Enterprise GP Holdings LP

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Enterprise GP Holdings LP Securities Settlement

The lawsuit was settled for $12.4 million in cash. There is no claim form to file as payment will be made to holders of the limited partnership units on the date the November 2010 merger closed. The following is a summary of the proceedings in the lawsuit: ‘A. Gerber I: In February 2005, DFI GP Holdings L.P. (DFI GP), an affiliate of Dan Duncan, the controlling unitholder of Enterprise GP Holding L.P. (EPE), purchased Texas Eastern Products Partners, LLC (Teppco GP) from a third party for $1.1 billion. Teppco GP was the general partner of Teppco Partners, L.P. (Teppco LP). In December 2006, Teppco GP relinquished certain incentive distribution rights in Teppco LP in exchange for 14.1 million limited partnership units of Teppco LP. In May 2007, EPE purchased Teppco GP from affiliates of Mr. Duncan in exchange for EPE limited partnership units worth approximately $1.1 billion (the 2007 Transaction). In the 2007 Transaction, EPE received 4.4 million of the Teppco LP units that Teppco GP had received in December 2006 and the remaining 9.7 million units were retained by Mr. Duncan. The 2007 Transaction received Special Approval pursuant to the Limited Partnership Agreement of EPE (the LPA), which is defined in the LPA as approval by a majority of EPE Audit and Conflicts Committee (the ACC). Plaintiff commenced the Gerber I litigation by filing his initial complaint on February 14, 2008, asserting common law claims for breach of fiduciary duty in connection with the 2007 Transaction against EPE GP, its directors, and EPCO, Inc., an affiliate of Mr. Duncan which provides management services to certain Duncan companies, based on Plaintiff claim that Mr. Duncan caused EPE to overpay for Teppco GP by hundreds of millions of dollars (the 2007 Claim). Defendants denied the claim for overpayment and stated, among other things, that in agreeing to the price for Teppco GP, the ACC considered that the price EPE paid for Teppco GP represented a multiple of distributions that was substantially less than multiples at which comparable general partners traded or were transferred. Plaintiff also asserted claims for aiding and abetting against DFI GP and Duncan Family Interests, Inc. On April 11, 2008, Defendants moved to dismiss the Complaint. Subsequently, on February 8, 2011, Plaintiff moved to amend his Complaint to restyle his claims as breach of contract claims and add additional facts and supplemental facts. On September 9, 2011, the Court denied Plaintiff motion to restyle his claims and amend, but allowed Plaintiff to supplement his claims to allege subsequent facts. On February 2, 2012, Plaintiff filed a Second Amended and Supplemental Verified Complaint consistent with the Court ruling. On February 16, 2012, Defendants moved to dismiss Plaintiff Second Amended and Supplemental Complaint, and on January 18, 2013, the Court dismissed Plaintiff Gerber I claims. On June 26, 2013, Plaintiff appealed and on July 10, 2013, Defendants cross-appealed, primarily on the ground that the Court should not have considered belated claims briefed but not pled by Plaintiff. On November 11, 2013, Plaintiff filed an opening brief on appeal but the Gerber I action was subsequently remanded on March 7, 2014 to the Court of Chancery to consider the fairness of the Settlement. B. Gerber II In 2009, EPE entered into two related transactions which consolidated two parallel partnership structures into one by transferring to Enterprise Product Partners L.P. (‘EPD’) ownership of both Teppco LP (the Teppco LP Merger) and Teppco GP (the 2009 Sale) (collectively, the 2009 Transactions). Before the 2009 Transactions, EPE indirectly held the 2% general partner interest and cash distribution rights in EPD and Teppco LP separately. After the 2009 Transactions, EPE held the general partner interests and cash distribution rights in EPD and Teppco combined. In the 2009 Sale, in exchange for Teppco GP, EPE received 1,333,681 common units of EPD worth $39.15 million plus an approximately $60 million increase in the capital account of EPD GP, which EPE owned, to maintain its 2% general partner interest in EPD. Both of the 2009 Transactions were given Special Approval by the ACC of EPE GP and the ACC of EPE GP received a fairness opinion from Morgan Stanley in connection with the consideration EPE received in both the Teppco LP Merger and the 2009 Sale, but not separately. Plaintiff argued that although EPE had purchased Teppco GP in the 2007 Transaction for $1.1 billion, in the 2009 Sale, EPE sold Teppco GP for about $100 million (the 2009 Claim). However, Defendants argued the 2009 Sale just transferred cash distribution rights from one wholly-owned EPE subsidiary to another. Specifically, EPE owned 100% of both EPD GP and Teppco GP before the 2009 Transactions, and therefore, EPE indirectly (through Teppco GP and EPD GP) owned the right to cash distributions generated by the assets of Teppco and EPD. After the 2009 Transactions, EPE still indirectly owned the right to cash distributions generated by those assets but all of those rights were indirectly held through EPD GP only. Defendants further argued that the 2009 Sale was intended to provide EPE with the same cash flow both before and after the 2009 Sale and, based on the foregoing, the 2009 Sale was fair to EPE. On November 22, 2010, EPE merged with a wholly owned subsidiary of EPD pursuant to an exchange of 1.5 common units of EPD for each unit of EPE (the 2010 Merger). The 2010 Merger was also given Special Approval by the ACC of EPE GP. As of the time of the 2010 Merger, Defendants and their affiliates owned approximately 78% of the common units of EPE. Plaintiff commenced the Gerber II litigation on November 15, 2010 and filed an Amended Verified Class Action Complaint on March 8, 2011. The Gerber II Amended Complaint alleged, among other things, that: Defendants breached express and implied duties in connection with the 2009 Sale, which Plaintiff asserts was at a price unfair to EPE; the 2010 Merger was designed to eliminate Plaintiff standing to pursue the claims in Gerber I and the 2009 Sale claims; Defendants breached their express and implied duties by failing to value those claims in approving the 2010 Merger; the executors of Mr. Duncan estate, EPE and EPD tortiously interfered with the LPA and were unjustly enriched as a result of the 2009 Sale. The Gerber II Amended Complaint also asserted similar claims for tortious interference and unjust enrichment against the same Defendants in connection with the 2010 Merger, and alleged that the Defendants other than EPE GP aided and abetted EPE GP alleged breaches of duties in connection with the 2009 Sale and the 2010 Merger. On December 13, 2010, Defendants moved to dismiss the Gerber II Amended Complaint and on January 6, 2012, the Court of Chancery dismissed the Plaintiff Gerber II claims in their entirety. On January 31, 2012, Plaintiff appealed and on June 10, 2013, the Delaware Supreme Court affirmed the Court of Chancery in part, reversed in part, and remanded for further proceedings. Gerber v. Enterprise Prod. Holdings, LLC, 67 A.2d 400 (Del. 2013). Specifically, the Court reversed the Vice Chancellor ruling that Plaintiff implied covenant claims were precluded by Section 7.10(b) of the LPA. The Delaware Supreme Court directed the Court of Chancery on remand to determine whether, in light of the ruling on appeal, the Gerber II Amended Complaint adequately alleged claims for aiding and abetting, tortious interference, or unjust enrichment. On August 20, 2013, in a teleconference, the parties requested the Court of Chancery to defer consideration of the secondary liability claims in view of the parties attempt to settle the Actions. On March 3, 2014, the Parties engaged in voluntary mediation to attempt to negotiate a global settlement of the Actions. That same day, the parties entered into a mutual Memorandum of Understanding, agreeing in principle to settle and compromise the Actions. On April 2, 2014, the parties entered into a Stipulation and Agreement of Compromise and Settlement.’

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