EXHIBIT 2.2
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of April 13, 1996, (the
"Agreement") by and between Texas Utilities Company, a corporation formed
under the laws of the State of Texas ("TUC"), and ENSERCH Corporation, a
corporation formed under the laws of the State of Texas ("Enserch").
W I T N E S S E T H T H A T:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Enserch, TUC, TXA, Inc., a wholly-owned subsidiary of TUC, and TXB, Inc., a
corporation formed under the laws of the State of Texas, entered into an
Agreement and Plan of Merger, dated as of April 13, 1996, (the "Merger
Agreement"), which provides, inter alia, upon the terms and subject to the
conditions thereof, for the merger of TXA, Inc. with and into Enserch or, in
certain circumstances, the merger of two newly formed, wholly-owned
subsidiaries of TXB, Inc. with and into TUC and Enserch respectively (in
either case, the "Merger").
WHEREAS, as a condition to TUC's willingness to enter into the Merger
Agreement, TUC has requested that Enserch agree, and Enserch has so agreed,
to grant to TUC an option with respect to certain shares of Enserch' common
stock, on the terms and subject to the conditions set forth herein;
NOW THEREFORE, to induce TUC to enter into the Merger Agreement, and in
consideration of the representations, warranties, covenants and agreements
contained herein, in the Merger Agreement, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Grant of Option.
(a) Subject to the receipt of all regulatory approvals and orders
required by applicable law, Enserch hereby grants TUC an irrevocable option
(the "Enserch Option") to purchase up to 3,363,570 shares, subject to
adjustment as provided in Section 11 (the "Enserch Shares"), of common stock,
par value $4.45 per share, of Enserch (the "Enserch Common Stock") (being 4.9%
of the number of shares of Enserch Common Stock outstanding as of March 31,
1996) in the manner set forth below, at a price (the "Exercise Price") per
Enserch Share of $16 3/8.
(b) The Exercise Price shall be payable, at TUC's option, as follows:
(i) in cash, or
(ii) subject to the receipt of all approvals of any Governmental
Authority required for Enserch to acquire, and TUC to issue, TUC Shares
(as defined below) from TUC, in shares of common stock, without par
value, of TUC ("TUC Shares"))
in either case in accordance with Section 4 hereof.
(c) Notwithstanding the foregoing, in no event shall the number of
Enserch Shares for which the Enserch Option is exercisable exceed 4.9% of the
number of issued and outstanding shares of Enserch Common Stock.
(d) As used herein, the "Fair Market Value" of any share shall be the
average of the daily closing sales price for such share on the New York Stock
Exchange (the "NYSE") during the ten NYSE trading days prior to the fifth NYSE
trading day preceding the date such Fair Market Value is to be determined.
(e) Capitalized terms used herein but not defined herein shall have
the meanings set forth in the Merger Agreement.
2. Exercise of Option.
(a) The Enserch Option may be exercised by TUC, in whole or in part,
at any time or from time to time after the Merger Agreement becomes terminable
by TUC under circumstances which could entitle TUC to a payment under Section
10.3(b) of the Merger Agreement, regardless of whether the Merger Agreement
is actually terminated or whether there occurs a closing of any Business
Combination involving a Target Party or a closing by which a Target Party
becomes a subsidiary (any such event by which the Merger Agreement becomes so
terminable by TUC being referred to herein as a "Trigger Event").
(b)(i) Enserch shall notify TUC promptly in writing of the
occurrence of any Trigger Event, it being understood that the giving of such
notice by Enserch shall not be a condition to the right of TUC to exercise the
Enserch Option.
(ii) In the event TUC wishes to exercise the Enserch Option, TUC
shall deliver to Enserch written notice (an "Exercise Notice")
specifying the total number of Enserch Shares it wishes to purchase.
(iii) Upon the giving by TUC to Enserch of the Exercise Notice and
the tender of the applicable aggregate Exercise Price, TUC, to the
extent permitted by law and Enserch's organizational documents, and
provided that the conditions to Enserch's obligations to issue the
Enserch Shares to TUC hereunder set forth in Section 3 have been
satisfied or waived, shall be deemed to be the holder of record of the
Enserch Shares issuable upon such exercise, notwithstanding that the
stock transfer book of Enserch shall then be closed or that certificates
representing such Enserch Shares shall not then be actually delivered
to TUC.
(iv) Each closing of a purchase of Enserch Shares (a "Closing")
shall occur at a place, on a date, and at a time designated by TUC in
an Exercise Notice delivered at least two business days prior to the
date of the Closing.
(c) The Enserch Option shall terminate upon the earliest to occur of:
(i) the Effective Time of the Merger;
(ii) the termination of the Merger Agreement pursuant to Section
10.1 thereof other than under circumstances which could entitle TUC to
a payment under Section 10.3(b) of the Merger Agreement; and
(iii) 180 days following any termination of the Merger Agreement
upon or during the continuance of a Trigger Event or, if at the
expiration of such 180 day period, the Enserch Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten business days after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal,
but in no event under this clause (iii) later than September 30, 1997.
(d) Notwithstanding the foregoing, the Enserch Option may not be
exercised if TUC is in breach of any of its representations or warranties, or
in material breach of any of its covenants or agreements, contained in this
Agreement or in the Merger Agreement.
3. Conditions to Closing. The obligation of Enserch to issue the
Enserch Shares to TUC hereunder is subject to the conditions that
(a) all waiting periods, if any, under the HSR Act applicable to the
issuance of the Enserch Shares hereunder shall have expired or have been
terminated;
(b) the Enserch Shares, and any TUC Shares which are issued in payment
of the Exercise Price, shall have been approved for listing on the NYSE upon
official notice of issuance;
(c) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any federal, state or local
administrative agency or commission or other federal, state or local
Governmental Authority, if any, required in connection with the issuance and
acquisition of the Enserch Shares hereunder shall have been obtained or made,
including, without limitation, any required approval of the SEC under Sections
9 and 10 of the 1935 Act, any required approval of the Texas Railroad
Commission or the Texas Public Utilities Commission, as the case may be, of
(i) the issuance of the Enserch Shares by Enserch (ii) the acquisition of
Enserch Shares by TUC and (iii) the acquisition by Enserch of the TUC Shares
constituting the Exercise Price hereunder; and
(d) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect.
The conditions set forth in paragraph (b) above may be waived by Enserch, in
the case of TUC Shares, and by TUC, in the case of Enserch Shares, in the sole
discretion of the waiving party.
4. Closing. At any Closing,
(a) Enserch shall deliver to TUC or its designee a single certificate
in definitive form representing the number of Enserch Shares designated by TUC
in its Exercise Notice, such certificate to be registered in the name of TUC
and to bear the legend set forth in Section 12; and
(b) TUC shall deliver to Enserch the aggregate price for the Enserch
Shares so designated and being purchase by
(i) wire transfer of immediately available funds or certified
check or bank check, or
(ii) subject to the conditions in Section 1(b)(ii), a certificate
or certificates representing the number of TUC Shares being issued by
TUC in consideration thereof, determined in accordance with Section
4(c).
(c) In the event that TUC issues TUC Shares to Enserch in
consideration of Enserch Shares pursuant to Section 4(b)(ii), the number of
TUC Shares to be so issued shall be equal to the quotient obtained by
dividing:
(i) the product of (x) the number of Enserch Shares with respect
to which the Enserch Option is being exercised and (y) the Exercise
Price, by
(ii) the Fair Market Value of the TUC Shares as of the date
immediately preceding the date the Exercise Notice is delivered to
Enserch.
(d) Enserch shall pay all expenses, and any and all United States
Federal, state and local taxes, and other chargers that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 4.
5. Representations and Warranties of Enserch. Enserch represents and
warrants to TUC that
(a) Subject to any required regulatory approvals, Enserch has the
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, subject in the case of the repurchase of the
Enserch Shares pursuant to Section 7(a) to applicable law and the provisions
of Enserch' Articles of Incorporation, as amended (the "Enserch Articles");
(b) this Agreement has been duly and validly executed and delivered
by Enserch, and assuming the due authorization, execution and delivery hereby
by TUC, constitutes a valid and binding obligation of Enserch, enforceable
against Enserch in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding therefor may be brought;
(c) Enserch has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise of the Enserch
Option, and at all times from the date hereof through the expiration of the
Enserch Option will have reserved 3,363,570 authorized and unissued Enserch
Shares, such amount being subject to adjustment as provided in Section 11, all
of which, upon their issuance and delivery in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable;
(d) upon delivery of the Enserch Shares to TUC upon the exercise of
the Enserch Option, TUC will acquire the Enserch Shares free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever;
(e) except as described in Section 5.4(b) of the Enserch Disclosure
Schedule to the Merger Agreement, the execution and delivery of this Agreement
by Enserch does not, and, subject to compliance with applicable law and the
Enserch Articles with respect to the repurchase of the Enserch Shares pursuant
to Section 7(a), the consummation by Enserch of the transactions contemplated
hereby will not violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or a lapse of time, or
both) under, or result in the termination of, or accelerate the performance
required by, or result in 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
(any such conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, hereinafter a "Violation") of Enserch or any
of its Subsidiaries, pursuant to
(i) any provision of the Enserch Articles or the Bylaws of
Enserch,
(ii) any provision of any material loan or credit agreement,
note, mortgage, indenture, lease, Enserch benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license of Enserch or its Subsidiaries or to which any of them is a
party (any of the foregoing in effect on the date hereof being referred
to as a "Material Contract"), or
(iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Enserch or its properties or assets,
which Violation, in the case of each of clauses (ii) and (iii), could
reasonably be expected to have a Enserch Material Adverse Effect (except that
no representation or warranty is given concerning any Violation of a Material
Contract with respect to the repurchase of Enserch Shares pursuant to Section
7(a));
(f) except as described in Section 5.4(c) of the Enserch Disclosure
Schedule to the Merger Agreement or Section 3 hereof, the execution and
delivery of this Agreement by Enserch does not, and the performance of this
Agreement by Enserch will not, require any consent, approval, authorization
or permit or filing with or notification to, any Governmental Authority;
(g) none of Enserch, any of its affiliates or anyone acting on its or
their behalf, has issued, sold or offered any security of Enserch to any
person under circumstances that would cause the issuance and sale of Enserch
Shares, as contemplated by this Agreement, to be subject to the registration
requirements of the Securities Act as in effect on the date hereof, and,
assuming the representations and warranties of TUC contained in Section 6(g)
are true and correct, the issuance, sale and delivery of the Enserch Shares
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and
Enserch shall not take any action which would cause the issuance, sale, and
delivery of Enserch Shares hereunder not to be exempt from such requirements);
and
(h) any TUC Shares acquired pursuant to this Agreement will be
acquired for Enserch' own account, for investment purposes only, and will not
be acquired by Enserch with a view to the public distribution thereof in
violation of nay applicable provision of the Securities Act.
6. Representations and Warranties of TUC. TUC represents and warrants
to Enserch that
(a) TUC has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder;
(b) this Agreement has been duly and validly executed and delivered
by TUC, and assuming the due authorization, execution and delivery hereof,
constitutes a valid and binding obligation of TUC, enforceable against TUC in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement
of creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, may be subject to the discretion of
any court before which any proceeding may be brought:
(c) prior to any delivery of TUC Shares in consideration of the
purchase of Enserch Shares pursuant hereto, TUC will have taken all necessary
corporate action to authorize for issuance and to permit it to issue such TUC
Shares, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable;
(d) upon any delivery of such TUC Shares to Enserch in consideration
of the purchase of Enserch Shares pursuant hereto, Enserch will acquire the
TUC Shares free and clear of all claims, liens, charges, encumbrances and
security interest of any nature whatsoever;
(e) except as described in Section 6.4(b) of the TUC Disclosure
Schedule to the Merger Agreement, the execution and delivery of this Agreement
by TUC does not, and the consummation by TUC of the transactions contemplated
hereby will not, violate, conflict with, or result in the breach of any
provision of, or constitute a default (with or without notice or a lapse of
time, or both) under, or result in any Violation by TUC or any of its
subsidiaries, pursuant to
(i) any provision of the Articles of Incorporation or Bylaws of
TUC,
(ii) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, TUC benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license of TUC
or any of its subsidiaries or to which any of them is a party, or
(iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to TUC or its properties or assets,
which Violation, in the case of each of clauses (ii) or (iii) would have a TUC
Material Adverse Effect;
(f) except as described in Section 6.4(c) of the TUC Disclosure
Schedule to the Merger Agreement or Section 3 hereof, the execution and
delivery of this Agreement by TUC does not, and the consummation by TUC of the
transactions contemplated hereby will not, require any consent, approvals
authorization or permit of, or filing with or notification to, any
Governmental Authority; and
(g) any Enserch Shares acquired upon exercise of the Enserch Option
will be acquired for TUC's own account, for investment purposes only and will
not be, and the Enserch Option is not being, acquired by TUC with a view to
the public distribution thereof, in violation of any applicable provision of
the Securities Act.
7. Certain Repurchases.
(a) TUC "Put". At the request of TUC by written notice (x) at any
time during which the Enserch Option is exercisable pursuant to Section 2 (the
"Repurchase Period"), Enserch (or any successor entity thereof) shall, if
permitted by applicable law, the Enserch Articles and Bylaws and Enserch's
Material Contracts (but notwithstanding any insufficiency in the number of
Enserch Shares authorized for issuance upon the exercise of the Enserch
Option), repurchase from TUC all or any portion of the Enserch Option, at the
price set forth in subparagraph (i) below, or, (y) at any time prior to March
31, 1997 (provided that such date shall have extended to September 30, 1997
under the circumstances where the date after which either party may terminate
the Merger Agreement pursuant to Section 10.1(b) of the Merger Agreement has
been extended to September 30, 1997), Enserch (or any successor entity
thereof) shall, if permitted by applicable law, the Enserch Articles and
Enserch's Material Contracts, repurchase from TUC all or any portion of the
Enserch Shares purchased by TUC pursuant to the Enserch Option, at the price
set forth in subparagraph (ii) below:
(i) the difference between the "Market/Offer Price" (as defined
below) for shares of Enserch Common Stock as of the date TUC gives
notice of its intent to exercise its rights under this Section 7 and the
Exercise Price, multiplied by the number of Enserch Shares purchasable
pursuant to the Enserch Option (or portion thereof with respect to which
TUC is exercising its rights under this Section 7), but only if the
Market/Offer Price is greater than the Exercise Price. For purposes of
this subparagraph (i), "Market/Offer Price" shall mean, as of any date,
the higher of (x) the price per share offered as of such date pursuant
to any tender or exchange offer or other offer with respect to a
Business Combination involving Enserch as the Target Party which was
made prior to such date and not terminated or withdrawn as of such date
and (y) the Fair Market Value of Enserch Common Stock as of such date.
(ii) the product of (x) the sum of (A) the Exercise Price paid
by TUC per Enserch Share acquired pursuant to the Enserch Option, and
(B) the difference between the "Offer Price" (as defined below) and the
Exercise Price, but only if the Offer Price is greater than the Exercise
Price, and (y) the number of Enserch Shares so to be repurchased
pursuant to this Section 8. For purposes of this clause (ii), the "Offer
Price" shall be the highest price per share offered pursuant to a tender
or exchange offer or other Business Combination offer involving Enserch
as the Target party during the Repurchase Period prior to the delivery
by TUC of a notice of repurchase.
(b) Redelivery of TUC Shares. If TUC shall have previously elected to
purchase Enserch Shares pursuant to the exercise of the Enserch Option by the
issuance and delivery of TUC Shares, then Enserch shall, if so requested by
TUC, in fulfillment of its obligation pursuant to Section 7(a)(y) (that is,
with respect to the Exercise Price only and without limitation to its
obligation to pay additional consideration under clause (B) of Section
7(a)(ii)(x)), redeliver the certificates for such TUC Shares to TUC, free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever; provided, however, that if at any time less than all of the
Enserch Shares so purchased by TUC pursuant to the Enserch Option are to be
repurchased by Enserch pursuant to Section 7(a)(y), then (i) Enserch shall be
obligated to redeliver to TUC the same proportion of such TUC Shares as the
number of Enserch Shares that Enserch is then obligated to repurchase bears
to the number of Enserch Shares acquired by TUC upon exercise of the Enserch
Option and (ii) TUC shall issue to Enserch new certificates representing those
TUC Shares which are not due to be redelivered to TUC pursuant to this Section
7(b) to the extent that excess TUC Shares are included in the certificates
redelivered to TUC by Enserch.
(c) Payment and Redelivery of Enserch Options or Shares. In the event
TUC exercises its rights under this Section 7, Enserch shall, within ten
business days thereafter, pay the required amount to TUC in immediately
available funds and TUC shall surrender to Enserch the Enserch Option or the
certificate or certificates evidencing the Enserch Shares purchased by TUC
pursuant hereto, and TUC shall warrant that it owns the Enserch Option or such
shares and that the Enserch Option or such shares are then free and clear of
all liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever.
(d) TUC "Call". If TUC has elected to purchase Enserch Shares pursuant
to the exercise of the Enserch Option by the issuance and delivery of TUC
Shares, notwithstanding that TUC may no longer hold any such Enserch Shares
or that TUC elects not to exercise its other rights under this Section 7, TUC
may require, at any time or from time to time prior to March 31, 1997
(provided that such date shall be extended to September 30, 1997 under the
circumstances where the date after which either party may terminate the Merger
Agreement pursuant to Section 10.1(b) of the Merger Agreement has been
extended to September 30, 1997), Enserch to sell to TUC any such TUC Shares
at the price attributed to such TUC Shares pursuant to Section 4 plus interest
at the rate of 8.75% per annum on such amount from the Closing Date relating
to the exchange of such TUC Shares pursuant to Section 4 to the Closing Date
under this Section 7(d) less any dividends on such TUC Shares paid during such
period or declared and payable to shareholders of record on a date during such
period.
(e) Repurchase Price Reduced at TUC's Option. In the event the
repurchase price specified in Section 7(a) would subject the purchase of the
Enserch Option or the Enserch Shares purchased by TUC pursuant to the Enserch
Option to a vote of the shareholders of Enserch pursuant to applicable law or
the Enserch Articles, then TUC may, at its election, reduce the repurchase
price to an amount which would permit such repurchase without the necessity
for such a shareholder vote.
8. Voting of Shares. Following the date hereof and prior to the
fifth anniversary of the date hereof (the "Expiration Date"), each party shall
vote any shares of capital stock of the other party acquired by such party
pursuant to this Agreement ("Restricted Shares"), including any TUC Shares
issued pursuant to Section 1(b), or otherwise beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), by such party on each matter submitted to
a vote of shareholders of such other party for and against such matter in the
same proportion as the vote of all other shareholders of such other party are
voted (whether by proxy or otherwise) for and against such matter.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date, neither
party shall, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7, or
(ii) in accordance with Section 7(b) or Section 10.
(b) Permitted Sales. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be
fair to and in the best interests of the shareholders of the other party, by
a majority of the members of the Board of Directors of such other party, which
majority shall include a majority of directors who were directors prior to the
announcement of such tender or exchange offer.
10. Registration Rights.
(a) Following the termination of the Merger Agreement, either party
hereto that owns Restricted Shares (a "Designated Holder") may by written
notice (the "Registration Notice") to the other party (the "Registrant")
request the Registrant to register under the Securities Act all or any part
of the Restricted Shares beneficially owned by such Designated Holder (the
"Registrable Securities") pursuant to a bona fide firm commitment underwritten
public offering, in which the Designated Holder and the underwriters shall
effect as wide a distribution of such Registrable Securities as is reasonably
practicable and shall use their best efforts to prevent any person (including
any Group (as used in Rule 13d-5 under the Exchange Act)) and its affiliates
from purchasing through such offering Restricted Shares representing more than
1% of the outstanding shares of common stock of the Registrant on a fully
diluted basis (a "Permitted Offering").
(b) The Registration Notice shall include a certificate executed by
the Designated Holder and its proposed managing underwriter, which underwriter
shall be an investment banking firm of nationally recognized standing (the
"Manager"), stating that
(i) they have a good faith intention to commerce promptly a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the then-
prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 80% of the then Fair
Market Value of such shares.
(c) The Registrant (and/or any person designated by the Registrant)
shall thereupon have the option exercisable by written notice delivered to the
Designated Holder within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a price (the "Option
Price") equal to the product of (i) the number of Registrable Securities to
be so purchased by the Registrant and (ii) the then Fair Market Value of such
shares.
(d) Any purchase of Registrable Securities by the Registrant (or its
designee) under Section 11(c) shall take place at a closing to be held at the
principal executive offices of the Registrant or at the offices of its counsel
at any reasonable date and time designated by the Registrant and/or such
designee in such notice within twenty business days after delivery of such
notice, and any payment for the shares to be so purchased shall be made by
delivery at the time of such closing in immediately available funds.
(e) If the Registrant does not elect to exercise its option pursuant
to this Section 10 with respect to all Registrable Securities, it shall use
its best efforts to effect, as promptly as practicable, the registration under
the Securities Act of the unpurchased Registrable Securities proposed to be
so sold; provided, however, that
(i) neither party shall be entitled to demand more than an
aggregate of two effective registration statements hereunder, and
(ii) the Registrant will not be required to file any such
registration statement during any period of time (not to exceed 40 days
after such request in the case of clause (A) below or 90 days in the
case of clauses (B) and (C) below) when
(A) the Registrant is in possession of material non-public
information which it reasonably believes would be
detrimental to be disclosed at such time and, in the opinion of
counsel to the Registrant, such information would be required to
be disclosed if a registration statement were filed at that time;
(B) the Registrant is required under the Securities Act
to include audited financial statements for any period in such
registration statement and such financial statements are not yet
available for inclusion in such registration statement; or
(C) the Registrant determines, in its reasonable judgment,
that such registration would interfere with any financing,
acquisition or other material transaction involving the Registrant
or any of its affiliates.
(f) The Registrant shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue Sky law of such jurisdictions as the
Designated Holder may reasonably request and shall continue such registration
or qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10 are subject
to the condition that the Designated Holder shall provide the Registrant with
such information with respect to such holder's Registrable Securities, the
plans for the distribution thereof, and such other information with respect
to such holder as, in the reasonable judgment of counsel for the Registrant,
is necessary to enable the Registrant to include in such registration
statement all material facts required to be disclosed with respect to a
registration thereunder.
(h) A registration effected under this Section 10 shall be effected
at the Registrant's expense, except for underwriting discounts and commissions
and the fees and these of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as is customary in
connection with underwritten public offerings as such underwriters may
reasonably require.
(i) In connection with any registration effected under this Section
10, the parties agree
(i) to indemnify each other and the underwriters in the
customary manner;
(ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and
the other underwriters participating in such offering, and
(iii) to take all further actions which shall be reasonably
necessary to effect such registration and sale (including if the Manager
deems it necessary, participating in road-show presentations).
(j) The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such
offering.
11. Adjustment of Number of Enserch Shares.
(a) Without limitation to any restrictions on Enserch contained in
this Agreement or in the Merger Agreement, in the event of any change in
Enserch Common Stock by reason of stock dividends, splitups, mergers (other
than the Merger), recapitalizations, combinations, exchange of shares or the
like, the type and number of shares or securities subject to the Enserch
Option, and the purchase price per share provided in Section 1, shall be
adjusted appropriately to restore to TUC its rights hereunder, including the
right to purchase from Enserch (or its successors) shares of Enserch Common
Stock (or such other shares or securities into which Enserch Common Stock has
been so changed) representing 4.9% of the outstanding Enserch Common Stock for
the aggregate Exercise Price calculated as of the date of this Agreement as
provided in Section 1.
(b) If, as a result of the application of the limitations on payments
contained in Section 10.3(d) of the Merger Agreement, the maximum payment upon
the "put" of the entire Enserch Option under Section 7(a) of this Agreement
is limited, the number of Enserch Shares shall be reduced to the maximum
number of Enserch Shares that would, if the "put" of the Enserch Option
provided in Section 7(a) of this Agreement were exercised on the Termination
Date (as defined in the Merger Agreement), result in such maximum payment as
so limited.
12. Restrictive Legends. Each certificate representing shares of
Enserch Common Stock issued to TUC hereunder, and TUC Shares, if any,
delivered to Enserch at a Closing, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES OR BLUE SKY LAWS, AN D MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE ENSERCH STOCK OPTION
AGREEMENT, DATED AS OF APRIL 13, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities
Act and state securities or Blue Sky laws in the above legend shall be
removed by delivery of substitute certificate(s) without such reference
if TUC or Enserch, as the case may be, shall have delivered to the other
party a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance satisfactory to the other party, to the
effect that such legend is not required for purposes of the Securities
Act or such laws;
(ii) the reference to the provisions to this Agreement in the
above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances
that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
In addition, such certificates shall bear any other legend as may be required
by law. Certificates representing shares should in a registered public
offering pursuant to Section 10 shall not be required to bear the legend set
forth in this Section 12.
13. Binding Effect; No Assignment; No Third Party Beneficiaries. (a)
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
(b) Except as expressly provided for in this Agreement, neither this
Agreement nor the rights or obligations of either party hereto are assignable,
except by operation of law, or with the written consent of the other party.
(c) Nothing contained in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature whatsoever
by reason of this Assignment.
(d) Any Restricted Shares sold by a party in compliance with the
provision of Section 10 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement, unless and
until such party shall repurchase or otherwise become the beneficial owner of
such shares, and any transferee of such shares shall to be entitled to the
registration rights of such party.
14. Specific Performance. The parties hereto agree that irreparable
harm would occur in the event that any of the provision of this Agreement were
not performed in accordance with their specified terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
Untied States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or equity.
15. Validity. (a) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of the other provisions of this Agreement, which shall remain in full force
and effect.
(b) In the event any court or other competent authority holds any
provision of this Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to effectuate,
to the extent permitted by law, the intent of the parties hereto with respect
to such provision and the economic effects thereof.
(c) If for any reason any such court or regulatory agency determines
that TUC is not permitted to acquire, or Enserch is not permitted to
repurchase pursuant to Section 8, the full number of shares of Enserch Common
Stock provided in Section 1 hereof (as the same may be adjusted), it is the
express intention of Enserch to allow TUC to acquire or to require Enserch to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) 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
therewith, or not take any action required herein, the other party shall not
be entitled to specific performance of such provisions or part hereof or to
any other remedy, including but not limited to money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
16. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if (a) delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) five days
after being mailed by registered or certified mail (return receipt requested)
to the parties in each case to the following addresses (or at such other
address for a party as shall be specified by like notice):
A. If to TUC to:
By Mail:
and Hand: Worsham, Forsythe & Wooldridge, L.L.P.
1601 Bryan Street, 30th Floor
Dallas, Texas 75201
Attention: Robert A. Wooldridge, Esq.
with a copy to: LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, N.Y. 10019
Attention: Douglas W. Hawes, Esq.
B. If to Enserch to:
By Mail:
and Hand: Enserch Corporation
300 South St. Paul
Dallas, Texas
Attention: William T. Satterwhite, Esq.
with a copy to: Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044
Attention: David Brown, Esq.
17. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas applicable
to agreements made and to be performed entirely within such State and without
regard to its choice of law principles.
18. Interpretation.
(a) When reference is made in this Agreement to Articles, Sections or
Exhibits, such reference shall be to an Article, Section or Exhibit of this
Agreement, as the case may be, unless otherwise indicated.
(b) The table of contents and heading contained in this Agreement are
for reference purposes and shall not affect in any way the meaning or
interpretation of the Agreement.
(c) Whenever the words "include," "includes," or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense.
19. Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
20. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of
a waiver, by an instrument signed on behalf of the party waiving compliance.
21. Extension of Time Periods. The time periods for exercise of
certain rights under Sections 2, 6 and 7 shall be extended:
(a) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the expiration of all statutory waiting
periods; and
(b) to the extent necessary to avoid any liability under Section 16(b)
of the Exchange Act by reason of such exercise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written
ENSERCH CORPORATION
By: /s/ D. W. Biegler
---------------------------------
Name:
Title:
TEXAS UTILITIES COMPANY
By: /s/ Erle Nye
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Name:
Title: