which may
properly come before the Special Meeting. On such
date, the directors and executive officers of
Grand Valley owned an aggregate of 1,346,085
shares of Grand Valley Common Stock, representing
approximately 21.25 percent of the outstanding
shares.
5
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Purpose of the Meeting.... The purpose of the Special Meeting is to consider
and vote upon (i) a proposal to approve and adopt
the Merger Agreement and (ii) such other matters
as may properly be brought before the Special
Meeting.
Vote Required............. The approval and adoption by Grand Valley share-
holders of the Merger Agreement will require the
affirmative vote of the holders of a majority of
the outstanding shares of Grand Valley Common
Stock entitled to vote thereon.
THE MERGER
Effect of the Merger...... At the Effective Time (as defined below), (i) Grand
Valley will be merged with and into ANGI, which
will be the surviving corporation and will be a
wholly-owned subsidiary of ANGC, and (ii) each is-
sued and outstanding share of Grand Valley Common
Stock will be converted into the right to receive
0.25 shares of ANGC common stock, $.05 par value
("ANGC Common Stock"), as described herein under
"The Merger Agreement--The Merger."
On February 18, 1994, the last full trading day
prior to the public announcement of the execution
and delivery of the Merger Agreement, the closing
sales price of ANGC Common Stock was $34.75 per
share on the NYSE Composite Tape and the closing
sales price of Grand Valley Common Stock was $7.25
as reported by NASDAQ-NM. Based upon the Conver-
sion Number, the equivalent per share market value
of Grand Valley Common Stock was $8.69 on such
date.
On May 20, 1994, the closing sales price of ANGC
Common Stock was $37.00 per share on the NYSE Com-
posite Tape, and the closing sales price of Grand
Valley Common Stock as reported by NASDAQ-NM was
$8.50. Based upon the Conversion Number, the
equivalent per share market value of Grand Valley
Common Stock was $9.25 on May 20, 1994.
Because the market price of ANGC Common Stock is
subject to fluctuation, the market value of the
shares of ANGC Common Stock that holders of Grand
Valley Common Stock will receive in the Merger may
increase or decrease prior to the Merger. See "The
Merger Agreement--The Merger." Grand Valley share-
holders are urged to obtain a current market quo-
tation for ANGC Common Stock and Grand Valley Com-
mon Stock.
Reasons for the Merger.... The Merger is intended to result in a combined en-
tity with greater financial resources and gas sup-
ply, transportation and market access. The Merger
is also intended to result in certain asset syner-
gies and expanded asset growth opportunities for
ANGC. See "The Merger--Reasons for the Merger."
Recommendation of the
Grand Valley Board of
Directors................ The Board of Directors of Grand Valley has deter-
mined that the Merger is in the best interests of
the shareholders of Grand Valley and unanimously
recommends that the shareholders of Grand Valley
approve and adopt the Merger Agreement. For a dis-
cussiconsidered by the Grand Valley Board of
Directors in
6
<PAGE>
reaching its decision, see "The Merger--Reasons
for the Merger;" and "--Recommendation of Grand
Valley's Board of Directors."
Opinion of Financial
Advisor.................. Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce"),
the financial advisor to the Board of Directors of
Grand Valley in connection with the Merger, has
delivered its written opinion dated February 18,
1994 (the "Financial Advisor Opinion") and has
confirmed such opinion by delivery of its written
opinion dated as of the date hereof, to the effect
that, subject to the assumptions and qualifica-
tions expressed therein, the consideration to be
received in the Merger is fair to the shareholders
of Grand Valley from a financial point of view.
The full text of the Rauscher Pierce opinion,
dated as of the date hereof, is attached to this
Proxy Statement/Prospectus as Annex B. See "Opin-
ion of Financial Advisor." The text of this opin-
ion is substantially identical to the opinion
dated February 18, 1994.
Effective Time of the
Merger................... The Merger will become effective upon the later of
(i) the filing of Articles of Merger by the Secre-
tary of State of Colorado and (ii) the filing of
Articles of Merger by the Division of Corporations
and Commercial Code of Utah or at such later time
as is specified in such Articles of Merger (the
"Effective Time"). Assuming all conditions to the
Merger contained in the Merger Agreement have been
satisfied or waived prior thereto, it is antici-
pated that the Effective Time of the Merger will
occur as soon as practicable following the Special
Meeting.
Exchange of Stock
Certificates............. Promptly after the Effective Time, The First Na-
tional Bank of Boston (the "Exchange Agent") will
mail a letter of transmittal with instructions to
each person who held Grand Valley Common Stock im-
mediately before the Effective Time for use in ex-
changing certificates representing shares of Grand
Valley Common Stock for certificates representing
shares of ANGC Common Stock and cash in lieu of
any fractional shares. CERTIFICATES SHOULD NOT BE
SURRENDERED BY THE HOLDERS OF GRAND VALLEY COMMON
STOCK UNTIL THEY HAVE RECEIVED THE LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT. SEE "THE
MERGER AGREEMENT--SURRENDER OF SHARE CERTIFI-
CATES."
Conditions to the Merger;
Termination of the
Merger Agreement......... The obligations of ANGC and Grand Valley to consum-
mate the Merger are subject to the satisfaction of
certain conditions, including (i) obtaining the
approval of Grand Valley's shareholders and requi-
site regulatory approvals, (ii) receiving approval
for listing on the NYSE of the ANGC Common Stock
to be issued and reserved for issuance in connec-
tion with the Merger, (iii) the absence of any in-
junction prohibiting consummation of the Merger,
(iv) the receipt of certain legal and tax opin-
ions, (v) the receipt and confirmation of an ac-
countants' letter with respect to qualification of
the Merger as a pooling of interests, (vi) the ex-
ercise or termination of certain options to pur-
chase Grand Valley Common Stock held by employees
of Grand Valley, (vii) the termination of certain
incentive stock award agreements and employment
agreements of Grand Valley, (viii) the Financial
Advisor Opinion must not have been withdrawn and
(ix) the absence of any material change in the fi-
nancial condition, results of operations, business
or prospects of the parties. See "The Merger--Ac-
counting Treatment," "The
7
<PAGE>
Merger--Certain Federal Income Tax Consequences"
and "The Merger Agreement--Conditions to Each
Party's Obligations."
The Merger Agreement is subject to termination at
the option of either ANGC or Grand Valley if the
Merger is not consummated before July 31, 1994 and
prior to such time upon the occurrence of certain
events. See "The Merger Agreement--Termination."
Regulatory Matters........ The consummation of the Merger is also subject to
certain regulatory matters, including expiration
of the relevant waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). Such waiting period is
expected to expire on June 9, 1994 unless a re-
quest for additional information is made. There
can be no assurance regarding the timing of such
approval or that such approval will, in fact, be
obtained. See "The Merger--Regulatory Approvals."
No Solicitation........... The Merger Agreement provides that Grand Valley
shall not solicit or knowingly encourage the ini-
tiation of any inquiries or proposals regarding
any merger, sale of substantial assets, tender of-
fer, sale of shares of capital stock or similar
business combination transactions involving Grand
Valley or its subsidiaries (an "Acquisition Trans-
action"); provided, however, that such agreement
shall not prevent the Board of Directors of Grand
Valley, in the exercise of its fiduciary duties
and after consulting with independent counsel,
from considering, negotiating and approving an-
other unsolicited bona fide proposal that the
Board of Directors of Grand Valley determines in
good faith, after consultation with its financial
advisors, may result in a transaction more favora-
ble to Grand Valley's shareholders from a finan-
cial point of view than the transaction contem-
plated by the Merger Agreement. See "The Merger
Agreement--No Solicitation of Transactions."
Termination Fee........... If the shareholders of Grand Valley fail to approve
the Merger Agreement and (i) prior to the time of
the Special Meeting, there shall have been pro-
posed an Acquisition Transaction with respect to
Grand Valley that has not been withdrawn, and (ii)
at the time of the Special Meeting, Grand Valley's
Board of Directors shall have withdrawn its recom-
mendation to the Grand Valley shareholders to ap-
prove the Merger, then Grand Valley will be re-
quired to pay ANGC $3,000,000.
Indemnification........... The Merger Agreement also provides that the offi-
cers, directors and employees of Grand Valley will
be indemnified against certain liabilities and
costs, including those arising out of, or pertain-
ing to, the Merger Agreement, the Merger or the
transactions contemplated thereby. See "The Merger
Agreement--Indemnification."
Benefit Plans............. After the Effective Time, ANGC will provide for
Grand Valley employees who are covered by Grand
Valley's benefit plans the same benefits that ANGC
provides to its employees, with credit for their
service with Grand Valley for purposes of eligi-
bility and vesting in the plans provided by ANGC.
In addition, the employees of Grand Valley will
not be subject to any exclusions for any pre-ex-
isting conditions under
8
<PAGE>
ANGC's medical benefit plan, and credit will be
received for any deductibles or out-of-pocket
amounts previously paid.
No Dissenters' Rights..... Holders of Grand Valley Common Stock are not enti-
tled to dissenters' rights under the Utah Revised
Business Corporation Act (the "URBCA") in connec-
tion with the Merger. See "The Merger--No Dissent-
ers' Rights." The URBCA does not provide for dis-
senters' rights where the merging corporation's
stock and the stock to be received in the merger
is held by more than 2,000 persons or is traded on
NASDAQ or a national exchange.
Certain Federal Income
Tax Consequences......... The Merger is intended to be a tax-free reorganiza-
tion so that no gain or loss would be recognized
by Grand Valley shareholders, except in respect of
cash received in lieu of fractional shares. The
consummation of the Merger is conditioned on each
of ANGC and Grand Valley receiving prior to the
Effective Time an opinion of counsel to the effect
that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Inter-
nal Revenue Code of 1986, as amended (the "Code").
For a further discussion of certain of the federal
income tax consequences of the Merger, see "The
Merger--Certain Federal Income Tax Consequences."
See also "The Merger Agreement--Conditions to Each
Party's Obligations."
Accounting Treatment...... The Merger is intended to qualify as a pooling of
interests for accounting and financial reporting
purposes. Consummation of the Merger is condi-
tioned upon the confirmation in writing of a let-
ter from KPMG Peat Marwick, with respect to ANGC,
and from Arthur Andersen & Co., with respect to
Grand Valley, stating that the Merger will qualify
as a pooling of interests transaction under Opin-
ion No. 16 of the Accounting Principles Board
("APB 16") at the Effective Time. See "The Merg-
er--Accounting Treatment" and "The Merger Agree-
ment--Conditions to Each Party's Obligations."
Interests of Certain
Persons.................. Certain officers and directors of Grand Valley have
direct or indirect interests in recommending the
Merger that may not be identical to those of unaf-
filiated shareholders of Grand Valley, including
the granting of certain options by ANGC to one
such officer and director. See "The Merger--Inter-
ests of Certain Persons in the Merger."
Comparison of Stockholder
Rights................... The rights of the shareholders of Grand Valley are
currently governed by Utah law and Grand Valley's
articles of incorporation and bylaws. Upon consum-
mation of the Merger, Grand Valley's shareholders
will become stockholders of ANGC and their rights
as stockholders of ANGC will be governed by Dela-
ware law and ANGC's certificate of incorporation
and bylaws. See "Comparison of Stockholder Rights"
for a summary of the material differences between
the rights of holders of ANGC Common Stock and
Grand Valley Common Stock.
9
<PAGE>
ANGC SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary financial information of ANGC set forth below for each of the
years in the three-year period ended September 30, 1993 has been derived from
the audited consolidated financial statements of ANGC. The summary historical
financial data for ANGC for the six months ended March 31, 1994 and 1993 has
been derived from ANGC's unaudited consolidated financial statements and
includes, in the opinion of ANGC's management, all adjustments necessary to a
fair statement of the financial position and results of operations for the
interim periods presented. All adjustments, in the opinion of management, are
of a normal recurring nature. This historical data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the consolidated financial statements and notes
thereto of ANGC included in the ANGC 1993 10-K and the ANGC Second Quarter 10-Q
which are incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------ -------------------------
1994 1993 1993 1992 1991
-------- --------- --------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue................. $869,993 691,525 1,465,323 928,447 630,662
Income from operations............ 25,970 25,806 46,491 31,181 22,450
Net earnings...................... 11,057 11,767 20,369 11,650 10,121
Earnings per common share......... .83 .91 1.56 .93 .92
Dividends declared per
common share..................... .06 .06 .12 .12 .12
Weighted average common shares
outstanding...................... 13,380 12,990 13,032 12,539 11,010
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, -------------------------
1994 1993 1992 1991
--------- --------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital................... $ 9,379 14,832 14,943 15,625
Property, plant and
equipment, net................... 422,499 344,834 298,049 230,645
Total assets...................... 693,496 598,648 493,216 357,379
Long-term debt, excluding current
installments..................... 209,000 153,000 137,000 120,830
Stockholders' equity.............. 218,105 197,356 174,548 131,892
</TABLE>
10
<PAGE>
GRAND VALLEY SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary financial information of Grand Valley set forth below for each of
the years in the three-year period ended May 31, 1993 has been derived from the
audited consolidated financial statements of Grand Valley. The summary
historical financial data for Grand Valley for the nine months ended February
28, 1994 and 1993, has been derived from Grand Valley's unaudited consolidated
financial statements and includes, in the opinion of Grand Valley's management,
all adjustments necessary to a fair statement of the financial position and
results of operations for the interim periods presented. All adjustments, in
the opinion of management, are of a normal, recurring nature. This historical
data should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial
statements and notes thereto of Grand Valley included in the Grand Valley 10-K
and the Grand Valley Third Quarter 10-Q which are incorporated by reference
herein and are being sent to shareholders of Grand Valley with this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28, YEARS ENDED MAY 31,
--------------------- ------------------------
1994 1993 1993 1992 1991
-------- ------------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenue............... $270,913 245,663 324,671 197,084 105,479
Income before income taxes and
minority interest.............. 4,446 5,109 5,351 5,213 5,655
Net income...................... 2,502 3,006 3,179 3,246 3,522
Net income per common share..... .39 .47 .50 .52 .56
Weighted average common shares
outstanding.................... 6,349 6,421 6,384 6,288 6,340
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
FEBRUARY 28, ------------------------
1994 1993 1992 1991
------------ ------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF
PERIOD):
Working capital (deficit)....... $ 6,175 7,912 (330) 7,147
Property, plant and equipment,
net............................ 23,473 9,793 6,266 752
Total assets.................... 98,821 77,818 41,296 14,982
Long-term debt.................. 10,000 10,000 -- --
Stockholders' equity............ 19,459 16,450 11,738 7,885
</TABLE>
11
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The summary pro forma combined financial information has been derived in part
from the pro forma combined financial statements appearing elsewhere herein and
should be read in conjunction with those statements and the notes thereto. This
pro forma data is not necessarily indicative of the results to be expected
after the proposed Merger is consummated. The following summary unaudited
condensed pro forma combined statements of operations for the six months ended
March 31, 1994 and 1993 assume that the business combination occurred as of the
beginning of the respective periods presented and combine the historical
results of operations of ANGC for the six months ended March 31, 1994 and 1993,
respectively with the historical results of operations of Grand Valley for the
six months ended February 28, 1994 and 1993, respectively. The following
unaudited condensed pro forma combined statements of operations for the years
ended September 30, 1993, 1992 and 1991 assume that the business combination
occurred as of the beginning of the respective periods presented and combines
the historical results of operations of ANGC for the years ended September 30,
1993, 1992 and 1991, respectively, with the historical results of operations of
Grand Valley for the years ended May 31, 1993, 1992 and 1991, respectively. The
following unaudited condensed pro forma combined balance sheet as of March 31,
1994 assumes that the merger occurred on that date and reflects the combination
of the historical balance sheet of ANGC as of March 31, 1994 with the
historical balance sheet of Grand Valley as of February 28, 1994. The summary
unaudited condensed pro forma combined balance sheets as of September 30, 1993,
1992 and 1991 assume that the Merger occurred as of the respective dates
presented and reflects the combination of the historical balance sheets of ANGC
as of September 30, 1993, 1992 and 1991, respectively, with the historical
balance sheets of Grand Valley as of May 31, 1993, 1992 and 1991, respectively.
See "Condensed Pro Forma Combined Financial Statements."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
-------------------- ---------------------------
1994 1993 1993 1992 1991
---------- --------- --------- --------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF
OPERATIONS DATA:
Operating revenue............. $1,069,215 868,800 1,788,850 1,125,035 735,830
Income from operations........ 30,105 29,622 51,900 36,026 27,962
Net earnings.................. 13,248 13,994 23,547 14,896 13,643
Earnings per common share..... .88 .96 1.61 1.06 1.08
Dividends declared per common
share........................ .06 .06 .12 .12 .12
Weighted average common shares
outstanding.................. 14,973 14,585 14,628 14,111 12,595
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ---------------------------
1994 1993 1992 1991
--------- --------- --------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRO FORMA BALANCE SHEET DATA
(END OF PERIOD):
Working capital............... $ 15,365 22,744 14,613 22,772
Property, plant and equipment,
net.......................... 446,161 354,627 304,315 231,397
Total assets.................. 791,860 676,466 534,512 386,882
Long-term debt, excluding
current installments......... 219,000 163,000 137,000 120,830
Stockholders' equity.......... 237,565 213,806 186,286 139,777
</TABLE>
12
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are the net earnings, cash dividends declared and book value
per common share data of ANGC and Grand Valley on an historical basis, and on a
pro forma per share basis for ANGC, and an equivalent pro forma per share basis
for Grand Valley. The ANGC pro forma combined data was derived by combining
historical financial information of ANGC and Grand Valley after giving effect
to the Merger under the pooling of interests method of accounting. The per
share equivalent Grand Valley pro forma data was calculated by multiplying the
ANGC pro forma combined per common share data by the Conversion Number.
The information set forth below should be read in conjunction with the
respective audited and unaudited financial statements of ANGC and Grand Valley
incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
---------------------------------------------
1994 1993 1993 1992 1991
--------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C>
ANGC HISTORICAL PER COMMON SHARE
DATA:
Net earnings.................... $ .83 .91 1.56 .93 .92
Dividends declared.............. .06 .06 .12 .12 .12
Book value (end of period)...... 16.22 15.00
ANGC PRO FORMA PER COMMON SHARE
DATA:
Net earnings.................... .88 .96 1.61 1.06 1.08
Dividends declared.............. .06 .06 .12 .12 .12
Book value (end of period)...... 15.80 14.46
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, YEARS ENDED MAY 31,
---------------------------------------------
1994 1993 1993 1992 1991
--------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C>
GRAND VALLEY HISTORICAL PER
COMMON SHARE DATA:
Net earnings.................... $ .34 .35 .50 .52 .56
Dividends declared.............. -- -- -- -- --
Book value (end of period)...... 3.07 2.52
GRAND VALLEY EQUIVALENT PRO
FORMA PER COMMON SHARE DATA:
Net earnings.................... .22 .24 .40 .27 .27
Dividends declared.............. .015 .015 .03 .03 .03
Book value (end of period)...... 3.95 3.62
</TABLE>
13
<PAGE>
COMPARATIVE MARKET PRICE DATA
ANGC Common Stock is listed on the NYSE under the symbol NGA. The prices of
Grand Valley Common Stock are quoted on NASDAQ-NM under the symbol GVGC.
The table below sets forth, for the calendar quarters indicated, the reported
high and low sales prices of ANGC Common Stock as reported on the NYSE
Composite Tape and the high and low sales prices for Grand Valley Common Stock
as reported on NASDAQ-NM, in each case based on published financial sources. No
dividends have been declared on Grand Valley Common Stock.
<TABLE>
<CAPTION>
ANGC GRAND VALLEY
COMMON STOCK COMMON STOCK
------------------------ --------------
HIGH LOW DIVIDEND HIGH LOW
------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
1992
First Quarter........................ $30.000 $18.125 $.03 $ 9.250 $6.125
Second Quarter....................... $24.750 $19.250 $.03 $ 8.875 $6.875
Third Quarter........................ $30.875 $22.500 $.03 $ 9.750 $8.000
Fourth Quarter....................... $30.625 $27.750 $.03 $ 9.375 $8.375
1993
First Quarter........................ $30.750 $25.500 $.03 $11.000 $8.375
Second Quarter....................... $37.000 $32.250 $.03 $10.000 $7.750
Third Quarter........................ $41.000 $32.000 $.03 $ 8.250 $4.875
Fourth Quarter....................... $39.500 $28.500 $.03 $ 7.125 $5.500
1994
First Quarter........................ $36.250 $31.375 $.03 $ 8.125 $6.000
Second Quarter
(through May 20, 1994).............. $37.000 $33.375 $.03 $ 8.750 $7.375
</TABLE>
As of May 16, 1994, there were approximately 479 holders of record of Grand
Valley Common Stock and as of May 16, 1994, there were approximately 316
holders of record of ANGC Common Stock.
On February 18, 1994, the last full trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the closing
sales price of ANGC Common Stock was $34.75 per share on the NYSE Composite
Tape and the closing sales price of Grand Valley Common Stock was $7.25 as
reported by NASDAQ-NM. Based upon the Conversion Number, the equivalent per
share market value of Grand Valley Common Stock was $8.69 on such date.
On May 20, 1994, the closing sales price of ANGC Common Stock was $37.00 per
share on the NYSE Composite Tape, and the closing sales price of Grand Valley
Common Stock as reported by NASDAQ-NM was $8.50. Based upon the Conversion
Number, the equivalent per share market value of Grand Valley was $9.25 on May
20, 1994.
Because the market price of ANGC Common Stock is subject to fluctuation, the
market value of the shares of ANGC Common Stock that holders of Grand Valley
Common Stock will receive in the Merger may increase or decrease prior to the
Merger. See "The Merger Agreement--The Merger." Grand Valley shareholders are
urged to obtain a current market quotation for ANGC Common Stock and Grand
Valley Common Stock.
Following the Merger, ANGC Common Stock will continue to be listed for
trading on the NYSE and there will be no further public market for the Grand
Valley Common Stock.
14
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus and the accompanying form of proxy are being
furnished to holders of Grand Valley Common Stock in connection with the
solicitation of proxies by the Grand Valley Board of Directors for use at the
Special Meeting to be held on June 30, 1994, at the Red Lion Hotel at 255 South
West Temple, Salt Lake City, Utah, commencing at 10:00 a.m., local time, and at
any adjournment or postponement thereof.
At the Special Meeting, holders of Grand Valley Common Stock will be asked to
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement
and (ii) such other matters as may properly be brought before the Special
Meeting.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to shareholders of Grand Valley on or about May 27, 1994.
RECORD DATE; VOTING AT THE SPECIAL MEETING
The Grand Valley Board of Directors has fixed May 16, 1994 as the record date
for the determination of the Grand Valley shareholders entitled to notice of
and to vote at the Special Meeting. Accordingly, only holders of record of
shares of Grand Valley Common Stock on the record date will be entitled to
notice of and to vote at the Special Meeting. As of May 16, 1994, there were
6,335,944 shares of Grand Valley Common Stock outstanding, entitled to vote and
held by approximately 479 holders of record. ANGC and its subsidiaries own no
outstanding shares of Grand Valley Common Stock. Each holder of record of
shares of Grand Valley Common Stock on the record date is entitled to cast one
vote per share on each proposal properly submitted for the vote of the Grand
Valley shareholders, either in person or by properly executed proxy, at the
Special Meeting. The presence, in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Grand Valley Common Stock
entitled to vote is necessary to constitute a quorum at the Special Meeting.
Abstentions will be counted in determining whether a quorum is present.
The adoption and approval by the Grand Valley shareholders of the Merger
Agreement will require the affirmative vote of the holders of a majority of the
outstanding shares of Grand Valley Common Stock entitled to vote thereon.
Abstentions and broker non-votes will have the same effect as a negative vote.
As of May 16, 1994, the directors and executive officers of Grand Valley
owned an aggregate of 1,346,085 shares of Grand Valley Common Stock,
representing approximately 21.25 percent of the outstanding shares.
PROXIES
All shares of Grand Valley Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at the Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted FOR adoption and
approval of the Merger Agreement.
At the date of this Proxy Statement/Prospectus, the Board of Directors of
Grand Valley does not know of any business to be presented at the Special
Meeting other than as set forth in the notice accompanying this Proxy
Statement/Prospectus. If any other matters should properly be presented at the
Special Meeting for consideration, including, among other things, consideration
of a motion to adjourn the Special Meeting to another time and/or place, the
persons named in the enclosed form of proxy and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Grand Valley, at or before the taking of
15
<PAGE>
the vote at the Special Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a later-dated proxy relating to the
same shares and delivering it to the Secretary of Grand Valley, before the
taking of the vote at the Special Meeting or (iii) attending the Special
Meeting and voting in person (although attendance at the Special Meeting will
not in and of itself constitute a revocation of the proxy). Any written notice
of revocation or subsequent proxy should be sent so as to be delivered to Grand
Valley Gas Company, 50 West Broadway, 10th Floor, Salt Lake City, Utah 84101,
Attention: Secretary, or hand-delivered to the Secretary of Grand Valley, at or
before the taking of the vote at the Special Meeting.
Expenses incurred in connection with the printing and mailing of this Proxy
Statement/Prospectus will be shared equally by ANGC and Grand Valley. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Grand Valley in person or by telephone,
telegram or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Arrangements will also be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodian, nominees and fiduciaries, and ANGC and Grand
Valley will reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
In addition, Grand Valley has retained Corporate Investor Communications,
Inc. ("CIC") for solicitation and advisory services in connection with this
Proxy Statement/Prospectus. For such services, CIC will receive a fee of
$3,500, will be reimbursed for certain out-of-pocket expenses and will be
indemnified against certain liabilities, including liabilities under the
federal securities laws, in either case incurred in connection with this proxy
solicitation. CIC will solicit proxies from individuals, brokers, bank nominees
and other institutional holders of Grand Valley Common Stock.
If your shares of Grand Valley Common Stock are held in the name of a
brokerage firm, bank nominee or other institution, only it can sign a proxy
card with respect to your shares of Grand Valley Common Stock. Accordingly,
please contact the person responsible for your account and give instructions
for a proxy card to be signed representing your shares of Grand Valley Common
Stock.
If you have any questions about giving your proxy or require assistance,
please contact Charlotte Brown at CIC, at (201) 896-1900.
GRAND VALLEY SHAREHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Grand Valley will
merge with and into ANGI, with ANGI being the surviving corporation. Each
outstanding share of Grand Valley Common Stock will be converted into 0.25
shares of ANGC Common Stock. Based upon the number of shares of Grand Valley
Common Stock expected to be outstanding as of the Effective Time, approximately
15,102,895 shares of ANGC Common Stock will be outstanding immediately
following the Effective Time, of which approximately 1,642,442 shares,
representing approximately 10.9 percent of the total outstanding shares of
ANGC, will be held by the former shareholders of Grand Valley.
BACKGROUND OF THE MERGER
In the past several years the natural gas industry has undergone significant
changes. The promulgation of new regulations has resulted in the "unbundling"
of natural gas services that has significantly affected the manner in which
natural gas and related services are marketed. Such regulations have also
resulted in increased competition in the gathering, supply, storage,
transportation and pricing of natural gas. See "--Reasons for the Merger--
ANGC/Grand Valley Historical Overview." As a result, emphasis has been placed
on the ability of natural gas companies to offer a full array of services. In
response to these changes, Grand Valley determined that to better position
itself competitively, Grand Valley should seek to expand its gas gathering,
processing and marketing operations.
In August 1991, Grand Valley acquired the stock of Centennial Natural Gas
Corporation, which owned interests in gathering and processing systems in
Oklahoma, Texas and Wyoming. Subsequent to this acquisition and continuing
through October 1993, Grand Valley pursued numerous acquisition opportunities
of natural gas gathering, processing, storage and marketing companies and
related assets, of which two acquisitions were successfully completed during
early 1992.
In October 1993, the Board of Directors of Grand Valley retained Rauscher
Pierce to investigate various strategic alternatives for Grand Valley. The
Board retained Rauscher Pierce because of its desire to explore potential
transactions that would enhance shareholder value and liquidity and address
Grand Valley's future working capital requirements. Among the potential
alternatives that Rauscher Pierce was asked to explore were acquisitions of
significant natural gas gathering, processing or storage assets, financial
alternatives for such acquisitions and business combinations with companies
having significant natural gas gathering, processing and marketing operations.
As part of its engagement, Rauscher Pierce reviewed Grand Valley's financial
condition, asset base and business prospects and advised the Board of Directors
in November 1993 that Grand Valley faced certain financial constraints in its
ability to expand its asset base. Specifically, Grand Valley was confronted
with more limited capital resources as compared to its competitors in
attempting to expand operations and acquire additional assets. Rauscher Pierce
noted that these financial constraints could place Grand Valley at a
competitive disadvantage relative to other companies for acquisitions.
Accordingly, they believed that shareholder value could be maximized by
combining Grand Valley's marketing expertise with a large asset-based company
with greater financial resources. As a result, the Grand Valley Board directed
Rauscher Pierce at the meeting to focus its efforts on identifying potential
business combinations for Grand Valley. During November and December 1993,
Rauscher Pierce contacted five companies, including ANGC, regarding a potential
combination with Grand Valley. No company, other than ANGC, submitted a
proposal to combine with Grand Valley.
On December 17, 1993, representatives of Rauscher Pierce met in Denver with
officers of ANGC to solicit interest in initiating discussions with Grand
Valley. Based on a general discussion about the strategic benefits of a
possible combination, management of ANGC expressed an interest in meeting with
representatives of Grand Valley.
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On January 13, 1994, the executive officers of Grand Valley met in Denver,
Colorado with management of ANGC to discuss the scope of each company's
operations and general operating philosophies, including ANGC's approach to
combining the operations of the two companies.
On January 26, 1994, representatives of Grand Valley met in Houston, Texas
with representatives of ANGC to discuss preliminary valuation, the proposed
form of the transaction and the strategic focus for ANGC's future marketing
activities.
On January 28, 1994, ANGC and Grand Valley entered into mutual
confidentiality agreements and began to exchange confidential information.
On February 1, 1994, a meeting between the managements of the two companies
was held in Denver, Colorado to discuss an appropriate exchange ratio and to
discuss the strategic focus of the potential combined operations.
At a meeting of the Grand Valley Board of Directors on February 2, 1994, in
Salt Lake City, Utah, Rauscher Pierce reviewed with the Board the discussions
that had taken place with possible merger candidates, including ANGC, regarding
a potential business combination and discussed the business, financial
condition and operating results and prospects of ANGC. The Board directed
management to continue to pursue discussions with ANGC.
Representatives of ANGC and Grand Valley met again in Denver, Colorado on
February 9, 1994 to continue discussions on the structure of the transaction,
including treating the combination as a pooling of interests, and to discuss
the establishment of an exchange ratio, the requirement of terminating existing
employment contracts and stock options held by Grand Valley officers, and to
establish a timetable for additional negotiations and due diligence.
On February 11, managements of the two companies were joined in Denver,
Colorado by their respective legal counsel and Rauscher Pierce to begin
discussions regarding the terms of a merger agreement. Detailed discussions
regarding the terms of a merger agreement were held in Denver throughout the
week of February 14-18, 1994.
At a special meeting of the Board of Directors of Grand Valley on February
15, 1994, the Board, representatives of Rauscher Pierce and legal counsel for
Grand Valley met in Denver, Colorado to review the current status of
negotiations with ANGC. At this meeting, Rauscher Pierce responded to questions
from the Board regarding ANGC's financial condition, and Grand Valley's legal
counsel responded to questions concerning the various provisions of the Merger
Agreement.
Grand Valley's Board met again on February 17, 1994 with representatives of
Rauscher Pierce and Grand Valley's legal counsel. Management reported to the
Board on the proposed resolution of the remaining open issues in the Merger
Agreement and the status of negotiations. The Board then proceeded with a
detailed review of the terms of the proposed Merger Agreement.
On February 18, 1994, the Board of Directors of Grand Valley approved the
terms of the Merger Agreement. As part of such approval, the Board reviewed the
final terms of the Merger Agreement with management and legal counsel, and
Rauscher Pierce advised the Board that, in its opinion, the proposed Conversion
Number of 0.25 shares of ANGC Common Stock for each share of Grand Valley
Common Stock was fair to the shareholders of Grand Valley from a financial
point of view. Rauscher Pierce based its opinion on a detailed review of the
strategic objectives of the two companies and financial analyses of the values
of comparable companies and comparable transactions from a cash flow, net
income and book value basis, the relative contributions of the two companies to
the Merger and the acquisition premium represented by the Conversion Number.
See "--Opinion of Financial Advisor."
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The ANGC Board of Directors met with ANGC management on February 10, 1994. At
the ANGC meeting, senior management made a detailed presentation concerning all
material aspects of the proposed Merger and related transactions. Subsequently,
a draft Merger Agreement was circulated among the Board of Directors and a
resolution approving the Merger Agreement was adopted by unanimous written
consent of the directors dated February 18, 1994.
Following such approvals, on February 21, 1994, ANGC, ANGI and Grand Valley
executed the definitive Merger Agreement. Pursuant to the Merger Agreement,
ANGC and Grand Valley each had the right to conduct a due diligence review of
the other, and each was entitled to terminate the Merger Agreement if it were
dissatisfied with the results of its review. This review was completed on April
4, 1994.
REASONS FOR THE MERGER
ANGC/Grand Valley Historical Overview
ANGC and Grand Valley commenced their respective businesses near the end of
the era in which interstate natural gas pipelines served as both merchants and
transporters of natural gas. Faced with both an oversupply of natural gas and
the financial burden of long-term purchase obligations under high-priced gas
contracts, interstate pipelines reacted by implementing substantial
curtailments of gas purchases. In this same time period, the Federal Energy
Regulatory Commission ("FERC"), in response to market demands, promulgated
Order 436, and later, Order 500, the purpose of which was to deregulate the
natural gas industry, open up end user markets and force interstate pipelines
to provide transportation of natural gas on an "open-access" basis. This trend
culminated in FERC's issuance in April 1992 of Order 636, which was
subsequently implemented, commencing November 1993. Order 636 required
interstate natural gas pipelines to unbundle their services of gas gathering,
processing, storage, transportation and marketing such that customers could
choose and pay for only those individual services offered by the pipeline which
they desired to use. By so doing, interstate natural gas pipelines became the
interstate transportation open-access grid demanded by market forces and
promulgated by FERC thereby increasing competition in the gathering, supply,
storage, transportation and pricing of natural gas. As a further result,
instead of looking to their interconnecting interstate pipeline to perform such
services, local distribution companies and industrial end users of natural gas
have become increasingly responsible for obtaining their gas supplies from
various supply sources and arranging for the storage and transportation of the
supplies, while producers have likewise increasingly arranged for the
gathering, processing and marketing of gas production from multiple providers
of such services.
It is in this environment that both ANGC and Grand Valley began providing the
formerly bundled services of interstate natural gas pipelines to their
respective producer, end user and local distribution company customers. By
creating packages of services, from agency marketing, to gathering, processing,
storage and transportation, ANGC and Grand Valley have offered their respective
customers in their operating regions packaged services providing the customer
the option either to sell or to purchase gas supplies through a single entity.
While the post-Order 636 era places a premium on value added services, local
distribution company and end user customers are also concerned with their
supplier's ability to provide firm gas supply, coupled with the financial
resources and assets to guarantee such supply. As a result, Grand Valley
concluded that remaining competitive and attaining continued growth and market
penetration in the post-Order 636 era would require Grand Valley to combine
both physical assets and marketing expertise. Based upon this analysis, Grand
Valley management determined that its future marketing opportunities could be
enhanced by an increase in its asset and working capital base.
GRAND VALLEY REASONS FOR MERGER
The terms of the Merger Agreement were the result of arm's length negotiation
between Grand Valley, ANGC and their respective representatives. In the course
of reaching its decision to approve and adopt the
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Merger Agreement, the Board of Directors of Grand Valley consulted with
management of Grand Valley and its legal and financial advisors, and considered
the following factors:
(a) The current economic and competitive environment in the natural gas
marketing industry;
(b) The growth prospects of Grand Valley, including expectations
regarding future results of operations and acquisition and related
financing opportunities;
(c) The financial resources and future growth prospects which would
result from a combination of ANGC and Grand Valley and the enhanced
opportunities for operating efficiencies and marketing and asset synergies
expected to result from the Merger, and the respective contributions the
parties would bring to the combined entity;
(d) ANGC's significant system supply of natural gas, asset base and long-
term experience in natural gas gathering, processing, transmission and
marketing;
(e) The expectation that the Merger will be a tax-free reorganization to
Grand Valley shareholders for United States Federal income tax purposes;
(f) The opinion of Rauscher Pierce that the terms of the Merger are fair
to the shareholders of Grand Valley from a financial point of view;
(g) The opportunity for shareholders of Grand Valley to maintain a
continuing equity interest in the combined operations of ANGC and Grand
Valley; and
(h) The increase in market capitalization and liquidity for Grand Valley
shareholders afforded by the combination of ANGC and Grand Valley.
Changes in the natural gas industry, especially following the adoption of
Order 636, have resulted in increased competition in Grand Valley's business.
Management of Grand Valley believes that the combination of ANGC and Grand
Valley will provide the opportunity for continued growth and market penetration
in this increasingly competitive environment.
Management of Grand Valley also believes the combined financial strength of
ANGC and Grand Valley should enable the combined entity to better serve its
customers. ANGC and Grand Valley expect that Grand Valley's current requirement
to furnish letters of credit to guarantee performance with certain suppliers
and transporters can be replaced after the Merger with parent company
guaranties, thus reducing operating expenses and freeing borrowing capacity and
working capital for more productive uses. The composite financial strength will
also enable the combined entity to better serve its customers by developing and
implementing more advanced transportation and marketing networks, trading
activities and information management systems.
The pipeline and storage facility assets of the combined entity should
provide it enhanced access to a variety of markets, enabling it to participate
in the daily and seasonal market swings of natural gas demand on a regional
basis, and allowing the combined entity to enhance the value derived from its
supply and market relationships. In addition, the combined entity should be
able to more effectively utilize the national pipeline grid and market hub
system encouraged by Order 636 to assure its customers firm gas supplies at
competitive prices. This, in turn, will permit producer customers of the
combined entity greater opportunities to move their gas production to a
national market. The increased market access of the combined entity should also
afford Grand Valley's traditional sources of gas supply in Western Canada and
the Western Rockies expanded access to Midwest and East Coast markets.
The Board of Directors considered that the Merger Agreement did not provide
for an adjustment to the Conversion Number or for termination of the
transaction in the event of a market decline or a market increase in the price
of ANGC Common Stock. The Board noted that the Merger Agreement provides for
both parties to conduct extensive due diligence following the execution of the
Merger Agreement and to terminate the
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Merger Agreement if the results of such due diligence review were
unsatisfactory. The Merger Agreement also provides for termination of the
transaction in the event of a material adverse change in the financial
condition, results of operations, business or prospects of ANGC. In addition,
the Board believes that fluctuations in stock price due to general market
conditions will likely affect the price of both the ANGC Common Stock and Grand
Valley Common Stock and that the benefits of a strategic business combination
with ANGC should enhance shareholder value in the long term, independent of
short term price changes. On the basis of the preceding and after consultation
with Rauscher Pierce, the Grand Valley Board concluded that not having a market
out provision in the Merger Agreement was acceptable.
Management of Grand Valley noted that ANGC currently owns and operates a
significant complex of crude oil, natural gas liquids ("NGLs") and natural gas
gathering, processing/fractionation and transportation facilities situated in
major oil and natural gas-producing basins in the Rocky Mountain, Mid-Continent
and Gulf Coast regions of the United States. These facilities connect over
7,400 producing wells to approximately 8,000 miles of company-owned pipelines,
resulting in approximately 800 million cubic feet per day of connected system
supply.
Representatives of Rauscher Pierce were available at all meetings of the
Board of Directors of Grand Valley to answer questions regarding the Merger and
the factors used in rendering the fairness opinion. In addition to the
discussions with Rauscher Pierce described under "--Background of the Merger,"
the Board reviewed with Rauscher Pierce the strategic and financial
considerations for the Merger cited above. The Board also discussed with
Rauscher Pierce the basis for the issuance of the fairness opinion. See "--
Opinion of Financial Advisor."
Following the Merger, shareholders of Grand Valley will hold, in the
aggregate, approximately 10.9 percent of the outstanding ANGC Common Stock and
will continue to participate in any future growth of the combined operations.
In addition, the greater capitalization of the combined companies should afford
shareholders of Grand Valley greater liquidity in the shares of ANGC Common
Stock held by such shareholders subsequent to the Merger.
The Board of Directors of Grand Valley considered all of these factors taken
together in determining to recommend approval and adoption of the Merger
Agreement to the shareholders of Grand Valley and did not give different weight
to any particular factors in reaching its decision. In summary, Grand Valley
believes a merger with a partner such as ANGC, with a substantial asset base of
gathering systems, processing plants and fractionation facilities, coupled with
strong financial resources, access to credit markets and substantial system
supplies of natural gas would be in the best interests of the shareholders of
Grand Valley and its customers and employees.
ANGC REASONS FOR MERGER
In reaching its determination that the Merger Agreement is fair to, and in
the best interests of, ANGC and its shareholders, the ANGC Board of Directors
consulted with ANGC management and considered the following factors:
(a) ANGC's desire to enter the Western Rockies, California, Southwest,
Pacific Northwest, and Canadian natural gas markets, as well as to gain
access to gas supplies in Western Canada and the Western Rockies;
(b) The Board's review, based in part on a presentation by ANGC
management, of Grand Valley's business, operations, earnings, asset quality
and financial condition on a historical, prospective and pro forma basis;
the enhanced opportunities for both operating and financial efficiencies;
marketing and asset synergies expected to result from the Merger; the
enhanced opportunities for growth fostered by the Merger; and the
respective contributions the parties would bring the combined entity; and
(c) The expectation that the Merger will be tax-free for United States
Federal income tax purposes to ANGC and that the Merger will qualify to be
accounted for under the "pooling-of-interests" method of accounting and
hence will not give rise to goodwill.
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Changes in the natural gas industry, especially following the adoption of
Order 636, have resulted in increased competition in ANGC's business.
Management of ANGC believes that the combination of ANGC and Grand Valley will
provide the opportunity for continued growth and market penetration in this
increasingly competitive environment.
ANGC views the Merger from much the same business perspective as Grand
Valley. As enumerated above, the Merger provides ANGC with increased natural
gas supply, transportation and market access; asset synergies; and expanded
asset growth opportunities.
The Merger provides ANGC increased natural gas supply, transportation,
storage and market access through the personnel, customers and assets of Grand
Valley. ANGC has grown primarily through the construction, acquisition and
expansion of gas gathering and processing facilities in major oil and gas
producing areas. While it engages in the marketing of off-system gas, its off-
system gas marketing activities do not constitute a major portion of ANGC's net
margin. In addition, ANGC, while accessing markets in the Midwest and East
Coast, does not currently market gas in the Western Rockies, California, Canada
or the Pacific Northwest. The addition of Grand Valley's market focus in these
areas not only enhances ANGC's ability to market gas supplies to new customers,
but will also enable ANGC to serve large customers on a national, rather than a
regional, basis. Further, the agency marketing expertise of Grand Valley with
respect to both gas markets and producers will enable ANGC to develop and
expand its existing customer base.
The asset synergies obtained through the Merger would also enhance ANGC's
current marketing and transportation opportunities. The proximity of Grand
Valley's Richfield storage facility in Kansas to ANGC's Stanton gas gathering
system will enable ANGC to better serve its producer and end user customers by
creating a trading, transportation and storage hub in that region. Current
access of the Stanton System to the transportation facilities of Colorado
Interstate Gas Company and Panhandle Eastern Pipeline Company will be expanded
through the interconnection with the facilities of Kansas Power and Light
Company and Northern Natural Gas Company, thereby permitting greater market
access. In addition, Grand Valley's Burton Flats System will provide ANGC a
foothold in a new gas supply area in New Mexico.
Expanded asset growth opportunities also will become available to ANGC as a
result of Grand Valley's presence in new supply regions, including the Western
Rockies and Canada. Expansion opportunities which may not have been available
either to Grand Valley or to ANGC because of a lack of physical presence or a
lack of financial resources, could be exploited to the benefit of the combined
entity. The synergism of physical assets, marketing expertise and service
focus, coupled with access to both firm gas supplies and substantial financial
resources should enable the combined entity to take greater advantage of the
market opportunities presented by Order 636 and become a supplier/marketer of
natural gas on a national, rather than regional, basis.
Under the Delaware General Corporation Law ("DGCL"), the approval of ANGC's
stockholders is not required because ANGI, ANGC's subsidiary, and not ANGC, is
merging with Grand Valley.
RECOMMENDATION OF GRAND VALLEY'S BOARD OF DIRECTORS
For the reasons set forth under "--Background of the Merger" and "--Reasons
for the Merger," the Board of Directors of Grand Valley believes that the
Merger Agreement is fair to, and in the best interests of, the shareholders of
Grand Valley. At the meeting held on February 18, 1994, the Board of Grand
Valley unanimously voted to approve the Merger Agreement and recommended that
the shareholders of Grand Valley vote FOR the proposal to approve and adopt the
Merger Agreement.
OPINION OF FINANCIAL ADVISOR
Rauscher Pierce has acted as financial advisor to Grand Valley in connection
with the Merger Agreement and assisted Grand Valley in the negotiations with
respect thereto. Grand Valley's Board of
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Directors directed Rauscher Pierce, in their role as financial advisor, to
evaluate the fairness of the Merger Agreement to the shareholders of Grand
Valley from a financial point of view and, in such regard, to conduct such
investigations as Rauscher Pierce deemed appropriate for such purpose. No
limitations were placed by the Board of Directors or management of Grand Valley
with respect to the investigations made or the procedures followed by Rauscher
Pierce in preparing and rendering its opinion.
Rauscher Pierce is an investment banking firm with substantial energy
industry expertise and experience in transactions similar to the Merger and is
familiar with Grand Valley and its business. As part of their investment
banking business, Rauscher Pierce is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
Rauscher Pierce delivered their opinion to the Board of Directors of Grand
Valley at the Board meeting on February 18, 1994, to the effect that, as of
such date, the terms of the Merger Agreement are fair to the shareholders of
Grand Valley from a financial point of view. In arriving at this opinion,
Rauscher Pierce reviewed the Merger Agreement and certain publicly available
information concerning Grand Valley and ANGC. Rauscher Pierce also met with the
managements of Grand Valley and ANGC to discuss the business and prospects of
the two companies (as described above under "--Reasons for the Merger") and
considered certain long-term strategic benefits, both operational and
financial, that were described to them by the senior managements of Grand
Valley and ANGC. A copy of Rauscher Pierce's opinion is attached as Annex B and
should be read in its entirety by holders of Grand Valley Common Stock.
In rendering their opinion, Rauscher Pierce reviewed the terms of the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volume of the Grand Valley Common Stock and the ANGC Common
Stock; the respective companies' historical earnings, book value and cash flow
per share; the capitalization and financial condition of Grand Valley and ANGC;
the pro forma financial impact of the Merger on Grand Valley and ANGC,
including the relative ownership of the ANGC Common Stock after the Merger by
the current shareholders of Grand Valley and the current stockholders of ANGC;
and, to the extent publicly available, the terms of recent merger and
acquisition transactions involving comparable companies. In addition, Rauscher
Pierce reviewed the merger premiums paid in recent stock-for-stock acquisitions
of public companies generally, and energy industry companies in particular.
Rauscher Pierce also analyzed certain financial, stock market and other
publicly available information relating to the business of other public
companies whose operations they considered comparable to the operations of
Grand Valley and ANGC. In addition, Rauscher Pierce also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as they deemed relevant in arriving at their
opinion.
The following is a summary of the comparable companies, comparable
acquisitions, relative contribution and merger premium analyses performed by
Rauscher Pierce in connection with their opinion.
Comparable Companies Analysis. Using publicly available information, Rauscher
Pierce calculated multiples of certain financial criteria (including cash flow,
net income and book value) for 12 publicly-traded natural gas gathering,
transportation and marketing companies--American Oil & Gas Corp., Aquila Gas
Pipeline Corp., ANGC, Eastex Energy Inc., Hadson Corp., K N Energy, Inc.,
Mitchell Energy & Development Corp., Tejas Gas Corp., Tejas Power Corp.,
Trident NGL Holding, Inc., USX-Delhi Group Common Stock of USX Corporation and
Western Gas Resources, Inc. Rauscher Pierce noted that these 12 companies were
generally significantly larger and more asset-intensive than Grand Valley, and
that the larger companies with extensive networks of natural gas gathering and
processing assets generally traded at higher multiples than did smaller
companies within the comparable group. For the 12 companies, the highest,
average, and lowest multiples of cash flow (generally defined as net income
plus non-cash charges and deferred taxes) were 14.4x, 7.8x and 3.5x,
respectively. The highest, average and lowest multiples of net income were
43.2x, 23.0x and 10.5x. The highest, average and lowest multiples of book value
were 3.1x, 1.9x and 1.0x.
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Based upon an analysis of such information and upon Rauscher Pierce's
subjective professional judgement, it was Rauscher Pierce's belief that, with
respect to Grand Valley, the appropriate multiples for price to cash flow,
price to net income and price to book value were at or near the average
multiples for the 12 comparable companies. Rauscher Pierce then evaluated the
consideration to be received by Grand Valley shareholders pursuant to the
Merger Agreement within the context of the market valuations of the 12
comparable companies. On February 18, 1994, the last full trading day prior to
the public announcement of the execution and delivery of the Merger Agreement,
the closing sales price of the ANGC Common Stock was $34.75 per share on the
NYSE Composite Tape. Based upon such closing sales price and the Conversion
Number, Rauscher Pierce determined that each share of Grand Valley Common Stock
would be exchanged in the Merger for ANGC Common Stock having a market value of
$8.69 ("Implied Merger Value"). Rauscher Pierce then calculated the value per
share of the Grand Valley Common Stock that would result from multiplying Grand
Valley's cash flow and net income per share for the twelve months ended
November 30, 1993, and book value per share at November 30, 1993, by the
average valuation multiples for the 12 comparable companies ("Reference
Values"). Rauscher Pierce determined that the Reference Values for the Grand
Valley Common Stock on cash flow, net income and book value bases were $6.16,
$8.97, and $5.38 per share, respectively. Rauscher Pierce then applied their
professional judgment in comparing the Reference Values to the Implied Merger
Value. In doing so, Rauscher Pierce gave greatest weight to the Reference Value
based upon cash flow multiples, because Rauscher Pierce believe that natural
gas gathering, transportation and marketing companies are primarily valued on
the basis of cash flow.
Comparable Acquisitions Analysis. Rauscher Pierce conducted a comparable
acquisitions analysis whereby it examined the terms of recent acquisitions of
businesses and assets related to the natural gas gathering, transportation and
marketing industry. Rauscher Pierce reviewed the terms of 75 such transactions
which had either been completed in the preceding year, or which were pending at
the time Rauscher Pierce delivered their opinion. With respect to the
significant majority of these transactions, public disclosure regarding
purchase price and target financial results was insufficient to permit Rauscher
Pierce to draw conclusions regarding value. Sufficient data did exist with
respect to six transactions which Rauscher Pierce considered reasonably
comparable to the Merger: [Acquiror/Target (Parent Company)], Tejas Gas
Corp./Acadian Gas Group (MidCon Corp. and Texas Oil & Gas), Trident NGL
Holding, Inc./Oxy USA, Equitable Pipeline Co./Louisiana Intrastate Gas Corp.
(Arkla, Inc.), Western Gas Resources, Inc./Mountain Gas Resources, Inc., Tejas
Gas Corp./Texas and Louisiana Natural Gas Pipeline System (Exxon Company USA)
and Valero Energy Corp./Valero Natural Gas Partners, L.P. Rauscher Pierce noted
that the purchase prices paid in these six transactions were significantly
larger than the aggregate consideration to be paid in the Merger, and that the
target companies in these transactions owned and operated significant natural
gas gathering, processing and transportation assets. For these six
transactions, the highest, average and lowest purchase prices as a multiple of
cash flow were 17.2x, 10.5x and 4.5x. The highest, average and lowest purchase
prices as a multiple of net income were 71.2x, 27.2x and 10.1x. The highest,
average and lowest purchase prices as a multiple of book value were 4.7x, 2.6x
and 1.7x. Based upon an analysis of such information and upon Rauscher Pierce's
subjective professional judgment, it was Rauscher Pierce's belief that, with
respect to Grand Valley, the appropriate multiples for price to cash flow,
price to net income and price to book value were at or near the average
multiples for the six comparable transactions. Rauscher Pierce then calculated
the value per share of the Grand Valley Common Stock that would result from
multiplying Grand Valley's cash flow and net income per share for the twelve
months ended November 30, 1993, and book value per share at November 30, 1993,
by the average valuation multiples for the six comparable transactions
("Acquisition Reference Values"). Rauscher Pierce determined that the
Acquisition Reference Values for the Grand Valley Common Stock on cash flow,
net income and book value bases were $8.30, $10.61 and $7.36 per share,
respectively. Rauscher Pierce then applied its professional judgment in
comparing the Acquisition Reference Values to the Implied Merger Value of $8.69
per share of Grand Valley Common Stock.
Relative Contribution Analysis. Rauscher Pierce performed a relative
contribution analysis to examine the relationship between the percentage
ownership of ANGC that the Grand Valley shareholders would
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receive pursuant to the Merger, and the relative contribution of Grand Valley
to certain financial measures on a pro forma combined basis. Based upon the
Conversion Number, and the Grand Valley and ANGC shares outstanding at the
time, Rauscher Pierce determined that, pursuant to the Merger, the Grand Valley
shareholders would, in the aggregate, receive approximately 10.9 percent of the
shares of ANGC Common Stock to be outstanding following the Merger. Based upon
income statements for the years ended November 30, 1993 for Grand Valley and
December 31, 1993 for ANGC, Rauscher Pierce determined that Grand Valley's
contributions to the combined entity on a pro forma basis would have been 17.5
percent of revenues, 10.4 percent of gross profit, 9.0 percent operating cash
flow (EBITDA), 9.3 percent of operating income (EBIT) 11.2 percent of net
income, and 9.1 percent of cash flow. Based upon a review of balance sheets
dated November 30, 1993 for Grand Valley and December 31, 1993 for ANGC,
Rauscher Pierce calculated that Grand Valley's contributions to the combined
entity on a pro forma basis would be 11.6 percent of total assets and 7.8
percent of stockholder's equity. Rauscher Pierce also considered the relative
size, financial strength and diversification of Grand Valley and ANGC. Applying
its professional judgment, Rauscher Pierce concluded that the percentage
ownership of the combined entity to be received by the Grand Valley
shareholders is fair in relation to Grand Valley's contributions to the
combined entity.
Merger Premium Analysis. Rauscher Pierce performed a merger premium analysis
to evaluate the merger premium derived by multiplying the Conversion Number by
the closing stock price of ANGC on the last trading day prior to the
announcement of the Merger, and comparing the result to the trading price of
Grand Valley Common Stock four weeks prior to such announcement date. Rauscher
Pierce reviewed the terms of 95 stock-for-stock mergers involving non-financial
corporations in a wide range of industries having transaction values of $20
million to $1 billion and occurring within the past five years. The highest,
average and lowest merger premiums relative to the target's share price four
weeks prior to the announcement were 229.0 percent, 54.3 percent, and (36.3)
percent, respectively. Six of these transactions involved companies in the
energy industry and were judged to be most relevant by Rauscher Pierce. The
highest, average and lowest merger premiums for these six transactions were
47.0 percent, 21.4 percent and (36.3) percent. Rauscher Pierce applied their
professional judgment to determine a reference range of merger premiums of 20
percent to 40 percent as being appropriate for the Merger. Rauscher Pierce then
calculated that the merger premium for the Merger was 33.7 percent, and that
such premium was within the reference range.
In connection with their review, Rauscher Pierce did not independently verify
any of the foregoing information, and relied upon it being complete and
accurate in all material respects. In addition, Rauscher Pierce did not make an
independent evaluation or appraisal of the assets of Grand Valley or ANGC, nor
were they furnished with such appraisals. In rendering their opinion, Rauscher
Pierce assumed that in the course of obtaining necessary regulatory and
governmental approvals for the Merger, no restriction will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger.
Rauscher Pierce's opinion is based upon circumstances existing and disclosed to
them as of the date of such opinion.
Rauscher Pierce believes that their analyses must be considered as a whole,
and that selecting portions of such analyses and of the factors considered by
Rauscher Pierce, without considering all of such analyses and factors, could
create an incomplete view of the process underlying their opinion. The
preparation of fairness opinions is a complex process and is not necessarily
susceptible to partial analysis or summary description.
Rauscher Pierce confirmed its February 18, 1994 written opinion by delivery
of its written opinion dated as of the date hereof, that the terms of the
Merger Agreement are fair to the shareholders of Grand Valley from a financial
point of view. In rendering such confirmation, Rauscher Pierce performed
procedures to update certain of their analyses made in connection with their
earlier opinion and reviewed the assumptions on which such analyses were based
and the factors considered in connection therewith. Rauscher Pierce considered,
among other things, Grand Valley's and ANGC's recent financial performance and
recent market conditions and developments based on the foregoing. The full text
of the opinion of Rauscher Pierce dated as of the date hereof is attached as
Annex B and should be read in its entirety by the holders of Grand Valley
Common Stock. The text of this opinion is substantially identical to the
opinion dated February 18, 1994.
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Rauscher Pierce was selected to serve as the Board's financial advisor in
connection with its strategic planning activities on the basis of Rauscher
Pierce's experience with mergers and acquisitions in the energy industry
generally and the natural gas gathering, processing and marketing industry in
particular. Grand Valley paid Rauscher Pierce a financial advisory fee of
$75,000 upon the execution of their engagement letter and an additional
$300,000 at the time Rauscher Pierce delivered its fairness opinion to the
Board of Directors. Grand Valley also has agreed to reimburse Rauscher Pierce
for its reasonable out-of-pocket expenses not to exceed $25,000 and to
indemnify Rauscher Pierce and its controlling persons against certain
liabilities and expenses relating to or arising out of the consummation of the
Merger, including certain liabilities under U.S. Federal securities laws. If
the Merger is consummated, Rauscher Pierce will receive a fee of 1.25 percent
of the "transaction value," less the $375,000 in fees previously paid by Grand
Valley. The "transaction value" is defined as the value of the ANGC Common
Stock received by the holders of Grand Valley Common Stock (including option
holders) in the Merger as reflected in the average trading prices for the ANGC
Common Stock during the 10 trading days immediately following the Merger.
Rauscher Pierce in the normal course of its business may trade the securities
of ANGC and Grand Valley for its own account and for the accounts of its
customers and, accordingly, may hold a long or short position in such
securities at any time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Grand Valley Board of Directors with
respect to the Merger, Grand Valley shareholders should be aware that certain
directors and officers of Grand Valley have certain direct or indirect
interests separate from their interests as holders of Grand Valley Common
Stock, including those referred to herein.
After the Effective Time, the officers and directors of ANGI will be the
directors of the corporation surviving the Merger. After the Effective Time,
Jeff J. Fishman, Michael D. Fowler and Steven D. Bench, Grand Valley's
executive officers, will be employees of ANGC and will be covered by ANGC's
benefit plans. As a condition to consummation of the Merger, Messrs. Fishman,
Fowler and Bench have agreed to terminate their employment agreements with
Grand Valley as of the Effective Time.
Messrs. Fishman, Bench and Fowler hold options to purchase 201,900 shares of
Grand Valley Common Stock pursuant to Grand Valley's 1993 Stock Option Plan. It
is a condition to ANGC's consummation of the Merger that all options granted
under the 1992 Stock Option Plan be exercised prior to the Effective Time or
terminated and that all options granted under the 1993 Stock Option Plan be
cancelled for no consideration. Messrs. Fishman, Bench and Fowler have
consented to the cancellation of their options granted under the 1993 Stock
Option Plan as of the Effective Time. Pursuant to the terms of the 1992 Stock
Option Plan, all options granted under such plan will become exercisable as a
result of the change in control of Grand Valley without regard to vesting
schedules.
ANGC has agreed to grant options under the Associated Natural Gas Corporation
Equity Incentive Plan, effective on the date of the Merger, to each holder of
options under the Grand Valley 1992 Stock Option Plan so that such holders will
receive options to purchase such number of shares of ANGC Common Stock as is at
least equal to the number of shares of Grand Valley Common Stock that they held
options to purchase on February 21, 1994, multiplied by the Conversion Number,
with an exercise price equal to the closing price for the ANGC Common Stock on
the NYSE on the date on which the Effective Time occurs. The options under the
1993 Stock Option Plan that will be cancelled will not be similarly replaced.
David Presley, an officer and director of Grand Valley until the termination
of his employment on April 22, 1994, has exercised options to purchase 21,780
shares of Grand Valley Common Stock. The vesting of these options were
accelerated in connection with the termination of Mr. Presley's employment. Mr.
Presley is also a participant in an incentive stock award program relating to
Grand Valley Common Stock. Under such program, Mr. Presley and certain other
persons who were employees or consultants to Centennial
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Natural Gas Corporation when it was acquired by Grand Valley were entitled to
grants of up to 34,081 additional shares of Grand Valley Common Stock, if
certain investments were made by Grand Valley and if certain financial tests
related to those investments were satisfied. In connection with the Merger,
Grand Valley has agreed with such persons to grant 17,423 shares of Grand
Valley Common Stock at the Effective Time and to terminate the program. Mr.
Presley will receive 7,066 of such shares.
The Merger Agreement provides for the indemnification of the officers and
directors of Grand Valley and its subsidiaries against all costs and expenses
in connection with any claim based in whole or in part on or arising in whole
or in part out of the fact that such person is or was a director or officer of
Grand Valley, whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, at or
after the Effective Time, as well as all liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to, the Merger
Agreement or the transactions contemplated thereby. See "The Merger Agreement--
Indemnification."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned
upon receipt of letters from KPMG Peat Marwick, with respect to ANGC, and from
Arthur Andersen & Co., with respect to Grand Valley, to the effect that the
Merger will qualify as a pooling of interests for accounting and financial
reporting purposes under APB 16. See "The Merger Agreement--Conditions to Each
Party's Obligations." Under this method of accounting, the recorded assets and
liabilities of ANGC and Grand Valley will be carried forward to the combined
company at their recorded amounts, and income of the combined company will
include income of ANGC and Grand Valley for the entire fiscal year in which the
Merger occurs. Unaudited pro forma combined financial statements giving effect
to the Merger are presented under "Condensed Pro Forma Combined Financial
Information."
The Merger Agreement provides that it is a condition to the obligations of
ANGC and ANGI that certain affiliates of ANGC and Grand Valley will execute a
written agreement at the Effective Time to the effect that they have not
transferred shares of ANGC Common Stock or Grand Valley Common Stock within the
preceding 30 days and will not transfer any shares of ANGC Common Stock or
Grand Valley Common Stock prior to the date that ANGC publishes financial
statements that reflect 30 days of consolidated operations of ANGC and Grand
Valley (which agreements relate to the ability of ANGC to account for the
Merger as a pooling of interests).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the Merger to the shareholders of Grand Valley and is based
upon current provisions of the Code, existing regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change. No ruling from the Internal Revenue Service ("IRS") has been or will be
requested in connection with the Merger.
Subject to the limitations described below, it is the opinion of Holme
Roberts & Owen LLC, counsel to ANGC, and Vinson & Elkins L.L.P., counsel to
Grand Valley, that for U.S. federal income tax purposes, under current law,
assuming that the Merger and related transactions will take place as described
in the Merger Agreement:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and ANGC, Grand Valley and ANGI will each be a
party to the reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by ANGC, Grand Valley or ANGI as
a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of Grand
Valley upon their receipt of ANGC Common Stock in exchange for their Grand
Valley Common Stock;
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(iv) the aggregate basis of the shares of ANGC Common Stock received in
the Merger (including any fractional shares deemed received) by a
shareholder of Grand Valley will equal such shareholder's aggregate basis
in the shares of Grand Valley Common Stock surrendered in the Merger;
(v) the holding period of the shares of ANGC Common Stock received by a
shareholder of Grand Valley in the Merger will include the holding period
of the Grand Valley Common Stock surrendered in exchange therefor, provided
such shares of Grand Valley Common Stock are held as capital assets at the
Effective Time; and
(vi) cash payments in lieu of fractional shares will be treated as if
fractional shares of ANGC Common Stock had been received in the Merger and
then redeemed by ANGC. Such redemption should qualify as a distribution in
full payment in exchange for the fractional share rather than a
distribution of a dividend. Accordingly, a Grand Valley shareholder
receiving cash in lieu of a fractional share will recognize gain or loss
upon such payment equal to the difference, if any, between such
shareholder's basis in the fractional share (as described in paragraph (iv)
above) and the amount of cash received. Such gain or loss will be capital
gain or loss if the ANGC Common Stock is held as a capital asset at the
Effective Time.
In rendering the foregoing opinions, such counsel have relied upon
representations regarding the existence of certain facts by ANGC and Grand
Valley set forth in their respective representation letters to such counsel
dated on or about the date of this Proxy Statement/Prospectus. Consummation of
the Merger is conditioned upon the delivery of opinions substantially similar
to the opinions described above by Holme Roberts & Owen LLC to ANGC and by
Vinson & Elkins L.L.P. to Grand Valley prior to the Effective Time. Delivery of
such opinions is conditioned upon the receipt by such counsel of representation
letters confirming as of the Effective Time the representations made in
connection with the Proxy Statement/Prospectus.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS ALL U.S. FEDERAL INCOME TAX MATTERS THAT MAY BE RELEVANT TO
PARTICULAR SHAREHOLDERS AND IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX
ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS
OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT
ADMINISTRATIVE RULINGS AND COURT DECISIONS. THE OPINIONS OF COUNSEL DESCRIBED
ABOVE ARE NOT BINDING UPON THE INTERNAL REVENUE SERVICE, AND NO RULINGS OF THE
INTERNAL REVENUE SERVICE WILL BE SOUGHT OR OBTAINED. THERE IS NO ASSURANCE THAT
THE INTERNAL REVENUE SERVICE WILL AGREE WITH THE OPINIONS DESCRIBED ABOVE. ALL
OF THE FOREGOING IS SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. THIS DISCUSSION DOES NOT APPLY TO
FOREIGN SHAREHOLDERS, SHAREHOLDERS WHO ACQUIRED THEIR SHARES AS COMPENSATION OR
WHO DO NOT HOLD THEIR SHARES AS A CAPITAL ASSET.
EACH GRAND VALLEY SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. ANGC and Grand
Valley each filed notification and report forms under the HSR Act with the FTC
and the Antitrust Division on April 27, 1994. The required waiting period under
the HSR Act is expected to expire on June 9, 1994. At any time before or after
consummation of the Merger, the Antitrust Division or the FTC could take such
action under the
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antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of ANGC or Grand Valley. At any time before
or after the Effective Time, and notwithstanding that the HSR Act waiting
period has expired, any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest. Such action could
include seeking to enjoin the consummation of the Merger or seeking divestiture
of Grand Valley or businesses of ANGC or Grand Valley. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
Based on information available to them, ANGC and Grand Valley believe that
the Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, ANGC and Grand Valley would prevail or would not be required to accept
certain conditions, which might include certain divestitures in order to
consummate the Merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of ANGC Common Stock received by Grand Valley shareholders in the
Merger will be freely transferable, except that shares of ANGC Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Grand Valley prior to the Merger may be resold by
them only in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Grand Valley
generally include individuals or entities that control, are controlled by, or
are under common control with, such party and may include certain officers and
directors of such party, as well as principal shareholders of such party. The
obligations of ANGC and ANGI to consummate the Merger are conditioned upon each
of Grand Valley's affiliates executing a written agreement to the effect that
such person will not offer or sell or otherwise dispose of any of the shares of
ANGC Common Stock issued to such person in or pursuant to the Merger in
violation of the Securities Act or the rules and regulations promulgated by the
Commission thereunder.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of ANGC Common Stock to be
issued pursuant to the Merger Agreement and required to be reserved for
issuance pursuant to stock options to be granted in connection with the Merger
be authorized for listing on the NYSE, subject to official notice of issuance.
NO DISSENTERS' RIGHTS
Holders of Grand Valley Common Stock are not entitled to dissenters' rights
under the URBCA in connection with the Merger. The URBCA does not provide for
dissenters' rights where the merging corporation's stock and the stock to be
received in the merger is held by more than 2,000 persons or is traded on
NASDAQ or a national exchange.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached, without exhibits, as Annex A to this
Proxy Statement/Prospectus and is incorporated herein by reference. Such
summary is qualified in its entirety by reference to the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following the adoption of the Merger
Agreement by the shareholders of Grand Valley and the satisfaction or waiver of
the other conditions to the Merger, Grand Valley will be merged with and into
ANGI, with ANGI continuing as the surviving corporation.
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If the Merger Agreement is approved and adopted by the shareholders of Grand
Valley and the other conditions to the Merger are satisfied or waived, the
Merger will become effective at the Effective Time.
Upon consummation of the Merger, pursuant to the Merger Agreement, each
issued and outstanding share of Grand Valley Common Stock will be converted
into the right to receive 0.25 shares of ANGC Common Stock. Based upon the
capitalization of Grand Valley and ANGC as of the date hereof and the
Conversion Number, the shareholders of Grand Valley immediately prior to the
consummation of the Merger will own approximately 10.9 percent of the
outstanding shares of ANGC Common Stock immediately following consummation of
the Merger. If any holder of shares of ANGC Common Stock would be entitled to
receive a number of shares of ANGC Common Stock that includes a fraction, then,
in lieu of a fractional share, such holder will be entitled to receive cash.
For these purposes, ANGC Common Stock will be valued at a five day average of
the closing prices of ANGC Common Stock as reported by the NYSE Composite Tape,
commencing on the fifth business day preceding the Effective Time.
SURRENDER OF SHARE CERTIFICATES
After the Effective Time, each certificate evidencing Grand Valley Common
Stock, until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive the number of shares of ANGC Common Stock
which the holder of such certificate is entitled to receive in the Merger and
the right to receive any cash payment in lieu of a fractional share of ANGC
Common Stock. The holder of such unexchanged certificate will not be entitled
to receive any dividends or other distributions payable by ANGC until the
certificate is surrendered. Subject to applicable laws, such dividends and
distributions, together with any cash payment in lieu of a fractional share of
ANGC Common Stock, will be paid, without interest.
Promptly after the Effective Time, transmittal forms will be mailed to each
holder of record of Grand Valley Common Stock to be used in forwarding his or
her certificates evidencing such shares for surrender and exchange for certifi-
cates evidencing the shares of ANGC Common Stock to which he or she has become
entitled and, if applicable, cash in lieu of a fractional share of ANGC Common
Stock. After receipt of such transmittal form, each holder of certificates for-
merly representing Grand Valley Common Stock should surrender such certificates
to ANGC, and each such holder will receive in exchange therefor certificates
evidencing the whole number of shares of ANGC Common Stock to which he or she
is entitled and any cash which may be payable in lieu of a fractional share of
ANGC Common Stock. Such transmittal forms will be accompanied by instructions
specifying other details of the exchange. GRAND VALLEY SHAREHOLDERS SHOULD NOT
SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of each
party relating to, among other things, their respective businesses and
financial condition, the accuracy of their various filings with the Commission,
the satisfaction of certain legal requirements for the Merger and the existence
of certain litigation matters. The representations and warranties of each of
the parties to the Merger Agreement will expire upon consummation of the
Merger.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, each party has agreed that, during the
period from the date of the Merger Agreement until the Effective Time, except
as permitted by the Merger Agreement or as otherwise consented to in writing by
the other party: (a) it will carry on its business in the ordinary course
consistent with prior practice; (b) it will not declare or pay any dividends
(other than ANGC's regular quarterly cash dividends) on or make other
distributions in respect of or repurchase any of its capital stock, and will
not effect certain other changes in its capitalization; (c) it will not amend
its articles of incorporation or its by-laws; (d) it will not take any action
that would or is reasonably likely to result in any of the conditions to the
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Merger not being satisfied; and (e) it will confer with the other party and
report on operational matters, advise the other party of material adverse
events and provide the other party with copies of all governmental filings.
Grand Valley has agreed that, during the period from the date of the Merger
Agreement until the Effective Time, except as permitted by the Merger
Agreement, or as otherwise consented to in writing by ANGC, (a) Grand Valley
will not issue capital stock, rights, warrants, calls, subscriptions, options
or convertible or similar securities, subject to certain exceptions; (b) except
with the consent of ANGC, Grand Valley will not engage in acquisitions other
than in the ordinary course of business; (c) subject to certain exceptions,
Grand Valley will not sell, lease, license, encumber or otherwise dispose of
material assets; (d) Grand Valley will not incur indebtedness for money
borrowed (or guarantees thereof) other than in the ordinary course of business
consistent with past practice; (e) Grand Valley will not (1) enter into, adopt,
amend (except as provided in the Merger Agreement and as may be required by
law) or terminate any employee benefit plans or any agreement, arrangement,
plan or policy, (2) make any increases in compensation, except in the ordinary
course of business consistent with past practice, or (3) pay any benefit not
required to be paid; (f) Grand Valley will file all tax returns and pay all
required taxes; and (g) Grand Valley will use reasonable efforts to (1) cause
the termination of its Employment Agreements with Jeff J. Fishman, Michael D.
Fowler, Steven D. Bench and David Presley, (2) amend certain option and
incentive stock award agreements to provide that they shall be terminated at
the Effective Time and to reduce the number of possible incentive stock awards
from 34,081 shares of Grand Valley Common Stock to no more than 18,000 shares,
and (3) cause the rescission of all options awarded under Grand Valley's 1993
Stock Option Plan.
ANGC has agreed that (a) it will use reasonable efforts to cause the shares
of ANGC Common Stock to be issued in the Merger and upon conversion of the
Convertible Notes after the Merger to be approved for listing on the NYSE, and
(b) it will provide officers' and directors' liability insurance continuation
coverage or comparable alternative coverage for five years after the Merger.
ANGC has agreed following the Merger to grant options under the Associated
Natural Gas Corporation Equity Incentive Plan to each holder of options under
the Grand Valley 1992 Stock Option Plan so that such holders receive options to
purchase such number of shares of ANGC Common Stock as is at least equal to the
number of shares of Grand Valley Common Stock that they held options to
purchase on February 21, 1994, multiplied by the Conversion Number, with an
exercise price equal to the closing price for the ANGC Common Stock on the NYSE
on the date on which the Effective Time occurs.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides, subject to certain exceptions, that Grand
Valley and its subsidiaries will not authorize or knowingly permit any of their
respective officers, directors, employees, representatives and agents to
solicit or encourage (including by way of furnishing information) any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any merger, sale of substantial assets, tender offer, sale of
shares of capital stock or similar business combination transaction involving
Grand Valley or its subsidiaries, provided that Grand Valley will not be in
breach of the foregoing if Grand Valley receives a proposal for such a
transaction and, to the extent necessary to comply with law, or fiduciary
obligations, Grand Valley and its representatives furnish information or take
other action to facilitate such proposal. The Merger Agreement provides that
Grand Valley shall promptly notify ANGC (orally and in writing) of any such
proposals or inquiries.
TERMINATION FEE
In the event that (i) either ANGC or Grand Valley terminates the Merger
Agreement following a failure of the shareholders of Grand Valley to adopt the
Merger Agreement, (ii) prior to the time of the Special Meeting, there shall
have been a proposal of a third party to acquire Grand Valley, and (iii) at the
time of the Special Meeting, Grand Valley's Board of Directors shall have
withdrawn its recommendation to the Grand Valley shareholders, then Grand
Valley shall pay ANGC $3,000,000 for its lost opportunity costs, for its out-
of-pocket costs and expenses (including fees of advisors, accountants and legal
counsel) and as liquidated damages and not as a penalty.
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INDEMNIFICATION
The Merger Agreement provides that from and after the Effective Time, ANGC
and ANGI will indemnify, defend and hold harmless each person who was as of the
date of the Merger Agreement or has been at any time prior to the date thereof,
or who becomes prior to the Effective Time, an officer, director or employee of
Grand Valley or ANGC or any of their subsidiaries against all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall
not be unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on, or arising in whole
or in part out of, the fact that such person is or was a director, officer or
employee of Grand Valley or ANGC or any of their subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining to
the Merger Agreement or the transactions contemplated thereby, in each case to
the full extent a corporation is permitted under the law of its state of
incorporation to indemnify its own directors, officers or employees.
CONDITIONS TO EACH PARTY'S OBLIGATIONS
The respective obligations of ANGC and Grand Valley to effect the Merger are
subject to the following conditions, among others: (a) the Merger Agreement
shall have been adopted by the shareholders of Grand Valley; (b) the shares of
ANGC Common Stock issuable and reserved for issuance in connection with the
Merger shall have been authorized for listing on the NYSE upon official notice
of issuance; (c) the receipt of all required governmental authorizations,
consents, orders or approvals; (d) the Registration Statement shall have become
effective and shall not be the subject of a stop order or proceedings seeking a
stop order; (e) no temporary restraining order, preliminary or permanent
injunction or other order shall be in effect that prevents the consummation of
the Merger; (f) the delivery of certain opinions with respect to tax (see "The
Merger--Certain Federal Income Tax Consequences") and legal matters; and (g)
the confirmation of the letters of KPMG Peat Marwick and Arthur Andersen & Co.
previously received with respect to qualification of the Merger as a pooling of
interests and letters from each party's affiliates consenting to certain
restrictions on transfers of ANGC Common Stock (see "The Merger--Accounting
Treatment").
The obligations of ANGC to effect the Merger are subject to the following
additional conditions: (a) the accuracy in all material respects of the
representations and warranties of Grand Valley set forth in the Merger
Agreement; (b) the performance in all material respects of all obligations of
Grand Valley required to be performed under the Merger Agreement; (c) the
receipt by Grand Valley of all necessary consents of third parties to
consummate the Merger; (d) the Board of Directors of Grand Valley not having
amended, modified, rescinded or repealed the resolutions adopted by such Board
in connection with the Merger and not having adopted any other resolutions
inconsistent therewith; (e) no material adverse change in the financial
condition, results of operations, business or prospects of Grand Valley and its
subsidiaries and its interests in certain partnerships, taken as a whole; (f)
all Grand Valley stock options outstanding (permitting the purchase of 233,823
shares of Grand Valley Common Stock) having been exercised or terminated and
Grand Valley not having awarded more than 18,000 shares of stock under its
incentive stock award agreements, and such agreements having been terminated;
and (g) Grand Valley having terminated its Employment Agreements with Jeff J.
Fishman, Michael D. Fowler, Steven D. Bench and David Presley.
The obligations of Grand Valley under the Merger Agreement are subject to the
following conditions: (a) the accuracy in all material respects of the
representations and warranties of ANGC set forth in the Merger Agreement; (b)
the performance in all material respects of all obligations of ANGC required to
be performed under the Merger Agreement; (c) ANGC's Board of Directors not
having recommended acceptance of a tender offer for the ANGC Common Stock or
approved of a plan to transfer more than 50 percent of the ANGC Common Stock or
to sell all or substantially all of ANGC's assets; (d) the Boards of Directors
of ANGC and ANGI not having amended, modified, rescinded or repealed the
resolutions adopted by such Boards in connection with the Merger and not having
adopted any other resolutions inconsistent therewith; (e) no material adverse
change in the financial condition, results of operations, business or
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prospects of ANGC and its subsidiaries, taken as a whole; and (f) Grand Valley
shall have received the Financial Advisor Opinion, which opinion shall not have
been withdrawn.
BENEFIT PLANS
ANGC will provide after the Effective Time for Grand Valley employees who are
covered by Grand Valley's benefit plans the same benefits that ANGC provides to
its employees. Present employees of Grand Valley will be credited for their
service with Grand Valley for purposes of eligibility and vesting in the plans
provided by ANGC. In addition, the employees of Grand Valley will not be
subject to any exclusions for any pre-existing conditions under ANGC's medical
benefit plan, and credit will be received for any deductibles or out-of-pocket
amounts previously paid.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of Grand Valley: (a)
by mutual consent of ANGC and Grand Valley; (b) by either ANGC or Grand Valley
if (i) there has been a material breach of any representation, warranty,
covenant or agreement on the part of the other party set forth in the Merger
Agreement which breach has not been cured or (ii) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and non-appealable; (c) by either party
if the Merger shall not have been consummated before July 31, 1994; or (d) by
either party if the shareholders of Grand Valley shall not have approved the
Merger.
In the event of any termination of the Merger Agreement by either ANGC or
Grand Valley as provided above, the Merger Agreement will become void and there
will be no liability or obligation on the part of ANGC, ANGI or Grand Valley or
their respective officers or directors (other than under certain specified
provisions of the Merger Agreement and except as set forth under "--Termination
Fee") except to the extent that such termination results from the willful
breach by a party of any of its representations, warranties, covenants or
agreement set forth in the Merger Agreement. The Merger Agreement further
provides that should any court or other competent authority hold any provision
of the Merger Agreement to be null, void or unenforceable, or order any party
to take any action inconsistent with the Merger Agreement or not take any
action required therein, the other party shall not be entitled to specific
performance of such provision or part of the Merger Agreement or to any other
remedy, including but not limited to money damages for breach of the Merger
Agreement or of any other provision of the Merger Agreement or parts thereof as
a result of such holding or order.
EXPENSES
Except as set forth under "--Termination Fee," whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such expense, except that expenses incurred in connection with
printing and mailing this Proxy Statement/Prospectus shall be shared equally by
ANGC and Grand Valley.
AMENDMENT AND WAIVER
Subject to applicable law, the Merger Agreement may be amended by action
taken or authorized by the respective Boards of Directors of ANGC and Grand
Valley at any time before or after its adoption by the shareholders of Grand
Valley, but after any such adoption, no amendment may be made which by law
requires further action by shareholders without such further action. At any
time before the Effective Time, the parties may, to the extent legally allowed
(i) extend the time for performance of any obligations of the Merger Agreement,
(ii) waive inaccuracies in the representations and warranties contained
therein, or other document delivered pursuant to the Merger Agreement and (iii)
waive compliance with any agreements or conditions contained in the Merger
Agreement.
33
<PAGE>
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
On February 21, 1994, ANGC and Grand Valley entered into an agreement that
provides for the merger of Grand Valley with a subsidiary of ANGC. Under the
terms of the Merger Agreement, Grand Valley shareholders will receive 0.25
shares of ANGC Common Stock in exchange for each of their shares of Grand
Valley Common Stock. The business combination is to be accounted for as a
pooling of interests. ANGC's fiscal year ends September 30 and Grand Valley's
fiscal year ends May 31.
The following unaudited condensed pro forma combined balance sheet as of
March 31, 1994 assumes that the Merger occurred as of that date and reflects
the combination of the historical balance sheet of ANGC as of March 31, 1994
with the historical balance sheet of Grand Valley as of February 28, 1994, with
pro forma adjustments to give effect to the issuance of 1,584,106 ANGC shares
in exchange for 6,336,422 shares of Grand Valley Common Stock outstanding as of
that date and the subsequent retirement of the Grand Valley Common Stock and
235,098 shares held in treasury.
The following unaudited condensed pro forma combined statements of operations
for the six months ended March 31, 1994 and for the years ended September 30,
1993, 1992 and 1991 assume that the Merger occurred as of the respective dates
presented, and combines the historical results of ANGC for the six months ended
March 31, 1994 and the years ended September 30, 1993, 1992 and 1991 with the
historical results of operations of Grand Valley for the six months ended
February 28, 1994 and the years ended May 31, 1993, 1992 and 1991,
respectively. Grand Valley's historical statement of income has not been
brought up to August 31, 1993, 1992 and 1991 as the effect on the condensed pro
forma combined statement of operations for the years ended September 30, 1993,
1992 and 1991 would not be material. In addition, this presentation of the pro
forma balance sheet as of March 31, 1994 and the pro forma results of
operations for the six months ended March 31, 1994 and for the years ended
September 30, 1993, 1992 and 1991 conforms to the presentation that will be
reported subsequent to the Merger.
The pro forma results of operations are not necessarily indicative of the
results of operations that would have been obtained if the Merger had occurred
as of the beginning of the periods presented nor are they indicative of future
operating results of the combined companies. These unaudited condensed pro
forma combined financial statements should be read in conjunction with the
historical financial statements and related notes of ANGC and Grand Valley.
34
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ANGC GRAND VALLEY PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
MARCH 31, FEBRUARY 28, ------------------- COMBINED
1994 1994 DEBIT CREDIT ANGC
------------ ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 53,799,849 12,905,226 66,705,075
Accounts receivable,
net of allowance..... 160,800,486 51,005,972 211,806,458
Natural gas, crude oil
and petroleum product
inventories.......... 15,304,811 31,167 15,335,978
Notes receivable...... 3,403,193 268,938 3,672,131
Income taxes
receivable........... 364,913 470,716 835,629
Other................. 714,637 1,271,269 1,985,906
------------ ---------- --------- --------- -----------
Total current
assets............. 234,387,889 65,953,288 300,341,177
------------ ---------- --------- --------- -----------
Property, plant and
equipment:
Natural gas processing
and storage
facilities........... 92,740,148 5,295,146 98,035,294
Natural gas and crude
oil pipelines........ 403,971,872 18,129,242 422,101,114
Construction in
progress............. 9,651,527 1,053,123 10,704,650
Other equipment....... 20,762,268 1,405,042 22,167,310
Developed oil and gas
properties........... -- 2,134,232 2,134,232
------------ ---------- --------- --------- -----------
527,125,815 28,016,785 555,142,600
Less accumulated
Depreciation,
depletion and
amortization......... 104,626,457 4,355,313 108,981,770
------------ ---------- --------- --------- -----------
Net property, plant
and equipment...... 422,499,358 23,661,472 446,160,830
------------ ---------- --------- --------- -----------
Other assets:
Goodwill, net......... 25,373,537 3,210,348 28,583,885
Gas contracts and
other intangibles.... 8,645,362 375,000 9,020,362
Base gas for storage.. -- 3,835,429 3,835,429
Other................. 2,590,122 1,328,176 3,918,298
------------ ---------- --------- --------- -----------
Total other assets.. 36,609,021 8,748,953 45,357,974
------------ ---------- --------- --------- -----------
$693,496,268 98,363,713 791,859,981
============ ========== ========= ========= ===========
</TABLE>
Continued
35
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET--CONTINUED
<TABLE>
<CAPTION>
ANGC GRAND VALLEY PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
MARCH 31, FEBRUARY 28, ------------------- COMBINED
1994 1994 DEBIT CREDIT ANGC
------------ ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade................. $183,500,663 56,618,204 240,118,867
Other................. 3,224,305 3,161,388 6,385,693
------------ ---------- -----------
186,724,968 59,779,592 246,504,560
Outstanding checks in
excess of bank
balances.............. 29,280,542 -- 29,280,542
Accrued interest
expense............... 4,599,779 187,500 4,787,279
Dividends payable...... 403,506 -- 403,506
Current portion of
long-term debt........ 4,000,000 -- 4,000,000
------------ ---------- -----------
Total current
liabilities........ 225,008,795 59,967,092 284,975,887
------------ ---------- -----------
Long-term debt.......... 209,000,000 10,000,000 219,000,000
------------ ---------- -----------
Deferred income taxes... 41,382,000 254,389 41,636,389
------------ ---------- -----------
Unearned revenue........ -- 1,109,472 1,109,472
------------ ---------- -----------
Minority interest....... -- 7,573,377 7,573,377
------------ ---------- -----------
Stockholders' equity:
Common stock.......... 672,510 82,144 82,144 79,205 751,715
Additional paid-in
capital.............. 163,488,177 5,860,684 2,115,781 167,233,080
Unamortized restricted
stock compensation... (1,317,468) (297,988) (1,615,456)
Retained earnings..... 55,262,254 15,933,263 71,195,517
Treasury stock........ -- (2,118,720) 2,118,720 --
------------ ---------- --------- --------- -----------
Total stockholders'
equity............. 218,105,473 19,459,383 2,197,925 2,197,925 237,564,856
------------ ---------- --------- --------- -----------
$693,496,268 98,363,713 2,197,925 2,197,925 791,859,981
============ ========== ========= ========= ===========
</TABLE>
See Accompanying Notes to the Condensed Pro Forma Combined Financial Statements
36
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ANGC GRAND VALLEY
HISTORICAL HISTORICAL
SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA
MARCH 31, FEBRUARY 28, COMBINED
1994 1994 ANGC
------------ ------------ -------------
<S> <C> <C> <C>
Operating revenue:
Natural gas and petroleum product
sales............................. $855,157,439 197,532,830 1,052,690,269
Transportation and agency fees..... 7,816,941 1,393,854 9,210,795
Other.............................. 7,018,446 295,649 7,314,095
------------ ----------- -------------
869,992,826 199,222,333 1,069,215,159
------------ ----------- -------------
Operating expenses:
Natural gas and petroleum products
purchases......................... 799,786,999 188,386,196 988,173,195
Operations......................... 20,715,546 1,371,252 22,086,798
General and administrative......... 9,961,803 3,873,674 13,835,477
Depreciation, depletion and
amortization...................... 13,558,868 1,455,620 15,014,488
------------ ----------- -------------
844,023,216 195,086,742 1,039,109,958
------------ ----------- -------------
Income from operations........... 25,969,610 4,135,591 30,105,201
Other income (expense):
Interest expense................... (7,217,930) (474,479) (7,692,409)
Interest income.................... 336,689 188,770 525,459
Other, net......................... 18,764 1,248 20,012
------------ ----------- -------------
(6,862,477) (284,461) (7,146,938)
------------ ----------- -------------
Earnings before income taxes and
minority interest............... 19,107,133 3,851,130 22,958,263
Income tax expense:
Current............................ 4,493,000 1,246,682 5,739,682
Deferred........................... 3,557,000 163,400 3,720,400
------------ ----------- -------------
8,050,000 1,410,082 9,460,082
------------ ----------- -------------
Earnings before minority interest.... 11,057,133 2,441,048 13,498,181
Minority interest................... -- 250,479 250,479
------------ ----------- -------------
Net earnings..................... $ 11,057,133 2,190,569 13,247,702
============ =========== =============
Earnings per common share............ $0.83 0.34 0.88
===== ==== ====
Weighted average common shares
outstanding......................... 13,379,647 6,373,693 14,973,070
============ =========== =============
</TABLE>
See Accompanying Notes to the Condensed Pro Forma Combined Financial Statements
37
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
GRAND
ANGC VALLEY
HISTORICAL HISTORICAL
YEAR ENDED YEAR ENDED PRO FORMA
SEPTEMBER 30, MAY 31, COMBINED
1993 1993 ANGC
-------------- ----------- -------------
<S> <C> <C> <C>
Operating revenue:
Natural gas and petroleum product
sales........................... $1,448,341,017 320,546,161 1,768,887,178
Transportation and agency fees... 10,270,862 1,866,081 12,136,943
Other............................ 6,710,841 1,114,578 7,825,419
-------------- ----------- -------------
1,465,322,720 323,526,820 1,788,849,540
-------------- ----------- -------------
Operating expenses:
Natural gas and petroleum
products purchases.............. 1,347,819,948 309,156,214 1,656,976,162
Operations....................... 33,424,262 838,672 34,262,934
General and administrative....... 15,661,710 6,463,578 22,125,288
Depreciation, depletion and
amortization.................... 21,925,305 1,659,851 23,585,156
-------------- ----------- -------------
1,418,831,225 318,118,315 1,736,949,540
-------------- ----------- -------------
Income from operations......... 46,491,495 5,408,505 51,900,000
Other income (expense):
Interest expense................. (12,670,495) (484,993) (13,155,488)
Interest income.................. 773,510 346,459 1,119,969
Other, net....................... (112,851) 81,031 (31,820)
-------------- ----------- -------------
(12,009,836) (57,503) (12,067,339)
-------------- ----------- -------------
Earnings before income taxes... 34,481,659 5,351,002 39,832,661
Income tax expense (benefit):
Current.......................... 7,268,000 2,382,726 9,650,726
Deferred......................... 6,845,000 (210,564) 6,634,436
-------------- ----------- -------------
14,113,000 2,172,162 16,285,162
-------------- ----------- -------------
Net earnings................... $ 20,368,659 3,178,840 23,547,499
============== =========== =============
Earnings per common share.......... $1.56 0.50 1.61
===== ==== ====
Weighted average common shares
outstanding....................... 13,031,730 6,383,803 14,627,681
============== =========== =============
</TABLE>
See Accompanying Notes to the Condensed Pro Forma Combined Financial Statements
38
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1992
(UNAUDITED)
<TABLE>
<CAPTION>
GRAND
ANGC VALLEY
HISTORICAL HISTORICAL
YEAR ENDED YEAR ENDED PRO FORMA
SEPTEMBER 30, MAY 31, COMBINED
1992 1992 ANGC
------------- ----------- -------------
<S> <C> <C> <C>
Operating revenue:
Natural gas and petroleum product
sales............................. $917,052,336 194,721,834 1,111,774,170
Transportation and agency fees..... 5,919,579 1,168,196 7,087,775
Other.............................. 5,474,779 697,923 6,172,702
------------ ----------- -------------
928,446,694 196,587,953 1,125,034,647
------------ ----------- -------------
Operating expenses:
Natural gas and petroleum products
purchases......................... 838,913,008 186,500,387 1,025,413,395
Operations......................... 25,177,826 262,501 25,440,327
General and administrative......... 11,856,304 4,454,435 16,310,739
Depreciation, depletion and
amortization...................... 21,318,640 525,581 21,844,221
------------ ----------- -------------
897,265,778 191,742,904 1,089,008,682
------------ ----------- -------------
Income from operations........... 31,180,916 4,845,049 36,025,965
Other income (expense):
Interest expense................... (12,332,364) (128,095) (12,460,459)
Interest income.................... 1,289,884 315,928 1,605,812
Other, net......................... (158,186) 179,810 21,624
------------ ----------- -------------
(11,200,666) 367,643 (10,833,023)
------------ ----------- -------------
Earnings before income taxes..... 19,980,250 5,212,692 25,192,942
Income tax expense:
Current............................ 3,284,000 1,800,906 5,084,906
Deferred........................... 5,046,000 166,038 5,212,038
------------ ----------- -------------
8,330,000 1,966,944 10,296,944
------------ ----------- -------------
Net earnings..................... $ 11,650,250 3,245,748 14,895,998
============ =========== =============
Earnings per common share............ $ .93 0.52 1.06
============ =========== =============
Weighted average common shares
outstanding......................... 12,539,420 6,287,584 14,111,316
============ =========== =============
</TABLE>
See Accompanying Notes to the Condensed Pro Forma Combined Financial Statements
39
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1991
(UNAUDITED)
<TABLE>
<CAPTION>
GRAND
ANGC VALLEY
HISTORICAL HISTORICAL
YEAR ENDED YEAR ENDED PRO FORMA
SEPTEMBER 30, MAY 31, COMBINED
1991 1991 ANGC
------------- ----------- -----------
<S> <C> <C> <C>
Operating Revenue:
Natural gas and petroleum product
sales............................... $621,794,644 104,119,594 725,914,238
Transportation and agency fees....... 4,357,743 669,781 5,027,524
Other................................ 4,509,255 378,809 4,888,064
------------ ----------- -----------
630,661,642 105,168,184 735,829,826
------------ ----------- -----------
Operating expenses:
Natural gas and petroleum products
purchases........................... 560,699,588 96,356,467 657,056,055
Operations........................... 21,249,584 -- 21,249,584
General and administrative........... 9,016,504 3,049,679 12,066,183
Depreciation, depletion and
amortization........................ 17,246,442 249,407 17,495,849
------------ ----------- -----------
608,212,118 99,655,553 707,867,671
------------ ----------- -----------
Income from operations............. 22,449,524 5,512,631 27,962,155
Other income (expense):
Interest expense..................... (8,376,655) (169,000) (8,545,655)
Interest income...................... 1,491,598 279,470 1,771,068
Other, net........................... 77,390 31,802 109,192
------------ ----------- -----------
(6,807,667) 142,272 (6,665,395)
------------ ----------- -----------
Earnings before income taxes....... 15,641,857 5,654,903 21,296,760
Income tax expense:
Current.............................. 2,265,000 2,130,086 4,395,086
Deferred............................. 3,256,000 2,646 3,258,646
------------ ----------- -----------
5,521,000 2,132,732 7,653,732
------------ ----------- -----------
Net earnings....................... $ 10,120,857 3,522,171 13,643,028
============ =========== ===========
Earnings per common share.............. $.92 0.56 1.08
============ =========== ===========
Weighted average common shares
outstanding........................... 11,010,375 6,340,158 12,595,415
============ =========== ===========
</TABLE>
See Accompanying Notes to the Condensed Pro Forma Combined Financial Statements
40
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) On February 21, 1994, ANGC and Grand Valley entered into an agreement that
provides for the merger of Grand Valley with a subsidiary of ANGC. Under the
terms of the Merger Agreement, Grand Valley shareholders will receive 0.25
shares of ANGC Common Stock in exchange for each of their shares of Grand
Valley Common Stock. The business combination is to be accounted for as a
pooling of interests. The condensed pro forma combined balance sheet as of
March 31, 1994 includes pro forma adjustments to give effect to the issuance of
1,584,106 shares of ANGC Common Stock in exchange for 6,336,422 shares of Grand
Valley Common Stock outstanding as of that date and the subsequent retirement
of the Grand Valley Common Stock and 235,098 shares held in treasury. Upon
consummation of the Merger, ANGC expects to issue approximately 58,500
additional shares of ANGC Common Stock in exchange for Grand Valley Common
Stock to be issued upon the exercise of certain stock options that are expected
to be exercised upon consummation of the Merger.
(2) Certain reclassifications have been made to the historical financial
statements of Grand Valley to conform with ANGC's presentation.
(3) Pro forma earnings per share have been computed based on the pro forma net
earnings and the pro forma weighted average common shares outstanding for the
periods presented. The pro forma weighted average common shares outstanding
have been computed by adjusting the historical weighted average common shares
outstanding for ANGC by the effect of the shares to be issued in exchange for
the Grand Valley Common Stock. The dilutive effect of options outstanding on
the calculation of pro forma earnings per share was not material.
(4) The pro forma unaudited condensed consolidated financial statements do not
include estimated merger expenses, which are not expected to exceed $1.5
million. These expenses, which primarily consist of financial advisory fees,
outside legal, accounting and professional fees and one-time costs of
consolidating certain operational and administrative functions of the
companies, will be expensed in 1994. The pro forma statements also do not
include any cost savings expected to occur as a result of the Merger, as well
as the deferral of a portion of Grand Valley's current income taxes.
41
<PAGE>
BUSINESS OF ASSOCIATED NATURAL GAS CORPORATION
GENERAL
ANGC is engaged in the business of purchasing, gathering, processing,
transporting and marketing natural gas, NGLs and crude oil to industrial end
users, local distribution companies, liquid petroleum gas wholesalers and
retailers and refiners. ANGC was formed in 1986 as a successor to Natural Gas
Associates, a partnership, which constructed its first natural gas gathering
system in March 1983 in Weld County, Colorado.
ANGC currently owns and operates a significant complex of crude oil, NGLs and
natural gas gathering, processing/fractionation and transportation facilities
situated in major oil and natural gas-producing basins in the Rocky Mountain,
Mid-Continent and Gulf Coast regions of the United States. These facilities
connect over 8,000 producing wells to approximately 9,000 miles of its
pipelines.
ANGC purchases natural gas and entrained NGLs from major and independent oil
and gas producers, gathers those volumes by means of its pipeline gathering
systems, processes the natural gas and extracts the NGLs where applicable,
combines the supply of residue gas from its plants with other supplies of
natural gas, arranges for transportation of the natural gas and markets the
natural gas to various industrial end users and local distribution companies.
NGLs that are extracted from the natural gas are, where applicable, further
separated, or fractionated into their primary component products: ethane,
propane, butane and natural gasoline. These component products are then sold to
liquid petroleum gas wholesalers, retailers and refiners as feedstock for
various chemical plants, retail heating fuel or blending stocks. In addition,
ANGC purchases, transports through wholly-owned and third party pipelines or
transport trucks, and markets crude oil in its various operating areas.
MARKETING AND TRANSPORTATION
With operating knowledge gained through many years of experience in
purchasing, gathering, transporting and marketing natural gas, crude oil and
petroleum products, ANGC's management believes it has the ability to identify
significant and expanding sources of supply, as well as markets for its
products. Nevertheless, any significant change that occurs in the industry, the
regulatory environment or the demands of ANGC's customers may adversely affect
ANGC's marketing efforts. The availability of ready markets for natural gas and
NGLs, and the prices for such products depend upon a number of factors beyond
the control of ANGC. Such factors include the level of domestic production, the
availability of imported crude oil and natural gas, the availability of
transportation systems, the availability and marketing of competitive fuels,
fluctuating and seasonal demand for crude oil, natural gas and NGLs and the
extent of governmental regulation. ANGC's ability to obtain and maintain
markets for natural gas is a key factor in maintaining optimum production
levels for its producers, assuring throughput for its facilities, obtaining
additional supplies and generating revenue. ANGC continues to emphasize system
supply sales over off-system sales as they provide a larger and more
sustainable margin for ANGC.
Off-system marketing has developed into a specialized activity of ANGC,
providing natural gas producers with access to services in transportation,
dispatching, contract negotiation and administration not usually available or
economically justifiable to smaller producers. The margins on a per MCF basis
earned in off-system sales are usually less than those earned in system supply
sales primarily due to the absence of any ANGC capital investment in off-system
activities.
ANGC does not own or produce crude oil or natural gas reserves. The majority
of the natural gas flowing through ANGC's facilities is purchased or
transported under long-term contracts with producers ranging in size from small
independents to major oil companies. The producer generally dedicates to ANGC
the natural gas produced from all geologic formations of designated oil and
natural gas leases for the term of the contract, which typically ranges from
three years to the economic life of ANGC's facilities. Under such purchase
42
<PAGE>
contracts, ANGC usually takes title to the natural gas at the outlet of the
producer's facilities. Most of these purchase contracts have percentage-of-
proceeds provisions under which ANGC pays the producer a specific percentage of
the net proceeds received from sale of the residue gas and NGLs, if extracted.
These percentage-of-proceeds pricing provisions in the majority of ANGC's
contracts for the purchase of natural gas mitigate, but do not eliminate, the
effect upon ANGC of fluctuations in natural gas and NGLs prices. In addition,
most of ANGC's contracts contain a provision that allows ANGC to cease taking
natural gas, or to cancel the contract, if such activity becomes unprofitable
to ANGC.
ANGC also purchases and aggregates off-system supplies of natural gas not
connected to its pipeline systems. Off-system supply is normally purchased
through short-term agreements of less than 90 days on a reasonable-efforts
basis at wellhead prices. ANGC takes title to the natural gas at the producer's
facilities or other mutually agreeable delivery points and arranges for
appropriate transportation in order to market this supply.
ANGC purchases and sells crude oil under short-term contracts (typically one
year or less). ANGC transports crude oil on its systems for volumetric charges
under published tariffs filed with state governmental authorities having
jurisdiction.
NATURAL GAS PROCESSING
ANGC currently has five fractionation facilities located in Colorado,
Louisiana, Oklahoma and Texas through which NGLs extracted are further
processed and separated into their individual components (ethane, propane,
butane and natural gasoline). ANGC markets its fractionated NGLs to a variety
of wholesale and retail customers and refiners. The prices received for these
products are generally based upon the industry average published price for NGLs
at Mont Belvieu, Texas or Conway, Kansas, plus or minus a transportation
differential for product delivered in the region.
BUSINESS OF GRAND VALLEY GAS COMPANY
The Grand Valley 1993 10-K and Grand Valley Third Quarter 10-Q are being
mailed to shareholders together with this Proxy Statement/Prospectus and are
incorporated by reference herein. The foregoing summary of Grand Valley's
business is qualified in its entirety by reference to the Grand Valley 1993 10-
K and Grand Valley Third Quarter 10-Q.
GENERAL
Grand Valley was incorporated in the State of Utah in 1981 and has owned and
operated natural gas gathering systems since 1982. Since 1985, Grand Valley has
been primarily engaged in the natural gas marketing business. Grand Valley's
marketing operations extend from the west coasts of the United States and
Canada through the Rocky Mountain and Midwest regions of the United States.
Grand Valley markets natural gas produced in the Rocky Mountain, Mid-Continent
and Southwestern regions of the United States and in western Canada to natural
gas utilities and industrial end users located in the western United States and
western Canada.
Marketing services provided by Grand Valley, such as supply and market
aggregation, contract negotiation, transportation and storage management and
related administrative services, facilitate the movement of natural gas from
the wellhead to the end user. Grand Valley provides its sales customers with
supply diversity and reliability by accessing a large group of producers in
numerous natural gas producing basins. Likewise, Grand Valley provides
producers with regional market diversity and certainty through its gas supply
relationships with a broad spectrum of local distribution companies and
industrial end users. Accordingly, Grand Valley considers its dealings with
both natural gas producers and natural gas sales customers as key customer
relationships.
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Grand Valley's business has been strongly influenced by regulatory
initiatives commenced in 1985 by the FERC promoting open access to interstate
natural gas pipelines. As a general matter, Grand Valley's ability to transport
gas through interstate pipelines, and the terms and conditions of such
transportation arrangements, may be affected by future application and
interpretation of FERC Order No. 636, and by the requirement that interstate
pipeline companies offer open-access transportation arrangements under this
order or otherwise. Any significant change in FERC policy could have a material
effect upon Grand Valley's business.
NATURAL GAS MARKETING
Grand Valley's natural gas marketing services include supply and market
aggregation, dispatching, balancing, regulatory compliance, transportation,
storage, contract negotiation and administration.
In addition to its standard marketing activities, beginning in fiscal 1990,
Grand Valley arranged for certain of its producer and sales customers to
contract directly with one another under long-term contracts negotiated and
administered by Grand Valley. In return for these and other services, Grand
Valley receives agency service fees in lieu of the direct sales service margins
associated with Grand Valley's more traditional marketing transactions.
Grand Valley does not own significant natural gas reserves nor does it obtain
a large proportion of the gas it sells through its own gathering and
transmission systems. Grand Valley purchases most of its natural gas supplies
from approximately 120 producers ranging from independent operators to major
integrated oil and gas companies.
NATURAL GAS MARKETING CUSTOMERS
Grand Valley's customers are located primarily in the Pacific Northwest, the
Rocky Mountains, the Midwest and California in the United States and in British
Columbia, Canada. During the fiscal year ended May 31, 1993, Grand Valley
marketed natural gas to 24 utility purchasers, to 77 industrial end users, and
to more than 230 industrial customers through purchase agents.
A significant portion of Grand Valley's sales volumes are to local
distribution companies that, in many instances, purchase natural gas supplies
from Grand Valley under long-term sales contracts. Grand Valley has a number of
customers that typically purchase gas under contracts having a one-year term
and also has numerous shorter term contracts with both producer and sales
customers. Approximately 53 percent, 49 percent and 62 percent of Grand
Valley's fiscal 1993, 1992 and 1991 natural gas marketing sales volumes,
respectively, were made pursuant to contracts with an initial term of at least
one year. The decline in fiscal 1992 long-term sales volume percentage reflects
significant new short term sales volumes to markets in California and the
Midwest that were relatively insignificant during fiscal 1991.
NATURAL GAS GATHERING AND PROCESSING
Grand Valley owns interests in or operates six gathering, compression and
processing systems.
COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Merger, shareholders of Grand Valley, a Utah
corporation, will become stockholders of ANGC, a Delaware corporation. The
following is a summary of material differences between the rights of Grand
Valley shareholders and ANGC stockholders.
Authorized Stock. Grand Valley's Articles of Incorporation authorize
50,000,000 shares of Grand Valley Common Stock, of which 6,335,944 were
outstanding as of May 16, 1994. ANGC's Certificate of Incorporation authorizes
40,000,000 shares of ANGC Common Stock, of which 13,460,453 were outstanding
44
<PAGE>
as of May 16, 1994, and 200,000 shares of preferred stock, $1.00 par value, of
which none are outstanding. The issuance of preferred stock could affect the
rights of holders of ANGC Common Stock. See "Description of ANGC Capital
Stock."
Power to Call Special Shareholders' Meetings. Under Delaware law, a special
meeting of stockholders may be called by the board of directors or by any other
person authorized to do so in the charter documents. ANGC's By-laws permit
special meetings to be called by the Chairman, Chief Executive Officer,
President, Board of Directors or by the holders of at least 25 percent of the
stock entitled to vote at the meeting.
Utah law provides that a special meeting may be called by the board of
directors, the holders of shares entitled to cast at least 10 percent of the
votes at such meeting or such other persons as are authorized by the bylaws.
Grand Valley's By-laws do not authorize additional persons to call special
meetings.
Shareholder Approval of Certain Business Combinations. Section 203 of the
DGCL prohibits a Delaware corporation from engaging in a "business combination"
with an "interested stockholder" (as such terms are defined in Section 203) for
three years following the date that such person becomes an interested
stockholder. With certain exceptions, an interested stockholder is a person or
group who or which owns 15 percent or more of the corporation's outstanding
voting stock (including any rights to acquire stock pursuant to an option,
warrant, agreement, arrangement or understanding, or upon the exercise of
conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner of 15 percent or more of such voting stock at any time within the
previous three years.
Section 203 does not apply if: (i) prior to the date on which such
stockholder becomes an interested stockholder the board of directors approves
either the business combination or the transaction which resulted in the person
becoming an interested stockholder; (ii) the interested stockholder owns 85
percent of the corporation's voting stock upon consummation of the transaction
which made him an interested stockholder (excluding from the 85 percent
calculation shares owned by directors who are also officers of the target
corporation and shares held by employee stock plans which do not permit
employees to decide confidentially whether to accept a tender or exchange
offer); or (iii) on or after the date such person becomes an interested
stockholder, the board approves the business combination and it is also
approved at a stockholder meeting by 66 2/3 percent of the voting stock not
owned by the interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, are quoted on an
interdealer quotation system such as NASDAQ or are held of record by more than
2,000 stockholders. However, a Delaware corporation may elect not to be
governed by Section 203 by a provision in its original certificate of
incorporation or an amendment thereto or to the bylaws, which amendment must be
approved by majority stockholder vote and may not be further amended by the
board of directors. ANGC has not made such an election.
Under the Utah Control Share Acquisitions Act (the "CSAA"), acquisition (on a
cumulative basis) of 20 percent or more of the voting power of certain publicly
held corporations located in Utah in a "control shares acquisition" prohibits
such shares, known as "control shares," from being voted on any matter unless
and until a resolution allowing such shares to be voted is approved by a
majority of the outstanding shares of each class of stock, excluding
"interested shares." "Interested shares" are those held by the acquiror subject
to the CSAA and by all officers and employee-directors of the company. A
corporation may "opt out" of the CSAA in its charter documents at any time
prior to a control share acquisition. Grand Valley has opted out of the CSAA.
Actions by Shareholders Without a Meeting. Under Delaware law, unless
otherwise provided in the certificate of incorporation, action may be taken by
stockholders without a meeting if a written consent to such action is signed by
the holders of a majority of the shares entitled to vote on such action. A
notice must
45
<PAGE>
be given to stockholders that did not consent, and in certain circumstances,
the notice must be delivered before completing the approved action. ANGC's
Certificate of Incorporation does not prohibit action by written consent of the
stockholders.
Under Utah law, for corporations in existence on July 1, 1992, action may be
taken by shareholders without a meeting if a written consent to such action is
signed by the holders of all of the shares entitled to vote on such action.
Such a corporation may by shareholder vote elect to permit action (other than
election of directors) to be taken by the written consent of a majority of the
shares entitled to vote. Grand Valley has not so elected.
Dividends and Repurchase of Shares. Delaware law permits a corporation,
unless restricted by its certificate of incorporation, to declare and pay
dividends out of surplus or, if there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and for the preceding fiscal year
as long as the amount of capital of the corporation is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets.
Under Utah law, a corporation may make distributions to shareholders so long
as such action would not (a) make the corporation unable to pay its debts as
they become due in the usual course of business or (b) cause the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed to
satisfy preferential rights of shareholders senior to those receiving the
distribution.
Sale of Substantially All Corporate Assets. Under Delaware law the sale,
lease or exchange of substantially all corporate assets, whether or not in the
regular course of business, requires the approval of the holders of a majority
of the stock entitled to vote.
Under Utah law, the sale, lease, exchange or other disposition of all, or
substantially all, of the corporation's assets requires the consent or approval
of the shareholders except when done in the regular course of its business.
The foregoing summary does not purport to be a complete statement of the
rights of holders of ANGC Common Stock and Grand Valley Common Stock under, and
is qualified in its entirety by reference to, the DGCL, the URBCA, the Restated
Certificate of Incorporation and By-laws, as amended, of ANGC, and the Articles
of Restatement of Articles of Incorporation and By-laws of Grand Valley.
DESCRIPTION OF ANGC CAPITAL STOCK
ANGC's authorized capital stock consists of 40,000,000 shares of ANGC Common
Stock, of which 13,460,453 shares were outstanding as of May 16, 1994, and
200,000 shares of preferred stock, $1.00 par value, none of which are
outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held and have
no pre-emptive or other rights to subscribe for additional shares. The Common
Stock does not have cumulative voting rights, which means that the holders of
more than 50 percent of the outstanding Common Stock voting in the election of
directors can elect all of the directors if they so choose, and in such event
the holders of the remaining shares of Common Stock will not be able to elect
any directors. Subject to outstanding contractual restrictions, holders of
Common Stock are entitled to such dividends as may be declared by the Board of
Directors out of funds legally available therefor. ANGC's debt agreements
contain provisions restricting ANGC's ability to pay dividends. Under the most
restrictive of these provisions, approximately $63 million was available for
the payment of dividends on March 31, 1994. All of the outstanding shares of
Common Stock are, and
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<PAGE>
the shares of Common Stock to be issued by ANGC in the Merger upon their
issuance will be, validly issued, fully paid and non-assessable.
PREFERRED STOCK
Of the 200,000 shares of preferred stock originally authorized, 75,620 were
issued and subsequently converted into ANGC Common Stock. At this time the
Board of Directors has the authority to issue the remaining 124,380 shares of
preferred stock in series and to fix the rights and preferences, including the
dividend rights, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or the
designations of such series, without any further vote or action by the
stockholders. Thus, any series may, if so determined by the Board of Directors,
have full voting rights with the Common Stock or superior or limited voting
rights, be convertible into Common Stock or another security of ANGC, and have
such other relative rights, preferences and limitations as the Board of
Directors shall determine. As a result, any class or series of preferred stock
could have rights which would adversely affect the voting power of the Common
Stock. The shares of any class or series of preferred stock need not be
identical.
ANGC has no present plans to issue any series of preferred stock. Any such
issuance could, however, be used by management to dilute the voting and
ownership interest of persons seeking to gain control of ANGC.
LIMITATION OF LIABILITY OF DIRECTORS
In accordance with amendments to the DGCL adopted in response to changes in
the market for directors' liability insurance, ANGC's Certificate of
Incorporation eliminates in certain circumstances the liability of directors of
ANGC for monetary damages for breach of their fiduciary duty of care as
directors. This provision does not abrogate the director's duty of care, nor
does it eliminate the liability of a director (i) for a breach of the
director's duty of loyalty to ANGC or its stockholders, (ii) for acts or
omissions by the director not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174 of the DGCL
(relating to the declaration of dividends and purchase or redemption of shares
in violation of the DGCL), (iv) for transactions from which the director
derived an improper personal benefit, and (v) for any violation of the Federal
securities laws. Although in certain circumstances money damages are precluded,
a director remains liable for equitable remedies such as injunction or
rescission. The effect of any repeal or amendment of this provision would not
be retroactive.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
LEGAL MATTERS
The validity of the shares of ANGC Common Stock to be issued in connection
with the Merger will be passed upon for ANGC by Holme Roberts & Owen LLC.
Certain tax matters will be passed upon for ANGC by Holme Roberts & Owen LLC
and for Grand Valley by Vinson & Elkins L.L.P.
EXPERTS
The consolidated financial statements of ANGC as of September 30, 1993 and
1992, and for each of the years in the three-year period ended September 30,
1993 incorporated by reference herein have been incorporated by reference
herein from the Annual Report on the Form 10-K for the year ended September 30,
1993 of ANGC in reliance upon the report of KPMG Peat Marwick, independent
auditors, incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
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The consolidated financial statements and schedules included in the Grand
Valley 1993 Form 10-K, which is being provided to Grand Valley shareholders
together with this Proxy Statement/Prospectus, have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports.
SHAREHOLDERS' PROPOSALS
If the Merger is not consummated, the annual meeting of shareholders of Grand
Valley is expected to be held in November, 1994. Any proposals of shareholders
of Grand Valley intended to be presented at the annual meeting must be received
by Grand Valley, addressed to the Secretary at 50 West Broadway, Salt Lake
City, Utah 84101, no later than June 24, 1994, to be considered for inclusion
in the proxy statement and form of proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
OF GRAND VALLEY GAS COMPANY
/s/ SIGNATURE
-------------------------------------
Secretary
48
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IMPORTANT
If your shares of Grand Valley Common Stock are held in the name of a
brokerage firm, bank nominee or other institution, only it can sign a proxy
card with respect to your shares of Grand Valley Common Stock. Accordingly,
please contact the person responsible for your account and give instructions
for a proxy card to be signed representing your shares of Grand Valley Common
Stock.
If you have any questions about giving your proxy or require assistance,
please contact Charlotte Brown at Corporate Investor Communications, Inc., our
proxy solicitor, at (201) 896-1900.
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ANNEX A
- --------------------------------------------------------------------------------
RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
ASSOCIATED NATURAL GAS CORPORATION,
ASSOCIATED NATURAL GAS, INC.
AND
GRAND VALLEY GAS COMPANY
DATED AS OF FEBRUARY 21, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
THE MERGER
<C> <S> <C>
1.1 Effective Time of the Merger......................................... 1
1.2 Closing.............................................................. 1
1.3 Effects of the Merger................................................ 1
1.4 Directors and Officers of the Surviving Corporation.................. 2
<CAPTION>
ARTICLE II
CONVERSION OF SECURITIES
<C> <S> <C>
2.1 Manner of Converting Shares.......................................... 2
(a) Capital Stock of ANGI............................................ 2
(b) Capital Stock of GVGC............................................ 2
2.2 Exchange of Certificates............................................. 2
(a) ANGC Certificates................................................ 2
(b) Exchange Procedures.............................................. 2
(c) Distributions with Respect to Unexchanged Shares................. 3
(d) No Further Ownership Rights in GVGC Common Stock................. 3
(e) No Fractional Shares............................................. 3
(f) No Liability..................................................... 3
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GVGC
<C> <S> <C>
3.1 Organization and Standing............................................ 3
3.2 Capitalization....................................................... 4
3.3 Lists of Properties, Contracts and Other Data........................ 4
3.4 Subsidiaries......................................................... 5
3.5 Partnerships and Joint Ventures...................................... 6
3.6 Title to Assets...................................................... 6
3.7 Authority............................................................ 7
3.8 Consents and Approvals............................................... 7
3.9 No Violation......................................................... 7
3.10 SEC Documents and Financial Reports.................................. 8
3.11 No Undisclosed Liabilities........................................... 8
3.12 Permits; Compliance with Applicable Laws............................. 8
3.13 [Intentionally omitted].............................................. 9
3.14 Taxes................................................................ 9
3.15 Employees............................................................ 9
3.16 Employee Benefit Plans............................................... 9
3.17 Environmental Matters................................................ 10
3.18 Absence of Certain Changes or Events................................. 11
3.19 Vote Required........................................................ 11
3.20 Number of Stockholders............................................... 11
3.21 Accounting Matters................................................... 11
3.22 Contracts and Customers.............................................. 12
</TABLE>
i
<PAGE>
ARTICLE IV
<TABLE>
<CAPTION>
REPRESENTATIONS AND WARRANTIES OF ANGC AND ANGI
<C> <S> <C>
4.1 Organization and Standing............................................ 12
4.2 Capitalization....................................................... 12
4.3 Lists of Properties, Contracts and Other Data........................ 12
4.4 Subsidiaries......................................................... 13
4.5 Partnerships and Joint Ventures...................................... 13
4.6 Title of Assets...................................................... 13
4.7 Authority............................................................ 14
4.8 Consents and Approvals............................................... 14
4.9 No Violation......................................................... 14
4.10 SEC Documents and Financial Reports.................................. 15
4.11 No Undisclosed Liabilities........................................... 15
4.12 Permits; Compliance with Applicable Laws............................. 15
4.13 [Intentionally omitted].............................................. 16
4.14 Taxes................................................................ 16
4.15 Employees............................................................ 16
4.16 Employee Benefit Plans............................................... 16
4.17 Environmental Matters................................................ 17
4.18 Absence of Certain Changes or Events................................. 17
4.19 Number of Stockholders............................................... 18
4.20 Accounting Matters................................................... 18
4.21 Contracts and Customers.............................................. 18
<CAPTION>
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
<C> <S> <C>
5.1 Covenants of GVGC, ANGC and ANGI..................................... 18
(a) Ordinary Course.................................................. 18
(b) Dividends; Changes in Stock...................................... 18
(c) Issuance of Securities........................................... 18
(d) Governing Documents.............................................. 18
(e) No Solicitations................................................. 18
(f) No Acquisitions.................................................. 19
(g) No Dispositions.................................................. 19
(h) Indebtedness..................................................... 19
(i) Other Actions.................................................... 19
(j) Advice of Changes; Filings....................................... 19
(k) Additional Employee Covenants.................................... 20
(l) Additional Tax Covenants......................................... 20
<CAPTION>
ARTICLE VI
ADDITIONAL AGREEMENTS
<C> <S> <C>
6.1 Preparation of S-4 and the Proxy Statement........................... 20
6.2 Comfort Letters of Accountants....................................... 20
6.3 Access to Information................................................ 21
6.4 Access to Financial Institutional Relationships...................... 21
6.5 Stockholder Approvals................................................ 21
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
6.6 Legal Conditions to Merger........................................... 21
6.7 Affiliates........................................................... 21
6.8 Stock Exchange Listing............................................... 21
6.9 Employee Benefit Plans............................................... 21
6.10 Expenses............................................................. 22
6.11 Brokers or Finders................................................... 22
6.12 Indemnification...................................................... 22
6.13 Additional Agreements; Reasonable Efforts............................ 23
6.14 Tax and Accounting Treatment......................................... 23
6.15 GVGC Options and Incentive Stock Awards; Employment Agreements....... 23
6.16 Takeover Statutes.................................................... 24
ARTICLE VII
<CAPTION>
CONDITIONS PRECEDENT
<C> <S> <C>
7.1 Conditions to Each Party's Obligation to Effect the Merger........... 24
(a) Stockholder Approval............................................. 24
(b) NYSE Listing..................................................... 24
(c) Other Approvals.................................................. 24
(d) S-4.............................................................. 24
(e) No Injunctions or Restraints..................................... 24
(f) Pooling and Comfort Letters...................................... 24
(g) Letters for Affiliates........................................... 24
(h) Legal Opinion.................................................... 24
7.2 Conditions of Obligations of ANGC and ANGI........................... 24
(a) Representations and Warranties................................... 24
(b) Performance of Obligations of GVGC............................... 25
(c) Tax Opinion...................................................... 25
(d) Consents Under Agreements........................................ 25
(e) No Amendments to Resolutions..................................... 25
(f) GVGC Options and Incentive Stock Awards.......................... 25
(g) Material Adverse Change.......................................... 25
(h) Due Diligence.................................................... 25
(i) Employment Agreements............................................ 25
7.3 Conditions of Obligations of GVGC.................................... 26
(a) Representations and Warranties................................... 26
(b) Performance of Obligations of ANGC............................... 26
(c) Acquisition of ANGC.............................................. 26
(d) Tax Opinion...................................................... 26
(e) No Amendments to Resolutions..................................... 26
(f) Material Adverse Change.......................................... 26
(g) Due Diligence.................................................... 26
(h) Fairness Opinion................................................. 26
ARTICLE VIII
<CAPTION>
TERMINATION AND AMENDMENT
<C> <S> <C>
8.1 Termination.......................................................... 26
8.2 Effect of Termination................................................ 27
8.3 Amendment............................................................ 27
8.4 Extension; Waiver.................................................... 27
</TABLE>
iii
<PAGE>
ARTICLE IX
<TABLE>
<CAPTION>
GENERAL PROVISIONS
<C> <S> <C>
9.1 Nonsurvival of Representations, Warranties and Agreements............ 27
9.2 Notices.............................................................. 27
9.3 Interpretation....................................................... 28
9.4 Counterparts......................................................... 29
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.. 29
9.6 Governing Law........................................................ 29
9.7 No Remedy in Certain Circumstances................................... 29
9.8 Publicity............................................................ 29
9.9 Knowledge of Parties................................................. 29
</TABLE>
TABLE OF SCHEDULES AND EXHIBITS
SCHEDULES
GVGC Disclosure Schedule
ANGC Disclosure Schedule
EXHIBITS
6.7 --Affiliates Letters
7.1(h) --Holme Roberts & Owen LLC Legal Opinion
iv
<PAGE>
RESTATED AGREEMENT AND PLAN OF MERGER, dated as of February 21, 1994, among
Associated Natural Gas Corporation, a Delaware corporation ("ANGC"), Grand
Valley Gas Company, a Utah corporation ("GVGC"), and Associated Natural Gas,
Inc., a Colorado corporation ("ANGI"). GVGC and ANGI are sometimes referred to
herein as the "Constituent Corporations" and ANGI is sometimes referred to
herein as the "Surviving Corporation."
WHEREAS, the respective Boards of Directors of ANGC, GVGC and ANGI have
approved and deem it advisable and in the best interests of their respective
stockholders to consummate the merger of GVGC into ANGI (the "Merger") whereby
each issued and outstanding share of common stock, par value $.0125 per share,
of GVGC ("GVGC Common Stock") will be converted into the right to receive .25
shares of common stock, $.05 par value, of ANGC ("ANGC Common Stock");
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests;
WHEREAS, ANGC, GVGC and ANGI desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger; and
WHEREAS, the parties executed an Agreement and Plan of Merger dated as of
February 21, 1994, and now wish to amend and restate the same in its entirety;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
hereto agree as follows:
ARTICLE I
The Merger
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger shall be duly prepared, executed and acknowledged
by the Constituent Corporations and thereafter delivered on the Closing Date
(as defined in Section 1.2) to the Secretary of State of the State of Colorado
and the Division of Corporations and Commercial Code of the State of Utah (the
"Division") for filing, as provided in the Colorado Corporation Code (the
"CCC") and the Utah Revised Business Corporation Act (the "URBCA"), as soon as
practicable on or after the Closing Date. The Merger shall become effective
upon the later of (i) the filing of articles of merger by the Secretary of
State of the State of Colorado and (ii) the filing of articles of merger by the
Division or at such time thereafter as is provided in such articles of merger
(the "Effective Time"). Prior to the Effective Time, ANGI shall qualify to do
business in the State of Utah.
1.2 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at 10:00 a.m. Denver time, on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the conditions set forth in Article VII have been met or
waived as provided in Article VII (the "Closing Date"), at the offices of Holme
Roberts & Owen LLC 1700 Lincoln, Denver, Colorado, unless another date or place
is agreed to by the parties hereto.
1.3 Effects of the Merger. (a) At the Effective Time, (i) the separate
existence of GVGC shall cease and GVGC shall be merged with and into ANGI, (ii)
the Articles of Incorporation of ANGI as in effect immediately before the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation, (iii) the By-laws of ANGI as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation.
(b) At and after the Effective Time, the Merger shall have the effects set
forth in the CCC and the URBCA.
A-1
<PAGE>
1.4 Directors and Officers of the Surviving Corporation. The directors and
officers of ANGI, from and after the Effective Time, shall be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Articles of Incorporation and By-laws.
ARTICLE II
Conversion of Securities
2.1 Manner of Converting Shares. The mode of carrying the Merger into effect
and the manner and basis of converting GVGC Common Stock into a right to
receive shares of ANGC Common Stock, forthwith at the Effective Time, are as
follows:
(a) Capital Stock of ANGI. The shares of common stock of ANGI, no par
value ("ANGI Common Stock"), that are issued and outstanding at the
Effective Time and all of which are owned by ANGC, shall be unaffected by
the Merger and shall remain outstanding.
(b) Capital Stock of GVGC. The shares of GVGC Common Stock that are
issued and outstanding at the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
and become a right to receive shares of ANGC Common Stock at the rate of
.25 shares of ANGC Common Stock for each share of GVGC Common Stock (the
"Conversion Number"), subject to the provisions of Section 2.2(e). All such
shares of GVGC Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect to such certificate except the right to receive
shares of ANGC Common Stock (or cash in lieu of fractional shares as
provided in Section 2.2(e)) to be issued in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.
2.2 Exchange of Certificates.
(a) ANGC Certificates. As of the Effective Time, ANGC shall reserve and hold
for the benefit of the holders of certificates that prior to the Effective Time
represented outstanding shares of GVGC Common Stock, for exchange in accordance
with this Article II, the number of shares of ANGC Common Stock into which the
shares of GVGC Common Stock have been converted as a result of the Merger.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, ANGC shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of GVGC Common Stock (the "Certificates") whose shares were
converted into the right to receive shares of ANGC Common Stock pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to ANGC and shall be in such form and
have such other provisions as ANGC may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of ANGC Common Stock. Upon surrender of a
Certificate for cancellation to ANGC or to such other agent or agents as may be
appointed by ANGC, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of ANGC Common Stock
(including the right to receive dividends or distributions and cash in lieu of
fractional shares as contemplated in Sections 2.2(c) and 2.2(e)) which such
holder has the right to receive pursuant to the provisions of this Article II,
and the Certificate so surrendered shall forthwith be cancelled. In the event
of a transfer of ownership of GVGC Common Stock which is not registered in the
transfer records of GVGC, a certificate representing the proper number of
shares of ANGC Common Stock (including the right to receive dividends or
distributions and cash in lieu of fractional shares as contemplated in Sections
2.2(c) and 2.2(e)) shall be issued to a transferee if the Certificate
representing such GVGC Common Stock is presented to ANGC, accompanied by all
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documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of ANGC Common Stock, dividends
or distributions and cash in lieu of any fractional shares of ANGC Common Stock
as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to ANGC Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of ANGC Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.2(e) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of ANGC Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any cash payable in lieu of a fractional share of ANGC Common Stock to which
such holder is entitled pursuant to Section 2.2(e) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of ANGC Common Stock.
(d) No Further Ownership Rights in GVGC Common Stock. All shares of ANGC
Common Stock issued in the Merger upon conversion of shares of GVGC Common
Stock in accordance with the terms hereof (including any dividends or
distributions and cash paid in lieu of fractional shares pursuant to Section
2.2(c) or 2.2(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of GVGC Common Stock, subject, however, to
the obligation of ANGC to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by GVGC on such shares of GVGC Common Stock in accordance with the terms
of this Agreement or prior to the date hereof and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of GVGC of the shares of GVGC Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to ANGC for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of ANGC Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of ANGC. In lieu of issuing
fractional shares of ANGC Common Stock, ANGC shall issue to each stockholder of
GVGC a check representing the cash amount equivalent to the value of the
fractional shares, if any. Such value of ANGC Common Stock shall be computed on
the basis of a five day average of the closing prices of ANGC Common Stock as
reported by the New York Stock Exchange ("NYSE") Composite Tape, such five day
average to start on the fifth business day preceding the Effective Time.
(f) No Liability. Neither ANGC nor GVGC nor ANGI shall be liable to any
holder of shares of GVGC Common Stock for such shares (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties of GVGC
GVGC represents and warrants to ANGC and ANGI as follows, except as set forth
in the GVGC Disclosure Schedule:
3.1 Organization and Standing. Each of GVGC, its Subsidiaries (as defined
below) and the Partnerships (as defined below) is a corporation or
partnership duly organized, validly existing and in good standing under the
laws of its state of incorporation or organization and has all requisite
power
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and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify
would not have a material adverse effect on GVGC, its Subsidiaries and its
interests in the Partnerships, taken as a whole. As used in this Agreement,
any reference to any event, change or effect being material with respect to
any entity means an event, change or effect materially related to the
condition (financial or otherwise), businesses or operations of such
entity; and any reference to any event, change or effect having a material
adverse effect means an event, change or effect that materially and
adversely affects the condition (financial or otherwise), businesses or
operations of such entity. As used in this Agreement, a "Subsidiary" of a
person means any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such person or by any one or more of its
Subsidiaries; and the "Partnerships" shall mean Richfield Gas Storage
System, Tecumseh Marketing Company, Shawnee Joint Venture and Shawnee Joint
Venture II, Oklahoma general partnerships.
3.2 Capitalization. As of the date hereof, the authorized capital stock
of GVGC consists of 50,000,000 shares of GVGC Common Stock. At the close of
business on February 21, 1994, (i) 6,336,444 shares of GVGC Common Stock
were outstanding, (ii) not more than 181,825 shares of GVGC Common Stock
were reserved for issuance pursuant to options issued under GVGC's 1992
Stock Option Plan adopted August 27, 1991 (the "GVGC 1992 Option Plan"),
(iii) not more than 201,900 shares of GVGC Common Stock were reserved for
issuance pursuant to options issued under GVGC's 1993 Stock Option Plan
(the "GVGC 1993 Option Plan"), (iv) not more than 963,856 shares of GVGC
Common Stock were reserved for issuance pursuant to GVGC's 9% Convertible
Senior Subordinated Notes due December 15, 2004 (the "Convertible Notes"),
(v) not more than 34,081 shares of GVGC Common Stock were reserved for
issuance pursuant to the letter agreements ("Incentive Stock Award
Agreements") dated August 12, 1991 between GVGC and David Presley relating
to Centennial Natural Gas Corporation ("Centennial"), (vi) not more than
33,000 shares of GVGC Common Stock were reserved for issuance pursuant to
employment and consulting agreements ("Centennial Option Agreements") dated
August 12, 1991 between GVGC and former employees of and consultants to
Centennial (the "Centennial Options"), (vii) not more than 5,000 shares of
GVGC Common Stock were reserved for issuance pursuant to that certain
letter agreement dated February 28, 1990, between GVGC and Russell K. Boone
(the "Boone Options"), and (viii) except for the Convertible Notes, no
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which stockholders may vote ("Voting Debt"), were issued or outstanding.
All outstanding shares of GVGC Common Stock are validly issued, fully paid
and nonassessable and are not subject to preemptive rights. Except as
disclosed herein or as contemplated by this Agreement, there are no
options, warrants, calls, rights, commitments or agreements of any
character to which GVGC or any Subsidiary of GVGC is a party or by which it
is bound obligating GVGC or any Subsidiary of GVGC to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or any Voting Debt securities of GVGC or any Subsidiary of
GVGC or obligating GVGC or any Subsidiary of GVGC to grant, extend or enter
into any such option, warrant, call, right or agreement.
3.3 Lists of Properties, Contracts and Other Data. The GVGC Disclosure
Schedule to be delivered in accordance with Section 7.2(h) hereof to ANGC
shall list the following, as of the date of delivery unless otherwise
provided below, and shall be certified by GVGC to be complete and accurate
in a manner reasonably satisfactory to ANGC:
(i) All existing written contracts, agreements and commitments of
GVGC, its Subsidiaries, and the Partnerships, which (A) are significant
contracts or agency agreements for the purchase, sale, exchange,
storage or transportation of natural gas, or (B) relate to changes in
the capitalization of
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or equity ownership of GVGC in any of its Subsidiaries or the
Partnerships or which limit or restrict, directly or indirectly,
control by GVGC of any of its Subsidiaries or the Partnerships,
including the partnership agreements for the Partnerships;
(ii) The names, current annual compensation rates (including bonuses
and commissions), accrued bonuses, accrued sick leave, accrued
severance pay and accrued vacation pay of all present officers and
employees of GVGC and its Subsidiaries whose total compensation in the
twelve-month period ended December 31, 1993, was $75,000 or more; the
current base salary rate of each of such individuals; all employment,
managerial, advisory or consulting agreements and written
confidentiality or other agreements protecting information to which
GVGC or any Subsidiary is a party; a complete description of all
pension, profit-sharing, thrift, or other retirement plans, employee
stock ownership plans, deferred compensation, stock ownership, stock
purchase, performance share, individual or group bonus or other
deferred or incentive plans, severance plans, hospitalization,
insurance, vacation, death benefit, collective bargaining or other
similar plans, agreements, arrangements, commitments or understandings
of GVGC and its Subsidiaries providing for any employee benefit, and
the annual cost to GVGC and its Subsidiaries of each such plan or
arrangement; all other contracts with or with respect to, and all other
obligations or liabilities between, GVGC or any of its Subsidiaries and
any employee (or other individual with whom GVGC has a business
relationship) of GVGC or any of its Subsidiaries; the name of each bank
in which GVGC or any of its Subsidiaries now has an account or safe
deposit box and the names of all persons authorized to draw thereon or
to have access thereto; and the names of all persons, if any, now
holding powers of attorney from GVGC or any of its Subsidiaries and a
summary statement of the terms thereof;
(iii) All pending or threatened litigation, governmental or
regulatory proceedings, investigations and labor disputes (including,
without limitation, unasserted claims and assessments), in each case
known to GVGC, to which GVGC, any of its Subsidiaries or the
Partnerships or its or their officers, directors or principal
stockholders in their capacity as such is or, in the case of threatened
proceedings, investigations or labor disputes, is threatened to be made
a party;
(iv) All claims asserted or threatened, in each case known to GVGC,
at any time against GVGC, any of its Subsidiaries or the Partnerships
in respect of personal injury, wrongful death or property damage
alleged to have resulted from products or services provided by GVGC,
any of its Subsidiaries or the Partnerships, together with a
description of each such claim, action initiated with respect thereto
and the disposition thereof;
(v) The jurisdiction of incorporation or organization of each
Subsidiary of GVGC, its capitalization, each jurisdiction in which it
is qualified or registered to do business as a foreign corporation and
the percentage of its issued and outstanding securities or other
interest owned by GVGC or any Subsidiary of GVGC, and copies of the
Articles of Incorporation and bylaws of each; and
(vi) Except for GVGC's Subsidiaries and except for any partnerships
deemed to be created under an operating agreement for oil and gas
properties, all corporations, joint ventures or other entities in which
GVGC or any of its Subsidiaries owns an equity interest, including the
Partnerships, and all limited partnerships or general partnerships
sponsored or promoted by GVGC or any of its Subsidiaries (other than
entities whose securities are publicly traded in any recognized regular
market), including, to the extent known by GVGC a brief description of
the activities conducted thereby, total assets thereof, percentage of
GVGC's equity interest and identities of other equity participants.
3.4 Subsidiaries. The only Subsidiaries of GVGC are the following:
Grand Valley Gas Services Company;
Grand Valley Gathering Company;
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Grand Valley Canada Ltd.;
Centennial Storage Corporation;
GV Power Corporation;
Mesquite Pipeline Company; and
GV Power Corporation II (to be incorporated).
Except as set forth in the GVGC Disclosure Schedule, GVGC is, directly or
indirectly, the record and beneficial owner of all of the outstanding
shares of or other interests in its Subsidiaries and no equity securities
of its Subsidiaries are or may be required to be issued by reason of any
options, warrants, rights, calls, commitments or other agreements. Except
as set forth in the GVGC Disclosure Schedule, all of such shares or other
interests so owned by GVGC are owned by it free and clear of any lien,
claim or encumbrance with respect thereto. The outstanding shares of stock
or other securities of each GVGC Subsidiary have been duly and validly
issued and are fully paid and nonassessable. None of GVGC's Subsidiaries
own any shares of GVGC Common Stock.
3.5 Partnerships and Joint Ventures. The joint venture corporations,
limited partnerships, general partnerships or other entities identified on
the GVGC Disclosure Schedule are the only joint venture corporations or
partnerships in which GVGC or its Subsidiaries has an equity interest,
except for interests in Subsidiaries. Except as set forth in the GVGC
Disclosure Schedule, all of such shares or interests so owned by GVGC or
its Subsidiaries are owned by it free and clear of any lien, claim or
encumbrance with respect thereto.
3.6 Title to Assets. GVGC, each of its Subsidiaries and the Partnerships
have good and defensible title to, or a valid leasehold interest in, their
respective properties and assets (including those reflected in GVGC's
consolidated balance sheet at November 30, 1993, except as since sold or
otherwise disposed of in the ordinary course of business), free and clear
of all title defects, liens and encumbrances, and except for: (i) Pipeline
Properties (as defined below), (ii) any liens, encumbrances and other
matters reflected in GVGC's consolidated balance sheet at November 30, 1993
(including the notes thereto), (iii) liens for current realty and personal
property taxes and assessments not yet due and payable, or (iv)
imperfections of title and encumbrances that are not substantial in
character, amount or extent and that do not materially detract from the
value or materially interfere with the present use of the properties
subject thereto or affected thereby or otherwise materially impair GVGC's,
any of its Subsidiaries' and the Partnerships' business operations in any
material respect. Except as set forth in the GVGC Disclosure Schedule,
neither GVGC nor any of its Subsidiaries nor, to the knowledge of GVGC, the
Partnerships has received any notice from any Governmental Entity or
official of any eminent domain proceeding or any violation (which has not
been complied with, satisfied or withdrawn) of any applicable zoning
regulation, ordinance or other law, order or regulation relating to its
operations or its owned or leased properties, and, to the knowledge of
GVGC, no such violation exists, except for such notices or violations that
would not materially interfere with the present use of the properties or
otherwise materially impair GVGC's or its Subsidiaries' or the
Partnerships' business operations in any material respect. As used in this
Agreement, the term "Governmental Entity" shall mean any court,
administrative agency, commission or other governmental authority or
instrumentality of any federal, tribal, state, county, local or foreign
government. As used in this Agreement, the term "Pipeline Properties" shall
mean all pipelines, equipment, other tangible personal property, easements,
rights of way, servitudes, permits, surface leases and other similar assets
and rights used by any person in connection with its natural gas gathering,
processing and storage operations. The maps attached to the GVGC Disclosure
Schedule depicting GVGC's Pipeline Properties are true and accurate in all
material respects and GVGC or a Subsidiary or Partnership has sufficient
title to or interest in the applicable asset or right to enable GVGC or any
Subsidiary or Partnership to conduct its business with respect thereto as
it currently is being conducted. Except as contemplated in this Agreement
or as set forth in the GVGC Disclosure Schedule, (a) no person (other than
GVGC or a Subsidiary or a Partnership) has any right, title or interest or
any claim thereto in any of the Pipeline Properties of GVGC, its
Subsidiaries or the Partnerships, the existence of which, either
individually or in the aggregate, would prevent or impede the consummation
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of the transactions contemplated hereby or to the knowledge of GVGC have a
material adverse effect on GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole; and (b) GVGC or a Subsidiary or Partnership
or a predecessor has made all filings and received all approvals,
certificates or other authorizations necessary under applicable state and
federal law to construct and operate all Pipeline Properties, to engage in
the gathering of gas and to abandon the Pipeline Properties or to terminate
any such transportation, except for such filings, approvals, certificate
and authorizations, the absence of which would not have a material adverse
effect on GVGC, its Subsidiaries and its interests in the Partnerships,
taken as a whole.
3.7 Authority. GVGC has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the approval
and adoption of this Agreement by the holders of a majority of the
outstanding shares of GVGC Common Stock). The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of GVGC (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the
outstanding shares of GVGC Common Stock), and no other corporate
proceedings on the part of GVGC are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly executed and delivered by GVGC and, assuming this Agreement
constitutes a valid and binding obligation of ANGC and ANGI, constitutes a
valid and binding obligation of GVGC enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws for the protection of creditors or
debtors or generally affecting creditors' rights.
3.8 Consents and Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity is
required by or with respect to GVGC or any of its Subsidiaries or the
Partnerships in connection with the execution and delivery of this
Agreement by GVGC or the consummation by GVGC of the transactions
contemplated hereby, the failure to obtain which would have a material
adverse effect on GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole, except for (i) the filing of a premerger
notification report by GVGC and ANGC under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing with
the Securities and Exchange Commission (the "SEC") of (A) a proxy statement
in definitive form relating to the meeting of GVGC's stockholders to be
held in connection with the Merger (the "Proxy Statement"), (B) the S-4 (as
hereinafter defined) and (C) such reports under Sections 13(a) and 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of such orders as may
be so required, (iii) the filing of such documents with, and the obtaining
of such orders from, the various state authorities, including state
securities authorities, that are required in connection with the
transactions contemplated by this Agreement, (iv) the filing of articles of
merger with the Secretary of State of the State of Colorado and the
Division and appropriate documents with the relevant authorities of other
states in which GVGC is qualified to do business, and (v) the qualification
of ANGI as a foreign corporation qualified to do business in Utah and other
such filings, authorizations, orders and approvals of tribal, state,
county, and local governmental authorities, including those required
pursuant to state takeover laws ("State Takeover Approvals").
3.9 No Violation. Except as set forth in the GVGC Disclosure Schedule,
the execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on
assets pursuant to (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "GVGC
Violation"), (A) any provision of the Articles of Incorporation or By-laws
of GVGC or any Subsidiary of GVGC, or the partnership agreements of the
Partnerships, (B) any provision of any loan or credit agreement, note,
mortgage, indenture, lease, Benefit Plan (as
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defined in Section 3.16) or other agreement, obligation, instrument,
permit, concession, franchise or license, or (C) any judgement, order,
decree, statute, law, ordinance, rule or regulation applicable to GVGC or
any Subsidiary of GVGC or any of the Partnerships or their respective
properties or assets, which GVGC Violation, in the case of each of clauses
(B) and (C), would have a material adverse effect on GVGC, its Subsidiaries
and its interests in the Partnerships, taken as a whole.
3.10 SEC Documents and Financial Reports. GVGC will deliver to ANGC as
part of the GVGC Disclosure Schedule a true and complete copy of each Form
10-K filed by GVGC since May 31, 1989 and each other report, schedule,
registration statement and definitive proxy statement filed by GVGC with
the SEC since May 31, 1991 (as such documents have since the time of their
filing been amended, the "GVGC SEC Documents") which are all the documents
(other than preliminary material) that GVGC was required to file with the
SEC since such date. As of their respective dates, the GVGC SEC Documents
complied in all material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable
to such GVGC SEC Documents, and none of the GVGC SEC Documents contained,
as of the respective dates thereof, any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
GVGC included in the GVGC SEC Documents complied, as of the respective
dates thereof, as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP"), as of the respective dates
thereof, applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of GVGC and its
consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
3.11 No Undisclosed Liabilities. Except as and to the extent set forth in
the GVGC SEC Documents or in the Partnerships' financial statements, as of
November 30, 1993, neither GVGC nor any of its Subsidiaries nor the
Partnerships had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, that would have been required by GAAP
to be reflected on the consolidated balance sheet of GVGC and its
Subsidiaries or of the Partnerships (including the notes thereto) as of
such date. Except as set forth in the GVGC Disclosure Schedule, since
November 30, 1993, to the knowledge of GVGC, neither GVGC nor any of its
Subsidiaries nor the Partnerships has incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, which would have,
individually or in the aggregate, a material adverse effect on GVGC, its
Subsidiaries and its interests in the Partnerships, taken as a whole,
except for liabilities incurred in the ordinary course of business and the
costs of the transactions contemplated by this Agreement.
3.12 Permits; Compliance with Applicable Laws. GVGC, its Subsidiaries and
the Partnerships hold all permits, licenses, variances, exemptions, orders,
approvals and other authorizations of all Governmental Entities which are
material to the operation of the businesses of GVGC, its Subsidiaries and
its interests in the Partnerships, taken as a whole (the "GVGC Permits").
GVGC, its Subsidiaries and the Partnerships are in compliance with the
terms of the GVGC Permits, except where the failure so to comply would not
have a material adverse effect on GVGC, its Subsidiaries and its interests
in the Partnerships, taken as a whole. Except as disclosed in the GVGC SEC
Documents, the businesses of GVGC, its Subsidiaries and the Partnerships
are not being conducted in violation of any law, ordinance or regulation of
any Governmental Entity, except for possible violations which individually
or in the aggregate do not, and, insofar as reasonably can be foreseen, in
the future will not, have a material adverse effect on GVGC, its
Subsidiaries and its interests in the Partnerships, taken as a whole.
Except as disclosed in the GVGC SEC Documents, as of the date of this
Agreement, to the knowledge of GVGC, no investigation or review by any
Governmental Entity with respect to GVGC, any of its Subsidiaries or the
Partnerships is pending or, to the knowledge of GVGC, threatened, nor has
any
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Governmental Entity indicated to GVGC an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably
can be foreseen, will not have a material adverse effect on GVGC, its
Subsidiaries and its interests in the Partnerships, taken as a whole.
3.13 [Intentionally omitted.]
3.14 Taxes. GVGC, each of its Subsidiaries and the Partnerships have
filed all tax returns required to be filed by any of them except for tax
returns the failure to file which would not cause a material adverse effect
on the business of GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole, and have paid, or have set up in accordance
with GAAP a reserve for the payment of, all taxes required to be paid as
shown on such returns, and the most recent financial statements contained
in the GVGC SEC Documents reflect in accordance with GAAP a reserve for all
taxes payable by GVGC and its Subsidiaries accrued through the date of such
financial statements. No material deficiencies for any taxes have been
proposed, asserted or assessed against GVGC, any of its Subsidiaries or the
Partnerships. Certain Federal income tax returns of GVGC for years before
1990 were audited by the United States Internal Revenue Service (the
"IRS"). These audits have been completed and all adjustments required have
been made. None of the Federal income tax returns of GVGC for 1990 and
later years, and none of the Federal income tax return of GVGC's
Subsidiaries or the Partnerships, have been audited by the IRS. For the
purpose of this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all Federal, state,
local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, severance, gross
proceeds, occupation, ad valorem, windfall profit and other taxes, duties
or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.
3.15 Employees. The employees of GVGC and its Subsidiaries are not
represented for purposes of collective bargaining nor have any employee
representation proceedings been initiated since May 31, 1993. The
Partnerships have no employees.
3.16 Employee Benefit Plans. (a) With respect to each employee benefit
plan (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (all the foregoing being herein called "Benefit
Plans"), maintained or contributed to by GVGC or any of its Subsidiaries or
the Partnerships, GVGC has made available to ANGC a true and correct copy
of (i) the most recent annual report (Form 5500) filed with the IRS, (ii)
such Benefit Plan and any related agreement, and (iii) each trust
agreement, group annuity contract or other funding agreement, if any,
relating to such Benefit Plan.
(b) With respect to the Benefit Plans, individually and in the aggregate,
to the knowledge of GVGC or any of its Subsidiaries, no event has occurred
and there exists no condition or set of circumstances in connection with
which GVGC or any of its Subsidiaries and the Partnerships could be subject
to any liability that is reasonably likely to have a material adverse
effect upon GVGC, its Subsidiaries and its interests in the Partnerships,
taken as a whole, under ERISA, the Internal Revenue Code of 1986, as
amended (the "Code"), or any other applicable law. Neither GVGC nor any of
its Subsidiaries or Partnerships have any liability, nor has any event
occurred nor does there exist any condition or set of circumstances in
connection with which GVGC or any of its Subsidiaries or Partnerships could
be subject to any liability that is reasonably likely to have a material
adverse effect upon GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole, with respect to any "employee benefit plan"
as defined in Section 3(3) of ERISA, maintained by any other trade or
business which is under common control with GVGC or any of its Subsidiaries
and the Partnerships (as determined in accordance with Section 4001 of
ERISA) or as a member of a "controlled group" (as defined in Section
4971(e)(2)(B) of the Code) with GVGC or any of its Subsidiaries or
Partnerships.
(c) With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions have not
been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly
footnoted in
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accordance with GAAP, on the financial statements of GVGC, any of its
Subsidiaries or the Partnerships, which obligations are reasonably likely
to have a material adverse effect on GVGC, its Subsidiaries and its
interests in the Partnerships, taken as a whole.
(d) Neither GVGC nor any of its Subsidiaries or Partnerships, nor any
other trade or business which is under common control with GVGC and its
Subsidiaries and Partnerships (as determined in accordance with Section
4001 of ERISA) or is a member of a "controlled group" (as defined in
Section 4971(e)(2)(B) of the Code) with GVGC and its Subsidiaries and
Partnerships contributes to, maintains or has any liability with respect to
(or has contributed to or maintained) any multiemployer pension benefit
plan (within the meaning of Section 3(37) of ERISA); any employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) subject to Title
IV of ERISA ("a defined benefit plan"); or any employee welfare plan
(within the meaning of Section 3(1) of ERISA) or any other arrangement,
understanding or agreement that provides or may be construed to provide
retiree health or medical benefits (other than benefits required to be
provided pursuant to Section 4980B of the Code) for or in respect of any
current, retired or former employees.
3.17 Environmental Matters. (a) Except as disclosed in the GVGC
Disclosure Schedule, the operations and activities of GVGC and each
Subsidiary and each Partnership comply in all respects with all applicable
federal, tribal, state, county, local and foreign laws, including, without
limitation, health and safety statutes and regulations and all
Environmental Laws (as such term is defined below), including, without
limitation, all restrictions, conditions, standards, limitations,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws or contained in any regulation, notice or demand
letter issued, entered, promulgated or approved thereunder, except for any
failures to comply that, singly or in the aggregate, would not have a
material adverse effect on the businesses of GVGC, its Subsidiaries and its
interests in the Partnerships, taken as a whole.
(b) Except as disclosed in the GVGC Disclosure Schedule, GVGC has
obtained all Environmental Permits that are (i) required for the ownership,
use and operation of each location owned, operated or leased by GVGC, each
Subsidiary and each Partnership (the "GVGC Property") which are material to
the operation of the businesses of GVGC, its Subsidiaries and its interests
in the Partnerships, taken as a whole or (ii) otherwise necessary in the
conduct of the business of GVGC and each Subsidiary and each Partnership,
which are material to the operation of GVGC, its Subsidiaries and its
interests in the Partnerships, taken as a whole. Except as disclosed in the
GVGC Disclosure Schedule, all such Environmental Permits are in effect, no
appeal nor any other action is pending to revoke any such Environmental
Permit, and GVGC, each Subsidiary and each Partnership is in full
compliance with all terms and conditions of all such Environmental Permits,
except where the failure so to comply would not have a material adverse
effect on the operation of the businesses of the GVGC, its Subsidiaries and
its interests in the Partnerships, taken as a whole.
(c) Except as disclosed in the GVGC Disclosure Schedule, there are no
physical or environmental conditions existing on any GVGC Property or
resulting from any GVGC operations or activities, past or present, at any
location, that would give rise to any on-site or off-site remedial
obligations under any existing Environmental Laws, except for remedial
obligations that would not have a material adverse effect on GVGC, its
Subsidiaries and its interests in the Partnerships, taken as a whole.
(d) GVGC shall and shall cause its Subsidiaries and the Partnerships to
make available to ANGC all internal and external environmental audits and
studies and correspondence on substantial environmental matters in the
possession of GVGC, its Subsidiaries or the Partnerships, made in the last
ten years relating to any GVGC Property or any other property or facility
previously owned, operated or leased by GVGC or any Subsidiary, or any
Partnership.
(e) Except as disclosed in the GVGC Disclosure Schedule, there is no
civil, criminal or administrative action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter
("Environmental Proceeding") known to GVGC relating to GVGC, any
Subsidiary, the Partnerships or any GVGC Property, pending or, to GVGC's
knowledge, threatened against GVGC, any Subsidiary, any Partnership or any
GVGC Property relating in any way to the Environmental Laws
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or any regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, which
Environmental Proceeding, if adversely determined, could have a material
adverse effect on the operation of the businesses of GVGC, its Subsidiaries
and its interests in the Partnerships, taken as a whole.
(f) The following terms shall be defined as follows:
(i) Environmental Laws--means all foreign, federal, state and local
laws, regulations, rules and ordinances in effect on the date hereof
relating to polluting or protection of the environment, including,
without limitation, laws relating to Releases or threatened Releases of
Hazardous Substances, Oils, Pollutants or Contaminants into the indoor
or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants, and all laws and
regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, Oils,
Pollutants or Contaminants.
(ii) Environmental Permits--means all licenses, permits and other
authorizations of a person that are required on the date hereof under
all federal, tribal, state, county, local and foreign Environmental
Laws.
(iii) Hazardous Substances, Oils, Pollutants or Contaminants--means
all substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.6, or defined
as such by, or regulated as such under, any Environmental Law.
(iv) Release--means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including the
movement of Hazardous Substances, Oils, Pollutants or Contaminants
through or in the air, soil, surface water, groundwater or property.
3.18 Absence of Certain Changes or Events. Except as disclosed in the
GVGC SEC Documents filed prior to the date of this Agreement or in the
consolidated balance sheet of GVGC and its Subsidiaries and of the
Partnerships at November 30, 1993, and the related statements of income,
cash flows and changes in stockholders' equity, true and correct copies of
which have been delivered to ANGC, or except as contemplated by this
Agreement or described in the GVGC Disclosure Schedule, since November 30,
1993, GVGC, its Subsidiaries and the Partnerships have conducted their
respective businesses only in the ordinary and usual course, and, as of the
date of this Agreement, there has not been (i) any damage, destruction or
loss, whether covered by insurance or not, which has, or insofar as
reasonably can be foreseen in the future is reasonably likely to have, a
material adverse effect on GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any GVGC Common Stock; or (iii) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of
any character (whether or not in the ordinary course of business)
individually or in the aggregate having or which, insofar as reasonably can
be foreseen, in the future is reasonably likely to have, a material adverse
effect on GVGC, its Subsidiaries and its interests in the Partnerships,
taken as a whole.
3.19 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of GVGC Common Stock is the only vote of the holders
of any class or series of GVGC capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
3.20 Number of Stockholders. GVGC has more than 2,000 stockholders, or
the GVGC Common Stock is listed on the National Market System of the
National Association of Securities Dealers Automated Quotation System.
3.21 Accounting Matters. Neither GVGC nor, to its knowledge, any of its
affiliates, has through the date of this Agreement taken or agreed to take
any action that would prevent ANGC from
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accounting for the business combination to be effected by the Merger as a
pooling of interests, except for actions that will be rescinded as of the
Effective Date.
3.22 Contracts and Customers. Except as disclosed in the GVGC Disclosure
Schedule, neither GVGC nor, to GVGC's knowledge, the other parties to any
of the contracts listed in the GVGC Disclosure Schedule is in default
thereunder and GVGC has received no notice of any such default and no event
has occurred, to the knowledge of GVGC, that with notice or the passage of
time would result in an event of default thereunder. All of such contracts
are in full force and effect.
ARTICLE IV
Representations and Warranties of ANGC and ANGI
Each of ANGC and ANGI jointly and severally represents and warrants to GVGC
as follows, except as set forth in the ANGC Disclosure Schedule:
4.1 Organization and Standing. Each of ANGC and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation or organization and has all requisite
power and authority to own, lease and operate its properties and to carry
on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure
so to qualify would not have a material adverse effect on ANGC and its
Subsidiaries, taken as a whole.
4.2 Capitalization. As of the date hereof, the authorized capital stock
of ANGC consists of 40,000,000 shares of ANGC Common Stock and 200,000
shares of preferred stock. At the close of business on February 21, 1994,
(i) 13,418,644 shares of ANGC Common Stock were outstanding, (ii) not more
than 853,000 shares of ANGC Common Stock were subject to options, (iii) no
shares of preferred stock were outstanding, (iv) no shares of ANGC Common
Stock were held by ANGC in its treasury or by its wholly-owned
Subsidiaries, and (v) no Voting Debt securities were issued or outstanding.
All outstanding shares of ANGC Common Stock are and the shares of ANGC
Common Stock to be issued in the Merger will be validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as disclosed
herein, there are no options, warrants, calls, rights, commitments or
agreements of any character to which ANGC or any Subsidiary of ANGC is a
party or by which it is bound obligating ANGC or any Subsidiary of ANGC to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or any Voting Debt securities of ANGC or
any Subsidiary of ANGC or obligating ANGC or any Subsidiary of ANGC to
grant, extend or enter into any such option, warrant, call, right or
agreement.
4.3 Lists of Properties, Contracts and Other Data. The ANGC Disclosure
Schedule to be delivered in accordance with Section 7.3(g) hereof to GVGC
shall list the following, as of the date of delivery unless otherwise
provided below, and shall be certified by ANGC to be complete and accurate
in a manner reasonably satisfactory to GVGC:
(i) All employment, managerial, advisory or consulting agreements to
which ANGC is a party; a complete description of all pension, profit-
sharing, thrift, or other retirement plans, employee stock ownership
plans, deferred compensation, stock ownership, stock purchase,
performance share, individual or group bonus or other deferred or
incentive plans, severance plans, hospitalization, insurance, vacation,
death benefit, collective bargaining or other similar plans,
agreements, arrangements and commitments or understandings of ANGC and
its Subsidiaries providing for any employee benefit; all other
contracts and relationships with or with respect to, and all other
obligations or liabilities between ANGC or any of its Subsidiaries and
any employee (or other individual with whom ANGC has a business
relationship) of ANGC or any of its Subsidiaries;
(ii) All pending or threatened litigation (except litigation in which
ANGC or any of its Subsidiaries is solely a stakeholder of money held
for others), governmental or regulatory
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proceedings, investigations and labor disputes (including, without
limitation, unasserted claims and assessments), in each case known to
ANGC, to which ANGC or any of its Subsidiaries is or, in the case of
threatened proceedings, investigations or labor disputes, is threatened
to be made a party;
(iii) All claims asserted or threatened, in each case known to ANGC,
at any time against ANGC or any of its Subsidiaries in respect of
personal injury, wrongful death or property damage alleged to have
resulted from products or services provided by ANGC or any of its
Subsidiaries, together with a description of each such claim, action
initiated with respect thereto and the disposition thereof;
(iv) The jurisdiction of incorporation or organization of each
Subsidiary of ANGC, its capitalization, each jurisdiction in which it
is qualified or registered to do business as a foreign corporation and
the percentage of its issued and outstanding securities or other
interest owned by ANGC or any Subsidiary of ANGC, and copies of the
Articles of Incorporation and bylaws of each; and
(v) Except for ANGC's Subsidiaries, all corporations, joint ventures
or other entities in which ANGC or any of its Subsidiaries owns an
equity interest and all limited partnerships or general partnerships
sponsored or promoted by ANGC or any of its Subsidiaries (other than
entities whose securities are publicly traded in any recognized regular
market), including, to the extent known by ANGC, a brief description of
the activities conducted thereby, total assets thereof, and percentage
of ANGC's equity interest.
4.4 Subsidiaries. The only Subsidiaries of ANGC are the following:
Associated Natural Gas, Inc., Associated Transport and Trading Company,
Associated Interstate Pipe Line Company, Associated Intrastate Pipeline
Company, Associated Louisiana Intrastate Pipe Line Company, ATTCO LA
Company, ATTCO NGL Pipeline Company, ATTCO Pipeline Company, AIM Pipeline
Company, ANGI Limited and Associated Natural Gas (U.K.) Ltd. Except as set
forth in the ANGC Disclosure Schedule, ANGC is, directly or indirectly, the
record and beneficial owner of all of the outstanding shares of or other
interests in its Subsidiaries and no equity securities of its Subsidiaries
are or may be required to be issued by reason of any options, warrants,
rights, calls, commitments or other agreements. Except as set forth in the
ANGC Disclosure Schedule, all of such shares or other interests so owned by
ANGC are owned by it free and clear of any lien, claim or encumbrance with
respect thereto. The outstanding shares of stock or other securities of
each ANGC Subsidiary have been duly and validly issued and are fully paid
and nonassessable. None of ANGC's Subsidiaries own any shares of ANGC
Common Stock.
4.5 Partnerships and Joint Ventures. The joint venture corporations,
limited partnerships, general partnerships or other entities identified on
the ANGC Disclosure Schedule are the only joint venture corporations or
partnerships in which ANGC or its Subsidiaries has an equity interest,
except for interests in Subsidiaries. Except as set forth in the ANGC
Disclosure Schedule, all of such shares or interests so owned by ANGC or
its Subsidiaries are owned by it free and clear of any lien, claim or
encumbrance with respect thereto.
4.6 Title to Assets. ANGC and each of its Subsidiaries have good and
defensible title to, or a valid leasehold interest in, their respective
properties and assets (including those reflected in ANGC's consolidated
balance sheet at December 31, 1993, except as since sold or otherwise
disposed of in the ordinary course of business), free and clear of all
title defects, liens and encumbrances, except for: (i) Pipeline Properties,
(ii) any liens, encumbrances and other matters reflected in ANGC's
consolidated balance sheet at December 31, 1993 (including the notes
thereto), (iii) liens for current realty and personal property taxes and
assessments not yet due and payable, or (iv) imperfections of title and
encumbrances that are not substantial in character, amount or extent and
that do not materially detract from the value or materially interfere with
the present use of the properties subject thereto or affected thereby or
otherwise materially impair ANGC's or any of its Subsidiaries' business
operations in any material respect. Neither ANGC nor any of its
Subsidiaries has received any notice from any Governmental Entity or
official of any eminent domain proceeding or any violation (which has not
been
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complied with, satisfied or withdrawn) of any applicable zoning regulation,
ordinance or other law, order or regulation relating to its operations or
its owned or leased properties, and, to the knowledge of ANGC, no such
violation exists, except for such notices or violations that would not
materially interfere with the present use of the properties or otherwise
materially impair ANGC's or its Subsidiaries' business operations in any
material respect. The maps attached to the ANGC Disclosure Schedule
depicting ANGC's Pipeline Properties are true and accurate in all material
respects and ANGC or a Subsidiary has sufficient title to or interest in
the applicable asset or right to enable ANGC or any Subsidiary to conduct
its business with respect thereto as it currently is being conducted.
Except as contemplated in this Agreement or as set forth in the ANGC
Disclosure Schedule, (a) no person (other than ANGC or any of its
Subsidiaries) has any right, title or interest or any claim thereto in any
of the ANGC Pipeline Properties, the existence of which, either
individually or in the aggregate, would prevent or impede the consummation
of the transactions contemplated hereby or to the knowledge of ANGC have a
material adverse effect on ANGC and its Subsidiaries, taken as a whole; and
(b) ANGC or a Subsidiary or a predecessor has made all filings and received
all approvals, certificates or other authorizations necessary under
applicable state and federal law to construct and operate all ANGC Pipeline
Properties, to engage in the gathering of gas and to abandon the ANGC
Pipeline Properties or to terminate any such transportation, except for
such filings, approvals, certificate and authorizations, the absence of
which would not have a material adverse effect on ANGC and its
Subsidiaries, taken as a whole.
4.7 Authority. ANGC and ANGI have all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of ANGC and ANGI, and no stockholders' vote or other corporate
proceedings on the part of ANGC or ANGI are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly executed and delivered by ANGC and ANGI and, assuming this
Agreement constitutes a valid and binding obligation of GVGC, constitutes a
valid and binding obligation of ANGC and ANGI enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws for the protection of
creditors or debtors or generally affecting creditors' rights.
4.8 Consents and Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity is
required by or with respect to ANGC or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by ANGC and
ANGI or the consummation by ANGC and ANGI of the transactions contemplated
hereby, the failure to obtain which would have a material adverse effect on
ANGC and its Subsidiaries, taken as a whole, except for (i) the filing of a
premerger notification report by GVGC and ANGC under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing with the SEC of (A) a proxy statement in definitive form relating to
the meeting of GVGC's stockholders to be held in connection with the Merger
(the "Proxy Statement"), (B) the S-4 and (C) such reports under Sections
13(a) and 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated hereby, and the obtaining from the SEC of
such orders as may be so required, (iii) the filing of such documents with,
and the obtaining of such orders from, the various state authorities,
including state securities authorities, that are required in connection
with the transactions contemplated by this Agreement, (iv) the filing of
articles of merger with the Secretary of State of the State of Colorado and
the Division and appropriate documents with the relevant authorities of
other states in which ANGI is qualified to do business, and (v) the
qualification of ANGI as a foreign corporation qualified to do business in
Utah and other such filings, authorizations, orders and approvals of
tribal, state, county, and local governmental authorities, including state
takeover approvals.
4.9 No Violation. Except as set forth in the ANGC Disclosure Schedule,
the execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time,
or
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both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on
assets pursuant to (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "ANGC
Violation"), (A) any provision of the Certificate of Incorporation or By-
laws of ANGC or any Subsidiary of ANGC, (B) any provision of any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan or other
agreement, obligation, instrument, permit, concession, franchise or
license, or (C) any judgement, order, decree, statute, law, ordinance, rule
or regulation applicable to ANGC or any Subsidiary of ANGC or their
respective properties or assets, which ANGC Violation, in the case of each
of clauses (B) and (C), would have a material adverse effect on ANGC or its
Subsidiaries, taken as a whole.
4.10 SEC Documents and Financial Reports. ANGC has made available to GVGC
a true and complete copy of each Form 10-K filed by ANGC since September
30, 1989 and each other report, schedule, registration statement and
definitive proxy statement filed by ANGC with the SEC since September 30,
1991 (as such documents have since the time of their filing been amended,
the "ANGC SEC Documents") which are all the documents (other than
preliminary material) that ANGC was required to file with the SEC since
such date. As of their respective dates, the ANGC SEC Documents complied in
all material respects with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such ANGC SEC Documents, and none of the ANGC SEC
Documents contained, as of the respective dates thereof, any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
financial statements of ANGC included in the ANGC SEC Documents complied,
as of the respective dates thereof, as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP, as of the respective dates thereof, applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of ANGC and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended.
4.11 No Undisclosed Liabilities. Except as and to the extent set forth in
the ANGC SEC Documents, as of December 31, 1993, neither ANGC nor any of
its Subsidiaries had any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that have been required by GAAP to
be reflected on the consolidated balance sheet of ANGC and its Subsidiaries
(including the notes thereto) on such date. Except as set forth in the ANGC
Disclosure Schedule, since December 31, 1993, to the knowledge of ANGC,
neither ANGC nor any of its Subsidiaries has incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, which would
have, individually or in the aggregate, a material adverse effect on ANGC
and its Subsidiaries, taken as a whole, except for liabilities incurred in
the ordinary course of business and the costs of the transactions
contemplated by this Agreement.
4.12 Permits; Compliance with Applicable Laws. ANGC and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, approvals and
other authorizations of all Governmental Entities which are material to the
operation of the businesses of ANGC and its Subsidiaries, taken as a whole
(the "ANGC Permits"). ANGC and its Subsidiaries are in compliance with the
terms of the ANGC Permits, except where the failure so to comply would not
have a material adverse effect on ANGC and its Subsidiaries, taken as a
whole. Except as disclosed in the ANGC SEC Documents filed, the businesses
of ANGC and its Subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for
possible violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future will not, have a
material adverse effect on ANGC and its Subsidiaries, taken as a whole.
Except as disclosed in the ANGC SEC Documents, as of the date of this
Agreement, to the knowledge of ANGC, no investigation or review by any
Governmental
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Entity with respect to ANGC or any of its Subsidiaries is pending or, to
the knowledge of ANGC, threatened, nor has any Governmental Entity
indicated to ANGC an intention to conduct the same, other than, in each
case, those the outcome of which, as far as reasonably can be foreseen,
will not have a material adverse effect on ANGC and its Subsidiaries, taken
as a whole.
4.13 [Intentionally omitted.]
4.14 Taxes. ANGC and each of its Subsidiaries have filed all tax returns
required to be filed by any of them except for tax returns the failure to
file which would not cause a material adverse effect on the business of
ANGC and its Subsidiaries, taken as a whole, and have paid, or have set up
in accordance with GAAP a reserve for the payment of, all taxes required to
be paid as shown on such returns, and the most recent financial statements
contained in the ANGC SEC Documents reflect in accordance with GAAP a
reserve for all taxes payable by ANGC and its Subsidiaries accrued through
the date of such financial statements. No material deficiencies for any
taxes have been proposed, asserted or assessed against ANGC or any of its
Subsidiaries. None of the Federal income tax returns of ANGC or its
Subsidiaries have been audited by the IRS.
4.15 Employees. The employees of ANGC and its Subsidiaries are not
represented for purposes of collective bargaining nor have any employee
representation proceedings been initiated since September 30, 1993.
4.16 Employee Benefit Plans. (a) With respect to each Benefit Plan
maintained or contributed to by ANGC or any of its Subsidiaries, ANGC has
made available to GVGC a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Benefit Plan and
any related agreement, and (iii) each trust agreement, group annuity
contract agreement or other funding agreement, if any, relating to such
Benefit Plan.
(b) With respect to the Benefit Plans, individually and in the aggregate,
to the knowledge of ANGC or any of its Subsidiaries, no event has occurred
and there exists no condition or set of circumstances in connection with
which ANGC or any of its Subsidiaries could be subject to any liability
that is reasonably likely to have a material adverse effect upon ANGC and
its Subsidiaries, taken as a whole, under ERISA, the Code, or any other
applicable law. Neither ANGC nor any of its Subsidiaries have any
liability, nor has any event occurred nor does there exist any condition or
set of circumstances in connection with which ANGC or any of its
Subsidiaries could be subject to any liability that is reasonably likely to
have a material adverse effect upon ANGC and its Subsidiaries, taken as a
whole, with respect to any "employee benefit plan" as defined in Section
3(3) of ERISA, maintained by any other trade or business which is under
common control with ANGC or any of its Subsidiaries (as determined in
accordance with Section 4001 of ERISA) or as a member of a "controlled
group" (as defined in Section 4971(e)(2)(B) of the Code) with ANGC or any
of its Subsidiaries.
(c) With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions have not
been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with GAAP, on the financial statements of ANGC or
any of its Subsidiaries, which obligations are reasonably likely to have a
material adverse effect on ANGC and its Subsidiaries, taken as a whole.
(d) Neither ANGC nor any of its Subsidiaries, nor any other trade or
business which is under common control with ANGC and its Subsidiaries (as
determined in accordance with Section 4001 of ERISA) or is a member of a
"controlled group" (as defined in Section 4971(e)(2)(B) of the Code) with
ANGC and its Subsidiaries contributes to, or maintains or has any liability
with respect to (or has contributed to or maintained) any multiemployer
pension benefit plan (within the meaning of Section 3(37) of ERISA); any
defined benefit plan; or any employee welfare plan (within the meaning of
Section 3(1) of ERISA) or any other arrangement, understanding or agreement
that provides or may be construed to provide retiree health or medical
benefits (other than benefits required to be provided pursuant to Section
4980B of the Code) for or in respect of any current, retired or former
employees.
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4.17 Environmental Matters (a) Except as disclosed in the ANGC Disclosure
Schedule, the operations and activities of ANGC and each Subsidiary comply
in all respects with all applicable federal, tribal, state, county, local
and foreign laws, including, without limitation, health and safety statutes
and regulations and all Environmental Laws, including, without limitation,
all restrictions, conditions, standards, limitations, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, notice or demand letter
issued, entered, promulgated or approved thereunder, except for any
failures to comply that, singly or in the aggregate, would not have a
material adverse effect on the businesses of ANGC and its Subsidiaries,
taken as a whole.
(b) Except as disclosed in the ANGC Disclosure Schedule, ANGC has
obtained all Environmental Permits that are (i) required for the ownership,
use and operation of each location owned, operated or leased by ANGC and
each Subsidiary (the "ANGC Property") which are material to the operation
of the businesses of ANGC and its Subsidiaries, taken as a whole or (ii)
otherwise necessary in the conduct of the business of ANGC and each
Subsidiary, which are material to the operation of ANGC and its
Subsidiaries, taken as a whole. Except as disclosed in the ANGC Disclosure
Schedule, all such Environmental Permits are in effect, no appeal nor any
other action is pending to revoke any such Environmental Permit, and ANGC
and each Subsidiary is in full compliance with all terms and conditions of
all such Environmental Permits, except where the failure so to comply would
not have a material adverse effect on the operation of the businesses of
the ANGC and its Subsidiaries, taken as a whole.
(c) Except as disclosed in the ANGC Disclosure Schedule, there are no
physical or environmental conditions existing on any ANGC Property or
resulting from any ANGC operations or activities, past or present, at any
location, that would give rise to any on-site or off-site remedial
obligations under any existing Environmental Laws, except for remedial
obligations that would not have a material adverse effect on ANGC and its
Subsidiaries, taken as a whole.
(d) ANGC shall and shall cause its Subsidiaries to make available to GVGC
all internal and external environmental audits and studies and
correspondence on substantial environmental matters in the possession of
ANGC or its Subsidiaries, made in the last ten years relating to the ANGC
Property or any other property or facility previously owned, operated or
leased by ANGC or any Subsidiary.
(e) Except as disclosed in the ANGC Disclosure Schedule, there is no
Environmental Proceeding known to ANGC relating to ANGC or any Subsidiary
or the ANGC Property pending or, to ANGC's knowledge, threatened against
ANGC or any Subsidiary or the ANGC Property relating in any way to the
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder, which Environmental Proceeding, if adversely
determined, could have a material adverse effect on the operation of the
businesses of ANGC and its Subsidiaries, taken as a whole.
4.18 Absence of Certain Changes or Events. Except as disclosed in the
ANGC SEC Documents filed prior to the date of this Agreement or in the
consolidated balance sheet of ANGC and its Subsidiaries at December 31,
1993, and the related statements of income, cash flows and changes in
stockholders' equity, true and correct copies of which have been delivered
to GVGC, or except as contemplated by this Agreement, since December 31,
1993, ANGC and its Subsidiaries have conducted their respective businesses
only in the ordinary and usual course, and, as of the date of this
Agreement, there has not been (i) any damage, destruction or loss, whether
covered by insurance or not, which has, or insofar as reasonably can be
foreseen in the future is reasonably likely to have, a material adverse
effect on ANGC and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any ANGC Common Stock;
or (iii) any transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary
course of business) individually or in the aggregate having or which,
insofar as reasonably can be foreseen, in the future is reasonably likely
to have, a material adverse effect on ANGC and its Subsidiaries, taken as a
whole.
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4.19 Number of Stockholders. ANGC has more than 2,000 stockholders or the
ANGC Common Stock is listed on the New York Stock Exchange.
4.20 Accounting Matters. Neither ANGC nor, to its knowledge, any of its
affiliates, has through the date of this Agreement taken or agreed to take
any action that would prevent ANGC from accounting for the business
combination to be effected by the Merger as a pooling of interests, except
for actions that will be rescinded as of the Effective Time.
4.21 Contracts and Customers. Except as disclosed in the ANGC Disclosure
Schedule, neither ANGC nor, to ANGC's knowledge, the other parties to any
of ANGC's significant contracts or agency agreements for the purchase,
sale, exchange, storage or transportation of natural gas is in default
thereunder and ANGC has received no notice of any such default and no event
has occurred, to the knowledge of ANGC, that with notice or the passage of
time would result in an event of default thereunder. All of such contracts
are in full force and effect.
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Covenants of GVGC, ANGC and ANGI. During the period from the date of this
Agreement and continuing until the Effective Time, except as contemplated by
this Agreement, GVGC on the one hand, and ANGC and ANGI on the other, each
agree as to itself and its Subsidiaries that:
(a) Ordinary Course. They shall use all reasonable efforts to carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all
reasonable efforts to preserve intact their present business organizations,
keep available the services of their present officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective
Time.
(b) Dividends; Changes in Stock. They shall not, nor shall they permit
any of their Subsidiaries to, nor shall they propose to (i) declare or pay
any dividends on or make any distributions in respect of any of their
capital stock (other than regular quarterly cash dividends declared by
ANGC), or (ii) split, combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of their capital stock
or (iii) repurchase or otherwise acquire, or permit any Subsidiary to
purchase or otherwise acquire, any shares of their capital stock.
(c) Issuance of Securities. GVGC shall not, nor shall it permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class, any Voting Debt or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, Voting Debt or convertible
securities, other than (i) the issuance of up to 963,856 shares of GVGC
Common Stock upon the conversion of the Convertible Notes, (ii) the
issuance of up to 18,000 shares of GVGC Common Stock pursuant to the
Incentive Stock Award Agreements, (iii) the issuance of up to 181,825
shares of GVGC Common Stock pursuant to outstanding options under the GVGC
1992 Option Plan, (iv) the issuance of up to 33,000 shares of GVGC Common
Stock pursuant to the Centennial Option Agreements, (v) the issuance of up
to 5,000 shares of GVGC Common Stock pursuant to the Boone Options and (vi)
the grant of an option to purchase up to 3,000 shares of GVGC Common Stock
to a new employee under the GVGC 1992 Option Plan and the issuance of GVGC
Common Stock upon the exercise thereof.
(d) Governing Documents. They shall not amend or propose to amend their
Articles of Incorporation or By-laws.
(e) No Solicitations. Neither GVGC nor its Subsidiaries shall, directly
or indirectly, through any officer, director, employee, representative or
agent of GVGC or any of its Subsidiaries, solicit or
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knowingly encourage, including by way of furnishing information, the
initiation of any inquiries or proposals regarding any merger, sale of
substantial assets, tender offer, sale of shares of capital stock or
similar business combination transactions involving GVGC or its
Subsidiaries (any of the foregoing transactions being referred to herein as
an "acquisition transaction"); provided, however, nothing in this Section
5.1(e) or elsewhere in this Agreement shall prevent the Board of Directors
of GVGC in the exercise of their fiduciary duties and after consulting with
independent counsel, from considering, negotiating and approving another
unsolicited bona fide proposal that the Board of Directors of GVGC
determines in good faith, after consultation with its financial advisors,
may result in a transaction more favorable to GVGC's shareholders from a
financial point of view than the transactions contemplated by this
Agreement. If the Board of Directors of GVGC receives a request for
confidential information by a potential bidder for GVGC and the Board of
Directors of GVGC determines, after consultation with independent counsel,
that the Board of Directors has a fiduciary obligation to provide such
information to a potential bidder, then GVGC may, subject to
confidentiality agreements substantially similar to those previously
executed by ANGC, provide such potential bidder with access to information
regarding GVGC. GVGC shall promptly notify ANGC, orally and in writing, if
any such proposal or offer is made and shall, in any such notice, indicate
the identity and terms and conditions of any proposal or offer, or any such
inquiry or contact. GVGC shall keep ANGC advised of the progress and status
of any such inquiries or proposals. The obligation of the Board of
Directors of GVGC to recommend the adoption and approval of this Agreement
and the Merger to the stockholders of GVGC pursuant to Section 6.5 of this
Agreement shall be subject to the fiduciary duties of the directors, as
determined by the directors after consultation with their independent
counsel, and nothing contained in this Section 5.1(e) or elsewhere in this
Agreement will prevent the Board of Directors of GVGC from approving or
recommending to the stockholders of GVGC any unsolicited tender offer or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 under the
Exchange Act if required in the exercise of their fiduciary duties, as
determined by the directors after consultation with independent counsel.
(f) No Acquisitions. GVGC shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial
portion of the assets of or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets not in
the ordinary course of business.
(g) No Dispositions. GVGC shall not, nor shall it permit any of its
Subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets, which are material, individually or in the aggregate, to GVGC, its
Subsidiaries and its interests in the Partnerships, taken as a whole, other
than (i) as may be required by law to consummate the transactions
contemplated hereby, (ii) in the ordinary course of business consistent
with prior practice, or (iii) in connection with an acquisition transaction
contemplated by Section 5.1(e).
(h) Indebtedness. GVGC shall not, nor shall it permit any of its
Subsidiaries to, incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of GVGC or any of its Subsidiaries or
guarantee any debt securities of others other than in each case in the
ordinary course of business consistent with prior practice.
(i) Other Actions. Except as may be required by law, each party shall use
reasonable efforts to cause the conditions to the Merger set forth in
Article VII to be satisfied.
(j) Advice of Changes; Filings. Each party shall confer on a regular and
frequent basis with the other, report on operational matters and promptly
advise the other of any change or event having, or which, insofar as can
reasonably be foreseen, could have, a material adverse effect on such party
and its Subsidiaries (and, in the case of GVGC, its interests in the
Partnerships), taken as a whole. Each party shall promptly provide the
other (or its counsel) copies of all filings made by such party with any
state or Federal Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
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(k) Additional Employee Covenants. During the period from the date of
this Agreement and continuing until the Effective Time, GVGC agrees as to
itself and its Subsidiaries that it will not, without the prior written
consent of ANGC, (i) (except as may be provided in this Agreement or
required by law) enter into, adopt, amend or terminate any employee benefit
plan or other agreement, arrangement, plan or policy between GVGC and one
or more of its directors or officers or (ii) except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, increase in any manner the compensation or fringe
benefits of any director, officer or employee or (iii) pay any benefit not
required by any plan and arrangement in effect as of the date hereof or
(iv) enter into any contract, agreement, commitment or arrangement to do
any of the foregoing.
(l) Additional Tax Covenants. During the period from the date of this
Agreement and continuing until the Effective Time, GVGC agrees to file with
respect to itself, its Subsidiaries and Partnerships, all returns required
to be filed by any of them and will pay (or GVGC will pay on their behalf)
all taxes required to be paid as shown on such returns.
ARTICLE VI
Additional Agreements
6.1 Preparation of S-4 and the Proxy Statement. ANGC and GVGC shall promptly
prepare and file with the SEC the Proxy Statement and S-4. Each of GVGC and
ANGC shall use reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. ANGC shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of ANGC Common Stock in
the Merger and GVGC shall furnish all information concerning GVGC and the
holders of GVGC Common Stock as may be reasonably requested in connection with
any such action. None of the information supplied or to be supplied in writing
by GVGC for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by ANGC in connection with the
issuance of shares of ANGC Common Stock in the Merger (the "S-4") will, at the
time the S-4 is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement will, at the
date mailed to GVGC stockholders and at the time of the meeting of stockholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not of the circumstances under which
they are made, not misleading. None of the information supplied or to be
supplied in writing by ANGC for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by ANGC in
connection with the issuance of shares of ANGC Common Stock in the Merger (the
"S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement will, at the date mailed to GVGC stockholders and at the time of the
meeting of stockholders of GVGC to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. ANGC agrees that the S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.
6.2 Comfort Letters of Accountants. Each of ANGC and GVGC shall use
reasonable efforts to cause to be delivered to the other a letter of such
party's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to the
other party, in
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form and substance reasonably satisfactory to the other party and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
6.3 Access to Information. Upon reasonable notice, GVGC and ANGC shall each
(and shall cause each of their respective Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, reasonable access, during normal business hours during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, each of GVGC and ANGC shall (and shall cause
each of their respective Subsidiaries (and, in the case of GVGC, its
Partnerships) to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. The parties hereby agree that the
Confidentiality Agreements between the parties dated January 28, 1994 (the
"Confidentiality Agreements") shall be incorporated into this Agreement and
made a part hereof for all purposes.
6.4 Access to Financial Institutional Relationships. GVGC agrees that ANGC
may contact, upon reasonable notice to GVGC, all financial institutions that
are currently providing financing to GVGC or its Subsidiaries or the
Partnerships and may inquire of such Financial Institutions whether they are
generally willing to continue to provide financing to GVGC and its Subsidiaries
and the Partnerships.
6.5 Stockholder Approvals. GVGC shall call a meeting of its stockholders to
be held as promptly as practicable for the purpose of voting upon the adoption
and approval of the Merger and this Agreement and related matters. Subject to
the conditions of Section 5.1(e), GVGC's Board of Directors will recommend to
the stockholders approval of such matters.
6.6 Legal Conditions to Merger. Each of GVGC, ANGC and ANGI will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger (including furnishing
all information required under the HSR Act and in connection with approvals of
or filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of GVGC, ANGC and ANGI will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained or made by GVGC, ANGC, ANGI or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. ANGC will reserve sufficient shares
of its Common Stock for issuance in the Merger.
6.7 Affiliates. Prior to the Closing Date, each party shall deliver to the
other party a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of GVGC, "affiliates"
of the party delivering the letter for purposes of Rule 145 under the
Securities Act and the SEC's Accounting Series Release 135. Each party shall
use reasonable efforts to cause each such person to deliver to the other party
on or prior to the Closing Date a written agreement substantially in the form
attached as Exhibit 6.7(i) in the case of ANGC or Exhibit 6.7(ii) in the case
of GVGC.
6.8 Stock Exchange Listing. ANGC shall use reasonable efforts to cause the
shares of ANGC Common Stock to be issued in the Merger and the Convertible
Notes after the Merger, to be approved for listing on the NYSE and any other
national securities exchange on which shares of ANGC Common Stock may at such
time be listed, subject to official notice of issuance.
6.9 Employee Benefit Plans. After the Effective Time, ANGC shall provide
those employees of GVGC covered by the benefit plans of GVGC and its
subsidiaries with the same benefits that accrue to the employees of ANGC. ANGC
and GVGC further agree that any present employees of GVGC shall be
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credited for their service with GVGC for purposes of eligibility and vesting in
the plans provided by ANGC. Those employees' benefits under ANGC's medical
benefit plan shall not be subject to any exclusions for any pre-existing
conditions, and credit shall be received for any deductibles or out-or-pocket
amounts previously paid. The provisions of this Section 6.9 are intended to be
for the benefit of, and shall be enforceable by, the parties hereto and each
employee of GVGC covered by GVGC's benefit plans.
6.10 Expenses. (a) Except as set forth in Section 6.10(b), whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, and, in connection therewith, each of ANGC and GVGC
shall pay, with its own funds and not with funds provided by the other party,
any and all property or transfer taxes imposed on such party resulting from the
Merger, except that expenses incurred in connection with printing and mailing
the Proxy Statement and the S-4 shall be shared equally by ANGC and GVGC.
(b) In the event that (i) either ANGC or GVGC shall terminate this Agreement
pursuant to Section 8.1(e) following a failure of the stockholders of GVGC to
approve this Agreement, (ii) prior to the time of the meeting of GVGC's
stockholders there shall be an acquisition transaction with respect to GVGC
that has not been withdrawn and (iii) at the time of the meeting of GVGC's
stockholders, GVGC's Board of Directors shall have withdrawn its recommendation
to the GVGC stockholders to approve the Merger (a "Section 6.10(b) Event"),
then GVGC shall promptly pay to ANGC the sum of $3,000,000, as compensation for
lost opportunities, reimbursement for out-of-pocket expenses and for liquidated
damages and not as a penalty.
6.11 Brokers or Finders. Each of ANGC, ANGI and GVGC represents, as to
itself, its Subsidiaries (and, in the case of GVGC, the Partnerships) and its
affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except Rauscher Pierce Refsnes, Inc. whose fees
and expenses will be paid by GVGC in accordance with GVGC's agreement with such
firm (copies of which have been delivered by GVGC to ANGC prior to the date of
this Agreement and which shall not be amended without the consent of ANGC); and
each of ANGC and GVGC respectively agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on
the basis of any act or statement alleged to have been made by such party or
its affiliate.
6.12 Indemnification. (a) From and after the Effective Time, the Surviving
Corporation and ANGC shall indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior
to the Effective Time, an officer, director or employee of either Constituent
Corporation or any of their respective Subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses, liabilities or judgments
or amounts that are paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of or in connection
with any claim, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was a director, officer or employee of either Constituent Corporation or any
Subsidiary of a Constituent Corporation, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether reasserted
or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including without limitation all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
full extent such corporations are permitted under the law of their respective
states of incorporation to indemnify their own directors, officers and
employees, as the case may be (and the Surviving Corporation or ANGC will pay
expenses in advance of the final disposition of any such action or proceeding
to each Indemnified Party to the full extent permitted by law). The defense of
any such claim, action, suit, proceeding or investigation shall be conducted by
the Indemnifying Party. If the Indemnifying Party has failed to conduct such
defense, the Indemnified Parties may retain counsel satisfactory to them and
the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received. The party not conducting the defense will use reasonable
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efforts to assist in the vigorous defense of any such matter, provided that
such party shall not be liable for any settlement of any claim effected without
its written consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 6.12, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify ANGC (but the failure so to notify a party shall
not relieve such party from any liability which it may have under this Section
6.12 except to the extent such failure materially prejudices such party). If
the Indemnifying Party is responsible for the attorneys' fees of the
Indemnified Parties, then the Indemnified Parties as a group may retain only
one law firm to represent them with respect to each such matter unless there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(b) The Surviving Corporation shall purchase and maintain for a period of
five years after the Effective Time continuation coverage for GVGC's directors'
and officers' liability insurance policy as in effect on the date hereof or
obtain a directors' and officers' insurance policy with comparable coverage.
(c) The provisions of this Section 6.12 are intended to be for the benefit
of, and shall be enforceable by, the parties hereto and each Indemnified Party,
his heirs and his representatives.
6.13 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use
reasonable efforts to take, or cause to be taken, all action and to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of stockholders of GVGC
described in Sections 6.5 and 7.1(a), including cooperating fully with the
other party in providing all information and making all necessary filings in
connection with, among other things, the approvals under the HSR Act and other
state and local approvals. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
6.14 Tax and Accounting Treatment. The parties agree to treat the Merger as a
reorganization within Section 368(a) of the Code. Neither ANGC nor ANGI nor
GVGC nor any of their Subsidiaries shall take or cause to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger
as a "pooling-of-interests" for accounting purposes or as a "reorganization"
within the meaning of Section 368 of the Code.
6.15 GVGC Options and Incentive Stock Awards; Employment Agreements. (a) GVGC
shall take such action as is necessary to accelerate the vesting of the options
outstanding under the GVGC 1992 Option Plan, to provide for the exercise of
such options (conditioned upon consummation of the Merger) at the Effective
Time and to terminate any such options that remain outstanding after the
Effective Time. GVGC shall use reasonable efforts to obtain all necessary
consents of the other parties thereto (i) to amend the Centennial Options and
the Boone Options to provide that they shall terminate unless they are
exercised before the Effective Time, (ii) to rescind all options granted under
the 1993 Option Plan and (iii) to amend the Incentive Stock Award Agreements to
provide that no more than 18,000 shares of GVGC Common Stock may be awarded
thereunder, that all of such shares shall be issued before the Effective Time,
and that the Incentive Stock Award Agreements shall be terminated at the
Effective Time. At the Effective Time, ANGC shall grant options to purchase
ANGC Common Stock under the Associated Natural Gas Corporation Equity Incentive
Plan of 1991, adopted February 14, 1992, to each holder of options under the
GVGC 1992 Option Plan so that such holders shall receive options to purchase
such number of shares of ANGC Common Stock as is at least equal to the number
of shares of GVGC Common Stock that they held options to purchase on the date
hereof multiplied by the Conversion Number. Such options shall have an exercise
price equal to the closing price for the ANGC Common Stock on the New York
Stock Exchange on the date on which the Effective Time occurs. GVGC shall use
reasonable efforts to cause the termination of the Employment Agreements
described in Section 7.2(i).
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(b) The provisions of this Section 6.15 are intended to be for the benefit
of, and shall be enforceable by, the parties hereto and each holder of GVGC
1992 Options and Centennial Options and the other parties to the Incentive
Stock Award Agreements.
6.16 Takeover Statutes. GVGC shall take all reasonable steps (i) to exempt
GVGC and the Merger from the requirements of any state takeover laws by action
of its Board of Directors or otherwise and (ii), upon the request of ANGC, to
assist in any challenge by ANGC to the applicability to the Merger of any state
takeover law.
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the
outstanding shares of GVGC Common Stock.
(b) NYSE Listing. The shares of ANGC Common Stock issuable to GVGC
stockholders pursuant to this Agreement and such other shares required to
be reserved for issuance in connection with the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance.
(c) Other Approvals. Other than the filings provided for by Section 1.1,
and State Takeover Approvals, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity the failure to obtain which
would have a material adverse effect on the Surviving Corporation and its
Subsidiaries, taken as a whole, shall have been filed, occurred or been
obtained. ANGC shall have received all state securities or "Blue Sky"
permits and other authorizations necessary to issue the ANGC Common Stock
in exchange for the GVGC Common Stock and to consummate the Merger.
(d) S-4. The S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(f) Pooling and Comfort Letters. ANGC shall have received a letter from
KPMG Peat Marwick and GVGC shall have received a letter from Arthur
Andersen & Co., dated the date of the Proxy Statement and confirmed in
writing at the Effective Time and addressed to ANGC, stating that the
Merger will qualify as a pooling of interests transaction under Opinion 16
of the Accounting Principles Board; and the letters described in Section
6.2 shall have been received by the parties.
(g) Letters from Affiliates. The parties shall have received from each
person named in the letters referred to in Section 6.7 an executed copy of
letters substantially in the form of Exhibit 6.7(i) in the case of ANGC and
Exhibit 6.7(ii) in the case of GVGC.
(h) Legal Opinion. Holme Roberts & Owen, counsel to ANGC, shall have
delivered to ANGC and GVGC its legal opinion in the form attached as
Exhibit 7.1(h).
7.2 Conditions of Obligations of ANGC and ANGI. The obligation of ANGC and
ANGI to effect the Merger is subject to the satisfaction of the following
conditions unless waived by ANGC:
(a) Representations and Warranties. The representations and warranties of
GVGC set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except for inaccuracies that
would not have a material adverse effect on GVGC, its Subsidiaries and its
interests in the Partnerships, taken
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<PAGE>
as a whole, and except as otherwise contemplated by this Agreement; and
ANGC shall have received a certificate signed on behalf of GVGC by the
President and the Vice President/Treasurer of GVGC to such effect. If any
of the representations and warranties of GVGC set forth in this Agreement
are inaccurate, but such inaccuracies are not material, then ANGC may not
bring an action for damages for the breach of such representations and
warranties.
(b) Performance of Obligations of GVGC. GVGC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and ANGC shall have received a
certificate signed on behalf of GVGC by the President and by the Vice
President/Treasurer of GVGC to such effect.
(c) Tax Opinion. Holme Roberts & Owen LLC, counsel to ANGC, shall have
delivered to ANGC its tax opinion substantially to the effect that (i) the
Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, (ii) GVGC, ANGC and ANGI will each be a party to the
reorganization within the meaning of Section 368(b) of the Code, (iii) the
stockholders of GVGC will not recognize any gain or loss as a result of the
Merger, other than to the extent that such stockholders receive cash in
lieu of fractional shares, and (iv) none of GVGC, ANGC or ANGI will
recognize any gain or loss as a result of the Merger.
(d) Consents under Agreements. GVGC shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to
in Section 7.1(c)), whose consent or approval shall be required in order to
permit GVGC to consummate the transactions contemplated hereby, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect (x) on
GVGC, its Subsidiaries and its interests in the Partnerships, taken as a
whole or (y) upon the consummation of the transactions contemplated hereby.
(e) No Amendments to Resolutions. Neither the Board of Directors of GVGC
nor any committee thereof shall have amended, modified, rescinded or
repealed the resolutions adopted by its Board of Directors approving this
Agreement (accurate and complete copies of which have been provided to
ANGC) and shall not have adopted any other resolutions in connection with
this Agreement and the transactions contemplated hereby inconsistent with
such resolutions.
(f) GVGC Options and Incentive Stock Awards. GVGC shall have delivered to
ANGC evidence that all of the Centennial Options, the Boone Options and the
GVGC 1992 Options have been exercised or terminated, that the Incentive
Stock Award Agreements have been terminated as of the Effective Time, that
all options granted under the 1993 Option Plan have been rescinded, that no
more than 18,000 shares of GVGC Common Stock were awarded under the
Incentive Stock Award Agreements after the date hereof, that no more than
184,825 shares of GVGC Common Stock were issued after the date hereof upon
exercise of options awarded under the GVGC 1992 Option Plan and that no
more than 38,000 shares of GVGC Common Stock were issued after the date
hereof upon exercise of options awarded under the Centennial Option
Agreements and the Boone Options.
(g) Material Adverse Change. Since November 30, 1993, there shall not
have been any material adverse change or changes which in the aggregate are
materially adverse, in the financial condition, results of operations,
business or prospects of GVGC, its Subsidiaries and its interests in the
Partnerships, taken as a whole.
(h) Due Diligence. GVGC shall have provided to ANGC the detailed GVGC
Disclosure Schedule and other information required by this Agreement by
March 8, 1994 and ANGC shall not have advised GVGC in writing on or before
the earlier of (i) the date the S-4 is filed with the SEC or (ii) April 4,
1994 that it has concluded that, as a result of its due diligence with
respect to GVGC, there exists material information that ANGC reasonably
expects to have a material adverse effect on the future operating prospects
of GVGC that, if known by ANGC as of the date of this Agreement, would have
caused ANGC reasonably to refuse to enter into this Agreement.
(i) Employment Agreements. GVGC shall have delivered to ANGC evidence of
the termination of all employment agreements between GVGC and Jeff J.
Fishman, Michael D. Fowler, Steven D. Bench and David Presley.
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<PAGE>
7.3 Conditions of Obligations of GVGC. The obligation of GVGC to effect the
Merger is subject to the satisfaction of the following conditions unless waived
by GVGC:
(a) Representations and Warranties. The representations and warranties of
ANGC set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except for inaccuracies that
would not have a material adverse effect on ANGC and its Subsidiaries,
taken as a whole, and except as otherwise contemplated by this Agreement,
and GVGC shall have received a certificate signed on behalf of ANGC by the
President and the Chief Financial Officer of ANGC to such effect. If any of
the representations and warranties of ANGC set forth in this Agreement are
inaccurate, but such inaccuracies are not material, then GVGC may not bring
an action for damages for the breach of such representations and
warranties.
(b) Performance of Obligations of ANGC. ANGC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and GVGC shall have received a
certificate signed on behalf of ANGC by the President and the Chief
Financial Officer of ANGC to such effect.
(c) Acquisition of ANGC. ANGC's Board of Directors shall not have
recommended acceptance of a tender offer for the ANGC Common Stock or
approved of any plan to transfer more than 50% of the ANGC Common Stock or
to sell all or substantially all of ANGC's assets.
(d) Tax Opinion. Vinson & Elkins LLP, counsel to GVGC, shall have
delivered to GVGC its tax opinion substantially to the effect that (i) the
Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, (ii) GVGC, ANGC and ANGI will each be a party to the
reorganization within the meaning of Section 368(b) of the Code, (iii) the
stockholders of GVGC will not recognize any gain or loss as a result of the
Merger, other than to the extent that such stockholders receive cash in
lieu of fractional shares, and (iv) none of GVGC, ANGC or ANGI will
recognize any gain or loss as a result of the Merger.
(e) No Amendments to Resolutions. Neither the Board of Directors of ANGC
or ANGI nor any committee thereof shall have amended, modified, rescinded
or repealed the resolutions adopted by its Board of Directors approving
this Agreement (accurate and complete copies of which have been provided to
GVGC) and shall not have adopted any other resolutions in connection with
this Agreement and the transactions contemplated hereby inconsistent with
such resolutions.
(f) Material Adverse Change. Since December 31, 1993, there shall not
have been any material adverse change, or changes which in the aggregate
are materially adverse, in the financial condition, results of operations,
business or business prospects of ANGC and its Subsidiaries, taken as a
whole.
(g) Due Diligence. ANGC shall have provided to GVGC the detailed ANGC
Disclosure Schedule and other information required by this Agreement by
March 8, 1994 and GVGC shall not have advised ANGC in writing on or before
the earlier of (i) the date the S-4 is filed with the SEC or (ii) April 4,
1994 that it has concluded that, as a result of its due diligence with
respect to ANGC, there exists material information that GVGC reasonably
expects to have a material adverse effect on the future operating prospects
of ANGC that, if known by GVGC as of the date of this Agreement, would have
caused GVGC reasonably to refuse to enter into this Agreement.
(h) Fairness Opinion. GVGC shall have received an opinion from Rauscher
Pierce Refsnes, Inc. dated the same date as the Proxy Statement (which
opinion shall not have been withdrawn) to the effect that the terms of the
Merger are fair to GVGC's stockholders from a financial point of view.
ARTICLE VIII
Termination and Amendment
8.1 Termination. At any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of GVGC, this Agreement may be terminated:
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<PAGE>
(a) by mutual consent of ANGC and GVGC;
(b) by either ANGC or GVGC (i) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the other
set forth in this Agreement, which breach has not been cured within 10
business days following receipt by the breaching party of notice of such
breach or adequate assurance of such cure shall not have been given by or
on behalf of the breaching party within such 10 business day period, or
(ii) if any permanent injunction or other order of a court or other
competent authority preventing the consummation of the Merger shall have
become final and nonappealable;
(c) by ANGC or GVGC if either shall not have been provided with the
Disclosure Schedule of the other within the time required by this
Agreement;
(d) by either ANGC or GVGC if the Merger shall not have been consummated
before July 31, 1994; or
(e) by either party if any required approval of the stockholders of GVGC
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof.
8.2 Effect of Termination. In the event of termination of this Agreement by
either GVGC or ANGC as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of ANGC,
ANGI or GVGC or their respective officers or directors except (a) with respect
to the last sentence of Section 6.3, and Sections 6.10 and 6.11 and (b) to the
extent that such termination results from the willful breach by a party hereto
of any of its representations, warranties, covenants or agreements set forth in
this Agreement except as provided in Section 9.7.
8.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of GVGC, but, after any such approval, no amendment shall be made
which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action duly taken, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE IX
General Provisions
9.1 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 2.1, 2.2, 6.9, 6.12 and
6.15 and Article IX, and the agreements of the "affiliates" of the Company
delivered pursuant to Section 6.7.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or telecopied
(which is confirmed) or upon deposit in the United States mail by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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<PAGE>
(a) if to ANGC, to
370 17th Street, Suite 900
Denver, CO 80202
Telecopy: (303) 595-0480
Telephone: (303) 595-3331
Attention: Donald H. Anderson
with a copy to
Thomas A. Richardson, Esq.
Holme Robert & Owen LLC
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Telecopy: (303) 866-0200
Telephone: (303) 861-7000
and
(b) if to GVGC, to
50 West Broadway, 10th Floor
Salt Lake City, UT 84101
Telecopy: (801) 364-7340
Telephone: (801) 531-4400
Attention: Jeff J. Fishman
with a copy to
Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2500
Houston, TX 77002-6760
Telecopy: (713) 758-2346
Telephone: (713) 758-2222
Attention: T. Mark Kelly, Esq.
and
(c) if to ANGI, to
c/o Donald H. Anderson at the
address set forth above
with a copy to
Thomas A. Richardson, Esq. at the
address set forth above
9.3 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth on the cover page of this Agreement.
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<PAGE>
9.4 Counterparts. This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership. This
Agreement (including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreements, and (b)
except as otherwise contemplated by Sections 2.1, 2.2, 6.9, 6.12 and 6.15
(which covenants shall be enforceable by the persons affected thereby following
the Effective Time), is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Colorado.
9.7 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take any action required herein, the other
party shall not be entitled to specific performance of such provision or part
hereof or thereof or to any other remedy, including but not limited to money
damages, for breach hereof or thereof or of any other provision of this
Agreement or part hereof or thereof as a result of such holding or order.
9.8 Publicity. Except as otherwise required by law or the rules of the NYSE
or NASDAQ, so long as this Agreement is in effect, neither GVGC nor ANGC shall,
or shall permit any of its Subsidiaries to, issue or cause the publication of
any press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
9.9 Knowledge of Parties. Any matter stated herein to be "known to GVGC," or
similar language, shall mean the actual knowledge of the President, Vice
President/Treasurer or Executive Vice President of GVGC. Any matter stated
herein to be "known to ANGC," or similar language, shall mean the actual
knowledge of the President, Executive Vice President, Chief Financial Officer
or General Counsel of ANGC.
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<PAGE>
IN WITNESS WHEREOF, ANGC, GVGC and ANGI have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first above written.
Associated Natural Gas Corporation
/s/ Donald H. Anderson
By __________________________________
Name: Donald H. Anderson
Title: President
Grand Valley Gas Company
/s/ Jeff J. Fishman
By __________________________________
Name: Jeff J. Fishman
Title: President
Associated Natural Gas, Inc.
/s/ Donald H. Anderson
By __________________________________
Name: Donald H. Anderson
Title: President
A-30
<PAGE>
ANNEX B
May 27, 1994
Board of Directors
Grand Valley Gas Company
50 West Broadway, Tenth Floor
Salt Lake City, Utah 84101
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Grand Valley Gas Company, a Utah corporation
("Grand Valley") of the terms of the proposed merger as set forth in the
Agreement and Plan of Merger, dated February 21, 1994 (the "Agreement") by and
among Grand Valley, Associated Natural Gas Corporation, a Delaware corporation
("ANGC"), and Associated Natural Gas, Inc., a Colorado corporation and wholly-
owned subsidiary of ANGC ("ANGI"). Pursuant to the Agreement, the separate
existence of Grand Valley will cease and Grand Valley will be merged with and
into ANGI (the "Merger"), and each outstanding share of Grand Valley common
stock $.0125 par value ("Grand Valley Common") shall be converted into the
right to receive 0.25 shares of ANGC common stock, $.05 par value ("ANGC
Common"). We understand that the Merger will be accounted for as a pooling of
interests transaction in accordance with generally accepted accounting
principles as described in Accounting Principles Board Opinion Number 16.
In arriving at our opinion, we have reviewed the Agreement, the Proxy
Statement/Prospectus of Grand Valley and ANGC dated May 20, 1994, filed as a
part of the Registration Statement on Form S-4 of ANGC, and certain publicly
available business and financial information concerning Grand Valley and ANGC.
We have also met with the managements of Grand Valley and ANGC to discuss the
businesses and prospects of Grand Valley and ANGC. In addition we have
considered certain long-term strategic benefits, both operational and
financial, that were described to us by the senior managements of Grand Valley
and ANGC.
We have reviewed the terms of the Merger in relation to, among other things:
current and historical market prices and trading volume of the Grand Valley
Common and the ANGC Common; the respective companies' cash flow, net income and
book value per share; the capitalization and financial condition of Grand
Valley and ANGC; the pro forma financial impact of the Merger on Grand Valley
and ANGC, including the relative ownership of the ANGC Common after the Merger
by the current shareholders of Grand Valley and ANGC; and, to the extent
publicly available, the terms of recent merger and acquisition transactions
involving comparable companies. In addition, we have reviewed the merger
premiums paid in recent stock-for-stock acquisitions of public companies
generally, and energy industry companies in particular. We have also analyzed
certain financial, stock market and other publicly available information
relating to the business of other public companies whose operations we consider
comparable to the operations of Grand Valley and ANGC. In addition to the
foregoing, we have also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
deemed relevant in arriving at our opinion.
In connection with our review, we have not independently verified any of the
foregoing information, and we have relied upon it being complete and accurate
in all material respects. In addition, we have not made an independent
evaluation or appraisal of the assets of Grand Valley or ANGC, nor have we been
furnished with such appraisals. In rendering our opinion, we have assumed that
in the course of obtaining the necessary regulatory and governmental approvals
for the proposed Merger, no restriction will be imposed that will have a
material adverse effect on the contemplated benefits of the proposed Merger.
Our opinion is based upon circumstances existing and disclosed to us as of the
date hereof.
We have acted as financial advisor to Grand Valley in connection with the
Merger, have received a fee for such advisory services and will receive an
additional fee if the Merger is consummated. In the ordinary
B-1
<PAGE>
course of our business, we may actively trade the securities of Grand Valley
and ANGC for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion hereby confirms our earlier opinion dated February 18, 1994,
delivered to the Board of Directors of the Company as to the fairness of the
Merger.
It is understood that this letter is intended solely for the benefit and use
of the Board of Directors and is not to be used for any other purpose, or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor shall any public references to Rauscher Pierce Refsnes,
Inc. be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work described above and other factors we deemed relevant, we are
of the opinion that the terms of the Merger are fair to the shareholders of
Grand Valley from a financial point of view.
Very truly yours,
/s/ Rauscher Pierce Refsnes, Inc.
Rauscher Pierce Refsnes, Inc.
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XII of ANGC's Bylaws requires ANGC to indemnify, to the full extent
authorized by applicable law, any person who is or is threatened to be made a
party to any civil, criminal, administrative, investigative, or other action or
proceeding instituted or threatened by reason of the fact that he is or was a
director or officer of ANGC or is or was serving at the request of ANGC as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise.
Article IX of ANGC's Restated Certificate of Incorporation, as amended,
provides that directors of ANGC shall not be liable to ANGC or any of its
stockholders for damages caused by a breach of a fiduciary duty by such
director, except for liability in respect of (i) a breach of the director's
duty of loyalty to ANGC or its stockholders, (ii) any acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) any willful or negligent declaration of an unlawful dividend, stock
purchase or redemption, or (iv) any transaction from which the director derived
an improper personal benefit.
Section 145 of the Delaware General Corporation Law authorizes the
indemnification of directors and officers against liability incurred by reason
of being a director or officer and against expenses (including attorney's fees)
in connection with defending any action seeking to establish such liability, in
the case of third-party claims, if the officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in the case of actions by or in the right of
the corporation, if the officer or director acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation and if such officer or director shall not have been adjudged liable
to the corporation, unless a court otherwise determines. Indemnification is
also authorized with respect to any criminal action or proceeding where the
officer or director had no reasonable cause to believe his conduct was
unlawful.
The above discussion of ANGC's Bylaws, Restated Certificate of Incorporation
and Section 145 of the Delaware General Corporation Law is intended to be only
a summary and is qualified in its entirety by the full text of each of the
foregoing.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 21, 1994, by and
among the Registrant, Associated Natural Gas, Inc. and Grand Val-
ley Gas Company (attached as Annex A to the Proxy
Statement/Prospectus included in this Registration Statement).
3.1 Restated Certificate of Incorporation of ANGC, as amended (Incor-
porated herein by reference to Exhibit 3.1 to ANGC's Registration
Statement on Form S-1, Registration No. 33-23330).
3.2 Certificate of Amendment of Restated Certificate of Incorporation,
dated August 26, 1988 (Incorporated herein by reference to Exhibit
3.3 to ANGC's Registration Statement on Form S-1, Registration No.
33-23330).
3.3 Certificate of Amendment of Certificate of Incorporation, February
14, 1994.**
3.4 Bylaws of ANGC, as amended (Incorporated herein by reference to
Exhibit 3.2 to ANGC's Registration Statement on Form S-1, Regis-
tration No. 33-23330).
3.5 Amendment to the Bylaws of ANGC dated September 16, 1988 (Incorpo-
rated herein by reference to Exhibit 3.4 to ANGC's Registration
Statement on Form S-1, Registration No. 33-23330).
3.6 Amendment to the Bylaws of ANGC dated May 2, 1989 (Incorporated
herein by reference to Exhibit 3.5 to ANGC's Registration State-
ment on Form S-1, Registration No. 33-31187).
3.7 Certificate of Designation of Series A 9.25% Convertible Preferred
Stock (Incorporated herein by reference to Exhibit 4.4 to ANGC's
Registration Statement on Form S-1, Registration No. 33-23330).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.1 Specimen of common stock certificate of ANGC (Incorporated herein
by reference to Exhibit 4.1 to ANGC's Registration Statement on
Form S-1, Registration No. 33-23330).
4.2 Specimen of preferred stock certificate of ANGC (Incorporated
herein by reference to Exhibit 4.1 to ANGC's Registration State-
ment on Form S-1, Registration No. 33-23330).
5 Opinion of Holme Roberts & Owen LLC regarding the legality of the
securities being registered.*
8.1 Opinion of Vinson & Elkins L.L.P. regarding tax consequences to
investors.*
8.2 Opinion of Holme Roberts & Owen LLC regarding tax consequences to
investors.*
10.1 Gas Sales and Purchase Contract dated as of November 17, 1986,
among ANGC, Thermo Power & Electric, Inc. and Ladd Petroleum Cor-
poration (Incorporated herein by reference to Exhibit 10.3 to
ANGC's Registration Statement on Form S-1, Registration No. 33-
23330).
10.2 Firm Gas Supply Agreement dated January 29, 1986, between ANGC and
Public Service Company of Colorado ("PSC") (Incorporated herein by
reference to Exhibit 10.4 to ANGC's Registration Statement on Form
S-1, Registration No. 33-21330).
10.3 Residue Gas Sales and Purchase Contract dated December 17, 1982,
between ANGI and Western Slope Gas Company ("WSG") (as assigned to
ANGC by the Assignment of Residue Gas Sales and Purchase Contracts
dated April 21, 1983, between ANGI and ANGC, and as assigned to
PSC by Assignment of Residue Gas Sales and Purchase Contract,
dated January 1, 1986, between PSC and WSG) and as subsequently
amended (Incorporated herein by reference to Exhibit 10.5 to
ANGC's Registration Statement on Form S-1, Registration No. 33-
23330).
10.4 Residue Gas Sales and Purchase Contract dated February 17, 1983,
between WSG and ANGI (as assigned to ANGC by Assignment of Residue
Gas Sales and Purchase Contracts dated April 21, 1983, between
ANGI and ANGC), as amended (Incorporated herein by reference to
Exhibit 10.6 to ANGC's Registration Statement on Form S-1, Regis-
tration No. 33-23330).
10.5 Gas Purchase Agreement dated September 23, 1987, between ANGI and
WSG (Incorporated herein by reference to Exhibit 10.7 to ANGC's
Registration Statement on Form S-1, Registration No. 33-23330).
10.6 Letter Agreement dated June 21, 1988, between WS and Em, Inc. and
ANGC (Incorporated herein by reference to Exhibit 10.8 to ANGC's
Registration Statement on Form S-1, Registration No. 33-23330).
10.7 Eaton Lease Agreement dated April 8, 1983, between Don Anderson
(an unaffiliated individual) and NGA (Incorporated herein by ref-
erence to Exhibit 10.9 to ANGC's Registration Statement on Form S-
1, Registration No. 33-23330).
10.8 Asset Purchase and Sale Agreement dated October 30, 1987, between
Pantera Energy Corporation and ANGI (Incorporated herein by refer-
ence to Exhibit 10.10 to ANGC's Registration Statement on Form S-
1, Registration No. 33-23330).
10.9 Note Agreement dated April 30, 1991 between ANGC and the investors
named therein (Incorporated herein by reference to ANGC's Quar-
terly Report on Form 10-Q for the quarter ended March 31, 1991,
Commission File No. 1-10008).
10.10 Revolving Credit Agreement dated June 1, 1992 among ANGC and cer-
tain commercial lending institutions, and Continental Bank N.A.,
as Agent (Incorporated herein by reference to Exhibit 10.15 to
ANGC's Form 8-K dated June 11, 1992).
21.1 Subsidiaries of ANGC (Incorporated herein by reference to Exhibit
22.1 to ANGC's Registration Statement on Form S-1, Registration
No. 33-23330).
23.1 Consent of KPMG Peat Marwick.*
23.2 Consent of Arthur Andersen & Co.*
23.3 Consent of Holme Roberts & Owen LLC (included in Exhibits 5 and
8.1).
23.4 Consent of Vinson & Elkins L.L.P. (included in Exhibit 8.2).
23.5 Consent of Rauscher Pierce Refsnes, Inc.*
24 Powers of Attorney. Contained on signature page of original Regis-
tration Statement on Form S-4, Registration No. 33-53121, filed
April 13, 1994.
99.1 Form of Proxy to be used by Grand Valley Gas Company sharehold-
ers.*
</TABLE>
- --------
* Filed herewith.
** Filed with original Registration Statement on Form S-4, Registration No. 33-
53121, filed April 13, 1994.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any
II-3
<PAGE>
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER, STATE OF
COLORADO, ON THIS 20TH DAY OF MAY, 1994.
Associated Natural Gas Corporation
/s/ Harold R. Logan, Jr.
By:
--------------------------------
HAROLD R. LOGAN, JR.
SENIOR VICE PRESIDENT/FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
POSITION HELD
SIGNATURE WITH THE REGISTRANT DATE
<S> <C> <C>
/s/ Cortlandt S. Dietler*
- ------------------------------------- Chairman and Chief May 20, 1994
CORTLANDT S. DIETLER Executive Officer;
Director (principal
executive officer)
/s/ Donald H. Anderson*
- ------------------------------------- President and Chief May 20, 1994
DONALD H. ANDERSON Operating Officer;
Director
/s/ Michael J. Quigley*
- ------------------------------------- Executive Vice May 20, 1994
MICHAEL J. QUIGLEY President; Director
/s/ Frederick R. Mayer*
- ------------------------------------- Director May 20, 1994
FREDERICK R. MAYER
/s/ Harold R. Logan, Jr.
- ------------------------------------- Senior Vice May 20, 1994
President/Finance;
HAROLD R. LOGAN, JR. Director (principal
financial officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD
SIGNATURE WITH THE REGISTRANT DATE
<S> <C> <C>
/s/ Wayne T. Biddle*
- ------------------------------------- Director May 20, 1994
WAYNE T. BIDDLE
/s/ John A. Redding*
- ------------------------------------- Director May 20, 1994
JOHN A. REDDING
/s/ J. Roger Grace*
- ------------------------------------- Treasurer and Vice May 20, 1994
J. ROGER GRACE President
(principal
accounting officer)
/s/ Harold R. Logan, Jr.
*-------------------------------------
HAROLD R. LOGAN, JR.
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
Holme Roberts & Owen LLC
1700 Lincoln, Suite 4100
Denver, Colorado 80203
May 20, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Associated Natural Gas Corporation
Form S-4 Registration Statement
Registration No. 33-53121
Gentlemen:
This firm has acted as counsel to Associated Natural Gas Corporation
(the "Company") in connection with the preparation and filing of its
registration statement on Form S-4 under the Securities Act of 1933, as
amended, covering an aggregate of 1,644,298 shares of the Company's Common
Stock, $.05 par value (the "Common Stock"), which may be distributed in
connection with the merger of Grand Valley Gas Company into Associated Natural
Gas, Inc., and wholly owned subsidiary of the Company.
We have examined the Company's Articles of Incorporation and bylaws
and the record of its corporate proceedings with respect to the registration
statement and have made such other investigation as we have deemed necessary
in order to express the following opinion.
The Common Stock, when sold and issued as contemplated by the Plan
and the registration statement, will be legally issued, fully paid and
nonassessable.
We hereby consent to all references to this firm in the registration
statement and all amendments to the registration statement. We further consent
to the use of this opinion as an exhibit to the registration statement.
Very truly yours,
Holme Roberts & Owen LLC
By /s/ Nick Nimmo
------------------------
Nick Nimmo, Member
<PAGE>
[LETTERHEAD OF VINSON & ELKINS APPEARS HERE]
Grand Valley Gas Company
50 West Broadway, 10th Floor
Salt Lake City, Utah 84101
Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger of Grand Valley Gas Company ("Grand Valley")
with and into Associated Natural Gas, Inc. ("ANGI"), a wholly-owned
subsidiary of Associated Natural Gas Corporation ("ANGC") (the "Merger"). In
connection with this opinion, we have reviewed the facts presented to us
concerning the Merger and have relied upon the accuracy of the facts set forth
in the Proxy Statement/Prospectus (the "Proxy Statement") contained in the
Registration Statement on Form S-4 (Registration No. 33-53121) filed by ANGC
with the Securities and Exchange Commission on April 13, 1994 (the
"Registration Statement"). All capitalized terms used but not defined have the
meanings ascribed to them in the Proxy Statement.
In rendering our opinion, we have assumed that the facts contained in
the Proxy Statement will continue to be accurate and complete at the Effective
Time. We have also reviewed the Restated Agreement and Plan of Merger dated
February 21, 1994 (the "Merger Agreement"), among Grand Valley, ANGC, and ANGI
and have assumed that the Merger will be carried out in accordance with the
terms of such agreement.
The Parties
-----------
The Parties to the Merger are Grand Valley, ANGC, and ANGI, and very
general descriptions of each are set forth below. A complete description of
each of the parties is found in the Proxy Statement.
Grand Valley is a Utah corporation primarily engaged in the business of
marketing natural gas to industrial end-users and local distribution companies
from the West Coast of the United States and Canada through the Rocky Mountain
and Midwest regions of the United States. Grand Valley also owns and operates
natural gas gathering, processing, and
<PAGE>
storage facilities. Grand Valley has authorized capital stock of 50 million
shares of Grand Valley Common Stock of which 6,336,444 shares were outstanding
on the date of the Merger Agreement.
ANGC is a Delaware corporation engaged in the business of purchasing,
gathering, processing, transporting and marketing natural gas, natural gas
liquids and crude oil to industrial end-users, local distribution companies,
liquid petroleum gas wholesalers and retailers and refiners.
ANGI, a Colorado corporation, is a wholly-owned subsidiary of ANGC and
is engaged in the construction, acquisition and operation of natural gas
gathering and processing facilities and marketing of both system supply and
third-party supplies of natural gas to industrial end-users and local
distribution companies.
Summary of the Merger/1/
---------------------
Pursuant to the Merger Agreement, Grand Valley will be merged with and
into ANGI at the Effective Time, with ANGI being the surviving corporation and
continuing to be a wholly-owned subsidiary of ANGC. Pursuant to the Merger,
all of the assets and liabilities of Grand Valley will be transferred to ANGI.
In the Merger, each outstanding share of Grand Valley Common Stock will be
converted into 0.25 shares of ANGC Common Stock. No fractional shares of ANGC
Common Stock will be issued in the Merger. Each shareholder of Grand Valley
Common Stock otherwise entitled to a fractional share of ANGC common stock
will receive an amount in cash equal to the value of such fractional share
based upon the average closing price of ANGC Common Stock for the 5 days
preceeding the Effective Time. Other than the cash in lieu of fractional
shares, no Grand Valley Common Stock will be acquired for cash in the Merger.
Under the Utah Revised Business Corporation Act, holders of Grand Valley
Common Stock are not entitled to dissenter's rights.
Detailed descriptions of each of Grand Valley's and ANGC's reasons and
business purposes for consummating the Merger are contained in the Proxy
Statement.
Representations
---------------
In addition, this opinion relies upon the accuracy of each
representation regarding the Merger that has been made to us by Grand Valley,
ANGC, and ANGI. Certain of these representations are set forth in the letters
dated May 20, 1994, from Grand Valley and ANGI (the "Representation Letters")
and we have assumed that each representation contained in the Representation
Letters is true, correct, and complete and will continue to be true, correct,
and complete at the Effective Time. This opinion shall be of no force and
- ------------------
/1/ Complete and detailed descriptions of the Merger and the Merger Agreement
are contained in the Proxy Statement.
<PAGE>
Grand Valley Gas Company
May 20, 1994
Page 3
effect if any representation contained in the Representation Letters is
determined not to be true, correct, and complete now or at the Effective Time.
Opinions
--------
Based on the forgoing facts, the Proxy Statement, the Merger Agreement,
and the Representation Letters, it is our opinion that for federal income tax
purposes:
(i) the Merger will constitute a reorganization within the
meaning of section 368(a) of the Code, and ANGC, Grand Valley
and ANGI will each be a party to the reorganization within
the meaning of section 368(b) of the Code;
(ii) no gain or loss will be recognized by ANGC, Grand Valley or
ANGI as a result of the Merger;
(iii) no gain or loss will be recognized by the holders of Grand
Valley Common Stock upon their receipt of ANGC Common Stock
in exchange for their Grand Valley Common Stock;
(iv) the aggregate basis of the shares of ANGC Common Stock
received in the Merger (including any fractional shares
deemed received) by a holder of Grand Valley Common Stock
will equal such holder's aggregate basis in the shares of
Grand Valley Common Stock surrendered in the Merger;
(v) the holding period of the shares of ANGC Common Stock
received by a holder of Grand Valley Common Stock in the
Merger will include the holding period of the Grand Valley
Common Stock surrendered in exchange therefore, provided such
shares of Grand Valley Common Stock are held as capital
assets at the Effective Time; and
(vi) cash payments in lieu of fractional shares will be treated as
if fractional shares of ANGC Common Stock had been received
in the Merger and then redeemed by ANGC. Such redemption
should qualify as a distribution in full payment in exchange
for the fractional shares rather than a distribution of a
dividend. Accordingly, a Grand Valley shareholder receiving
cash in lieu of a fractional share will recognize gain or
loss upon such payment equal to the difference, if any,
between such shareholder's basis in the fractional share (as
descried in paragraph (iv) above) and the amount of cash
received. Such gain or loss will be capital gain or loss if
the ANGC Common Stock is held as a capital asset at the
Effective Time.
<PAGE>
Grand Valley Gas Company
May 20, 1994
Page 4
Our opinion is based upon the existing provisions of the Code,
regulations promulgated and proposed thereunder, existing interpretations
thereof by the Internal Revenue Service ("IRS") and the courts, all of which
are subject to change with prospective or retroactive effect and our opinion
could be adversely affected or rendered obsolete by any such change. Our
opinion is not binding on the IRS or the courts and accordingly, no assurance
can be given that some or all of the conclusions set forth above will not be
challenged by the IRS.
Our opinion is specifically limited to the conclusion set forth above
and no other opinions are expressed or implied. Specifically, we express no
opinions as to the state, local, or foreign tax consequences of the Merger.
We hereby consent to the use of our name in the Prospectus and to the
filing of this opinion letter as part of the Registration Statement. This
consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1933, as amended.
Very truly yours,
Vinson & Elkins L.L.P.
<PAGE>
Holme Roberts & Owen LLC
1700 Lincoln, Suite 4100
Denver, Colorado 80203
May 20, 1994
Associated Natural Gas Corporation
370 17th Street, Suite 900
Denver, Colorado 80202
Re: Grand Valley Merger Transaction
Gentlemen:
We are rendering this tax opinion in connection with the merger of Grand
Valley Gas Corporation ("Grand Valley") into Associated Natural Gas, Inc.
("ANGI"), a wholly owned subsidiary of Associated Natural Gas Corporation
("ANGC"). Undefined capitalized terms used in this letter have the same
meaning as in the Proxy Statement/Prospectus dated May 20, 1994 relating to
the merger (the "Prospectus").
In rendering this tax opinion, we have examined: (i) the Agreement and
Plan of Merger, dated February 21, 1994 among ANGC, ANGI and Grand Valley (the
"Merger Agreement"); (ii) the Articles of Merger proposed to be filed with the
Secretary of State of Colorado and the Division of Corporations and Commercial
Code of Utah, (the "Articles"); (iii) the Prospectus; (iv) the agreements
between Grand Valley and its affiliates entered into pursuant to section 6.7
of the Merger Agreement; and (vi) such other documents and instruments as we
deemed necessary as a basis for the opinions set forth below.
In rendering this tax opinion we have assumed that: (i) the Merger
Agreement and the Articles set forth the complete agreement among the parties
with respect to the Merger and that the Merger and related transactions will
be carried out in accordance with the provisions of these documents; (ii) all
documents are valid, binding and enforceable in accordance with their terms,
and all copies of documents are accurate reproductions of the original
documents; (iii) the representations made to us by Grand Valley in the
representation letter dated May 20, 1994 and the representations made to us by
ANGC in the representation letter dated May 20, 1994, which we have not
independently verified, are true
<PAGE>
Associated Natural Gas Corporation
May 20, 1994
Page 2
and correct in all material respects; and (iv) the Merger is a valid merger
under applicable state law. If any of these assumptions is not true or
accurate, our opinion may be different.
This tax opinion does not cover the special tax consequences, if any,
that might apply to Grand Valley shareholders entitled to special treatment
under the code (such as, for example, foreign persons, tax exempt
organizations, retirement plans, life insurance companies, regulated
investment companies and S corporations) or to Grand Valley shareholders who
acquired their shares as compensation or do not hold their shares as a capital
asset. The opinion does not cover state, local or foreign tax consequences.
Our opinion is based on the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the applicable Treasury Regulations
issued thereunder, the official published interpretation of those provisions by
the Internal Revenue Service (the "Service") and the courts, all of which are
subject to change, which changes could be applied retroactively.
Opinion. Subject to the assumptions, qualifications and conditions
-------
described herein and in the section of the Prospectus captioned "Certain
Federal Income Tax Consequences," and based on current federal income tax law,
it is our opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
section 368(a) of the Code and ANGC, Grand Valley and ANGI will each be a
party to the reorganization within the meaning of section 368(b) of the Code;
2. No gain or loss will be recognized by ANGC, Grand Valley or ANGI as a
result of the Merger.
3. No gain or loss will be recognized by the shareholders of Grand
Valley upon their receipt of ANGC common stock in exchange for their Grand
Valley common stock.
4. The aggregate tax basis of the shares of ANGC common stock received
in the Merger (including any fractional shares deemed received) by a share-
<PAGE>
Associated Natural Gas Corporation
May 20, 1994
Page 3
holder of Grand Valley will equal such shareholder's aggregate tax basis
in the shares of Grand Valley common stock surrendered in the Merger.
5. The holding period of the shares of ANGC common stock received by a
shareholder of Grand Valley in the Merger will include the holding period of
the Grand Valley common stock surrendered in exchange therefor, provided
such shares of Grand Valley common stock are held as a capital assets at the
Effective Time.
6. Cash payments in lieu of a fractional share will be treated as if that
fractional share of ANGC common stock had been received in the Merger and
then redeemed by ANGC. Such redemption should qualify as a distribution in
full payment in exchange for the fractional share rather than as a
distribution of a dividend. Accordingly, a Grand Valley shareholder
receiving cash in lieu of a fractional share will recognize gain or loss
upon such payment equal to the difference, if any, between such
shareholder's basis in the fractional share (as described in paragraph 4
above) and the amount of cash received. Such gain or loss will be capital
gain or loss if the ANGC common stock is held as a capital assets at the
Effective Time.
Our opinion may change if the applicable law changes, if any of the facts
of the Merger transactions as included in the Prospectus and the Merger
documents are inaccurate, incomplete or change, if any of the representations
made to us by Grand Valley and ANGC in the representation letters are not
true, or if the conduct of the parties is materially inconsistent with the
facts reflected in the Prospectus or the Merger documents.
The opinion does not cover all tax issues with respect to the Merger. The
opinion represents our current legal judgment on the specific issues
addressed, based on the assumptions, qualifications and conditions described
above.
<PAGE>
Associated Natural Gas Corporation
May 20, 1994
Page 4
We hereby consent to the filing of this opinion letter with the
Securities and Exchange Commission as an exhibit to the Registration Statement
and to the use of our name therein.
Very truly yours,
HOLME ROBERTS & OWEN LLC
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Associated Natural Gas Corporation
We consent to incorporation by reference in the registration statement on
Form S-4 of Associated Natural Gas Corporation of our report dated December 7,
1993, relating to the consolidated balance sheets of Associated Natural Gas
Corporation and subsidiaries as of September 30, 1993 and 1992 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended September 30, 1993, which
report appears in the September 30, 1993 annual report on Form 10-K of
Associated Natural Gas Corporation, and to the references to our firm under the
heading "Experts" in the Proxy Statement/Prospectus.
KPMG Peat Marwick
Denver, Colorado
May 20, 1994
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our reports dated July
30, 1993 included in Grand Valley Gas Company's Annual Report on Form 10-K for
the year ended May 31, 1993 and to all references to our firm included in this
registration statement.
Arthur Andersen & Co.
Salt Lake City, Utah
May 20, 1994
<PAGE>
EXHIBIT 23.5
CONSENT OF RAUSCHER PIERCE REFSNES, INC.
We hereby consent to use in the Proxy Statement/Prospectus included in the
Registration Statement on Form S-4 (the "Registration Statement") of Associated
Natural Gas Corporation of our opinion and to the references to our firm and
such opinion included in the Registration Statement. In giving this consent, we
do not admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Rauscher Pierce Refsnes, Inc.
May 20, 1994
<PAGE>
PRELIMINARY COPY DATED MAY 27, 1994
PROXY
GRAND VALLEY GAS COMPANY
SPECIAL MEETING OF SHAREHOLDERS - JUNE 30, 1994
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeff J. Fishman and Michael D. Fowler as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote as designated below, all the shares of
common stock of Grand Valley Gas Company ("Grand Valley"), held of record by
the undersigned on May 16, 1994, at the Special Meeting of Shareholders of
Grand Valley to be held on June 30, 1994 at the Red Lion Hotel at 255 South
West Temple, Salt Lake City, Utah, commencing at 10:00 a.m., local time, or any
adjournment or postponement thereof.
The purpose of the Special Meeting is to consider approval and adoption of
the Restated Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which Grand Valley would be merged into a subsidiary of Associated Natural Gas
Corporation ("ANGC") and each share of Grand Valley common stock would be
converted into .25 shares of ANGC common stock.
The Board of Directors recommends a vote FOR the following proposal:
1. Approval and adoption of the Merger Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment or
postponement thereof.
(CONTINUED ON REVERSE SIDE)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER AND IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
If you receive more than one proxy card, please sign and return all cards in
the accompanying envelope.
Date ______________________, 1994
---------------------------------
Signature
---------------------------------
Signature if held jointly
Please sign exactly as name
appears on your stock
certificates. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
This proxy may be revoked at any time prior to the voting of the proxy by the
execution and submission of a revised proxy, by written notice to the Secretary
of the Company or by voting in person at the meeting.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
