SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 13, 1996
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ENSERCH CORPORATION
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Exact name of registrant as specified in its charter)
Texas 1-3183 75-0399066
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201-5598
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(Address of principal (Zip code)
executive office)
Registrant's telephone number, including area code (214) 651-8700
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events
ENSERCH Corporation, a Texas corporation ("ENSERCH"), Texas
Utilities Company, a Texas corporation ("TUC"), TXA, Inc., a
newly formed Texas corporation wholly owned by TUC ("TXA"), and
TXB, Inc., a Texas corporation 50% of the outstanding capital
stock of which is owned by ENSERCH and 50% of the outstanding
capital stock of which is owned by TUC ("TXB"), have entered into
an Agreement and Plan of Merger, dated as of April 13, 1996 (the
"Merger Agreement"), providing for a strategic business
combination of ENSERCH and TUC (the "Merger"). The Merger, which
was approved by the Boards of Directors of ENSERCH and TUC, would
be preceded by the spinoff of ENSERCH's 83.4% interest in Enserch
Exploration, Inc., a Texas corporation ("EEX"), and certain other
assets to the shareholders of ENSERCH (the "Distribution"). The
consummation of the Merger is subject to a favorable IRS ruling
and certain regulatory approvals. The closing is expected to
occur in late 1996 or early 1997.
In the Merger, TXA will merge with and into ENSERCH and
ENSERCH will become a wholly owned subsidiary of TUC.
Alternatively, under certain circumstances, the Merger Agreement
would be amended as appropriate to effect the transaction by the
merger of two newly formed, wholly owned subsidiaries of TXB with
and into ENSERCH and TUC, respectively, with the result that
ENSERCH and TUC each would become wholly owned subsidiaries of
TXB.
The Merger Agreement, the Press Release, dated April 15,
1996, issued in connection with the announcement of the Merger,
and the related Stock Option Agreement (as defined below) are
filed as exhibits to this report and are incorporated herein by
reference. The descriptions of the Merger Agreement and the
Stock Option Agreement set forth herein do not purport to be
complete and are qualified in their entirety by the provisions of
the Merger Agreement and the Stock Option Agreement.
To effect the Distribution, immediately prior to the
effective time of the Merger, EEX will be merged (the
"Preliminary Merger") into Lone Star Energy Company, a Texas
corporation wholly owned by ENSERCH ("LSEC"), and the shares of
capital stock of LSEC held by ENSERCH will then be distributed to
the shareholders of ENSERCH. Certain matters pertaining to the
Distribution will be set forth in a Distribution Agreement and a
Tax Allocation Agreement, each to be entered into by and among
ENSERCH, LSEC, EEX and TUC, the forms of which are attached as
Exhibits A and B, respectively, to the Merger Agreement.
In the Merger, each outstanding share of common stock, par
value $4.45 per share ("ENSERCH Common Stock"), of ENSERCH will
be converted into the right to receive that number (the "Ratio")
of shares of TUC common stock, no par value ("TUC Common Stock"),
equal to the quotient obtained by dividing $8.00 by the average
closing sales price of the TUC Common Stock over a 15 consecutive
trading day period preceding the fifth trading day prior to the
effective time of the Merger (the "Average TUC Price"), provided
that the Average TUC Price will be deemed to be not less than
$35 5/8 and not more than $43 5/8.
The Merger Agreement provides, with respect to certain
outstanding ENSERCH debt, that ENSERCH and TUC will cooperate
with each other in maintaining, and that TUC will take such
actions as are necessary to meet the quantitative parameters
necessary for ENSERCH to maintain, the ratings on such debt by at
least two nationally recognized rating agencies at their current
levels.
The Merger Agreement contains customary representations and
warranties on the part of ENSERCH and TUC, and the consummation
of the Merger is subject to customary closing conditions,
including, without limitation, approval by the shareholders of
ENSERCH, the receipt of all necessary governmental approvals and
the making of all required governmental filings (including the
approval of the Securities and Exchange Commission under the
Public Utilities Holding Companies Act of 1935, and the filing of
the requisite notifications with the Federal Trade Commission and
with the Department of Justice under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the
expiration of applicable waiting periods thereunder), and any one
of several specified actions by the Texas Railroad Commission.
The Merger also is subject to (i) the receipt from the Internal
Revenue Service of a ruling that the Distribution will qualify as
a tax-free distribution and the receipt of opinions of counsel
that the Merger will qualify as a tax-free reorganization, (ii)
the effectiveness of the registration statement to be filed by
TUC in respect of the TUC Common Stock to be issued in the
Merger, and (iii) the approval of the shares of TUC Common Stock
for listing on the New York Stock Exchange. (See Article IX of
the Merger Agreement).
The Merger Agreement contains covenants regarding the
activities of the parties pending the consummation of the Merger.
These covenants in respect of ENSERCH do not extend to LSEC, EEX
and their respective subsidiaries. Generally, each of ENSERCH
and TUC must conduct its business in the ordinary course
consistent with past practice. In addition, with respect to
ENSERCH, the Merger Agreement prohibits any increase of dividends
and imposes restrictions on amendments to its charter documents,
acquisitions, capital expenditures, dispositions, incurrence of
indebtedness and the modification of employee compensation and
benefits arrangements. (See Article VII of the Merger
Agreement.)
ENSERCH and TUC each are afforded a period of 21 days
following the execution of the Merger Agreement to conduct a due
diligence investigation. Each of ENSERCH and TUC has the
opportunity to terminate the Merger Agreement by notice delivered
no later than May 4, 1996, if it uncovers information amounting
to a material adverse change in the business or prospects of the
other party as compared to the information disclosed prior to the
execution of the Merger Agreement.
The Merger Agreement also may be terminated (1) by mutual
consent of ENSERCH and TUC, (2) by either ENSERCH or TUC if the
Merger is not consummated by March 31, 1997, provided that such
termination date will be extended to September 30, 1997, if all
conditions to closing of the Merger, other than the receipt of
certain regulatory approvals, are capable of being satisfied on
March 31, 1997, (3) by either ENSERCH or TUC if the shareholders
of ENSERCH fail to approve the Merger, (4) if any federal or
state law or court order prohibits the Merger, (5) by either
ENSERCH or TUC as a result of a third-party tender offer or
business combination proposal which the Board of Directors of
such party in good faith and based upon the advice of counsel
determines to accept after negotiations with the other party to
make adjustments in the terms of the Merger Agreement as would
enable the Merger to proceed, (6) by the non-breaching party if
there exists a material breach of representation, warranty,
covenant or agreement under the Merger Agreement and such breach
is not remedied within 20 days after notice from the other party,
or (7) by either ENSERCH or TUC if the Board of Directors of the
other party withdraws or adversely modifies its recommendation in
respect of the Merger.
In the event the Merger Agreement is terminated as described
in clause (6) or (7) of the preceding paragraph, the breaching
party or the party whose Board of Directors has withdrawn or
modified its recommendation is required to pay to the other, as
liquidated damages, the out-of-pocket expenses incurred by the
other party in connection with the Merger in an amount up to $15
million, except that if the termination occurs as the result of a
willful breach, the non-breaching party may pursue any other
remedies available to it at law or in equity. Moreover, if (i)
the Merger Agreement is terminated (a) as a result of a failure
to obtain the approval of the shareholders of ENSERCH or a
failure by ENSERCH to pursue such approval or (b) as described in
clauses (5) or (7) of the previous paragraph, and (ii) at the
time of such termination (or prior to shareholder disapproval)
there is a third-party tender offer or business combination
proposal with respect to ENSERCH or TUC, as the case may be, and
such offer or proposal has not been rejected by the Board of
Directors of the target company of the offer or proposal and
withdrawn by the third party, then the Merger Agreement provides
for the payment by the target party of a termination fee in the
amount of $42.5 million (the "Termination Fee"), which includes
out-of-pocket expenses and the value as of the date of
termination of the Stock Option (as defined below). (See Article
10 of the Merger Agreement.)
Concurrently with the Merger Agreement, ENSERCH and TUC have
entered into a stock option agreement (the "Stock Option
Agreement") granting TUC an irrevocable option to purchase up to
3,363,570 shares of ENSERCH Common Stock (the "Stock Option"),
which is equal to 4.9% of the shares of ENSERCH Common Stock
outstanding as of March 31, 1996, at a price per share of $16 3/8,
if any of the circumstances which trigger payment of the
Termination Fee occurs. The issuance of any stock upon the
exercise of the Stock Option is subject to any required
regulatory approvals. If the Stock Option becomes exercisable,
TUC may require that ENSERCH repurchase from TUC all or any
portion of the Stock Option, or any shares acquired by TUC upon
the exercise thereof, at a price to be calculated as specified in
the Stock Option Agreement. (See the Stock Option Agreement.)
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Description of Exhibit Reference
2.1 Agreement and Plan of
Merger dated as of
April 13, 1996 (1) . . . . . .Filed herewith.
2.2 Stock Option Agreement
dated as of April 13,
1996 . . . . . . . . . . . . .Filed herewith.
99 News Release of ENSERCH
Corporation dated
April 15, 1996 . . . . . . . .Filed herewith.
(1) The registrant agrees to furnish supplementally any omitted
exhibits or schedules to the Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
ENSERCH CORPORATION
(Registrant)
Date: April 17, 1996 By: /s/ J. W. Pinkerton
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J. W. Pinkerton
Vice President and Controller