ML20129B682
| ML20129B682 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 09/20/1996 |
| From: | Terry C TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| TXX-96473, NUDOCS 9609230190 | |
| Download: ML20129B682 (318) | |
Text
.
E l- m Log # TXX-96473 File # 10010
_ ,,,-- Ref. # 10CFR50.80 r =
1UELECTRIC c, % 7 ,7 September 20, 1996 Groep Vice President U. S. Nuclear Regulatory Commission Attn: Document Control Desk Washington, DC 20555
SUBJECT:
COMANCHE STEAM ELECTRIC STATION DOCKET NO:.. m 445 AND 50 446 ACQUISITION OF ENSERCH CORPORATION BY TEXAS UTILITIES COMPANY REF: (1) TU Electric Letter logged TXX 96468 dated September 13, 1996, from C. L. Terry to NRC Gentlemen:
By letter dated September 13, 1996. (Reference 1), TU Electric Company (TV Electric), the holder of NRC License Nos. NPF 87 and NPF 89 to own and operate the Comanche Peak Steam Electric Station Units 1 and 2 (CPSES),
notified the Nuclear Regulatory Commission (NRC) of the proposed acquisition of ENSERCH Corporation (ENSERCH) by. Texas Utilities Company (TUC), the holding company parent of TU Electric.
In the above referenced letter TU Electric expressed our position that the acquisition transaction was not one that required NRC Staff consent under the requirements of 10CFR50.80. Notwithstanding that position.
TU Electric in the interest of resolving any contrary position within the NRC staff hereby requests NRC consent, to the extent required by Section 184 of t'9 Atomic Energy Act of 1954, as amer.ded (AEA), and 10 C.F.R. S 50.E to any indirect transfer of control of TU Electric's NRC licenses that ma,y occur in connection with this acquisition.
Attachment 2 to this letter contains TU Electric's Request for Consent, which contains the iriformation required under 10 C.F.R. S 50.80 in support of a request for NRC consent under Section 184 of the AEA.
Enclosed is a copy of the Joint Proxy Statement / Prospectus which has been filed with the Securities and Exchange Commission (SEC) and will be provided to the shareholders of TUC and ENSERCH in connection with this acquisition. Attachment 3 also contains a copy of the Amended and Restated Agreement and Plan of Merger among TUC, ENSERCH, and TUC Holding Company. j/
9609230190 960920 E, PDR ADOCK 05000445 H PDR
$d 00rk P. O. Box 1002 Glen Rose. Texas 76043
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l TXX 96473 Page 2 of 2 The consummation of the proposed merger transactions associated with this acquisition will depend upon the receipt of the required regulatory and shareholder approvals. Assuming all required regulatory and shareholder approvals are obtained by November 15, 1996, TUC and ENSERCH plan to consummate these transactions as soon as possible thereafter. TU Electric l
therefore respectfully requests that the NRC review this Request for Consent on a schedule that will permit final action on this request as ,
promptly as possible and, in any event, by November 15, 1996.
i If NRC has any questions about the proposed Request for Consent or wishes to obtain any additional information about the proposed acquisition of ENSERCH, please contact me or my staff as soon as possible.
Si e 419,
[ C. L. Terry RDW/grp Attachments l Enclosure c- Mr. J. L. Callan, Region IV Hr. J. I. Tapia, Region IV l Hr. T. J. Polich, NRR ,
i Resident inspector, CPSES I i
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l Attachment 1 to TXX 96473 Page 1 of 1 UNITED STATES OF AMERICA NUCLEAR REGULATORY C0HNISSION In the Hatter of )
)
Texas Utilities Electric Company ) Docket Nos. 50 445
) and 50-446 (Comanche Peak Steam Electric )
Station Unit 1 & 2) )
AFFIDAVIT Charles L. Terry being. duly sworn, hereby deposes and says that he is Group Vice President, Nuclear Production of TV Electric, the licensee herein; that he is duly authorized to sign and file with the Nuclear Regulatory Commission this Acquisition of ENSERCH Corporation by Texas Utilities Company; that he is familiar with the content thereof; and that the matters set forth therein are true and correct to the best of his knowledge, information and belief.
)/ $
Adul2d Charles L. Terry
_r w Group Vice President, N STATE OF TEXAS )
COUNTY OF eld ) )
Subscribed and sworn to before me, on this Jo //r day of s// M d C 1996. /
SUSAN C.GRAVATI NOTARY PUBUC STATE OF TEXfS / ~
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Commission Expires 3-24-97 d,j64 % .
g,g /fG gNotary Public g//
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I Attachment 2 to TXX 96473 Page 1 of 17 l
REQUEST FOR CONSENT !
- 1. BACKGROUND INFORMATION CONCERNING TUC AND ENSERCH j Texas Utilities Company (TUC) is a Texas corporation which is a public utility holding company. TUC's principal subsidiary TV Electric Company (TV Electric), is an operating public utility company engaged in the generation, purchase, transmission, distribution and sale of electric energy in the north central, eastern and western portions of Texas. TU Electric j' holds NRC License Nos. NPF 87 and NPF 89 authorizing TU Electric to own and l operate the Commanche Peak Steam Electric Station Units 1 and 2 (CPSES).
l Two other subsidiaries of TUC are engaged directly or indirectly in i public utility operations: (1) Southwestern Electric Service Company, which is '
engaged in the purchase, transmission, distribution and sale of electric energy in ten counties in the eastern and central parts of Texas, and (2)
Texas Utilities Australia Pty. Ltd., which in 1995 acquired the common stock of Eastern Energy Limited, a company engaged in the purchase, distribution and sale of electric energy in the Melbourne area of Australia. TUC also has seven other wholly owned subsidiaries which perform specialized functions within.the TUC system.
ENSERCH Corporation is a Texas corporation which is an integrated energy company engaged in natural gas and oil exploration and production, natural gas l
pipeline gathering, processing and marketing, and natural gas distribution and power generation. ENSERCH is engaged in (1) exploring for, developing, producing and marketing natural gas and oil primarily in the United States (a segment of the business which will be spun off to.the ENSERCH shareholders),
(2) owning and operating interconnected natural gas transmission lines, underground storage reservoirs, compressor stations and related properties in i Texas: gathering and processing natural gas to remove impurities and extract liquid hydrocarbons for sale in Texas, and the wholesale and retail marketing of natural gas in several areas of the United States, (3) owning and operating local gas utility distribution systems in Texas, and (4) developing, financing ;
and operating cogeneration facilities. Additional information concerning the i business and activities of TUC and ENSERCH is provided in the Joint Proxy Statement / Prospectus.
t i
Attachment 2 to TXX 96473 Page 2 of 17 II. REASONS FOR THE ACQUISITION AND DESCRIPTION OF THE MERGER TRANSACTIONS ASSOCIATED WITH THE ACQUISITION The acquisition of ENSERCH will offer significant strategic and financial benefits to TUC by creating a stronger company with expertise in both electric and gas utility operations that is able to offer its customers enhanced service options, maintain competitive rates, efficiently pursue non-utility operations, and take advantage of complementary operational functions as well as reduced administrative costs, in order to participate effectively in the increasingly competitive utilities industry.
The acquisition of ENSERCH will be accomplished through the merger transactions contemplated by the Amended and Restated Agreement and Plan of Herger among TUC, ENSERCH and TUC Holding Company, dated as of April 13, 1996.
A copy of the Herger Agreement is included in the Joint Proxy Statement / Prospectus. The relevant merger transactions involve (1) the formation of a new Texas corporation, TUC Holding Company, and two new subsidiaries of TUC Holding Company ( i.e., TUC Herger Corp. and Enserch Herger Corp.), (2) the merger of TUC Herger Corp. with and into TUC with TUC being the surviving corporation, and (3) the merger of Enserch Herger Corp. with and into ENSERCH with ENSERCH being the surviving company. l Upon the consummation of these transactions, TUC and ENSERCH will both become wholly owned subsidiaries t' TUC Holding Company and TUC Holding Company will change its name to Texas Utilities Company. Shares of common stock of TUC and ENSERCH will be converted into shares of common stock in the new Texas Utilities Company in connection with these transactions. TU Electric will remain a wholly owned subsidiary of TUC and become an indirectly wholly owned subsidiary of the new Texas Utilities Company upon the consummation of the merger transactions. In addition to becoming the corporate parent of ENSERCH, the new Texas Utilities Company will essentially continue to conduct the business and activities currently being conducted by TUC. Additional information related to the ENSERCH acquisition and the proposed merger transactions is contained in the Joint Proxy Statement / Prospectus.
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Attachment 2 to TXt 96473 Page 3 of 17 Ill.
SUMMARY
OF THE IMPACT OF THE MERGER TRANSACTIONS ON TU ELECTRIC AND CBES The merger transactions will have no impact on the management and operation of TV Electric or TU Electric's ownership and control of its NRC licenses. After consummation of the merger transactions:
(1) The new Texas Utilities Company will be a publicly traded company and the common stock of the new Texas Utilities Company will be widely held:
(2) The current shareholders of TUC will become shareholders of the new Texas Utilities Company and hold approximately 94% of the issued and outstanding shares of common stock of the new Texas Utilities Company:
(3) All of the directors and officers of the new Texas Utilities Company, TUC and TV Electric will be U.S. citizens and none of Texas Utilities Company. TUC, or TV Electric will be owned, j controlled, or dominated by any alien, foreign corporation or l foreign government: ;
(4) The directors and officers of TUC will become directors and officers of the new Texas Utilities Company and both the current Chairman and Chief Executive Officer of TUC will become the i Chairman and Chief Executive Officer of the new Texas Utilities Company:
(5) TU Electric will remain a wholly owned subsidiary of TUC and i become an indirect wholly owned subsidiary of the new Texas !
Utility Company:
(6) TV Electric will remain the sole owner of CPSES and will remain exclusively entitled to the entire power output from CPSES:
(7) The officers and directors of TV Electric will remain unchanged and there will be no change in the management or technical qualifications of TU Electric's nuclear organization:
(8) TU Electric will continue to own and operate CPSES in accordance with the terms and conditions of NRC Licenses Nos. NPF 87 and NPF-89: and (9) TU Electric will continue to be an " electric utility" within the meaning of 10 CFR S 50.2 subject to regulation by the Texas Public Utility Commission, and there will be no change in TU Electri.c's source of funds or in its ability to obtain funds to support the operation and decommissioning of CPSES.
Attachment 2 to TXX 96473 i Page 4 of 17.
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IV. REQUIRED REGULATORY APPROVALS The other principal regulatory approvals required in connection with the ,
acquisition of ENSERCH by TUC include review by the Department of Justice !
(D0J) and the Federal Trade Commission (FTC) under the Hart Scott Rodino l l Antitrust Improvements Act (HSR Act), the approval of the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935 (PUHCA), and review by Texas Railroad Commission. The acquisition of ENSERCH I by TUC is also subject to the approval of the shareholders of both TUC and ENSERCH.
(1) Deoartment of Justice / Federal Trade Commission . The HSR Act and the rules and regulations thereunder provide that the merger transactions associated with the acquisition of ENSERCH may not be consummated until certain information has been submitted to the Antitrust Division of the D0J (Antitrust Division) and the FTC and the specified HSR Act waiting period l requirements have been satisfied. TUC and ENSERCH submitted respective .
! Premerger Notifications pursuant to the HSR Act on July 1,1996. On July 30, '
1996, TUC and ENSERCH each received a request for additional information ,
j regarding the mergers from the Antitrust Division, and the mergers may not be consummated until 20 days after both TUC and ENSERCH have substantially :
l complied with all such requests. TUC and ENSERCH expect to have substantially l complied with these information requests by the end of September,1996.
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! (2) Securities and Exchanae Commission . The new Texas Utilities '
l Company is required to obtain SEC approval under.Section 9(a)(2) of PUHCA in
( connection with the mergers. Section 9(a)(2) of PUHCA requires an entity owning, directly or indirectly 5% or more of the voting securities of a public utility company to obtain the approval of the SEC prior to acquiring a l direct or indirect interest in 5% or more of the voting securith of another
! public utility company. In the mergers, the new Texas Utilities Company will l acquire all of the outstanding voting securities of TUC which holds all of the outstanding voting securities of TU Electric and SESCO, each of which is a public utility company for purposes of PUHCA, as well as all of the outstanding voting securities of ENSERCH, which is also a public utility l l company for purposes of PUHCA. An application for approval of the mergers and an order confirming that the new Texas Utilities Company will be a holding company exempt from all provisions of PUHCA, except Section 9(a)(2) thereof, will be filed with the SEC by the new Texas Utilities Company. TUC expects to receive the approval of the-SEC by November 15, 1996.
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Attachment 2 to TXX 96473 Page 5 of 17 i
i (3) Texas Railroad Commission. The Texas Railroad Commission which has jurisdiction over gas utilities in the State of Texas, has indicated that it has no opposition to the ENSERCH acquisition, that it will rely on existing authority and resources to protect the public interest and ratepayers ,
subject to its jurisdiction, including ratepayers who are customers of ENSERCH, and that there is no hindrance under Texas natural gas utility regulatory law to the consummation of the ENSERCH 2(quisition. ,
l (4) Shareholders Anorovals . The oroposed acquisition of ENSERCH ,
by TUC is subject to the approval of the shareholders of both TUC and ENSERCH. !
Special meetings of the shareholders of TUC and ENSERCH to vote on the proposed acquisition are scheduled for November 15, 1996. The Joint Proxy i Statement / Prospectus related to the acquisition will be mailed to the l shareholders of both companies on or about October 1, 1996. Additional i l information related to the shareholder approval and the securities of the new ;
Texas Utilities Company to be issued upon the consummation of the mergers, is !
contained in the Joint Proxy Statement / Prospectus. ,
V. GENERAL INFORMATION CONCERNING LICENSEE (1) Name of Licensee :
Texas Utilities Electric Company (2) Address of Licensee :
Energy Plaza 1601 Bryan Street l
Dallas, Texas 75201 (3) Descriotion of Business or occuoation of Licensee :
l TU Electric is engaged principally in generating, purchasing, I distribution and selling electric energy at retail and at wholesale in Texas, including the ownership and operation of CPSES. Additional information related to the business and activities of TU Electric is l contained in the Joint Proxy Statement / Prospectus.
(4) NRC Licenses Held by Licensee :
NRC Nuclear Production Facility Licenses Nos. NPF 87 and NPF 89 for Commanche Peak Steam Electric Station. Units 'I and 2.
l (5) Oroanization and Manaoement of Licensee :
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Attachment 2 to TXX 96473-Page 6 of 17 r
I TU Electric is a Texas corporation which is currently a wholly owned !
subsidiary of TUC.
1 The names, titles, and mailing addresses of the current officers of TU l Electric, who are all citizens of the United States, are set forth !
! below:
l
( TU Electric Officers ;
Erle Nye !
, Chairman of the Board and Chief Executive -
7 l Texas Utilities Electric Company ,
1601 Bryan Street, 41st Floor Dallas, TX 75201 i
- i E. L. Watson i Vice Chairman ,
i Texas Utilities Electric Company l l- 1601 Bryan Street, 42nd Floor j Dallas, TX 75201 '
l H. Jarrell Gibbs '
President l l Texas Utilities Electric Company
! 1601 Bryan Street, 41st Floor
! Dallas, TX 75201 l
T. L. Baker l President, Electric Service Division Texas Utilities Electric Company 1601 Bryan Street, 41st Floor l Dallas, TX 75201 Michael J. McNally President, Transmission Division Texas Utilities Electric Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 J
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L l l Attachment 2-to TXX 96473 '
l Page 7 of 17 :
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-W. H. Taylor !
l President, Generation Division
' Texas Utilities Electric Company i 1601 Bryan Street, 41st Floor !
Dallas, TX 75201 ;
John U. Hartin ;
! Executive Vice President !
l Texas Utilities Electric Company ;
1601 Bryan Street. 41st Floor Dallas, TX 75201 John D. Janak [
Group Vice President Fossil Production j Texas Utilities Electric Company '
l 1601 Bryan Street. 41st Floor l
Dallas, TX 75201 l
Lance Terry l l Group Vice President, Nuclear Production Texas Utilities Electric Company s P.O. Box 1002 i l Glen Rose, TX 76043 )
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L Kenneth R. Breeden l Senior Vice President. Marketing Texas Utilities Electric Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 Terry R. Griffin Senior Vice President, Customer Service Marketing i Texas Utilities Electric Company 1601 Bryan Street. 41st Floor l Dallas. TX 75201 Joe R. Thompson I Senior Vice President. Transmission :
t Texas Utilities Electric Company L
P.O. Box'970 Forth Worth, TX 76101 4
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Attachment 2 to TXX 96473 Page 8 of 17 Paul D. Williams Senior Vice President, Distribution Texas Utilities Electric Company P.O. Box 970 Forth Worth TX 76101 J. A. Byrd, Jr.
Vice President System Operations l Texas Utilities Electric Company j l 2233 8 Hountain Creek Parkway l Dallas, TX 75211
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John H. Carlson Vice President, Fossil Production, Operations Texas Utilities Electric Company ,
1601 Bryan Street, 41st Floor l Dallas, TX 75201 l Charles W. Jenkins III Vice President, Fuels :
Texas Utilities Electric Company l 1601 Bryan Street, 41st Floor l Dallas, TX 75201 i
Ron Keeney l Vice President, Rates and Regulatory Texas Utilities Electric Company 1601 Bryan Street, 41st Floor I Dallas, TX 75201
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James J. Kelley, Jr.
Vice President, Nuclear Engineering and Support Texas Utilities Electric Compar:j j P.O. Box 1002 I Glen Rose. TX 76043
\ l l Larry D. Nace Vice President, Production Engineering and Support / Fossil Texas Utilities Electric Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 l
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Attachment 2 to TXX 96473 Page 9 of 17 l
T. Michael Ozymy Vice President. Regulatory Affairs Texas Utilities Electric Company l 1005 Congress, Suite 750 l Austin, TX 78701 l
! Ron Seidel l Vice President, Bulk Power Transactions '
! Texas Utilities Electric Company l l
1601 Bryan Street, 41st Floor Dallas, TX 75201 Cathryn C. Hulen Controller l Texas Utilities Electric Company ,
l 1601 Bryan Street, 41st Floor' i Dallas TX 75201 !
James H. Scott i Secretary and Assistant Treasurer Texas Utilities Electric Company i l 1601 Bryan Street. 41st Floor l- Dallas, TX 75201 i Robert S. Shapard Treasurer and Assistant Secretary '
l Texas Utilities Electric Company '
1601 Bryan Street. 41st Floor l Dallas, TX -75201 Glen H. Hibbs !
i Assistant Secretary
- Texas Utilities Electric Company l 1601 Bryan Street, 41st Floor Dallas, TX 75201 l
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t Attachment 2 to TXX-96473 l- Page'10 of 17 t I
The names and addresses of the current directors of TV Electric, who are >
! also all citizens of the United states, are set forth below:
TU Electric Directors T. L. Baker i i Texas Utilities Electric Company '
1601 Bryan Street, 41st Floor Dallas, TX 75201 l
J. S. Farrington Texas Utilities Company 1601 Bryan Street, 41st Floor i Dallas, TX 75201 H. Jarrell Gibbs Texas Utilities Electric Company 1601 Bryan Street, 41st Floor i Dallas, TX 75201 ;
f l Michael J. McNally Texas Utilities Electric Company '
1601 Bryan Street, 41st Floor Dallas, TX 75201 l Erle Nye Texas Utilities Electric Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 W. H. Taylor Texas Utilities Electric Company l 1601 Bryan Street, 41st Floor Dallas, TX 75201 L E. L. Watson Texas Utilities Electric Company l 1601 Bryan Street, 41st Floor l Dallas. TX 75201 j 1
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j Attachment 2 to TXX-96473 Page 11 of 17 l
(6) Oraanization and Manaaement of TUC l
TUC is a Texas corporation with its principal offices located at Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201. The names and addresses of the current directors and officers of TUC, who are all citizens of the United States, are set forth below:
l TUC Directors J. S. Farrington Texas Utilities Company
- 1601 Bryan Street, 41st Floor Dallas, TX 75201 l Bayard H. Friedman 500 Throckmorton Street, Box 44225 Fort Worth, TX 76102 3708 ;
l l William H. Griffin The WHG Company Ha tf d T b6 Kerney Layday l
The Layday Company i l 122 West Carpenter Freeway, Suite 480 ;
! Irving, TX 75039 i Hargaret N. Maxey ;
TOWERS OF TOWN LAKE Suite 12B1, 40 IH 35 N.
Austin TX 78701 I
i James A. Middleton i 574 Chapala Drive Pacific Palisades, CA 90272 4429 Erle Nye Texas Utilities Company 1601 Bryan Street, 41st Floor i Dallas, TX 75201
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Attachment 2 to TXX 96473 Page 12 of 17 l
James E. Oesterreicher J.C. Penney Company, Inc.
P.O. Box 10001 Dallas, TX 75301-0005 l
l Charles R. Perry l Perry Management, Inc.
P.O. Box 60380 ;
Midland, TX 79711 0380 Dr. Herbert H. Richardson i Office of the Director !
Texas Transportation Institute 3501 Parkway Terrace Bryan, TX 77802 TUC Officers :
J. S. Farrington Chairman of the Board ;
Texas Utilities Company '
1601 Bryan Street, 41st Floor Dallas, TX 75201 Erle Nye President and Chief Executive Texas Utilities Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 Cathryn C. Hulen Controller Texas Utilities Company 1601 Bryan Street, 41st Floor Dallas, TX 75201 James H. Scott Secretary and Assistant Treasurer l Texas Utilities Company l
1601 Bryan Street, 41st Floor Dallas, TX 75201 J
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l Attachment 2 to TXX 96473 Page 13 of 17 Peter B. Tinkham l Treasurer and Assistant Secretary
- Texas Utilities Company l 1601 Bryan Street, 41st Floor Dallas, TX 75201 l
(7) Oraanization and Manaaement of TUC Holdino Comoany TUC Holding Company is a Texas corporation with its offices located at Energy Plaza,1601 Bryan Street, Dallas, Texas 75201. The names and addresses of the current director and officers of TUC Holding Company, who are all citizens of the United States, are set forth below:
TUC Holdina Comnany Director
! Robert A. Wooldridge l Worsham, Forsythe & Wooldridge, LLP 1601 Bryan Street, 30th Floor Dallas, TX 75201 l
TUC Holdina Comoany Officers H. Harrell Gibbs President l
TUC Holding Company.
1601 Bryan Street, 41st Floor Dallas, TX 75201 Peter B. Tinkham Treasurer and Assistant Secretary TUC Holding Company 1601 Bryan Street, 43rd Floor Dallas, TX 75201 Cathryn C. Hulen Controller TUC Holding Company 1601 Bryan Street, 36th Floor Dallas, TX 75201 l
.- . . _ . . _ -. . . - . - = . . . , - . . _ . .. _
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l Attachment 2 to TXX 96473 Page 14 of 17 l- James H. Scott Secretary and Assistant Treasurer TUC Holding Company 1601 Bryan Street, 41st Floor l Dallas, TX 75201 ,
l I l (8) Oraanization and Manaaement of TU Electric. TUC. and Texas Utilities {
Comoany after the Consummation of the Heraer Transactions l
Upon the acquisition of ENSERCH by TUC and the consummat' ion of the merger transactions, TV Electric will remain a wholly owned subsidiary .i of TUC and become an indirect wholly owned subsidiary of the new Texas Utilities Company (i.e., TUC Holding Company). Management of TV Electric's licensed operations will remain unchanged. TV Electric's principal offices will remain at 1601 Bryan Street, Dallas, Texas 75201. The directors and officers of TU Electric, including management responsible for the operation of CPSES, will remain the same and not be affected by the ENSERCH acquisition.
Upon the consummation of the merger transactions, and the change of TUC !
Holding Company's name to Texas Utilities Company, the current directors j of TUC will become the directors of the new Texas Utilities Company and ;
the current officers of TUC will assume identical positions with the new '
Texas Utilities Company. Two of the current ENSERCH officers (i.e., '
Hessrs. D.W. Biegler and W.T. Satterwhite) will also become officers of ,
the new Texas Utilities Company. Messrs. Biegler-and Satterwhite are U.S. citizens. Upon the consummation of the merger transactions, it is presently contemplated that the current officers and directors of TUC Holding Company will assume similar positions at TUC and that one or more of the current officers and directors of TUC will also become officers and directors of TUC. The new Texas Utilities Company and TUC ,
will continue to maintain their principal offices at 1601 Bryan Street, l Dallas, Texas 75201. Additional information pertaining to the management, business and activities of the new Texas Utilities Company, '
TUC, and TV Electric is provided in the Joint Proxy Statement / Prospectus.
(9) Foreian Ownershio and Control Following the proposed merger transactions, the shares of the new Texas Utilities Company will be widely held and TUC's current shareholders will hold approximately 94% of the issued and outstanding shares of common stock of the new Texas Utilities Company. TUC will be a wholly owned subsidiary of the new Texas Utilities Company and TV Electric will <
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.. .s a Attachment 2 to TXX 96473 Page 15 of 17 l
be a wholly owned subsidiary of TUC. The directors and officers of all i of these companies will be U.S. citizens. None of TV Electric TUC, or the new Texas Utilities Company will be owned, controlled, or dominated by any alien, foreign corporation or foreign government.
VI. TU ELECTRIC's FINANCIAL QUALIFICATIONS l
As specified in its NRC licence, TU Electric is licensed pursuant to Section 103 of the Atomic Energy Act of 1954, as amended (AEA), and 10 CFR Part 50, to own and operate CPSES. " Electric utilities" licensed pursuant to Section 103 of the AEA are exempt from the requirement to demonstrate financial qualifications. Moreover, TU Electric is and will remain an
" electric utility" within the meaning of 10 CFR S 50.2 following consummation of the merger transactions, in that it will remain an " entity that generates or distributes electricit) and which recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority". The business of TV Electric will remain essentially unchanged upon consummation of the mergers and it will continue to be regulated by the Texas Public Utility Commission.
- The merger transactions, therefore, will not adversely affect l TU Electric's ability to obtain the funds necessary to cover its share of i costs for the safe operation, maintenance, repair, decontamination and .
decommissioning of CPSES. TV Electric's liability for such costs and for its obligations under 10 CFR Part 140 and 10 CFR S 50.54(w) will not be affected.
by the merger transactions. Additional financial information related to TU Electric, TUC, ENSERCH, and the new Texas Utilities Company (i.e., TUC Holding Company) is contained in the Joint Proxy Statement / Prospectus.
VII. DECOMMISSIONING FUNDING FOR CPSES
- As explained above., the financial qualifications of TU Electric i will not be adversely affected by the proposed merger transactions.
Similarly, the mergers will not affect the ability of TU Electric to assure that the funds necessary to cover the costs for decontamination and
[ decommissioning of CPSES will be available upon decommissioning. No changes l in the decommissioning funding plan are anticipated due to the mergers.
However, to provide additional assurance of the availability of funds for decommissioning, TV Electric agrees to provide the Director of Nuclear Reactor Regulation with a copy of any application to any other regulatory authority, at the time it is filed, to transfer (excluding grants of a security interest or liens) from TU Electric to its parent company, or any other affiliated
I l . , e, ,
Attachment 2 to TXX 96473 Page 16 of 17 company, facilities for the production, transmission or distribution of J electric energy having a depreciated book value exceeding one percent (1%) of !
TU Electric's consolidated net utility plant, as recorded on TU Electric's !
books of account.
I VIII. TU ELECTRIC'S TECHNICAL QUALIFICATIONS l
The proposed acquisition of ENSERCH will not result in any change )
in the design or operation of CPSES, nor any change in the terms and )
l conditions of TU Electric's existing licenses or technical specifications. !
The personnel at TU Electric having control over licensed activities at CPSES !
will not change as a result of the merger transactions. There will also be no !
other changes in the management or operation of CPSES or TU Electric as a i result of the merger transactions.
IX. ANTITRUST CONSIDERATIONS ;
l As noted above. TV Electric is licensed, pursuant to Section 103 i l Of the AEA, to own and operate CPSES. Upon the consummation of the merger ;
transactions, TU Electric will remain the sole licensed owner and operator of j CPSES and remain exclusively entitled to the power output of CPSES. The i submission of antitrust information is not required in connection with '
licensing actions which do not affect the ownership of nuclear generating
- facility, entitlement to the power output from such a facility, or otherwise ;
I involve a "significant change" in licenses activities. See,e A , SECY 91 246 (Aug. 7, 1991) " Antitrust Considerations for License Amendments Authorizing I l New Operating Entities." Moreover, the merger transactions associated with l g the ENSERCH acquisition are subject to separate antitrust reviews by other federal agencies addressing the potential effect of the mergers on competition. As noted above, the parties filed appropriate notifications to
- the FTC and 00J under the HSR Act and are filing an application for SEC l approval under Section 9(a)(2) of PUHCA.
l X. ACCESS TO RESTRICTED DATA This request does not contain any Restricted Data or other
- Classified Defense Information or any change in access to such Restricted Data !
or Classified Defense Information. TU Electric's existing restrictions on l l access to Restricted Data and Classified Defense Information will be l l unaffected by the proposed acquisition of ENSERCH. l i
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l Attachment 2 to TXX 96473 l Page 17 of 17
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l XI. EFFECTIVE DATE OF THE MERGERS l TUC's acquisition of ENSERCH requires the approval of the other ;
i regulatory agencies identified in Section IV above. TUC and ENSERCH intend to consummate the merger transactions as soon as possible after all regulatory l and shareholder appr0Vals have beer. obtained. The shareholder meetings are {
L scheduled for November 15, 1996. TU Electric requests that the NRC expedite -
its review of this request on a schedule that will permit the issuance of any ;
required _ NRC consent as promptly as possible and, in any event, by November l 15, 1996.
XII. REQUESTED NRC ACTION !
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For the reasons stated above, TV Electric respectfully submits L that the proposed acquisition of ENSERCH by TUC is in accordance with the :
provisions of the AEA. TU Electric therefore respectfully requests that, to l
, the extent required by Section 184 of the AEA and 10 C.F.R. S 50.80, the NRC !
I consent to any indirect transfer of control of TU Electric's NRC licenses that l may occur in connection with this acquisition, j 1
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ENCLOSURE TO TXX 96473 i l
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JOINT PROXY STATENENT/ PROSPECTUS i
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FROM: EDGAR POSTMASTER, BDM POSTMASTER -- 1
.TO: R.R. Donn211sy & Sons Co,.74313,1305 4- !
DATE: :09/20/96 at 14:30
SUBJECT:
ACCEPTED FORM TYPE S-4 6 I-fiMSG-ID: 8-84632 i
- .THE FOLLOWING SUBMISSION..HAS BFEN ACCEPTED BY THE U.S. SECURITIES-
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! AND EXCHANGE COMMISSION:
,j
<g COMPANY:' TUC HOLDING CO '
FORM. TYPE: S-4 NUMBER OF DOCUMENTS: 16 .
i 3
RECEIVED DATE: 20-Sep-96 14: 34 _ ACCEPTED DATE: 20-Sep-96 15:23 i
- FILING DATE
- 20-Sep-96.14:34 , l I TEST FILING: NO CONFIRMING COPY: NO- '
-i 1$ I ACCESSION NUMBER: 0000930661-96-001227 sj i
( FILE NUMBER (S): :j
- 1. 333-12391 n ;
THE PASSWORD FOR LOGIN CIK 0000930661 WILL EXPIRE 05-Apr-97.01:00. l 1
PLEASE REFER TO THE ACCESSION NUMBER LISTED ABOVE FOR FUTURE i INQUIRIES. {
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L REGISTRANT (S):
- 1. CIK: 0001023291 COMPANY: TUC HOLDING CO ' $
l FORM TYPE: S-4 FILE NUMBER (fs): '
-1. 333-12391 l
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'U.S. Securities and Exchanga Commission EDGARLink Electronic Filing System i
Your PC Time: Sep 20,'1996 1:47 pm
' Electronic messages will be returned to CompuServe E-mail address: 74313,1305 i &EE32"EEEEEEEEEEEEEEEEEEEEEEEEE Send Live Filing EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE i L ~ n Film Name(s) To Transfer : ks\14433\ filing.xmt n 1- in File Transmitted : filing.xmt a 1
!. n File Size : 423664 m a EDGAR Receipt Time : Fri Sep 20 14:34:31 1996 a ,
n Estimated Transmission Time : 441 sec. n l n Bytas Transmitted So Far : 423664 m l- n Estimated Time'to Completion : O sec. m l- a Estimated Bytes /Second- : 718 m n .
a
- . p A separate notice will be furnished when submission is accepted or suspended n l ;635535EEEEEEEEEEEEEEEEEEEEEEEEEEE Message Area EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE-H nThs Accession number for this submission is
- 0000930661-96-001227 m i j' nPress any key to return to Main Menu a
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-Directly Transfer a LIVE Filing to the SEC Using a Modem 'l
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, RR DONNELLEY FINANCIAL
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EDGAR FILINc TRANSIWSSION Atm10RIZATION FORM l
To ensure that you mamtam complete control over your EDGAR filing process, we would like you to sign and date this form '
whcm you have cleared the EDGAR Sie package and are ready to submit your filing to the SEC. Our experienced EDGAR production department will begin the transmission ofyour fdmg immediately upon receipt of this authodzation. Please give (or fax) the signed form to your Customer Service Representative. '
Please note: Electronicflings transmi..'edas "hve"plings andacceptedby the SECEDGAR system are disseminated i simultaneously to the Exammers andthe Public. An electronicfhng submitted in error which has been acceptedby the SEC can only be corrected by an amendmentfimg.
Thank you for using RR Donnelley as your Financial Printer. We appreciate the opportunity to work with you on your EDGAR Egs.
Please review the following items in the Submission IIcader and verify their securacy.
O < TYPE > Filing type O <CIK> Filer's account number with the SEC O <CCC> Filer's authorization code for hg O < LIVE > or < TEST > Transnutting file as a Live or Test. filing Q < NOTIFY > CompuServe address for acceptance notice O < FEE-PAID > Amount of filing fee O < METHOD > Payments can be sent via FEDWIRE or to the LOCKBOX at the Mellon Bank.
O < EQUITY > ,<DEBD, etc. Series of tags that identify amount of shares, debt, etc. being registered.
O < TEXT >
Verify the entire document sequence and that each part of the Eg (i.e. exhibits, SEC cover letter) is listed here.
O <EX.2b Confirm that a Financial Data Schedule is required for this Eg.
Please approve value in the < MULTIPLIER > tag within the FDS.
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/^'9 b#5 (Fam type) (Campany Name) has been reviewed and is authorized to be filed with the SEC. Please transmit the hg package immediately.
is
~
(authonzation signature)
(date / time)
Forinternal Use Only:
Job Name: l W "'S 6"A# 'Y !
m Number: l'l'l5S CSR: d Document : b* Y 1 l
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Pags 1 of 2 i - ((1))FINEDG a [14433] SUS. PIP EDGAR only EDGs 20 8tP 1996 10:51 SLKs 00 000-0000 00:00
-[(1))7ue/tasisch Pir2 8 4 1.E. Donn:11sy (212) 341-7777 EDIYC3 V2.7-1 m- '
i ' < SUBMISSION)
- ' (TYPE) S-4 l . (DOCUMENT-COUNT) 16 i- J(NOTIFY)- 74313,1305 *
[
I (SROS) NONE
- l. (SUBMISSION CONTACT)'
(NAME) R.R. DONNELLEY EDGAR SERVICES ~ '*[
j
-(PRONE) 214-443-1177 i
</SUIMISSION-CONTACT) '
(FILER) 0001023291 (CIK)
(CCC) . yuvjp3*j i
(/ FILER) ,
l .(PAYOR) i l' '(CIK) 0000097561 1 4
(CCC) o*mrphh9 *
(/PAYOR)
-(FEE-PAID) $1,488,816.14 '
(METROD) FEDNIRE (OFFSET-PAYMENT)
!= (CIK) 0000033015 !
- (FORM-TYPE) PRE CON l
(FILE-NUMBER) 3183 I t
(AMOUNT) $303,624.35
(/ OFFSET-PAYMENT) ..
,(EOUITY) $9,897,582,249 .
(DOCUMENT) l (TYPE) S -
(DESCRIPTION) FORM S-4 [
(TEXT) l '.fs]1- f
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</ DOCUMENT) !
! (DOCUMENT) ,,
[ (TYPE) EX-5.(A)
-- (D ESCRIPTION) ' OPINION OF WORSBAM, FORSYTHE & WOOLDRIDGE, L.L.P. ;
! (TEXT) 4
[.sx5s]1 I t/ TEXT)
(/ DOCUMENT) ,
(DOCUMENT)
'(TYPE) . EX-8.(A) !
(DESCRIPTION) OPINION OF REID & PRIEST LLP (TEXT)
'[.sz83]1 j
</ TEXT)
</ DOCUMENT)
~(DOCUMENT)
(TYPE) EX-8.(B)
(DESCRIPTION) OPINION OF KING & SPALDING (TEXT)
[.sxSb]1-3
</ TEXT)-
4/ DOCUMENT) l' (DOCUMENT) i (TYPE) EX-15.(A)
(DESCRIPTION) LETTER OF DELOITTE & TOUCHE LLP (TEXT)
(.c115a]1
</ TEXT)
(/ DOCUMENT)
[ (DOCUMENT) i
' (TYPE) EX 15.(B)
(DESCRIPTION) LETTER OF DELOITTE & TOUCHE LLP (TEXT)
[.sx15b]1
</ TEXT) i ' . </ DOCUMENT) s (DOCUMENT)
(TYPE) EX-23.(D)
(DESCRIPTION) . CONSENT OF DELOITTE & T;)CHE LLP (TEXT) l [.ex23d]1
(/ TEXT)
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((1])FIstDC s [14433]S03.FIF EDGAR only EDC 20.stF.1994 10:51 33: 00-000 0600 00:00
. ((1))Tuc/tasorch :-- Far2 8+4 2.1. DonnI11ry (212) 341 7777 EDITOR V2.7 1 He T
(/ DOCUMENT) l (DOCUMENT) \
. (TYPE) EX-23.(E)
(DESCRIPTION) h CONSENT OF DELOITTE & TOUCHE LLP 1
-(TEXT)- I l
[.sE23e]1
</ TEXT)
(/ DOCUMENT)
(DOCUMENT)
(TYPE) EX-23,(F) '\ j I
(*.ETCRIPTION) CONSENT OF BARR DEVLIN & CO. INCORPORATED i
(TEXT) -)
[.tx23f]1 i
</ TEXT)
[~ . (/ DOCUMENT)
(DOCUMENT)
(TYPE) EX-23.(G)
(DESCRIFTION) CONSENT OF MORGAN STANLEY & CO. INCORPORATED (TEXT)
[ .cx2 3g]1
(/ TEXT)
-(/ DOCUMENT)
(DOCUMENT)
(TYPE) - EX-23.(H)
(DESCRIPTION) CONSENT OF ARTHUR ANDERSEN LLP (TEXT)
[.tx23h]1
(/ TEXT) ;
(/ DOCUMENT)
-(DOCUMENT) ,
(TYPE) EX-23.(I)
(DETCRIPTION) CONSENT OF DEGOLYER & MACNAUGHTON (TEXT) ;
l~ [.#x231]1
(/ TEXT) ,
</ DOCUMENT) ?
(DOCUMENT)
(TYPE) EX-99.(A)
'(DEICRIPTION) FORM OF TEXAS UTILITIES CO. PROXY / DIRECTION CARD (TEXT)
[.tx99a]1-2
.(/ TEXT) l (/ DOCUMENT)
(DOCUMENT) '
, (TYPE) EX 99.(B) i (DE2CRIPTION) FORM OF ENSERCH PROXY / DIRECTION CARD (TEXT) i [.pc]1 2 i (/ TEXT) +
,1 (/ DOCUMENT)
(DOCUMENT)
(TYPE) EX-99.(E) i (DEICRIPTION) QUESTIONS AND ANSWERS FOR SHAREBOLDERS OF TUC
- , (TEXT)
[21883.ts]1-2
^(/ TEXT) l (/ DOCUMENT) '
(DOCUMENT)--
(TYPE) CORRESP E 4
(DESCRIPTION)- SEC COVER LETTER ' '
(TEXT)
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, (/ TEXT)
(/ DOCUMENT)
(/ SUBMISSION)
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PAG 20 SEP.1996 05:16 EDGs 90 000-0000 00:00 BLE: 00-000-0000 00:00
- I[ll))Tue/EnsIrch(1FINEDGe[14433.T8]00001. Fors 8 4 1.PIP
- 1. Donnellay- (212) 341-7777 AOC 3.4.1,p01 i
i (PAGE)- JAS FILED WITH THE SECURITIES AND EXCEANGE COMMISSION ON SEPTEMBER 20, 1996 REGISTRATION NO. 333 i p % i SECURITIES AND EXCHANGE COMMISSION i WASHINGTON, D.C. 20549 FORM S.4
- REGISTRATION STATEMENT >
UNDER l THE SECURITIES ACT OF 1933 I ,1 . .............. TUC EOLDING COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 4911 75 2669310 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
.OF INCORPORATION OR ORGANIZATION)
' ENERGY PLAZA l 1601 BRYAN STREET j l'
DALLAS, TEXAS 75201 - (214) 812 4600 ? (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ERLE NYE ROBERT A. wOOLDRIDGE, ESQ. PRESIDENT AND CHIEF EXECUTIVE . WORSE 14, FORSYTRE & TEXAS UTILITIES COMPANY WOOLDRIDGE, L.L.P. I ENERGY PLAEA ENERGY PLAZA l 1601 BRYAN STREET 1601 BRYAN STREET, 30TE FLOOR l DALLAS, TEXAS 75201 DALLAS, TEXAS 75201 (214) 832 4600 l (214) 979 3000 l (NAMES, ADDRESSES, INCLUDING EIP CODES,- AND TELEPHONE NUMBERS, INCLUDING AREA $ l CODES, OF AGENTS FOR SERVICE) ' COPIES TO: , DOUGLAS W. BAWES, ESO. WILLIAM T. SATTERNEITE, ESO. DAVID N. BROWN, ESO. l LEBOEUF, LAMB, GREENE SENIOR VICE PRESIDENT AND COVINGTON & BURLING i i & MACRAE, L.L.P. GENERAL COUNSEL 1201 PENNSYLVANIA
'123 WEST 55TE STREET ENSERCE CORPORATION AVENUE, N.W.
a l- NEW YORK, NEW YORK 10019 300 SOUTE ST. PAUL STREET WASHINGTON, D.C. 20044
- DALLAS, TEXAS 75201 I
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLICS As soon as
, practicable after this Registration Statement is declared effective. The .
issutace of securities shall occur when all other conditions to the merger of ! i* TUC M3rger Rtgistrant, Corp., with and ainto Texas Texas corporation and a wholly Utilities Company (theowned subsidiar{)of "TUC Merger andthe the. mergtr of ENSERCH Merger Corp., Texas corporation and a wholly owned I subsidiary of the Registrant ,with and into ENSERCE Corporation (the 'ENSERCH l Margar,' together with the TUC Merger, the ' Mergers') pursuant to the Amended end Rastated Agreement and Plan of Merger described in the Joint Proxy Str. tenent / Prospectus forming a part of this Registration Statement, have been ) satisfied or waived. , If.the securities being registered on this form are being offered in i conntetion with the formation of a holdin<r company and there is compliance
-with Gtneral Instruction G, check the following box. [.,)
CALCULATION OF REGISTRATION FEE l (TABLE) l (CAPTION) PROPOSED ' AMOUNT MAXIMUM PROPOSED MAXIMUM
. TITLE OF EACE CLASS OF TO BE OFFERING AGGREGATE AMOUNT Or i
SECURITIES 70 BE REGISTERED i REGISTERED (1) PRICE PER UNIT OFTERING PRICE REGISIRATION TEE (S) (C)' .(C) (C) (C) Common Stock, without ] par value............. 242,142,685 shares $40,875(2) 49,897,502,249(2) 83,412,959.40(3) (
./. TABLE) 1 (1) Based on the maximum number of shares of common stock which may be issued
} in the Mergers and the Conversion (as defined in Note 2 below).
' (2) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended, based upon the proposed maximum aggregate offering price of the average of i
+ the high and low prices of the common stock of Texas Utilities Company, as j ! reported on the New' York Stock Exchange Consolidated Transactions Tape on S*ptember it, 1996, multiplied by $242,142,685, which represents the sum ! of (1) the maximum number of shares of common stock of Oe Registrant into which the common stock of Texas Utilities Company will be converted in the l l
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. l[1)]FISEDCs [14433.F8]e0001.FIF PAG: 20-SEF-1996 05:16 EDC: 00-006 0000 00:00 SLK 00-000 0000 00:00 I!!!!Tue/Easirch Fire 8-4 2. R. Domnallt! (212) 341 7777 A0G 3.4.1,p01 ,
TUC Merger, (ii) the' maximum number of shares of common stock of the
- R gistrant into which the common stock of ENSERCE Corporation will be . \%
ccnverted in the ENSERCE Merger and (iii) the maximum number of shares of common stock of the Registrant into which ENSERCE Corporation's 6 3/8% 1 , Cavertible Subordinated Debentures due 2002 will become convertible i (3) pursuant Filing Feeto the of ENSEBCE
$303,624.35Merger was paid(theto " Conversion").
the Commission on July 22, 1996 in + "" '- cenrection with the filing of the preliminary proxy material of ENSERCE Ccrporation and $1,620,518.91 was paid to the Commission on September 12, ' 1996 in connection with the filing of the revised preliminary 2oint proxy Dettrial of ENSERCE Corporation and Texas Utilities Company. The balance %- i cf the filing fee for uis Registration Statement, $1,488,816.14, is being l paid in connection with this filing.
............. y, i
THE REGISTRANT REREBY AMENDS THIS REGISTRATION STATEMENT ON SUCE DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
.SHALL FILE A FURTHER AMENDMENT WEICE SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SEALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITE i SECTION 8(A) OF TEE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL- !
, BECOME EFFECTIVE ON SUCE DATE AS THE COMMISSION, ACTING FURSUANT TO SAID ' !" .SECTION 8(A), MAY DETERMINE. J
)
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((1))FINEDCsl14433.CR3]C0001. PIP PAGs 20.SEP.1996 05:27 EDG 00 000 0000 00:00 BLK 00 000 0000 00:00 ((1))Tuc/Eas?rch Fire S.4 1. R. Donne 11sy (212) 341 7777 A0c 3.4.1,p01 i (PACE) TUC BOLDING COMPANY CROSS REFERENCE SEEET PURSUANT TO ITEM $01(B) OF REGULATION S.K l (TABLE) (CAPTION) FORM S 4 .- ITEM NO. AND CAPTION JOINT PROXY STATEMENT /PRObitrit s (C) (S) ' A. INFORMATION ABOUT TEE TLANSACTION I 1.Farepart of Registration Statement and Outside Front cover Page of Prospectus... Facing Page of Registration Statements Cross Reference Sheets Cover Page of Prospectus 1
- 2. Imside Front and Outside Back Cover Pages i of Prospectus............................ Available Informations Incorporation by References Table 4
i of Contents '
- 3. Risk Factors. Ratio of Earnings to Fixed 1
Charges, and Other Information........... Summary of Joint Proxy ' Statement /Prospectuas Selected Eistorical TUC and Pro Forma ' Company Financial Datas Selected Eistorical Financial Data of ] ENSERCE: Comparative Per Sha e , Prices of TUC, ENSERCE and EEX3 1 Comparative Per Share Data '
- 4. Tsras of the Transaction................. Summary of Joint Froxy '
Statement /Prospectuas The Mergers; Regulatory Matteras The Plan of 1 Mergers The Stock option Agreements Description of Company i Capital Stocks comparison of l Sharabolder Rights; Management and I Operations Following the Mergeras Annex Is Annex II: Annex III; ! Annex IV: Annet Vs Anner VIs Annar l VII: Annex VIIIs Annex IXs Annen- I X Annes XI Annex XII t
- 5. Pro Forma Financial Information.......... Selected Ristorical TUC and Pro I Forma Company Financial Datas Pro Forma Financial Information of ENSERCE with New EEX Presented as a Discontinued Operations Selected Pro Forma Financial Data of ENSERCH Business to be Mergeds selected Pro Forma Financial Data of New EEXs Pro Forma Financial Information of the Companys Pro Forma Financial Information of ENSERCE Business to be Merged
- 6. Material Contacts With the Company Being Acquired................................. The Mergers: Relationships Between The Parties; Selected Information Concerning TUC and ENSERCH
- 7. Additional Information Required for Bacifering by Persons and Parties Deemed Not Applickble to be Underwriters.......................
- 8. Interest of Named Experts and Counsel. ... Legal Matteras Experts
- 9. Disclosure of Commission Position on
-Indemnification for Securities Act Not Applicable List 111 ti es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B. INFORMATION ABOUT THE REGISTRANT
- 10. Information with Respect to S 3 Not Applicable Rigistrants..................... ........ j
(/ TABLE) l l i k L I f i
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l. l. ((1])rINEDCal14413.Cas]00003. PIP PACS 20 8EP.1006 05:24 EDG: 00-000 0000 00:00 SLE: 00 000 0000 00:00 (11))Tuc/tawrch Frra 8 4 3. R. Donne 11ty (212) 341 7777 AOC 3.4.1.p01 (PACE)~ c(TARLE) (CAPTION) FORM S.4 .. ITEM NO. AND CAPTION
................................ JOINT PR0XY STATEMENT
..................... /. PROSPECTUS (C) '(8)
- 11. I* corporation of certain Taformation by R1ference................................ Incorporation by Reference
- 12. Izformation with Respect to 8 2 or s.3 s ]
Registrants.............................. Not Applicable
- 13. Incorporation of Certain Information by ,
arterence................................ Not Applicable
- 14. Information with Res et to Registrants Other Than 8 3 or 8 Registrants........ Incorporation by References . -j Selected Nistorical TUC and Pro forma Company rinancial Dates Pro Forma rinancial Information of the l Company selected Information :
Concern ng TUC, ENSERCN and New k EEX: Management and operations ! Following the Mergers [ C. INFORMATION AROUT TNE COMPANY REING ACQUIRED
- 15. Information Nith Respect to s.3 Incorporation by References The i
, Companies............. .................. Mergers: Selected Nistorical l j l- Financial Data of ENSERCNs Pro i Forma rimancial Information of ( ENSERCN with New EEK Presented as f a Discontinued Oprations selected t Pro forma rinancial Data of li ENSERCN Susiness to be Mergods selected Pro Forma rinancial Data i of New EEX Pro forma rinancial i Information of ENSERCN Susiness to ' be Mergeds Selected Information Concerning TUC, ENSERCN and New [ r EEX
- 16. Information With Respect to 8 2 or 8 3 !
Companias.............................~.. Not Applicable i'
- 17. 11 formation Nith Respect to companies
- Other Than 8 2 and 8 3 Companies......... Not Applicable .
D. VOTING AND MANAGEMENT INrDRMATION !
- 10. Izformation if Prozies, Consents or I Authorizations Are to be Solicited....... Incomration by References Special I Meetlngs, Voting and Proziess .
Summary of Joint Proxy l
&catement/Prospectual The Mergeres l shareholder Proposals 9
- 10. I2 formation if Proxies, Consants or 1
Authorizations Are Not to be Solicited, Not Applicable i cr in an Exchange 0ffar.................. 6 (/TARLED t i f i I f I r I i i t 1 I k 1 l ,. L ! _ _ __ u _ _ _ - _ _ _ _ .. - - - - - 1
1 l I l ([1])FINEDGs(14433.LTR1]00001.FIP Hil}Tuc/Ensuch FAGS 20 stP-1996 04:30 EDG 00-000-0000 00:00 BLK 00-000 0000 00:00 FIra 8-4 3. 3. Donnellty (212) 341 7777 A0G 3.4.1,p01
.~< PACE)
I [LETTEREEAD OF TUC) be:r Texas Utilities Company Shareholders i Yru are cordially invited to attend a Special Meeting of Shareholders (the l
*Sp:cial Meeting * ) of Texas Utilities Company ("TUC*) which will be held in __ I th) Grand Ballroom of the Harvey Hotel / Downtown, Live Oak and Olive Streets, )
Dilles, tias. Texas on November 15, 1996. The meeting will start at 9:30 a.m. local i l I At the Special Meeting, you will be asked to approve an Amended and Restated 1 Agr ement and Plan of Merger, more fully described below and in the l accompanying Joint Proxy Statement / Prospectus, which provides for the i j i ecquicition of ENSERCH Corporation by TUC. THE BOARD OF DIRECTORS OF TUC ! UNANIMOUSLY BELIEVES THE PLAN OF MERGER IS IN THE BEST INTERESTS OF TUC AND i ITS SEAREHOLDERS AND, THEREFORE, RECOMMENDS TEAT TUC SEAREBOLDERS VOTE FOR THE 1 APPROYAL OF THE PLAN OF MERGER. l J In crder to accomplish the acquisition, the Plan of Merger provides that TUC M;rgir Corp., a Texas corporation created to f acilitate this transaction and a l I ttolly owned subsidiary of TUC Holdin Company, a Texas corporation (the )
- Comp 1ny"), will merge into TUC (the TUC Merger *), with TUC as the surviving crrporation. At the time of the TUC Merger, ENSERCE Merger Corp., another tub;itiary of the Company also created to facilitate this transaction, will merJ3 into ENSERCE (de ENSERCh Merger,' and together with the TUC Merger, i
! th3 ' Mergers *). A special Meeting of the ENSERCE shareholders is being held at l thout the same time as the TUC meeting to vote on the Plan of Merger. As a 1 l r: cult of the Mergers, TUC and ENSERCH will both become subsidiaries of the Comp;ny, which will change its name to Texas Utilities Company in connection ; ti O the Mergers. Shares of TUC common stock will be automatically converted inta chares of Company common stock on a one-for-one basis in a tax-free , trc= iction. Therefore, after the TUC Merger, you will own the same number of I ch r:3 of common stock in a Texas corporation named Texas Utilities Company i cvidaLced by your existing TUC stock certifj cate. The Board of Directors believes that the Mergers offer significant strategic emd financial benefits for TUC because the combination of TUC and ENSERCE will enabla the Company to be able to more effectively meet the challenges facinq th2 itereasingly competitive utilities industry and provide potential benefits to ch?reholders in ne form of greater financial strength and flexibility. The i coorAination and integration of TUC and ENSERCE will allow the Compan i pravide customers with enhanced service and choice of energy sources,yand to permit the Company to assist customers in managing their total energy service requirements in O s most efficient manner. Also, the combination of TUC and ENSERCH should allow the Company to manage and pursue their complementary non-Ytility oprations more ef ficiently and effectively. TUC's financial advisor, Ecrr Devlin & Co. Incorporated, has issued its opinion that, based on the conYid: rations described in its opinion, the terms of the Plan of Merger are f ir from a financial point of view to the holders of TUC common stock. Approval of the Plan of Merger by the holders of TUC and ENSERCE common ctock are conditions to the consummation of the Mergers. If the Plan of Merger is Epproved by the shareholders of TUC and ENSERCH, the Mergers will only be cin;ummated after certain zegulatory approvals have been obtained and certain ethir conditions have been satisfied or waived. It is anticipated that this will eccur in late 1996. As previously mentioned, it will not be necessary to i szchinge your certificates representing sharea of TUC common stock. After the t MErgara, these certificates will represent the same number of shares of ' Company common stocks so, please do not send in your certificates. SHAREHOLDERS ARE URGED TO CIVE THE ATTACHED JOINT PROXY STATEMENT / PROSPECTUS TEEIR CAREFUL AND PROMPT ATTENTION. APPROVAL OF THE PLAN OF MERGER REQUIRES THE AFFIRKATIVE VOTE OF THE HOLDERS OF MORE TEAN 66 2/3% OF ALL TEE VOTES ENTITLED TO BE CAST ON THE TRANSACTION. AS SUCE, YOUR FAILURE TO VOTE WOULD BE EQUIVALENT TO A VOTE AGAINST TEE TRANSACTION.
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((1))Tuc/tastrek Farm 5 4 R.R. Donne 11sy (212) 341-7777 EDITot V2.7 1 '*** * (PAGE) ' [ ACCORDINGLY, SEAREROLDERS ARE URGED TO VOTE FOR THE PLAN OF MERGER BY SIGNING, i DATING AND MAILING TBE ENCLOSED PROXY CARD TODAY.IN THE ENCLOSED POSTAGE PAID ENVELOPE. IF YOU EAVE ANY QUESTIONS REGARDING TNE SPECIAL MEETING OR NEED ASSISTANCE -
- IN VOTING, PLEASE CONTACT OUR PROXY SOLICITOR, D.F. KING & CO., INC. , AT 1-800-659 5550. l Think you for your cooperation and continued support. l Very truly yours, .
[ SIGNATURE OF ERLE NYE) ! t Erle Nye ! , President and Chief Executive ! i l f I
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l ( (1] ) F!5rDC s !!4433.u071] 00001. FIF FAGS 10-8t7 1006 21:04 EDG: 00-000-0060 00:00 BIA: 00 900 0000 00:00 ((1))Tue/t.asIrch tors 8 4 R. R. Donne 115y (212) 341 7777 AOC 3.4.1,p01 l (PAGE) 1 TEXAS UTILITIES COMPANY ENERGY PLAZA 1601 BRYAN STREET DALLAS, TEXAS 75201 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS September 23, 1996
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To thm Shareholders of Texas Utilities companys l AS will be h114kecialMeetingofShareholdersofTexasUtilitiescomfany("TUC") n the Grand Ballroom of the Harvey Botel/ Downtown, L ve Oak and Olive Strests, Dallas, Texas on Friday, November 15, 1996 at 9:30 a.m. for the purpoJe of approving an Amended and Restated Agreement and Plan of Merger involving TUC and ENSERCE Corporation and the transactions contemplated l tharain, including as described in the accompanying Joint Proxy StEttment/ Prospectus, the merger of a wholly owned subsidiary of TUC Bolding > compisy with and into TUC (the *TUC Merger"), as a result of which TUC will ~ become a wholly owned subsidiary of TUC Bolding Company. At the effective time af tha TUC Merger, TUC Bolding Company will change its name to Texas Utilities Comp 1ny and the outstanding shares of TUC common stock will be converted into I' th2res of TUC Bolding company common stock on a one-for-one basis. Th'a Board of Directors has fixed the close of business on September 17, 1996 cs thi time as of which shareholders entitled to notice of, and to vote at, th3 creting and any adjournments and postponements thereof shall be M tcrzined. ! WEETHER OR NOT YOU WILL BE ABLE TO ATTEND THE MEETING, PLEASE SIGN AND l
. RETURN THE ACCOMPANYING PROXY PROMPTLY. NO POSTAGE NEED BE ArrIXED TO THE REPLY ENVELOPE WHICE IS ENCLOSED RERENITH TOR YOUR CONVENIENCE IF IT IS MAILED IN THE UNITED STATES.
James E. Scott i Secretary l-I , l' > I
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I 1 l l l l ((1])F15EDGsl14433.LIR2]00001.FIF FAG 8 15-8EF.1906 21:03 EDC: 00-000 0000 00:00 812: 00 600 0000 00:00 ((1))Tuc/En%rch Fors 8-4 3. 2. Donne 11ty A0G 3.4.1 p01
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(212) 341 7777 (PAGE) l [LETTEREEAD OF ENSERCH) D2cr ENSERCH Corporation Shareholder You are cordially invited to attend a Special Meeting of Shareholders of _ _ _ _ ENSERCH Corporation ("ENSERCE*) which will be held at 301 South Harwood . ! Stroct, Dallas, Texas, on November 15, 1996. The meeting will start at 2:00 j P.n. local time. At this important meeting, the holders of ENSERCH common stock will be asked to cpprove (a) an Amended and Restated Agreement and Plan of Merger (the
- Plan of Mirger") Pursuant to which (1) holders of ENSERCH common stock and holders of Tazas Utilities company, a Texas corporation ("TUC"), common stock will I becomi holders of common stock of TUC Holding company, a Texas corporation I (th " Company"), upon completion of the mergers of two wholly owned rub's j sidiaries of the Company with and into ENSERCE and TUC, respectively (the ,
*M:rgIrs"), and (ii) o uer transactions will be effected as noted below, and (b) a proposal to amend the Restated Articles of Incorp ration of ENSERCH to I chnzgn the gar value of ENSERCE common stock from $4.45 per share to 5.01 per chira (the ENSERCH Articles Amendment") in order to facilitate the Distribution (as defined below).
In the Mergers, ENSERCH will become a wholly owned subsidiary of the Company (ths name of which will be changed to Texas Utilities Company in connection cith the Mergers), and the shares or ENSERCE common stock will be converted r into Company common stock. The Plan of Merger further contemplates that ' immediately prior to the Mergers, Enserch Exploration, Inc. "EEX"), a Texas crrporation approximately 83% of whose outstanding shares of(common stock are i currently directly or indirectly owned by ENSERCE, will merge (the i
- *Prsliminary Merger") with and into Lone Star Energy Plant Operations, Inc.
t (*LSEPO*), a Texas corporation indirectly wholly owned by ENSERCH. LSEPO is to be tb3 surviving comration in the Preliminary Merger, in which its name will be chinged to Enserch Exploration, Itc. ("New EEX"). Prior to the consummation cf th) Mergers, ENSERCH is to distribute to the holders of ENSERCH common stock, on a pro rata basis, ENSERCE's entire interest in New EEX (the
" Distribution *).
. Th2 accompanying Joint Proxy Statement / Prospectus discusses the Mergers, the Distribution and the ENSERCE Articles Amendment in detail. You are urged to rand the Joint Proxy Statement / Prospectus and the Annexes thereto in their [
cntirsty. THE BOARD OF DIRECTORS OF ENSERCH BELIEVES THAT THE MERCERS, THE DISTRIRUTION AND THE ENSERCE ARTICLES AMENDMENT ARE IN THE BEST INTERESTS OF t l ENSERCH AND ITS SHAREBOLDERS AND RECOMMENDS THAT THE SEAREBOLDERS VOTE FOR THE APPROYAL OF THE PLAN OF MERGER (INCLUDING THE DISTRIBUTION AND OTHER TRANSACTIONS CONTEMPLATED THEREIN) AND FOR THE ARTICLES AMENDMENT. The Board of Directors believes that the transactions contemplated by the Plan of Merger providing a
.significant near term increase in shareholder value,will benefit the (i holders of ENSERCE unlocking common stock by (i)i) the value Of EEX by allowing it to operate as an independent company, (iii) providing y for crntinued participation in ENSERCH and TUC as a combined enterprise with -
grsatsr financial strength and enhanced business prospects, (iv) allowing ETSERCE and TUC to comprehensive and cJnvenient service, provide and (v) improved, more diveralfied, permitting ENSERCE and TUC to achieve greater i cperating efficiencies than they could as separate enterprises. ! Approval of the Plan of Merger by the holders of ENSERCH and TUC common stock are conditions to the consummation of the Distribution and the Mergers. , If th2 Plan of Merger is approved by the holders of ENSERCE and TUC common I stock, the Distribution and the Mergers will be consummated only after certain regulatory approvals have been obtained and certain other conditions are
'estisfied or waived. It is anticipated that this will occur in late 1996.
Approval of the Plan of Merger and the ENSERCH Articles Amendment will rsquire the affirmative vote of the holders of at least two-thirds of the ! outattading shares of ENSERCH common stock on each of the l l l l
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FAGS 20-8t7-1996 05:24 CDC: 20-8tt 1996 06:33 31Ks' 00 000-0000 00:00 , [l1)lTue/tasirchl [ 1])fIntDG (14433.LTa2]00002.FIF fara 3-4 .- 1.1. Donnelley (212) 341-7777 EDITot V2.71_ m ( l (PAGE)~ l ' proposals. Under Texas law, in determining whether the requisite number of~ affirmative votes has been cast, abstentions and broker non-votes will have the st.ma effect as votes cast against each proposal. Your vote is important no mattar how many shares you hold Evrn if you plan to attend the meetino t!te enclosed proxy and return it promptly, we in urge you to mark, the enclosed sign and envelope. You date have - th2 eption to revoke it at any time, or to vote your shares personally on riqu3at it.you attend the meeting sincerely, [ SIGNATURE OF DAVID W. BIEGLER) David W. Biegler Chairman and President,
-Chief Executive Officer
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FACs 10 8E7 1996 21:09 EDCs 00 000-0000 00:00 SLK 00 000 0000 00:00 l[li))Tue/F.astreh[1))FINEDGe[14433.5072)D0001.717 Ftra 8 4 3. R. Donnellty (212) 341-7777 A0G 3.4.1,p01 (PAGE) NOTICE OF SPECIAL MEETING OF ENSERCH SEAREBOLDERS
'To th) Common Shareholders of ENSERCH Corporations NOTICE IS HEREBY GIVEN that a Special Meeting of the Common Shareholders of ENSERCH Corporation ("ENSERCE* ) wlll be held at 301 South Barwood Street, D211as, Texas on November 15, 1996 at 2:00 p.m. local time, for the following purpoies:
- 1. To consider and vote upon a proposal to approve an Amended and RA2tated Agreement and Plan of Merger involving ENSERCH Corporation
("ENSERCE*), Texas Utilities Company, a Texas corporation ("TUC"), and TUC Holding Company, a Texas corp retion (the " Company"), and the transactions contemplated Gerein, including as described in n e accompanying Joint Prazy Statement / Prospectus, (i) the merger of wholly owned subsidiaries of th2 Company with and into ENSERCE and TUC, respectively, as the result of which ENSERCH and TUC will become wholly owned subsidiaries of the Company End the outstanding shares of TUC common stock and ENSERCH common stock vill be converted into shares of common stock of the Company (the
'M!rgers') and (ii) immediately prior to the Mergers, the distribution to thi shareholders of ENSERCH on a pro rata basis of ENSERCE's entire istcrest in Enserch Exploration, Inc., a Texas corpration ('New EEX'), the curviving corporation of the proposed merger of erlsting Enserch E::ploration, Inc. with and into Lone Star Energy Plant Operations, Inc., a
.T Els corporation and a wholly owned subsidiary of ENSERCH (the "Di tribution").
- 2. To consider and vote upon a proposal to amend the Restated Articles of Incrrporation of ENSERCE to change de par value of ENSERCE cosmon stock from $4.45 per share to 6.01 per share in order to facilitate the Dictribution.
Tha Board of Directors has fixed the close of business on September 20, 1996, as the record date for the determination of the holders of ENSERCH commot stock entitled to notice of and to vote at the meeting and any rdjturnments and postponements thereof. A form of proxy and a Joint Proxy Strtement/ Prospectus accompany this Notice of Special Meeting. The proxy covrra all of the shares of ENSERCH common stock held by you directly and all cf th2 shares participating in the ENSERCE Dividend Reinvestment Plan. PLEA?E HARK, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. By order of the Board of Directors, Michael C. Fortado Vice President end Corporate Secretary 8;ptember 23, 1996 I
{ [ 1 ] l f1NEDG a [ 144 33. CO'/] G 0001. PIP PAG: 20-SEP-1996 04:32 EDGs Co.000-0000 00:00 BLE: 09 000-0000 00:00 ((1)]Tuc/Ensirch Firm 8 4 2. 2. Donn111ry (212) 341-7777 A0G 3.4.1,p01 (PAGE) l
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + + REGISTRATION STATEMENT RELATING TO THESE SECURITIES EAS BEEN FILED WITH THE + + SECURITIES AND EXCEANGE 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 SEALL THERE BE ANY SALE OF TRESE + + SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE + +WOULD BE UNuAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES + +LAWB OF ANY SUCE JURISDICTION. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED SEPTEMBER 20, 1996 JOINT PROXY STATEMENT FOR TEXAS UTILITIES COMPANY AND ENSERCH CORPORATION
- PROSPECTUS FOR TUC BOLDING COMPANY COMMON STOCK SPECIAL MEETING OF SRARESOLDERS OF TEXAS UTILITIES COMPANY TO BE EELD ON NOVEMBER 15, 1996 SPECIAL MEETING OF SHAREBOLDERS OF ENSERCH CORPORATION TO BE EELD ON NOVEMBER 15, 1996 This Joint Proxy Statement / Prospectus relates to an Amended and Restated Agrictent and Plan of Merger, dated as of April 13, 1996 (the ' Plan of M;rgir"), among Texas Utilities Company, a Texas corporation ('TUC"), ENSERCH Corporation, a Texas corporation ('ENSERCH"), and TUC Bolding Company, a Texas corptration (the " Company"), 50% of whose capital stock is owned by TUC and 50%
of khose capital stock is owned by ENSERCB. The Plan of Merger provides for, R;olg other things, (1) the merger of TUC Merger Corp., a Texas corporation and a tholly orTed subsidiary of the Company, with and into TUC (the "TUC Merger'), (ii) the merger of Enserch Merger Corp., a Texas corporation and a wholly owned cubsidiary of the Company, wi n and into ENSERCE (the "ENSERCE Merger *), and (iii) immediately prior to the ENSERCE Merger, the merger (the " Preliminary Merg:r") of Enserch Exploration, Inc., an approximately 83% owned subsidiary of ECSERCH ("EEX'), with and into Lone Star Energy Plant Operations, Inc. (*LSEPO"), Envirch Exploration, a wholly owned subsidiar{)of Inc. ("New EEX ENSERCH whose name in the Preliminary is to be Merger, andchanged the to cub;equent Commo2 distribution Stock") on a proto the holders rata basis of common (the stock of*) ENSERCH
' Distribution of ENSERCH ls"ENSERCH entire interIst in New EEX. The ENSERCH Merger and the TUC Merger are referred to h2rtin, collectively, as the " Mergers." This Joint Prozy Statement / Prospectus is being furnished to holders of outstanding shares of common stock of TUC
(*TUC Common Stock") in connection with the solicitation of proxies by TUC's Brero of Directors (the 'TUC Board") for use at the special meeting of holders cf TUC Common Stock to be held at the Harvey Botel/ Downtown, Live Oak and Olive Strssts, Dallas, Texas, at 9:30 a.m., local time, on November 15, 1996, and any tdjrurnments or postponements thereof (the "TUC Meeting *), and to the holders of outstanding shares of ENSERCE Common Stock in connection with the eclicitation of proxies by ENSERCE's Board of Directors (the "ENSERCE Board") fer u:e at the special meeting of holders of ENSERCH C,mmon Stock to be held at 301 Stuth Barwood Street, Dallas, Texas, at 2:00 p.m. local time, on November 15, 1996, and any adjournments and postponements thereof (the 'ENSERCH M: sting"). This Joint Proxy Statement / Prospectus also relates to an amendment of thi Articles of Incorporation of ENSERCE to reduce the par value of ENSERCH Common Stock from $4.45 per share to 5.01 per share (the *ENSERCH Articles AmLndmint*) in order to facilitate the Distribution. This Joint Proxy St2taacnt/ Prospectus also constitutes the prospectus of the Company filed under ths S;curities Act of 1933, as amended (the " Securities Act"), to cover the i=rutnce of Compan) Common Stock in the Mergers and the Conversion (as defined balow). See 'Available Information." THESE SECURITIES EAVE NOT BEEN APPROVED OR DISAPPROVED BY TEE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR RAS THE SECURITIES AND EXCEANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTR)RY IS A CRIMINAL OFFENSE. Th2 date of this Joint Proxy Statement / Prospectus is September 23, 1996. This Jrint Proxy Statement / Prospectus is first being mailed to the shareholders of TUC c.nd the shareholders of ENSERCH on or about October 1, 1996. i l i f I
ll!)ll! KEDGE [14433.TX)D0002. PIP PAG: 19 SEP 1996 20:40 EDG 00-000-0000 00:00 SLK 00-000 0000 00:00 [(1))Tuc/Ensuch Fors 5 4 3. 1. Donnt11ey (212) 341 7777 A0G 3.4.1,p01 1 , <PAGE) l ( MERGER RELATED KATTERS i Upon consummation of the Mergers, pursuant to the Plan of Merger: Each issued and outstanding share of TUC Common Stock (other than any shares of TUC Common Stock owned by TUC, any subsidiary of TUC, ENSERCH j or any subsidiary of ENSERCH, all of which will be cancelled without consideration and will cease to exist) will be converted into one share i of common stock of the company (* Company Common Stock"). l Each issued and outstanding share of ENSERCH Common Stock, together with the associated right (the ENSERCH Rights") to purchase, in certain specified circumstances, interests in ENSERCH voting preference stock and I in other specified circumstances, shares of ENSERCH Common Stock, I pursuant to the terms of the Rights Agreement between ENSERCH and Harris 1 Trust Company of New York, as Rights Agent thereunder, dated as of March j 26, 1996 (the 'ENSERCH Rights Agreement") (other than any shares of ENSERCH Common Stock owned by ENSERCH, any subsidiary of ENSERCH, TUC or i toy subsidiary of TUC, all of which will be cancelled without consideration and will cease to exist), will be converted into that fraction of a share of company Common Stock obtained by dividing 58.00 by the average closing tales price of TUC Common Stock as reported on the New York Stock Exchange Consolidated Transactions Tape on each of the 15 consecutive consummation trading of the days preceding Mergers the fifth (the Aversge TUC trading) Price ;day prior tohowever, provided, the in no event will the Average TUC Price be deemed to be less than $35.625 ! or more than $43.625. Each share of capital stock of the Company issued and outstanding immediately prior to the Mercers will be surrendered and cancelled without consideration, and wlli cease to exist. l Upon consummation of the Mergers, each certificate representing shares of TUC Common Stock issued and outstanding immediately prior to the TUC Merger will bn deemed to represent an equal number of shares of Company Common Stock End each certificate representing shares of ENSERCH Common Stock issued and outstrading immediately prior to the Mergers will represent instead the shares l of Company Common Stock (and cash in lieu of a fractional share, if any) into which those issued and outstanding shares will be converted pursuant to the i Pltn of Merger. Based upon the Average TUC Price which would have been rpplicable had the Mergers been consummated on April 12, 1996 and the number of shares of TUC Common Stock and ENSERCH Common Stock outstanding on such dIts, each ENSERCH shareholder would have received pursuant to the Mergers 0.20 of a share of Company Common Stock for each share of ENSERCH Ccamon Stock hsid by such shareholder and TUC and ENSERCH shareholders would hold i approrlmately 94.3 percent and 5.7 percent, respectively, of the 239,571,542 [ eggragste number of shares of Company Common Stock that would have been l outstanding immediatel Margsr--The Mergerc." y after consummation of the Mergers. See "The Plan of l Tha Distribution is expected to result in each holder of ENSERCH Common Stock zeceiving a distribution of approximately 1.5 shares of New EEX common ! stock, par value $.01 per share ("New EEX Common Stock"), for each share of ENSERCH Common Stock held by such shareholder. Each share of adjustable rate I curulative preferred stock of ENSERCH (the *ENSERCH Preferred Stock") issued and outstanding at the time of the Mergers shall be unchanged in and remain ! outstanding after the Mergers. See "The Mergers--The Preliminary Merger and ths Distribution." Notice to Holders of ENSERCH Common Stocks Holders of ENSERCH Common Stock whose holdings of New EEX Common Stock immediately following the Distribution arceso $15 million may be subject to the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. See *The i Margsrs--The Preliminary Merger and the Distribution." l All information herein with respect to TUC and its subsidiaries Las been furnished by TUC, all information herein with respect to ENSERCH and its subsidiaries has been furnished by ENSERCH and all information with respect to the Company and its subsidiaries has been furnished by the Company. 2 1 l l l l I 1 ? l l t i l 1
l ((1)lFISEDGal!4433.TIj00003.FIP ill))Tue/tasirch PAG: 10 5tP 1996 21:11 EDG 00 000 0000 06:00 SLKs 00-000 0000 00:00 ' Fir 2 8-4 3. 3. Donne 11ty (212) 341-7777 Aoc 3.4,1,p01 l (PAGE) AVAILABLE INFORMAt!ON E TUC, ENSERCH and EEX are, and the Company will become, subject to the infor ational requirements of the Securities Exchange Act of 1934, as amended ths
- Exchange Act*),
- Inforcation with the SEC.and accordingly Such reports, proxyfile reports, proxyand statements statements and other other information filsd with the SEC are available for inspection and copying at the public rifertnce f acilities maintained by the Securities and Exchange Commission
(*sEC') at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and at 500 West Madison Street, suite 1400, Chicrgo, Illinois 60661. Copies of such documents may also be obtained from th2 Public Reference Room of the SEC at Judiciary Plaza, 450 Fifth Street,
.N.W., Washington, D.C. 20549, at prescribed rates. In addition, any such estzrial and other information concerning TUC, ENSERCH and EEX can be in;picted at the New York Stock Exchange, Inc. fthe 'NYSE'), 20 Broad Street, Dow York, New York 10005 and the Chicago Stock Exchange, Incorporated, 440 Etuth LaSalle Street, Chicago, Illinois 60605 and, with respect to TUC, can be intp&cted at The Pacific Stock Exchange Incorporated, 301 Pine Street, San Fr:scisco, California 94104. Certain of such materials filed by TUC, ENSERCH sr EEx are alsogov.
http://www.sec. available at the SEC's site on the World Wide Web at Th3 Company has filed with the SEC under the Securities Act a Registration Statem nt on Form S-4 (together with all amendments, schedules and exhibits tbcrito, the ' Registration Statement') with respect to the shares of Compan Comm n Stock issuable in the Mergers and upon conversion (the ' Conversion')y of ENSERC3's outstanding 6 3/8% Convertible Subordinated Debentures Due 2002 (the
*CJnysrtible Debentures'). This Joint Proxy Statement / Prospectus does not cintein all of the information set forth in the Registration Statement, c3rtain parts of which are omitted as permitted by the rules and regulat' ions sf th2 3EC. The Registration Statement is available for inspection and copying as set are hirsin forthsummaries above. Summaries of the contracts of the material provisionsand otherand thereof documents are not referred to niccastrily complete and in each instance reference is made to the copy of such crntract or other document filed or incorporated by reference as an cahibit to the Registration Statement.
3 i I t l 4 4 i I l l
l (ll))rIMEDGa[14433.TX]00004.FIF i ((1]Itu/Ennerch FAGS 19-8t7-1996 20:40 EDC: 00-000-0000 09:00 But 00-000-0000 00:00 Ftra 8-4 1. 1. Donne 11ty (212) 341-7777 AsG 3.4.1,p01 ! (PAGE) l INCORPORATION BY REFERENCE l
]
- TCIS JOINT PROXY STATEMENT / PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE '
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE r AVAILABLE UPON REQUEST FROM, IN THE CASE OF DOCUMENTS RELATING TO TUC, MR. JAMES C. SCOTT, SECRETARY, ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEKAS i 75201, TELEPHONE (214) 812-4600: AND, IN THE CASE OF DOCUMENTS RELATING TO i EN.ERCH OR EEX, MR. MICHAEL G. (ORTADO, VICE PRESIDENT AND CORPORATE i l SECRETARY, 300 SOUTH ST. PAUL STREET, DALLAS, TEXAS 75201, TELEPHONE (214) 670-2649. ' TUC cnd ENSERCH hereby undertake to provide without charge to each person, [ itcluding any beneficial owner of TUC Common Stock, ENSERCH Common Stock or ! Crnvsrtible Debentures to whom a copy of this Joint Proxy Statement / Prospectus has be:n delivered, l upon the written or oral request of such person, a copy (Tithtut exhibits, except those specifically incorporated by reference) of any cnd c11 of the documents referred to below which have been or may be itcorporated in this Joint Proxy Statement / Prospectus by reference. Requests fer Euch documents should be directed to the persons indicated above Th> following documents, previously filed by TUC (File No. 1-3591), ENSERCH (File No. 1-3183) and EEX (File No. 1-11413) with the SEC pursuant to the Exchtige Act, are hereby incorporated by references i
- 1. TUC Annual Report on Form 10-K for the year ended December 31, 1995 (
l (th) 'TUC 1995 Form 10-K*): i l
- 2. TUC Ouarterly Report on Form 10-0 for the quarters ended March 31, l 1996 and June 30, 1996 (the "TUC 1996 Forms 10-0"); i i
- 3. TUC Current Report on Form 8-K dated April 13, 19963
- 4. TUC Proxy Statement for the 1996 Annual Meeting of Shareholders held en May 17, 1996;
- 5. ENSERCH Annual Reprt on Form 10-K for the year ended December 31, 1995 (the "ENSERCH 1995 Form 10-K*)#
- 6. ENSERCH Ouarterly Reprt on Form 10-0 for the quarters ended March 31, 1996 and June 30, 1996 (%e 'ENSERCH 1996 Forms 10-Q*): !
I
- 7. ENSERCH Current Reports on Form 8-K dated April 13, 19963 l
S. ENSERCH Current Report on Form 8-K dated April 16, 19963 l
- 9. ENSERCH Current Report on Form 8-K dated May 26, ~1995 (the 'ENSERCH 1995 Forn 8-K")3_
- 10. ENSERCH Current Report on Form 8-K dated July 31, 1996;
- 11. ENSERCH Current Report on Form 8-K dated September 20, 1996 (the
*ENSERCH September 1996 Form 8 K*);
- 12. ENSERCH Proxy Statement for the 1996 Annual Meeting of Shareholders bald cn May 14, 19963
- 13. EEX Annual Report on Form 10-K for the year ended December 31, 1995
( tha *EEX 1995 Form 10-K* );
- 14. EEX Ouirterly Report on Form 10-0 for the quarters ended March 31, 1996 rnd June 30, 1996 (the 'EEX 1996 Forms 10-0*)s
- 15. EEX Current Report on Form 6-K dated June 8, 1995 (the 'EEX 1995 Form 8-K*):
- 16. EEX Current Report on Form 8-K dated April 13, 19963
- 17. EEX Current Report on Form 8-K dated July 31, 19963 and
- 18. EEX Prory Statement for the Annual Meeting of Shareholders held on May 14, 1996.
All dicuments filed by TUC, ENSERCH and EEX pursuant to Section 13(a), 13(c), 14 or 15(d) of de Exchange Act af ter the date hereof and prior to the dita of the termination of this offering shall be deemed to be incorporated by r$fsrtnce herein and to be a part hereof from the date of filing of such docuaints. 4 l I i l i
'll1))TINEDGal14433.TX]0000$.FIP ' PACS 16 8EP'1996 20:22 EDCs 00-000 0000 00:00 SLKs 60-000 0000 80:00
- ((1))Tuc/Easirch. Frra 8 4 3. 2. Donnellty (212) 341 7777 AOC 3.4.1,p01 (PACD 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 Joint Frosy Statement / Prospectus to the estent u at a statm ent 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 Joint Frosy Statement / Prospectus.
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TABLE OF CONTENTS (TABLE)
'(CAPTION)
PAGE (S> , (C> AVAILABLE INFORMATION.................................................... 3 INCORPORATION BY REFERENCE............................................... 4 TAILE OF CONTENTS........................................................ 6
SUMMARY
The OF JOINT PROXY STATEMENT / PROSPECTUS.............................. 9 Parties...................................... ............ 9
'Special Meetings..............................................
Rrquired Vote.......................................................... 10
........ 10 Thu Mergers................................................... 11 Ccaversion Ratios...................................................... ......... 11 E ctange of Stock Certificates......................................... 11 Btc1 ground........................................... 12
................. 1212' Tha Distribution..................................... ................
Rsaaone for the Mergers................................................. RIcommendations of the Boards of Directors...................... Opinions of Investment Bankers.................................. ...... Conflicts of Interest of Certain Persons in the Mergers; Management
...... 1312 F llowing the Mergers................................................. 13 Canditions to the Mergers.............................................. 14 Stock Option Agreement................................................. 14 Rights to Terminate, Amend or Waive Conditions......................... 15 C:rtain Tax consequences of the Mergers................................ 15 M w.gement and Operations After the Mergers............................ 16 Rigulatory Matters.............................................. 16 Accounting Treatment................................................... 16 To Dissenters' Rights........................................... .....
Comparison of Shareholder Rights........................................ ...... 17 17 Th3 ENSERCE Articles Amendment....................................... 17 COMFARATIVE PER SEARE DATA............................................. . SELECTED RISTORICAL TUC AND PRO FORMA COMPANY FINANCIAL DATA.............
. 18 19 SELECTED RISTORICAL FINANCIAL DATA OF ENSERCH............................ 21 PRO FfRMA FINANCIAL INFORMATION OF ENSERCH NITH NEN EEX PRESENTED AS A DISCONTINUED OPERATION.................................................. 22 SELECTED PRO FORMA FINANCIAL DATA OF ENSERCE BUSINESS TO BE MERGED....... 23 i- SELECTED PRO FORMA FINANCIAL DATA OF NEW EEX............................. 24
- l. COMPARATIVE PER SHARE PRICES OF TUC, ENSERCE AND EEX..................... 26 MEETINGS, VOTING AND PROXIES.......... 27 TUC Meeting............................................................
. 27 ENTERCE Meeting........................................................
................. 28 THE MERGERS.............................................................. 3D
...... 30 B1ckground of the Mergers................................. .....
t Tha Preliminary Merger and the Distribution..................... R m ons for the Mergers................................................ 3537 l Rrcommendations of the Boards of Directors................ 38 ! Opinions of Financial Advisors............................ ............ Canflicts of Interest of Certain Persons in the Mergers................
............ 4048 Cartain Arrangements Regarding Management Following the Mergers........
Employment Agreements.................................................. 49 49 (/ TABLE) ; 6 i i l l 1 I h i t 1 l .I 1 i f l l i I r ] i i i . ( i I 1 i l l i
m , 1, .m.I,,, u , ,, m , .........., ,,,,, , ,, ,,.,,,.,,,, ,,,,, gTuc/EnXrchm m ,n o . m ....,. m fir 2 8 4 3. 1. Donne 11ty A0G 3.4.1.p,1 (213) 341 7777 l (PAGE)' (TABLE)
' (CAPTION) ,
i PAGE { (3) (C) Rit(ntion Bonus Arrangements....ri....................................... 50 li Chznge*in-Control Agreements and Other Arrangements...................... 51 Cartain United States Federal Income Tax Consequences.................... 53 i j AcoGunting Treatment..................................................... 55 N D Di s s ent e rs ' Righ ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 j Dividend Policy.......................................................... 55 Stack Exchange Listing of Company Common Stock........................... 56 Fidsral Securities Law Consequences.............................. ....... 56 REGULATORY MATTERS......................................................... 57 l Antitrust Considerations................................................. 57 T2x Matters.............................................................. 57
.Public Utility Holding Company Act of 1935............................... 57' T:sts Railroad Commission Review..................... l
................ 58 1 Oth2r Regulatory Matters................ .............................. . 58 THE PLAN OF MERGER......................................................... 59 Th3 Mergers.............................................................. 59 RIprisentations and Warranties.......................................... 61 Cartain Covenants........... ............................................ 61 Da Solicitation of Transactions.......................................... 63
%ndianification..........................................'................ 64 '
Emple:y e e Bene f i t Ma tte r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 ! ENSERCENotes........................................................... Canditions to the Mergers................................................
....... 64 65 T3rmination s Termination Fees and Expens es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Espenses................................................................. 66 AmIndment and Waiver..................................................... 66 THE STOCK OPTION AGREEMENT................................................. 67 cancral.......................................................... ....... 67 RELATIONSEIPS BETWEEN THE PARTIES.......................................... 69 Prirr to the Mergers..................................................... 69 Following the Mergers......................................,............. 69 TEE ENSERCE ARTICLES AMENDMENT............................................. 71
- DETCRIPTION OF COMPANY CAPITAL STOCK....................................... 73 Central.................................................................. 73 Company Common Stock............................................ 73 Comp;ny Preference 8tock.................................................
DESCRIPTIOF OF NEW EEX CAPITAL STOCK.......................................
......... 73 74 l
G20Cral.................................................................. 74 K ew E EX C ommon S toc k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 DCW EEX Preferred Stock.................................................. 74 COMPARISON OF SEAREBOLDER RIGHTS........................................... 75 PRO FORMA FINANCIAL INFORMATION OF THE COMPANY....................... ..... 81 PRO FORMA FINANCIAL INFORMATION OF ENSERCE BUSINESS TO BE MERGED. . . . . . . . . . . 88 SELECTED INFORMATION CONCERNING TUC, ENSERCN AND NEW EEX................... 95 Business of TUC.......................................................... 95 Business of ENSERCH...................................................... 96 Euriness of New EEX................................ ..................... 99
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-(PAGE) '
(TABLE) f [ (CAPTION) PAGE l ......
' - -<C) _. ___. . !
MANAGEMENT AND OFERATIONS FOLLOWING THE MERGERS........................ 101 EXPERTS......................................................... ...... 101
- LEGAL MATTERS................................................... ...... 102 SKARE! OLDER PROPOSALS.............................. ................... 102
- ANNEX IAmended and Restated Plan of Merger............................. 11 ANNEX IIStock Option Agreement......................................... II.1 ANNEX IIIrairness Opinion of Barr Devlin & Co. Incorporated............ III.1 l
ANNEX IVFairness Opinion of Morgan Stanley & Co. Incorporated.......... IV.1 ANNEX VEmployment Agreement of David W. Biog1er........................ V.1 [ ANNEX VIEmployment Agreement of Michael E. Rescoe................... .. VI.1 i ANNEX VIIEmployment Agreement of William T. Satterwhite................ VII.1 A?NEX VIIIRestated Articles of Incorporation of TUC Rolding Company.... VIII.1 ANNEX IXRestated Bylaws of TUC Holding Company......................... IX.1 i ANNEX XENSERCE Articles Amendment...................................... X-1 l ANNEX XIsostated Articles of Incorporation of Lone Operstions, Inc. ................................. ................... Star Energy Plant
- XI.1
.. ANNEX XIIBylaws of Lone Star Energy Plant Operations, Inc. ............ XII.1
(/ TABLE) e l-i ! h I
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l 4 i i PAG 18 8EP-1996 21:09 EDGs 90-000 0000 00:00 BLKi 00-000-0000 00:00 l [1] (1))] FINEDG r [14433. fX] Tuc/Eas:rch O9009. PIP fir 3 5-4 1. R. Donnellay (212) 341 7777 A0G 3.4.1,p01 )' (PAGE)
SUMMARY
OF JOINT PROXY STATEMENT / PROSPECTUS Th3 following is a summary of the material terms and conditions of the Mergsrs and related inforartion. This summary does not purport to be complete ccd is qualified in its entirety by reference to the more detailed information Epp:tring in this Joint Proxy Statement / Prospectus, in the Annexes hereto and in th) documents incorporated herein by reference. Shareholders are urged to rstd this Joint Proxy Statement / Prospectus and the Annexes in their entirety. j 1 THE PARTIES { TUC. TUC, a Texas corporation, is a holding company whose principal I Eubsidiary,ity public util company engaged in the generation, Texas Utilities Electric purchase Company ("TU Electric",), is an operating transmission, l dittribution and sale of electric energy in the north central, eastern and wortern portions of Texas, an area with a population estimated at 5,820,000, I i in public Two cther utility subsidiaries operationes of TUC are engaged (1) Southwestern directly Electric Service or indirect company 1{SESCO*), ( which j is cninged in the purchase, transmission, distribution and sale of electric j cnirgy in ten counties in the eastern and central parts of Texas, with a ' p;pulation estimated at 125,000, and (ii) Texas Utilities Australia Pty. Ltd., whlch in 1995 acquired the common stock of Eastern Energy Limited (' Eastern Ezergy"), a company engaged in the purchase, distribution and sale of electric occrgy to approximately 475,000 customers in the Melbourne area of Australia. , l N;ithir SESCO nor Eastern Energy generates any electricity. TUC also has seven ctL:r wholly owned subsidiaries which perform specialized functions within the ) TUC eystem. See *Sulected Information concerning TUC and ENSERCE--Business of i TUC' The principal executive offices of TUC are located in Energy Plata, 1601 Bry:n Street, Dallas, Texas 75201. ! ENSERCE. ENSERCH, a Texas corporation, is an integrated company focused on I actursi gas. Its major business segments are natural gas and oil exploration t.nd productions natural gas pipeline and gathering, processing and marketing (*GPM*); natural gas distribution, and power generation. Through these business ceg22nts, ENSERCH is engaged in (1) exploring for, developing, producing and mark: ting natural gas and oil primarily in the United States, (ii) owning and tperating interconnected natural gas transmission lines, underground storage 1 r2ccrvoirs, compressor stations and related properties in Texass gathering and i proc 2: sing natural gas to remove impurities and extract liquid hydrocarbons for i ccia in Texas, and the wholesale and retail marketi g of natural gas in several cr:ac of the United States, (iii) owning and opere 7 some 550 local gas utility distribution systems in Texas, and (iv) d oping, financing and oporrting electric power generating plants and cc eration facilities worldwide and operating thermal energy plants fo> arge building complexes, such cs universities and medical centers, in Texas. The principal executive efficis of ENSERCE are located at 300 South St. Paul Street, Dallas, Texas I 75201. Company. The Company, a Texas corporation, was created to become a holding company for TUC, ENSERCE and their respective subsidiaries following the M 2rg rs . See "The Company Following the Mergers." It has, and prior to the ! Mergirs will have, no operations except as contemplated by the Plan of Merger. l' cLo "The Plan of Merger." As of the date of this Joint Proxy St?tcmont/ Prospectus, 50% of the outstanding stock of the company is owned by TUC cnd 50% of the outstanding stock of the company is owned by ENSERCH. The principal executive offices of the Company are located at Energy Plaza, 1601 Brycn Street. Dallas, Texas 75201. j LSEPO. LSEPO is a wholly owned subsidiary of ENSERCH. LSEPO, under long term etntracts, operates and maintains three cogeneration facilities. Although LSEPO i will bi the corporation that survives the Preliminary Merger, its name will be chIng1d to Enserch Exploration, Inc. in the Preliminary Merger. EEX. EEX is engaged in the exploration for and the development, production cod scle of natural gas and crude oil. Tha business of EEX has been in l existance since 1918. EEX is one of the largest independent 9 f l l l r
.. . - , . ~ . - . _ - . - ~; - - .- ~ ~ - ,
PAGs 19.stF 1996 20:42 EDCs 00 000-0000 00:00 812: 00 900-0000 00:00 ; llIl)FINEDGsl14433.Tx]e0010. [1)]Tue/Easrrch fir
. PIre 3 4 3. 3. Doasellty - (212) 341 7777 A0G 3.4.1,p01 - -
(PAGE) taploration and production companies in the United States, with a reserve base cf 1,792 billion cubic feet of natural gas equivalent ("scfe") at January 1, ' 1996, as estimated by DeGoyler & McNaughton, independent petroleum consultants. Apprszimately 75% of these reserves on an energy equivalent basis consist of nitural gas. EEx has grown through exploration, development and acquisition-activities concentrated in major production basins located offshore in the Gulf of Misico and onshore in East Texas, North Central Teams and the U.S. Gulf Czert. The Drfucipal esecutive offices of EEX are located at Energy Square II, 4049 Greenville Avenue,, suite 1500, Dallas, Texas 75206. ,
.SPECIAL MEETINGS TUC.' 'At the TUC Meeting,-the holders of TUC Common Stock will be asked to centider and vote upon a propsal to approve the Plan of Merger. See ' Meetings, t Veting and Proxies--TUC Meeting.' ,
T32 TUC Meeting is scheduled to be held at the Harvey Hotel / Downtown, Live 0 k tid Olive Streets, Dallas, Texas, at 9:30 a.m. local time, on November 15,
;1996. The TUC Board has fixed the close of business on September 17, 1996 as ,
th2 rccord date (the 'TUC Record Date') for the determination of holders of TUC Common Stock entitled to notice of, and to vote at, the TUC Meeting. Th3 TUC Board has unanimously approved and adopted the Plan of Merger and ricomeends that holders of TUC Common Stock vote FOR approval of the Plan of Merg:r. ENSERCE. At the ENSERCE Meeting the holders of ENSERCH Common Stock, voting AJ e class, will be asked to cons $ der and vote upon a proposal to approve the
'Plra af Merger and a proposal to approve the ENSERCE Articles Amendment. See ,
'Meltings, Voting and Frozies==ENSERCH Meeting.' '
Th3 ENSERCE Meeting is scheduled to be held at 301 South Barwood Street,
' Dalles, Texas, at 2:00 p.m. local time, on Novamber 15, 1996. The ENSERCH Board
- his fixed the close of hsiness on September 20, 1996 as the record date (the
'ENSERCE Record Date") for the deternhation of holders of ENSERCH Common Stock catitled to motice of, and to vote at, the ENSERCE Meeting.
The ENSERCE Board, by a vote of eight of the nine directors in favor and with h Mr. Biogler abstaidag, has approved and adopted the Plan of Merger and i
. recommends that holders of ENSERCE Common Stock vote FOR approval of the Plan #
sf MIrger. l Th3 ENSERCE Board has unanimously approved the ENSERCH Articles Amendment and
.ricommends that holders of ENSERCE Common Stock vote FOR approval of the ENSERFE Articles Amendment.
I REQUIRED VOTE I Tha affirmative vote of the holders of two-thirds of the votes entitled to be cast by the holders of outstanding shares of TUC Common Stock and ENSERCE j
- Commos Stock, respectively, is required for the approval of the Plan of Merger. j Tha cffirmative vote of n e holders of two-thirds of the votes entitled to M cast by holders of outstanding shares of ENSERCE Common Stock is required for tpproval of the ENSERCH Articles Amendment. UNDER APPLICABLE TEXAS LAW, IN DETERMINING NEETHER THE REQUISITE NUMBER OF AFFIRMATIVE VOTES BAS BEEN CAST ON EACH OF THE PROPOSALS, ABSTENTIONS AND BROKER NON-VOTES WILL BAVE THE SAME EFFECT AS VOTES CAST AGAINST EACE PROPOSAL. On the TUC Record Date, 224,602,557 ghtras of TUC Common Stock were outstanding and entitled to vote. As of the TUC 'R2 cord Date, directors, executive officats and affiliates of TUC beneficially cwnId less than 1% of the issued and outstanding shares of TUC Common Stock.
Saa
- Meetings, Voting and Prozies--TUC Meeting. On the ENSERCE Record Date,
-69,527,645 shares of ENSERCE Common Stock were outstanding and entitled to , vote. As of the ENSERCE Record Date, directors, esecutive officers and af filiates of ENSERCE beneficially owned approximately 1.4% of the issued and -
i
'tutatznding shares of ENSERCH Common Stock. See ' Meetings, Voting and Proxies--
ENSERCE Meeting.' 10 l l l { t t l l
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.THE MERCERS Tha Plan of Merger provides, immediately after the Preliminary Merger and the ,
Distribution, for (1) the merger of TUC Merger Corp. with and into TUC in the -"- TUC Mergers (ii) the merger of Enserch Merger Corp, with and into ENSERCH in
~
ths ENSERCE Mergers (iii) the cancellation of any shares of TUC Common Stock ownid by TUC, any subsidiary of TUC, ENSERCE or any subsidiary of ENSERCE; (iv) , tha cincellation of any shares of ENSERCH Common Stock owned by ENSERCH, any tub 2idiary of ENSERCE,'TUC or any subsidiary of TUC; (v) the conversion of all .
. isEuid and outstanding shares of TUC Common Stock (except shares which are 4 ccreslied) into shares of Company Common Stocks (vi) the conversion of all issuid and outstanding shares of ENSERCH Common Stock (except shares which are cinesiled) into shares of company Common Stock (and cash in lieu of fractional i 2%2rsa, if any): and (vii) the cancellation of all shares of capital stock of tha Company which are issued and outstanding immediately prior to the Mergers.
As a result, holders of TUC Common Stock and holders of ENSERCE Common Stock will become holders of company Common Stock and TUC and ENSERCH will become '
' ELolly owned subsidiaries of the Company. See "The Plan of Merger--The ,
Me rg sr s . " . s Purruant to the Plan of Merger, articles of merger complying with tts ! requirements of the Texas Business Corporation Act ('TBCA") will be executed by l TUC Cnd TUC Merger Corp., and by ENSERCE and Enserch Merger Corp., - torpectively, and filed with the Secretary of State of Texas on the second businssa day following the satisfaction or waiver of all conditions to the i
?MergTrs, or at such other time as TUC and ENSERCH shall agree. The TUC Merger >
End the ENSERCE Merger shall become effective simultaneously at the time the S;ctstary of State of Texas issues certificates of merger in respect of the .!
'Mirgcrs. The " Effective Time
- shall mean the time and date that the TUC Merger
- CEd the ENSERCE Merger become effective. See 'The Plan of Merger--The Mergers."
CONVERSION RATIOS Ezch share of TUC Common Stock outstanding immediately prior to the Effective Time will, upon consummation of the TUC Merger, be automatically converted into cas Chare of Company Common Stock. Each share of ENSERCH Common Stock j outzttading immediately prior to the Effective Time will, upon consummation of - th) ENSERCE Merger, be converted into that number of shares of Company Common Stack obtained by dividing $8.00 by the Average TUC Price; provided, however, is no event will the Average TUC Price be deemed to be less than $35.625 or j mora than $43.625. Tractional shares of company common Stock will not be - issued, ascept to participanti in the ENSERCE Dividend Reinvestment Plan and , participants in the TUC Dividend Reinvestment and Common Stock Purchase Plan. i In lisu of fractional shares, holders of ENSERCH Common Stock will receive i c1Mh. The ratio for converting TUC Common Stock into Company Common Stock (the "TUC Conversion Ratio") and the ratio for converting ENSERCH Common Stock into .I
'Compiny Common Stock (the 'ENSERCE Conversion Ratio ) are together referred to hertis as the " conversion Ratios". See "The Plan of Merger--Consummation of the MIrgrra.*. , ,
- p. ; EXCEANCE OF STOCK CERTIFICATES '
As soon as practicable after the Effective Time, Harris Trust Company of New York (the " Exchange Agent") will mail transmittal instructions to each holder , of record of shares of ENSERCH Common Stock at the Effective Time, advising the .t
.thirtholder of the procedure for surrendering certificates (the "ENSERCH CGrtificates") representing ENSERCE Common Stock in exchange for certificates f b riprstenting Company Common Stock. Bolders of certificates that prior to the ' .Effsctive Time represented shares of ENSERCE Common Stock will not be entitled to rsceive any payment of dividends or other distributions on or a cash payment t 1 .for SEy fractional shares of Company Common Stock until such certificates are J Kurrrndered for exchange. ENSERCH Certificates should not be surrendered until )'
e fora of letter of transmittal and instructions therefor are received from the
.Exchtnge Agent.
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Cartificates representing TUC Common Stock at the Effective Time will be dssmed to represent an equal number of shares of Company Common Stock and there ; will be no need for the holders of TUC Common Stock to exchange their cartificates. See "The Plan of Merger--The Mergers." j
\
EACKGROUND 5 t For a description of the background of the Mergers, sea *The Mergers-- , Stekground of the Mergers." ; THE DISTRIBUTION Th3 Plan of Merger provides that immediately prior to the consumastion of the Marg 2rs, EEX is to be merged with and into LSEPO pursuant to the terms of the , Preliminary Merger. In the Preliminary Merger, LSEPO is to change its name to !
-Enisrch Emploration, Inc. Subsequent to the Preliminary Merger and immediately l prict to n e consummation of the Mergers, all of the outstanding shares of New ;
EEX Common Stock owned by ENSERCE are to be distributed pro rata to the holders -
~ cf ENSERCE Common Stock pursuant to an agreement and plan of distribution to be i sntared into among ENSERCH, New EEX and the Company (the " Distribution
. It is expected that approximately 1.5 shares of New EEX Common }
Agrimment')be Stack will distributed for each share of ENSERCE Common Stock. Cash is to be g
' distributed in lieu of fractional shares of New EEX Common Stock. The New EEX i Commo3 Stock is to be listed on the NYSE. See "The Mergers--The Preliminary Margtr and the Distribution.' i REASONS FOR THE MERCERS i TUC. The TUC Board believes that the Mergers offer significant strategic and
- fim:1cial benefits to TUC, ENSERCE and their respective shareholders and
- r customers by creating a stronger company with espertise in both electric and gss utility operations that is able to offer its customers enhanced service l tyticts, malatain competitive rates, efficiently pursue non-utility operations, .
and tche advantage of complementary operational functions as well as reduced , administrative costs, competitive utilities in order industry. Seeto"The participate effectively for Mergers--Reasons in the the increasingly Mergers. 1 I ENSERCE. The ENSERCE Board believes the ENSERCE Merger and the Distribution af far significant benefits to ENSERCE and ENSERCE shareholders by providing a Significant near term increase in shareholder value, unlocking the value of EEX cs On independent entity and providing an opportunity for ENSERCE and TUC to l
-pursus a competitive total energy services strategy and capture greater oportting efficiencies in times of increased competition resulting from the !
c;ntinuing deregulation of the utilities industry. See *The Mergers--Reasons for the Mergers.*
' RECOMMENDATIONS OF TEE BOARDS OF DIRECTORS TUC. The TUC Board unanimously approved the Plan of Merger and determined to 1 ricommend that the shareholders of TUC vote FOR approval of the Plan of Merger. {
Th3 TUC Board approved the Plan of Merger after consideration of a number of l 3 frctors, which are described under the heading "The Mergers--Recommendations of I th2 Brard of Directors--TUC." The members of the TUC Board will become {
- dirsctors and, in certain instances, employees of the Company following '
con 2ummation of the Mergers. See *The Mergers -Conflicts of Interest of Certain Parsons in the Mergers.' l
. ENSERCE. The ENSERCE Board, by a vote of eight of the nine directors in favor aid with Mr. Biogler abstaining, approved the Plan of Merger and determined to
- ricommend that the shareholders of ENSERCE approve the Plan of Merger. Mr.
Sieglar abstained because of the possibility that he would be employed by the Comptny following the Mergers. See "The Mergers--Emp oyment Agreemants." The
' ENSERCE Board approved the Plan of Merger after cons deration of a number of reasons and factors, which are described under 12 1
l l 4 i t I I
(ll))f!*EDG a [144 33.TI)00011.F17 FAGS 19 5EP-1996 20:45 EDC: 00-000-0000 00.00 BIK: 00-000-0000 f,9:00 [11)]Tuc/Easitch FIra 5 4 1. R. Donnellry (212) 341-7777 A0G 3.4.1,p01 (PAGE) thi headings *The Mergers--Reasons for the Hergers' and *The Mergers-- . R: commendations of the Boards of Directors--ENSERCE.* Mr. Biegler will become
- cn employee of the Company following consummation of the Mergers and will i become entitled to severance benefits as a result of the Mergers. See *The M:rg:rs--Conflicts of Interest of Certain Persons in the Mergers.*
_ _ j OPINIONS OF INVESTMENT BANKERS i TUC has retained Barr Devlin & Co. Incorporated ("Barr Devlin") as its N finracial advisor in connection with the transactions contemplated by the Plan of Merger and to assist the TUC Board in evaluating the financial terms of the MergIrs. See 'The Mergers--Background of the Mergers." Birr Devlin rendered to the TUC Board its oral opinion on April 13, 1996, rhich was confirmed by delivery of written opinions dated May 4, 1996 and the d;t3 hereof, each to the effect that, as of the date of each such opinion, and ! ba:ed on the procedures and subject to the assumptions described in such cpinions, from a financial point of view, the TUC Conversion Ratio is fair to I tha holders of TUC Common Stock. A copy of the written opinion of Barr Devlin ditid the date hereof is attached to G is Joint Proxy Statement / Prospectus as I Annix III and should be read in its entirety. For a description of the matters l erscidered and assumptions made by Barr Devlin in reaching its opinions and the f s2 received and to be received by Barr Devlin, see *The Mergers--Opinions of j Firrscial Advisors--TUC" and Annex III, 1 i 1 ENSERCH has retained Morgan Stanley s Co. Incorporated (" Morgan Stanley") as its financial advisor in connection with the transactions contemplated by the 1 Ples cf Merger and to assist ENSERCB's Board in evaluating the flnancial terms i tf th) Mergers. See "The Mergers--Background of the Mergers.' Da April 13, 1996, Morgan Stanley rendered to ENSERCH's Board an oral opinion tD th2 affect that, as of the date of such opinion and based upon certain mattcrs set forth therein, the ENSERCE ' Conversion Ratio was fair, from a fina;cial point of view, to the holders of ENSERCH Common Stock. Morgan Stanley h3s crnfirmed this opinion by delivery of a written opinion dated the date hereof. The full text of Morgan Stanley's written opinion, which sets forth the j rsrumptions made, matters considered and limitations of the review undertaken, i I is cttached to herein iacarporated this Joint by Proxy Statement reference / Prospectus and should be readasinAnnex IV is hereb{The its entirety. See l l Merg rs--Opinions of Financial Advisors -ENSERCE" and Annet IV. C'NFLICTS OF INTEREST Or CERTAIN PERSONS IN THE MERGERS; MANAGEMENT FOLLOWING THE MERGERS Employment Agreements. TUC has entered into employment agreements with Me31r3. D.W. Biegler and W. T. Satterwhite pursuant to which they each will become an officer of TUC. Texas Utilities Services Inc., a wholly owned , tub'idiary of TUC ("TU Services'), has entered into an employment agreement ! eith Mr. M.E. Rescoa pursuant to which he will become an officer of TU S rvices. Each of these employment agreements is conditioned upon and will b;come effective et the time of the closing of the Mergers. The employment (greements will each have a term of two years and will provide for a minimum ennuti salary--$600,000 in the case of Mr. Biegler, 5282,000 in the case of Mr. S:ttfrwhite and $280,000 in the case of Mr. Rescoe. The employment agreements ' 1 vill clso provide for the participation b Messrs. Biegler, satterwhite and R;zcoa in all incentive compensation, emp oyee benefit, and fringe benefit l progr ms for which they are eligible by v rtue of their employment. The < Laployment agreements of Messrs. Satterwhite and Rescos also will provide for T ratantion bonus payments. All employment agreements in effect at TUC at the , Effective Time will be assigned to, and assumed by, the Company without any 1 chinga in the terms thereof. See *The Mergers--Conflicts of Interest of Certain ; Paratna in the Mergers--Employment Agreements" and Annexes V, VI and VII. Chinge-in-Control Agreements and Other Arrangements. Under change-in-control (grscaents entered into by ENSERCH with 32 key employees, including seven cz;cutive officers, certain benefits will become payable to such employees if th31r employment is terminated following the approval of the Plan of Merger by 13 l 1 1
((11)r!NEDCs[14433.yX]00014.FIF FACs 19-SEF-1996 20:45 EDG 00 000-0000 00:09 BLK 00 000-0000 00:00 ((1))Tuc/tas:rch Fira 5-4 R. R. Donnelliy (212) 141 7777 Aos 3.4.1,p01 (PAGE) thi chtrabolders of ENSERCH. Under certain benefit plans of ENSERCH, options h:1d by employees of ENSERCH vested and the forfeiture rovisions with respect to rhtres of restricted stock lapsed upon the approval the ENSERCH Board of tha Plcn of Merger or will become vested or lagse upon e approval of the Plan of Merger by the shareholders of ENSERCE. See The Mergers--Change-in-Control Agr:emints and Other Arrangements." Indstnification. To the extent not prohibited by law, all rights of ind3nnification existing in favor of the employees, agents, directors and ef ficsrs of ENSERCH and its subsidiaries at the Ef f ective Time will continue in full feree and effect for six years from the Effective Time. In addition, for a p:riod of six years from the Effective Time, the Company will maintain the policits of directors' and officers' liability insurance maintained by ENSERCH ct tb3 Effective Time. See "The Plan of Merger--Indemnification.' CORDITIONS TO THE MERGERS Th3 obligations of TUC snd ENSERCH to consummate the Mergers are subject to thi satisfaction of certain conditions, including the approval of the Plan of M;rg:r by the shareholders of TUC and ENSERCH, respectively, the absence of any isjunction or applicable law or regulation that prevents or prohibits the crurummation of the Mergers, the effectiveness of the Registration Statement, th3 Kpproval of the listing on the NYSE of the shares of Company Common Stock istu:ble in the Mergers upon official notice of issuance, the receipt of all att: riel governmental approvals and the review of the ENSERCE Merger by the T:1 S Railroad Commission (unless such review is waived by TUC) and that no cuch rpproval or review shall impse a term or condition that would have a matarisl adverse effect, the expiration or termination of the applicable c iti g period under the Eart-Scott-Rodino Antitrust Improvements Act of 1976, es ameEdad (the 'ESR Act'), the receipt of a ruling from the Internal Revenue 8;rvic3 (" IRS *) to the effect that the Distribution will result in no taxable grin to ENSERCH or its shareholders, the execution and delivery of the Tax Allocition Agreement and the Tax Assurance Agreement, the consummation of the Distribution, the material accuracy of the representations and warranties of i th) rs:pective parties set forth in the Plan of Merger, the material perfrrmance or waiver of all obligations required to be performed under the Pltn cf Merger, the receipt by TUC and ENSERCE of officers' certificates from each ather stating that the conditions set forth in the Plan of Merger have beas citisfied, the absence of any material adverse ef fect (or f acts or circumItances that would have a material adverse effect) on the respective burir?sses of the parties, the receipt of tax opinions that each of the Mergers will b2 treated as a tax-free transaction as described in section 351 of the Intcrnal Revenue Code of 1906, as amended (the ' Code'), and the receipt of c:rttia third-party consents. See " Regulatory Matters
- and 'The Plan of Merg:r--Conditions to the Mergers."
STOCK OPTION AGREEMENT Purtuant to the Stock option Agreement dated as of April 13, 1996, by and betT2rn ENSERCH and TUC (the ' Stock Option Agreement *), ENSERCH has granted TUC tha right (the ' Option"), to purchase, under certain circumstances relating to a Butitess Combination (as hereinafter defined) proposal by a third party, up to 3,363,570 authorized but unissued shares of ENSERCH Common Stock, subject to (djusteent (which represents 4.9% of the shares of ENSERCH Common Stock q i outztcnding on March 31, 1996), at $16.375 per share. The exercise of the ' optica is subject to certain conditions set forth in the Plan of Merger I rAleting to Business combination proposals by third parties and rights of tsrninttion. See 'The Stock option Agreement--General" and "The Plan of M;rgsr--Termination; Pees and Expenses." In addition, the Stock Option Agr$3RInt provides that TUC has the right to require ENSERCE to repurchase from 3 TUC (i) all or any portion of the Option at any time the Option is exercisable tt a price that represents the dif ference between the Market /Of fer Price (as hirsinsiter defined) and the exercise price of the Option and (ii) on or at any tina prior to March 31, 1997 (which date may be extended to September 30, 1997, I undar cartain circumstances) all or any portion of any shares purchased purturnt to the option. See 'The Stock option Agreement--General--Repurchases." i Any such amounts payable under the Stock Option Agreement are subject to the S42.5 c1111on aggregate limit on termination fees and reimbursement expenses psycble to TUC under certain circumstances in the event that the 14 I b I I
FACa 19 StP.1996 20:45 EDC: 00 000 0000 00:00 SLK 00 060 0000 00:00 l(1)))rINEDCa[14433.TI)00015.FIP
!!!] Tue/Enserch Mr284 1. R. Donne 11Ty (212) 341 7777 AOC 3.4.1,p01 (PAGE)
I M rg:rs are not consummated. The Stock Option Agreement is intended to increase i thi likelihood that the Mergers will be consummated in accordance with the 7 torss of the Plan of Merger by discouraging competing offers. See "The Stock ) Option Agreement." RIGHTS TO TERMINATE, AMEND OR WAIVE CONDITIONS Th3 Plan of Herger may be terminated under certain circumstances, including, ([ by Lutual written consent of the TUC and ENSERCH Boards, by any party if the Merg rs are not consummated by March 31, 1997 (or by September 30, 1997, if o2rttin regulatory approvals and the tax ruling on the Distribution have not %[ s yit been obtained), by any party if the requisite shareholder approvals are not s
)
obttined, by any party if a law, order, rule or regulation is issued or adopted - 'e th:t t.as the effect of prohibiting either Merger or if any final and ntncppealable action by a court of competent jurisdiction prohibits either M;rg:r, under certain circumstances, as a result of a third-party tender offer or Buriness Combination proposal if the Board of Directors of the party ric2iving the offer or propsal determines in good faith that its fiduciary oblimations require acceptlng the offer or proposal after receiving writtsn I cdvica that such fiduciary duties would require such Board to reconsider its j commitment, by a nonbreaching party if there occurs a material breach of the Pltn of Merger which is not cured within 20 days after notice, or by either TUC i i cx E* 2 SERCE, if the Board of Pirectors of the other withdraws or modifies in a cann r materially adverse to the other its approval of the Plan of Merger or l its r:commandation to its shareholders in frvor of the Plan of Merger. Th3 Plan of Merger requires that certain fees be paid upon termination of the Plr3 of Merger under certain circumstances. The aggregate termination fees undir these provisions may not exceed $42.5 million (ibeluding out-of-pocket erpeaaes of up to $15 million and any amounts payable by ENSERCH under the Opcica). See The Plan of Merger--Termination; Termination Fees and Expenses." The Plan of Merger may be amended by the TUC Board and the ENSERCH Board at Cry time before or after its approval by the shareholders of TUC and ENSERCH, ra;pectively, and prior to the Effective Time but, after any such approval, no # amendment may be made which alters or changes (i) the amount or kind of shares to be received or exchanged for or on the conversion of any class or series of crpit:1 stock of TUC or ENSERCE in the Mergers or (ii) the terms or conditions ci th1 Plan of Merger if such alteration or change, alone or in the aggregate, woult materially and adversely affect the rights, respectively, of the holders of TUC Common Stock or ENSERCE Common Stock. See "The Plan of Merger--Amendment cid Waiver." At cny time prior to the Effective Time, the time of performance of any chlig: Mon or other acts may be extended or any inaccuracies in the r:prazentations and warranties or conditions to a party's obligation to cenrummate the respective Mergers may be waived by the other parties. CERTAIN TAX CONSEQUENCES OF THE MERGERS A cIndition precedent to consummation of the Mergers is the receipt of
' opiniens of counsel for TUC and ENSERCE, respectively, substantially to the sffset that the respective Mergers each will be treated as a tax-free trintiction described in section 351 of the Code. A condition to the obligation of TUC to effect the TUC Merger is the receipt by it of an opinion of counsel to tha effect that, among other things, no gain or loss for federal income tax purpoies will be recognized in the TUC Merger by TUC shareholders whose shares of TUC Common Stock are converted into shares of Company Common Stock. A condition to the obligation of ENSERCE to effect the ENSERCE Merger is the ricaipt by it of an opinion of counsel to the effect that, among other things, no giln or loss for federal income tax purposes will be recognized in the ENSERCE Merger by ENSERCH shareholders whose shares cf ENSERCH Common Stock are crnysrted into shares of Company Common Stock (except with respect to cash rcerived by holders of ENSERCH Common Stock in lieu of fractional shares of Comp ny Common Stock). In addition, it is a condition to the consummation of thi M1rgers that the IRS 15 l
I i l I l l l l
l
-{[1))FINEDC114433.TX)o0016.FIF PAG: 19-stF-1996 20:45 EDC: 00-000-0000 00:00 BLE: 00-000-0000 00:00 I
((1))Tue/hs:rch im 8 4 1. 3. Donne 11ey (212) 341 7777 A0G 3.4.1,p01 (FAGE) l
- ht11 have issued and not revoked a ruling to the ef fect that the Distribution <
uill result in no taxable gain or income to ENSERCE or its shareholders. See I
Th3 Mergers--Certain United States rederal Income Tax Consequences.*
EACH TUC SEAPEBOLDER AND EACH ENSERCH SHAREROLDER IS URGED TO CONSULT HIS OE YER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE RESPECTIVE MERGERS, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS. MANAGEMENT AND OPERATIONS AFTER THE HERGERS r:11 ewing the Effective Time, the Company will maintain its corporate offices in Dallas, Texas. Each of TUC's operating subsidiaries will continue as direct er iidirect wholly owned subsidiaries of the Company and ENSERCH and its rublidiaries (other than New EEX) will continue their respective operations as dircct or indirect subsidiaries of the Company. The names of ENSERCE and Lone Star Gas Company will be retaired. The business of the Company will be to operate as a holding company for its utility subsidiaries and various non-utility subsidiaries. Concurrently with the Mergers, the company will change its nine to Texas Utilities Company. See " Management and Operations Following th) M rgers.' It is presently anticipated that at or after the Effective Time, the Company vill coopt or assume all employee benefit plans in effect at TUC h ediately prier to the Ef fective Time, with modifications to reflect the Mergers as ne compicy may deem appropriate and the TUC Employees' Th2ift Plan will be amended t@ pr vide for the issuance and sale of Company Common Stock in lieu of TUC commoa Stock and the Dividend Reinvestment Plan of TUC will be merged into the Company's Dividend Reinvestment Plan. The Company will cause ENSERCH to < maint in the level of benefits provided to employees and former employees of ENSERCE in effect on April 13, 1996, until such time as the Company shall prrvife benefits to such employees and former amployees on a basis consistent with the provision of benefits provided to other employees and former employees in thm TUC system as appropriate. At the Effective Time, the Employee Stock Purch;se and Savings Plan of ENSERCE will be amanded to provide for the iacuince and sale of Company Common Stock in place of ENSERCE Common Stock and tha common stock of EEX under such plan. The Dividend Reinvestment Plan of ENSERCH will be merged into the Company Dividend Reinvestment Plan. At the Eff!ctive Time, each option which remains outstanding under ENSERCH incentive p10.n3 will be converted into an option to purchase Company Common Stock having es equivalent value. See "The Mergers--Certain Arrangements Regarding M;n gement Following the Mergers REGULATORY MATTERS Tia approvals of the SEC under the Public Utility Bolding Company Act of 1935 (th) *1935 Act"), the receipt of a ruling from the IRS wi d regard to the Di:tribution and the expiration or termination of the applicable waiting period und:r the ESR Act are required to consummate the Mergers. In addition, the Trz2s Railroad Commission, which has jurisdiction over gas utilities in the Stata of Texas, indicated that it has no opposition to the ENSERCH Merger, that it will rely on existing authority to protect the public interest and ratzpryers subject to its jurisdiction, and that nere is no hindrance under T zia natural gas utilit{ regulatory law to consummation of the ENSERCH Merger. SE2 ' Regulatory Matters. ACCOUNTING TREATMENT Th3 TUC Mercer will be accocated for as a combination of companies under common control using historical costs in a manner similar to a poling of intsrcsts; the ENSERCE Merger vill be accounted for by the purchase method of Eccounting. See "The Mergers--Jccounting Treatment." 16 I 1 I i l 1
FAC: 18 8t7 1996 21:17 EDGs 00-009-0000 00:00 SLE: 00 000-0000 00:00 (11))]Tue/EnsachIll ]FINEDCs[14433.TX]O0017.FIF Fir 2 8 4 R. R. Donn:11ty (212) 341-7777 AOC 3.4.1.p01
< RACE) l
\ ! ! E0 DISSENTERS' . RIGHTS t Dissenters' rights are not available to holders of shares of TUC common Stock or ENSERCH Common Stock in connection with, or as a result of, the matters to be &cted upon at the TUC Meeting and the EFSERCH Meeting, respectively. See
*Tha Mergers--No Dissenters' Rights." -- --
! COMPARISON OF SHAREBOLDER RIGHTS As a result of the TUC Merger, holders of TUC common Stock will nutomatically ' becom) shareholders of the Company. Because the Company and TUC are both Texas there will be estporations no chLnge in thewithrights identical of Articles of Incorporation TUC shareholders, except and thatBylawski they wi not possess ,e thi sEme relative voting power with respect to matters put to a vote of the "
- thtr holders of the Company. As a result of the ENSERCE Merger and the i Distribution, holders of ENSERCH Common Stock will become shareholders of the
! Company and New EEX and will have certain different rights as shareholders of the Company and New EEX than they had as shareholders of ENSERCE. For a
. comparison of the provisions in the Restated Articles of Incorporation and the ByltwJ of the Company, New EEX and ENSERCH governing the rights of the ahlr holders of ENSERCE, New EEX and the Company, respectively, see " Comparison cf Shtreholder Rights.*
TEE ENSERCH ARTICLES AMENDMENT At the ENSERCE Meeting, the holders of ENSERCH Common Stock will be asked to cessifer and vote upon the ENSERCE Articles Amendment, pursuant to which the R3?tated Articles of Incorporation of ENSERCH will be amended to change the par vsluz of ENSERCE Common Stock from $4.45 per share to 3.01 per share in order , ta freilitate the Distribution. See *The ENSERCH Articles Amendment." If t (ppraved, this change will take effect whether or not the Mergers are chesummated. FORWARD 1.OOKING STATEMENTS This Joint Proxy Statement / Prospectus includes forward looking statements , eithis the meaning of Section 21E of the Exchange Act. Although TUC and ENSERCH belicve their expectations are based on reasonable assumptions, no assurance c;n be given that actual results may not differ materially from those in the
' forwird looking statements herein for reasons including he speed and degree to which competition enters the electric and natural gas utilities industriess stata and federal regulatory initiatives that increase com m tition, threaten cast End investment recovery and impact rate structuress de economic climate and growth in the service territories of TUC and ENSERCBs the weather and other t=tur:1 phenomenap the timing and extent of changes in commodity prices for ,
crudi cil, natural gas and interest ratess conditions of the capital markets ced equity marketas and the ability of TUC and ENSERCE to achieve the goals dracribed in 'The Mergers--Reasons for the Mergers's in each case during the p2riods covered by the forward looking statements. 17 l l l i e e I t 1 t l
f t *, ((11)r!NEDGal14433.TX]00018.FIF PAGs 19 8EF.1996 20:48 EDC: 00 000 0000 00:00 BLK: 00 000 0000 #0:00 lll])Tuc/Eastra , Tyr2 8 4 R. R. Donatllty (312) 341 7777 A0G 3.4.1,p01 l (PAGE) l I COMPARATIVE PER SEARE DATA i i For' financial reporting purposes,'the Company will succeed to the business of ! TUC cnd the business operations of ENSERCH remaining after the Preliminary Margrr and the Distribution (the 'ENSERCE Business to be Merged'). The TUC - Margsr will be accounted for as a combination of companies under common control - ' ~ " urigg historical costs in a manner similar to a pooling of interests, and the ENSERCE Merger will be treated as e purchase for accounting purposes. The INSERCH assets acquired and liabilitles assumed will be recorded at their fair
-vtlus.
Th2 following table sets forth certain historical, pro forma and equivalent I pro ferma per share financial information for the year ended December 31, 1995 cnd cs of and for the six months ended June 30, 1996. The pro forma Company (moults include a preliminary allocation of the ENSERCE purchase price. The fc11owing informadon should be read in conjunction with the historical finns.cial statements of TUC and ENSERCE incor ' Pro Farun Financial Information of the Coogany", porated Pro Forma by reference Financial herein, Information of ENSERCE Business to be Merged' and Selected Pro Forma Financial Data of New i EEX' itcluded elsewhere herein and ' Pro Forma Financial Information of New EEX' ! included in the ENSERCH September 1996 Forn 8.K incorporated by reference h2rsin. BISTORICAL TUC AND PRO FORMA COMPANY PER COMMON SHARE DATA (TABLE) (CAPTIIN)
- l. HISTORICAL PRO FORMA TUC COMPANY (S) --
(C) -(C) Y3nr cLded December 31, 1995 , .Lo2s per common share (a)................................ $ (.61) $ (.62) l Dividende declared per common share (b).................. 2.81 2.81 Six morths anded June 30, 1996
'E rnings per common share................................ 1.46 1.38 Dividends declared per common share (b).................. 1.00 1.00
- As of June 30,-1996 s Book value per common s ha re . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.95 26.73
(/ TABLE) EQUIVALENT TRO FORMA ENSERCH PER COMMON SHARE DATA (TABLE) (CAPTION) EQUIVALENT PRO FORMA ENSERCH(C) HISTORICAL PRO FORMA NEW ENSERCE COMPANY EEX TOTAL (S) (C) (C) (C) (C) Yser raded December 31, 1995 Earnings (loss) per common shire (a)................... Dividends declared per common
$ .02 $ (.12) $ (.15) $ (.27) sh2re....................... .30 .56 --
.56 j Six acnths ended June 30, 1996 Etraings per common share.... .25 .28
.06 .34 Dividends declared per common
.shtre....................... .10 .20 --
.20 l As of June 30, 1996 t Book value per common share.. 10.73 5.35 11.15 16.50
(
./. TABLE)
(a) Includes an $802 million after-tax charge related to an impairment of asveral non-performing assets, including TU Electric's partially completed Twin Oak and Forest Grove lignite fueled facilities and coal reserves in Niw Mexico of TUC's subsidiary, Chaco Energy Company, as well as several
-ninor assets. Excluding the chrge for the impairment, earnings per common share data for the year 1995 are as follows: .. (TABLE)
(S) (C) Historical TUC................................................... $ 2.94 > Pro Forma Company................................................ 2.73 ' Equivalent Pro Forma ENSERCS Pro Forma Company................... ........................... .55 Equivalent ENSERCE Pro Forma.................................... .40 t/ TABLE)
'(b) Amounts represent historical dividends declared per share'of TUC Common Stock.
(c) Th3 total pro forma epivalent of one share of ENSERCH Common Stock is equal to Oe sum of (i) the Company pro forma combined per share data I cultiplied by an assumed ENSERCH Conversion Ratio of .2 and (ii) the New EEX pro forma per share data multiplied by 1.5 (representing the 1 rpproximate number of shares of New EEX Common Stock to be distributed per j thtre of ENSERCH Common Stock in the Distribution). i s 18 I \ i 1 1 1 I
f
# l l(11)F1WEDGs[14433.TIj00019.F17 PAG: 20.sEP.1996 11:32 EDC: 00 000 0000 00:00 BLK: 00 000-0000 00:00 1
lil])Tuc/Enserch Fire 8 4 R. 2. Donnell y (212) 341 7777 FMT 3.4.1,p02 j i (PAGE) i SELECTED HISTORICAL TUC AND PRO FORMA COMPANY FINAP'CIAL DATA Far financial reporting purposes, the Company will succeed to the business of TUC cnd the ENSERCH Business to be Merged. The TUC Merger will be accounted for c3 & combination of companies under common control using historical costs in a G:nn r similar to a pooling of ir.terests, and the ENSERCH Merger will be trMted as a purchase for accounting purposes. The ENSERCH assets acquired and litbilities assumed will be recorded at their fair value. Th2 following selected historical financial data of TUC for each of the five y:Or3 in the period ended December 31, 1995 is derived from the consolidated finneial statements included in the TUC 1995 Form 10-K, which have been rudited by Deloitte s Touche LLP, independent public accountants, and selected f fin ucial data also included in the TUC 1995 Form 10.K incorporated by r:fsrence herein. The historical financial data for the six months ended June 30, 1996 and 1995 is unaudited and derived from the unaudited consolidated fin ncial information included in the TUC 1996 Forms 10-Os however, in the opinion of management, all adjustments (consisting only of normal recurring a.ccruals ) necessary for a fair presentation have been made. Thi selected unaudited pro forma financial data of the company for the year cndzd December 31, 1995 and the six months ended June 30, 1996 is derived from th3 historical financial statements of TUC and ENSERCH and gives effect to the Distribution and Mergers. The balance sheet data is presented as if the Distribution and Mergers had occurred on June 30, 1996, and the income cutement data assumes the Distribution and Mergers occurred at the beginning ef cich period presented. This information is not necessarily indicative of the fi m cial results cralummated onthat would have the be indicated occurred had the above. described events been rr uits, and should read indates con, or of the Company's future financial cut:mentsofTUCandENSERCHandjunctionwiththehistoricalfinancial Management's Discussion and Analysis of Firincial by Condition r2ference hereinand andResults of Operations"
" Pro Forma Financialof TUC and ENSERCE Information of the Company incorp rated and
" Pro Forma Financial Information of ENSERCH Business to be Merged" included clsewhere herein. Results for interim periods do not necessarily indicate ru ults for the full year.
(TABLE. I
-(CAPTION) 7R0 FORMA BIST011 CAL TUC COMPANI 8IX
$1X MONTES YEAR MONTES YEAR ENDED DECEMBER 31, ENDED JUNE 30, ENDED ENDED
.................................................. ................... DECEMBER 31, JUNE 30, 1991 1992 1993 1994 1995 1995 1996 1995 1996 UNAUDITED (IX NILLIO53, EXCEPT FE2 SHARE AM00NTS)
(8) (C) (C) (C) (C) (C) (C) (C) (C) (C) INCOME STATEMINT DATA operating tevenues..... $ 4,893.2 $ 4,907.9 4 5,434.5 $ 5,663.5 $ 5,638.7 8 2,598.3 $ 3,155.2 $ 7,361.7 $ 4,117.2 Consolidated Wet income (Loss)(a).............' (410.0) 700.1 368.7 542.8 (138.6) 223.8 329.0 Earnings (Loss) and (147.6) 330.7 Dividends Per Share of Common Stock Earnings (Loss) (on aver:ge shares outstanding ) ( a ) . . . . . (1.98)- 3.26 1,66 2.40 1,46 (.61) .99 (.62) 1.38 l Dividinds Declared.... 3.00 3.04 3,08 3.08 2.81 1.54 1.00 2.81 1.00 l BALANCE SEEET DATA (at l period end) i Total Assets........... $18,792.8 $19,428.6 $21,518.1 $20,893.4 $21,535.9 $20,943.4 $21,657.9 t/A' $23,989.5 Long-tern Debt......... 8 7,951.1 6 7,932.0 $ 8,379.8 $ 7,888.4 $ 9,174.6 8 8,130.2 $ 8,971.7 N/A $ 9,784.2 Pre hrred Stock Not Subject to Mandatory Redemption., 1,007.7 999.6 1,083.0 870.2 489.7 855.9 489.7 SubjIct to Mandatory N/A 664.7 3edemption............ 425.7 418.7 396.9 387.5 263.2 300.5 250.8 i TU E1:ctric obligated, N/A 250.8 Mandatorily J R deemable, Preferred Securities of Trusts.. - -- -- -- 381.5 -- 381.7 N/A 381.7 Coninon stock Equity... 6,283.7 6,590.5 6,571.0 6,490.0 5,731.7 6,372.6 5,827.8 6,375.4 N/A T:tal Capitalization... $15,668.2 $15,850.8 $16,430,7 $15,636.1 $16,040.7 $15,659.2 $15,921.7 N $17,456.8
......... ......... ......... ......... ......... ......... ......... ......./A.. .........
</. TABLE)
N/A Not applicable 19
PAG: 10 stF-ill6 17:55 EDG 00 000-0000 00:00 812: 00 000 0000 00:00 l[1))F!NEDGs(14433.TX]00020.FIP (1))Tue/Enssrch Tor 2 5-4 1. 2. Donas11ey (212) 341 7777 A0G 3.4.1,p01 (PAGE) ( (a) The net loss for the year 1991 was primarily due to the recognition of a charge against earnings, representing a provision for regulatory disallowances and for fuc1 gas costs disallowed in TU Electric's Docket 9300 rate case. Additionally, the years 1991 and 1992 were affected by the discontinuation of the accrual of allowance for funds used during construction and the commencement of depreciation on approximately $1.3 billion of investment in Unit 1 of TU Electric's comanche Peak nuclear . gsnerating plant (' Comanche Peak") and facilities which are common to l Comanche Peak Units 1 and 2 incurred after the end of the June 30, 1989 test year and, therefore, not included in TU Electric's Docket 9300 rate case. Effective January 1992, TU Electric began recording base rate revenue 3 for energy sold but not billed to achieve a better matching of revenues and i expenses. The effect of this change in accounting increased net income for the year 1992 by approximately $102 million, of which approximately 580 milllon represented the cumulative effect of the change in accounting at January 1, 1992. The year 1993 was affected by the recording of regulatory disallowances in TU Electric's Docket 11735 rate case, and the year 1995 was affected by the recording of an impairment of several non-performing assets, includlng TU Electric's partially completed Twin Oak and Forest Grove lignite-fueled generating facilities and Chaco Energy Company's coal reserves in New Mexico, as well as several minor assets. Such impairment, on an after-tax basis, amounted to 5802 million ($3.55 per share). 20 Il L Su I l 1 )
taOn 1 of 2 I fil))FINEDCt(14433.TX)00021.P!F PACS 10.SEP.1996 17:23 EDCs 00 000 0000 00:00 9LKs 60 000 0000 00:00 l : ll1))Tuc/Easirch - Trra 5 4 8. R. Donne 11sy (212) 341 7777 AOC 3.4.1.p01'
< PACE) --
l' ' SELECTED EISTORICAL FINANCIAL DATA OF ENSERCH Tha following selected historical financial data of ENSE.RCH for each of the fiva yrars in the period ended December 31, 1995 is derived from the i conzclidated financial statements included in the ENSERCH 1995 Form 10.K, which l h2vs been audited by Deloitte & Touche LLP, independent public accountants, and esisetad financial data also included in the ENSERCH 1995 Form 10.E incrrporated by referer- herein. The historical financial data for the sia l Ko.thz. ended June 30,19n and 1995 is unaudited and derived f rom the unaudited ' consolidated financial information included in the ENSERCH 1996 Forms 10 0; how m r, in the opinion of management, all adiustments (consisting only of neraal recurring accruals) necessary for a falt presentation have been made. This information does not give effect to the Distribution and is not areasserily indicative of ENSERCB's future financial results and should be read in conjunction with the historical financial statements of ENSERCE and "M a cgiment's Discussion and Analysis of Financial Condition and Results of operstions' of ENSERCE incorporated by reference herein and " Pro Forma l FinIncial Information of ENSERCD Business to be Merged" included elsewhere hIrzin. Results for interim periode do not necessarily indicate results for the full ysar. t - (TABLE) (CAFTION) SIK MONTES ENDED TEAR ENDED DECEM8ER 31, JUNE 30, 1991 1992 1993 1994 1995 1995 1996-
........ ........ .r...... ........ ........ ........ ........
UNAUDITED (IN MILLIONS, EXCEPT PER SNARE AMOUNTS) 1- <C) (C) <C) (C) <C) <C) <C)
INCOME STATEMENT DATA (A)
Rsv: cuts............... $1,564.7 $1,627.7 81,878.9 $2,095.5 $1,931.2 $1,008.8 $1,093.8 operiting Income....... 134.4 106.5 68.2 88.6 97.7 63.6 s5.5 11come (Loss) from Con. .
' ti;;uing operations. . . . 37.8 1.8 (16.0) 81.5 13.1 16.2 23.1 11raose (Loss) from Dis.
costitued operations.. (18.6) (13.8) 75.4 20.6 ~ .. .. Estracrdinary Loss on ExtiEguisbaent of Debt.................. ~ (15.3) -- ~ ~ .. .. I ' N2t 22come (Loss)...... 19.2 (27.3) 59.4 102.1 13.1 16.2 23.1 l E:rnings (Loss) Appli. i cols to Common '. Stock................. 4.9 (40.3) 46.7 90.5 1.4 10.2 17.5
.Pir Shire of Common i
Stock IFcome (loss) from I crntiruing operations titrr provision for prsfarred dividends... .35 (.16) ( 42) 1.03 .02 .15 .25 Dlsematinued opera. r tions..... ........... (.28) (.21) 1.11 .30 .. .. -~ l Extetordinary loss..... *. (.23) .. .. .. ~ .. ! Earnings (loss) appli. ! cible to common stock................. .07 (.60) .69 1.33 .02 .15 .25 Cub dividends de. clared................ .80 80 .20 - .20 .20 .10 .10 BALANCE SHEET DATA (at psriod end) Totr.1 Assets........... 83,169.8 $3,158.9 $2,806.0 $2,888.5 $3,381.1 $3,272.3 $3,400.3 l - CAPITAL STRUCTURE (at period and) t Sinior Long-term Debts. $ 757.6 8 865.3 $ 640.0 $ 726.3 $ 885.2 $1,069.9 8 965.0 i C:2ysrtible Subordi. n2tto Debentures...... 205.7 90.8 90.8 90.8 90.8 90.8 90.8 Manditorily Redeemable Prsistred Securities l cf Subsidiary of EEX.. ..- .. .. -- 150.0 150.0 150.0 l Minority Interest in l Subsidiaries.......... 5.5 5.1 8.8 12.1 156.4 12.1 157.6 i - Frsfarred Stock........ 175.0 175.0 175.0 175.0 175.0 175.0 175.0 l Common Shareholders' l Equity................ 686.5 605.4 647.6 726.2 719.2 732.4 742.8 l' t Total Capitalization...
$.1,830.3 $1,741.6 $.1,562.2 ..... ........
. ...... ........ . ...... . .$1.,730.4 $2,176.6........
42,230.2........
$2,281.2
!: t/ TABLE) i f (a) Tha year 1991 includes a $15.1 million pretax ($10.0 million after. tar, ! $.15 per share) gain from the sale of oklahoma utility properties and non.
' .U.S. gas and oil assets. The year 1992 includes a $16.5 million pretat (510.9 million after. tax, $.16 per share) write.down of an inactlve 1
offshore pipeline and facilities and a $15.5 million bretar ($10.2 million efter tas, $.!' per share) provision for litigation. 1 year 1993 includes i a $41.4 million pretax ($26.9 million after-tax, 8.4 er share) charge as a result of an adverse judgment in litigation a $13. million after tax,-8.13 per share) write.down of non.'. aillion U.s. pretax gas and oil ($8.6 , properties: a $12.0 million pretar $7.8 million after-tax, $.12 per share) chu ge pctncipally for severance exp(enses associated with re. engineering l
( l I tage 2 of 2 Il PACS 18 387-1996 17:21 EDC: 00-000 0000 00:00 SIJs 00 000-0000 06:00 l[1]jrlutDCel14433.TE]G0021.FIF [ Ifue/taxrch Ftra 8 1. 3. Donne 11sy (212) 341-7777 AOC 3.4.1,p01 distribution operationes and a $10.8 million ($.16 per share) charge from ( the 1% increase in the statutory federal income-taz Late on corporations. The year 1994 includes a $7.6 alllion pretax ($4.9 million after-tas, $.07 (: per share) gain from the sale of an inactive offshore pipeline and I racilities and a $70.0 million ($1.03 per share) reduction of deferred i income tases associated with the reorganization of partnerships to form s EEX. \:
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((1 PAG 18 SEP-19961h21 EDGs 60-000 0000 00:00 BLE 00-000-0000 00:00 ((1]!FINEDCs[14433.TI)00022. 1]Tuc/E;sIrch- PIP Farm 8 4_ t. 3. Donne 11ty (212) 341-7777 A0G 3.4.1.p01
-(PACE) j e PRO TORMA TINANCIAL INFOkMATION OF ENSERCH WITH NEW EEX PRESENTED AS A DISCONTINUED OPERATION Thi following presents summary unaudited pro forna financial information of ENSERCE with How EEK as a discontinu<il operation. This information should be retoinconjunctionwiththehistor1ralfinancialstatementsofENSERCHand
" Msisgement s Discussion and Analysis of Financial Condition and Results of
- O p r$tions" of ENSERCE incorporated by reference herein and " Pro Forma .
.Fiar/.tclal Information of ENSERCE Business to be Merged
- included elsewhere .
L hirsia. Results for interim periods do not necessarily indicate results for the full year.
- (TABLE)
'(CAPTION)
SIX MOr'18 YEAR ENDED DECEMsER 31, ENDED
.................................. . JUNE 30, 1993 1994 1995 1996 (IN MILLIONS, EXCEPT PER 88ARE AMOUNTS)
(S) . (C) (C) (C) -(C) Itcoon (Loss) from Continuing . Optrations...................... $ 22.3 $ (5.8) $ 21.0 $ 16.4 l IIcom> (Loss) from Discontinued Oper tions
-Engi2eering and construction.... 75.4 20.6 .. ..
Explsration and production..... (38.3) 87.3 (7.9) 6.7 , met 1tcome....................... 59.4 102.1 13.1 23.1 L Eirnirgs Applicable to common ! Stock.......... . . . . . . . . . . . . . . . . 46.7 90.5 1.4 17.5 Psz Sha re o f a=
- a. Stock
. Zacone (loss) f rom continuine sperations after provision for
, priferred dividends........... $ .14 8 (.26) $ .14 - $ .16 i Liston tinued opera tions. . . . . . . . .55 1.59 (.12) .09 l Ezrnings applicable to common" stock......................... 69
. .. . $.... 1. ..
- 33. $..... 02
.. 8... 25 (f* TABLE) 22 I
I i l^ k i h j 1 e ,'
lil)) FINED 0s[14413.TX]D0033. PIP PAQs 10.sEP.1996 21:18 EDO: 00 000-0000 00:00 B1Jts 00 000-0000 00:00 [(1))Tue/Ensirch Prra s.4 3. 2. Donne 111y (212) 341 7777 ADG 3.4.1,p01 (PACE) SELECTED PRO FORMA TINANCIAL DATA OF ENSERCH BUSINESS TO BE MERGED ( Tha following selected unnudited pro forma financial data of ENSERCH Business k to be Merged is derived from the historical financial statements of ENSERCH and givc1 effect to the Distribution. The balance sheet data is presented as if the Distribution had occurred on June 30, 1996, and the income statement data cerumes the Distribution occurred at the beginning of each period presented. This information is not necessarily indicative of the financial results that s could have occurred had the Distribution been consummated on the indicated I datta, or of ENSERCE's future financial results, and abould be read in cmjunction with the historical financial statements of ENSERCH and DT l I
'M m gement's Discussion and Analysis of Financial Condition and Results of Operstions" of ENSERCH incorporated by reference herein and the " Pro Forma
.)r 1 j
Finaicial Information of ENSERCH Business to be Merged" included elsewhere i h;rcin. Results for interim periods do not necessarily indicate results for the full year. (TATLE) (CAPTION) SIX MONTES YEAR ENDED DECEMBER 31, ENDED
............................... ,7UNE 30, !
1993 1994 1995 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (S) (C) (C) (C) (C) INCOME STATEMENT DATA Rxiu s N:t:ral gas pipeline & GPM...... $ 900.0 $ 1,235.8 8 996.5 6 569.2 N;tural gas distribution........ 967.9 874.7 887.5 503.3 Pow;r and other............. ... 38.4 32.3 32.1 13.9 Less intercompany revenues...... (123.7) (128.2) (125.0) (94.7) Tntal revenues................ 1,790.6 2,014.6 1,791.1 991.7 Oper; ting Income (Loss) (a) N;tural gas pipeline s GPM...... 73.4 27.0 59.6 31.8 N;tural gas distribution.. ..... 34.2 38.3 54.6 42.6 Power and other................. 8.5 3.9 1.2 (2.3) Gen;ral and other............... (10.4) (8.9) (10.3) (6.1) Total operating income........ 105.7 60.4 105.1 66.0 N;t IIcome (Loss) (b)............. 22.3 (5.8) 21.0 16.4 E rti;gs (Loss) Applicable to Common Stock..................... 9.6 (17.4) 9.3 10.8 P:r Shire of Common Stock E m ings (loss) applicable to common stock................... .14 (.26) .14 .16 C?sh dividends declared......... .20 .20 .20 .10 BALANCE SREET DATA (at period and) Total Assets...................... $ 1,658.5 CAPITAL STRUCTURE (at period end) Selitr Long. tern Debt............. $ 743.0 Conn rtible subordinated Deb;stures....................... 90.8 Prsfirred Stock.................. 175.0 Common Shareholders' Equity (DJficiency)...................., (49.6) Total Capitalization.. ....... 959.2
./. TABLE)
(a) operating income of the Pipeline 4 CPM segment for 1995 was improved $33 tillion irom 1994 with pipeline operations adding $24 million, principally dus to a $25 million reduction in the cost of gas lost in transmission. Hild winter weather adversely impacted pipeline results by an estimated $5 million in 1995 versus some $4 million in 1994. Natural gas marketing operations had a 1994 to 1995 improvement in operating income of $5.2 million, primarily due to an increase in gas margin, and natural gas processing improved $3.2 million including a $3 million reduction in Cspreciation expense as several plants reached fully depreciated status at ths and of 1994. Operating income of the Natural Gas Distribution segment for 1995 was improved $16 million from 1994 mostly reflecting lower op2 rating expenses resulting from cost reduction measures initiated in prior. years. Distribution operating results for the year 1993 include a $12 tillion charge principally for severance expenses associated with re-U gineering those operations. Mild winter weather adversely impacted distribution results by an estimated $5.5 million in 1995 and $3 million in 1994, while colder weather had a slightly positive impact in 1993. (b) Thi year 1993 includes a $3.3 million charge from the 1% increase in the st;tutory federal income. tax rate on corporations. 23 l i i l l l l l I I l
Pop 1 of 2 PACS 17-SEP 1996 03:33 EDC: 00-000 0000 00:00 812 : 00-000-0000 00:00 llI1}}fINEDGe[14433.TX]e0024.
!)]7ue/Easerch PIP Fire 3 4 3. R. Donn211ty (312) 341 7777 A0G 3.4.1,p01 (PAGE)
SELECTED PRO FORMA FINANCIAL DATA OF NEW EEX Th3 following selected unaudited pro forma financial data of New EEX is derived from the historical financial statements of EEX and LSEPO and gives ef f 3ct to the Preliminary Merger. The balance sheet data is presented as if the Prs 11zinary Mercer had occurred on June 30, 1996, and the income statement data Corumes the Preliminary Merger occurred at the beginning of each period promonted. For purposes of financial re prting, the merger of EEX and LSEPO will be treated as a combination of entities under common control. Accordingly, th) 82 sets and liabilities of EEX and LSEPO will be recorded at their hi t:rical amounts. This information is not necessarily indicative of the fix::cial results that would have occurred had the Preliminary Merger been ccm ummated on the indicated dates, or of New EEX's future financial results, rnd thould be read in conjunction with the historical financial statements of EEX r.nd LSEPO, ' Management's Discussion and Analysis of Financial Condition and R :ults of operations" of EEX and LSEPO and ' Pro Forma Financial Information of N 37 EEX" included in the EEX 1995 Form 10.K, the EEX 1996 Forms 10-0 and the ENltiCR September 1996 Form 8.K incorporated by reference herein. (TABLE) (CAPTION) YEAR ENDED DECEMBER 31, SIX MONTES ENDED JUNE 30, 1993 1994 1995 (A) 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) * (S) (C) (C) (C) (C) INCOME STATEMENT DATA N;tural gas revenues............ $ 146.4 5 144.6 $ 157.3 $ 111.9 011 cad condensate revenues..... 36.9 30.9 56.5 43.9 N tural gas liquids revenues.... 4.1 2.1 4.9 3.6 Cogeneration operations revenues (b)............................ 10.7 12.7 16.5 6.0 Cth r........................... 2.4 1.3 2.2 .9 Tit:1 revenues................. 200.5 191.9 237.4 166.3 Production and operating ez. p e nI e s . . . . . . . . . . . . . . . . . . . . . . . . . 31.4 31.7 48.7 36.6 Expl ration..................... 8.7 9.1 11.8 6.2 Depr ciation and amortization... 78.4 80.8 115.7 68.0 C 13 of inactive pipeline....... .. (7.5) .. .. Nrits-down of gas and oil prop. c r ti e s . . . . . . . . . . . . . . . . . . . . . . . . . 10.2 ..
.9 ..
Cogateration operations ex. pa=1es......................... 8.6 11.0 13.9 5.5 ' Gen ral, administrative and oth. cr............................. 30.0 19.8 30.7 16.5 T:x3, other than income taxes.. 16.2 13.6 19.6 11.2 Tat:1 expenses................. 183.5 158.5 241.3 146,0 op3rsting income (loss)......... 17.0 33.4 (3.9) 20.3 Oth;r income (expense).. net..... .. (.3) .2 .1 Interest income................. 2.0 .7 1.0 .. Int: rest and other financing co2ts.......................... (30.5) (20.9) (14.7) (12.0) IXcome (loss) before income tax. ca............................. (11.5) 12.9 (17.4) 8.4 11come taxes (benefit).......... (2.6) .3 (6.3) 2.9 N3t income (loss)............ .. 5.5
.$ .. ...( .8... 9 ).$....12.6
... .$. ...(11.1)
Pro forma information.. change in Liz status (c) Zicomi (loss) before income tax. o3............................. $ (11.5) $ 12.9 Itcome taxes (benefit) (includ.
-irg income taxes on partnership op2 rations)............. ...... (3.9) 4.6 Nit income (loss)..............
$.....(7.6)
. ... .$ .. ... 8 ... 3 .
nit income (loss) per share (d)............................ Clighted average shares out.
$ (.07) $ .08 $ (.10) $ .04 et:/nding (4)................... 106.6 106.6 111.9 126.6 BALANCE SHEET DATA (at period
, cmd) Pr perty, plant and equipment.. nit............................ $ 1,696.1 Tn t 1 a s s ets . . . . . . . . . . . . . . . . . . . . 1,827.8 CAPITAL STRUCTURE (at period end) Capitsi lease obligations te)... $ 95.8 Long. term debt.................. 222.0 Cstpray. obligated mandatotily r:d:emable preferred secarities of subsidiary.................. 150.0 Own ra' equity.................. 941.5 Tot 1..........................
$..1,409.3 l
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l L Page 2 of 2 ((11)f15EDG11443).TX)D0024.FIF PAG: 17 SEF-1906 03:32 EDG 00 000-0000 00:00 BLF.: 00 000-0000 00:00 ((1]lfue/Easirch tora 8-4 1. 1. Donne 11ty (212) 341 7777 AOC 3.4.1,p01 l ( i ./.TABLD I ta) 1995 includes results of DALEW Corporation since acquisition on June 8, 1 1995. 34 l l 1 i
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jj;jjTuc/Baserchn. n o.. .,xi ...... n, nre 8 4 1. R. Donnellry (212) 341 7771 Aos 3.4,1,p,1 (FACE) ;
-(b) Ravenues include contract revenues and reimbursement of expenses incurred en behalf of operatin partnerships (c) Prior to 1995, most o EEX's operations were conducted through a ;
partnership, and the income or loss of the partnership was includable in 4 l the tax returns of the individual partners. Fro forma income and per share i data for periods prior to 1995 include a pro forma provision for income s teses or partnership operations based on the applicable f oderal statutory . l tra rat . . (d) The wely.ced average shares outstanding and the not income (loss) per share are based on historical EEX average shares plus approximately 778,000 l obares assumed to be issued in the Preliminary Merger. ! (e) includes current portion. i 25 l h y t i t L b i
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1 PAG: 19 8EP.1996 20:50 EDG: 00 000 0000 00:00 SLEs 00 000-0000 00:00 l(1l)fINEDGs!!4433.TI)00026.FIP [1))7mc/Easerch Fire S-4 R. 1. Domaillry (212) 341 7777 A0G 3.4.1,p01 I (PAGE) l l COMPARATIVE PER SHARE PRICES OF TUC, ENSERCH AND EEX r TUC Cosumon Stock, ENSERCE Common Stock and the common stock of EEX ("EEX Cosa ca Stock") are traded on the NYSE. The following table sets forth, f or the j : calradtr quarters indicated, the high and low sales prices of TUC Common Stock i 3:;4 ENSERCE Common Stock as reported on the NYSE Consolidated Tape, in each ~ ~ ( c se based on published financial sources, and dividends paid, as well as the . high tnd low sales price of EEX Common Stock since it began trading on the NYSE 1 es JL uary 3,1995 as reported on the arYSE Consolidated Tape, based on - l
- l. published financial sources. No dividends have been paid on EEX Common Stock. ;
1 (TABLE) (CAFTION) l i TUC ENSERCE EEX i
......................... ......................... ............ a l RIGE LOW DIVIDENDS BIGE LOW DIVIDENDS EIGH LOW (S) (C) (C) (C) (C) (C) (C) (C) (C) i 1993 i First Quarter. . . . . . . . . $47 3/8 $41 $/8 $.76 $19 1/8 $14 1/8 8.05 .. .. l S:cond Quarter........ 47 7/8 44 1/4 .77 19 5/s 16 7/8 .05 .. ..
l Turd Qua rter. . . . . . . . . 49 3/4 45 1/2 .77 22 5/8 17 1/2 .05 .. .. J rourth Quarter........ 47 42 1/4 .77 21 1/4 15 1/2 .05 .. ..- l- 1994 ,
- First Quarter......... $43 1/8 $36 1/2 8.77 $19 1/8 $12 7/8 .05 ... .. 1 1 Second Quarter........ 38 29 7/8 .77 15 1/4 12 5/8 .05 .. .. '
l Third Quarter......... 34 1/8 29 5/8 77 16 1/2 13 1/8 .05 .. .. l ' Fourth Quarter........ 34 1/8 30 3/4 .77 15 12 1/8 .05 .. .. t 1995 ji Fir 2t Quarter......... $ 35 $30 1/8 8.77 $15 1/8 $12 5/s .05 $11 1/8 $ 9 3/s 83cond Quarter........ 36 1/8 31 5/8 .77 18 3/8 14 5/8 .05 14 7/8 10 1/8 Third Quarter......... 35 32 5/8 .77 18 5/8 15 7/8 .05 14 3/4 10 , Fourth Quarter........ 41 1/4 34 1/4 .77 16 7/8 14 1/4 .05 11 5/8 9 1/4 1996 Fir 2t Quarter......... $42 7/8 $38 7/8 $.50 - $16 3/4 $14 1/8 .05 $ 12 4 9 Stcond Quarter........ 42 3/4 38 1/2 .50 22 1/8 15 7/8 .05 11 3/8 9 5/8 l- Third Quarter (through 'l September 18)........ 43 3/8 39 5/8 22 3/4 19 1/4 .05 11 1/2 8 1/4 (/ TABLE) Da April 12, 1996, the last full trading day before the public announcement i ' cf tha execution and delivery of the Plan of Merger, the closing price per rhirs cn the NYSE Consolidated Tape of (1) TUC Common Stock was $39.625, (ii) E.UERCE Cosumon Stock was $16.375 and (iii) EEX common Stock was $10.125. On S.ptember 18, 1996, the closing price per share on the NYSE Consolidated ) Trp3 cf (i) TUC Common Stock was $40.75, (ii) ENSERCH Common Stock was $20.375 l ckd (iii) EEX Common Stock was $9.25. l j Thi carket prices of TUC Common Stock, ENSERCE Common Stock and EEX Common I Stcck gre subject to fluctuation. As a result, TUC and ENSERCE shareholders are ! urg::d to obtain current market quotations for TUC Common Stock, ENSERCE Comunon [ Stack cod EEX Common Stock. 26 , I
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'((1])F1stDCs[14433.TI]G0017.FIF PAC 10 857 1996 21:40 EDC: 00-000-0000 00:00 Bus 00 000-0000 00:00 (II))Tuc/faxrch rar: 5 4 R. R. Domme11ry -(212) 341-7777 A0G 3.4.1.p01. i (PACE)
MEETINGS, VOTING AND PROXIES This Joint Proxy Statement / Prospectus is being furnished to (1) the shsrcholders of TUC in connection with the solicitation of proxies by the TUC asard f rom the holders of TUC Common Stock for use at the TUC Meeting, and (ii) the shareholders of ENSERCN in connection with the solicitation of
- prraias by the ENSEBCE Board from the holders of ENSERCH Common Stock for use Et the EMSERCE Meeting.
TUC MEETING I Purpose of the TUC Meeting. The purpose of the TUC Meeting is to vote on the' prrpoJa1 to approve the Plan of Merger. The Plan of Merger provides, among l sth:r things, for the merger of two wholly owned subsidiaries of the company J with and into TUC and ENSERCE, respectively, whereby TUC and ENSERCH will b2coms wholly owned subsidiaries of the Conspany. Thi enclosed roz card, upon due execution and delivery thereof, authorizes thi voting wf L e a ares represented by the prosy on the Plan of Merger. The premy card also authorizes the voting of the shares represented by the proxy ; on cry other matter that may proprly come before the TUC Meeting and any 3 tdjrurnments and postponements u ereof, and it is the intention of the proxy , i hs R"srs, unless otherwise espressly directed therein, to vote such shares in i eraniction with any such matters in accordance with their best judgement. The ; TUC 3 ard does not know of any other business to be brought before the TUC Mast 1Eg. >
'l Th2 TUC Board has unanimously approved and adopted the Plan of Merger, has ,
cercluded that the terms of the TUC Merger and us other transactions . cratemplated by the Plan of Merger are advisable and are fair to the holders ' et TUC Common Stock, and recommends that the holders of TUC Common Stock vote P*R the approval of the Plan of Merger. The TUC Board approved and adopted the i Plc.n of Mercer after consideration of a number of factors described under the hacdings 'The Mergers--Reasons for the Mergers--Recommandations of the Boards cf Directors--TUC.' , i Thi consummation of the Plan of Merger is subject to approval by the holders i of TUC Common Stock as described below. See 'The Plan of Merger--Conditions to , th3 M rgers." Data, Time and Places secord Date. The TUC Meeting is scheduled to be held
'at tha Marvey Botel/ Downtown, Live Oak and Olive streets, Dallas, Texas on ,
Navenbar 15, 1996, at 9:30 a.m. local time. Bolders of shares of TUC Common i i Stock at the close of business on the TUC Record Date will be entitled to vote at ths TUC Meeting. At the close of business on the TUC Record Date, there , wsrs 224,602,557 shares of TUC Common Stock issued and outstanding and ' entitled to vote. Th.a TUC Meeting may be adiourned or p stponed to another date and/or place for (my proper purpose (including, wi u out limitation, for the purpose of-soliciting additional proxies). : t l1 Vating Rights.'Esch share of TUC Common Stock entitles its holder to one l vote. The presence, in person or by duly executed proxy, of the holders of a ! cajority of the outstanding shares of TUC Common Stock entitled to vote at the j TUC MIeting is necessary to constitute a quorum, - t [ Tha affirmative vote of the holders'of at least twoithirds of the TUC Common Stock is required to approve the Plan of Merger. Under the TBCA, an ! d2 tar =ining whether the requisite number of affirmative votes has been cast,. . s.bstentions and broker non-votes will have the same effect as votes cast
.i egtinat the approval of the proposal. '
t l As of the TUC Rtcord Date, the directors and executive officers of TUC, i togsther with the. affiliates, collectively beneficially owned less than l'. of fths outstanding shares of TUC Common Stock I 7 Proxies. Holders pf TUC Common Stock may vote either in person or bf duly cascuted proxy. By ompleting and returning the enclosed proxy card, a holder of TUC Common Stock authorizes the persons named therein to vote all such i tharrholder's sharvis in accordance with the instructions indicated on the ! i pipay card. If a s3gned prosy card is duly executed and returned without any
', sting instructions , the shares will be voted FOR 27 l
1 l i : 1 f 3 1 l
_ _ _ m, . - _ . - _ _ . _ . _ __ ..m_ _ . _ _ . m m - [ PACS 10.sEF-1996 23:51 EDGs 00-000 0000 00:00 SIK 00 000-0000 00:00 t[1qrlstDCs[14433.TI)00028P!F il],Tue/Ennrch Firs 8-4 3. R. Donnelley A0G 3.4.1,p01 (212) 341 7777 (PAGE) ths cpproval of the Plan of Merger. If a proxy card is executed and returned, th:2 proxy conf erred thereby may nevertheless be revoked at any time by d3117sring notice of revocation or a duly executed proxy bearing a later date to tha Secretary of TUC before the proxy is voted, and a holder of TUC Common Steck who is present at the TUC Meeting may revoke his or her proxy and vote in person. Attendance at the TUC Meeting will not in itself constitute revicrtion of the proxy. a TUC will bear the cost of soliciting proxies for the TUC Meeting, exce th t ENSERCH and TUC will share equally the expenses incurred in connect.pton with the printing and filing of this Joint Proxy Statement / Prospectus. See "
"Ths Plan of Merger--Expenses.' TUC will solicit proxies by mail and has rstsined D.F. King & Co., Inc. (*D.F. King") to aid in solicitation from b1nks, brokers, other institutional holders and beneficial owners. In codition, officers and employees of TUC and D.F. King may solicit by '
talephone, by telecopy, by telegram or in person, TUC's beneficial and rtgittered holders. TUC officers and employees will not receive an additional ,
. compensation for their solicitation efforts. The fee for D.F. King a services ,
is capected to be approximately $30,000. In addition, TUC will reimburse D.F. r King for its out-of-pocket expenses. Prrticipants in the TUC Employees' Thrift Plan may give confidential instructions to the trustee of such plan regarding the voting of the TUC Commo3 Stock allocated to their accounts. Participants in the TUC Dividand Riinvratment Plan may instruct the agent under such plan regarding the voting cf th3 TUC Common Stock allocated to their accounts. All uninstructed shares und:r the TUC Employees' Thrif t Plan will be voted by the trustee of such plan in tha discretion of the trustee. , ENSERCE MEETING Purpose of the ENSERCH Meeting. The purpose of the ENSERCE Meeting is to vats in the proposal to approve the Plan of Merger and the proposal to approve th3 ENSERCH Articles Amendment. The Plan of Merger provides, among other things, for the merger of two wholly owned subsidiaries of the Company with End into ENSERCH and TUC, respectively, whereby ENSERCH and TUC will Mcome thally owned subsidiaries of the Company, and the distribution to ENSERCH charibolders of ENSERCR's entire interest in New EEX. The ENSERCH Articles Amendment provides for the reduction of the par value of the ENSERCH Common Strca from 54.45 per share to 5.01 per share in order to f acilitate the Distribution.' Tha enclosed prory card, upon due execution and delivery thereof, authorizes ths vrting of de shares represented by the proxy on the Plan of Merger and on
'tha ENSERCH Articles Amendment. The proxy card also authorizes the voting of th1 rhares represented by the prosy on any other matter that may properly come befors the ENSERCE Meeting, and any adjournments and postponements h ereof; and it is the intention of the proxy holders, unless otherwise expressly dirscted therein, to vote such shares in connection with any such matters in ,
c.cctrdance w'.th their best judgment. The ENSERCH Board does not know of any ' cthIr business to be brought before the ENSERCE Meeting. Th3 ENSERCH Board, by a vote of eight of the nine directors in favor and t with Mr. Biegler abstaining, has approved and adopted the Plan of Herger, has '4 cancluded that the terms of the ENSERCH Merger and the other transactions cantemplated by the Plan of Merger are in the best interests of the holders of ENSERCE Common Stock, and recommends that the holders of ENSERCE Common Stock Vita FOR the approval of the Plan of Merger. Mr. Biegler abstained because of th2 possibility that he would be employed by the Company following the MIrgsrs. See "The Mergers--Employment Agreements." The ENSERCH Board approved e d tdopted the Plan of Merger after consideration of a number of factors 632cribed under the headings 'The Mar ers--Reasons for the Mergers-- R$commIndations of the ENSERCH Board. Th2 ENSERCH Board, by a unanimous vote, has approved the ENSERCH Articles AmindmInt and recommends that the holders of ENSERCH Common Stock vote TOR spproval of the ENSERCH Articles Amendment. See 'The ENSERCH Articles Amindm nt." l Ths consummation of the Plan of Merger and the ENSERCE Articles Amendment are each subject to approval by the holders of ENSERCH Common Stock as d3 scribed below. The consummation of the transactions 28' l l' l l
_m . .. . . . . ._. . -- _ . [ FAQs 18 stF 1904 21:40' EDC: 00 000 0000 00:00 BIJs 00-006-0000 00:09 (1)lfuc/tas;rch
.((1])FINEDGel14433.TX]00029.FIF Ftra 8-4 R. R. Donne 11ty (212) 341 7777 A0G 3.4.1,p04 .<PAGE) cratorplated by the Plan of Merger, including the Preliminary Merger and the Distribution, is also subject to various further conditions set forth in the Plan of Merger and the documents governing such transactions. See "The Merg2rs--The Preliminary Merger and the Distribution
- and 'The Plan of -
M rg2r--Conditions to Os Mergers. ' Dits; Time and Places Record Date. The ENSERCE Meeting is scheduled to be h*1d at 301 South Marwood Street, Dallas, Texas on November 15, 1996, at 2:00 ' p.=. local time. Roldars of shares of ENSERCH Common Stock at the close of busitass on the ENSERCE Record Date will be entitled to vote at the ENSERCE i Matti7g. At the close of business on the ENSERCE Record Date, there were ' 69,527,645 shares of ENSERCH Common Stock issued and outstanding and entitled .l to vrte. I Th1 ENSERCE Meeting may be adjourned or postponed to another date and/or i plces for any proper purpose (including, witbout limitation, for the purpose I of soliciting additional proxies). 1 Vating Rights. Each share of ENSERCE Common Stock entitles its holder to one 1 v&te. The presence, in person or by duly executed proxy, of the holders of a Otjarity of the outstanding shares of ENSERCH Common Stock entitled to vote at thJ ENSERCE Meeting is necessary to constitute a quorum. Th3 affirmative vote of the holders of at least two-thirds of the ENSERCH
-Common Stock voting as a class is roe ired to approve each of the Plan of Merg r and the ENSERCE Articles Amenhent. Under applicable Texas law, in isterIining whether the requisite number of af firmative votes has been cast, cbst:ntions and broker non-votes will have the same ef fect as votes cast '
cgmiszt the approval of either proposal. A2 of the ENSERCE Record Date, the directors and executive officers of ENIERCE, together with their affiliates, collectively beneficially owned rpprizimately 1.4% of the outstanding shares of ENSERCE Common Stock. Thi holders of ENSERCH Preferred Stock are not entitled to vote on the ENSERCE Merger or the ENSERCE Articles Amendment. ! Ptszies. Rolders of ENSERCH Common Stock may vote either in person or b
- duly czecuted proxy. By completing and returd ng the enclosed proxy card,ythe ht142r of ENSERCE Common Stock authorizes the persons named therein to vote all auch shareholder's shares in accordance with the instructions indicated on thi prrzy card. If a signed proxy card is duly executed and returned without Eny v ting instructions, the shares will be voted FOR the approval of the Plan of M3rger and FOR the approval of the ENSERCE Articles Amendment. If a proxy c3rd la executed and returned, the prosy conferred thereby may nevertheless be ravrked at any time by delivering notice of revocation or a duly executed premy bearing a later date to the Corporate Secretary of ENSERCH before the prrzy is voted, and a holder of ENSERCE Common Stock who is present at the ENIERCE Meeting may revoke his or her proxy and vote in person. Attendance at th:2 ENSERCE Meeting will not in itself constitute revocation of the prory.
ENSERCH will bear the cost of soliciting proxies for the ENSERCE Meeting,
'c2c:pt that ENSERCE and TUC will share equally the expenses incurred in , 'sonn2ction with the printing and. filing of W s Joint Proxy Statement /Prospetus . See "The Plan of Merger--Expenses." ENSERCE will solicit proxies by mail and has retained D.F. King to aid in the solicitation from f .binks, brokers, other institutional holders and beneficial owners. In c rddititn, officers and employees of ENSERCE and D.F. King may solicit by telephone, by telecopy, by telegram or in person, INSERCE's beneficial and !
i rrgistsred holders. ENSERCE officers and employees will not receive any toditirnal compensation for their solicitation efforts. The fee for D.F. King's services is expected to be approximately $20,000. In addition, ENSERCH j will reimburse D.F. King for its out-of-pocket expenses. i Participants in the ENSERCE Employee Stock Purchase and Savings Plan may in2truct the plan's trustee (the Trustee') regarding the voting of the [ ENSERCH Common Stock allocated to their account. All uninstructed shares will be voted by the Trustee in the same proportion as the shares for which voting itstructions are received from plan participants. 29 i i I l i t I i l i l i I t : i l l
~
l
- . _ = - _ - a . , . . .. -. . - - . . - -. - ~- . . _ . . . _ - -
1 i Ill))FINEDCs[14433.TI)00030.TIP PACS 17-8EP 1996 03:52 EDC 00 000-0000 00:00 S m 00-000 0000 00:00 ill))Tue/Eas;rch h rs 8-4 3. R. Douselley (212) 341 7777 AOC 3.4.1,p04 l (PAGE) TEE MERGERS BACKGROUND OF TEE MERGERS In this section there are references to the following groups which are comprized of the persons listede ENSERCE Boards Frederick S. Addy, David W. Biegler, Bernard A. Bridgewater, Jr., Odie C. Donald, Marvin J. Girouard, Joseph M. Baggar, Jr., Thomas W. A Luca, III, William C. McCord and Diana S. Natalicio, j ENSERCE Special Committees Frederick S. Addy, Thomas W. Luce, III, and willica C. McCord. 4 TUC Boards.J.S. Farrington, Bayard Friedman, William M. Criffin, Kerney a Lecay, Margaret N. Maxey, James A. Middleton, Erle Nye, J.E. Oesterreicher, Chirica R. Perry, and Berbert B. Richardson. During the early 1990's, management of ENSERCE in its continuing efforts to enhnses shareholder value developed a plan to establish ENSERCE as an integrated natural gas company engaged in natural gas and oil exploration and production, natural gas pipeline transmission, natural gas gathering, natural gts liquids processing, natural gas marketing, natural gas distribution and Glrctric power generation. In furtherance of this objective, several non-core busin32ses were divested and EEX was converted from a partnership into a corporation. Internal organizational changes were also undertaken to sharpen th2 f;cus of the business units. Despite these changes, management continued to believe that ENSERCE's share price did not fully reflect its underlying valurs, and was concerned that ENSERCB's capitalization restricted its ability t:0 finance investment needed to support ongoing activities and to take f ull
-tdyrntrge of available opportunities without impairing the rating of its public debt. Management was also monitoring the trends toward consolidation in ,
th2 citetric utility industry, vertical integration in the natural gas LIdu.Itry, and the potential for consolidation and integration of the natural j gas tnd electric utility industries. r 13 February 1995 ENSERCE retained the services of Moraan Stanley to conduct a fintacial . advisory review of ENSERCE's shareholder relations program and to suggagt procedures that would enable ENSERCE to evaluate unsolicited business codisztlon proposals. Murgan Stanley was also requested to review the
'stratrgic options available to ENSERCE and recommend actions that could
- cnh;Ici shareholder value. Between February and August, 1995, Morgan Stanley !
ctd EZSE2CE senior management met several timed to discuss these matters. As part of this effort Morgan Stanley provided certain financial advisory ! earvicts, including an overview of the strategic alternatives available to ! ENSERC3. ! On August 15, 1995, Morgan Stanley presented the results of its analysis to i EN1ERCE senior management. Among the alternatives asamined was the sale by EEK l ef mark its 2t common stock in in EEX shares a would that publichelp of fering f orathe establish marketpurpse value offor creating ENSERCE a liyuid a , i investmant in EEX. The other alternatives presented by Morgan Stanley con 21sted of an ENSERCE equity of fering, an ENSERCH convertible debt of fering, 5 ccquisition of complementary pipeline assets for cash or stock, acquisition of i toditianal oil and gas assets for cash or EEX stock, and the sale of business uzits. Management concluded that strategic actions were necessary to reduce or , sli=inste de gap between its judgment of share value and the then current ; Sczkst trading value of ENSERCH Common Stock. ' On S:ptember 26, 1995, EEX completed a public offering of 20 million shares of ita common stock, in which it received net proceeds of $208 million. 'i On November 29, 1995, Mr. Erle Nye, President and Chief Executive of TUC, inter = ally approached Mr. David W. Biegler, Chairman, President and Chief Executive Officer of ENSERCH, following a ballas Chamber of Commerce meeting, i i to discuss trends in the natural gas and electric utility industries and public speculation concerning the future of ENSERCE. Mr. Nye indicated that l TUC would be interested in discussing the possibility of a business combination with ENSERCE and/or Mr. Biegler joining TUC management. J BEtT2en November 1995 and January 1996, ENSERCE management continued to evnluste various strategic alternatives. ENSERCE management also had internal discussions regarding ENSERCB's financial performance 30 I l 1. i i I L.
FACs 18.sEF.1996 21:14 EDGs 00-000-0000 00:00 BLK 00-006-0000 00:00 ((1]) hic /tas'rchFINEDC (14413.TI)t0031.FIF lil)) Firm 8-4 R. R. Donnell:y (312) 341 7777 A0G 3.4.1,p04 (FACE) l cad prrepects and the developments in the electric and gas utility industries. l ENSERCE management continued to believe that ENSERCB's share price did not fully reflect its underlying values, including the value of its investment in EEX, d spite the public offering of EEX Common Stock in September 1995. In J!nuiry 1996, ENSERCE management determined to explore more intensively pot:c.tial strategic alternatives. During the same period, Mr. Nye considered furth r the possibility of a transaction with ENSERCH, sought advice from j TUC's regular corporate counsel, Worsham, Forsythe s Wooldridge, i L.L.P.. and cr;tscted Barr Devlin to provide assistance. At a meeting on January 25, 1996, Mr. Biegler informed Mr. Nye of his intration to recommend to the ENSERCE Board a process to better define a str tigic plan f or ENSERCE. Mr. Biegler indicated that he expected business combin;tions would be among the alternatives considered. Mr. Nye made it clear et this meeting that TUC had no interest in EEX and, therefore, any trrntiction TUC might propose would not include ENSERCE's ownership interest 13 EEX. ENSERCH management engaged Covington a Burling, which had acted as , cIunnal to ENSERCE for many years, to advise it in connection with the i 6:v lipment of the plan. On or about February 1, 1996, Deloitte a Touche Cisculting Group was retained by TUC to assist management in its iL:nti11 cation of potential synergies that might be realized from a possible tiscatetion with ENSERCE. Am:ndments to change-in-control agreements between ENSERCH and its executive tific rs and certain key employees were approved by the Compensation Committee cf th3 ENSERCH Board at its meeting on February 13, 1996 and in the case of Mr. Bicgler, the amendments were approved by ne ENSERCH Board at its meeting th) came day. The amendments ts these agreements (which generally provide for th7 payment of certain benefits in the event amployment is terminated cub:equent to a change in control of ENSERCB) included changing the annual compearation rate to include targeted bonuses, and adding provisions permitting certain officers to receive certain benefits after voluntarily t: rain". ting their employment in the thirteenth through the eighteenth month frilowing a change in control. At the regular ENSERCE Board Meeting on February 13, 1996, Mr. Biegler rcported his conversation with Mr. Nye, as well as the possibility dat other companies might have an interest in ENSERCH. ENSERCH management expressed to th) ENSERCH Board continuing concern regarding ENSERCE's stock price and r:ctrictive capitalization, the rating of ENSERCB's public debt, and the cash flos cvailable for internally funded investment. ENSERCE management also diccurred the accelerated pace of consolidation and integration within the gas tra clictric utility industries. Several stzategic alternatives were outlined
- by ENSERCE management--continuing internal growth of ENSERCB's business, ractructuring, selling major divisions or subsidiaries to reduce debt cpinning off EEX, combining ENSERCE with another company or some combknation i cf th: e. The ENSERCE Board voted to engage Morgan Stanley to undertake a furthIr strategic review. The ENSERCH Board also created the ENSERCE Special Committee to assist in further developing the strategic plan for ENSERCH.
On Fabruary 15, 1996, Mr. Biegler telephoned Mr. Nye to inform him of the dicielen of the ENSERCH Board to commence a process which could lead to contid: ration of possible business combinations and that Morgan Stanley would be ctg ged as ENSERCB's financial advisor for this purpose. Mr. Nye indicated th:t TUC remained interested in considering making a proposal and would begin , to fin:lise its evaluation. On Tcbruary 16, 1996, the TUC Board met for its regular quarterly board c:Iting at which representatives of Worsham, forsythe a Wooldridge, L.L.P., cnd p2321bleBIrr Devlin were with transaction in attendance ENSERCE. and discussed Possible various corporate matters for structures related a to a tz"ntiction, required approvals, strategic rationale, ENSERCH and its ep;r:tions, and preliminary financial analyses were discussed. TUC's manigLrent, with the assistance of Deloitte s Touche Consulting Group, also discurred with the Board management's preliminary view of potential synergies rarulting from a possible transaction. On several occasions between February 16 rnd February 24, Mr. Biegler and Mr. Nye spoke by telephone about the procass by which the two companies would consider a business combination Proposcl. 31 i e f
((1))TINEDG a [14433.7X]00032.FIF PAC 16 8E7 1096 2h 07 EDC: 00-000-0000 00:00 BLKr 00-000-0060 00 90 ((1])Tue/tas:r h Pira 8-4 3. 3. Donnell:y (212) 341-7777 AOC 3.4,1,p04 (PA!E) On February 27, 1996, ENSERCH senior management met with Morgan Stanley to diccula undertaking a strategic rev.ew. On or about March 1, TUC formally ratlined Barr Devlin as financial advisor with respect to the possible trtm2tction.
~
On March 1, 1996, the ENSERCH Special Committee met with representatives of ~'
- Morg;n Stanley and Covington s Burling. Mr. Biegler and other senior officers cf EZSERCH also participated in portions of the meeting. Covington & Burling briefed the Special Committee on its legal duties and the process to be fellowed. Morgan Stanley presented an overview of the energy and utility buriniss and a preliminary review of a number of strategic alternatives cv'ilible to ENSERCH, including continuing to operate the business, spinning cff EEX to shareholders, selling or merging the business units, selling cdditional EEX stock, and selling or merging the company. Morgan Stanley's prrlininary view was that a strategic business combination with or without the spin-aff of EEX could be more attractive than other alternatives. Morgan (tcally identified several prospective candidates for such a strategic combiration, including TUC, and described certain of their relative merits, including strategic fit, potential for merger synergies, and balance sheet comp 1tibility.
On March 12, 1996, the ENSERCE Special Committee met again with Morgan Stnnl:y, Mr. Biegler and other senior of ficers of ENSERCE. The ENSERCH Special Committee discussed the materials distributed by Morgan Stanley at the pr vious meeting. While not ruling out any alternatives, the ENSERCH Special Committee was of the view that a business combination could be the most Cttr ctive strategy for ENSERCH, but only if the combined businesses would complement each other sufficiently to e d ance shareholder value over the long term cnd if the transaction would have good prospects of surmounting any regulctory hurdles and achieving broad public support. The ENSERCH Special Committee also was of the view that a negotiated transaction with a selected partn:r would be the most likely transaction to be successfully consummated. 01 th) basis of the compatibility of corporate cultures, overlapping service trSla and the likelihood of a f avorable public response and regulatory circptance, the ENSERCE Special Committee expressed its belief that TUC was th2 partner most likely to satisfy these considerations. In addition, the ENSERCE Special Committee considered that TUC's and ENSERCE's complementary (per tions in overlapping service areas would of fer an opportunity to achieve tubitcntial operating efficiencies and to provide improved customer service which, togetbar with the greater financial strength, stability and investment rrcources available to a combined entity, would amount to a algnificantly imprrved competitive position as compared to the psition of ENSEkCE as a Ctand-alone entity. Accordingly, the ENSERCH Special Committee authorited Morgr_3 Stanle to initiate discussions with Barr Devlin to determine the cztn.t of TUC{s interest in pursuing the possibility of a business combi;; tion. On M:rch 14, 1996, TUC retained the firms of LeBoeuf, Lamb, Greene s MacRae, L.L.P. and Reid & Priest LLP to provide additional legal assistance and tax nivic3. On March 19, 1996, Morgan Stanley began discussions with Barr Devlin. Th) praliminary discussions focused on confirming the general views of the pri?cipals and negotiation of a confidentiality agreement. On March 20, 1996, ENIERCE and TUC executed a confidentiality agreement in which TUC undertook to k cp c nfidential all information rivicT of a possible transaction. provided TUC also by ENSERCE agreed not in to connection with TUC's make any offer
- ctraing a possible business combination or to participate in any proxy colicitation involving ENSERCH without the prior written consent of the ELSERCH Board.
At ENSERCE's regular Board Meeting on March 26, 1996, Mr. Biegler and the ENSERCH Special Committee reported to the ENSERCH Board on the status of the retivities of the ENSERCH Special Committee and Morgan Stanley. At this same meeting, the ENSERCE Board addressed the issue of its Sh;rcholders Rights Plan due to expire in May. Representatives of Skadden, Arps, Slate, Meagher & Flom discussed with ne ENSERCH Board the replacement cf th3 Shareholders Rights Plan with a proposed plan to take effect upon the grpiration of the existing rights plan. After discussion, the replacement rights plan was unanimously approved by the INSERCH Board. 32 1 I l
lfl])tec/tasischll])FINEDGa[14413.TK)00033.717 Forn 8-4 16 8tP-1998 (PACE) PAGs 22:07 EDG E. 3. Connelley 00 006-0000 00:00 BLKs 00-000-0000 00:00 (212) 341 7777 A0G 3.4.1.p04 Following the ENSERCE Board meeting, a business combination with ENSERCE. in a discussion directors,with Mr.one Biegler of thelearned that another company had a possible i t n erest in The chairman of the other company j scheduled for April 9, subsequently 1996 telephoned to request a meeting with Mr. Biegler, which was At a meeting on March 27 19 interest by tne other compa,ny.96, Mr. Biegler advised Mr. Nye of the possible fthe avorablyother company'supon a bidding interest in ENSERCH and stated that TUC wouldMr. contest. Nye reported that he had heard rumors of Mr. Nye espressed willingness to not look devote additional resources to consideration of a possible business combination with ENSERCE. a W21ker,
& possible business combination--Skadden. Arps,ENSERCH L.L.P.3 and King & nection with retained additional outside counsel to assist it in co e
Slate, Meagher & Flons Jackson officer and controller of TUC,Spalding. TUC retained S. S. Swiger, a former accounting matters, to provide further assistance on financial and and other senior officers of ENSERCB Mr.Tha ENSERCE 1996 with Mr. Special BieglerCommittee met again on April 4, thz discussions with TUC and the apcoming meeting with theBiegler reported on the status of chairman of the discussing valuation of ENSERCB and Certain other issues rel tiothat company. During this period faasibility of a combination. Between March 27 and April 4 a ng to the and Mr. investigation Nye spoke of several times 1996, Mr. Biegler diligence transaction. ENSERCH buttodiddiscuss not discuss facilitating substantiv TUC's preliminary d ue e terms of a On April 4 respond to TUC sprospects investigation.'The questions forarising the variousfromENSERCE its preliminary due diligenceand 5,1996, members of mana businesses pertinent to each were discussed. At this same time Morgan Stanl and issues bivlin shared their views on valuation parameters. On April 5 6ey and Barr and B, 1996 Morgtn Stanley to a possible combination with TUC.met with senior ENSERCH management to discu , ss issues relating, On April 8 discussions.,Mr. Nye indicated that TUC was considering a e valuations aggreg t1996, Mr. Biegler and Mr. Nye met t of ENSERCH EEX. in the range of $1.6 billion to $1.7 billion after pa n-off si of Tha trends in the electric and gas utility industries er cos?any. cussed, were disOn April 9, 1996, Mr. Biegler met with the woe oth2r chairman indicated interest in discussing a negotiated business offer. combination Mr. Si with ENSERCH provided EEX was first divested, but present d inforzation a e no Mr. EISERCHBiegler Board. ler indicated reported this meeting tohe was notSpecial the ENSERCH in a position C to provide , anycould make no commitments, but ommittee and the On April 9, 1996 ragsr61mg the rapresentatives propo, sed of Worsham, acquisition took place, at which Mr. S Sa Forsythe . special meeting of the Board of Directors of TUC Conruiting Group and Barr Devlin were&present. Wooldridge, L.L.P., Deloitte &. Swiger and Touche strategic benefits of a gas compan acquisition,Items discussed included the ENSERCH, an overview of ENSERCB s usinesses trsnatetion the history and background of a description of the potential A essh flow an,alysis and market valuation of similar companiesfinancial
, and a range of e and synergy analyses,, evaluation potsntial pt. chase prices. Bart Devlin indicated the range of co ratios that boldsrs of TUC wouldCommonbe fairStock.
from aMr. financial Nye later point of view agreed uponto TUC and nversion th e ENSERCH by resolution, within the rangeMr. authorized discussed J.S. by Bart Devlin a conversion ratio with accepted by ENSERCH.Nya to anterIarrington, the Chairman into the transaction if aof TUC,. price Atand in the such reMr.meeting, the Board, commended range would be Morgan Stanley and Barr Devlin continued to discuss TUC stock and formulas for determiningvarious financial a conversion, valuation ratiomatters, of including valuation of ENSERCR ENSERCE to permit a and TUC discussed various tax issues, includi . Tax counsel for ng alternative structures 33
((1]}r3EDCs!!4433.TXjo0034. PIP FAC 17 SEP-1996 03:33 EDC: 00 000 0000 00:00 BIra 90-000 0000 00:00 lin))Tuc/Eas;rch Fira 8-4 R. 3. Donnelliy (212) 341 7777 A0G 3.4.1,p04 (FACE) t x-free merger and the conditions for a tax-free spin-off of EEX. Outside c:untel for ENSERCH and TUC met to discuss various legal issues and prepare dr:fts of the necessary agreements. On April 11, 1996, the ENSERCH Special Committee met again to review the etstus of negotiations. Mr. Biegler described the progress of the negotiations rid etated his view that a valuation of approximately $1.65 billion to 51.7 billion warranted continued discussion. Outside counsel summarized the prtposed agreement and plan of merger and the legal issues under discussior. Out ide counsel also briefed the INSERCH Special Committee on its fiduciary r20ponsibilities and on the process to be followed by the ENSERCH Board in conTidering the merger. Morgan Stanley presented an analysis of the valuation cf ENSERCH for purposes of determining the conversion ratio and updated the Special Committee as to the status of the negotiations and range of values beirg discussed by Barr Devlin. O~t April 11, 1996, Mr. Biegler and Mr. Nye and their respective counsel met to discuss the break-up f ee and stock option, the limits on the collar on the cosysraion ratio and d e application of TUC's representations and warranties at thi closing date. At a special meeting of the ENSERCH Board on April 11, 1996, Mr. Biegler bri fed the ENSERCH Board on the status of the negotiations. On April 12, 1996, the ENSERCH Board and senior ENSERCH management again met to cintinue to review the progress of the negotiations. Mr. Biegler again Occcribed the status of the negotiations. Representatives of ENSERCB's outside clun;:1 briefed the ENSERCH Board regarding the directors' fiduciary duties in ernn:ction with consideration of the merger and described the terms of the prIpo ed agreements to effect the merger. The principal issues discussed contieted of the conversion ratio, the break-up fees and stock option, the liLits on the collar on the conversion ratio, TUC credit support for ENSERCH public debt, the circumstances under which the parties could terminate the Plan af Merger and the treatment of employee benefits for ENSERCH employees cnd ritirees. Counsel also discussed state and. federal regulatory oriciferations and the probable pablic response to a merger. ENSERCH tax crunsel described the tax treatment of the merger and the spin-off of EEX and th7 r;1sted ruling request. In addition, tax counsel confirmed their prior vicw that it would be advisable to execute definitive agreements with respect to th3 merger before April 15, 1996 in light of certain proposals of the Administration for tax legislation which might adversely affect the tar tr:Itment of the EEX spin-off if the transaction was not entered into prior to Cirgr:ss's reconvening on that date. Morgan Stanley provided an evaluation of c:rt in issues relating to the business combination with TUC and presented its etudy on valuation for pu noses of negotiating a conversion ratio. While the cccthg was in progress, the ENSERCH Board received a formal proposal from TUC which contemplated a merger preceded by a spin-off of EIX. The proposed estversion ratio for the merger was based on equity value of $7.17 per share ef ENSERCH Common Stock. The conversion ratio was Jubject to a collar which fix d the equity value of TUC's offer at $7.17, unless the price of TUC Common Stack rose or fell by more than 7 1/2% between the date a definitive agreement
' ecs eigned and the closing of the transaction. The pro psal was discussed and cr:as of uncertainty were identified. The Board determined to defer a response to ths proposal pending further clarification. Morgan Stanley was requested to dircurs valuation issues and the operation of the collar win representatives of BLrr Devlin.
Thi ENSERCH Board and senior ENSERCH management met on April 13, 1996, to con 31 der the TUC proposal as clarified by further discussions. Morgan Stanley dm?cribed the discussions with Barr Devlin. It was generally agreed by the ENSERCH Board that the TUC proposal was not acceptable but was of sufficient istsr:st to merit continued negotiations. The Board also concluded that cintinuation of present operations by ENSERCH was not the preferred long-term rpti:n and the alternative in the best interest of the shareholders was either coniummating a transaction with TUC or seeking another business combination. Thz ENSERCH Board concurred in the Special Committee's view that a negotiated tr n2:ction with a selected partner would be most likely to be successfully etniummated and that a transaction with TUC presented he highest probability of ruccess. The ENSERCH Board then discussed the outstanding issues that n3cd:d to be resolved before a transaction with TUC could go forward. These issuss consisted of the conversion ratio, the limits on the collar on the c nvarsion rat 3J, the break-up fees and the site of the stock option, the duration of TLC's unilateral right 34 l i 1 l l l l i
^
4 ((1]!itanGi[14433.Tx]D0035.FIP PAG 18.str.1996 21:56 EDC: 09-000-0000 00:00 B12: 00 000 0000 00:00 ((1))Tuc/tasirch Firm 8 4 R. 1. Donne 11ty (212) 341 7777 A0G 3.4.1.p04 1 (PAGE) i to catend the closing date, treatment of employee benefits, the timing of TUC's election of an altsrnative merger structure, restrictions on EEX
*perttions, fiduciary Guty considerations relating to the spin-off of EEX and raiponding to unsolec ti.4 acquisition proposals. The ENSERCE Board directed Mr. Biegler to di9 cuss with Mr. Nye possible modifications of the parties' po2itions on thest matters. -- - - -
Thi meeting recessed in Ltder to permit Mr. Biegler to meet with Mr. Nye. Mr. Biegler returned and reported to the ENSERCE Board that Mr. Nye had agreed on behalf of TUC to modify the proposal to accommodate certain concerns the EMSERCE Board had raised. The conversion ratio was increased to $8.00 per shire and the collar was broadened to 10% from 7 1/2%, the break-up fee was riduced, the duration of any unilateral extension of the closing date by TUC res reduced, EEX representations and warranties at closing and restrictions on EEX cperations were eliminated, and fiduciary duty considerations were clarified. After reviewing the modifications, on April 13, 1996, Morgan Stanley provided an oral opinion that the Conversion Ratio was fair, from a finiscial point of view, to the holders of ENSERCE Common Stock. Following the I e rsztsring of the Morgan Stanley opinion, the ENSERCH Board discussed the tra2raction and its nanefits to ENSERCE and its shareholders. The principal
-.co1nomic benefit, from the standpoint of the shareholders, was the conversion r:tio based on an equity value of $8.00 per share of ENSERCE Common Stock, rhich constituted a valuation increase of approximately 12% as compared to the initial offer. Considering the ENSERCE Merger and Distribution together, this $8.00 valuation plus the last closing market price of EEX shares represented a premium of approximately 45% over the ENSERCE closing price on April 12, 1996, the day before the meeting (based on the shares then outstanding). In .Cddition, ENSERCE shareholders would participate in a financially stronger company with better prospects for future earnings growth, and have the apportunity to continue equity ownership in EEX. The ENSERCE Board also esgridered the reasons and factors described in 'The Mergers--Reasons for the M rg7rs' and 'The Mergers--Recommendations of the Boards of Directors--
ENSERCE." After these discussions, Mr. Biegler, other members of senior man +gement and representatives of the legal and financial advisers left the melting, and the remaining members of the ENSERCH Board again reviewed and discussed the proposal and then voted unanimously to approve the per er , l gional.Mr.NyewasinvitedtomeetwiththeENSERCEBoard,which a then Ts11owing the meeting on April 13, 1996 the relevant agreements for the Mirosrs were executed by ENSERCE and TUC. ENSERCE and TUC executives and empl=yees met over the weekend to develop press releases, communications plans i tid employee communications packages. On April 14, 1996, Mr. Nye and Mr. ler briefed government officials on the p 1996,- BiegeproposedMergerswerepubliclyannouncegoposedMergers.OnApril15, THE PRELIMINARY MERGER AND THE DISTRIBUTION In the negotiations between ENSERCE and TUC, TUC informed ENSERCE that it f.id Eot wish to engage in a transaction involving the acquisition of the attural gas and oil exploration and production business of EEX. TUC felt that bec1use the risk profile of EEX's business is dif ferent from the risk profile cffered by TUC, an involvement in EEX's business would not be attractive to l j TUC investors. Accordingly, ENSERCH determined that, immediately preceding the etniummation of the Mergers, ENSERCE would distribute its equity 2 EEX to the hold:rs of ENSERCH Common Stock on a pro rata basis. The ENSERCH Board b211cves that the Distribution will preserve for ENSERCE's shareholders ENSERCE's share of the value and the prospects of EEX. Prior to the Distribution, EEX is to be merged with and into LSEPO. This ' stsp is believed necessary to enable the Distribution to be tar free to ENSERCE and its shareholders. LSEPO operates and maintains, under long-term crntracts, a 255 megawatt cogeneration facility located in Sweetwater, Texas, I e 62 megawatt cogeneration facility located in Buffalo, New York, and'a 160 ; csg:=att egeneration f acility located in Bellingham, Washington. LSEIO is to j bs the surviving corporation of the Preliminary Merger, in which its name is to b3 changed to Enserch Exploration, Inc. ("New EEX'). The Preliminary Merger is to be effected pursuant to an agreement and plan of merger to be entered into among EEX, LSEPO and ENSERCH (the ' Preliminary Plan of Merger *) which is , czpreted to provide that the obligations of EEX and LSEPO to consummate the l Prsliminary Merger are subject to the satisfaction of certain conditions, including the approval of the Preliminary 35 i l l
ll!])F!NfDCa[14433.Tr]00036.P!F PAC:
.[11)Tve/tasirch 20<SEP-10 H 04:43 EDC 09-000 0000 00:00 SLKs 00 000-0000 00:00 P:ra 5 4 R 3. Dona 111ry (212) 341 7777 A0G 3.4.1,p04 (PAGE)
Pirn of Merger by the shareholders of EEX, the approval of the Plan of Merger by tha shareholders of ENSERCH, the dissolution of the direct subsidiaries of EN3ERCE that told the capital stock of LSEPO and EEX, respectively, the
;njunction or applicable 1sw or regulation that prevents or eb22 ce o'.6 consummation of de Preliminary Merger, the Distribution or the prchibits MergIts, ..ffectiveness of a registration statement relating to the .
j l istuince o. aares of New EEX Common Stock in the Preliminary Merger, the l rpprrval of the listing on the NYSE of the shares of New EEX Common Stock j isgu:ble in the Preliminary Merger upon ofiaw;31 notice of issuance, the l r:c ipt of all material governmental approvals and the receipt of certain third-party consents. l i Und:r the TBCA, the approval of the Preliminary Merger requires the sffircative vote of the holders of two-thirds of the outstanding sharea of EEX j Common Stock. ENSERCE is the beneficial owner of approximately 83% of the ! commo3 stock of EEX and 100% of the common stock of LSEPO, and under the Plan ! cf M2rger has an obligation to vote such shares of EEX and LSEPO, or cause such shares to be voted, in favor of the Preliminary Merger. l Aftar the Preliminary Merger and immediately prior to the Mergers, the sh2r:s of New EEX Common Stock held by ENSERCH are to be distributed pro rata l to ths holders of ENSERCE Common Stock. The Preliminary Merger and the l Distribution are components of the Plan of Merger. The Distribution also is cinditioned upon 1) Distribution will(result in no taanble gain or income to ENSERCE or itsthe receipt by ENSERCH of a ruling from the IRS that the i l- thartholders and (ii) the absence of any temporary restraining order 1 prs 1L;inary or permanent injunction or other order issued by any cour,t of l . competent 3urisdiction or other legal restraint or prohibition preventing the l contummation of the Distribution. ENSERCE is not obligated to effect the Distribution if it determines in good faith after the receipt of the written tovica vislation of of outside the TBCA counsel that to relating thecorporate Distribution would result distributions in a substantive or Texas or federal
- itva relating to fraudulent conveyances.
l Thi terms of a Note Agreement between ENSERCE and The Prudential Insurance . Comp Ky of America and certain of its affiliates (the
- Prudential Note l Agriement') prohibit the Distribution in the absence of the consent of the holists of de 9.06% adjusting rate senior notes of ENSERCE issued thereunder (thi " Prudential Notes"). Approximately $59 million in principal amount of -
l Prud20tial Notes is currently outstanding. ENSERCE eEpects to obtain the ! !. cin2 cat of the holders of the Prudential Notes to the Distribution and the ath:r transactions contemplated in the Plan of Merger or to prepay these -) Mitas. The Prudential Notes are prepayable at any time at the f ull outstanding ' pritcipal amount plus accrued interest and a yield maintenance premium. Aftsr the Preliminary Merger, ENSERCE's ownership of New EEX Common Stock till reflect the 105,015,328 shares attributable to its current approximate i 83% beneficial interest in EEX and the additional shares attributable to the l v 1ua of its beneficial interest in LSEPO prior to the Preliminary Merger. At .i
.Juni 30, 1996, there were 69,202,131 shares of ENSERCE Common Stock outstradings accordingly, at that date, the holders of ENSERCH Common St7ck i
rould be entitled to receive in the Distribution approximately 1.5 shares of NFT EEX Common Stock for each share of ENSERCE Common Stock owned. The actual r rctio will depend on the final determination of the number of shares to be I ric ived by ENSERCE for its interest in LSEPO and the shares of ENSERCH Common I Stock outstanding at the record date for the Distribution. Cash is to be l distributed Comarn Stock in lieu of be is to fractional shares listed on of New EEX Common Stock. The New EEX the NYSE. Ths ESR Act and Premerger Notification Rules promulgated thereunder, re l- rscipisnts of voting securities or assets in certain acquisitions to subufuire preastger notification filings with the Department of Justice and Federal t Trida Commission and observe certain waiting periods prior to obtaining binaticial ownership of such securities or assets. Shareholders of ENSERCE may I be rubject to the BSR Act filing and waiting requirements if the total fair l strist value ofwill Distribution their holdings exceed 515ofmillion. New EEX Common stock In determining this aftermillion immediately$15 whether the thrathold will be exceeded, ENSERCE shareholders must aggregate the value of cll shires of New EEX common Stock to be received as an ENSERCH shareholder in ths Distribution or as an EEX shareholder in the Preliminary Merger, including til 36 i l i I i
((1))FINEDGs[14433.TX]00037.FIP PAGs 20-stP.1006 11:32 DG 00-000 0000 00:00 312 00-000-0000 00:00 ([1))Tuc/Enserch I;ra 8 4 3. 1. Donnell:y (212) 341-7777 PMT 3.4.1,p02 . (PAGE) ch:rss of New EEX Common Stock to be received by any parents, subsidiaries, or o:rt in af filiates under common control, and regardless of whether shares of row EEX Common Stock are received solely as an ENSERCH shareholder in the Distribution, or both as an ENSERCE shareholder in the Distribution and as a , farmer EEX shareholder in the Preliminary Merger. Depending on the i circu: stances, one or more statutory or regulatory exemptions may be available : cvin where ENSERCH shareholders immediately after the Distribution will hold
' N:s EEX Common Stock exceeding the $15 million threshold. ENSERCH shareholders thruld consider carefully, with the advice of legal counsel, whether they rivht be subject to the ESR Act obligations in connection with their ccquirition of shares of New EEX Common Stock in the Distribution or the Pr:lizinary Merger.
REASONS FOR THE MERGERS Tha TUC Board believes that the Mergers offer the following significant strrt gic and financial benefits to TUC, ENSERCH and theiz respective chircholders, as well as to their employees and customers and to the communities in which they do business .
. Enhanced Customer Service and Operational Efficiencies. By coordinating cnd integrating certain operations of TUC's and ENSERCE's utility businesses to take advantage of the companies' overlapping service territories, the Company will be able to provide customers with enhanced service and choice. The Company intends to assist customers in managing their total energy service requirements in the most ef ficient manner.
The Mergers should offer greater convenience to customers who, in most cases, will be able to conduct all of their energy business with one system. In addition, the Company should be able to respond more quickly to distribution interruptions with a combined workforce.
. Maintenance of Competitive Rates. TUC and ENSERCH should be able to meet the challenges of the increasingly competitive pricing environment in the utilities industry more ef fectively than either company could on a stand alone basis. The Hergers should create the opportunity for potential benefits for customers in the form of lower rates over the long term than could be achieved if the companies operated independently rnd for shareholders in the form of greater financial strength and financial flexibility.
. Coordination of Diversification Programs. TUC and ENSERCH each have complementary non-utility operations and, as a combined and financially stronger company, should be able to manage and pursue these operations more efficiently and effectively.
, setter Utilization of Resources. The joint engineering, siting and construction of facilities should reduce costs and minimize cnvironmental disruption.
. Integration of Corporate and Administrative runctions. TUC and ENSERCH till be able to consolidate certain corporate and administrative functions, thereby eliminating duplicative positions, reducing other Eonlabor corporate administrative expenses and limiting or avoiding certain capital expenditures for administrative facilities and information systems. It is anticipated that, as a result of combining etaf f and other f unctions, af ter the Mergers TUC and ENSERCE will be capable of operating with fewer employees than TUC and ENSERCH currently have in the aggregate.
Th3 ENSERCH Board believes that the Mergers and the Distribution offer
. significant benefits to ENSERCH and the ENSERCE shareholders.
. Significant Near Term Increase in Shareholder Value. Depending on the Larket price of TUC Common Stock at the Effective Time, ENSERCH thareholders will receive between 0.183 and 0.225 shares of company Common Stock, and approximately 1.5 shares of New EEX Common Stock for cach share of ENSERCB Common Stock as a result of the INSERCH Merger and the Distribution, respectively. See "The Plan of Herger--The Mergers."
Based upon outstanding shares and closing prices of TUC Common Stock and the common stock of EEX at the close of business immediately prior to the announcement of the Mergers, the Company Common Stock and New EEX Common Stock to be received as a result of the ENSERCH Merger and the Distribution, respectively, for each 37 ! j f ; i l I I-i i
l l[1))f!NEDG:(14433.TX]00030. PIP ((1])?ue/Ersuch PAG 10 $EP 1996 21:36 EDCs 00-000-0000 00:00 Blas 00 000-0000 00:00 l Tora 5 4 3. R. Donnellry (212) 341 7777 A0G 3.4.1,p04 (PAGE) i I share of ENSERCH Common Stock (after the conversion of the common stock of EEX into New EEX Common Stock in the Preliminary Merger) represented a combined value of 523.66, equal to a 45% premium over the closing price of ENSERCH Common Stock on such date. See "The Mergers--The Preliminary Merger and the Distribution.' . . ( . EEX as an Independent Company. Both ENSERCH and EEX management, as a result of their own observations regarding the superior valuations I accorded ' pure play" investments and from listening to the views of i investors and financial advisors, believe that EEX has been undervalued in the financial markets as a result of its majority ownership by I ENSERCE. New EEX will have balance sheet resources that should enhance its ability to make acquisitions and to develop its prospects. Through the Distribution, ENSERCB's ownership of EEX Wlll remain with the shareholders of ENSERCH, thereby unlocking the value of EEX for them. Ongoing Participation in the Company. TUC and ENSERCH as a combined anterprise after the Mergers will have greater financial strength and stability than ENSERCH as a stand alone entity, including greater capital and resources for future investment with which to meet the l challenges and take advantage of the opportunities offered by ongoing deregulation of the utilities industry. The Company Common Stock i received in the ENSERCH Merger represents enhanced business prospects of ! the combined enterprise, which are expected to result in increased sarning power in d e future. If the company pays dividends on its common stock at the same rate as TUC currently pays on its common stock, former holders of ENSERCE Common Stock will experience a twofold increase in dividend payments after the Hergers. l . Improved Customer Service. By combining their complementary operations in overlapping service areas, ENSERCE and TUC will be in a position to offer customers improved, more diversified, comprehensive and convenient asrvice. Efficiency of Operations. Integrating operations and consolidating csrtain corporate and administrative support functions will allow ENSERCE and TUC to achieve greater operational efficiency than they could as separate enterprises and will permit costs to be spread over core customers, products and services. These efficiencies will allow ENSERCE and TUC as a combined entity to maintain competitive rates, both benefitting customers and allowing the enterprise to occupy a strong position in light of industry trends toward increased consolidation and competition. RECOMMENDATIONS OF THE BOARDS OF DIRECTORS TUC. The TUC Board approved the Plan of Merger by the unanimous vote of all th3 directors present. l Tha TUC Board believes that the Mergers will provide strategic and l opsrttional opportunities and will enable TUC and its shareholders to I participate in a company which, through the pooling of managemest, work force and tscu ical expertise in both gas and electric utility operations, will be batter able to compete in the evolving market for the delivery of energy and sarvicas. In its deliberation concerning the Plan of Merger, the TUC Board considered TUC's and ENSERCB's respective businesses, operations, assets, management, gsogrrphic location and prospects. The TUC Board also considered the raspactive financial conditions and results of operations of TUC and ENSERCH on historical and prospective bases. Other factors considered by the TUC Board includ-s (1) the market diversification resulting from the combination of TUC's and ENSERCR's existing f acilities and expertise in electric and gas utility opsrctions and non-utility businesses; (ii) the presentations of TUC's mantgnient, including potential operational and financial synergies anticipated from the Mergers and discussed above under *--Reasons for the Margsrs's (iii) the proposed accounting treatment of the Mergers; (iv) the fact that the Mergers will be tax-free to TUC, ENSERCH and their respective sh2rtholders; (v) the opinion of TUC's financial advisor, Barr Devlins (vi) tha LIpact of the Distribution on the future operations of ENSERCH and INSERCH's financial structure following the Distribution; (vii) the impact of rsgulation under various state and federal laws (as described under
'Ragulatory Matters'); and (viii) the terms of the Plan of Merger, the Stock Option Agreement, the Distribution l l
l 38 i r l d
i ((1])FINEDCs[14433.TX]00039.fIP FACs 20-SEP 1996 04:43 EDC: 00-000 0000 00:00 SLK 00-000 0000 00:00 1[1)]Tue/Enserch Firs 8 4 E. 3. Donnelliy (212) 341-7777 AOC 3.4,1,p04 (PACE) Agr30G nt, the Tax Allocation Agreement and the Employment Agreements. No f ctor was assigned a greater significance by the TUC Board than any other. l THE TUC BOARD EAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN OF MERGER, BELIEVES THAT THE TERMS OF THE MERGERS ARE ADVISABLE AND TAIR TO THE BOLDERS OF TUC COMMON STOCK AND RECOKMENDS TRAT THE BOLDERS OF TUC COMMON STOCK VOTE ~ FOR APPROVAL OF THE PLAN OF ME2GER. ENTERCE. The ENSERCH Board believes that the Plan of Merger is advisable and i in th) best interests of ENSERCH, and that the terms of the Mergers are in the bett 17tereste of the holders of ENSERCH Common Stock and offer the holders of i EISERCH Common Stock better prospects for the future than would be available if EISERCE were to remain a stand-alone entity. The ENSERJE Board believes th;t the ENSERCE Articles Amendment is advisable and in the best interests of ENSERCH and its shareholders as an action that will f acilitate the crecummation of the Plan of Merger. In its deliberations with respect to the Plan of Merger, the ENSERCE Board con:id red the following factors: (i) the significant near term increase in EZSERC3 shareholder values (ii) ENSERCE's and TUC's respective businesses, cper:tions, assets, management, geographic location and prospects (iii) combiied with the business and operations of TUC, ENSERCH will have greater fir 7cial stability and strength than as a stand-alone entitys tiv) current Ltdu try, economic, market ano regulatory conditions and trends which encourige consolidation to reduce risk and create new business strategies and c rnitgs growths (v) opportunities for stronger relationships with customers through a multiple product deliver systems jvi) economies from combining the bu?inaises of ENSERCE and TUC3 (vi ) ENSERCH a and TUC's compatible corporate culturis, shared ties to the communities in their service areas and the lik:lihood of a favorable public response to the Mergers (viii) the ocpirrtion of the gas and oil exploration and production business of EEX from th) Ether businesses of ENSERCE, with resulting increased potential for EEX butivacs and earnings growth and the prospect of an improved market valuation cf EEX operating as an independent companys (ir) the likelihood that the M rgIr3 and the Distribution will be tax-free to ENSERCE and its shareholders: (2) th) opinion of ENSERCE's financial advisor, Morgan Stanley, that the ENSERCE Conversion Ratio is fair, from a financial point of view, to the h31drrJ of ENSERCH Common Stocks (11) the ability to successfully consummate the M:rgers, including, in particular, the ability to obtain required rc pletory approvals: (zii) the terms and conditions of the Plan of Merger, thichkonstoclosingandrightsrelatingtoterminationrovideforsubstantiallyreciprocalrepresentations, crndit , and, in part warranties 1cular, prot:ct the employee benefits provided to ENSERCH employees and credit ratings , cupport afforded the holders of publicly traded ENSERCE debt, and (1111) the rc.g3 cf other strategic business alternatives available to ENSERCH, such as equity or convertible debt offerings, acquisitions of complementary pipeline er (dditional oil and gas assets for cash or stock, and h e sale of Individual burirecs units. In determining that the terms of the Plan of Merger are fair tD h51fers of ENSERCH Common Stock, the ENSERCH Board considered the above i fivirtble factors as a whole and did not assign specific or relative weights ) to them. Mr. Biegler abstained f rom the vote of de ENSERCE Board on the Plan ' rf M;rger because of the possibility that he would be employed by the Company following the Mergers. See "The Mergers--Employment Agreements." , In light of the considerations set forth above and in "The Mergers--Reasons ict thi Merger," the ENSERCE Board believes that the Mergers and the Distribution present an excellent strategic opportunity for ENSERCE. The t ENSERC3 Board also believes that, particularly in light of the compatibility 4 l cf thi corporate cultures and shared community ties of ENSERCH and TUC and the l lik:lthood of a favorable public response and regulatory acceptance of the Marg:rs, TUC is the best partner among likely candidates for a business combin tion involving ENSERCE. TEE ENSERCE BOARD, BY A VOTE OF EIGHT OF THE NINE DIRECTORS IN FAVOR AND WITH MR. BIEGLER ABSTAINING, EAS APPROVED AND ADOPTED THE PLAN OF MERGER, BELIEVES TEAT THE TERMS Of THE MERGERS ARE IN THE BEST INTERESTS OF THE 39 l u a e
1 i I (lll]FIREDCs[14433.TX]00040. PIP PACS 14 $rP-1996 31:49 EDC: 00 000-0000 00:00 31Ke 00-000 0000 00:00 ((1)lfue/tasarch Firs 8 4 3. R. Dommellry (212) 341-7777 AOC 3.4.1,p04 (PACE) COLDERS OF ENSERCE COMMON STOCK AND BECOMMENDS THAT THE MOLDERS OF ENSERCE COMMON STOCK VOTE FOR APPROVAL OF THE PLAN OF MERGER, OPINIONS OF FINANCIAL ADVISORS TUC. On March 1, 1996, TUC entered into an engagement letter with Barr D2vlin pursuant to which Barr Devlin was retained to act as TUC's financial J cdvisst in connection with a potential business combination with ENSERCE. On
- April 13, 1996, Barr Devlin rendered an oral opinion, and on May 4, 1996 and ,
tha dite of this Joint Proxy Statement / Prospectus, delivered its written i ' apicigns to the TUC Board, to the effect that, on and as of the respective datos of such opinions, and based upon assumptions made, matters considered, cnd limits of the review, as set forth in the opinions, the TUC Conversion Ritio was and 11 fair, from a financial point of view, to the holders of TUC Common Stock. A COPY OF THE OPINION OF BARR DEVLIN DATED THE DATE HEREOF IS ATTACHED TO TEIS JOINT PROXY STATEMENT / PROSPECTUS AS ANNEX III AND IS INCORPORA%ED EEREIN BY REFERENCE. THE MAY 4, 1996 OPINION IS SUBSTANTIALLY IDENTICAL TO THE OPINION ATTACHED BERETO. TUC SEAREMOLDERS ARE URGED TO READ CAREFULLY THE OPINION DATED TEE DATE MEREOF IN ITS ENTIRETY FOR ASSUMPTIONS 6 MADE, MATTERS CONSIDERED AND THE LIMITS OF TEE REVIEW UNDERTAKEN BY BARR DEYLIN. ! In connection with rendering its opinion dated the date of this Joint Proxy S tatemant/ Pros pectus, Barr Devlin (i) reviewed the Annual Re w rts Forms 10-K ' end the related financial information for the three-year perlod ended December , 31, 1995 and uneudited financial information for the quarterly periods ended , March 31, 1996 and June 30, 1996, for ENSERCE; (ii) reviewed the Annual ! R7 ports, Forms 10-K and the related financial information for the three-year period ended December 31, 1995 and unaudited financial information for n e qurrtarly periods ended March 31, 1996 and June 30, 1996, for TUCs (iii) reviewed certain other filings with the SEC and other regulatory authorities . Cada by ENSERCE and TUC during the last three years; (iv) reviewed certain l irtsrial information, including financial forecasts, relating to the business, crrnings, capital expenditures, cash flow, assets and prospects of ENSERCE as , tajulted pro forma to reflect the Distribution ('ENSERCE As Adjusted") , furniched to Barr Devlin by ENSERCE: (v) conducted discussions with members of ; scciar management of TUC and ENSERCE concerning their respective businesses, regulttory environments, prospects, strategic objectives and possible c'per: ting and administrative synergies which might be realised for the benefit cf th2 Company f ollowing the Mergers: (vi) reviewed the historical market pricts and trading activity for shares of ENSERCE Common Stock with those of cartsin publicly traded companies deemed by Barr Devlin to be relevants (vii) compared the results of oprations of ENSERCE As Adjusted with those of c rt:in companies deemed by Barr Devlin to be relevant; compared the prr p2ed financial terms of the Mergers with the financia(viii) l terms of certain tu2iniss combinations deemed by Barr Devlin to be relevant; (12) analysed the - veluttion of shares of ENSERCE Common Stock, after giving ef fect to ne i Distribution, using various valuation methodolgies deemed by Barr Devlin to ; be appropriates (x) considered the pro forma effect of the Nergers on the Compety's capitalization, earnings and cash flows (zi) compared the pro forma ' ciftet of the Mergers on the Compaby's earnings per share with corresponding ,' currsst and projected values for TUC on a stand-alone basis; (zii) reviewed i th3 Plan of Mergers (3111) reviewed the Registration Statement, including this Joint Prory Statament/ Prospectus, and (ziv) reviewed such other studies, 2 csaducted such other analyses, considered such other financial, economic and cark3t criteria, performed such other investigations and took into account such other matters as Barr Devlin deemed necessary or appropriate for purposes - of its opinions. In preparing its opinions, Barr Devlin' relied, without independent vsrification, on the accuracy and completeness of all financial and other information publicly available or otherwise furnished or made available to it by TUC and ENSERCE, and upon the assurances of management of TUC and ENSERCE . 2 2t they were not aware of any facts that would make such information iniccurate or misleading. With respect to the financial projections of TUC and ENSERCE As Adjusted (including, without limitation, projected cost savings htnsfits), Barr Devlin relied upon assurances of management of TUC and ENSERCE thst ruch projections were reasonably prepared and reflected the best r currtntly available estimates and judgments of the respective managements of . TUC LLd ENSERCE as to the future financial performance of TUC and ENSERCH As ' Adjuated, as the case may be, and as to the projected outcomes of legal, regulatory and other contingencies. Barr Devlin was not provided with and did' nat undertake an independent evaluation or appraisal of the assets or , 40 i I i i l i l I l 4
t . l l 1 l i l l ((1))FINEDGi[14433.TX]00041.PD PAG: 20-SEP-1996 06:15 EDG 00 000-4000 00:00 BLKs 00 000 0000 00:00 I l ((1))ree/Enser;h FIra 5-4 R. 1. Donnell y (212) 341 7777 Aoc 3.4.1,p04 I (PAGE) I l litbilities (contingent or otherwise) of TUC or ENsERCH, nor did Barr Devlin , caka any physical inspection of the properties or assets of TUC or ENSERCH.
- Is arriving at its opinions, Barr Devlin assumed that the Mergers will be tax-free transactions as described in Section 351 of the Code, and the regulations thereunder and that-the Distribution shall qualify as a tax-free
! epin-off within the meaning of Section 355 of the Code. In addition, Barr Devlin has assumed that the TUC Merger will be accounted for as a combination s i et companies under common control using historical costs in a manner similar I to e pooling of interests and the ENSERCH Merger will be accounted for by the y %s ! purchase method of accounting. Barr Devlin's opinions are based upon general '% fin;scial, stock market and other conditions and circumstances as they existed ) cnd could be evaluated, and the information made available to it, as of the I' rsepective dates of the opinions. Barr Devlin's opinions are directed only to th2 TUC Board and the fairness of the TUC Conversion Ratio from a financial l poist of view, do not address any other aspect of the Mergers and do not ! L ct;ctitute a recommendation to any TUC shareholder as to how such shareholder i , chould vote at the TUC Meeting. Although Barr Devlin evaluated the f airness of i th3 TUC Conversion Ratio from a financial point of view to the holders of TUC ! Commin Stock, the specific TUC Conversion Ratio was determined by TUC and ENSERCH through arm s-length negotiations. TUC did not place any limitations I upon Barr Devlin with respect to the procedures followed or factors considered l by L:rr Devlin in rendering its opinions. B2rr Devlin has advised TUC that, in its view, the preparation of a fairness opinion involves various determinations as to the most appropriate and rritvant methods of financial analysis and the application of those methods to the particular circumstances, and, therefore, such an opinion is not readily cuic ptible to summary description, yurthermore, in arriving at its fairness epinions, Barr Devlin did not attribute any particular weight to any analysis er f;ctor considered by it, nor did Barr Devlin ascribe a specific range of fair values to TUCs rather, Barr Devlin made its determination as to u m flirress of the TUC Conversion Ratio on the basis of qualitative judgments as tD the significance and relevance of each of the financial and comparative taalyses and f actors described below. Accordingly, notwithstanding the ccpirate factors summarized below, Barr Devlin believes that its analyses must be considered as a whole and that considering any portions of these analyses Ltd factors, without considering all analyses and factors, could create a ciricading or incomplete view of the evaluation process underlying its cpinion. In its analyses, Barr Devlin made many assumptions with respect to 111u2try performance, general business and economic conditions and other , matt:rs, many of which are beyond TUC's and ENSERCR's control. Any estimates An these analyses do not necessarily indicate actual values or predict future rstults or values, which may be significantly more or less favorable than as cat forth therein. In addition, analyses relating to the value of businesses do Est purport to be appraisals or to reflect the prices at which businesses cetuilly may be sold. In connection with rendering its oral opinion dated April 13, 1996, and its Tritten opinions dated May 4, 1996 and the date hereof, and preparing for its participation in meetings with the TUC Board, Barr Devlin performed a variety of financial and comparative analyses and considered a variety of factors of li which the material analyses and factors are summarized below. While this cummiry describes the material analyses performed and factors considered, it dras tot purport to be a complete description of the analyses performed or fictars considered by Barr Devlin. Barr Devlin's opinions are based upon its con;ideration of the collective results of all such analyses, together with ths ether f actors ref erred to in its opinions. Because each share of TUC Common Stock is being converted into one share of Company Common stock, the TUC Conversion Ratio can be compared to the ENSERCH Conversion Ratio in ditsrsining the fairness of the Mergers. Subject to the Collar (as defined l b210w), the ENSERCH Conversion Ratio is the quotient obtained by dividing
$8.00 by the average TUC Common Stock price during a defined period prior to thi Effective Time. In concluding that the TUC Conversion Ratlo is fair, from o financial point of view, to the holders of TUC common Stock and in its ,
dircu7sions with the TUC Board, Barr Devlin noted that $8,00 discussed above cma within the range of implied values set forth below under " Discounted Cash t l Flow Analysis' and ' Comparable Transaction Analysis.' In connection with its cpinion dated the date hereof, Barr Devlin performed certain procedures to 1 l updIts its analyses made for its May 4, 1996 opinion and reviewed with the unnigements of TUC and ENSERCH the assumptions 41 1 l a l 6
.- , ~ . - - . - - , .. . - - . = - ..- -- ... - ~.. - - , ._ ~ , -.
l l. l . l, - ((1 , FAQs 18 827 1996 21:21 EDC: 00-000 0000 00:00 SLK: 00-000 0000 00:00 ! Ill])FINEDGl[14433.TI]e0042.FIF llfuc/tasireb rire 8-4 1. R. Donnelley (212) 341 7777 AOC 3.4.1,p04 (PAGE)
~
- upos which such analyses were based. The results of such analyses were I 1
sub2tc2tia11y the. same as those for the May 4, 1996 opinion of Barr Devlin. l Digerunted cash Flow Analysis. To determine the present value of ENSERCH As J Adjusted, Barr Devlin repared and reviewed the results of an unleveraged . . _ _ _ m
- Discou ted cash riow ( DCr") analysis for ENSERCH As Adjusted using certain a sprating and financial projections grovided by ENSERCE for the period 1996 through 2000 (the " Projection Period ), as revised by Barr Devlin to reflect
. c rtain adjustments it deemed appropriate. To calculate the present value, the a prajreted unleveraged free cash flows (including espected cost savings ba2afits) for each year during the Projection Period, together with the estimated terminal value of the businesses in the final year of the Projection ^
l Pariod, were discounted to the present. Barr Devlin estimated terminal values , i' far ENSERCE As Adjusted by applying multiples to (1) the projected earnings beform interest and taxes (*EBIT*) in 2000 and (ii) the projected earnings 5 b3ter2 interest, taxes, depreciation and amortization ("EBITDA*) in 2000. The r cultiples applied were based on analyses of the corresponding multiples of I cartala public companies comparable to ENSERCH As Adjusted. For the purposes of thage analyses, the terminal multiple ranges used were 10.0s-12.0x with ' reepect to EBIT and 7.0s-8.5a with respect to EBITDA. The cash flow streams med tarminal values were then discounted to present value using discount rates i th:t traged from 7.25% to 7.75%. This analysis produced reference values of 3
$6.33 to $12.01 per share of ENSERCE As Adjusted.
Comparable Transaction Analysis. Barr Devlin reviewed certain proposed or completed transactions involving mergers and acquisitions with and among
- naturtl gas distribution (* Gas"), natural cas pipeline (' Pipeline"), and actur:1 gas marketing and natural gas ligulds processing (" Marketing and i Proco331ng") companies deemed by Barr Devlin to be comparable to ENSERCH As '
Adjusted (collectively, the " Comparable Transactions'). The Comparable
- Trassictions involved companies possessing general business, operating and
, finiacial characteristics representative of companies in industries in which l ENSERCJ As Adjusted operates. The Gas comparable Transactions included Puget Sound Power & Light Company / Washington Energy Company, Atmos Energy t 1 Co rition/Greeley Gas Company, Arkla, Inc./ Diversified Energies, Inc., Clu@stna Utilities Company / Louisiana General Services, Inc., Consolidated tatural Gas Company / Virginia Natural Gas, Inc., Southern Union Gas Co./ Western , ( Rttourses, Inc. (Essouri gas operations) and Arkla, Inc./Entez, Inc. The
- Pipeline Comparable Transactions included The Williams Companies, Inc./Transco
=
l Panhandle Eastern Corporation / Associated Natural Gas En;rgy Company,jas Gas Corporation /Ezzon Cor p ration (Texas and Louisiana Ctrper: tion, Te prsparties), Equitable Besources, Inc./Louislana Intrastate Gas Corporation, Pr e radle Eastern Corporation / Texas Eastern Corporation, Transco Energy ComprXy/ Texas Gas Transmission, Arkla, Inc./ Mississippi River Transmission Carporition and Occidental Petroleum Corporation /Miocon Corp. The Marketing L tad Processing Comparable Transactions included El Paso Natural Gas
. Company /Eastes Energy Inc., Atlanta Gas Light Company /Sonat Marketing Company, LG&E Energy Corp./Eadson Corporation, Panhandle Eastern Corporation / Associated Ertur21 Gas Corporation, Natural Gas clearinghouse / Trident NGL Bolding, Inc.,
Red Cedar Gathering Company /WestGas Gathering, Inc., Associated Natural Gas c Corporation / Grand Valley Gas Company, NOVA Corporation / Natural Gas i Castritghouse, Easten Energy Inc./ Heath Petra Resources, Inc., Tenneco J Zac./EnTrade Co m ration, LG&E Energy Corp & British Gas public limited ' comp 2xy/ Natural Ces clearinghouse, DEKALB Energy Company / Natural Gas o C1caria.ghouse and Apache Corporation & Noble Affiliates, Inc./ Natural Gas c clearirghouse. Brrr Devlin calculated the ' implied total consideration * (defined as the sum
.cf ths implied equity consideration plus the lip idation value of preferred stock, the principal amount of debt, capitalized lease obli i Linority interests, minus cash and option proceeds, if any)gations for each andof the Comptrible Transactions as a multiple of each company's respective latest 12 l Gesth EBITDA and EBIT. This analysis produced reference values of $2.02 to i
$11.98 per share of ENSERCH As Adjusted,
- r. Bicruse the reasons for and circumstances surrounding each of the Comparable Trcsatetions analyzed were diverse and because of the inherent differences betwscs the operations of ENSERCE As Adjusted and the companies in the
<salected transactions, Barr Devlin believed that a purely quantitative comparsble transaction analysis would not be particularly meaningful in the i l
crntazt of the Mergers. Barr Devlin believed that an 42 l I l l
l 1 ((1))f!NEDGi[14431.yI)00043. PIP PAG 16 SEP 1996 22:09 CDGs 00 000 0000 00:00 33: 00 000-0000 00:00 l [(1))Tue/Ena;tch fir = 8-4 2. 3. Donnell y (212) 341 7777 A0G 3.4.1,p04 I (PAGE) epprrpriate use of a comparable transaction analysis in this instance would invalve qualitative judgments concerning differences between the chirteteristics of dese transactions and the Mergers which would af fect the relitive values of TUC and ENSERCH As Adjusted. Publicly Traded comparable Company Analysis. Using publicly available infarmation, Bart Devlin compared selected financial information for ENSERCH A) Adjusted with corresponding financial information and ratios for a group of 003, Pipeline, and Marketing and Processing companies deemed by Barr Devlin to be comparable to ENSERCH As Adjusted (collectively, the " Comparable ~% Comp;nies"). The Comparable Companies possessed general business, operating '%g gnd financial characteristics representative of companies in industries in j thich ENSERCH As Adjusted operates. The Gas Comparable Companies included - *e Atitnta Gas Light Company, Bay State Gas Company, Brooklyn Union Gas Company, Indirna Energy, Inc., Laclede Gas Company, MCN Corm ration, NICOR, Inc., Pacific Enterprises, Peoples Energy Corporation, Pledmont Natural Gas Company, Irc., Washington Gas Light Company and WICOR, Inc. The Pipeline Comparable Comp 1nies included Coastal Corporation, El Paso Natural Gas Company, Enron C4rporation, NOVA Corporation, Panhandle Eastern Corporation, Sonat, Inc., Trinicanada Pipelines Limited, The Williams Companies, Inc. and Valero Energy Crrporation. The Marketing and Processing Comparable Companies included Aquila fis Pipeline Corporation, Cornerstone Natural Gas, Inc., NGC Corporation, TIj23 Gas Corporation, Tejas Power Corporation and Western Gas Eesources, Inc. L rr Devlin determined ranges of multigles for selected financial ratios for th] Comparable Companies, including the aggregate market value" (defined as th2 cum of the market value of common stock, plus the liquidation value of pr fstred stock, the principal amount of debt, capitalized lease obligations Gnd rinority interests, minus cash and cash equivalents) as a multiple of (1) EBIT for the latest 12-month period ending December 31, 1995 (the "LTH P riod") and (ii) EBITDA for the LTH Period. This analysis produced reference v luis of $0.93 to $5.19 per share of ENSERCH As Adjusted. Cccause of the inherent differences between the operations of ENSERCH As Adju ted and the Comparable Companies, Barr Devlin believed that a purely qut;titative comparable company analysis would not be particularly meaningful h_ the contert of the Mergers. Bart Devlin believed that an appropriate use of a comparable company analysis in this instance would involve qualitative judgments concerning differences between the characteristics of the Comparable Companies and ENSERCH As Adjusted. Moreover, Barr Devlin observed that comparable company analysis does not reflect the potential incremental value t2 TUC of a controlling interest in ENSERCH As Adjusted or expected cost civilgs benefits, among other factors incidental to the Mergers. Pro Porma Merger Analysis. Barr Devlin analyzed certain pro forma effects to th1 chareholders of TUC resulting from the Mergers, based on the TUC Crnv2rsion Ratio and the ENSERCH Conversion Ratio, for each year in the Pr*jiction Period. This analysis, based on the respective forecasts of the cin.g:ments of TUC and ENSERCH and assuming retention of a portion of the Cyzargies forecasted, showed modest dilution to holders of TUC common Stock in carnings per share in the first year after consummation of the Mergers (r:flecting certain anticipated one-time costs to be incurred in such year to cchicvs future cost savings benefits) and essentially no dilution thereafter. B:rr Devlin was selected as TUC's financial advisor because Barr Devlin and principals of Barr Devlin have a long history of association in the investment b1nking and electric and gas utility industries. Bart Devlin is a privately h ld investment banking firm specializing in strategic and merger advisory tarvices to the electric and gas utility industries, the energy industry and salteted other industries. In this capacity, Barr Devlin and principals of B:rr Devlin have been involved as advisors h numerous trassactions and (dvi'ory assignments in the electric, gas and energy indusuries and are sonttintly engaged in the valuation of businesses and secu2ities in those industries. Purruant to the terms of Barr Devlin's engages?vt. TUC has agreed to pay I Dirr Devlin for its services in connection with the Mergers (1) a financial cdvisory retainer fee of $50,000 per quarter commencing March 1, , 43 i i i l i
PAG: 16 8f7 1996 23:04 EDG: 00 000-0000 00:00 SL*a 00-000-0000 00:00 [l((1)) FINED 1)]Tue/ Ens:r:h0tl14433.YX)00044.FIF firm S-4 3. 3. Donnell:y (2 12) H1 7777 A0G 3.4.1,p04 (PACE) 1996s (ii) an initial financial advisory progress fee of $2,257,500 payable i upon crecution of the Plan of Mergers (iii) a second financial advisory progt:ss fee of $967,500 payable upon shareholder approval of the Plan of M;rgrr, and (iv) a transaction fee of $6,450,000 payable upon consummation of th: Mergers. All financial advisory retainer fees payable during the term of th) (ngagement,-all financial advisory progress fees and an additional 5500,000 would be credited against any transaction fee payable to Barr Devlin. 1 TUC his agreed to reimburse Barr Devlin for its out-of-pocket expenses, I including fees and expenses of legal counsel and other advisors engaged with l th) c'nsent of TUC, and to indemnify Barr Devlin against certain liabilities, ixcluding liabilities under the federal securities laws, relating to or cric11g out of its engagement.
)
ENSERCE. Morgan Stanley was retained by ENSERCE to act as its financial cfvicIr in connection with the possible sale of all or a portion of the assets tr Etock of ENSERCE and related matters based upon Morgan Stanley's experience rnd cxpertise and prior investment banking relationship and f amiliarity with ENSERCH. At the April 13, 1996 meeting of the ENSERCH Board, Morgan Stanley rradired to the ENSERCH Board an oral opinion to the effect that, as of such l (ct:, the ENSERCH Conversion Ratio was fair from a financial point of view to j thi holders of ENSERCH Common Stock. Morgan Stanley has rendered a written , apinirn on the date hereof to the effect that, as of the date hereof and based on c rtain matters set forth therein, the ENSERCH Conversion Ratio is fair from c financial point of view to the holders of ENSERCH Common Stock. THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED AS OF THE DATE OF THIS JOINT PROXY STATEMENT / PROSPECTUS, WHICH SETS FORTE THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACBED AS ANNEX IV TO THIS JOINT PROXY STATEMENT / PROSPECTUS AND IS INUORPORATED HEREIN LY REFERENCE. HOLDERS OF ENSERCE COMMON STOCK SHOULD READ MORGAN STANLEY'S CPI 1 ION CAREFULLY IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE EN ERCH BOARD AND THE FAIRNESS OF THE ENSERCH CONVERSION RATIO FROM A FINANCIAL POINT OF VIEW TO THE BOLDERS OF ENSERCH COMMON STOCK, AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGERS NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF ENSERCH COMMON STOCK AS TO BOW TO VOTE AT THE ENSERCH MEETING. TEE
SUMMARY
OF MORGAN STANLEY'S OPINION SET FORTH IN THIS J; INT PROXY STATEMENT / PROSPECTUS IS OUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. 12 crriving at its opinion, Morgan Stanleys (i) analysed certain publicly Cyril:ble financial statements and other inforastion of ENSERCH, LSEPO, EEX rrd TUCp ii) analyzed certain internal financial statements and other finszeial(and operating data concerning ENSERCB, LSEPO, EEX and TUC prepared by th7 managements of ENSERCH and TUC3 (iii) reviewed certaLn financial prtj:ctions prepared by the managements of ENSERCH and TUC, including the ENSERCH 1996 budgeted financial inf ormation prepared by ENSERCH management (th) "1996 ENSERCH Budget'); (iv) participated in certain due diligence di cussions and discussed the past and current operations and financial Condition and the prospects of ENSERCE, LSEPO, EEX and TUC with senior cx cutives of ENSERCH and TUCp (v) reviewed the reported prices and trading tctivity for ENSERCH Common Stock, EEX Common Stock and TUC Common Stock; (vi) comptred the financial performance of ENSERCH, EEX and TUC and the prices and tr:di:g activity of ENSERCH Common Stock, EEX Common Stock and TUC Common Stock with that of certain other comparable publicly-traded companies and th ir securitiess (vii' reviewed the financial terms, to the extent publicly evciltble, of certain comparable acquisition transactions; (viii) participated in diicussions with sunior management of ENSERCH and their legal advisors reg rding certain recalatory and other legal issues in connection with the M:rg:rs; (1x) discursed wid senior management of ENSERCH certain alternative tr:A :ctions to tF2 Mergers involving certain other third partiess (x) p;rticipated in i.scussions and negotiations among representatives of ENSERCE cnd TUC and their financial and legal advisors; (zi) considered the terms and cJrtcin benefits of the Preliminary Merger and the Distributions (111) l r;vis7ed the Plan of Merger, the Distribution Agreement and certain related 1 dicurints; and (ziii) performed such other analyses as Morgan Stanley deemed cppripriate. la rendering its opinion, Morgan stanley assumed and relied upon without l ind' pendent verification the accuracy and completaness of the information rsvi(wed by Morgan Stanley for the purposes of its opinion. Nith respect to th3 financlal projections, Morgan Stanley assumed that they were reasonably pr7p; red on bases reflecting the best currently available estimates and julgscnts of the future financial performance of ENSERCH, 44 i l
((1]FINEDCo[14433.yI]00045.FIF PACS 17 SEF-1996 th26 EDGs 00 000-0000 00:00 SLE: 00-000 0000 00:00
. ((1] Tue/Easerch Firs 8-4 2. 3. Donnelley (212) 341 7777 A0G 3.4.1,pO4 (PAGE)
LSEPO, EEX and TUC. In addition, Morgan Stanley assumed that the Mergers and i thi Di:tribution will be consummated in accordance with the terms set forth in ths Plin of Merger and the Distribution Agreement, including, among other things, that the Mergers and the Preliminary Merger will be treated as tax. frse transactions and the Distribution will qualify as a tax. free spin-off, occh pursuant to the Internal Revenue Code of 1986. Morgan Stanley did not ~ ~~~' Orki cry independent valuation or appraisal of the assets or liabilities of ECSERCH, LSEPO, EEX or TUC, nor was Morgan Stanley furnished with any such Cppreigals. Morgan Stanley's opinion is necessarily based on economic, market Lnd ether conditions as in ef fect on, and the information made available to it a3 of, the date hereof In arriving at its opinion, Morgan Stanley was not authorized to solicit and did not solicit, interest from any party with rotpect to the acquisition of ENSERCE or any of its assets, nor did Morgan Stin1:y negotiate with any of the parties, other than TUC, which expressed interrst to Morgan Stanley or ENSERCH in the possible acquisition of ENSERCH cr c:rtain of its constituent businesses. Tha' following is a brief summary of certain analyses performed by Morgan
< Ctenity and reviewed with the ENSERCE Board on April 13, 1996 in connection with ne preparation of the Morgan Stanley opinion and with its oral !
proccatation to the ENSERCH Board on that dates ENSERCH Common Stock Performance. Morgan Stanley's analysis of ENSERCH's Common Stock performance consisted of an historical analysis of closing prices cid trtaing volumes from April 9, 1993 to April 12, 1996. During this period, basco en closing prices on the NYSE, ENSERCH Common Stock achieved a high of
$22.375 per share and a low of $12.125 per share. ENSERCH Common Stock closed ct a grice of $16.375 per share on April 12, 1996 (the 'ENSERCH Market Prics ). EEX Common Stock closed at a price of $10.25 per share on April 12, 2996 (the *EEX Market Price'). Morgan Stanley observed that, based on the EEX Mirkit Price and the fact that holders of ENSEBCE Common Stock would receive rpprrxiwately 1.5 shares of EEX Common Stock via the Distribution, and $8.00 per chire of TUC stock as a result of the Mergers, the implied value received i by ths holders of ENSERCE Common Stock as a result of the contemplated j Distribution and Mergers was approximately $23.68 per share, which represented
+
a 45% premiun to the ENSERCE Market Price. TUC Common Stock Performance. Morgan Stanley's analysis of TUC Common Stock perfrrmance consisted of an historical analysis of closing prices and trading vtlume2 from April 9, 1993 to April 12, 1996. During this period, based on elseing prices on the NYSE, TUC Common Stock achieved a high of $48.25 per thirs rnd a low of $29.75 per share. TUC Common Stock closed at a price of
$39.625 on April 12, 1996 (the 'TUC Market Price").
Comparable Company Analysis. Comparable company analysis examines a compayy's trading performance relative to a group of publicly traded peers. Morg:n Stanley analyzed the trading performance of ENSERCH and three groups of compsties in the natural gas pipeline and GPM, natural gas distribution, and ind;pindent power plant sectors (the 'ENSERCE Comparable Companies') . Companies in the natural gas pipeline and GPM grcup includeds Western Cas i R ;ources, Inc.; KN Energy, Inc.; Tejas Gas Corporations NGC Corporations Aquila Gas Pipeline Corporation and USX-Delhi Group (collectively the 'ENSERCH Catursl Gas Plpeline and GPM Comparable Companies"). Companies in the natural g2s distribution group included: Washington Gas Light Companys Brooklyn Union , Inc.: Northwest Natural Gas Company; Atlanta Gas ! C33 Company; Light IndianaInc. Company NICOR, Energy, an d Piedmont Natural Gas, Inc. (collectively the
*ENSERCH Natural Gas Distribution Comparable Companies"). Companies in the i . ind:pindent power plant group included: AES Corporations California Energy I
Co.: Dsstec Energy, Inc. Enron Global Power & Pipelines LLC 3 Kenetech Crrporctions Trigen Energy Corporations and Sithe Energies, Inc. (collectively tha 'ENSERCH Independent Power Plant Comparable Companies"). Morgan Stanley ciro r.n11ysed the trading performance of TUC and a group of companies in the cl ctric utilities sector (the "TUC Comparable companies'). Companies in the ! TUC Comparable Companies group included: Carolina Power & Light Company; I - CIntr:1 and south West Corporations souston Industries Inc.; PacifiCorp; The soutkarn Company and Wisconsin Energy Corporation. The ENSERCE Comparable Comp 2nics and the TUC Comparable Companies (collectively, the ' Comparable ! Companics') were selected based on general business, operating and financial chartcteristics re ! TUC, r:rpectively,presentative of companies operate. Historical in industries financial in which ENSERCH and information 45 1 I l l
I '
' ((1)lFINEDGs [14433.frl00045.FIF FAGS II stF 1996 21:23~ EDGs 60-000-0000 00:00 SLE: 00 000-0000 00:00 l ([1))Tue/Eas:rch Ftra 3-4 1. R. Donnellsy (213) 341-7777 A0G 3.4.1,p04-(PAGE) usto in connection with the ratios provided below with respect to the Comparable Companies is as of the most recent financial statements publicly Evtiltble for each company. Market information used in calculating the ratios !
below is as of April-4, 1996 with respect to the ENSERCR Comparable Companies and April 9, 1996 with respect to the TUC Comparable Companies. Morgan Stanley analyzed the relative performance and value for ENSERCH and TUC by comparing certain market trading statistics for EMSERCE and TUC with th3 E SERCH Comparable Companies and h e TUC Comparable Companies, rszptctivriy. Among the market trading information considered in the analysis was asset value to earnings before interest and taxes ("EBIT*) and asset value to strainas before interest taxes, depreciation and amortization ("EBITDA"), ectual e.nd estimates for calendar years 1995 and 1996, respectively. The l- medirn ratios of asset value to EBIT for calendar year 1995 for the ENSERCH [ Gas Grthering and Processing Comparable Companies, ENSERCE Gas Distribution Comparable Companies, ENSERCE Independent Power Plant Comparable Companies, rnd TUC Comparable companies were 15.01, 10.3x, 13.1x and 10.6x, respectively. Th3 median ratios of asset value to EBITDA for calendar year 1995 for the ENSERCE Gas Gathering and Processing Comparable Compan* es, ENSERCE Gas Distribution Comparable Companies, ENSERCE Independent Power Plant Comparable Comptales, and TUC Comparable companies were 9.5x, 6.9x, 10.2x and 7.01, rss pectively. Ulitg the financial information and the 1996 ENSERCE Budget provided by mas:gement of EN8ERCH, Morgan stanley derived an implied equity value range fcr ENSERCE upon application of the financial multiples f rom he ENSERCE Comptrable Companies (after adjusting for the Distribution, which is cratempleted to be completed prior to the Mergers). This analysis indicated i that h e implied equity value of ENSERCE was from $135.3 million to $322.0 tillion and the equity value per fully-diluted common equivalent share of EN8ERCE outstanding was from $1.88 per share to $4.52 per share. Using public fintncial information and-forecasts for TUC, Moraan Stanley derived an implied squity value rance for TUC upon application of the financial multiples from !. ths TUC Comparable Companies. This analysis indicated that the implied equity [1 valus of TUC was from $8,376.8 million to $10,393.0 million and he equity i valun per fully-diluted common equivalent share of TUC outstanding was from
$37.09 per share to $46.02 per share.
! - N3 company utilized in the comparable companies analysis as a comparison is I i$catical to ENSERCE or TUC. In evaluating the comparable companies, Morgan st;nity made judgments and assumptions with regard to industry performance, ,
- gs
- sr:1 business, economic, market and financial conditions and other matters, many cf which are beyond the control of ENSERCE or TUC such as the impact of competition on the business of ENSERCE or TUC and the industry ganerally,
! indu1try growth and the absance of any material adverse change in the t
-fiant.cial condition and prospects of ENSERCE or TUC, or the indu?try or the [
E fincncial markets in general. Mathematical analysis (such as determining the ! Ev;rige or median) is not in itself a meaningful method of using comparable i company data. Comparable Transaction Analysis. Using publicly available information, Morgan Stanley performed an analysis of selected transactions (collectively !F th2 "ENSERCE Comparable Transactions") involving certain natural gas pipalhe CId GPM companies (collectively the " Natural Gas Pipeline and GPM Comparable Tren2&ctions') and natural gas distribution companies (collectively de
Tstural Gas Distribution Comparable Transactions"). Morgan Stanley compared esrtain financial and market statistics, including multiples of asset value to tw:lve months trailing EBIT and ESITDA, equity value to M ok value and premium to cerket price one month prior to announcement of a transaction for the ENSERCH Comparable Transactions. The Natural Gas Pipeline and GPM Comparable Transactions comparison included the following transactions (acquiree/acquiror): Seagull Energy Corporation /Tejas Power Co m rations Easter Energy Inc./El Paso Natural Gas Company: Badson Corporation /LGsE Enzrgy; Associated Natural Gas Company /Padandle Eastern Pipeline Corporation; TridLnt NGL / Natural Gas Clearinghouse; American Oil's Gas /KN Energy Inc.; '
Trid nt NGL / Occidental Petroleum Corporation and certain other private market ' t-I' trznsactions. The Natural Gas Distribution Comparable Transactions comparison included the following transactions-(acquiree/acquiror): Western Resources Inc./ Southern Union Company: Greeley Gas Company / Atmos Energy Corporation Wiccznsin Southern Gas Company Inc./ Wisconsin Energy Corporations Arkla Gas Distribution /Utilicorp United inc.; Northern Indiana 46 l I l t 1
((1))FIREDGe[14413.yx]C0047. PIP PAGi 17 sEP-1996 83:43 EDG: 00-000-0000 09:00 812 : 00-000 0000 00:00 [11])Tuc/En'crch F;ra 8-4 3. 1. Donne 11ry (212) 341 7777 ADG 3.4.1,p04 (FACE) rual & Light Company /NIPSCO Industries Inc.; Union Energy Corp./westcoast Energy Corp.: Citizens Utility /Utilicorp United: Southern Union Comp;ny/ Citizens Utilitys Northern Carolina Natural Gas Company /Sonat Inc. For th) ENSERCE Comparable Transactions the analysis showed a range of multiples of equity value to book value of 1.0 to 3.02, a range of twelve months trelling multiples of 8.2x to 30.5x EBIT and 3.7z to 14.6x EBITDA and a 9.5% t2 56.3% premium to the price one month prior to announcement of the trtn; action. U:ing the financial information and the 1996 ENSERCH Budget provided by manfgement of ENSERCE, Morgan Stanley derived an implied equity value range far ENSERCE upon application of the financial multiples from de ENSERCH Compirable Transactions (after adjusting for the Distribution, which is cratemplated to be completed prior to the Mergers). This analysis indicated that de implied equity value of ENSERCH was f rom $330.7 million to $727.4 cillion and the equity value per fully-diluted common equivalent share of E2SERCE Common Stock outstanding was f rom $4.63 per share to $10.18 per share. Os transaction utilised in the comparable transaction analysis is identical to the Mergers. In evsluating the precedent transactions, Morgan Stanley made urgments and assumptions with regard to industry performance, general uti7ess, economic, market and financial corditions and other matters, many of thish are beyond the control of ENSERCE or TUC, such as the impact of competition oL the business of ENSERCB and the industry generally, industry gr wth and the absence of any material adverse change in the financial c;ndition and prospects of ENSERCH or the industry or in the financial markets is g neral. Mathematical analysis (such as determ hing the average or median) is tot in itself a meaningful method of using comparable transaction data. Discounted Cash Flow Analysis. Morgen Stanley conducted a discounted cash flow analysis of ENSERCE for the fiscal years 1996 through 2000 to estimate th3 present value of the stand-alone unleveraged free cash flows that ENSERCE is czpected to generate if ENSERCE performs in accordance with scenarios based uppa certain financial forecasts. The discounted cash flow analysis for EN.ERCH was based upon the 1996 ENSERCH Budget and certain discussions with thi management of ENSERCB. Unleveraged free cash flows of ENSERCH were c21culated as net income plus depreciation and amortization plus deferred taxas plus minority interest plus other noncash expenses plus after-taa net intcrest expense less capital expenditures less investment ia working capital. Morrinles multi stanley calculated of EBITDA terminal (" Terminal values Multiple EBITDA for ENSERCH by agplying Methodology ) to theaEBITDA range ofin fier: 2000 from 6.5x to 8.52 representing estimated trading ranges of long-tcra EBITDA multiples. The unleveraged free cash flow streams and terminal v;1urt were then discounted to the present using a range of discount rates from 9.0 % to 10.0 %. The discount rate ranges were selected based upon a hted average cost of capital analysis of ENSERCH. Using the financial eci;irmation inf and forecasts provided by management of ENSERCB, Morgan Stanley dirived an implied equity value range for ENSERCH (af ter adjusting for the Distribution contemplated prior to the completion of the Mergers). This rn:1yris indicated that the implied equity value of ENSERCH was from
$310 tillion to $719 million and the equity value per fully-diluted common cquivilent thir3.
share of ENSERCH outstanding was from $4.34 per share to $10.06 per Dividend Discount Model Analysis. Morgan Stanley performed a dividend ditcount analysis of TUC for n e fiscal years 1996 through 2000 which calculates the present value per share of the estimated future stream of a comp 2ry's dividends based upon certain research analysts' dividend praj:ctions. Ihe projected TUC dividends per share ("DFS') growth through to ths yrar 2000 were analyzed using a range of perpetual growth rates from 4.5% to 5.3% and a range of discount rates from 10.0% to 11.04. The discount rate rrng:s were selected based upon a weighted average cost of capital analysis of TUC. Using this public financial information and forecasts for TUC, Morgan Strnisy derived an implied equity value range for TUC ranging from $8,380.1 tillitn to $9,429.5 million and an implied equity value per fully-diluted common equivalent share outstanding ranging from $37.11 per share to $41.75 per chare. Fra Forme Analysis of the Mergers. Morgan Stanley analyzed the pro forma 1:pict of the Mergers on the ownership of TUC Common Stock. Based on public infor ation available at April 11, 1996, assuming TUC is required to is.,ue cpproximately 14.6 million sEares of TUC Common Stock to holders of ENSERCE Commo3 47 I l l l
l[1])?uc/Eas:rch1))FIsrDC PACS 15 8EP-1996 23:04 EDc: 00-000 0000 00:00 Etb 00 006-0000 00:00 (14433.yX]00048.FIF ( [ Firm 8 4 3. 3. Donne 11ry (212) 341 7777 A0G 3.4.1 p04 t (PAGE) , Stock, the former holders of ENSERCH Common Stock will own approximately 6% of [ tha issued and outstanding TUC Common Stock following the Mergers. Th3 preparation of a fairness opinion is a complex process and is not nicsssarily susceptible to a partial analysis or summary description. In erriving at its opinion, Morgan Stanley considered the results of all of its cn: lyres as a whole and did not attribute any particular weight to any particular analysis or f actor considered by it. Furthermore, selecting any portita of Morgan stanley's analyses, without considering all analyses, would crocts an incomplete view of the process underlying its opinion. In addition, Marg s Stanley may have deemed various assumptions more or less probable than othir casumptions, so that the ranges of valuations resulting for any i pirticular analysis described above should not be taken to be Morgan stanley's l vicw cf the actual value of ENSERCH or TUC. I In performing its analyses, Morgan stanley made numerous assumptions with rsspect to industry performance, general business and economic conditions and eth:r matters, many of which are beyond the control of ENSERCH or TUC. The ca lysss performed by Morgan stanley are not necessarily indicative of actual v 1uma, which may be significantly more or less f avorable than those suggested by cuch analyses, such analyses were prepared solely as a part of Morgan Strnicy's analysis of the fairness of the ENSERCE Conversion Ratio from a finc;clal point of view to the holders of shares of ENSERCH Common Stock and cers provided to the ENSERCH Board in connection with the delivery of Morgan Stan1sy's written opinion dated as of the date of this Joint Prory , Statement / Prospectus. The analyses do not purport to be appraisals or to ! r3flict the prices at which ENSERCH or TUC might actually M sold. Because l ruch c:timates are inherently subject to uncertainty none of ENSERCH, TUC, Morg n stanley or any other person assumes responsibklity for their accuracy. Ia todition, as rescribed above, Morgan Stanley's opinion and presentation to th1 ENSERCE Board was one of many factors takan into consideration by the ENSERCH Board in making its datermination to approve the Plan of Merger. Conieguently, the Morgan stanley analysis described above should not be viewed CG Cct:rminative of de opinions of Oe Boards of ENSERCH or TUC with resMct to thi value of ENSERCE and TUC or whether such Boards would have been willing to cgr e to a different ENSERCH Conversion Ratio. The ENSERCE Board retained Morgan Stanley based upon its experience and (rpertise. Morgan Stanley is an intarnationally recognized investment banking i cad fiiancial advisory firm. Morgan Stanley, as part of its investment banking buziners, is continuously engaged in the valuation of businesses and s>curities in connection with mergers and acquisitions, negotiated undrrwritings, competitive biddings, secondary distributions of listed and l unli ted securities, private placements and valuations for corporate and other I purports. Morgan stanley is a full-service securities firm engaged in securities trading and nrokerage activities, as well as prc<iding investment l i banking and financial advisory services. In the ordinary course of its trading tnd brokerage activities, Mor trld long or short positions,gan Stanley or its affiliates may at any timeand may trade or otherwise effect transactions, t for its own account or the accounts of customers, in securities of ENSERCH or , TUC. In the past, Morgan Stanley and its af filiates have provided financial i cdvierry services to ENSERCH and TUC and have received customary fees for the ! rindizing of these services. Pursuant to a letter agreement dated as of March 13, 1996, ENSERCH has
'cgrcrd to pay Morgan stanley (i) an advisory fee estimated to be between $250,000 and $500,000 in the event the Mergers are not consummated and, (ii) if thi Mergers are consummated, a total f ee estimated to be approximately $11,400,000 (against which any previously paid fees would be credited). In rodition to the foregoing compensation, ENSERCH has agreed to reimburse Morgan Stcnisy for its expenses, including reasonable fees and expenses of its coun:al, and to indemnify Morgan stanley for liabilities and expenses arising i
out of the engagement and the transactions in connection therewith, including ! liebilities under federal securities laws. CONTLICTS OY INTEREST OF CERTAIN PERSONS IN THE MERGERS In crnsidering the recommendations of the TUC Board and the ENSERCH Board with rsspect to the Plan of Merger, shareholders abould be aware that certain C:mbers of ENSERCH management have certain interests 48 i i { l
[ 1))FIEEDGs[14433.TI]00049.FIF FAG 20 SEP-1996 11s$7 EDGs 00 000 0000 00:00 Bus 90 000 0000 00:00 1 1))Tue/Zaserch Firs 8-4 3. R. Donnell:y (213) 341-7777 PMT 3.4.1,p02 (PAGE) in th) Mergers in addition to the interests of shareholders of ENSERCH g21 rslly. The ENSERCE Board was aware of these interests and Considered tnam, amoJg ather matters, in approving the Plan of Merger. Empiryment Agreements. At the time that the ENSERCH Board approved the Plan of Mer er, it was aware of the likelihood that certain members of the senior " ' trzzgement of ENSERCH would enter into employment agreements with TUC or rub;idiaries of TUC. Since the execution of the Plan of Merger, Messrs. Biegler and Satterwhite have entered into employment agreements with TUC, and TU S rvices has entered into an employment agreement with M.E. Rescoe, which till become ef fective only if the Mergers are consummated. See "The Mergers-- Empityment Agreements." The Employment Agreements with Messrs. Biegler, S ttsrwhite and Rescoe will become ef fective only at the Ef fective Time. The Empiryment Agreements are described in greater detail under "--Employment Agriements" below. ChInge-in-Control Agreements and Other Arrangements. Under change-in-control rgrrements entered into by ENSERCH with 32 key employees, certain benefits vill become payable to such employees if their employment is terminated f ollowing the approval of the Plan of Merger by de shareholders of ENSERCE. Unt r certain incentive plans of ENSERCH, options held by employees of ENSERCH v;cted and the forfeiture provisions with respect to shares of restricted ctrek bald by officers and directors lapsed upon the approval by the ENSERCH Brard cf the Plan of Merger and forfeiture provisions with respect to ENIERCB's annual award in May 1996 to nonemployee directors of shares of restricted stock will lapse upon the approval of the Plan of Merger by the chir:hilders of ENSERCE. Upon approval of the Plan of Merger by the char holders of EWSERCH, outstanding ENSERCE stock options will become noxfrrfeitable. See "The Mergers--Change-in-Control Agreements and Other Arr;ngements." Indemnification. Pursuant to the Plan of Merger, to the fullest extent not prohibited by law, the Company has agreed that for a period of six years after the Effective Time all rights to indemnification existing as of the Effective Time in favor of the current and former directors, officers and employees of ENSERCE and its subsidiaries as provided for in their respective Articles of Incyrporation and Bylaws will continue in full force and effect. After the Effective Time, the company will consent to the ertablishment by ENSERCE and its cubsidiarias of such additional indemnification arrangements in favor of thiir respctive directors and of ficers as may be necessary so that they will h v3 the unefit of the maximum indemnification arrangements available to the dir:ctors and officers of the Company for all events or actions occurring cubs quent to the Effective Time. Moreover, for a period of six years after th2 Effective Time, the company will cause to be maintained in effect the policirs end of directors andthe its subsidiaries,'to officers' extentliability such insurance maintained liabllity insurance canbybeENSERCH maintained , nnu*lly at a cost of not greater than 200% of the current aggregate premiums f4r the policies maintained by ENSERCE and its subsidiaries for its directors' rnd efficers' liability insurances provided that the Company may substitute th7r:ffr equivalent policies with respect to matters occurring prior to the Eff ctive Times and provided further that if such insurance cannot be so maintained or obtained, the Company will maintain or obtain as much of such 1:xurnFce for ENSERCE and its subsidiaries as can be so obtained or maintained et c c7st equal to 200% of the current annual premiums of ENSERCE and its cubaidiaries for their respective directors' and officers' liability in2ularce. CERTAIN ARRANGEMENTS RECARDING MANAGEMENT FOLLOWING THE MERGERS At the Effective Time, the composition of the Company Board will be id ncical to the composition of the TUC Board immediately prior to the Effictive Time. Following consummation of the Mergers, Mr. Biegler and Mr. S:ttarwhite will become officers of TUC reporting directly to the Chief Exccutive of TUC, and Mr. Reacoe will become an officer of Texas Utilities Farvic:s Inc. ("TU Services") reporting directly to the Chief Executive of TU S2rviczs. EMPLOYMENT AGREEMENTS TUC has entered into employment agreements with Messrs. Biegler and S:ttsrwhite pursuant to which they will each become an officer of TUC. TU c rvicIs has entered into an employment agreement with Mr. Rescoe 49 I i l l t
I 1
)
PAGs 20-stF-1996 04:32 EDC: 00 000-0000 00:00 B12: 00-000-0000 00:00 I ll1])FINEDGil14433.TX]D0050.FIF [1))Tuc/taserch hre 5 4 2. R. Donnellry (212) 341 7777 A0G 3.4.1.p04 (PACE 3 pur uint to which he will become an officer of 70 services. Each of these employment agreements are expressly conditioned upon the closing of the M;rg rs, and will become effective at the Effective Time. The employment egr:ements will each have a term of two years and will provide for a minimum cnnu:1 salary--$600,000 in the case of Mr. Biogler, $282,000 in the case of , Mr. S:tterwhlte and $280,000 in the case of Mr. Rescoe. The employment I cgriements will also provide for participation in all incentive compensation, i empisyee benefit, and frings benefit programs for which they are eligible by i virtu) of their employments provided that they will be entitled to receive a ' ainimum amount of incentive compensation for the calendar year 1997 equal to
$330,000 in the case of Mr. Biegler, $112,800 in the case of Mr. satterwhite rad $112,000 in the case of Mr. Rescoe. The employment agreements specify that th3 employees will be entitled to participate in the retirement plan sponsored by TUC and provide that the benefit to which they will be entitled by virtue cf cuch participation following the Mergers will not be less than the benefit to which they would have been entitled had they continued to participate in tha r;tirement plan adopted for ENSERCE employees following h e Mergers.
Thi employment agreements of Messrs. Satterwhite azd Rescoe also provide for th3 payment of retention bonus payments in the amount of $141,000 in the case af Mr. satterwhite and $140,000 in the case of Mr. aescos upon the attainment cf eix months of continuous employment following the Mergers, and an r/ditional cash bonus equal to $262,000 in the case of Mr. Satterwhite and
$280,000 in the case of Mr. Boscoe upon attainment of eighteen months of critinuous employment following the Mergers. The bonus payments will not become payable in the event that (i) the employee voluntarily terminates his employment prior to the thirteenth month following the closing of the Mergers in thJ case of Mr. Rescoe and the particular bonus payment date in the case of Mr. Cetterwhite, or (ii) the employee is terminated for cause. In the event a the employee dies or his employment ceases due to his total disability (i.e.,
the employee's incapacity to perform all of his normal duties of employment on a full-time basis for more than six months due to physical or mental illness), thi employee will be entitled to a pro rata part of the retention bonus p yment proportional to the employee's service after the Mergers through the dats rf death or the first date n a employee ceased performing services due to his disability, to the amount of service required to fully earn the applicable ritention bonus payment. 13 the event that Mr. Biegler, Mr. Satterwhite or Mr. Rescoe is terminated eithiut "cause" during the term of his employment agreement, or terminates his empiryment for " good reason
- during such term, he will be entitled to receive
. his cccrued and unpaid salary through the date of the termination, as well as czy benefits, including severance benefits, normally provided by TUC and its cub;idiaries to their of ficers under circumstances similar to such t:rmin tion, and, in the case of Messrs. Satterwhite and Rescoe, the retention bonu3 payments. For purposes of the employment agreements, termination for ,
cruso means (1) an act or acts of dishonesty or material violation of an empityment policy by, or at the direction of, the employees (ii) willful frilura or refusal of the employee to perform services as properly required by his employers (iii) any action or failure to act on the part of h e employee chich is intended to result in injury to the assets, business or prospects of his employers or (iv) the employee's conviction of a felony. Good reason is d2fiscd in the employment agreements to includc an adverse change in the ; empiryce's status or position, a reduction in the employee's salary or ben; fits, or the failure by a successor company to assume the obligations und:t the employment agreements. Any employment agreements in effect at TUC at the Effective Time will be ' cszign d to, and assumed by, the Company, without any change in the terms th:rsof. RETENTION BONUS ARRANGEMENTS Ef frctive upon the closing of the Mergers, ENSERCH has entered into r trntion bonus arrangements with eleven key employees of ENSERCH, each of thom cre expected to retain positions with ENSERCE following the Mergers, itcluding de f ollowit; excentive of ficers of ENSERCH: G.R. Bryan, M.T. Huntir, D.R. Long, and R.B. Williams. Under each of these arrangements, ENSERCH will pay the employee a cash bonus equal to a percentage of the ccployce's current annual salary (typically $0%) upon the employee's Ettsinment of six months of continuous employment following the Mergers, and rs coditional cash bonus equal to a percentage of the employee's current canuti aalary (typically 100%) upon the employee's attainment of eighteen months of 50 1 i I 1 , 1
)
i 1 l l
~., - ,. . -- -.- .=- - - ~ - - - . - . . - . , - ~ , . ~r . ~ ,_ - .-.
i l r!**DGsl14433.T1100051.P!F FaCs 17-8tt 1996 04:10 EDGs 00 000-9000 00:00 B12: 00-000-6000 00:00 Tuc/tas*rcR Fire 3-4 R. R. Donnelley (212) 341 7777 A0G 3.4.1,p03 (PAGE)
~
eintituous esployment following the Mergers. The bonus payments will not becomi payable in the event that, on or prior to the particular bonus payment Eats, n e employee (i) terminates employments-(ii) dies or becomes disabled; er (iii) is terminated for cause. For purposes of the retention bonus arrangements termination for cause means (1) an act or acts of dishonesty or catarial violation of-an employment policy by, or at the direction of, the empicyees (ii) willful failure or refusal of the employee to perform services es prrperly required by TUC or ENSERCR; (iii) any action or failure to act on thm part or busiassa ofprospects the employee of TUC which is inten$ed or ENSERCE; to result or (iv) the employeein injurya to the assets, conviction of ) a fsigny. The aggregate amount of the retention bonus payments which may become payable under these arrangements to all of the applicable employees is ] 63,929,750. i CEANGE-IN-CONTROL AGREEMENTS AND OTHER ARRANGEMENTS ENIERCH has entered into change-in control agreements with 32 hey employees, I including the seven esecutive officers of ENSERCE: D.w. Biegler, G.R. Br ! M.T. Bunter, D.R. Long, M.E. Roscoe, W.T. Satterwhite and R.B. Williams.yan, Tha approval by the holders of ENSERCE Common 8tock of the Plan of Merger will constitute a
- change in controla pursuant to the change-in-control .
agreements. The agreements generally provide for the payment of benefits to r da employee if within a certain time of a change in control such employee's '
-etplayment is terminated, except in the case of (i) death or retirement (other ' ~.thrn sarly retirement initiated by ENSERCB) of the employee, (ii) termination or (iii) termination by the by ENSERCE empiryee other for cause than for *orgood as areason,*.
result of defined disability, to include an adverse change in i tha employee's status or psition, a reduction in the employee's salary or a benefits, or the failure by a successor company to assume ne obligations undrr the change-in-control agreement. The change-in-control agreements of , thrse executive officers (Messrs. Biegler, Rescoe and SatterwM te) and one eth2r officer also provide for the payment of benefits in the event of a . valustory termination of employment by the employee during the period from the thirteenth through the eighteenth month following a change in control. See "-- Empityment Agreements.' ' Th3 benefit payable by ENSERCE in the event of a qualifying termination - fallowinY a change in control is a lump sua amount equal to the sum of (i) the empiryee s accrued base salary, earned vacation time and benefits or awards I ur.dir benefit plans to the date of termination, (ii) the amount of the employee's highest target bonus in the year in which the termination occurs or t in either of the two preceding years pro rated based on the number of days .; citpied in the year to the date of termination, (iii) an amount equal to a multiple of the employee's " annual compensation" (but not in excess of the
- canutl compensation that would be earned up to normal retirement), and (iv) thi value of unezercised stock options that the employee, by giving modce to ENIERCB, chooses not to retain. For purposes of clause (iii) in the preceding l e3ater.ce, the applicable multiple is three for each of the executive of ficers
,' cad sither three, two or one for each other employee. " Annual compensation" f for purposes of clause (iii) above is defined to helude the individual's base 4 p2y plus target bonus for the esecutive officers and for certain, but not all, t of us other employees; while for the remaining of ficers and employees annual i compensation means base pay, r In the event of a qualifying termination following a change in control, the ! ching3-in-control agreements further provide for (i) a gross-up if the besafits payable are taxed under section 4999 of the M e, (ii) the centinuation of insurance programs until the earlier of three years after the - ' date cf termination or the employee's normal retirement date,.(iii) in the cass of employees not participating in the ENSERCE Retirement Income -r l
.Rastcration Plan, a lump sua payment corresponding to payments that would have !
born received under the ENSERCE Retirament Plan if such employee were to j complate two additional years of service, (iv) for employees not vested under . the ENSERCE Retirement Plan, the lump sua value of any payment such employee ' would have received at his or her normal retirement date from the ENSERCE [R2tirement Plan if such employee were fully vested and assuming two additional 1 years of service, and (v).the assignment of club memberships. t Thrse esecutive officers of ENSERCH, Messrs. Biegler, Satterwhite and Rsscos, have agreed with ENSERCH to the modification of their respective fi ,K chings-in-control agreements pursuant to which, upon the . 51 e i e i l i
i[ll)l}Tuc/Enxrch[1 FAG 18 SEF-1996 21:35 EOGi 00-000 0000 00:00 SLKs 00-000-0000 00:00
)TINrDGa[14433.TI)00053.FIF Fora 3-4 1. 1. Donn2111y (212) 341-7771 A0G 3.4.1,p03 (PAGE) actisfaction of all conditions prerequisite to the Merger, and prior to the L Effcetive Time, ENSERCE will pay each of these individuals a lum p:yment in the amount of $2,790,000 in the case of Mr. Biegler, p$789,600 sua cashin tha esse of Mr. Satterwhite, and $784,000 in the case of Mr. Rescoe in lieu of l ti in-)c : trol agreement payment provisions are subsequently activateds andtheir respective rights to receive such payment in the event the chan (ii) th;ir respective rights to receive any of the other benefits under the change-is-control agreements in the event of a voluntary termination by them during '
th) p;riod from the thirteenth through eighteenth month following a change in c7mtrol. ENSERCE has also agreed to pay Mr. Biegler a bonus in the amount of
$900,000 prior to the Effective Time conditioned upon his continued employment with ENSERCE to the Effective Time. The payments made to Messrs. Biegler, 2 tt:rwhite end Rescoe and the modification of their change-in-control (greements will be treated as payments under their existing change-in-control egrocments entitling them to any tax gross-up payments as therein provided.
EESERCH will make any necessary changes to its Executive Deferred Compensation Plta to that Messrs. Biegler, Satterwhite and Bescoe may defer all of the pryncnts made under the modification to their change-in-control agreements undIr such Plan. Except for the foregoing modifications, the terms of the ch:rgs-in-control agreements of these employees will remain in effect fallowing the Mergers. If the employment of the other ENSERCH executive ef fic:rs had been terminated as of June 30, 1996 under circumstances giving rima to an entitlement to benefits under the change-in-control agreements, the v lu2 of their multiple of annual compensation and prorated bonus would have be n es follows: G.R. Bryan--81,425,000 M.T. Hunter--$1,425,0003 D.R. Long--
$704,000; and R.B. Williams--8520,000. The Special Compensation Plan has been c;tcaled by the Board of Directors effective immediately prior to the cInsummation of the Mergers and the payment of deferred compensation payable th:reunder at retirement will be accelerated and result in a payment of compensation by ENSERCE to Mr. Biegler of $900,000 and payment of compensation to three other participants (who are not executive officers), each in the amow;t of 150% of base salary. Under the provisions of the 1996 Performance 11c:;ntive Plan of ENSERCH, de 1996 target bonus levels for plan participants became payable upon adoption of the Plan of Merger by the ENSERCE Board.
P2yments to ENSERCH executive officers arising out of such provisions were as fallows: D.W. Biegler--8338,652; G.R. Bryan--$153,9323 M.J. Hunter --8153,932) D.R. Long--$65,678; M.E. Rescoe--$114,936; W.T. Satterwhite--$115,757s and R.B. Williams--$133,578. In cccordance with the provisions of the ENSERCH 1991 Stock Incentive Plan (thm *1991 Plan'), upon de adoption of the Plan of Merger by the ENSERCH Becrd, all then-outstanding unvested stock options awarded under the 1991 Plan cutomatically became vested and, upon the approval of the Plan of Merger by tio chareholders of ENSERCH, each outstanding option will not be subject to farf iture for any reason, including the termination of the employment of the hold:r, prior to the scheduled erpiration of the option. Also in accordance with the provisions of the 1991 Plan, upon the adoption of the Plan of Merger by th) ENSERCH Board, the restrictions on all then-outstanding shares of rastricted stock awarded under the 1991 Plan (including shares awarded to 4 nrnstployee directors) lapsed, with the result that all such shares of ENSERCH Common Stock became nonforfeitable and immediately transferable. Subsequent to I thi approval by the ENSERCH Board of the Plan of Merger, the automatic annual C7ard of restricted stock to the nonemployee directors of ENSERCE was made pursurnt to the terms of the 1991 Plan, in accordance with which each ninnsployee director received an award of 1,301 shares of restricted stock. Thi rsstrictions on these shares will lapse upon the approval of the Plan of M;rgsr by the shareholders of ENSERCH. . Undar the terms of the ENSERCE Management Incentive Plan (the ' Management Pirn"), upon the approval of the Plan of Merger by the shareholders of ENSERCH, the remaining 2,421 unvested stock options held by five employees thit htve been granted pursuant to the Management Plan will become rutom tically vested and each outstanding stock option under the Management Pl:n Will not be subject to forfeiture for any reason before the expiration of ana yesr from the date on which such option first becomes exercisable. In cccordance with the provisions of the ENSERCH 1981 Stock Option Plan (the
*1981 Plan *) each outstahding option, all of which had previously vested, upon thi cpproval of the Plan of Merger by the shareholders of ENSERCH, will not be ,
subjict to forfeiture for any reason, including the termination of the i employRent of the holder, prior to the scheduled expiration date of the ! option. t 52 q l i l i 3
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f/ FAG: 20 827-1996 11:33 EDCs 00-000 0009 00:00 B1K 00-000 0000 00:00 ll1])Tue/tas;rch1))FINEDCa[14433.TI)00053.FIF [1 Firs 8 4 R. R. Donnellry (212) 341-7777 FMT 3.4.1,p02 (PACE) Th2 aggregate number of options the vesting of which has so been accelerated Lnd the aggregate number of shares of restricted stock as to which the rcitrictions have lapsed held by the executive officers of ENSERCE are as fcllows: D.W. Biegler--78,750 options and 72,000 shares of restricted stocks G.R. Bryan--33,375 options and 30,200 shares of restricted stocks M.T. Cuntsr--39,000 options and 20,000 shares of restricted stocks D.R. Long--
'14,013 options and 5,000 shares of restricted stocks M.E. Rescoe--35,000 options and 19,000 shares of restricted stocks W.T Satterwhite--20,625 options and 14,700 shares of restricted stocks and R.B. Williams -31,500 options and 22,100 shares of restricted stock.
At the Effective Time of the Mergers, each option which remains outstanding undar the 1981 Plan, the 1991 Plan and the Management Plan will be converted to en option to purchase shares of TUC Common Stock having equivalent value. M3fers. Biegler, Roscoe and Satterwhite, who are also officers of EEX, were previcusly granted 25,000 shares, 6,000 shares and 5,000 shares, respectively, of rsstricted EEX Common Stock under the EEX 1994 Stock Incentive Plan (the
'EEX Plan"). Under provisions of the EEX Plan, the restrictions on those thirza will be lifted at the time the EEX Board of Directors approves the Pralininary Merger. In addition, under change-in-control provisions in the EEX Plts, all unvested options granted under the EEX Plan will become fully carrcisable upon approval of the Preliminary Merger by the shareholders of EEX. Messrs. Biegler, Long, Roscoe and Sattacwhite hold 31,250 options, 3,438 'aptions, 14,000 options and 6,875 options, respectively, that would be eft cted.
Ftllowing the Mergers, non-employee directors of ENSERCE may elect to r:caive in a discounted lump sum any fees deferred through the ENSERCH Csrporation Deferred Compensation Plan for Directors and other deferred compelsation that have been funded through a trust. CERTAIN UNITED STATES TEDERAL INCOME TAX CONSEQUENCES The following is a summary of certain United States federal income tax conrequances applicable to United States Bolders (as defined below) of TUC etock and ENSERCE stock. This summary is based upon the provisions of the Cod , applicable Treasur Re lations promulgated thereunder, judicial ; diaisions, and current a sin strative rulings, all of which are subieet to chrag2. This discussion addresses only United States Rolders who hold TUC stock or ENSERCE stock as capital assets. For this purpose, a ' United States Rolter" is any beneficial owner of ENSERCH stock or TUC stock that is (1) a , Unitrd States citizen or resident, (ii) a corporation, partnership, or other cttity created or organised under the laws of the United States or any state } thstrof, or (iii) any estate or trust subject to United States federal income
'ta= ca its income, regardless of its source.
This summary is based upon the saalification of the Distribution as a tax. frae spin-off pursuant to section 3b5 of the Code and the Mergers as tax-free t trin2tetions as described in section 351 of the Code. Consummation of the M:rgrrs is conditioned upon (1) a favorable ruling from the Internal Revenue 4 SJrvice that the Distribution will qualify as a tax-free spin-off under sectica 355 of the Code such that no taxable gain or income will result to ENIERCE or the holders of ENSERCH Common Stock as a result of the Distribution, and (ii) the receipt of opinions of King & Spalding, special tax crunzel to ENSERCH, and Reid & Priest LLP, special tax counsel to TUC, to the affect that the Mergers will be treated as tax-free transactions as described in scetion 351 of de Code. Any ruling or opinions will be based upon certain assurptions and upon representations by the managemant of TUC and ENSERCH, thich if incorrect or untrue in any respect may undermine the ability of TUC cid EZSERCH to rely on such rulings or opinions. In the event that the rulings cr epinions could not be relied u p n, the tax consequences of the Distribution rmd the Mergers would be substantially different from those described below. ENSERCE and TUC are not aware of any facts or circumstances which would cause (my tuch representation or assumption to be incorrect or untrue in any octarial respect. Nevertheless, if both the Distribution and the ENSERCE MIrgtr were held to be taxable, ENSERCE would be taxable on the Distribution and its shareholders would be subject to tax on the Distribution and the archstge pursuant to the ENSERCH Merger, which tax could be material (subject to thm indemnity obligations of New EEX under the Tax Allocation Agreement). 53
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([1))FINEDCs[14433.TX]e0054. PIP FAGS 20-8rt.1996 04:49 EDGs 60-000 0000 00:00 SLK 60-000 0009 00:00 {[1)]Tue/ Ens:rch Fir 3 8-4 3. 3. Donnellry (212) 341 7777 A0G 3.4.1,p03 (PAGE) T:s Consequences of the Distribution to United States Bolders of ENSERCB L Common Stock. A United States Bolder of ENSERCH Common Stock who receives New EEX Common Stock in the Distribution will recognize no gain or loss upon the Distribution, and no amount will be included in the income of such Holder upon th) Distribution, except that gain will be recognized to the ext (nt that cash l is r:ceived in lieu of fractional shares. Accordingly, (1) the aggregate tax bs:is of the New EEX Common Stock and the ENSERCH Common Stock in the hands of . Gach Bolder of ENSERCH Common Stock immediately after the Distribution will be th) come as the aggregate basis of the ENSERCE Common Stock held by such Koltar immediately prior to the Distribution (reduced by any basis allocable . _47' to e fractional share interest in New EEX Common Stock for which cash is rrcOived), and will be allocated between the New EEX Common Stock and the I ENSERCH Common Stock in proportion to the fair market value of each, and (ii) I thi hrlding period of the New EEX Common Stock received by each holder of EZSERCH Common Stock pursuant to the Distribution will include the holding ptriod of the ENSERCH Common Stock held by such common shareholder. A United Stitc3 Holder of ENSERCH Common Stock who receives cash in lieu of a frictional share of New EEX Common Stock will recognize gain in an amount equtl to the excess of the amount of cash received (plus the Holder's share of Asiling expenses, if any, which expenses may be deductible) over the United States Bolder's ratable portion of the tax basis of the New EEX Common Stock chich is allocated to such fractional share. T:x Consequences of the ENSERCH Merger to United States Holders of ENSERCH Commta Stock. A United States Bolder of ENSERCE Common Stock whose shares are rzchinged and converted into Company Common Stock pursuant to the ENSERCE M:rg:r will recognize no gain or loss as a result of the exchange and ettv;rsion, except that gain will be recognized to the extent that cash is r:crived in lieu of fractional shares. Accordingly, (i) the aggregate tax baris of the Company Common Stock received by such United States Bolder will be equc1 to the aggregate tax basis of the ENSERCH Common Stock surrendered th r;for (reduced by any basis allocable to a fractional share interest in Company Common Stock for which cash is received), and (ii) the holding period of th) Company Common Stock will include the holding period of the ENSERCH Common Stock surrendered. A United States Bolder of ENEERCH Common Stock who r:crives cash in lieu of a fractional share of Company Common Stock will r: cognize gain in an amount equal to the excess of the amount of cash received (plus the Holder's share of selling expenses, if any, which expenses may be d2?uctible) over the United States Holder's ratable portion of the tax basis of th) ENSERCE Common Stock surrendered which is allocated to such fractional ghtra. Such gain will be capital gain and will be long-term capital gain if th3 United States Holder has owned the ENSERCH Common Stock for more than one yccr. E7ch issued and outstarding share of ENSERCH Common Stock is accompanied by l ENIERCH Rights. The ENSERCE Rights will be extinguished in the ENSEECE Merger. i Thi (stinguishment of the ENSERCH Rights will not be treated as a taxable avcnt to the United States solder of such stock. 1 Tax Consequences to United Stater Jolders of ENSERCH Preferred Stock. United ' Statss Bolders of ENSERCH Preferred Stock will not receive anything in tne i Distribution. United States solders of ENSERCH Preferred Stock will remain holdtra of such stock and will not receive Company stock in the ENSERCE MIrgir. Accordingly, United States Bolders of ENSERCE Preferred Stock will not rccognire gain or loss with respect to such stock as a result of the Distribution or the ENSERCH Merger. Ttz Consequences of the TUC Merger to United States Holders of TUC Common Stock. A United States Holder of TUC Common Stock whose shares are deemed azchinged and converted into company Common Stock pursuant to the TUC Merger will rtcognize no gain or loss as a result of the conversion. Accordingly, (1) th2 aggregate tax basis of the Company Common Stock received by such United States Holder will be equal to the aggregate tax basis of the TUC Common Stock surrendered therefor, and (ii) the holding period of the company Comm n Stock will include the holding period of the TUC Common Stock turrendered. Ttz Consequences to ENSERCH, TUC and the Company. None of ENSERCH, TUC or t%3 Co'pany will recognize any material gain or loss as a result of the Dietribution or the Mergers. The consolidated group of which TUC will have b>In the common parent prior to the Mergers for federal income tax purposes will curvive the Mergers, and the corporations which are members of the coarolidated group of which ENSERCH vlli have
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54 1 1 1 I I I 1 i 1
FACs 20-SEF 1996 04:49 EDC: 00 000 0000 00:00 01J:s 00-000-0000 00:00 [l 1))Tuc/Easerch [l 1] ) FINIDC a [144 :3.TX) 00055. Fire FIF 8-4 R. R. Donnellty (212) 341-7777 AOC 3.4.1,p03 4PAGE)- born the common parent prior to the Mergers for federal income tax purposes (oth3r than the Distribution Subsidiaries) will become members of ne TUC cantalidated group of which the Company will, after the Mergers, be the common p2rint for federal income tax purposes. Cod 3 Section 382 Limitations. In general, section 382 of the code imposes "~~' liniLEtions on the future use of net operating losses (*NOLs") by a corporation which has sustained a fifty percentage point change in the ownIrthip of its stock within a three year period. As a result of the ENSERCH M;rg2r, ENSERCH will have an ownership change within the meaning of section 362 of the Code. As a result, af ter ne ENSERCE Merger ENSERCB's ability to use its NOLs generated prior to the ENSERCH Merger will be limited. Pscillary Transactions. In conjunction with the ENSERCE Merger, nonqualified empicyee stock options to buy shares of ENSERCH Common Stock will be converted 11to cptions to purchase Company Common Stock having an equivalent value. This crnycrsion will not be considered a taxable event to any holder of such eptiens. Tha 6 3/8% convertible subordinated debentures due 2002 issued by ENSERCH (thm *ENSERCE Convertible Debentures") which are currently convertible into ENSERCE Common Stock will, after the Mergers, be made convertible into Company Commo3 Stock. A bolder of an ENSERCH Convertible Debenture who converts such Debenture into Company Common Stock subsequent to the Mergers will recognize glin er loss to the extent of the difference between the fair market value of th7 Company Common Stock received and the holder's adjusted basis in the ENSERCE Convertible Debenture converted. In addition, under certain final Trangury Regulations effective as of September 24, 1996, it is likely that the ch;ngs b Qe conversion feature of the ENSERCE Convertible Debentures would be tr:ated as a significant modification of the debt instrument which results in a ' deemed
- taxable exchange of the old debenture for a new debanture. The brid!.rs of ENSERCE Convertible Debentures should consult with their tax (dvissrs as to the specific tax consequences of the Mergers to them.
t THE ASOVE FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY AND DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX COWSEQUENCES OF THE MERGERS. THE DISCUSSION ALSO DOES NOT ADDRESS THE TAX CONSEOUENCES OF THE RECEIPT OF TUC STOCK OR ENSERCE STOCK BY A PERSON AS COMPENSATION UNDER THE APPLICABLE TAX LANS. ALL BOLDERS OF TUC AND ENSERCE STOCK ARE URGED TO CONSULT NITH THEIR ONN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGERS. ACCOUNTING TREATMENT Th3 TUC Merger will be accounted for by the Company as a combination of compcnies under common control using historical costs in a manner similar to a pooling of interests, and the ENSERCE Merger will be accounted for by the comptzy as a ' purchase
- for financial accounting purposes in accordance with g : r:lly accepted accounting principles. The purchase price (i.e., the '
crazideration) will be allocated based on the fair value of the ENSERCH assets c.co ired and liabilities assumed. Such allocations will be made based upon valu;tions and other studies that have not been finalized as of the date ' h3rGcf. The excess of the purchase price in the ENSERCH Merger over the ' crou;ts so allocated will be allocated to goodwill. NO DISSENTERS' RIGHTS Und2r the TBCA, dissenters' rights are not available to holders of shares of (i) TUC Common Stock in connection with the matters to be acted upon at the TUC M:eting or (ii) ENSERCE Common Stock in connection with the matters to be acttd upon at the ENSERCE Meeting. DIVIDEND POLICY Th3 Company will be a legal entity, separate and distinct from its various sub3idiaries. As a holding company with no significant operations of its own, tha principal sources of its funds are dividends and other 55 4 l 1 l l i
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, . _ _ _ . . .- . . . . . -- ___m -- m _ . _
fit))rIstDGs[14433.Tr]00056. PIP PAGs 20-SEP*1996 04:49 EM: 00 000-0000 00:00 SIK: 00 000 0000 00:00 ll1])Tve/taserch Pn m 5-4 1. 3. DonnellI7 (212) 341-7777 A0G 3.4.1,p03 (PAGE). distributions from its operating subsidiaries, borrowings and sales of equity. Th3 rights of the Company, and consequently its shareholders, to participate ' in any distribution of u s assets of any of its subsidiaries will be subject to the prior claims of creditors and preferred shareholders of each + gub31 diary, except to the extent that claims of the Company in its capacity as e creditor are recognized. Th1 Company does not expect that the regulatory and contractual restrictions tpplicable to the Company or its subsidiaries will significantly affect the eperctions of the Company or its ability to pay appropriate dividends on the
'CompIny Common Stock following the Mergers. Subject to these restrictions, the Comptny presently intends to pay quarterly divioends on the Company Common Stock following the Mergers at a rate no less than the current rate being paid en TUC Common Stock, although future dividends on the Company Common Stock eill depend upon future financial results and requirements, and there can be no assurances as to any future dividands.
STOCK EXCHANGE LISTING OF COMPANY COMMON STOCK l Th3 Company will apply for the listing on the NYSE of Company Common Stock 12ruible in the Mergers and in connection with the Conversion. Approval of the . ligting on the NYSE cf the shares of Company Common Stock issuable in the i Merggrs, upon of ficial notice of issuance, is a condition precedent to the cri;ummation of the Mergers. The Company may also apply for listings on other i txthinges. If TUC and ENSERCE continue to meet the requirements of the NYSE rnd the Chicago Stock Exchange, and with respect to TUC, the Pacific Stock Etchinge, TUC Common Stock and ENSERCH Common Stock, respectively, will continue to be listed on those exchanges until the Effective Time. Each series rf ENSERCE Preferred Stock will continue to be listed on all stock exchanges en thich it currently is listed, provided that ENSERCE continues to meet the requirements of those exchanges. , i TEDERAL SECURITIES LAW CONSEQUENCES All shares of Comp y Common Stock received by TUC and EMSERCH sharabolders
'in the Mergers will b freely transferable, except that shares of Company i
' Common Stock received by persons who are deemed to be " affiliates" (as defined j und:r the Securities Act) of TUC or ENSERCE prior to or upon consummation of '
th3 respective Mergers may be resold by them only in transactions permitted by e the resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144 or after registration in the case of such persons who become i af filiates of the Company upn consummation of the Mergers) or as otherwise . permitted under the Securities Act. Persons who may be desmed to be affiliates e af TUC, ENSERCH or the Company generally include individuals or entities which ! 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 ! char holders of such party. The Plan of Merger r gulres TUC and ENSERCE to use - th11r best efforts to cause each of their respeuve af filiates to execute a crittcn agreement to the effect that the affiliate will not offer or sell or atherwise dispose of any shares of Company Common Stock issued to the , sffiliate in or pursuant to the applicable Merger in violation of the , Sicurities Act or the rules and regulations promulgated by the SEC thereunder. ' 56 i l l l' i i t l
l l . M1))FINEDC (14433.TIl00057. PIP FAG: 18 SEF 1996 21:39 DC: 00 000 0000 00:00 SLK 00-000-0000 00:00 l ((1))Tuc/Ensirch F!rs 8-4 R. I. Donnell&7 (212) 341-7777 ADG 3.4.1.p03 i (PAGE) REGULATORY MATTERS srt forth below is a summary, based on advice of counsel for TUC and ENSERCB, of the regulatory requirements affecting the Mergers. Failure to ebtsin any necessary regulatory approval or any adverse conditions that are 1 po 44 with respect to any necessary regulatory approval may affect the cinTummation of the Mergers. I %NTITRUST CONSIDERATIONS Th3 ESR Act and the rules and regulations thereunder provide that certain i trinacetions (including the Mergers) may not be consummated until certain j ! infrrmation has been submitted to the Antitrust Division of the Department of Juf tice (the
- Antitrust Division") and the Federal Trade Commission (the
*FTC*), and the specified ESR Act waiting period requirements have been satisfied. TUC and ENSERCH submitted respective Premerger Notifications purcu:nt to the BSE Act on July 1, 1996. On July 30, 1996, TUC and ENSERCE cach received a request for additional information regarding the Mergers from th3 Antitrust Division, and the Mergers may not be consummated until 20 days i efter both TUC and ENSERCH have substantially complied will all such requests.
r Tb2 czpiration or earlier termination of the ESR Act waiting period would not i pr;clude the Antitrust Division or the FTC from challanging de Mergers on i i s.stitrust grounds. Neither TUC nor ENSERCH believes that de Mergers will l viAltte federal antitrust laws. If the Mergers are not consummated within 12 j l mont% after the expiration or earlier termination of the applicable ESR Act l taitirg period, TUC and ENSERCE must submit new information to the Antitrust Divi" ion and the FTC, and a new ESR Act waiting period must expire or be i ccrli;r terminated before the Mergers can be consummated. l TAX MATTERS Spis-off Ruling. Under the Plan of Merger, the consummation of the Mergers is conditioned upon the consummation of the Distribution, which is itself ; t conditioned upon the receipt of a ruling f rom the IRS reasonably satisf actory to ENSERCH and TUC to the effect that de Distribution will result in no tazible gain or income to ENSERCH or to its shareholders. On June 12, 1996, l E2fERCE submitted a request for a ruling from the IRS that, among other thing), the Distribution will qualify as a tax-free spin-off under section 355 , l of O 2 Code for federal income tax purposes and that, for federal income tar 1 pur p es, (a) no gain or loss will be recognized by, and no amount will be l lucluded in the income of, the holders of ENSERCH Common stock upoa the l Dietribution, (b) no gain or loss will be recognized by ENSERCH upon the 1 Di:tribution, (c) the aggregate basis of the New EEX Common Stock and the ! EN1ERCH Common Stock in the hands of each holder of ENSERCE Common Stock l immedirtely after the Distribution will be the same as the aggregate basis of i the ENSERCE Common Stock held by such holder immediately prior to the ) i rittribution, and will be allocated between the New EEX Common Stock and the ENSERCH Common Stock in proportion to the fair market value of each, and (d) th) hilding period of the New EEK Common Stock received by each holder of ' ENSERCE Common Stock pursuant to the Distribution will include the holding period of the ENSERCH Common Stock held by such common shareholder, provided l th2t tuch stock is held as a capital asset on the date of the Distribution. l Th1 ruling will not address U.S. state or local or non-U.S. tax consequences of ths Distribution or the tax consequences of any other transactions. The rulirg will be based on certain factual representations and assumptions which l if incorrect or untrue in any material respect may invalidate the ruling, j PUBLIC UTILITY EOLDING COMPANY ACT OF 1935 Th3 Company is required to obtain SEC approval under Section 9(a)(2) of the 1933 Act in connection with the Mergers. Section 9(a)(2) of the 1935 Act I rIquirse an entity owning, directly or indirectly, 5% or more of the voting securities of a public utility company (as defined in the 1935 Act) to obtain tb2 rpproval of the SEC prior to acquiring a direct or indirect interest in 5% cr acra of the voting securities of a second public utility company, in the i M;rgrre, the Company will acquire all of the outstanding voting securities of l TUC thich holds all of the outstanding voting securities of TU Electric and SESco es w311 as all of the outstanding voting securities of ENSERCH,each also of which is a public utility company for purposes of the 1935 Act, a public utility company 57 l [
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((1])f1NEDGsl14433.TZ)00050.717 FAC: 20 stF 1996 04:53- CDG 00 000-0000 00:00 suo 00-000 0000 00:00 ((1))Tue/ Enrich Firm 5-4 1. 3. Donnelley (212) 341 7777 A0G 3.4.1,p03 (PAGE) for purposes of the 1935 Act. An application for approval of the Mergers and La crdIr confirming that following consummation of the Mergers the Company vill be a holding company (as defined in the 1935 Act) esempt from all provisions of the 1935 Act except section 9(a)(2) thereof, will be filed by , ths Company. ._ .- I Unter the applicable standards of the 1935 Act, the SEC is directed to l 1 Cpprova the proposed Mergers unless it finds that (i) the Mergers would tend towarts detr uental interlocking relations or a detrimental concentration of control, (ii) the consideration to be paid in connection with the Mergers is j nst rsasonable, (iiin the Mergers would unduly complicate tre capital ' structure of the applicant's holding company system or would be detrimental to j ths prrper functioning of the applicant's holding company system or (iv) the Mergirs would violate applicable state law. To approve ne proposed Mergers, ths SEC must also find that the Mergers would tend towards the development of an intagrated public utility system and would otherwise conform to the 1935 Act's integration and corporate simplification standards. TEXAS RAII. ROAD COMMISSION REVIEW l Th2 Texas Railroad Commission (the
- Railroad Commission"), which has i jurirdiction over gas utilities in the state of Texas, has indicated that it has zo opposition to the ENSERCH Merger, that it will rely on existing Euthirity and resources to protect n e public interest and ratepayers subject to its jurisdiction, including ratepayers who are customers of ENSERCH, and thtt there is no hindrance under Texas natural gas utility regulatory law to con;ummation of the ENSERCH Merger. .
OTHER RECULATORY MATTERS TU Electric holds various Nuclear Regulatory Commission ("NRC") licenses tuthorizing TU Electric to own and operate the Comanche Peak nuclear gescr: ting facility. The Atomic Energy Act provides that no NRC license may be tr:asfarred, assigned, or in any manner disposed of directly or indirectly, thrcugh transfer of control of any license to any person uM ess the NRC con 3 cats to the transfer. Nhile TU Electric does not believe that the Mergers , izvsiva a transfer of control of TU Electric's licenses, TU Electric has ! notified the NRC of the Mergers and will obtain NRC consent, if re uired in c:nnretion with the Mergers. If NRC consent is required, TU Electr c belkeves thit, under applicable NRC precedents and practice, such consent can be cbtaised in a timely manner and on satisfactory terms. TUC and ENSERCH have ' ' Egreed in the Plan of Mercer to use all commercially reasonable efforts to tbtnin regulatory approvals, but there can be no assurance as to when or if tuch cpprovals will h obtained or that such approvals will be obtained on tirat er conditions that do not have a material adverse ef fect on the buziness, operations, properties, assets, condition, prospects or results of ( tha Company following the Mergers. 58 i l- . [ P k l t
t l l ((1))f7EEDGsil4433.TX)o0059.FIF FAG: 17.sEF 1996 03:49 EDGs 90 000 0000 00:00 B1Js 00 900 0000 09:00 [(1))Tuc/Easerch Ftr5 8 4 R. 2. Donnelig (213) 341 7777 A0G 3.4.1,P03 (FAGE) l THE PLAN OF MERGER Th2 following is a brief summary of the material provisions of the Plan of M:rgir, a copy of whien is attached as Annex I and is incorporated herein by rifar: tee. Thls summary is qualified in its entirety by reference to the Plan af M:rger. j THE MERGERS Th3 Plan of Merger provides that, following the approval of the Plan of M!rgsr by the holders of TUC common Stock and ENSERCH Common Stock and the retisfiction or waiver of the other conditions to the Mergers, including (btcining the requisite regulatory approvals, each of two wholly owned , rub:idiaries of the Company will be merged with and into TUC and ENSERCH, ! rsepretively, as the result of which TUO and ENSERCH will become wholly owned cubridiaries of the Company. If the Plan of Merger is approved by the holders of TUC Common Stock and ENSERCH Common Stock, and the other conditions to the Mergers are satisfied or I etived, the closing of the Mergers will take place on the second business day immedictely following the date on which the last of the conditions referred to below under *The Plan of Merger--Conditions to the Mergers
- is fulfilled or Taiv d, or at such other time and date and place as TUC and ENSERCE shall mutu 11y agree, i
Purcuant to the Plan of Merger, immediately prior to the closing of the ENSERCH Merger, EEX is to be merged with and into LSEPO in the Preliminary Marg;r in which LSEPO is to change its name to Enserch Exploration, Inc. ENSERCH is to subsequently distribute its entire interest in New EEX to its rhirch:1ders of record as of a date to be fixed by the ENSERCE Board, which is expectcd to be shortly prior to the Effective Time but after the effective i time ef the Preliminary Merger. Articles of Merger complying with the requirements of the TBCA shall be ex cuted by TUC and TUC Merger Corp. as well as ENSERCE and ENSERCE Merger CJrp., and filed with the Secretary of State of Texas as soon as practicable fwllowing the closing of the Mergers. The Mergers shall become effective at i cuch time as the Secretary of State of Texas, upon such filing of the Articles cf M:rger, issues certificates of merger with respect to the Mergers. CIniummation of the Mergers. At the Effective Time, pursuant to the Plan of M:rg:rs
. E;ch issued and outstanding share of TUC Common Stock (except shares
-owned by TUC or ENSERCH or any of their respective subsidiaries, which L'ill be cancelled and cease to exist) will M converted into one share of Company Common Stock.
. Each issued and outstanding share of ENSERCH Common Stock (and the (ccompanying ENSERCE Right) (except shares owned by ENSERCH or TUC or cny of neir respective subsidiaries, which will be canceled and cease to exist) will be converted into such f raction of a share of Company Common Stock as is equal to the quotient obtained by dividing $8.00 by the Average TUC Price, provided that notwithstanding the actual Average TUC Price, the Average TUC Price will not be deemed to be less than
$35.625 or more than $43.625 (the " Collar *). As a result of the Collar, if the actual Average TUC Price is greater than or equal to $43.625, the E%SERCH Conversion Ratio will be fixed at 0.183, and if the actual A7erage TUC Price is less than or equal to $35.625, the ENSERCH Cinversion Ratio will be fixed at 0.225. To the extent that the actual Average TUC Price is between $35.625 and $43.625, the ENSERCH Conversion Ritio will equal a number between 0.183 and 0.225.
. E ch issued and outstanding share of each series of ENSERCH Preferred Stock shall be unchanged in and shall remain outstanding after the Mirgers.
. Each issued and outstanding ENSERCH Convertible Debenture shall remain outstanding after the Mergers. ENSERCH will take such action as may be nicessary so that, after the consummation of the Mergers, the ENSERCH Convertible Debentures shall be convertible in accordance with their tares 59
((1])FINEDCsl14433.yX]00060.P!F PAG: 20 5EP-1996 04:33 EDG 00 000-0000 00:00 BLits 00-000 0000 00:00 ((1)]yuc/Ezssrch Fors S-4 R. R. Donn211sy (212) 341-7777 A0C 3.4.1,p03 (PACE) only for company Common Stock and the Company will authorize and reserve for issuance, or otherwise provide, a sufficient number of shares of Company Common Stock for delivery upon such conversion of the then-outstanding ENSERCH Convertible Debentures. Moreover, the conversion price for the ENSERCH Convertible Debentures will be adjusted, effective as of the record date for the Distribution, by multiplying the conversion price in effect immediately prior to the Effective Time by a fraction, the numerator of which is the average of the daily closing prices of ENSERCH Common Stock for the 30 consecutive business days commencing 45 business days before the record date for the Distribution minus the fair market value (as determined by the Board of Directors) of the New EEX Common Stock being distributed, and the denominator of which is the average of the daily closing prices of ENSERCH Common Stock for the 30 consecutive business days commencing 45 business days before the record date for the Distribution. The issuance of shares of Company Common Stock into which the ENSERCE Convertible Debentures may be converted is being registered under the Securities Act pursuant to the Rsgistration Statement.
. Each share of capital stock of the company that is issued and outstanding immediately prior to the Mergers shall be canceled, and no consideration shall be delivered in exchange therefore.
Bassd on the capitalization of TUC and ENSERCH and the Conversion Ratios, calculated as of April 12, 1996, holders of TUC Common Stock and ENSERCH Comzon Stock would have held approximately 94.3% and 5.7%, respectively, of tha Eggregate number of shares of Company Common Stock that would have been outetsuding if the Mergers had been consummated as of such date. No certificates or scrip representing fractional shares of Company Common Stock will be issued upon the delivery for exchange of certificates of ENSERCH Common Stock, and such fractional shares will not entitle the owner thereof to vote or to any rights of a holder of Company Common Stock. As promptly as practicable following the Effective Time, d e Exchange Agent will determine tha szcess of (i) the number of full shares of Company common Stock delivered to ths Exchange Agent by the Company based on the ENSERCH Conversion Ratio evsr (ii) the aggregate number of full shares of Company Common Stock to be distributed to holders of ENSERCH Common Stock (the Excess Shares"). As soon aftsr the Effective Time as practicable, the Exchange Agent, as agent for the holdars of ENSERCH Common Stock, will sell the Excess Shares at then prevailing prices on the NYSE through one or more member firms of the NYSE in round lots to the extent practicable. The Company will pay all commissions, trtasfer taxes and other out-of-pocket transaction costs, including the arpenses and compensation of the Exchange Agent, incurred in connection with such sale of the Excess Shares. The Exchange Agent will determine the p rtion of such net proceeds from the sale of the Excess Shares to which each holder of ENSERCH Common Stock is entitled, if any. Certificates representing TUC common Stock at the Effective Time will be disazd to represent an equal number of shares of Company Common Stock and there will be no need for the holders of TUC Common Stock to exchange their certificates. As soon as practicable after the Effective Time, the Exchange Agtnt will mail to each holder of record of a certificate or certificates that, immediately prior to the Effective Time, represented outstanding shares of ENSERCH Common Stock (collectivel{, the " Certificates") that were converted (collsetively, the " Converted Shares ) into shares of Company Common Stock, as , osseribed above, (i) a form of letter of transmittal (which shall specify that delivary shall be effected, and risk of loss and title to any Certificate shall pass, only upon actual delivery of such certificate to the Exchange Agant) and (ii) instructions for effecting the surrender of Certificates in exchrnge for certAficates representing Company Common Stock and cash in lieu of fractional shares, if any, and (iii) instructions concerning enrollment in the COIpany's Dividend Reinvestment and Common Stock purchase Plan. SEAREHOLDERS OT TUC SHOULD NOT SEND IN THEIR CERTIFICATES. SKAREHOLDERS OF ENSERCH SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE INSTRUCTIONS i TROM THE EXCEANGE AGENT. Upon surrender of a certAficate to the Exchange Agent (or to such other
- agent or agents as may be appointed by agreement of TUC and ENSERCH), together 1 with a duly executed letter of transmittal and such other 60 3
i _ _
1 ([IlFINfDGi[14433.TX]00061. PIP PAGs ll 8EP 1996 21:29 TDGs 00-000-0000 00:00 BLKs 00-000 0000 90:00 ((1])Tue/t.as:rch TIr3 5 4 1. R. lionaality (212) 341-7777 A0G 3.4.1.p03 (PAGE) . docu2Jnts as the Exchange Agent shall require, the holder of such certificate chill be entitled to receive in exchange therefor a certificate representing th2 number of whole shares of Company Common Stock that such holder has the right to receive under the Plan of Merger. Until surrendered, each certificate Ahull be deemed at any time after the Effective Time to represent only the right to receive upon such surrender a certificate representing shares of i Comp ny Common Stock and cash in lieu of any fractional shares of Company j Common Stock. No dividends or other distributions declared or made after the Effective Tino with respect to shares of Company Common Stock with a record date after th2 Effective Time will be paid to the holder of any unsurrendered Certificate with respect to the shares of Company Common Stock represented thereby, and no c ch payment in lieu of fractional shares shall be made to any such holder, until such certificate shall be surrendered. After such surrender, subject to
- spplicable law, there will be paid to such holder, without interest, the unpaid dividends and distributions and any cash p yment in lieu of a i l
frcetional share, to which such holder is entitl REPRESENTATIONS AND WARRANTIES Tha Plan of Merger contains customary representations and warranties by each cf TUC and ENSERCH relating to (1) their respective organization and quslification, the organization and qualification of their respective cubridiaries and similar co orate matterms (ii) the businesses of their rtipective subsidiaries and oint ventures, including the capital structure of cuch subsidiariess (iii) the r respective capital structuress (iv) tu thorization, execution, delivery, performance and enforceabilit of M'rger and the Stock Option Agreement and related matteres (v)yrequired of the Plan regul: tory and statutory approvalsa (vi) compliance with applicable laws and cgreements; (vii) their reports and financial statements filed with g v:rnmental authorities and the accuracy of information contained thereins (viii) the absence of material adverse changes and undisclosed liabilitiess (ix) the absence of any litigation matters, pending or threatened, likely to biva 2 TUC Material Adverse Effect (as defined in the Plan of Merger) or an ENIERCH Materihl Adverse Effect (as defined in the Plan of Merger), as the c203 tay bes (x) the accuracy of information supplied thereby for use in the R;gi2tration Statement, of wMeh this Joint Proxy Statement / Prospectus forms a p rt, filed by the company in connection with the issuance of shares of Comp'ny Common Stocks (zi) the filing of all required Tax Returns (as defined in tb3 Plan of Merger) and the absence of any claims, assessments, audits or przcacdings for any alleged deficiency in tax: (zii) employee matters relating to th2 Employee Retirement Income Security Act of 1974, as amendeds (1111) with r:spect to ENSERCH only, compliance with all applicable labor and c:ployment laws and related matters: (xiv) compliance with applicable cmvironmental, health and saf ety laws, the absence of which is likely to have 1 c TUC Material Adverse Effect or an ENSERCH Material Adverse Effect, as the ' l cmco DCy bes (xv) the utility regulatory status of TUC and ENSERCH and their ricpeed ve subsidiariess (xvi) the votes of the sharabolders of TUC and the thirtholders of ENSERCH required to approve the Plan of Mergers (xvii) the ricript by TUC of a f airness opinion of Barr Devlin and by ENSERCH of a f&irness opinion of Morgan Stanleys (xviii) the existence of material iraurrnce policies that are valid and enforceables (xix) ownership of the i etinr's common stocks and (zz) with respect to TUC only, the absence of any NRC Action (as defined in the Plan of Merger) under the Atomic Energy Act l which is likely to have a TUC Material Adverse Effect. CERTAI2 COVENANTS l ENSERCH and TUC have agreed that pending the consummation of the Mergers or th2 tcraination of the Plan of Merger, except as permitted under the Plan of Margsr or as otherwise consented to in writing by the other, each will and will ciuse each of its subsidiaries (other than, with respect to ENSERCH, the Distribution Subsidiaries) to conduct its business in the ordinary course rub 2tintially as previously conducted and use commercially reasonable efforts j to pro:erve specified arrangements and, subject to prudent management of workforce needs and ongoing programs currently in force, keep available the I carvicss of their present officers and employeess (ii) in the case of ENSERCH cud its subsidiaries only, not declare or pay any dividends or make other i distributions in respect of any of their capital stock other than to ENSERCH ! cad its subsidiaries other than (a) stated dividends on ENSERCH Preferred Stock, (b) regular quarterly dividends on ENSERCH Common 61 i l l t I
1 l 1 l PAG: 16 SEP 1996 23:05 EDGs 00 000-0000 00:00 Blas 00-000 0000 00:00 l ll1]))Tue/EnsirchIll] FINEDGs[14433.TI]00062. T!r: 8-4 R. PIP R. Donnelliy (212) 341-7777 ADG 3.4.1,p03 j (PAGE) Stock with usual record and payment dates r.ot, during any calendar year, in exc cs of $.05 per quarter and (c) in order to consummate the Distribution in tecrrdance with the terms thereof s in the case of ENSERCE and its subsidiaries rnly, not effect certain changes in their capital stocks in the esse of ENSERCE and its subsidiaries only, not redeem, repurchase or otherwise acquire --- , cry chares of their capital stock, other than (a) as permitted by the I r:spcctive terms of any series of ENSERCH Preferred Stock, (b) in connection < rith n refunding of ENSERCH Preferred Stock, with lower-cost funds, (c) iit:rrompany acquisitions or (d) in connection with employee benefit and ) aivit:nd reinvestment plans as in ef fect on the date of Oe Plan of Merger in ] thi crdinary course of the operations of such planas in the case of ENSERCH ' cnd its subsidiaries only, not issue any shares of capital stock or any eccurities convertible or exchangeable for, or any rignts, warrants or options tD ccquire, any such shares or convertible or exchangeable securities, except frr (a) issuances of capital stock upon the conversion of the ENSERCE Crivertible Debentures, (b) the issuances of common stock or other securities by ENSERCH pursuant to the ENSERCH Corporation 1976 Management Incentive ProgrLa, the ENSERCE Corporation 1981 Stock Option Plan, the ENSERCH * ] Carptration 1991 Stock Incentive Plan and the ENSERCH Corporation Employee i l Stock Purchase and Savings Plan, in each case in the ordinary course in J cecardance with their present terms or (c) issuances by a wholly owned cub 1 diary of its capital stock to a parents in the case of ENSERCH only, not amend its Articles of Incorporation or Bylaws in any way adverse to TUCs in ] th3 c:se of ENSERCE and its subsidiaries only, not acquire or agree to acquire cry cubstantial equity interest in or substantial portion of the assets of any bu21scas or any corporation, partnership, association or other business erg nization or division thereof, except es contemplated by the ENSERCH 1996 B dgit (as defined in the Plan of Merger) and the ENSERCH 1997 Budget (as d:fiaed in the Plan of Merger) in the case of ENSERCE and its subsidiaries caly,.not make any capital expenditures, except for normal extensions to or , r'pl: cements of properties in the ordinary course of business consistent with { prier practice and as contemplated in the ENSERCH 1996 Budget and the ENSERCE I 1997 Budgets in the case of ENSERCH and its subsidiaries only, not dispose of mat: rial assets except in the ordinary course of business consistent with past pr'ctice and as contemplated in the ENSERCH 1996 Budget and the ENSERCH 1997 Ludg:t and except for property leased by EEX: in the case of ENSERCH and its rub idiaries only, not sell, lease, license or otherwise transfer to any of , th2 Distribution Subsidiaries any assets that are material to ENSERCH and its i rub 3idiaries (other than the Distribution Subsidiaries) taken as a wholes in th7 cise of ENSERCH and its subsidiaries only, not incur or guarantee any ! ind:btedness, other than (a) short-term indebtedness in the ordinary course of ' buriscss consistent with past practice, (b) long-term indebtedness to r:f15Lnce existing indebtedness at stated maturity or with lower-cost of fu;d), (c) additional long-term indebtedness aggregating not more than $125 rillita or (d) in connection with the refunding of preferred stocks (zii) in tha c0re of ENSERCE and its subsidiaries only, except as required by law, not CLt:r into, adopt or amend or increase the amount of or accelerate the payment er v;; ting of any benefit or amount payable under any employee benefit plun or cth r contract, agreement, commitment, arrangement, plan or policy maintained by, c:ntributed to or entered into by ENSERCH or any of its subsidiaries, or incrac3e, or enter into any contract, agreement, commitment or arrangement to ircr:rre in any manner, the compensation or fringe benefits, or otherwise tztcrd, expand or enhance the engagement, employment or any related rights, of ' cay director, of ficer or other employee of ENSERCH or any of its subsidiaries, I (sc:pt for normal increases in the ordinary course of business consistent with pact practice that, in the aggregate, do not result in a material increase in , be:4 fits or compensation expense to ENSERCE or any of its subsidiaries or in l I th3 cria of ENSERCE and its subsidiaries only, not enter into or amend any empityment, severance or special pay arrangement with respect to the 1 tcrzin: tion of employment or similar arrangements with any director, officer s'r oth:r employee, other than in the ordinary course of business consistent tith pist practices (xiii) not engage in any activities that would cause a i charga in its status under the 1935 Act, or in an activities that, in the essa of ENSERCH, would cause ENSERCE to become a { holding company' under the 1935 Act or in the case of yUC, would cause TUC to lose its exemption from registration as a " holding company" under the 1935 Acts (ziv) not make any ch;ngea in its accounting methods other than required by law or in accordance , cith GAAP (xv) not take any action that would adversely af fect the status of I I thi Mirgers caintain withasfinancially tax-free transactions under section responsible insurance 351 of the companies Codes (zvi)f. (or through sel 12curtnce not inconsistent with past practices) insurance in such amounts and (grinJt such risks and losses as are customary for companies engaged in the clectric or gas utility industry and other businesses of it and its cub idiaries; (zvii) confer wi n representatives of the other party, promptly rotify the other party of significant changes in its business, advise 62 9 e i l
((1)]FINEDGs(14433.TX]00063.FIF PAC 16 8EP 1996 23:05 EDC: 00-000 8000 00:00 BLKi 00-000-0000 00:00
- {[1))Tuc/tasirch Fir 3 5-4 3. E. Donne 11sy (212) 341-7777 AOC 3.4.1,p03 (PAGE) l th:2 cther party of any change or event that has had or, to the knowledge of such party, would reasonably likely have a TUC Material Adverse Effect or an ENSERCE Material Adverse Effect, and consult prior to making any governmental filizgs in connection with the Plan of Merger and the transacticas contemplated thereby, and promptly after each such filing provide the other with a copy thereofs (xviii) not make any filing to change its or any of its utility subsidiaries' rates on file with any governmental authority that could htva a material adverse effect on the benefits associated with the Mergeras (zix) use commercially reasonable efforts to obtain certain third-party c222cIts to the Mergerst (xx) not take any action which would likely i docp7rdize the qualification of outstanding revenue bonds issued f or the knefit of TUC or ENSERCH, as the case may be, as ' exempt facility bonds' or as tra.ezempt industrial development bonds under section 103(b)(4) of the Internal Revenue Code of 1954, as amended prior to the Tax Reform Act of 19863 (zzi) use commercially reasonable efforts to maintain in effect all existing y.rmits pursuant to which such party operates: (zzii) not use any non-public
. it.farsation obtained from the other in connection with any solicitation, inquiry, proposal, arrangement, understanding or agreement with any person ralsting to the provision of electric or gas utility service by such party to commercial and industrial customers in the other party's service territorys (sziii) with respect to TUC only, not engage in any unterial repurchase at a premium, recapitalization, restructuring or reorganization with respect to its c7 pit 21 stock, including by way of extraordinary dividend or distribution, or estad any material term or provision of the TUC Common Stocks (zziv) with torpect to TUC and its subsidiaries only, not acquire or agree to acquire a cubatential portion of the assets of or equity in any business or any crmration, partnership, association or other business organization or division thereof, or o uerwise acquire or agree to acquire any assets if the Est4 ring into of a definitive agreement relating to or the consummation of such acquisition would (a) impose any material delay in the obtaining of or eignificantly increase the risk of not obtaining any consent or approval of cny grvernmantal authority necessary to consummate the Mergers or the czpirttion or termination of any applicable waiting period, (b) significantly incrsase the risk of any governmental authority entering an order prohibiting thi ocnsummation of the Mergers, or (c) significantly increase the risk of not being able to remove any such order on ap with r2rpect to TUC and its subsidiaries only, peal not or takeotherwises and or fail to (zzv) take any action which would reasonably be expected to prevent or materially impede, interfere eith er delay the Mergers.
i Tha Plan of Merger provides for the creation by TUC and FNSERCH of a special tren2ition management task force (the ' Task Force") comprised of repr3sentatives from each of the primary business functions of each company. l Tha functions of the Task Force will include (i) serving as a conduit for the flow ef information between the companies pending the Mergers, (ii) reviewing
- cr.d cvaluating proposed exceptions to the restrictions on the conduct of buzitass pending de Mergers, (iii) developing regulatory plans and proposals, I
corporate orgadzational management plans, workforce combination proposals and (iv) cuch other matters as INSERCE and TUC deem appropriate. EO SOI,! CITATION OF TRANSACTIONS Tha Plan of Merger provides that neither TUC nor ENSERCE will, directly or i indirictly, initiate, solicit or encourage, or take any action to facilitate I tha making of, any offer or proposal that constitutes or is reasonably likely 'j to lord to any Takeover Proposal (as defined below), or, in the event of any unrolicited Takeover Proposal, engage in negotiations or provide any j confidential information or data to any person relating to any Takeover Preposal. Under the Plan of Merger, TUC and ENSERCH must notify the other arally and in writing of any such inquiries, offers or proposals within 24 hours of the receipt thereof and shall give the other 10 days' advance notice l' of cny agreement to be entered into with, or any information to be supplied to, Eny person making such inquiry, offer or proposal, l Notwithstanding the foregoing, unless the approval of the Plan of Merger by i th3 holders of TUC Common Stock or ENSERCH Common Stock shall have been I - Cbt, tined, TUC or ENSERCH, respectively, say, to the extent that the Board of Dirsetors of such party determines in good faith with the written advice of I cutside counsel that a failure to do so could reasonably be ex Mcted to result ! in a breach of its fiduciary duties under applicable law, participate in ! discussions or negotiations with, furnish information to, and afford access to. ths properties, books and records of such party to any person in connection with a possible Takeover Proposal with respect to such party by such person. 63. l i l {' 1 l l L i
IT l l PAG 20-stP 1996 04:34 EDC: 00-000 0000 00:00 SLKs 00-000-0000 00:00 I f(1))]rDEDGil18433.TX]00064.FIF ((1] Tuc/Eastrch . Tara 3-4 1. 2. Donne 11ry (212) 341-7777 70G 3.4.1.p03 I (PAGE) As used above, " Takeover Proposal" means any tender or exchange offer, prrpoJal for a merger, consolidation or othsr business combination involving - TUC, ENSERCH or any of their respective material subsidiaries, or any proposal l cr efter to acquire in any manner a substantial equity interest in, or a rubitrntial portion of the assets of,. TUC, ENSERCH or any of their respective catorial subsidiaries, other than pursuant to the transactions contemplated by ths Plan of Merger. IYDEMN;FICATION l Th3 Plan of Merger requires that for a period of six years after the i Effsetive Time, ne Company shall cause to be maintained in effect the
. policies of directors' and officers' liability insurance maintained by ENSERCH l 4
c.nd its subsidiaries to the extent such liability insurance can be maintained j g.nnutlly at a cost to the Company not greater than 2004 of the current i aggregate annual premiums for the policies currently maintained by ENSERCH and ' its cubsidiaries for their directors' and officers' liability insurances pravited that the Company may substitute therefor policies of at least the acas coverage containing terms that are no less advantageous with respect to ccttars occurring prior to the Effective Time; and provided further, that if such insurance cannot be so maintained or obtained at such cost, the Company chill maintain or obtain as much of such insurance for ENSERCH and its cubridiaries as can be so maintained or obtained at a cost equal to 200% of I tha rispective current annual premiums of ENSERCH and its subsidiaries for 1 thiir directors', and officers' liability insurance. The Plan of Merger also e prcvides that to the fullest extent not prohibited by law, from and after the ' Eff;ctive Time, all rights to indemnification existing at the Effective Time la frvor of the current and former directors, officers and employees of ENSERCH and its subsidiaries, as provided in their respective Articles of 2ncsrporation and Bylaws, shall continue in full force and effect for a period cf six years from ne Effective Time. After the Effective Time, the Company will consent to the establishment by ENSERCH and its subsidiaries of such ciditional indemnification agreements in favor of their respective directors l i c.nd officers as may be necessary so that they will have the benefit of the maxirum indemnification arrangement available to the officers and directors of ths company for events or actions occurring subsequent to the Effective Time. It is presently anticipated that at or after the Effective Time, the Company
- will rdopt indemnification arrangements in favor of its directors, officers and employees identical to those in effect at TUC immediately prior to the Effsetive Time, with modifications to reflect the Mergers as n a Company may dien gppropriate.
EMPI,0YEE BENEFIT MATTERS
'Tha Plan of Merger provides that, from and after April 13, 1996, the date of th2 Pitn of Merger, no further awards (other than formula awards required by the tsras of the plant, will be made under any stock option plan, stock bonus pirn er any similar plan of ENSERCH under which delivery of ENSERCH Common Stock is required to be used for purposes of the ayment of benefits, grant of twtrds or exercise of options (each a " Stock Plan ). It is also presently cnticipated that, at or after the Effective Time, the Company will adopt or aarume all of the benefit plans in effect at TUC immediately prior to the Effective Time, with modifications consistent with the Plan of Merger to r2fiset the Mergers as the Company may deem appropriate. Following the closing of thi Mergers, the Company will cause ENSERCH to maintain the level of bart fits provided to the employees and all former employees of ENSERCH and its subsidiaries that were in effect as of April 13, 1996 (other than benefits undzr (ny Stock Plan) until the Company shall provide benefits to such atpleytes and former employees on a basis consistent with the provision of btnsfits provided otherwise to other employees and former employees within the Corpsny system.
ENSERCH NOTES Tb3 Plan of Merger provides that ENSERCH will use its reasonable best efforts to maintain, and that the Company will take such actions as are
. nicecarry to meet the quantitative parameters necessary for ENSERCH to ceintain, the credit ratings issued by two Nationally Recognized Statistical Rating Organisations (as defined in Rule 15c.3 of the Exchange Act) (the
'NSROz") of the INSERCH Convertible Debentures and certain outstanding notes isautd by ENSERCH at or above their respective levels as of April 13, 1996.
64 l l l I
-__.u , ~... - , _ - ~ - - ~ ~ ~ . . -~_ ~ , -~
l- ((1))F15EDGs[14433.TE]e0065. Fit PAGs 11 sEP.1996 04:10 EDGi 00-000-0000 00:00 BLE: 00 000 0000 00:00 ((1)]Tuc/Easisch Ftr3 5 4 E. R. Domme11ey (212) 341-7777 A0G 3.4.1,p03 - 4PAGE) ! CONDITIONS TO TEE MERCERS- + , Th3 respective oblications of TUC and ENSERCE to ef fect the Mergers are j l tubjtet to the following conditions e (1) the approval of the Plan of Merger by i ! th2 r3rPective holders of TUC Common Stock and ENSERCE Common Stock shall have -- - - been abtaineds (ii) no tem prary restraining order, preliminary or permanent i injusction or other order by any federal or state court shall be in effect , that prevents the consummation of the Mergers, and the Mercers and the ] treassetions contemplated by the Plan of Merger shall not have been prohibited : l . tntar ony applicable federal or state law or replations (iii) the - 1 _ RIsistration Statement shall have become ef fective and shall not be the mubjret of a stop order suspuding such effectivenesas (iv) the shares of
! Comp 2;y Common Stock issuable in connection with the Mergers shall have been l'
rpprovtd for listing on the NYSE, upon official notice of issuances (v) all-required material governmental approvals shall have been received and such spprevals shall not impose terms or conditions that would have, or would be ! rasastably likely to have, a material adverse effect on the business, [ fcperstions, properties, described assets, condition (financial or otherwise), prospects or results of operations of TUC and its subsidiaries, taken as a * .. .'th. sis, or ENSERCE, as the case may be (see ' Regulatory putters"); (vi) the L Distribution shall have become effective in accordance with the terms of the ,! Distribution Agreement, the Tax Allocation Agreement and the Tax Assurance {
'.Agrtement shall have become effective in accordance with their res p ctive taras, the Internal Revenue Service shall have issued and not revoked a ruling racecnibly satisfactory to ENSERCE and TUC to the effect that the Distribution vill rsault in no taxable gain to ENSERCE or its shareholders and TUC shall have received a reasonably satisfactory representation of ENSERCE that no
- l. . sctrrici tas liability will be incurred by ENSERCE as a result of the
- i
. ' Distribution notwithstanding the tax free nature of the Distributions (vii) l- thz ggreements and covenants required to be performed by TUC and ENSERCE, .
- rcepectively, under the Plan of Merger at or prior to Oe Effective Time shall- '
hava been performed in all material respectas (viii) the representations and i tettr*aties of TUC and ENSERCE, respectively, shall have been true and correct' l- in all material respects, as of the date of the Plan of Merger and the Closing i .DItas (ix) TUC or ENSERCE, as the case may be, shall have received officers'
-cIrtificates from the other stating that the conditions set forth in the Plan of Merger to the obligations of TUC or ENSERCH, as the case may be, to ciniummate the Mergers have, to such officers' knowledge, been satisfieds (s) no TUC Material Adverse Ef fect or ENSERCE Material Adverse Ef fect, as the case ;
may be, shall have occurred and there shall exist no fact or circumstance that would have, or would be reasonably likely to heve, a TUC Material Adverse Effret or an ENSERCE Material Adverse Effect, as the case may bes (zi) each of
. TUC and ENSERCE shall have received from their respective special tax counsel . r i opixicas to the effect that the Mergers will be tax-free transactions under
, and (in the case of ENSERCE) ENSERCE and its sharehol otetirn 351 of the Code and that (in the case of TUC)ders TUCwhose and its sharabolders shares are i 1
conysrted into shares of company common Stock will recognise no gain or loss . far ftderal income tax purposes as a result of the consummation of the ! M rgtrs; and (zii) the other party shall have received certain material third- ' [ party consents. ! i :TERMI:!ATION; TERMINATION FEES AND EXPENSES
- Th2 Plan of Merger may be terminated under certain circumstances listed btlow. Khere indicated, termination will result in the payment by one party to thi ether, as liquidated damages, of either or both (1) out-of-pocket expenses and fess incurred by the other in connection with the Mergers and the I ;
trensactions contamplated by the Plan of Merger in an amount of up to $15 i
- sillien ("Out-of-Pocket Expenses") and (ii) a termination fee equal to 542.5 =l million less Out-of-Pocket Expenses (the ' Termination Fee"). - The circumstances '
utdsr which the Mergers can be terminated are (i) by mutual written consent of i tha Botro of Directors of TUC and ENSERCE (no payment) (ii) by either ENSERCH '
' er TUC if the Mergers are not consummated by March 31, 1997; provided, !
'hoTsysr, that such termination date shall be extended to September 30,'1997,-
if $11 conditions to closing the Mergers, other than the receipt of certain . I
'riguistory approvals and the tax rul hg on the Distribution, shall have been attisfied by March 31, 1997 (no payment) (iii) by either TUC or ENSERCE if i
= tha roquisite approval of the Plan of Merger by TUC's or ENSERCE's i shtrtholders shall not have been obtained at a duly held meeting of ?
!- - shtrihelders (payment of the Termination Fee by TUC or ENSERCH only if prior (
' to tha meeting it was the target of a business combination proposal made by a third party Gat as of the time of the meeting has.not been rejected by the ,
trrgat and withdrawn by the third party; otherwise no payment): (iv) by either <
'TUC sr ENSERCE if any state or federal law or court order prohibits the
' i
'Margsrs (no payment); (v) by t
6 5 ,-
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4 l l 4 PAG: 17 SEP-1006 04:00 EDC: 00 000 0000 00:00 BLE: 00-000 0000 00:00 Ill)]Tuc/tasirch((1
] ) MNEDGs!!4433.TX}00066.71F Mr3 8 4 2. 3. Donnelley (212) 341-7777 A0G 3.4.1,p03 (PAGE)
Gither TUC or ENSERCH, if there has been a material breach of any representation or warranty contained in the Plan of Merger, or any material br ich of any covenant or agreement by the other party, as the case may be, cnd cuch breach is not cured within 20 days after receipt of notice by the cth:r party (payment by the breaching party of Out-of-Pocket Expenses; prsvidad nat if the breach is willful, the non-breaching party shall also be cititled to pursue and recover any additional damages it is entitled to r:cairs at law or in equity, and payment by either party of the Termination i Fra if the breach involves the f ailure of that party to take required actions cacscccry to obtain shareholder approval when Gere has been a business combin: tion proposal made by a third party with respect to that party that at th3 tire of termination has not been rejected by that party and withdrawn by th) third party) (vi) by either ENSERCH or TUC if the Board of Directors of thi ether party, as the case may be, shall withdraw or adversely modify its cpproval or recommendation of the Mergers (payment by the party withdrawing or cov:r:cly modifying its approval or recommendations of Out-of-Pocket Expenses, tad p yment by such party of the Termination ree if the withdrawal or de codizication occurs while there is a business combination proposal by a third p;rty with respect to the party withdrawing or adversely modif ing its rrcommendation that at the time of termination has not h en re ected by such pirty cud its Board and withdrawn by the third party); or (vii by einer pcrty, under certain circumstances, as a result of a third-party tender offer er butiness combination proposal which such party's Board of Directors ditarnines in good faith that their fiduciary duties requires be accepted, Ef tir the other party has first been given an opportunity to make adjustments in th) terms of the Plan of Merger so as to enable the Mergers to proceed (piyment of the Termination Fee by the party accepting such proposal). Tha amount payable by TUC and its affiliates to ENSERCH pursuant to the ternin: tion provisions may not ex eed $42.5 million in the aggregate. The amount payable by ENSERCH and its affiliates to TUC pursuant to the t:rmination provisions, when added to the amount payable by ENSERCH under the Stich Option Agreement if TUC on the termination date were to exercise its right to require ENSERCH to reEurchase the Option, may not exceed $42.5 cillirn in the aggregate (the Termination Date Option value"). See "The Stock Optitn Agreement--General--Repurchases". If the sum of the Out-of-Pocket Expen ss, the Termination Fee and the Termination Date Option Value exceeds
$42.5 cillion, the Out-of-Pocket Expenses will be paid in full, and the T rninition Fee and the Termination Date Option Value generally will be r dusid in equal amounts. In the event of a reduction in the Termination Date Option Value, the number of shares of ENSERCH Common Stock issuable upon the as rcice of the Option will be correspondingly reduced.
EXPENSES Exc pt as set forth above, all costs and expenses incurred in connection tith the Plan of Merger and the transactions contemplated thereby will be paid by th3 party incurring such expenses, except that dose expenses incurred in cinn:ction with printing this Joint Proxy Statement / Prospectus, as well as the filitg relating hereto, will be shared equally by TUC and ENSERCH. . AMENDMENT AND WAIVER Th1 Plan of Merger may be amended by the TUC Board or the ENSERCH Board at Eny time before or after its approval by TUC's and ENSERCH's shareholders and prior to the Ef fective Time, but af ter any such approval no amendment may be 1 trda which alters or changes (i) the amount or kind of shares to be recelved er Gzchanged for or on conversion of any class or series of capital stock of TUC cr ENSERCH in the Mergers, or (ii) any of the terms and conditions of the PlEn of Merger if such alteration or change, alone or in the aggregate, would act:rielly and adversely affect the rights of the holders of TUC Common Stock l Er ENSERCH Common Stock. At (my time prior to the Ef fective Time, to the extent permitted by epplicible law, a party may (i) extend the time for performance of any oblig:tions or other acts by the other party, (ii) waive inaccuracies in the r: pro rntations and warrantles contained in the Plan of Merger or any document d liYsr:d pursuant thereto or (iii) waive compliance with the agreements or cozditions of the other party, including conditions to the other party's obligrtion to consummate the Mergers. 66 i f l 1
. - , . . . . -~_ - .
PACS 17 8t7 1996 04:01 EDCs 00 000-0000 00:08 SLE: 00 000 0000 00:00 I {((1] l1Tue/Eas;rch
} ]} FINEDC s [14433.TX] 00067. Fire 5FIF 4 3. R. Donnelliy (212? 341 7777 A0G 3.4.1,p03 (PAGE)
THE STOCK OPTION AGREEMENT Thi following is a brief summary of the material terms of the Stock option Agrrement, a copy of which is attached as Annex II and which is incorporated h1rsin by reference. This summary is qualified in its entirety by reference to thz stock option Agreement. Th2 Stock Option Agreement is intended to increase the likelihood that the M:rgars will M consummated by discouraging persons who might now or prior to ths Effective Time be interested in acquiring all of or a significant interest is, or otherwise effecting a business combination with, ENSERCH, or from crnmidering or proposing such a transaction, even if such persons were oth*rwise prepared to of fer to pay consideration to shareholders of ENSERCH rhich had a higher value than n e consideration to be received per share of ENSERCH Common Stock pursuant to the Plan of Merger.
}
GENERAL Concurrently with entering into the Plan of Merger, ENSERCH and TUC entered into the Stock Option Agreement pursuant to which ENSERCH granted TUC an irr2 vocable option to purchase up to 3,363,570 shares of ENSERCH Common Stock (tubjIct to adjustment for changes in capitalisation) representing 4.9% of the runber of shares of ENSERCH Common Stock outstanding on March 31, 1996, at an exercise price of $16.375 per share, which is equal to the Fair Market value (ss d fjsed in the stock option Agreement) of a share of ENSERCH Common Stock as of April 12, 1996, the usiness day immediately preceding the date on which th2 Stock Option Agreement was executed. The Option becomes exercisable only citar the Plan of Merger becomes terminable by TUC under circumstances where TUC is entitled to receive a termination fee under the Plan of Merger (see
*Th3 Plan of Merger--Terminations Termination Fees and Expenses) but without r: gird to whether the Plan of Merger is actually terminated or whether a bu11 ness combination is actually closed with a third party (a
- Trigger Evott*). In no event, however, will ENSERCH be required to issue shares upon (zircise of such Option unless all required regulatory approvals for the 12cu;rce of such shares are obtained, all waiting periods under the HSR Act cpplicable to such issuance are approved or have been terminated and, unless crived by TUC, such shares (and, unless waived by ENSERCH, any shares issued by TUC in pa_ pent of the exercise price thereof) have been approved for I
liating on ne NYSE upon of ficial notice of issuance. Time,Thzo$tionwillterminateupontheearliesttooccurof ( 1) the termination of the Plan of Merger other than due (ihtheEffective to a Trigger ' Evsat and (iii) 180 days following any termination of the Plan of Merger upon t er during the continuance of a Trigger Event (or if, at the expiration of such i leo-dry period, such option cannot h exercised by reason of any applicable judgme;t, decree, order, law or regulation, ten business days after such up;dinent to exercise shall have been removed or shall have become final and not tubject to appeal, but in no event later than September 30, 1997). Th3 number of shares of ENSERCH Common Stock issuable upon the exercise of thz Option is subject to reduction to the extent that the sum of the Out-of-j Psckst Expense and the Termination Tee payable by ENSERCH to TUC, combined i with the Termination Date Option value, exceeds $42.5 million. See "The Plan . of M3rger -Terminations Termination Fees and Expenses.' , R1 purchases. At any time during which the option is exercisable, the Stock Optien Agreement entitles TUC to require ENSERCH to repurchase from TUC all or 5( any portion of the option (or if the option has been exercised, to repurchase , from TUC all or any portion of the acquired shares). The amount that ENSERCH is rsquired to pay to TUC for the repurchase of the Option is (i) the diffsrtnce between (a) the Market / Offer Price (as defined in the Stock Option Agracment) for shares of ENSERCH Common Stock an of the date TUC gives notice j of its intent to exercise its rights to have such Option repurchased and (b) th1 Exarcise price for the Option multiplied by (ii) the number of shares of ENSERCH Common Stock purchasable pursuant to such Option (or the portion thIrcof with respect to which TUC is exercising such rights). The amount that ENSERCH is required to pay to TUC for the repurchase of the shares issued upon Exarcise of the option is (i) the exercise price paid by TUC for such shares plus the difference between the offer Price (as defined in the Stock Option AgrG6:ent) 67 i
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i l f 4 I 1 l
l ((111FINEDGa[14433.TZ100068.FIF PAC 17 SEF-1996 04:18 EDCs 00-000-0000 00:00 BIJa 00-000-0000 00:00 {l1))Tuc/tas;rch FJra 5-4 2. 2. Donnell!y (212) 341-7777 AoG 3.4.1,p03 (PAGE) cnd the esercise p' rice paid by TUC for such shares, multiplied by (ii) the number of such shares to be repurchased. In the event that the price would tubjict the repurchase of the Option or any shares of ENSERCH Common Stock is ued upon the exercise thereof to a vote of the ENSERCH shareholders, TUC m::y r: duce the purchase price to an amount which would not require shareholder _- cpproval. Notwithstandina the foregoing, the amount payable by ENSERCH and its Cf filiates pursuant to de provisions described above under *--Terminations T rrination rees and Expenses," when added to the amount payable upon a ] rrpurchase of the option and for the shares issued upon exercise of the optio:4, may not exceed $42.5 million in the aggregate. Purchase With Option Bolder's Sharess Call. The Stock Option Agreement eatitles TUC to pay for t's shares of ENSERCH Common Stock issuable upon the cx rcise of the option witn shares of TUC Common Stock, and thereafter, at any ' tina or from time to time prior to March 31, 1997 (extendible under certain circumstances to September 30, 1997), to require ENSERCE to resell such shares sf TUC Common Stock to it. The payment of the exercise price in shares of TUC Commo:s Stock is subject to the receipt by FWSERCH of any regulatory approvals thit tre necessary gor ENSERCH to own such shares. The value attributed to th2r s of TUC Common Stock used to purchase shares upon exercise of the Option
'is th7 rair Market value of such shares as of the date immediately preceding th3 dite on which notice of such esercise is delivered to ENSERCH. The price (t which ENSERCE may be required to sell back to TUC shares of TUC Common Etock used to purchase shares on exercise of the Option is the value cttributed to such shares for such purchase plus interest on such amount at the rrte of 8.75% per annum (from de date of the delivery of such shares to ENSERCE through the date of such repurchase) less any dividends paid or drclared and payable thereon.
Vrting. Each party to the Stock option Agreement has agreed to vote, prior to th2 fifth anniversary of the entry into the Stock Option Agreement (tbe
" Expiration Date'), any shares of capital stock of the other party acquired by cuch party pursuant to the Stock option Agreement or otherwise beneficially owned by such party, on each matter submitted to a vote of shareholders of cuch cuer party, for and against such matter in the same proportion as the ,
vrti af all other shareholders of such other party is voted for and against l cuch matter.
)
Crctrictions on Transfer. The Stock Option Agreement provides that, prior to l the Ezpiration Date, neither TUC nor ENSERCH will, directly or indirectly, ! enll casign, pledge or otherwise dispose of or transfer any of the shares of I ENSERCH Common Stock or TUC Common Stock that it acquires pursuant to the Stock Option Agreement (the " Option Shares *), except as oderwise provided in thi itock Option Agreement. The Stock option Agreement also provides that, isllowing u s termination of the Plan of Merger, a holder of any option Shares may esll such shares pursuant to a tender or exchange offer approved or i j r2ionmended,ders, tha charehol or otherwise determined by a majority of thetoBoard be f air of and in theofbest Directors the interests issuer of of Euch chares. In addition, subsequent to the termination of the Plan of Merger, a brlier of any option Shares has the right to require the issuer of such ch:ros to register the option Shares under the Securities Act for sale in a 4 public offerug, unless the issuer of such shares elects to repurchase them at th:ir then Fair Market Value. 68 i l r
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.((1))FIstDCa[14433.TK]00060.FIF- FAG: 16-SEF-1906 23:06 EDCs 00 000-0000 00:00 BIJs 00 000 0000 00:00
( (l1))Tec/Eneerch rcra 8-4 R. 3. Donnellsy (212) 341 7777 ADC 3.4.1,p03 (FAGE)
; I l RELATIONSHIPS BETWEEN THE PARTIES !. !
PRIOR Td TEE' MERGERS i i i TUC/ENSERCE/The Company. Texas Utilities Fuel Company ("TUFCO"), a TUC I subsidiary, p rchases natural gas from ENSERCE under an agreement expiring at 1 (
.ths esd of 2007. This agreement provides for the payment of specified profit \ j ocroise based on 20 Ref of gas per year with adjustments for purchases above \ i er b low that level. Turco also has a gas transportation agreement with '
i EMSERCE aad makes spot purchases of natural gas f rom an ENSERCE subsidiary. ,5 I' . , I Thsse tressections re ulted in revenues to ENSERCE in 1995 and for the first- \ ' siz months of 1996 of approximately $68 million and $30 million, respectively. f (4 i Additional transactions between TUC and its' subsidiaries and ENSERCE and its l submitiaries includes ordinary purchases of electricity by ENSERCE from TU Electric, purchases by TUC of gas from ENSERCE's gas distribution utility; purchtse by TU Electric of electricity generated by a 255-megawatt cgt:gration plant owned by a limited partnership, in which an ENSERCE , i affiliate owns a 1% general partnership interests joint ownership, together ; with a third party, and the payment of esponses related to a north Tesas ! l . pipeline operated by TUFCO. These additional transactions, in the aggregate, j i tra not material to either company from a financial standpoirt. i l< t
'Th3 Company's outstanding capital stock is owned equally by TUC and ENSERCE.
ENSERCE/EEX. ENSERCE beneficially owns approximately 83% of the outstanding i EEX Common Stock, and af ter the Preliminary Merger is espected to own a l E . clightly greater percentage of the New EEX Common Stock, enabling it to elect i all Cirectors of EEX and New EEX, respectively. Until consummation of the l Distribution, through its ability to elect all directors of EEX, ENSERCE will ! castitue to have the ability to control all matters relating to the management i of EEX, the issuance of EEX Common Stock and other securities of EEX and the .j pryment of dividends on the EEX Common Stock. ENSERCE also has the ability to - cactrzl EEX's drilling, development, capital, operating and acquisition , czpenditure plans. In addition, ENSERCE has effective control over the outcome , et all matters upon which EEX shareholders vote, including the approval of the
- i Prclicinary Merger. Certain of EEX's directors and officers are also directors *
-?
or efficers of ENSERCE or its other subsidiaries. ! i ,; 'FOLLONING TEE MERGERS s
-5 TUC/ENSERCE/The Company. Following consummation of the Mergers, TUC and i ENIERCE will M wholly owned subsidiaries of the company and the Company will !
have the ability to effect the management of TUC and ENSERCE. Pursuant to the , teras of the Plan of Merger, the Company has agreed to take such actions as 1 are accessary to meet the quantitative parameters necessary for ENSERCE to a maistAin the credit ratings issued by two NSROs of certain notes issued by 'I ENSERCE at or above their respective levels as of April 13, 1996. See "The l
; = Plan cf Merger--ENSERCE Notes. " .
.l E SERCE/New EEX. Following consummation of the Distribution, ENSERCE will
, contiEue-to have certain contractual relationships with, and performance bond f tad guarantee obligations with respect to, New EEX and, as a result, following csntummation of the Mergers, the Company will indirectly have such rslationships and obligations. The Distribution Agreement will establish cartain transitional and other arrangements deemed necessary in connection with the Distribution, and, to deal with various tax issues arising in cinnrction with and af ter the Distribution, New EEX is to enter into a Tax .
Allocztion Agreement and a Tax Assurance Agreement with ENSERCE. Set forth i below is a summary of certain of the principal provisions of the Distribution ; Agreement, the Tax A11ocatior .greement and the Tax Assurance Agreement and a i discu2sion of the performance end and parantee obligations of ENSERCE. Such l dascription does not' purport to be complete and is qualified in its entirety
- I by reference to such agreements.
69 1 1
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f l ((1))FUEDGi[14433.TX]00070.FIF PAGa 20 8EF-1996 04:36 EDGs 00-000 0000 00:00 BLh 00-000 0000 00:00 l [11))hc/ Ens;rch Fir] S-4 R. R. Donn;11ey (212) 341-7777 A0G 3.4.1.p03 (PACy) l j Distribution Agreement. As a condition to the consummation of the Mergers cod citer the Preliminary Merger, New EEX, the Company and ENSERCE are to catcr into the Distribution Agreement, which is to set forth the intention of th3 p;rties to separate the operations of New EEX from ENSERCB and its
- remaining subsidiaries (the *ENSERCH Companies") after the Distribution and to o;tiblish certain arrangements between New EEX and ENSERCH deemed necessary in ordsr to deal with various business, legal and replatory issues following the Distribution. Under the Distribution Agreement, (1) existing contracts would c!ntirue in accordance with their terms until amendment or termination as prsvided therein or as otherwise may occur without violation thereof, (ii) carvices that have historically been provided by the ENSERCH Companies would be ctbject to continuation, revision or termination in the discretion of the racpective parties, and (iii) performance bond obligations and guaranties cz:cuted by any of the ENSERCE Companies would continue in effect to the satent the terms thereof are applicable and enforceable, until amended, codified or terminated in conformity with the terms thereof.
Thi Distribution Agreement is expected to provide also that each of ENSERCH cnd Ecw EEX will agree to indemnify the other and its affiliates and their r:cpective directors, officers and employees from and against certain losses, including losses arising out of (i) breaches of the provisions of the D11tribution Agreement and (ii) certain misstacements or omissions, or alleged nicstitements or omissions, in certain filings under the securities laws. The Dietribution Agreement allocates to ENSERCH responsibility for the payment of f ar2 and expenses incurred by the parties in connection with the Distribution. Tax Allocation Agreement. Under the Plan of Merger, each party's obligation t3 prreeed with the Plan of Merger is conditioned upon the party's having ent red into a Tax Allocation Agreement which is to provide that the elloemtion of tax liabilities as between EEX and ENSERCE as in effect prior to tb7 Distribution will be honored in all material respects for periods up to rnd itcluding the effective time of the Distribution, with the EEX obligations having been assumed by New EEX pursuant to the Preliminary Merger. Such (greement is to further provide for the payment of taxes, the preparation of r.tu r;s , the allocation of refunds and O e handling of audits and tax contraversies in relation to tax periods of the ENSERCE group of companies tnding with the Distribution. In addition, pursuant to such agreement, New EEX cnd ElSERCE agree to indemnify one another for liabilities for taxes that racult to any person and which arise from the Distribution in accordance with prtportionate shares in the amount of 36% for ENSERCH and 64% for New EEX, except that (1) New EEX will indemnify ENSERCE against any such r:cp;ctively[es ttx liabilit that result from a breach by New EEX of the Tax Assurance Agr ement (as described below) and (ii) ENSERCH will indemnify New EEX against ray ruch tax liabilities that result from specified actions by ENSERCH. yor periods subsequent to the Distribution, New EEX will no longer be a member of th) ENSERCE consolidated group. Tax liabilities of New EEX in respect of such cub equent periods are not subject to such agreement. T:x Assurance Agreement. Under the Distribution Agreement, New EEX has cgrced to enter into a Tax Assurance Agreement which contains covenants intcoded to protect the tax-free status of the Distribution. In general and a cubj;ct to certain exceptions, the Tax Assurance Agreement would require that N 52 EEX (1) for two years after the Distribution, own and utilize at least 50% of tha fair market value of its properties, determined both with reference to NOT EEX only and to New EEX and its subsidiaries on a consolidated basis, at tha time of the Distribution and continue directly to own and operate the busin ss that LSEPO operated immediately prior to the Preliminary Merger, and (ii) f or six months af ter the Distribution, not authorize, facilitate or aff ct any transaction involving the acquisition by any person of outstanding NNT EEX Common Stock, the issuance of shares of New EEX Common Stock (other thin the grant of certain stock options and the sale of certain convertible dJbt) or the repurchase of New EEX stock, unless in each case, in the tggregate or cumulatively, the shares of New EEX Common Stock acquired, issued er repurchased does not exceed 3.0% of the number of shares of New EEX Common Sttch outstanding immediately prior to the Distribution. P rformance Bond and Guarantee Obligations. ENSERCH has obligstions under guar ntees and indennity arrangements with respect to 39 performance bonds is:uid on behalf of EEX and its subsidiaries, which obligations of ENSERCE total approximately 59.4 million. 70 l r a
1 1 ((1))FINEDGa[14433.TI)00071. PIP PAGs 20-SEP 1996 04:36 EDG 00-000 0000 00:00 SLKs 00 006-0000 00:00 ((1))Tuc/tas;rch Fara 5 4 R. R. Donnellty (712) 341-7777 A0G 3.4.1,p03 (PAGE) Majrr Contracts. EEX sells its gas'and oil under long- and short-term contrrcts. In 1995, Enserch Energ Inc. ('EES"), the ENSERCH natural-gas marketing subsidiary,y Services,was EEX's largest gas customer, purchasing g:s under two long term variable-priced contracts. In addition, Lone Star Gas Comp:ny, a division of ENSERCE, purchases gas from EEX under a fixed price..-_~u carvice contract expiring in 1997. In 1995, EES, Lone Star Gas Company and cthsr af filiates of ENSERCH purchased approximately 54% of EEX's natural gas volumes for an aggregate of $06,718,000. THE ENSERCH ARTICLES AMENDMENT l Th3 information contained in this Joint Proxy Statement / Prospectus with rarpect to the proposed amendment to the ENSERCH Articles is qualified in its citirsty by reference to the text of the Articles of Amendment attached hereto cs Annes X and incorporated herein by reference. l At the ENSERCH Meeting, the holders of ENSERCH Common Stock will be asked to cem iter and vote on a proposal to approve the ENSERCE Articles Amendment, which would amend the ENSERCH Articles to change the par value of the ENSERCE Common Stock from $4.45 per share to 5.01 per share. If the ENSERCH Articles Amendment is approved by the holders of ENSERCH Common Stock, the Articles of Amendment will be filed with, and the ENSERCH Articles Amendment will become ef ftetive upon the issuance of a certificate of amendment by, the Secretary of Sttta of Texas, whereupon the ENSERCE Articles, as so amended by the Articles of Am:ndment, will thereaf ter be the ENSERCE Articles. Approval of the ENSERCH Articles Amendment is not a condition to the roniummation of the Mergers pursuant to the terms of the Plan of Merger. The
'ENSERCH soard expects to be able to effect the Distribution whether or not the ENSERCE Articles Amendment is approved by shareholders at the ENSERCE Meeting.
In the Distribution, all'of the shares of New EEX Common Stock held by ENIERCH will be distributed as a dividend to the holders of ENSERCE Common Stock. See "The Mergers--The Preliminary Merger and the Distribution.' Under th; EMBERCH Articles, dividends may be paid upon the ENSERCH Common Stock out af cry assets of ENSERCE available therefor. Under the TBCA, a distribution may Lot be made if the amount of the distribution exceeds the surplus of the carpor2 tion. The TBCA defines surplus as the excess of the net assets (total cascts less total liabilities) of a corporation over its stated capital. Under l th3 TBCA, the computation of surplus is not required to be based on financial statem:nts of the corporation prepared in accordance with generally accepted recru; ting principals. Instead, fair value can be computed on the basis of a ! fair vsluatlon of a corporation's assets and liabilities or information from nsy cther method that is reasonable under the circumstances. The stated c: pit:1 of a corporation generally is equal to the number of issued shares , multiplied by the par value per share, ENSERCE expects to satisfy the regirements of the TBCA with respect to the Distribution on the basis of the fair value of its assets and liabilities. Howrvsr, by decreasing the par value of the ENSERCH Common Stock, the ENSERCH Articles Amendment will have the effect of decreasing the stated capital of ENSERCH, thereby inc2 easing the surplus and, correspndingly, the amount of castts legally available for distribution to the holders of ENSERCE Common -
- Stack. The ENSERCH Board believes that the ENSERCE Articles Amendment will prsvida greater assurance that the Distribution can be effected in compliance
, with the TBCA. i It is the intention of ENSERCH, if the INSERCE Articles Amendment is rpproved, to effect the amendment of the ENSERCH Articles contemplated thereby r:grrdless of whether the Distribution and the Mergers are consummated. The sffset of the ENSERCH Articles Amendment under such circumstances will be to persit the INSERCH Board at any time or from time to time to declare and pay a ceah dividend or other distribution to shareholders in a single transaction or
'a scrics of transactions of an amount that would not be permitted in the EAscnca of the ENSERCH Article Amendment.
71 l-1 i i
)
1 L I l i
((1)]FIEEDG e [14413.TX]00072.FIF PAGs 20-8EP-1996 04* M EDG: 00 000-0005 00:00 SLKs 00 000-0000 00:00 ((13)Tuc/Ena;rch Firm 8-4 3. 1. Donne 11ey (212) J41 7777 A0G 3.4.1,p03 (PAGE) THE ENSERCH BOARD RAS APPROVED THE ENSERCH ARTICLES AMENDMENT AND RECOMMENDS THAT THE HOLDERS OF ENSERCH COMMON STOCK VOTE FOR APPROVAL OF THE ENSERCH ARTICLES AMENDMENT. 72 l l i I 1 l
. . ~ - . , -,~ . .-. .._ = .- - -. -~ ,-n . ~ > . . . - - . ._
e , ((1))FIsEDGs(14433.TX]00073.FIF PAG 20 8tF 1M6 04:38 EDG 00-000 0000 00:00 su: 00-000 0000 00:00 ((lllfuc/Easirch Fira s-4 -1. R. Donne 11ty (212) 341 7777 A0G 3.4.1.p03 (PAGE) DESCRIPTION OF COMPANY CAPITAL STOCK GENERAL _ Tha tuthorised capital stock of the Company, as of the Ef fective Time of the > Mergsrs, will consist of 500,000,000 shares of Common Stock, without par vslus, and 50,000,000 shares of preference stock, $25 par value per share ("Comptny Preference Stock"). The description of the material aspects of the
.Compixy capital stock set forth herein does not purport to be complete and is l i p alified in its entirety by reference to the Company Restated Articles of !
Ixcorporation and Bylaws, as well as by applicable statutory or other law. Upon issuance and delivery of the shares of company Common Stock offered hirsby, such shares will be fully paid and nonassessable. 1 COMPANY COMMON STOCK Voting. Each holder of Company Common Stock will be entitled to one vote per chara en each matter submitted to a vote at a meeting of shareholders and to curulate such votes in all elections of directors. Dividends. The holders of Company Common Stock will be entitled to receive ' divi? nds when and as declared by the Company Board, subject to any rights of htbCors of any preference stock of the Company.'The Company's ability to pay l dividtads depends primarily upon the ability of its subsidiaries to pay ; divid tds or otherwise transfer funds to it. The articles of incorporation, ecrtcLa mortgages and other agreements, as supplemented, of TU Electric, SESCO t end Trzas Utilities Australia Pty. Ltd., TUC's electric utility subsidiaries, corttia provisions which under certain conditions, will restrict the ability ' cf thtse subsidiaries of TUC to transfer funds to TUC in the form of cash divi $rnds, which could likewise restrict the amount of funds TUC could transist to the Company. Similar restrictions may arise under certain finasci.ngs and the Restated Articles of Incorporation of ENSERCE. Provisions in th3 Company Restated Articles of Incorporation also will preclude the , pIystat of dividends on Company Common stock if there is any arrearage in the paymast of dividends on the Company Preference Stock. ! Liquidation. In the event of any liquidation, dissolution or winding up of (. th2 Company, the holders of its common Stock will be entitled to receive the remaining assets after payment to the holders of Company Preference Stock of the prsferential amounts to which they are entitled. _ Prtemptive Rights. Holders of Company Common Stock will not be entitled, as
- a matttr of right, to subscribe for, purchase or receive any new or additional '
- istun of Company capital stock or securities convertible to capital stock of th3 Company.
Listing and Transfer Agent. The company Common Stock will be listed on the
'NYSE, tad may be listed on other stock exchanges. The transfer agent and registrar for the Company Common stock will be Texas Utilities shareholder Scrvicss, Dallas, Texas, through a subsidiary of TUC. '
i l^ COMPANY PREFERENCE STOCK Tha holders of Company Preference Stock will not be accorded voting rights, czc2pt that, when dividends thereon are in default in an amount equivalent to ftur full quarterly dividends, the holders of the preference stock will be I cntitled to vote for the election of one-third of the Company Board or two ; directors, whichever is greater, and, when dividends are in default in an ' , t. mount equivalent to eight full quarterly dividends, to vote for the election of tha smallest number of directors necessary so that a majority of the full Compiny Board shall have been elected by the holders of Company Preference ! Stock. The Company must also secure the approval of the holders of two-thirds of ths outstanding shares of Company Preference Stock prior to effecting ~ i various changes in its capital structure. The Company Board will be authorized !
.to divide any preference stock issued by the Company into series and, within tha limitations set forth in the Company Restated Articles of Incorporation or ,
l prascribed by law, to fix and determine the relative rights and preferences of thz sh2rea of any series so established. Such rights and preferences include !' -tha anzimum number of shares in a series, preferences as to
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{[1))lTINEDG ((1] yuc/EnsIrch(14433.yX)C0074.P!7 FAGr 20 8EP 1006 04:37 EDC: 00-000-0000 00:00 SLK 00-000 6#00 th00 Ftr2 s.4 3. R. Donnality (212) 341-7777 AOC 3.4.1,p03 (PAGE7 divid:nds and upon liquidation, dividend rates, redemption prices and terms, sinkirg fund provisions, conversion rights, restrictions on the creation of ind::btedness of the Company or on the issuance of any additional stock ranking ca a parity with or prior to the shares of such series and any other rights or pr:fsrences in which the TBCA permits variations between different series of prefarred stock. There will not be any Company Preference Stock outstanding at ths Effective Time of the Mergers. DESCRIPTION OF NEW EEX CAPITAL STOCK GENERAL Tbs authorized capital stock of New EEX, as of the time of the Distribution, eill consist of 400,000,000 shares of Common Stock, par value 5 01 per share, Cnd 10,000,000 shares of Preferred Stock, of no par value. The description of th3 citerial aspects of the New EEX capital stock set forth herein does not purport to be complete and is qualified in its entirety by reference to (1) th:2 R: stated Articles of LSEPO and the Bylaws of LSEPO, which will become rcensetively the articles of incorporation and bylaws of New EEX in the Prilicinary Merger (the "New EEX Articles" and "New EEX Bylaws", respectively) cad which are Annexes hereto, and (ii) applicable statutory and other law. NEW EEX COMMON STOCK Vrting. Each holder of New EEX Common Stock will be entitled to one vote per Chir 3 on each matter submitted to a vote at a meeting of shareholders of New EEX, except as otherwise provided by the TBCA or as set forth in the r:colutions adopted by the Board of Directors establishing any series of pr2fstred stock. Dividends. solders of New EEX Common Stock will be entitled to receive dividrnon when and as declared by the Board of Directors of New EEX (the "New EEX Board *), subject to the preferential rights, if any, of the holders of preicrred stock of New EEX. Liquidation. Upon voluntary or involuntary liquidation of New EEX, the hold;rs of New EEX Common Stock will be entitled to receive the remainder of - th2 properties and assets of New EEX, subject to the preferential rights, if cry, cf the holders of preferred stock of New EEX. Pr: emptive Rights. The Articles of Incorporation of New EEX will provide that to shareholder of New EEX shall, by reason of holding shares of any class er scries, have any preamptive or preferential rights to purchase or subscribe to chsres of any class or series of New EEX. Ligting and Transfer Agent. New EEX Common Stock will be listed on the NYSE , undir the symbol *EEX.* The transfer agent and registrar for the New EEX Commic Stock will be Harris Trust Company of New York. NEW EEX PREFERRED STOCK
~
Th2 Artic1es of Incorporation of New EEX will provide that New EEX Preferred Stock may be issued in one or more series as the New EEX Board may from time to tire determine. The New EEX Common Stock will be subject and subordinate to tha rights (including voting rights), privileges and preferences of any series of MrJ EEX Preferred Stock to the artent set forth in the resolutions of the Niw EEX Board establishing such series. The New EEX Board may establish series of NIU EEX Preferred Stocx by fixing and determining the designations, prsisrences, rights, limitations and relative rights of the shares of the ssries, subject to and within the limitations of the TBCA and the New EEX Articiss. At the time of the Distribution, there will be no shares of prsisrred stock of New EEX outstanding, although 1,000,000 shares of $200 Sstiss A Junior Participating Preferred Stock have been reserved for issuance upon the exercise of rights which will attach to the New EEX Common Stock purru:nt to the New EEX Rights Plan (as defined below). 74
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I l i [IlllFINEDGi[14433.TX]00075. PIP PAG 20-SEP 1996 04:30 EDGs 00-000 0000 00:00 BLE: 00 000 0806 W OO I ((1])Tuc/Enserch TJre 8-4 3. 3. Donnelliy (212) 341-7777 AOC 3.4.1,p03 ! 1 (PACE) ' COMPARISON OF SEAREBOLDER RIGHTS If th3 Mergers are consummated, the holders of TUC and ENSERCE Common Stock will become holders of Company Common Stock, and their rights as holders of Company Common Stock will be governed by the Company's Restated Articles of 1 scar Mration (the " Company Articles") and Bylaws rather than TUC's Restated ArticlC3 of Incorporation and Bylaws or ENSERCE's Restated Articles of InsJrp3 ration (the 'ENSERCE Articles') and Bylaws. If the Distribution is crJrummated, the holders of ENSERCH Common Stock will also become holders of N:o LEX Common Stock, with their rights as holders of New EEX Common Stock being giverned by the New EEX Articles and Bylaws. The Company and TUC are both T;xas corporations and the Company will adopt Restated Articles of 115xrporation and Bylaws that are identical to those of TUC. As a result,
- th ra till be no change in the rights of TUC's shareholders following -ctntummation of the Mergers, except as set forth below under '.. Voting Power.'
B ciu;2 each of the Company, New EEX and ENSERCH is incorporated under the TBCA, the consummation of the Mergers will not affect the rights of ENSERCE thircholders to the extent such rights are determined by state law. The rst:rici dif ferences between the rights of holders of Company Common Stock, 007 EEX Common Stock and ENSERCE Common Stock will be based on differences betzeen the respective articles of incorporation and bylaws of the Company, A ew EEX and ENSERCR as described below. The summary of the mate rial diffcrences between the rights of shareholders does not purport to be an cah;ustive list or a detailed description of the provisions discussed and is qu:lif t d in its entirety by ref erence to the full text of the Company Articles and Bylaws filed as exhibits to the Registration Statement. Vstirg Power. If the Mergers and the Distribution are consuarited, based on ths r. umber of shares outstanding as of April 12, 1996, holders of TUC Common Stack wruld hold approximately 225,841,037 of the approximately 239,571,542 (ggreg te number of shares of Company Common Stock and holders of ENSERCE Common Stock would hold approximately 13,730,505 of the approximately 239,571,542 aggregate n e er of shares of Company Common Stock and rppracimately s3% of the approximately 126,714,000 aggregate number of shares tf N]T EEX Common Stock to M outstanding at the Effective Time. yollowing the Merg:rs, TUC and ENSERCE shareholders will therefore not possess the same ril:tiv3 voting power on matters put to a vote of shareholders of the Company cs th y possessed with respect to matters put to a vote of shareholders of TUC j 1 Cr ENSERCH, respectively, prior to the Mergers. Cumul;tive voting. Cumulative voting is expressly prohibited under the ENSERCH Articles and will be expressly prohibited under the New EEX Articles. Furturnt to Article VII of the Company Articles, in all elections for i dir:ct:rs every shareholder entitled to vote shall have the right to vote the j rumber of shares owned by the shareholder for as many persons as there are fir cters to be elected, or to cumulate such shares and give one candidata as many votos as the number of directors multiplied by the number of his shares chall cqual, or to distribute them on the same principle among as many cr%210ctes as he shall think fit. Any shareholder who intends to cumulate his vttas chall give written notice of such intention to the Secretary of the i comp ny on or before 12e day preceding the election at which such shareholder i istinds to cumulate his votes. 4 Vrting. Holders of ENSERCH Common Stock are entitled to one vote for each ' thtra h:16 on matters submitted generally to a vote of shareholders of EZSERCB. Il Ac c11 meetings of company shareholders, each shareholder entitled to vote is entitled to one vote for each ehere of stock held by him and zacorded in his n:me on the record date of the meeting ] Each outstanding share of New EEX Common Stock will be entitled to one vote on sich matter submitted to a vote at a meeting of shareholders, except as etharwire provided by the TBCA or as set f orth in the resolutions adopted by tha Naw EEX Board establishing any series of preferred stock. i Spleial Shareholder Meetings, Shareholder Action Without a Meeting. The ENSERCH Articles and Bylaws provide that the holders of not less than one-t; nth of all the shares entitled to vote at shareholdars 75 i l l
I PACS 18 SEP 1996 21:31 EDG 00 000 0000 00:09 BLEs 00-009 0000 09:00 l([1))Tuc/ Ens:rch1])FINEDC (14433.TK]00076. TIr2 S 4 E. PIP R. Donnell:7 (212) 341-7777 ADG 3.4.1,p02
- (PAGE) l l me: tings may call a special poeting of shareholders of ENSERCE. The Company
!' By11:a provide that special meetings of shareholders may be called by the Chiirrrn of the Board, President or Board of Directors of the Company or by ' th) bilders of not less than ten percent of all the outstanding shares of the Compa~y capital stock entitled to vote at the meeting. Pursuant to the New EEX Articles, subject to such rights to call special meetings of shareholders as i may be granted to the holders of preferred stock of New EEX, special meetings I af cb:reholders may be called only by the Chairman of the New EEX Board, by th) Pr:sident, by a vote of not less than a majority of the Continuing I Dircetire (as defined below) or at the request of ne holders of not less than 50% ef the outstanding shares entitled to vote at the meeting. Under the New i EEX Articlan (1) a ' Continuing Director' is e director who is not an affiliate er ce: ciate of a Related Person (as defined below) and was an EEX director prier to the time that the Related Person became such and any successor dirteter who is recommended by a majority of the Continuing Directors and is gat affiliated with a Related Person, and (ii) 'Related Person
- is any person er grrup that is the beneficial owner of not less than 10% of the outstanding vrting stock.
- Uzdir the TBCA, any action to be taken by shareholders may be taken without l e Gesting only if all of the shareholders entitled to vote on the matter i con!cct to the action in writing, unless the Articles of Incorporation provide l tth rwise. Neither the Company Articles nor the ENSERCH Articles have any such j prrvicion. Under the New EEX Articles, any action required or permitted to be L
- k:n by the shareholders of New EEX must be ef fected at a duly called annual er cpecial meeting of such holders and may not be effected by any consent in
} eritL*g by such holders. Crcrd of Directors. Under the ENSERCE Articles, the number of directors I crr,etituting the ENSERCH Board is nine, subject to increase or decrease as i prrvided in the ENSERCH Bylaws, provided that in no event shall there be less I thna three directors. The ENSERCE Bylaws provide that the ENSERCE Board shall con 2ict of not less than six directors, with the exact number to be fixed from time ts time by resolution adopted by the ENSERCE Board. There are currently nias directors. The directors are elected at the annual meeting of char: holders. Th3 Company Bylaws provide for a board of 10 directors, all of whom are elect;d annually. The Company Bylaws may be amended by the shareholders to Lterrare or decrease the number of directors. ! Tht New EEX Articles provide that the number of directors of New EEX shall be fiz d from time to time by the New EEX Board by the affirmative vote of not i loss than a majority of the continuing Directors, but shall not be less than ! thrso, subject to such rights to elect additional directors under such circu;;tances as may be granted to holders of New EEX Preferred Stock. The New EEX Articles further provide that directors shall be elected by the cf firmative vote of holders of a majority of the outstanding shares entitled i to vrt3 in the election of directors. Subject to the rights to elect directors und:r Cpecial circumstances that may be granted to holders of Preferred Stock, I dir:ctorships resulting from an increase in the number of directors and any ,
- vreracies on the New EEX Board may be filled solely by the affirmative vote of j the OOjority of the Continuing Directors even though less than a quorum.
Removal of Directors. Under the ENSERCH Articles, any director may be r:mrved from office by a vote of the holders of shares representing a majority I of th1 votes entitled to be cast by the shares of the class or classes of stock by which his successor would be elected. The ENSERCH Articles further provida that a special meeting of the holders of shares of such class or cinesas may be called by a ma of removing a director, and u, jority vote at the of the ENSERCH President of ENSERCE Board for in shall, theany purpose event. within ten days after delivery to ENSERCB at its principal office of a request to such effect signed by the holders of shares representing at least 5% of the i votos entitled to be cast by the outstanding shares of ENSERCH Preferred Stock cr 25% of the votes entitled to be cast by the outstanding shares of ENSERCH Voting Preference Stock and Common Stock combined, as the case may be, call a rpecial meeting of the holders of the shares of such class or classes ior such purpoma to be held within 40 days after the delivery of such request. The ENSERCH Bylaws provide that any director may be removed either for or without crues &t any special meeting of shareholders by the af firmative vote of the , holdsrs ruch of record of a majority of the shares present in person or by proxy at j l 76 l t i t I l
i l l PACS 17 5t7 1996 04:52 EDC: 00 000-0000 00:00 312s 00-900 0000 00:00 I!111FINEDCs[14433.fr]S0077. [1)) rue /tasirch PIP Firm 8 4 B. 3. Donnethy (212) 341 7777 Aoc 3.4.1,p02 (PAIE) me: ting and entitled to vote for such removal, if notice of the intention to Kct Epon such matter shall have been given in the notice calling for such nexting. Th> Company Articles provide for the removal of directors, with or without eiuso, by a vote of the holders of a majority of the shares entitled to vote at ca clection of directors given at a special meeting called for the purpose af con idering such action. Und;r the New EEX Articles, any director may be removed from office either far er without cause only by the af firmative vote of the holders of not less i i thna a majority of the sbares entitled to vote in the election of directors. Shirtholder Proposals, Nomination of Directors by Shateholders. The ENSERCH BylcTs and the New EEX Sylawa provide that for buslness to be properly brought l i by a shareholder before an annual meeting of shareholders, the shareholder muzt h:ve given timely notice in writing thereof to the respective corporate -
]
cecr2tary by delivery to, or mailing and receipt at, the principal executive cfficas of the corporation not less than 50 days nor more than 75 days prior to thD meetings provided, however, that in the event that less than 65 days' > notics or prior public disclosure of the date of the meeting is given or made i t3 Chareholders, notice by the shareholder to be timely must be so received r4t ltter than the close of business on the fifteenth day following the day on which such notice or the date of the annual meeting was mailed or public disclosure was made. Th2 ENSERCE Sylaws and the New EEX Bylaws allow shareholders to nominate prioni for election to the board of directors. Such nominations must be made by timely notice in writing to the corporate secretary by delivery to, or
- mailing and receipt at, the principal executive offices of the corporation not ,
losa d an 50 days nor more u an 75 days prior to the meetings provided, howrvsr, that if less than 65 days' notice or prior public disclosure of the tats of the meeting is given or made to shareholders, notice by the i th;reh51 der to be timely must be so received not later than the close of bu2iEc2s on the fif teenth day following the day on which such actice or the , data si the annual meeting was mailed or public disclosure was made. - Th3 Company Articles and Bylaws do not address shareholder proposals for burine:s items at Company shareholders meetings or shareholder nominations of c? did3tes for election of company directors. t Amendments to Articles of Incorporation. Under the Company Articles, amendments to the Company Articles may be made pursuant to the affirmative
- vit2, in person or by proxy, of the holders of a majority in aggregate number . af th3 shares of stock of the Company then outstanding and entitled to vote, c=orpt in cases where a different vote or consent is required by statute or by the Company Articles.
Th2 ENSERCH Articles and the New EEX Articles do not generally address the mann r in which they may be amended. Under the TBCA, unless otherwise 9pecified in the articles of incorporation, an amendment to the articles of , incArporation requires an affirmative vote by the holders of at least two- 1 thirds of the outstanding shares entitled to vote, unless any class or series is cititled to vote as a class, in which case a proposed amendment requires an affirmitive vote of the holders of at least two-thirds of the shares within occh such class or series and of the holders of at least two-thirds of the tatti cutstanding shares entitled to vote on the amendment. Th3 Company Articles provide that as long as any shares of Company Pr2fsr:nce Stock are outstanding, the Company shall not without the tuthsrization of the holders of not less than two-thirds of the outstanding shirsa of Preference stock, voting as a class, (1) create, authorize or issue
. cny class of stock ranking prior to the Preference Stock in respect to dividinds or liquidation rights, (ii) create, authorire or issue any eblig: tion or security convertible into, or any warrants, rights or options to purch2ee or subscribe to, any stock ranking prior to the Preference Stock in roepict to dividends or liquidation rights, or (iii) materially alter the provisions relative to the Preference Stock, or any series thereof, which would change the express terms and provisions of such stock.
Thi ENSERCH Articles provide that so long as any shares of ENSERCH Preferred Stock are outstanding, ENSERCH shall not, without the affirmative vote at a mesting of the holders of shares representing at least two-77 l t l
( 1 l h ))FINEDGs[14433.yXJ00078. PIP ((l])Tuc/Entirch PACS 18 SEF-1996 21:32 EDG 00-000 0000 00:00 315s 90 000-0000 00:00 Firm S-4 3. R. Dunne11ty (212) 341 7777 A0G 3.4.1,p02 l (PAGE) thirds of the votes entitled to be cast with respect to the shares of j i Prsferred Stock outstanding on the record date for such meeting, adopt an ' tocadlent to the ENSERCH Articles if such amendment would (1) authorize or creat1, or increase the authorized amount of, any class of stock which is i c1 titled to dividends or assets in priority to or on a parity with the I Pr3firred Stock, (ii) increase the authorized number of shares of Preferred i Eteck, or (iii) change any of the rights or preferences of the then cut;tinding Preferred Stock or any series thereof. I-Purruant to Article Eleven of the New EEX Articles, the provisions of the 1 COT EEX Articles relating to the New EEX Board, the limitation of shareholder cetirrs taken by written consent, the calling of special meetings, the l tacndment of the New EEX Bylaws and the "f air price" provision (as described below) may be amended only by the af firmative vote of the holders of at least 75% af the aggregate voting power of the outstanding capital stock of New EEX rrtitled cf th1 Newto vote EEXforArticles the election and toofthe directors. Amendments
" fair price' provisions to ArticleinEleven require, rddition, the af firmative vote of the holders of not less than 50% of the tggr:gite thi vote ofvoting powerowned any shares of the by outstanding capital stock of New EEX, excluding a Related Person th:11 not be applicable if the amendment is approv(ed by the affirmative votesuch 50% voting requirement cf th2 holders of not less than 90% of such voting stock). l Am ndments to Bylaws. The ENSERCH Articles and Bylaws provide that the power ta cit r, amend or repeal the bylaws or to adopt new bylaws shall be vested in l
th2 ENSERCH Boards provided, however, that any Bylaw or amendment thereto roepted by the ENSERCH Board may be altered, amended or repealed, or a new l Bylnw in lieu thereof may be adopted, by vote of the shareholders entitled to i vota frr the election of directors. The New EEX Articles provide that the powgr to alter, amend or repeal the Bylaws or adopt new Bylaws shall be vested is, tnd shall require the approval of, the affirmative vote of not less than a ccjority of the continuing birectors provided, however, that any Bylaw or Emendment thereto adopted by the New EEX Board may be altered, amended, Guipended or repealed by a 66 2/3% vote of the shareholders entitled to vote in th) election of directors. No provision of the ENSERCH or New EEX Bylaws which has been altered, amended or adopted by shareholder vote may be altered, taanded or repealed, or a new Bylaw in lieu thereof be adopted, by vote of the i bo:rd cf directors until two years shall have expired since such action by ch:rchilder vote. Pursuant to Article XIII of the Company Articles and Section 23 of the Compa;y Bylaws, the company Bylaws may be altered, changed or amended as prtvided by statute, or at any meeting of the Company Board by affirmative 1 vita cf a majority of all of the directors if notice of the proposed change l h;s been delivered or mailed to the directors at least ten days before the me; tings provided, however, that the Company Board shall not make or alter any l provi; ion of the Company Bylaws fixing hair number, qualifications, clts:ification, or term of office. j i 1 Exculpation and Indemnification of Directors. The ENSERCH Bylaws provide i j th;t ENSERCH shall indemnify any person who (1) is or was a director, officer, empiryce or agent of ENSERCH or (ii) while a director, officer, employee or [ c; tnt cf ENSERCH, requist of ENSERCH, its divisions er subsidiaries, is or was serving at the j a dirsetor, officer, pursuant to aventurer, partner, resolution adopted by proprietor, the ENSERCH trustee, emplo Board, as cr cicilar functionary of another foreign or domestic corporation,yee, agent pirt=srahip, joint venture, sole proprietorship, trust, employee benefit plan tr extcrprise, to the fullest extent that a corporation may or is required to grant indemnification to a director under the TBCA. ENSERCH, pursuant to a rs7olution adopted by the ENSERCH Board, may indemnify any such persons to tuch further extent as permitted by law. The ENSERCH Articles provide that no , dir:ctor shall be liable to ENSERCH or its shareholders fo2 monetary damages i ist in act or omission in such director's capacity as a director, except that thiri is no such limitation on the liability of a director for (1) a breach of j thi director's duty of loyalty to ENSERCH or its shareholders, (ii) an act or omissien not in good faith or that involves substantial misconduct or a knrring violation of the law, (iii) a transaction from which the director rcesived an improper benefit, whether or not the benefit resulted from an
&ctirn taken within the scope of the director's office, (iv) an act or omissionorfor(v)which the liability of the director is expressly provided for by et2tuta, divid:nd. an act related to an unlawful stock repurchase or payment of a Thi Company Articles provide that the company will indemnify any former, prsacnt or future director, officer or employee of the Company, or any person rho may have served at its request as a director, officer or 78 1
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^
l l I ((1))FI3EDCs[14433.Tr]00079.FIF FAC: 16-81P 1996 23:07 EDGs 60 000-0000 00:00 212: 00-000 0000 00:00 l l{1])Tue/fasorch n ra 5 4 R. 3. DonnellIy (212) 341-7777 AOC 3.4.1,p02 (PACE) espiry:e of another corporation, or any former, present or future director, cffic:r or employee of the Company who shall have served or shall be serving C3 C3 caministrator, agent or fiduciary for the Company or for another errpor: tion at the request of the Company for all expenses and liabilities iteurred or imposed on such person in connection wi n the defense of any cetion, suit or proceeding G at such person may be involved in by reason of being er having been such director, officer or employee, except with respect to matters as to which such person shall be adjudged liable because such persin did not act in good faith, or because of dishonesty or conflict of 17tcrast in the performance of duty. The Company Articles also provide that a dir ctir shall not be liable to the Company or its shareholders for monetary i dam:gos for any act or omission in the capacity as a director, except for (i) a br:cch of the duty of loyalty, (ii) an act or omission not in good faith ! con 3tituting a breach of duty or that involves intentional misconduct or a I knowing violation of the law, (iii) a transaction from which the director r:ccived an improper benefit, or (iv) an act or omission for which liability is provided by statute. Th3 rew EEX Articles provide that, to the fullest extent permitted by law, a dir:cter shall not be 11able to the corporation or its shareholders for mo25ttry damages for any act or omission in his capacity as a director. The New EEX Bylaws provide that the corporation shall indemnify, and advance or r: imburse reasonable expenses incurred by, any person who (1) is or was a director, officer, employee or agent of the corporation, or (ii) while a dir:ctrr, officer, employee or agent of the corporation, its divisions or cub idiaries, is or was serving at the request of the corporation pursuant to a rarclution adopted by the New EEX Board as a director, officer, partner, vanturr.r, proprietor, trustee, employee, agent or similar functionary of (noth r foreign or domestic corporation, partnership, joint venture, sole pr*priatorship, trust, employee benefit plan or other enterprise, to the full 0~t extent that a corporation may or is required to grant indemnification to a director under the TBCA. Tha Company will anter into indemnific'ation agreements with its directors
- cro c
- rtain officers with respect to various liabilities, in accordance with th] pr visions of the TBCA in the same form and to the same extent as such (gr:ements presently exist with the TUC directors and certain of its officers.
ENSERCH has not entered into any such indemnification agreements with its dir cters and officers. Common Stock Purchase Rights. ENSERCH, pursuant to the ENSERCB Rights Agrrement, has distributed one ENSERCE Right for each outstanding share of ENSERCE Common Stock to all shareholders of record at the close of business on ! May 5, 1996. Each ENSERCE Right entitles the holder, among other things, upon (i) th') occurrence of certain events, to purchase f rom ENSERCH a unit c?n31 sting of one two-hundredths of a share of ENSERCH 5200 voting Preference Stick, Series C, without par value, at a purchase price of $60 per one two-hundr'oths of a share, subject to adjustment, and (ii) the occurrence of ecrttim further events, to receive ENSERCH Common Stock (or, in certain circunstances, other consideration) having a value equal to two times the ! C1;rcire price of the ENSERCE Right. The ENSERCE Rights will become carrei:ahle upon the earlier of (1) ten days following a public announcement th t c person or group of affiliated persons has acquired, or obtained the rights to acquire, beneficial ownership of 15% or more of the outstanding th2rO3 cf ENSERCH Common Stock, or (ii) ten business days following the commencement of a tender offer that would result in a person or a group t ben:ficially owning 15% or more of the outstanding shares of ENSERCH Common Strek. The ENSERCH Rights Agreement will be amended so that the ENSERCH Rights will n:t be triggered by the Mergers. E ither TUC nor the Company has adopted a shareholder rights plan. At the aff ctive time of the Preliminary Merger, a sharabolder rights plan previously (doptid by LSEPO will be applicable to the New EEX Common Stock and rights utdar that plan, which will become the New EEX shareholder rights plan (the i
*N;M EEX Rights Plan"), will attach to all shares of New EEX Common Stock, I
tr.cluding the shares distributed to ENSERCH shareholders in the Distribution. E ch NIw EEX Light will entitle the holder, among other things, upon (i) the occurr;nce of certain events to purchase from New EEX a unit consisting of onD-tco-hundredth of a share of New EEX $200 Series A Junior Participating Pr:fstred Stock, without par value, at a purchase price of $45 per one two-hundredths of a share, subject to adjustments, and (ii) the occurrence of ccrtain further events to receive New EEX Common Stock or, in certain circusatances, other consideration (having the value equal to two times the l casrcice price of the New EEX right). The New EEX rights will become rzsrcitable on the earlier of (1) ten days fallowing a public announcement th t a person or group of affiliated persons nas acquired, or 79 i l i l l e
. . . s -. .~ - - _ . . .. -
i _ll1llr15tDGs!!4433.?I]D0000F17 PAC 16-SEP 1996 23:07 ~ EDts 09-000-0000 00:00 SLKs 00-000 0000 00ie0-7Ill))Tue/Easerch Fir 2 8 4 3. 3. Donnelley (212) 341-7777 A00 3.4.1,p02 + 1 i (PAGE) I obtained the rights to acquirei beneficial ownership of 18% or more of the tut %tinding shares of New EEX Common Stock, or (ii) ten business days ' f allowire the commencement of a tender of fer that would result in a person or group beneficially owning 18% or more of the outstanding shares of New EEX i Commo:e Stock. The New EEX rights will not be triggered by the receipt of I ch2rcs af New EEX common Stock in the Distribution so long as the holder does - not ecquire any additional shares of EEX Common Stock. Fair Price Provision. The New EEX Articles also contain a " fair price" przvisirn that applies to certain business combination transactiona involving e R31cted Person. The ' fair price
- provision requires the affirmative vote of ]
the bilders of (1) at least 80% of the voting stock of New EEX and (ii) at i
' icast 50% of the voting stock of New EEX not beneficially owned by the Related Pargo2, to approve certain transactions between the Related Person and New EEX sr its subsidlaries, including any merger, consolidation or share anchange, gny scle, lease, exchange, pledge or other disposition of assets of New EEX or its cubiidiaries having a fair market value of at least SS million, any i tramsfer or issuance of securities of New EEX or any of its subsidiaries, any rdoptien of a plan or proposal by New EEX of voluntary liquidation or 6 dissclution of New EEX, certain reclassifications of securities or ")
rrc:pitalizations of New EEX or certain other transactions, in each case 1% valving the Related Person. This voting requirement will not apply to { c:rttia transactions, including (a) any merger or consolidation winin one ye r of the person being a Related Person where the cash or f air market value , cf proprty to be received by the holders of New EEX capital stock is not less > th:2. um highest price tf its holdings, or (b)per anyshare paid by approved transaction the Related Person by New in acquiring EEX's continuing any dirtetsrs (as defined in de New EEX Articles). TMs provision could have the , i cfftet e:f delaying or preventing a change in control of New EEX in & ?
. tr:04&ction or series of transactions that did not satisfy the 'f air price' ~ crit:ria.
I Dcith2r the Company Articles nor the ENSERCE Articles contain a similar
" fair price
- provision.
i 80 l i l f
+
t I i 4 1 f i l. l
/
PAGs 30-8t7 1996 11:34 EDGs 00-000-0000 00:00 3LKs 00-000-0600 00:00 111 PINEDGil14433.TI)00001. PIP. 1 Tue/Easirch Pare 8 4 R. 2. Donne 11ry (212) 341 7777 PMT 3.4.1.p03 (PAGE> , PRO FORMA FINANCIAL INFORMATION OF THE COMPANY l Fcr financial reporting purposes, the Company will succeed to the business of TUC cnd the ENSERCE Business to be Merged. The TUC Merger will be accounted for ca a combination of companies under common control using historical costs in a minn2r similar to a pooling of interests, and the ENSERCE Merger will be trsated as a purchase for accounting purposes. The ENSERCE assets acquired and
. liabilities assumed will be recorded at their fair value.
Th3 following unaudited pro forma financial statements give effect to the . > Distribution and Mergers. The unaudited condensed pro forma balance sheet as of j ~Ju2e 30, 1996 is presented as if the Distribution and Mergers had occurred on
- j. thit date. The unaudited pro forma statements of income for the year ended i DI. comber 31, 1995 and the six months ended June 30, 1996 assume that the l - Distribution and Mergers occurred at the beginning of each period presented.
l Tha unaudited pro forma financial statements should be read in conjunction with the historical financial statements of TUC and ENSERCE and ' Management's Discussion and Analysis of Financial Condition and Results of Operations' of TUC End ENSERCE incorporated by reference herein and ' Pro Forms Financial 11for;ation of ENSERCE Business to be Merged' included elsewhere herein. The
- uncudited pro forma statements of income are not necessarily indicative of the fini.:icial results that would have occurred had t.he above-described events been caniummated on the indicated dates, nor are they necessarily indicative of futura financial results. Results for interim periods do not necessarily 11dicste results for the full year.
l 81 i i o L l l I
1 PAGs 18-8EP 1994 21:33 EDG 00-000 0000 00:00 812a 00 000-0000 00:09 l(1))7uc/Easuch( ))FINEDC (14433.TK)00082. . Pars 5 4 R. 8.PIP Donne 11sy (312) 341 7777 AOC 3.4.1,p02 (PAGE) THE COMPANY UNAUDITED CONDENSED PRO FORMA BALANCE SEEET
.7UNE 30, 1996 (TABLE)
(CAPTION) ENSERCB BUSINESS EISTORICAL TO DE PRO FORMA TUC HERGED(A) ADJUSTMENTS COMPANY (IN TROUSANDS) (S). (C) .(C) (C) (C)- , UTILITY PLANT I I In service (net of cccumulated depreciation) . Electric............... $18,427,653 $ -.
$ $18,427,653 Gss.................... .. 1,027,570 1,027,570 Utility plant in serv.
ice.. net............. 18,427,653 1,027,570 Ccnstruction work in 19,4,55,223 progress................ 274,776 26,890 301,666 Mucitar fuel (net of s,ccumulated trottisation).......... 274,697 ..- 274,697 Cold for future use..... 25,065 .. 25,065 Utility plant less < tecumulated 6:preciation and t.nortization......... 19,002,191 1,054,460 20,056,651 Less reserve for rsgulatory disal10wances.......... 1,308,460 .. 1,300,460 N3t utility Plant..... 17,693,731 1,054,460 18,748,191 Wan. utility property.... 427,560 65,768 493,328 Oth2r................... 704,002 116,674 (8,992)(c) 1,492,848 681,164 (d)(g) Total investments..... 1,131,562 182,442 672,172 1,986,176 , CURRENT ASSETS Cech in banks........... 13,930 14,439 8,479 (e) 36,848 Special deposits........ 4,835 .. 4,835
' Accounts receivable.. , ,
nat.................... 489,599 181,201 (7,567)(f) 663,233
- I Inysntories..at average cost...................
Mitarials and su
.Futi stock......pplies..
199,982 74,622 6,299 206,281 74,622
) '
4 Gas stored under 42,497 93,906 Othsr........... ground.,
........ 138,967 99,353 136,403 238,320 i
j Tots 1 current assets., 964,432 395,198 912 1,360,542 DEFERRED DEBITS Untsortised regulatory assets................. 1,856,328 1,310 1,857,638 Othtr....... ........... 84,496 25,061 46 (f) 109,603 Total deferred deb. its.................. 1,940,824 26,371 46 1,967,241 I, ass reserve for tsgulatory l diss11owances.......... 72,685 .- 72,685 N3t deferred debits... 1,868,139 26,371 46 1,894,556 Total assets.......... $21,657,864 $.1,658,471 $23,989,465
........... . ........ .$.673,130 k ,
83s notss l 82 I i , 1 l i ^ i EI J
,-,-m. r -, , -._r r
.. - . - - - -~ - - .. . . - ~ . .
l PACS 18 8EP 1996 21:33 EDC: 06 000-0000 00:00 St.Es 00-609-0000 00:00 [([1))Tuc/Ensuch1]lFINEDCi[14433.TI)00083.P!F g Tar 2 8-4 8. 3. Donnelley (212) 341-7777 AOC 3.4.1,p02 l - l (PAGE) l TEE COMPANY f UNAUDITED CONDENSED PRO TORMA BALANCE SHEET _ _- - JUNE 30, 1996 (TABLE)- j (CAPTION) ENSERCE I BUSINESS i HISTORICAL TO BE PRO TORMA l TUC MERGED (A) ADJUSTMENTS COMPANY l (IN THOUSANDS) (S) (C) (C) (C) (C) ' l CAPITALIZATION TUC common stock........... $ 4,784,571 $ -- $552,400 (e) $ 5,332,121 l (4,850)(b) l ENSERCH common equity (after Distribution)...... -- (49,590) 49,590 (d) .. ! Estcined earnings.......... 1,006,037 .. 1,006,037 Cumulative currency trtmalation adjustment.... 37,228 -- 37,228 ! .. Total common equity...... 5,827,836 (49,590) 597,140 6,375,386 ! Prsierred stock Not subject to mandatory ; redamption.............. 489,695 175,000 664,695 : Subject to mandatory redemption.............. 250,796 .. 250,796 TU Electric obligated, $ mandatorily redeemable, prsferred securities of trusts.................... 381,679 -- 381,679 *
' LaTg-term debt, less .
a amounts due currently. . . . . 8,971,681 816,889 (4,323)(c) 9,784,247 , Total capitalization..... 15,921,687 942,299 592,817 17,456,803 i ........... .......... ........ ........... CURRENT LIABILITIES , Mitts payable ' Commercial paper......... 291,000 209,500 500,500 B:nks.................... 11,813 -- 11,813 i Leng-term debt due currently................. 517,179 16,875 534,054 . ! Acetunts payable........... 355,052 163,856 (7,521)(f) 511,387 ! l Dividends declared......... 125,626 2,856 128,482 f l T22:s accrued . . . . . . . . . . . . . . 182,037 12,232 194,269 Ittsrest accrued........... 178,446 19,779 198,225 Othar..................... 212,767 125,568 28,900 (b) 367,235 , Total current liabilities............. 1,873,920 550,666 21,379 2,445,965 I DETERRED CREDITS AND OTHER i l NONCURRENT LIABILITIES ' Accurulated deferred fidaral income taxes...... 2,732,302 (22,748) (20,537)(d) 2,705,488 t 16,471 (c) l Un: ortised federal investment tax credits.... 601,414 3,372 604,786 Othsr...................... 528,541 184,882 63,000 (c) 776,423 l Total deferred credits and other noncurrent liabilities............. 3,862,257 165,506 58,934 4,086,697 Total capitalization and > liabilities............. $21,657,864 $1,658,471 $23,989,465
........... .......... .$673,130
(/ TABLE) Sao notes 83 ' i r I i t 6 i
_ _. .m . , 1 l l i f(!!)FINEDGr[14433.7%)00084.FIF PAC: 18 SEF.1996 21:34 EDC 00 000 0000 00:00 SLK 00 000 0000 00:00 , ll1))7ue/Easirch Far2 8 4 E. B. Donne 11sy - (212) 341 7777 A0G 3.4,1,p02 (PACE) i i
' THE COMPANT k j UNAUDITED PRO TORMA STATEMENT OF INCOME SIX MONTES ENDED JUJE 30, 1996 _. . . . _ _ .
3 l . (TABLE)
~
(CAPTION) ENSERCE vy I i SUSINESS % l BISTORICAL TUC TO BE MERGED (A): ADJUSTMENTS PRO FORMA COMPANY (G)
}
(IN TB00fANDS, EXCEPT PER SHARE AMOUkTS) I i - (S) l (C) (C) (C) (C) OPERATING REVENUES E1setric.................. 53,155,213 $ -- 4 $3,155,213 Gas....................... ~~ 533,123 533,123 i Oth3r..................... *- 468,408 468,408 Lars intercompany rsyssues................. .. (9,857)' (29,673)(f) (39,530) Tott.1 operating rsvenues.,............. 3,155,213 991,674 (29,673) 4,117,214 OPERATING EXPENSES Eltetric fuel and purchased power.......... 1,036,451 -- (32,467)(f) 1,003,984 Gis purchased for resale., .. 696,125 3,867 (f) 699,992 Operation................. 441,445 150,900 (1,073)(f) 591,352 Maittraance............... 157,689 11,609 169,298 Depriciation and enortisation............. 307,753 27,031 8,515 (d) 343,299 tses other than income... 261,890 39,934 301,824 . T;tal operating expenses............... 2,205,228 925,679 (21,158) 3,109,749 OPERATING INCOME (LOSS)..... 949,985 65,995 (8,515) 1,007,465 OTEER INCOME (DEDUCTIONS)-* l NET........................ (792) (2,766) (3,558) TOTAL INCOME (L085)......... 949,193 63,229 (8,515) 1,003,907 INTEREST AND OTHER CEARCES Istarist.................. 416,824 36,970 955 th) 454,749 Allowin.ce fu-os asedfor borrowed
- durirg construction...... (6,537) .(29) (6,566)
TU Eltetric obligated, , nand:torily redeemable, prafstred securities of trusts distributions..... 16,499 .. 16,499 ; I Prsistred stock dividends of subsidiaries.......... 27,725 5,576 33,301 Totsi interest and other chtrges................ 454,511 42,517 955 497,983 INCOME (LOSS) BEFORE INCOME TAXES...................... 494,682 20,712 505,924 INCOME TAXE8 (BENEFIT)...... 165,651 9,866 (9,470) (334)( 1) 175,183 CONSOLIDATED NET INCOME (LOS2)..................... 5. 329,031 5 10,846 .$..( ..... 9,13 6 ) $........ 330,741 Avsgrps shares of common . sttex outstanding.......... 225,717 68,87
.......... ...... 5. 239,658 (j) i
! Etraings per share of coseon stock........... .......... 5 16
..... 1. 46 .. . $.... .. $....
. 1. ..
38
</ TABLE)
- Sao notes F i
84 l i l l E F b I 1 1 > b i i
11 FINEDGe[14433.TE]00005. PIP PA4 18 82P 1996 21:34 EDGs 80-000 0000 09:00 BLK 09 000-0000 00:00 Il1))?ue/8asuch
) Fire 3-4 1. 1. Donne 11ry (213) 341 7777 A0G 3.4.1,p03 (PAGE)
THE COMPANY , UNAUDITED PRO FORMA STATEMENT Of INCOME YEAR ENDED DECEMBER 31, 1995 t (TABLE)- (CAPTION)- i ENSERCH ; BUSINESS i EISTORICAL TO BE PRO TORMA TUC MERGED (A) ADJUSTMENTS COMPANY (G) (IN TBOUSANDS, EXCEPT PER SHARE AMOUNTS) l (S) - (C) (C) (C) (C) CPERATING REVENUES E1actric............ ... 55,638,688 $ .. $ $5,638,688 Cas..................... .. 947,144 947,144 Othtr................... .. 853,892 853,892 Less intercompany rsvtnues............... .. (9,968) (68,061)(f) (78,029) Tetal operating rsvenues............. 5,638,688 1,791,068 (68,061) 7,361,695 OPERATING EXPENSES i
-Elsetric fuel and
- purchased power........ 1,640,990 .. (67,460)(f) l',573,530 Gts purchased for . e r2acle................. .. 1,260,191 3,868 (f) 1,264,059 4.
O pe rttion . . . . . . . . . . . . . . . 819,633 282,889 (4,469)(f) 1,098,053 Maintenance............. 290,011 25,137 315,148 Deprsciation and coortisation........... 563,819 48,872 17,029 (d) 629,720 Trx*.s other than income................. - 536,608 68,894 605,502
.......... .......... ......... .......... 7 Tstal operating 1 szpanses............. 3,851,061 1,685,983 (51,032)' 5,486,012 OPERATING INCOME (LOSS)... 1,787,627 105,085 (17,029) 1,875,683 OTHER INCOME -
(DEDUCTIONS).. NET........ 24,583 (1,501) 23,082 ! TOTAL INCOME (LOSS)....... 1,812,210 103,584 (17,029). 1,898,765
- INTEREST AND OTHER CHARCES Intsrest................ 706,182 71,614 1,910 (h) 779,706 I Allowance for borrowed funds used during crnstruction........... (15,327) -(234) (15,561)
Irpairment of assets.... 1,233,320 .. 1,233,320 l TU Electric obligated, j candatorily redeemable, i prsferred securities of trusts distributions... 1,801= .. 1,801 Prsfarred stock dividends of subsidiaries........... 84,914 11,690 96,604 Total interest and other charges........ 2,010,890 83,070 1,910 2,095,870 INCOME (LOSS) BEFORE INCOME TAXES............. (198,680) 20,514 (18,939) (197,105) INCOME TAXES (BENEFIT).... (60,035) 11,214 (669)(i) (49,490) CONSOLIDATED NET INCOME 9,300 (LOSS).................. .$..(13 8,64 .5 )
....... $... ..... .$..( ......
18,2 7 0 ) $..(
. .14 7,615 )
Avarrgs shares of common stock outstanding........ 225,841 68,323 239,782(j)
.......... ........... .......... 1 Earnings (loss) per share l of common stock.......... 14 62)
.$ ......( 61 )
.. . $...... .. .$......( ..
I 1 (/TABLi>
' 833 notes l
t 85 l 3 k i
1 {[1])Tue/tas;rch[ FAG 17.SEP.1994 05:22 EDc 00-000 0000 00:09 ptJts 00-006-0000 00:00 1 !f!NEDCs[14433.Tz)D0004.FIP [) Firm S-4 3. R. Donnellry (212) 341*7777 A0G 3.4.1,P02 i (PACE) THE COMPANY
- NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (c) The ENSERCH historica1' financial statements have been adjusted to reflect the Distribution. See " Pro Forma Financial Information of ENSERCH Business to be Merged
- included elsewhere herein. Certain amounts have been ,
rcclassified to conform to the company's financial statement presentation. ! I (b) R1 presents estimated costs associated with the Mergers. Includes estimated l capenses of $4.9 million to be incurred by TUC for legal, accounting, ' I printing and similar expenses, which will be charged directly to shareholders' equity, and $7.3 million for financial advisory and other pryments as a result of the Mergers. An additional $16.7 million of costs tre espected to be incurred by ENSERCE prior to the Mergers, including s
$15.3 million for financial advisory, legal, accounting printing and I 1
timilar expenses and $1.4 million for costs associated with the Distribution. Does not include cash payments for executive contracts and cther benefits, severance and out placement costs for employees that may be terminated as a result of the Mergers. (c) below,R2flects resulting estimated effects of identified from application acquisition of the purchase meth adjustments, M of accounting as shown to 1 r: cord assets acquired and liabilities assumed at fair value as of the i dite of the Unaudited Condensed Pro Forma Balance Sheet. ' I
' (TABLE) l (CAPTION) l 1
(S) (IN THOUSANDS) l (C) ; Adjust ENSERCH long-term debt to fair value................. $ (4,323) R: cognize ENSERCE liabilities for retiree benefits, includ. i ing pensions and other postratirement benefits . . . . . . . . . . . . . 63,000 Nrite off tax credit carryforwards expected to expire prior to utilization due to limitations resultin from the Merg. cr2.......................................g.................
~
16,471 Nrite off ' goodwill" associated with companies previously gcquired by ENSERCH........................................ 8,992 EJtimated adjustments to fair value.......................
$.84,140
</ TABLE)
(d) 22flects the excess of cost over the fair value assigned to net assets ccquired, which is to be amortized over 40 years. The excess amount is gummarized below . (TA7LE) (CAPTION) 1 4 (S) (IN THOUSANDS) i (C) ' Company Common Stock to be issued (see Note e).............. $ 552,400 EJtimated Costs of Mergers and Distribution (see Note b).... 24,050 E:timated acquisition adjustments (see Note c).............. 84,140 Eatimated proceeds f rom issuance of . ENSERCE Common Stock prior to closing (see Note e).............................. (8,479) Daterred tax ef fect of estimated acquisition adjustments. . .. (20,537) 631,574 I N1t asset deficiency of ENSERCH Business to be Merged, be-fore expenses of Mergers and Distribution.................. i ' Exc2ss of cost over the fair value assigned to net essets 49,590 scquired......................... .........................
.$.681,164 Annual amortiration over 40 years........................... 17,029 - (/ TABLE) 86 l
l l r-4 F
'i PACS 14-SEF 1996 21:34 EDGs 00-000 6000 00:00 SLKa 09-000-0000 00:00
((1)]Tuc/tes1rch.((1]
) rINEDCa[14433.TX]D0007 Ftr2 8 4 R. R. FIF Donne u ey (212) 341 7777 AOC 3.4.1,p03 t
(PACE) 1 TRE COMPANY NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(CONTINUED) (4) ENSERCH Common Stock,to be. converted into Company Common Stocks l t (TABLE)
'(CAPTION) i PROCEEDS OF -)
j SEARES NEW ISSUES
........ ........... 8
.(S) (IN TROUSANDS)
(C) (C) ENSERCE Common Stock outstanding at June 30, 1996..... 69,202.1 ENSERCE Common Stock issued in connection with the tuercise of stock options under the Stock Option Plan through August 7, 1996............................... 178.9 $3,027 Szles of ENSERCH Common Stock to the Employee Stock Purchase Plan through August 7 1996................. 6.1 136 "In the money' stock options expiring prior to D3 comber 31, 1996 and assumed to be exercised prior to closing........................................... 316.2 5,316 Kubtotal............................................ 501.2 $8,479 i
~
I. Pro forma ENSERCE Common Stock outstandin A3xumed ENSERCE Conversion Ratio.........g............ 69,703.3
.2 l ........
l Company shares to be 1ssued........................... 13,940.7
- Per share value of Company Common Stock............... $ 39.625 1 value of Company Common Stock to be issued............
.$.5......
5 2,4 00 (/ TABLE) ; I Tht actual number of shares to be issued upon conversion of the ENSERCH i common Stock in the ENSERCH Merger will be determined by reference to the ENSERCE Conversion Ratio and the actual number of shares of ENSERCE Common Stock issued and outstanding immediately prior to the effective date of the ENSERCE Merger. The per share value of Company Common Stock to be issued is tha closing price of TUC Common Stock on d e last trading date before the Plan of Merger was executed. l (f) Elimination of transactions between TUC and ENSERCH Business to be Merged. (g) A final determination of the repired purch so accounting adjustments ' cannot be made at this time, aM the earnings results will very from the pro forma earnings shown. l I Estimated costs to be incurred by TUC and ENSERCH as a result of the [ Margars and Distribution have been excluded from the Unaudited Pro Forma i e Statements of Income. The pro forma statements of income do not reflect [, significant operating ef ficiencies and annual cost savings the Company 1 4xpects to achieve as a result of the Mergers. Potential cost savings are l expscted from eliminating duplicative functions and further re. engineering op-arations and business practices of the combined companies. l As a result of the Mergers, the Company is expected to incur certain nonrscurring, indirect expenses within the first twelve months after the Margsrs that are not reflected in the pro forma statements.
- (h) Rspresents amortization of the adjustment of ENSERCH long. term debt to fair value (zee Note c).
(i) Reflec'ts taxes on pro forma adjustment 'h* at the statutory tax rate.
. (j) Represents historical average shares of TUC Common Stock outstanding plus tha pro forma number of shares of Company Common Stock to be issued upon conversion of the ENSERCH Common Stock in the INSERCH Merger (see note e).
- 87 j
i i r k .. 4 !
[f1]IFINEDC a l14433.TX]000BI. PIP PAG 18 SEP 1996 21:35 EDGs 00-000 0000 00:00 SLE: 00-090-0090 00:00
'((1])?ue/Eas.rch FIra 8-4 2. 3. Doane11ry (212) 341 7777 ADC 3.4.1,p02 (PAGE) -
PRO FORMA FINANCIAL INFORMATION OF ENSERCE BUSINESS TO BE MERGED [ Th2 following unaudited pro forma financial statements give effect to the prrpored Distribution. The unaudited condensed pro forma balance sheet as of _ _ . _ . . _ . . _ _ - , JuR4 30, 1996 is presented as if the Distribution had occurred on that date. l' Th3 r audited pro forma statements of income for each of the three ears in
'thi period ended December 31, 1995 and the six months ended June 30 1996 1 rtficct the reclassification of the operating results of New EEX and the l . distribution adjustments to ' income (loss) from discontinued operations
- and j thi cubsequent Distribution as if it had occurred at the be inning of each ,
period presented. In the uneudited pro forma statements of neone, the income 1 (less) from discontinued op rations has been removed in order to present the ! rosults of operations of na ENSERCH Business to be Merged. ; t l The unaudited pro forma financial statements are based on the assumptions l' ett farth in the accompanying notes and should be read in conjunction with the , histerical financial statements of ENSERCH and ' Management's Discussion and Antlysis of Financial condition and Results of Operations" of ENSERCH 130erporated by reference herein. The unaudited pro forma statements of income l Era not necessari1 indicative of the financial results that would have ( cccurred had the D stribution been consummated on the indicated dates, nor are f thiy necessarily indicative of future financial results. Results for interim
. p;riode do not necessarily indicate results for the full year. ;
88 l i t I 1 o b h i l i l 1 i ! i l I
I t FAG: 18.s17 1996 21:35 EDGi 00-000-0000 00:00 SLKi 09-000 0000 00:00 ({1]}7sc/
}
Ens; reb ((1)FzREDCs!!4433.TI]es019.rzt Fara 5-4 R. 2. Donne 11ty (212) 341 7777 AOC 3.4.1 p02 i (PAGE) I ENSERCE BUSINESS TO BE MERGED i UNAUDITED CONDENSED PRO FORMA BALANCE SHEET
.7UNE 30, 1996 (TAILE)
! (CAPTION) DISTRIBUTION ENSERCH i RISTORICAL --------------------------- BUSINESS ( ENSERCH NEW EEX(A) ADJUSTMENTS (B) TO BE MERGED l (IN THOUSANDS) l CS) (C) (C) (C) (C) l AS!ETS Currcnt Assets Csch and equivalents.... $ 16,312 $ (1,873) $ .. $ 14,439 Accounts receivable..... 212,741 (89,259) 46,376 169,858 G13 stored underground.. 93,906 -- .- 93,906 Othsr............ ...... 127,746 (14,482) 3,741 117,005 Tstal current assets.. 450,705 (105,614) 50,117 395,208 Irycatments............... 109,561 .. (1,879) 107,682 Prrparty, Plant and Equipment.-Net........... 2,781,799 (1,696,125) 34,554 1,120,228 OtM r Assets.............. 58,242 (26,063) 3,174 35,353 l Tsta1................. 83,400,307 $.(.1,827,802) i
. ........ . ........ $..85,966
. ..... .$.1,6 5 8,4 71 Z,IABILITIES AND SHAREBOLD-ERS' EQUITY Currist Liabilities Commercial paper and other short-term borrowings............. $ 209,500 $ -- $ -- $ 209,500 Current portion of cenior long-term debt.. 16,875 .. .. 16,875 Accounts payable........ 229,061 (91,769) 26,564 163,856 Accrued interest........ 19,779 -. .- 19,779 Li,.bilities for di continued tperations...... 34,761 -.
34,761 06 :r...................
....... 123,273 - (22,301) 4,923 105,895 Total current l liabilities...... ... 633,249 (114,070) 31,487 550,666 t
Srnior Long-term Debt..... 948,139 (222,000) -- 726,139 Cavsrtible Subordinated , Deba tures............... 90,750 .. -- 90,750 l Defstred Income Tazes..... 286,214 (276,194) (29,396) (19,376) Othir Liabilities......... 216,506 (124,027) 92,403 184,882 Manditorily 3edeemable Prsf%rred Securities of Sub2idiary of EEX........ 150,000 (150,000) .- .. Mim.ority Interest in Subsidiaries............. 157,682 -. (157,682) -. Adjustable Rate Preferred Stock.................... 175,000 -- -- 175,000 Comm:n Shareholders' Equity (Deficiency)...... 742,767 (941,511) 149,154 (49,590) Tots 1.................
.$.3,4 0 0,3 0 .7 $.(
........ .1,82 7,802 )
........ $..85,966
. ..... .$.1,6 5 8,4 71
(/ TABLE) l Sea notes 89 i l l , i I f l
.(11])FINEDGe[14433.TX]O6990.FIP PAG: 18 SEP.1996 21:44 EDCe 06 000 0000 00:00 312: 08 000 0000 00:00 ll!)]Tuc/Ene:rch Fire 8-4 3. 3. Donnellry (212) 341 7777 ACC 3.4.1,p02 4 FACE)
ENSERCE BUSINESS TO BE MERGED UNAUDITED PRO FORMA STATEMENT OF INCOME SIX MONTBS ENDED .7UNE 30, 1996 4 TABLE) (CAPTION)- ) WITN EEX A3 A REMOVE ENSERCE
- l NISTORICAL RECIASSIFICATION OF Est TO DISCONTINUED DISCONTINUED BUSINESS TO i ER$ERCE DISCONTINUED OPERATIONS OPERATION CPERATIONS DE MERGED i j
NEW EEX(A) ADJUSTMENT 8(C) > r (IN 750USANDS, EXCEPT PER 8EARE AMOUNTS)
- l. (s> (C) (C) (C) (C) (C) (C)
I~ 3 m Eule ratural gas and oil expirration and { Production............ $ 160,347 $ (160,347) $ .. 8 ~ $ ~ $ ~ t matural gas pipeline a ! GPM................... 569,216 ~ ~ 569,216 - 569,216 N:turtl gas distribution. .'. . . . . . . . 503,268 - .. 503,268 .. 503,268 Poser a 17,253 (5,993) 2,676 13,936 .. 13,936 Less 1.nd other........ tercompany i rIvenuis.............. (156,286) 61,540 (94,746) ~ (94,746) Total.............. .. 1,093,790 (166,340) 64,216 991,674 .. 991,674 s Costs tad Espenses ' Gas purchase........... 633,813 (75) 62,387 696,125 .. 696,125 I i Oper1 ting expenses..... 227,085 (65,569) 1,073 162,519 - 162,589 Depreci! tion and amortisation.......... 95,206 ' (68,039) (136) 27,031 - 27,031 6 t T;zis stber than ' 1:come................ 52,227 (12,293) ~ 39,934 .. 39,934
.......... .............. ..........n ........ ....... ........
Tota 1.................. 1,003,331 (145,976) 63,324 925,679 - 925,679 e Operating Income........ 85,467 (20,364) B92 65,995 .. 65,995 , other Income (Espense)~ , i ' nit.................... (2,650) (lis) ~ (2,766) ~ (2,766) t I:rtirrat and Other , Financing Costs........ (46,261) 12,029 (2,709) (36,941) ~ (36,941) i i 15come (Lossi before } r.come T:ses and - 1 Minority Interest...... 36,556 (0,451) (1,817) 26,280 - 26,204 4 Itcome T:ses (genefit).. 12,590 (2,912) 184 9,866 - 9,966 i Minority Interest....... 890 - (890) ~ _ ~ ~
.......... .............. ............ ........ ....... ........ i
- Ircome (Ioss) from Ctatisuirg Operations. 23,076 (5,539) (1,115) 16,422 ~ 16,422 i l
Income (Loss) from Discontirued Operations , Expliration and i production............. .. 5,539 1,115 6,654 (6,654) l , . nit IIcces (Loss)....... 23,076 ~ ~ 23,076 ' (6,654) 16,422 i Provision for Dividends en Preftrred stock..... 5,576 - .. 5,576 - 5,576
- Earnitgs (Less)
Applicible to Cosmon Stcck..................
.$...17,500
..... .$..........~... .$.......... ... .$.17,......500 .$.( ....
.6,6 54 ) .$.10,8 46 9er Share of Cosmon l
Stock i i ! Income (loss) from ! cintinuing operations j i af tzt provision for i preferrsd dividends... $' O.25 8 (0.08) $ (0.01) $ 0.16 $ ~ $ 0.16 Dlsetatitued 1' Operations............ .. 0.08 0.01 0.09 (0.09) ~ Earnings (loss) applicIble to cosmon stock................. 0 25 0.25 0.16
.$.... . .. . 8.............. $........~..
. . .$.. .... .$..( ...
.0. 0 9 ).$.. .... i j
.. Ay m ge common and j
dilutive cosmon ' equivalsat shares outstrading.... ....... 68,875 68,875 4 (/ TABLE) 1 See riotas { 90 t s
PAC: 18 3E7 1996 21:45 EDC: 00 000-0000 00:00 SLK 00-000-0000 00:00 l[1)1)Tuc/Enatrch1 ( ]FI*EDCs[14433.TX]00091. _ fir 3 8-4 R. R. PIPDonne 11ry (212) 341 7777 AOC 3.4.1.p02 , (PACE) ENSERCE BUSINEs3 TO BE MERCED UNAUDITED PRO FORMA STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1995 . .- (TABLE) (CAPTION) WITE EEX AS A REMOVE ENSERCH EISTORICAL RECIASSITICATION OF E4P TO DISCONTINUED DISCONTINUED BUSINESS TO ENSERCE DISCONTINUED OPERATIONS OPERATION CPERATIONS BE MERGED NEW La:X(A) ADJUSTMENTS (C) (IN TBOUSANDS, EXCEPT PER SEARE AMOUNTS) (3) - (C) (C) (C) (C) (C) (C) amtuss , Nitural gas and oil ! up12 ration and Prodiction............ 8 220,851_ $ (220,851) 4 -.
$ .. -8 ..
N1tural gas pipeline a CPM................... 996,451 .. .. 996,451 .. 996,451 Batur21 gas . distribution.......... 887,465 .. .. 887,465 .. 887,465 Power tad other........ 39,817 (16,507) 8,812 32,122 .. 32,122 Less ittercompany j ry.enues . . . . . . . . . . . . . . (213,344) .. 88,374 (124,970) ..~ (124,970) r Tota 1.................. 1,931,240 (237,350) 97,184 1,791,068 .. 1,791,068 Costs a 4 Espenses Gas purchase........... 1,170,732 .. 89,459 1,260,191 .. 1,260,191 Operating expenses..... 405,580 (104,695) 7,141 308,026 .. 300,026 Depticiation and amortisation.......... 168,262 (116,628) (2,762) 48,872 .. 48,872 Taxis (ther than , income................ 88,937 (19,939) (104) 68,894 .. 68,894 i
' Tota 1.................. 1,033,511 (241,262) 93,734 1,685,983 .. 1,683,983 Operiting Income........ 97,729 3,904 3,452 105,085 .. 105,085 oth u Income (Espense)..
3et.................... (1,033) (161) (307) (1,501) .. (1,501) Interrst and other l' Financing Costs........ (83,324) 13,695 (1,751) (71,340) .. (71,300) t .......... .............. ............ .......... ...... .......... Income before income Taxis and Minority Intuist............... 13,372 17,438 1,394 32,204 .. 32,204 Income Tases............ 921 6,306 3,987 11,214 r
.. 11,214 ll Minority Interest....... (602) .. 602 .. .. ..
i Income (Imss) from i Continuing operations.. 13.053 11,132 (3,155) 20,990 .. 20,990 I Income (Ioss) from Discontinued operations ( Expirration and I' production............. .. (11,132) 3,195 (7,937) 7,937 .. Net Income.............. 13,053 .. .. 13,053 7,937 20,990 l ' Provision for Dividends l on Preferred stock..... 11,690 -. .. 11,690 .. 11,690-l Earnirgs Applicable to !- Common Stock........... 1,363 . 1,363 57,937 9,300
.$... ..... .$............ ... .$........ .. 8... ..... . ....
8
. Per Ehare of Common l Strck
!' income (loss) from continuing operations citar provision for prsfu red dividends... f .02 5 .16 8 (.04) $ .14 4 .. $ .14 Dlscoztinued l tperations............ .. (.16) .04 (.12) .12 .. l
. Earnings applicable to common stock.......... 02 .. .02 L 4......
. .. 8........ ... .$.......... ...
8
......... 8.. 12
. .. 5...... 14 l A7Erags common and dilutive common equivalent shares outstrading...... ..... 68,3 68,32
....... 23 . .........3
</ TABLE)
; Sse notes 6 91 i 3
4 l I l l l L
, . n-. n j' fl1))FINJlDCa l14433.TX]00092.FIF ' FAss II.SEF-1996 21:46 Eas: 00 000-0000 00:00 sIKs 00 000-0000 00:00
[ [11])Tue/Enairth FIra 8 4 1. 1. Donn:llay (212) 341 7777 AOC 3.4.1,p02 (FAGE) i ENSERCB BUSINESS TO BE MERGED l 17NAUDITED PRO FORMA STATEMENT OF INCOME
. YEAR ENDED DECEMBER 31, 1994 i (TABLE)
(CAFTION) RECLASSIF1 CATION OF Est TO WITE EEX DISCONTINUED OPERATIONS A8 A REMOVE ENSERCH ! EIST011 CAL . ~ . ~ . . - ~ . ~ ~ . ~ ~ . . . . . ~ . . DISCONTINUED DISCONTINUED BUSINESS TO ENSERCN NEW EEX(A) ADJUSTMENTS (C) OPERATION OPERATIONS BE MERCED (IN TROUSANDS, EXCEPT FER SEARE AMOUNT $) l , (s> <C) (C> (C> (C) <C) (C) i Berenuis ' Nittral gas and oil aspirrttion and production............ $ 179,140 $ (179,140) $ ..
$ .. 8 ~ $ ~
. Nitural gas pipeline s GFM................... 1,235,763 *. ~ 1,235,763 ~ 1,235,763 Natural gas distribution.......... 174,707 .. ~ 874,707 - 174,707 l Power and other........ 45,499 (12,726) (479) 32,294 - 32,294 Less intercoepany revenues.............. (239,601) ~ 111,404 (128,197) .. (128,197)
.......... ............. ............ .......... ..~...~ ..........
T:ta1.................. 2,095,500 (191,866) 110,925 2,014,567 ~ 2,014,567 Czsts and Espenses Gas purchase........... 1,432,301 (148) 112,332 1,544,485 - 1,544,485 Operating arpenses...,. 364,512 (11,136) (312) 295,064 .. 295,064 DeprIciation and amortization.......... 126,979 (73,280) (6,326) 47,373 - 47,373 Ta Is ether than izcome................ 81,070 (13,870) .. 67,200 - 67,200 Tsta1.................. . 2,006,962 (158,434) 105,694 1,954,122 ~ 1,954,122
.......... .....~...... ............ .......... ......... ..........
Operating inecen........ 18,646 (33,432) 5,231 60,445 - 50,445 Other Income (Expense)~ Nit.................... (6,040) 314 488 (5,246) - (5,246) Inttr:st and other Fina;cing Costa........ (69,310) 20,248 (20,470) (69,532) - (69,532) Income (Ioss) before 11come fases and Mi.nority Interest...... 13,2e8 (12,870)- (14,751) (14,333) .. (14,333) 2nIone T:ses (Benefit).. (60,737) (4,580) 64,773 (8,544) ~ (B,544) l . Minority Interest....... 573 ~. ~ ~ (573) .. l Income (loss) from L Continuing operations,. 11,452 (8,290) (78,951) (5,709) - (5,719) ecome (Loss) from Discontinued operations E;gistering and construction.......... 20,642 = .. 20,642 (20,642) ..
. Explstation and production............ .. 8,290 78.951 87,241 (87,241) ..
N7,t Income (Loss)....... 102,094 ~ ~ 102,094 (107,883) (5,719)
. Provision for Dividends on Frtfirred Stock..... 11,619 ~ .. 11,619 - 11,619 ; Earnings (Loss)
Applicable to Conson 8tock.................. 90,475 90,475
.$.. ..... . $........... ... .$........~... .$.. ...... . $.(.107,88
...... .3 )......
$...( 17,4 0 8 )
Per shara of Coemon strek ' Income (loss) from cIntinuing operations afts: provision for preistred dividends... $ 1.03 $ (.13) $ (1.16) $ (.26) $ ~
$ (.26)
Discontinued sperations............ .30 .13 1.16 1.59 (1.59) .. Earnings (loss) applicable to coeueon stock................. 1.33
.$.... 1.33.....$.........~.. . $........~..
. . .$.... .... .$....( .1. . 98......(
... 5 ) 26)
Anrage coemon and dilutive cosmon equitaient shares
- outstanding....... .... 68,049 68,049
! 4/ TABLE)
- i i
saa notes l [ 92 i 1 1
1 i ! ((1))FINEDGd14433.TI)00093.FIP PAGs 10 8E7 1996 21:47 EDG 00 000-0000 00:00 BLK 00 000 0090 00:00
- ((1))Tue/Enersch Pere 8-4 2. R. Donnelley (212) 341 7777 A0G 3.4.1,702
! (FAGE) l ENSERCE BUSINESS TO DE MERCED ., UNAUDITED PRO FORMA STATEMENT OF INCOME
.; _ YEAR ENDED DECEMBER 31, 1993 '
(TABLE) I (CAPTION) \ RECIASSIFICATION OF E4P TO WITE EEX
- DISCONTINUED OPERATIONS AS A REMOVE ENSERCN NISTotICAL ... -...----*...-..........---- DISCONTINUED DISCONTINUED BUSINESS TO -..
ENSERCN NEW EEX(A) ADJUSTMENTS (C) OPERATION OPERATIONS DE MEEGED }< (IN TROUSANDS, EXCEPT FE3 SHARE AMOUNTS) 4)
- 4) (C) (C) (C) (C) (C) (C) (C) 31renuis -
Nitural gas and oil
- aspirration and production............ $ 189,796 $ -(189,796) $ ..
t' Estural gas pipeline & GPM................... 907,969 -. .. 907,969 .. 907,969 Natural gas distribution.......... 967,876 .. .* 967,876 .. 967,876 .1 j' PowIr and other........ 48,635 (10,662) 479 38,452 .. 38,452 ' Less intercompany (235,374) ! , tsvinuis.............. - 111,674 (123,700) .. (123,700) l Total............... .. 1,878,902 (200,458) 112,15J 1,790,597 .. 1,790,597 Crsts and Expenses 1 G:s purchase........... 1,160,416 (443) 112,316 ' 1,272,289 .. 1.272.289 j Operiting expenses..... 420,272 (77,941) (42,563) 299,768 .. 299,768 ; Depriciation and i (mortisation...... ... 144,326 (88,614) (12,061) 43,644 .. 43,644 Tatts other than i come................ 15,651 (16,451) .. 69,200 .. 69,200 Tata1.................. 1,B10,665 (183,449) 57,685 1,684,901 .. 1,684,901 Operatirg Income........ 68,237 (17,009) 54,468 105,696 .. 105,696 Other Income (Expense).. N1t.................... 116 -- 5,844 5,960 .. 5,960
- 11terest and Other ,
Finarcing Costs.. ..... (77,720) 28,543 (24,492) (73,669) .. ~ (73,669)
.......... ............. ............ .......... ........ .......... p i '15c'ome (less) before 1:come Taxes .ind l Minority Interest...... (9,367) 11,534 35.820 37,987 .. 37,987 i
l 1 come Taxes............ 6,636 3,932 5,159 15,727 .. 15,727 ' [ Miscrity Interest....... 34 -- (34) .. .. .. 1:come (Imss) from , Conti1uing operations.. i (16,037) 7,602 .30,695 22,260 .. 22,260 Income (Loss) from Discattinued operations j Engisesrin9 and construcu on.......... 75,418 -. .. 75,418 (75,418) - Empirration and i I production............ -- (7,602) (30,f05) (38,297) 30,297 ..
.......... ............. ............ .......... ........ .......... j Nrt Income (Loss)....... 59,381 .. -- 59,381 (37,121) 22,260 i
- Provision for Dividends on Freferred stock..... 12,663 .. .. 12,663 .. 12,663 Earnirgs (Loss) l Applicab h to Coisson Stock.................. 46,718 9,597
...46,714
.. .$.(.37,121) $
72r shire of Conson Stock Income (loss) from conti:uing operations aftar provislon for i prafttred dividends... $ (.42) $ .11 $ .45 .14
$ $ .- $ .14 !
Discontinued (perations............ 1.11 (.11) (.45) .55 (.55) .. i Earn bgs (loss) ' applicable to common * " ' stock................. .69 69
.$. . ' . . . . .(.55) 14
.. j Avaragi common and i dilutive common equivalent shares j outstanding............ 67,802 67,802 l
. </ TABLE) I S$4 Dotes I 93
)
3 i
i pl)]TINEDG e [144 33.TX]00094. PIP ' PACS 18 $EP.1996 17:26 EDGs 00-000 6000 00:60 BLKs 00-000-0000 00:00 [11))Tue/ Ens rch Tir3 S-4 I, 3. Donne 11sy (212) 341 7777 A0G 3.4.1,p02 (PAGE) l ENSERCH BUSINESS TO BE MERGED NOTES TO UNAUDITED PRO FORMA TINANCIAL STATEMENTS (g!) R3flects the removal of the assets and liabilities of New EEX and the r: classification of New EEX's operating results to income (loss) from ; discontinued operations. Certain amounts have been reclassified to conform i to ENSERCE's financial statement presentation. j l (b) Adjustments are summarized as follows:
)
(TABLE) (CAPTION) i IISTORE CIASSITICATION PROPERTY INVESTMINT ELIMINATE i INTERCOMPANY AND REPORTING SUS-LEASE 8 ASIS MINORITY I BAIANCES(1) DITTERENCES(2) TRANSACTIONS (3) DITTERENCES(4) INTEREST TOTAL I (IN TH0tl SANDS) (8) (C) (C) (C) (C) (C) (C) ASSETS Accounts Receivable..... $22,338 $ .. $24,038 $ .. $ ~ $ 46,376 Oth:r Current Assets.... .. 3,741 ~ .. - 3,741 lu :stments............. .. (1,941) ~ 62 ~ (1,879) Property, Plant and Equipment- Net. . . . . . . . ~ ~ 64,784 (30,230) ~ 34,554 other Assets............ 453 1,942 779 - .. 3,174 Total Assets......... .
.$.22,7
. . .91 $.3,742
. ... $.89,601
. ..... $.(.....
. .30,168 ) .$..... . .. S.........
85,966 LIABILITIES AND SEAREROLDERS' EQUITY Accounts Payable........ $21,4 35 $ ~ $ 5,129 $ -. $ ~ $ 26,564 other current Liabilities............ 903 159 3,861 - -- 4,923 Def:rred Income Taxes... ~ 3,387 (3,993) (28,790) - (29,396) Other Liabilities...... 453 - 91,935 (260) 275 92,403 Minority Interest in Subsidiaries........... - ~ -. ~ (157,682) (157,682) Common Shareholders' . . . --. Equity............. 196 (7,331) (1,118) 157,407 149,154 T tal Liabilities...... $.22,791 8 3, 7 42
.$.8 9,601 .$.( .....
.30,16 8 )
. ..... ...... ..... .$.....-.. . .$. B5,966
</ TABLE)
(1) Restore intercompany balances between ENSERCH and New EEX eliminated in ENSERCH consolidation. (2) Classification and reporting period differences between ENSERCH consolidation and separate financial statements of New EEX. (3) Effects of property sub. lease transactions between ENSERCH and New EEX. (4) Differences in ENSERCE's carrying value for its investment in New EEX
- i. and New EEX's carrying value of such assets.
(c) R2flects the restoration of intercompany transactions between ENSERCH and N w EEX eliminated in ENSERCH consolidation and adjustments for classification differences between ENSERCH consolidation and separate financial statements of New EEX. Also reflects the after-tax effects on income of discontinued operations of differences in amounts reported by E w EEX and amounts reported for the discontinued business by ENSERCH in its consolidated financial statements, as detailed in the following tables (TABLE) (CAPTION) SIX HONTES YEAR ENDED DECEMBER 31, ENDED
.......................... avNE 3o, 1993 1994 1995 1996 (S)
(IN THOUSANDS) (C> (C) (C) (C) Amortization of costs capitalized by ENSERCH not incurred by EEX. . . . . . . . . . $ (5,826) $(4,112) $(4,544) $ (14) Litigation judgment against ENSERCH... (30,766) (485) -- -- Effects of property sub-lease transac. tisns................................ .- .. 2,279 1,128 Riduction of deferred income taxes as-ceciated with the reorganization of p;rtners hips to f orm EEX. . . . . . . . . . . . . .. 70,000 -- .. 1% increase in the statutory federal income tax rate on corporations...... (7,504) .. .. .. Intsrest on debt assumed by ENSERCH Companies in connection with the re-organization of partnershi to form EEX in 1994...............ps ........... 16,136 13,597 -- -. t Activities not conducted through EEX l rnd other........................... (2,765) 44 4,545 891 Elininate minority interest........... 30 (93) 915 (890) , Total adjustments to net income. . . .. $(30,695) $78,951 $1,1 i
........ ....... .$.3,195
.... ... 15 ..
</ TABLE) 94
l PAG: 20-SEP-1996 11:57 fDC: 00 000 0000 00:00 31J: 00 000-0000 00:00 l((1])Tue/ Ens _rch1))FIsIDC !14433.TI)00095. F1ra 5-4 2. PIP
- 1. Donne 11ey (212) 341-7777 FMT 3.4.1.p01 l
(PAGE) l SELECTED INFORMATION CONCERNING TUC, ENSERCH AND NEW EEX l Th3 following is a brief description of TUC, ENSERCE and New EEX and their r:rpactive businesses. This information does not purport to be complete. For itistmation which is complete in all material respects, reference is made to ths (dditional information contained in the TUC 1995 Form 10-K, TUC 1996 Forms 10-0, ENSERCH 1995 Form 10-K, ENSERCE 1996 Forms 10-0, EEX 1995 Form 10-K and EEX 1996 Forms 10-0 which are incorporated herein by reference. see
*Igerrporation by Ref erence.* '
BUSINESS OF TUC TUC is a holding company which owns all of the outstanding common stock of d I TU Elretric, the princlpal subsidiary of TUC, SEsCo and Texas Utilities AuTtrilia Pty. Ltd. ("TU Australia"). TUC also has seven other wholly owned ! cubridiaries which perform specialized functions within the Texas Utilities < l Comp 2ty system. TUC and its subsidiaries are referred to herein as the ' System Comp:nies." References herein to TU Electric include its financing l j rub 111 aries, TU Electric Capital I, TU Electric capital II and TU Electric C pital III. TU Electric is an electric utility engaged in the generation, purchase, trrre ission, distribution and sale of electric energy wholly within the state Cf T: cts. TV Electric's service area is located in ne north central, eastern and western parts of Texas, with a population estimated at 5,820,000--about one-third of the p pulation of Texas. Electric service is provided in 91 counties and 372 incorporated municipalities, including Dallas, Fort worth, Arlington, Irving, Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Dd: c3, Midland, Carrollton, Tyler, Richardson and Killeen. The area is a div:rIified commercial and industrial center with substantial banking, insurance, communications, electronics, aerospace, petrochemical and rpeciclized steel manuf acturing, and automotive and aircraft assembly. The t.rrit ry served includes major portions of the oil and gas fields in the P rmian Basin and East Texas, as well as substantial farming and ranching ccctions Airport of the and the Alliance state. It Airport. also includes the Dallas Fort worth International TU Australia owns all of the common stock of Eastern Energy, a major Aultrtlian electricity distribution company. Eastern Energy is engaged in the purch;ce, distribution and sale'of electric energy to approximately 475,000 cuitomers in a service area in Australia extending from the outer eastern cuburbi of the Melbourne metropolitan ares to the eastern coastal areas of Vict ria and the New South Wales border to the north. Eastern Energy generates no citetric energy. SESCO is engaged in the purchase, transmission, distribution and sale of clcetric energy in ten counties in the eastern and central parts of Texas with a population estimated at 125,000. sEsC0 generates no electric energy. TUC holds no franchises other than its corporate franchise. TU Electric. SESCO tmd TU Austra31a possess all of the necessary franchises, licenses and scrtificates required to enable them to conduct their respective businesses. T;zse Utilities Fuel Company owns a natural gas pipeline system, acquires, stnzsa and delivars fuel gas and provides other fuel services at cost for the gn23r: tion of electric energy by TU Electric. T:xas Utilities Mining company owns, leases and operates fuel production iteilities for the surface mining and recovery of lignite at cost for the g:nir: tion of electric energy by TU Electric. TU S2rvices provides financial, accounting, information technology, customer c rvic:s, procurement, personnel and other administrative services at cost to tb3 System Companies. IU Services acts as transfer agent, registrar and dividino paying agent with respect to the TUC Common stock and the preferred etrek tnd pref erred securities of TU Electric, and as agent for participants endar TUC's Automatic Dividend Reinvestment and Common Stock Purchase Plan. 95 l i l I l i
l ((1))FINEDGi[1443) frje0096.FIF ' PAC: 15-8E7-1996 23:00 EDG 09 000-0000 00:00 BLE: 09 000-0000 00:09 ((1))Tuc/Easerch Ftru 8 4 2. 3. Donnellry (212) 341 7777 A0G 3.4.1,p02
]
(PAGE) . Texas Utilities Properties Inc. owns, leases and manages real and personal ! properties, primarily TUC's corporate headquarters. l t T: mas Utilities Communications Inc. was organized to provide access to j zCdv2& red telecommunications technology, primarily for ne system Companies' ! capected espansion of the energy servlces business. ; Casic Resources Inc. was organized for the purpose of developing natural recources, primarily energy sources and other business opportunities. l Chico Energy Company was organised to own and operate facilities for the l stquizition, production, sale and delivery of coal and other fuels, and ! currsntly leases eatensive coal reserves, j Infsraation regarding the names, ages, positions and business backgrounds of I
' tha (secutive of ficers and directors of TUC, as well as additional infarnation, including executive compensation, securities ownership of certain !
bcesficial owners and management and certain relationships and related - i trEnatetions, is inco @ rated by reference to Items 10, 11, 12 and 13 of the ! TUC 1995 Form 10-K (which iccorporates portions of TUC's definitive Proxy. ktatement for its Annual Meeting of Shareholders held on May 17, 1996).
.EUSINESS OF EN8ERCH r
'ENSERCE is an integrated company focused on natural gas. It is the successor to a company organized in 1909 for the purpose of providing natural gas carvice to nord Texas. ENSERCE's operations, after the Preliminary Merger and j
'thi Distribution, will include the followings
?
M;tural Gas Pipeline and Gathering, Processing and Marketin 1 (SPM). Owning and operating interconnected natural gas transa saion lines, uvoirground storage reservoirs, compressor stations and related properties, allwithinTexasfdhydrocarbonsforsalesandthewholesaleandretailgathering cad extract liqu and processing natural gas to remove impurities i scrketing of natural gas in several areas of the United states. (Lone star i Pipeline Company, a division of ENSERCE, Enserch Processing Company, a J division of MSERCE, Enserch Processing, Inc., Enserch Energy services, i I 10c., and related operations.) 1 2 tural Gas Distribution. Owning and operating some 550 local gas utility l distribution systems in Texas. (Lone Star Gas Company, a division of j ENSERCE, and related operations.) Power and Other. Developing, financing and operating electric-power graerating plants and cogeneration f acilities and operating thermal energy pitats for large building complenes, such as universities and medical i 1
-crmters. (Enserch Development Corporation, Lone Star Energy Company and -
l relcted operations.) U2tural Gas Pipeline and GPM ja RNSERCE's pipeline and GPM business is comprised of the partially rate-regulated business of Lone star P,*peline Company ('LSP'), the nonregulated gath2 ring and gas processing operations of Enserch Processing Company ('EPC") cr.d the nonregulated gas marketing operations of Enserch Energy services, Inc. ('EES*). LSP owns and operates interconnected natural gas transmission lines,
. uzd2rground gas storage reservoirs, compressor stations and related preperties, all within Texas. Through nese f acilities, it transports natural gas to the distribution systems of Lone Star Gas company ('LsG"). Rates for th3se services nstursi gas forare regulated affiliates by the other thanRailroad Las andCommission. LSP also transEorts third-prty shippers. LsP s trtn2;ission system is connected to the major gas hubs at Waha in West Texas,' i K3ty in South Texas and Carthage in East Texas. l I
For tho year ended December 31, 1995, 23% of total LSP throughput - repreganted volumes transported to LsG for ultimate sale to residential and commercial customers, 38% represented volumes transported for ultimate i 96 3
\
(ll))FIEIDCs[14433.TI]00097.FIP PAGi 16-8tP 1996 23:08 EDCs 00 000 0000 00:00 RLK 00-000 0000 00:00 til))Tue/Ensirch Firm 8-4 1. 3. Donnelliy (2'.J) 341 7777 AOC 3.4.1,p02 (PACE) deitimation to competitive on-system industrial and power-generation markets Ond 39% represented volumes transported for destination to of f-system markets. I ENSERCH holds a 50% interest in a partnershi named Gulf Coast Natural Gas comp y, which operates a transmission system kn the Texas Gulf Coast aren ' th t transports and sells natural gas primarily to industrial and sensifiliated pipeline customers. j 1 Ccthiring and Processing { EN!ERCB's operations for the processing of natural gas for the recovery of natur:1 gas llquids (* NGL') are conducted by EPC. EPC uses cryogenic and mechInical refrigeration processes at its NGL extraction facilities. The mixed NGL stream, containing the heavier hydrocarbons ethane, sctur:1 gasoline, is pumped via pipeline to Mt. Belvieu, propane, butane Texas. The and remaining l rcturel gas, primarily methane, leaves the NGL plants in gas transmission Iteco for transportation to end-use customers. Ces Marketing EE3 is a marketer of natural gas and naturni gas services to both the fom32 tic wholesale and retail markets, primarily in the northeast, midwest and weit crest. EES marketing activities typically consist of (1) contracting to purcha:e specific volumes of gas f rom producers, pipelines and other suppliers ct various points of receipt to be supplied over a specific period of time, (ii) cggregating gas supplies and arranging for the transportation of these g:s tupplies and (iii) negotiating to sell specific volumes of gas over a tpecified period of time to local distribution companies and o der end users. Th2 marketing activities of EES involve price commitments into the future t nd, therefore, give rise to market risk, which represents the potential lose that can be caused by a change in the market value of a particular commitment. To ma" age these market risks, EES enters into a variety of transactions, including forward contracts principally involving physleal delivery of natural gns One derivative financial instruments, includhg swaps, options, futures tnd ather contractual arrangements. C:tur:1 Gas Distribution LSG owns and operates natural gas distribution systems and related prrperties. Through these f acilities, its purchases, distributes and sells natur:1 gas to over 1.3 million residential, commercial, industrial and cicetric-generation customers in approximately 550 cities and towns, including th2 11-county Dallas /yort Worth Metroplex. LSG also transports natural gas within its distribution system as market opportunities require. rir the year ended December 31, 1995, sales to residential and commercial cu;tomirs accounted for 88% of LSG's total gas sales revenues and 84 % of n;tur:1 gas volumes sold, Sales to industrial and electric-generation cu; tom;rs accounted for the remainder. LIG's gas supply consists of contracts for the purchase of dedicated cp;cific reserves, contracts with other pipeline companies in the form of cervic 2 agreements that are not related to specific reserves or fields, and g:s in storage. The total gas supply as of January 1, 1996, was 754 Bef, which is cpproximately five times LSG's purchases during 1995. Of this total, 197 Bef tr9 dedicated reserves and 32 Bcf are working gas in storage. Management has calculated that 525 Bef, including 197 Bei under one agreement, are committed to LSG under service agreements. In 1995, about s6% of LSG's gas requirement was purchased from some 264 independent producers and tenaffiliated pipeline companies, one of which supplied approximately 12% of j tst:1 requirements. The remaining 14% of LSG's requirement was supplied by cffilittes. LSG is wholly intrastate in character and performs its distribution rper tions in the State of Texas subject to regulation by the Railroad Commission and municipalities in Texas. The Railroad Commission regulates the i 97 l t
i , I 1))f!NEDGe[14433.TX]00091.7IF PAG: 20-stF.1996 04:39 EDG 00-000-0000 00:00 b1Ks 00-000 0000 08:00 (1))Tuc/Easesch fire 8-4 R. 2. Donnell:7 (212) 341 7777 A0G 3.4.1,p02 , I (PA!E) 1 [htrga for the transportation of gas by LSP to LSC's distribution systems for 0:13 to LsG's residential and industrial consumers. The Railroad commission has triginal jurisdiction over rates charged to customers for gas delivered 1 1 tutcife incorporated cities and towns (environs rates). Bates within ' inc1rporated cities and towns in Texas are subject to the original
. juri diction of the local city council with appellate review by the Railroad
~
Commission. ENSERCH operates in the compressed natural gas market throu Alt;rnative Fuels Division of Lone Star Energy Company (*LSECgh) and the two j ratur71 gas vehicle affiliates, rieet star of Texas, L.C. (*rleet star') and i TRANSTAR Technologies, L.C. ("TRANSTAR*) that are both 50% owned by LSEC. Yleet star and Finastar, a partnership between Fleet star and Fina Oil and Chemical, had 14 public natural gas fuel stations in commercial operation at Derember 31, 1995. TRANSTAR provides turnkey natural gas vehicle conversions cnd Ether related services and performed over 1,200 vehicular natural gas convarsions in 1995, compared with 500 conversions in 1994. j In south America, LsG is providing its distribution expertise to develop a ! [ new infrastructure in support of gas systems being constructed to service ! SL;tirgo, Chile, and surrounding communities. Additionally, newly passed legislation in Mexico provided a basis for partial ownership of gas pipeline -l l trascaission and distribution systems by foreign companies. Based upon its giogr phic proximity to the existing U.S.-based, natural gas reserves, l ENSERCR's af filiates are examining the economic potential to be gained by i participating in the developing natural gas infrastructure in Mexico. i i Power i En:crch Development Corporation ("EDC") develops business opportunities primarily in the areas of independent power, including cogeneration. EDC cv11uites the risks and rewards for these potential venturess selects for d;v;1opment those ventures with the highest potential of success; implements r.nd contro3 s development of each ventures and brings together all the ro"ources required to develop, finance, construct, operate and manage the cc1:cted ventures. EDC's efforts are currently focused on international ! prrj cts, with decreased emphasis on projects in the United States. - i i EDC has completed the development of three cogeneration plants, including a J 255-megawatt ("Mw") plant in sweetwater, Texas, that began operation in 1989, ! c 62-Mw natural gas-fired cogeneration f acility in Buf f alo, New York, that was complated in 1992 and a 160-MW plant in Bellingham, Washington, that began commercial operation in 1993. The electricity produced at the sweetwater plant i is purchased by TU Electric, and thermal energy is sold to United States I Gypzia Company under a long-term agreement. A subsidiary of EDC is the man ging general partner of the plant's owner, EEx and EES provide gas to the plcit, and LSP transports the gas. The Buffalo plant supplies electricity to i Nirg:r2 Mohawk Company and thermal energy to Outokumpu American Brass, Inc. The cl ctricity produced at the Bellingham plant is sold under a long-term i power cales agreement with Puget Sound Power & Light Company, and thermal s en:rry in the form of steam and hot water is sold to Georgia-Pacific C3rpor; tion. At the end of 1995, EDC had two international projects in the construction tid drilling phase. Construction of a 36-MW coal-fired cogeneration facility in th) Ehejiang Province of the People's Republic of China, in which EDC has a 70% LLterest, began in the fourth quarter of 1995. The plant is expected to be complited in 1998. Electricity will be sold to the Shaoxing Administration of Pow.r Utilisation, and steam will be sold to several industrial users in the cris. The second project, in which EDC will have a 15% interest, is a 300 to 400-Mw geothermal pwar plant in Java, Indonesia. Drilling for geothermal r crurce will continue Groughout 1996, and construction of the power. gincrition facility is scheduled to begin in 1997. Electricity f rom the plant Will be sold to the Indonesian electric utility, PT PLN (PERSERO). ENSERCH owns and/or operates four central thermal energy plants providing hast11g and cooling to various institutional customers in Texas under crrasg:ments which expire in 1996 and 1997. ENSERCH is 98 1
4 [ FAGS 20-SEP 1996 06:16 EDC: 00-000-0000 00:00 BLKs 00-000 0000 00:00 H[1]!FINEDGal14433.TI]00099.FIP i))Tuc/Easerch rara s-e 3. R. Donnelliy (212) 341-7777 A0G 3.4.1,p03 (PAGE) Letivsly pursuing new contracts to operate the plants after the existing (groteents expire. The expiration of these agreements will not have a Cignificant impact on EASERCE. Irfrrmation regarding the names, ages, positions and business backgrounds of tha crecutive officers and directors of ENSERCH, as well as additional
' isfirmation, including executive compensation, security ownership of certain bencficial owners and management and certain relationships and related trcns ctions, is incorporated by reference to Items 10, 11, 12 and 13 of the ENSERCH 1995 Torm 10-E (which incorprete portions of ENSERCH's definitive Prizy Statement for its Annual Meeting of Shareholders held on May 14, 1996).
BUSINESS OF NEW EEX N:1 EEX will be the surviving corporation in the Preliminary Merger, in which EEX will merge with and into LSEPO. LSEPO LIEPO operates and maintains, under long term contreets, a 255 megawatt l rogan:rstion facility located in Sweetwater Texas, a 62 megawatt cogeneration I fscility located in Buffalo, New York, and a 160 megawatt cogeneration f cilit Power."y locatedisina Bellingham, LSEPO wholly ownedWashington. subsidiary ofSee *--Business of ENSERCB-- ENSERCH. l EEX EEX has been engaged in the exploration for and the development, production rnd alle of natural gas and crude eil since 1918. EEX is one of the largest i ind: pendent exploration and production companies in the United States, with a rix rve base of 1,792 Befe at January 1, 1996, as estimated by DeGolyer and .I l MacN:ughton th:03 reserves (*D&M*)ist cons of natural gas. EEX has grown through explorationindependent petroleum consultants. Approximately 75% of
#cvil:pment and acquisition activities concentrated in major production basins j lic:ted offshore in the Gulf of Mexico and onshore in East Texas, North j Centr:1 Texas and the U.S. Gulf Coast. ,
1 On June 8, 1995, EEX acquired all of the capital stock of DALEN Corm ration I ('DALEN"), an independent gas and oil company engaged in the exploration for I cnd the development and production of natural gas and crude oil (the *DALEN Acquicition"). Through %e DALEN Acquisition, EEX acquired proved reserves tat:11ng 397 scfe at June 30, 1995, and other assets for cash of $340 million 1 cnd cisumed DALEN's bank debt of $115 million. The DALEN Acquisition was l irititlly f unded through EEX's borrowings. DALEN's activities were oriented l primarily toward natural cas and were concentrated in selected major production regions, including the Gulf Coast, the Gulf of Mexico, the Mid-Contin:nt and the Rocky Mountains. Substantially all of the Rocky Mountain i caatts (which includes ap?roximately 150 Befe of reserves) have since been csid. EEX cells its gas and oil under long and short-term contracts. In 1995, 1 Ens 2rch Energy Services, Inc. ("EES*), the ENSERCE natural-gas marketing rub 3idiary, was EEX's largest gas customer, purchasing gas under two long-term v ricble-priced contracts. A division of ENSERCH, Lone Star Gas Company, purch::es gas under a long-term fixed-priced service contract. In 1995, tpprrximately 10% of IEX's natural-gas volumes was sold to Lone Star Gas Comp;ry. The continuing maturity of gas markets is causing an evolution in the g;s cerketing efforts of EEX. Unbundling of services by interstate pipelines, dIrcgulation ef forts of many state regulatory bodies and the explosion of , firtscial instruments tied to gas markets have radically altered marketing ! epportunities for producers. EEX believes that it can achieve the greatest 1 I ccstomic benefit from using the services of gas marketing organizations rather thna h;ving its own large staff, while maintaining a core staff to ensure j scrk;t prices are being received. j Oil sales contracts are for one year or less, and prices generally are based upon field posted prices. 99 i
i 1 l PACS 18 8EP 1996 21:59 EDGs 00-000 0000 00:00 sIKs 00-000 0000 00r00 l((1))?uc/tasenh1))rINEDC e [1443k.TI)00100.FIF FIra 5-4 3. 3.-Donnellry (313) 341 7777 AOC 3.4.1,p03 g i (PAGE) EEX may utilise future contracts, commodity price swaps and other financial
. instruments to reduce esposure of EEX's gas and oil production to price valttility.
EEX's domestic activities are focused _in four regionse the Gulf of Mexicos East Tazas; North Central Texas; and the Gulf Coast Region of Texas, Louisiana, Mississippi and Alabama. The following table sets forth estimated
. net prsved reserves of EEX by region, as estimated by DsM, at January 1, 1996s (TABLE)
(CAPTIIN) OIL AND NATURAL GAS GAS LIQUIDS TOTAL' REGION (ACF) (MMBBLS) (BCFE)
....... ........ ....... j (S) (C) . (C) (C) l Gulf of Mexico..................................... 127.6 36.4 346.0 l E rt Texas......................................... 846.6 7.7 892.8 i Carth central Texas and other...................... 248.9 18.1 357.5 '
Gulf Coast......................................... 139.7 4.3 165.5 ; T tal Domestic.............................. 1, 3 6 2 . 8 66.5 1,761.8 ! Intc rna tiona1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....
.... .. 5.0 30.0 '
T4tal........................................... 1,362.8 71.5 1,791.8 (/TAILE) Dev:lo p e and undeveloped lease acreage as of December 31, 1995, are set firth belows (TABLE) (CAPTION) DEVELOPED ACRES UNDEVELOPED ACRES GROSS NET (1) GROSS NET (1) (S) (C) (C) (C) (C) Domestic Offshore............................... 141,842 40,329 755,240 416,272 Onshore................................ 535,294 337,790 1,541,826 901,017 Tota 1............................... 677,136 378,119 2,297,066 1,317,289 International............................ .. .. 2,489,567 618,637 Tota 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7....... 7,13 6 3 7....... 8,119 4,7 ...8 6,6 3 3 1.,9
..... 3 5,9 2 6 ../. .......
TAB LE ) L (1) RIpresents 1cese, the proportionate interest of EEX in the gross acres under l 2 Information regarding the names, ages, positions and business backgrounds of tha czacutive officers of EEX, as well as additional information, including i cxrcutive compensation, security ownership of certain beneficial owners and management and certain relationships and related transactions is incorporated by 23fsrence to Items 10, 11,12 and 13 of the EEX 1995 Torm 10.K (which ixcorporates portions of EEX's definitive Proxy Statement for its Annual , i MDatitg of Shareholders held on May 14, 1996). 100 1 1 l
([1]IFINEDGs(14433.TI]00101. PIP PAG: 20-8tP 1996 04:41 EDG 00-000 0000 00:00 BLK 00-000 0000 00:00 ((1))Tuc/Eas:rch Forn 8 4 3. 1. Donnelliy (212) 341 7777 ADG 3.4.leP02 (PAGE) MANAGEMENT AND OPERATIONS TOLLOWING THE MERGERS M;n:gement. At the Effective Time, the Company Board will consist of the thin-current members of the TUC Board and will have six committees as follows: ca (zrcutive committee, an audit committee, an organization and compensation --- committee, a finance committee, a nominating committee and a nuclear committee. The members of TUC's management will become members of the
- Compicy's management, holding the same position and on the same terms as in cff;ct at TUC on the Effective Date. Mr. Nye will continue as President and Chi f Executive officer of the Company; and Mr. Biegler will become an officer Cf TUC reporting directly to the CMei Executive, will continue as President cad Chief Executive Officer of ENSERCH and will have an employment agreement with the Company following the Mergers. In addition, Mr. Satterwhite will berome an officer of the Company following the Mergers. See "The Mergers--
Employment Agreements." Operations of the Company. The Company, TUC and ENSERCH will each maintain th:ir forporate offices in hallas, Texas and will collectively continue their rper:tions essentially as conducted prior to the Mergers. Following the M ricr2, the Company presently intends to pay dividends on its Common Stock at tDo current rate of $2.00 per annum being paid on TUC Common Stock, subject to sviluition from time to time by the Company Board based on the Company's tsault3 of operations, financial condition, capital requirements and other r: lev:nt considerations. Bowover, no assurance can be civen that such dividend rnt) Till be in ef f ect or will remain uschanged, and de Company reserves the right to increase or decreas a the dividend on its Common Stock as may be required by law or contract, or as may be determined by the company Board, in ita 41:cretion, to be advissale. For a description of certain restrictions on th3 Company's ability to see ' Description af Company Capital Stock. pay dividends on its Common Stock, EXPERTS The consolidated financial statements and the related financial statement cchedule included in the TUC 1995 Form 10-K, incorporated herein by reference, hSv2 been audited by Deloitte & Touche LLP, independent auditors, as stated in th:ir report included in such TUC 1995 Form 10-K, and have been incorporated by r:frrence herein in reliance upon such rep rt given upon the authority of that firm as experts in accounting and auditlng. With respect to the unaudited condensed consolidated interim financial infrrmation included in the TUC 1996 Forms 10-0, which is incorporated herein by r:frrence, Deloitte & Touche LLP has applied limited procedures in cccTrd nce with professional standards for a review of such information. As ctatid in their reports included in the TUC 1996 Forms 10-0, incorporated h;rlin by reference, Deloitte & Touche LLP did not audit and they do not rzpr:cs an opinion on that condensed consolidated interim financial inferm tion. Deloitte s Touche LLP is not subject to the liability provisions cf irction 11 of the Securities Act for their reports on such unaudited cintctcod consolidated interim financial information because such reports are F%t *r; ports
- or a 'part' of the Registration Statement prepared or certified by cn tecountant wi din the meaning of sections 7 and 11 of the securities Act.
K, Th2 consolidated financial statements included in the ENSERCH 1995 Form 10-incorporated herein by reference, have been audited by Deloitte s Touche LLP, independent auditars, as stated in their report included in such ENSERCH 1995 rorm 10-K, and have been inco gorated by reference herein in reliance upoa cuch report given upon the auuority of that firm as experts in tecounting and auditing With respect to the unaudited condensed consolidated interim financial infirmation included in the ENSERCB 1996 Forms 10-0 incorporated herein by r7far:nce, Deloitte & Touche LLP has applied limited procedures in accordance eith prof essional standards for a review of such information. Bowever, as etnt:d in their reports included in the ENSERCH 1996 Torms 10-0, they did not cudit cnd they do not express an opinion on such interim financial inform: tion. Deloitte & Touche LLP is not subject to the liability provisions of s:ction 11 of the Securities Act for their reports on such unaudited cand2n ed consolidated interim financial 101 1 1 e f
[ll))FINEDCs[14433.TX]00102.FIF FACs 18.stF-1996 21:59 EDC: 09-000 0000 00:00 312: 00 000 0000 00:00 i
!!!)lTuc/ Ens:rch Fira 5-4 2. 1. Donnelliy (212) 341-7777 AOC 3.4.1,p02 (PAGE) infArmation because such reports are not " reports" or a 'part" of the
! Regictration Statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Securities Act. Th2 financial statements of LSEPo included in the ENSERCH September 1996 FIra 0-K and incorporated herein by reference have been audited by Deloitte s Touch 3 LLP, independent auditors, as stated in their report appearing therein, ! Ond tr;ve been incorporated by reference herein in reliance upon the report of l cvch firm given upon their authority as experts in accounting and auditing. ! T%s consolidated financial statements included in the EEX 1995 Form 10-K, incarporated herein by reference, have been audited by Deloitte & Touche LLP, itLIp2ndent auditors, as stated in their report included in such EEX 1995 Form 10-K, cnd have been incorMrated by reference herein in reliance u g n such j report given upon the authority of that firm as experts in accounting and cuditiLg. t With respect to the unaudited interim financial information included in the EEX 1996 Torms 10-0 incorpor?ted herein by reference, Deloitte & Touche LLP has cpplied limited procedursA in accordance with profession 11 standards for a rivi w of such information. However, as stated in their report included in the EEX 1996 Forms 10-0, they did not audit and they do not express an o inion on th;t interim financial information. Deloitte & Touche LLP is not sub act to th3 licbility provisions of Section 11 of the Securities Act f or the r reports en Euch unaudited interim financial information because those reports are not
'r ports" or a *part" of the Registration Statement prepared or certified by-ca eccountant within the meaning of Sections 7 and 11 of the Securities Act.
Th3 cudited consolidated financial statements of DALEN and its subsidiaries inclufed in the EEX 1995 Form B-K incorporated herein by reference, to the extstt and for the period indicated in their report, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their r:Mrt with respect thereto, and have been incorporated by reference herein in rili Lee upon de authority of said firm as experts in accounting and auditing in giving said report. Reference is made to said report, which includes an 0xplcnatory paragraph with respect to the change in method of accounting for incom) taxes as of January 1, 1993 as discussed in Note 2 to the DALEN Fincreial Statements incorporated herein. Th catimates of the reserves of gas and oil of EEX made by DeGolyer and MacN:ughton, independent petroleum consultants, have been incorporated herein by rcfarence in reliance upon such estimates given upon such firm's authority sa czperts with respect to the matters contained herein. LEGAL MATTERS Wrrcham, Forsythe a Wooldridge, L.L.P., Dallas, Texas will pass on the legnlity of the shares of company Common Stock issued in the Mergers on behalf cf th) Company. Certain United States federal income taxation matters in c!nn:ction with the Distribution and the Mergers will be passed upon by Reid & Prisst LLP, special tax counsel to TUC, and by King & Spalding, special tax i counici to ENSERCH. SHAREHOLDER PROPOSALS l If the Mergers are not consummated before the Annual Meeting of Shareholders of TUC to be held in 1997, any holder of TUC Common Stock who wishes to prca xt a proposal for inclusion in the prory statement for such Annual Meiting must comply with the rules and regulations then in effect. Under the taras of current SEC rules and the TUC Restated Articles of Incorporation and Bylers, any such proposal must be received by TUC no later than December 3, 1996. Froposals should be sent to the Secretary of TUC. If the Mergers are not consummated before the Annual Meeting of Shareholders of ENSERCH to be held in 1997, any holder of ENSERCH Common Stock who wishes to prteent a proposal for inclusion in the proxy statement for such Annual Mw;tiig must comply with the rules and regulations then in effect. Under curr'nt SEC rules, any such proposal must be received by ENSERCH no later than Novembir 28, 1996. Proposals should be sent to the Corporate Secretary of ENSERCH. 102 l
((1))FINEDCa[14433.ANB1j00001.FIP FAG 16-5EP+1996 00:52 EDC: 00-000-0000 00:00 BLK 00-000 0000 00:00 ((1))Tue/Enserch Fors S 4 2. 2. Donnallsy (212) 341-7777 A0G L 4.1,p02 (PAGE> ANNEX I AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of April 13, 1996 (this ' Agreement"), by and among ENSERCE Corporation, a corporation i fermed under the laws of ne State of Texas (*ENSERCE"), Texas Utilities CompIny, a corporation formed under the laws of'the State of Texas ("TUC*) and TUC Holding Company (formerly named TXB, Inc.), a corporation formed under the icws of the State of Texas (the
- Company"), 50t of whose outstanding capital stock is owned by TUC and 50t of whose outstanding capital stock is owned by ENSERCJ.
WHEREAS, TUC and ENSERCE have determined to engage in a strategic business combinations WHEREAS, TUC, ENSERCn, the Company and TXA, Inc., a wholly owned subsidiary of TUC formed under the laws of the State of Texas (*TXA"), entered into an Agrecaent and Plan of Merger dated as of April 13, 1996 (the " Original ' Agrc ment") and ENSEkCB and TUC entered into the ENSERCH Stock Option Agreement, dated as of April 13, 1996 (the 'ENSERCH Option"); , 1 WHEREAS, by this Agreement, the parties hereto wish to amend and restate the Origin:1 Agreements WHEREAS, to effect the strategic business combination, the respective Boards of Dir&ctors of INSE*CH' 'm and TUC have approv.'d the merger of two wholly owned, n cly formed subsi" of the Company with and into TUC and ENSERCH, rarpectively, wherr e f>. and ENSERCH will beoome wholly owned subsidiaries of thJ Company, all pt: " at to the terms and cosoitions set forth in this Agr:ement (such transa.61ons are referred to serein individually as the TUC M;rgsr cnd the ENSERCH Merger (as defined in lection 2.3), respectively and celltetively as the " Mergers"); WHEREAS, it is a condition to the Mergers that the Preliminary Merger (as hirzintiter defined) shall have occurred, and the stock of Lone Star Energy Plf.ut Operations, Inc., a Texas corporation ('LSEPO*), an indirect wholly own;d subsidiary of ENSERCE, shall have been distributed to the shareholders cf ENSERCE prior to the Mergers (the ' Distribution * ), in accordance with the tar %2 cf the distribution agreement to be entered into among ENSERCB, tSEPO, En;srch Exploration, Inc., an approximately 83% owned Subsidiary of ENSERCH ("EE1"), and the Company substantially in the form attached hereto as EEhibit A (tha ' Distribution Agreement"); and WHEREAC, for federal income tax purposes, it is intended that (a) the M1rgIrs will be tax-free under Section 351 of the Internal Revenue Code of 19h6, es amended (the " Code'), and the regulations thereunder, and (b) the Distribution shall qualify as a tax-free spin-off within the meaning of S;ction 355 of the Code. l NOW, THEREFORE, in consideration of the premises and the representations, wirrtnties, covenants and agreements contained herein, the parties hereto, intsnding to be legally bound, hereby agree as follows: ARTICLE I - Certain Definitions As usid in this Agreement, the following terms shall have the following macnings:
" Articles of Merger
- shall have the meanings set forth in Section 2.4.
*Barr Devlin
- shall have the meaning set forth in Section 6.14.
" Business Combination" shall have the meaning set forth in Section 10.lte).
1-1 i i 1 l i i
!I l
i 1 PAG: 16 SEP 1996 01:43 EDG 00-000 0000 00:00 BLE: 00-090-0000 00:00 l l[1))Tuc/EnsirchPINEDC:(1443). [ )) ANNI]60002. Pris 3-4 PIP
- 1. E. DonnellJy (212) 341-7777 ACC 3.4.1,p02 (PACE)
*Cartificates' shall have the meaning set forth in Section 3.2(b).
)
*Cicaing' and
- Closing Date" shall have the meaning set forth in Section l 4.1. -
' Company Common Stock" shall have the meaning set forth in Section 3.1(b).
' Confidentiality Agreement" shall have the meaning set forth in Section 7.20.
' Converted Shares' shall have the meaning set forth in Section 3.2(b).
' Disclosure Schedules
- shall mean the ENSERCH Disclosure Schedule and the TUC Disclosure Schedule, collectively.
'Dictribution Subsidiaries
- shall mean EEX and LSEPO and their respective Cubsidiaries and Joint Ventures.
"Dum Diligence Period
- shall have the n aning set forth in Section 8.6.
' Effective Time
- shall have the meaning set forth in Section 2.2.
*ENSERCH Benefit Plan" shall have the meaning set forth in Section 5.10(c)(ii).
'ENSERCH 1996 Budget
- shall have the meaning set forth in Section 7.5.
*ENSERCH 1997 Budget
- shall have the meaning set forth in Section 7.5.
'ENSERCH Common Stock" shall mean the common stock, par value $4.45 per thir3, of ENSERCH.
'ENTERCH Conversion Ratio" shall have the meaning set forth in Section 3.l(b).
*ETSERCH Convertible Debentures" shall mean the issued and outstanding 6 3/8% convertible Subordinated Debentures Due 2002 issued by ENSERCE. j
'ENSERCE Disclosure Schedule" shall have the meaning set forth in Section 8.6(a)(ii).
*ENSERCE ERISA Af filiate" shall have the meaning set forth in Section 3.10(e)(1)(D).
*ENSERCH Pinancial Statements" shall have the meaning set forth in Section 5.5(d).
'ENSERCH Material Adverse Effect* shall mean a material adverse effect on the business, operations, properties, assets, condition (financial or ethirvise ), prospects or results of operations of ENSERCH and its Subsidiaries takin as a whole or on the consummation of the transactions contemplated by this Agreement; provided that an EWSERCE Material Adverse Effect shall not include any adverse effect resulting from a failure to obtain the consent of thz holders of the ENSERCH Notes to the transactions contemplated by this Agr:Ement.
'ENSERCE Merger
- shall have the meaning set forth in Section 2.3(b).
"ENSERCH Merger Corp." shall have the meaning set forth in Section 2.l(a).
*ENSERCH Notes' shall means (i) the issued and outstanding 84 Notes Due 1997, 8 7/8% Notes Due 2001, 7% Notes Due 1999, 6 3/8% Notes Due 2004, 7 1/8%
Notsa Due 2005 issued by ENSERCH under the Indenture, dated as of Pebruary 15, 1992 between ENSERCH and The First National Bank of Chicago, as Trustees (ii) tha E2SERCH Convertible Debentures; and (iii) the 9.06% Adjusting Rate Senior totas issued by ENSERCH pursuant to the Note Agreement, dated as of January , 12, 1990, between ENSERCH and the Prudential Insurance Company of America, r Pruco Life Insurance Company, Prudential Property and Casualty Insurance comprny, and Prudential Reinsurance Company. ; I-2 l l 1 1 l 1
ll1] FINEDCs[14433.AF51100003.FIP FACs 16-SEP-19M 00:52 EDCs 00 000 0000 00:00 BLE: 00 000-0000 00:00 I [11] Tue/Easerch 2. 3. Donnsilsy
~
rara 5 4 (212) 341 7777 A0G 1.4.1,p02
- (PAGE) l
*EISERCH Pension Benefit Plans" shall have the meaning set forth in Section j
5.10(e)(1)(D).
'ENSERCH Preferred Stock' shall mean the (i) adjustable rate cumulative preistred stock, series E (" Series E Preferred Stock"), and (ii) adjustable reta cumulative preferred stock, series F (* Series r Preferred Stock"), of ENJERCH.
*ENSERCH Requiltd Consents" shall have the meaning set forth in Section 5.4(b)(iii).
"ENSERCH Required Statutory Approvals" shall have the meaning set forth in S*ctica 5.4(c).
I *ENSERCH Rights" shall mean all of the outstanding rights to purchase ENSERCH Common Stock pursuant to the Rights Agreement dated as of harch 26, 1996.
*ENiERCH SEC Reports
- shall have the meaning set forth in Section 5.5(b).
j
*ENSERCH Shareholders' Approval
- shall have the meaning set forth in Section 5.13.
*ENSERCH Special Meeting
- shall have the meaning set forth in Section j 8.4(a)(i). I
*ENIERCH Trust
- shall have the meaning set forth in Section 3.2(d)(iii).
l ' Environmental Clains' shall mean, with respect to any person, (A) any and all administrative, regulatory or judicial actions, suits, demands, demand j lstters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation in writing by or from any person or entity l (including any Governmental Authority), or (R) any oral information provided l by a Governmental Authority that written action of the type described in the foregoing clause is in process, which (in case of either (A) or (B)) alleges potential liability (including, without limitation, potential liability for snicreement, investigatory costs, cleanup costs, governmental response costs,
- . removsl costs, remedial costs, natural resources damages, property damages, perarnal injuries, or penalties) arising out of, based on or resulting f rom (a) the presence, or Release or threatened Release into the environment, of cny Cesardous Materials at any location, whether or not owned, operated, leccid or managed by ENSERCH or any of its Subsidiaries or Joint Ventures (for purpores of Section 5.11) or by TUC or any of its Subsidiaries or Joint vintures (for purposes of Section 6.11), (b) circumstances forming the basis
- cf any violation, or alleged violation, of any Environmental Law or (c) any 1 i rad all claims by any third party seeking damages, contribution, l
- l. incennification, cost recovery, compensation or injunctive relief resulting j from the presence or Release of any Batardous Materials.
! ' Environmental Laws" shall mean all federal, state and local laws, rules rtgulations and guidances reisting to pollution or protection of human henkth er th3 environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without , li=itstion, laws and regulations relating to Releases or threatened Releases i cf Erzardous Materials or otherwise relating to the manuf acture, processing, distribution, use, treatment, storage, disposal, transport or handling of 81Eardous Materials. l
- Environmental Permits" shall have the meeting set forth in Section 5.11(b).
*ERISA" shall'mean the Employee Retirement Income Security Act of 1974, as l cmendsd.
l
- Excess Shares" shall have the meaning set forth in Section 3.2(d)(ii).
' Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
' Exchange Agent" shall have the meaning set forth in Section 3.2(a).
j 'FERC* shall mean the Federal Energy Regulatory Commission. 1-3 l s l
1 1
)
FAC: 16-SEF 1996 02:42 EDG 00-000-6000 00:00 BLE: 00-000-0000 00:00 I!1)))rINEDC[14433. (1] fzc/Enserch ANNI]00004.FIF H ra S-4 3. 1. Dona:11*y (212) 341-1777 AOC 3.4.1,p02 (PAGE)
*rinal order
- shall mean action by the relevant regulatory authority (or in thi cise of the Texas Railroad Commission Review, satisfaction of any one of (i) through (v) of the definition thereof) that has not been reversed, stayed, l cnjoined,-set aside, annulled or suspended, with respect to which any waiting i period prescribed by law before the transactions contemplated hereby may be crntummated has espired, and as to which all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied, end es to which all opportunities for rehearing are exhausted (whether or not cny tppeal thereof is pending).
'GAAP' shall mean generally accepted accounting principles.
" Governmental Authority" shall mean any court, governmental or regulatory body (including a stock exchange or other self-regulatory body) or authority, domestic or foreign.
*C::ardous Materials" shall mean (a) any petroleum or petroleum products, r diorctive materials, asbestos in any form that is or could become friable, urca formaldehyde foam insulation, and transformers or other equipment that etntain dielectric fluid containing polychlorinated biphenyls, (b) any cha:Acals, materials or substances which are now defined as or included in the d finition of " hazardous substances", *bazardous wastes", " hazardous matcrials", " extremely hazardous wastes", ' restricted hazardous wastes",
- toxic substances", " toxic pollutants", or words of similar import, under any Environmental Law and (c) any other chemical, material, substance or waste, czpocure to which is now prohibited, limited or regulated under any Environmental Law in a jurisdiction in which ENSERCH or any of its tub:idiaries or Joint Ventures operates (for purposes of Section 5.11) or in which TUC or any of its subsidiaries or Joint ventures operates (for purposes tf Section 6.11) .
*ESR Act* shall mean the Bart-Scott-Rodino Antitrust Improvements Act of ,
1976, as amended.
'Jsint Proxy Statement' shall have the meaning set forth in Section 5.B(a)(ii).
'Jrint Proxy / Registration Statement
- shall have the meaning set forth in Orction 8.2(a )(1) .
' Joint Venture" shall mean, with respect to any person, any corporation or oth r entity (including partnerships and other business associations and joint vcatures) in which such person or one or more of its Subsidiaries owns an j equity interest that is less than a majority of any class of the outstanding <
vsting securities or equity, other than equity interests held for passive l inusstment purpses that are less than 5% of any class of the outstanding j weting securitles or equity.
' Merger Subsidiaries
- shall have the meaning set forth in Section 2.1.
- Morgan Stanley" shall have the meaning set forth in Section 5.14.
'1935 Act' shall mean the Public Utility Bolding Company Act of 1935, as (mindId.
'KRC Actions" shall have the meanings set forth in Section 6.17.
'NYSE" shall mean the New York Stock Exchange, Inc.
- option Value' shall have the meaning set forth in Section 10.3(C).
"Out-of-Pocket Expenses' shall have the meaning set forth in Section 10.3(a).
*PBGC" shall mean the Pension Benefit Guaranty Corporation.
" Power Act* shall mean the Federal Power Act.
"Praliminary Merger" shall have the meaning set forth in Section 8.15(a).
1-4 l l l i l
I l PAG: 16 SEP-1996 06:53 EDC: 00-000-0060 00:00 SLK 00-000 0000 00:00 l Ill))] FINIDG a ll4433. ANKI) 00905.717 1] Tuc/Easerch Tars 5-4 2. 2. Donnelley (212) 341 7777 A0G 3.4.1,p02 ;
.<PAGE)
'RIgistration Statement
- shall have the meaning set forth in Section j 5.8(a)(1).
"R31 ease" shall mean any release, spill, emission, leakin ocposit, disposal, discharge, dispersal, leaching or migratfo,n into the injection, -- --
) '
ctmorphere, soil, subsurf ace, surf ace water, groundwater or property. i
*R:presentatives" shall have the meaning set forth in Section 8.1. !
"SEC" shall mean the Securities and Exchange Commission.
*s:curities Act" shall mean the Securities Act of 1933, as amended.
" stock Plan
- shall have the meaning set forth in Section 8.10.
'* subsidiary
- shall mean, with respect to any person, any corporation or
- oth:r entity (including partnerships and other business associatione) in which a person directly or in nrectly owns at least a majority of the outstanding ;
voting securities or other equity interests having the power, under ordinary i
' circumstances, to elect a majority of the directors, or otherwise to direct i thi management and policies, of such corporation or other entity.
"T.ikeover Proposal" shall mean any tender or exchange offer, proposal for a <
mergrr, consolidation or other business combiastion involving ENSERCH, TUC or ' tny et the!r respective material Subsidiaries, ir any proposal or of fer to acquire is. any manner a substantial equity interest in, or a substantial portian of the assets of, ENSERCH, TUC or any of their respective material ! sub3idiaries, other than pursuant to the transactions contemplated by this Agrgement. "
}
" Target Party" shall have the meaning set forth in Section 10.3(b)(ii).
" Task Force' shall have the meaning set forth in Section 8.12(a). l
*Tra Allocation Agreement" shall have the meaning set forth in Section 8.15(b). 1
, *T2x Assurance Agreement
- shall have the meaning set forth in section
! 8.15(b).
*T:ses" shall mean any federal, state, county, local or foreign taxes, i
chargis, fees, levies or other assessments, including, without limitation, all net-ir.come, gross income, sales and use, ad valores, transfer, gains, profits, , cacise, franchise, real and personal property, gross receipts, capital stock, production, business and occupation, disability, emplo m nt, payroll, license, ' I estimated, stamp, custom duties, severance or withholMng taxes or charges l , irpssrd by any governmental entity, and includes any interest and penalties '
'(civil or criminal) on or additions to any such taxes, charges, fees, levies e or cther assessments, and any expnses incurred in connection with the
- ditcraination, settlement o3 liugation of any liability for any of the forigoing.
' Tex Return" shall mean any report, return or other information required to be supplied to a governmental entity with respect to Tazes, including, where permitted or required, combines or consolidated returns for any group of
, sntities that includes ENSERCE or any of its Subsidiaries on de one hand, or TUC cr any of its subsidiaries on the other hand. i
*Tszas Law" shall mean the Texas business Corporation Act.
"Taras Railroad Commission Review' shall mean any one of the following with r gard to the Mergers (i) a rinal Order by the Texas Railroad Commission finding that the Transaction is in the public interests (ii) a rinal order 62clining jurisdiction over the transaction by the Texas Railroad Commission;
> (iii) a determination by the Texas Railroad Commission that an Investigation associated with the Merger is not necessary; (iv) the issuance of a letter by
' thn Taras Railroad CMasion stating that, at a minimum, it does not oppose tha Marger or (v) the taking of no action to docket or otherwise consider the Mergar by the Texas Railroad commission by the time that all approvals set fcrth in Section 9.1 (e) have been obtained 15 i
l l t i
1 PAGi 16 817 1996 13:18 EDGs 00 009 0000 00:00 ELK 00-000-0000 00:00 ((1))Tuc/Enserch (( ))FINEDCs[14413. ANNI)00006.FIF firs 8 4 1. R. Donn211ry (212) 341-7777 A0G 3.4.1,p02 (PAGE)
*TUC Benefit Plan" shall mean any " employee pension benefit plan
- or
' employee welfare benefit plan" as defined in ERISA, of TUC.
"TUC Common Stock" shall mean the common stock, without par value, of TUC.
' "TUC Conversion Ratio
- shall have the meaning set forth in Section 3.l(b).
'TUC Disclosure Schedule" shall have the meaning set forth in Section 8.6(a)(1).
'TUC Financial Statements" shall have the meaning set forth in Section 6.5(d).
'TUC Material Adverse Effect" shall mean a material adverse effect on the buriniss, operations, properties, assets, condition (financial or otherwise),
prscpects or results of oprations of TUC and its Subsidiaries taken as a whnis or on the consummation of the transactions contemplated by this Agrtement.
"TUC Merger
- shall have the meaning set forth in Section 2.3(a).
'TUC Merger Corp." shall have the meaning set forth in Section 2.1(a).
"TUC Pension Benefit Plan" shall have the meaning set forth in Section 6.10.
'TUC Required Consents" shall have the meaning set forth in Section, 6.4(b)(141).
"TUC Required Statutory Approvals" shall have the meaning set forth in 8:ction 6.4(c).
'TUC SEC Reports" shall have the meaning set forth in Section 6.5(b).
"TUC Shareholders' Approval' shall have the meaning set forth in Section 6.13.
*TUC Special Meeting" shall have the meaning set forth in Section 8.4(b)(i).
- violation" shall have the near ing set forth in Section 5.4 (b).
ARTICLE II The Mergers Srction 2.1 Formation of Merger Subsidiaries. To effectuate the transactions cantatplated herein, prior to the TUC Special Meeting and the ENSERCE Special M3 sting (each as defined below), the Company shall cause the following corporations to be organized: L thi(a) TUC Merger Cor State of Texas (g.,TUC a transitory corporation Merger Corp.'), organized the articles underoration of incor the lawsandof i bylswa of which shall be in such forms as shall be determined TUC with the conscnt of ENSERCH, which consent shall not be unreasonably wi eld, and the tuthorized capital stock of which shall initially consist of 1000 shares of common stock, without par value, which shall be issued to the Company at a ( prica of $1.00 per share, ' l (b) ENSERCH Merger Corp., a transitory corporation organized under the laws of thi State of Tetas ("ENSERCH Merger Corp. 3 TUC Merger Corp and ENSERCH ) Mxrgsr Corp., collectively, the " Merger Subsidiaries"), the articles of : incrrporation and bylaws of which shall be in such forms as shall be 63ttrnined by ENSERCH with the consent of TUC, which consent shall not be unrecaonably withheld, and the authorized capital stock of which shall initially consist of 1,000 shares of common stock, par value 50.01 per share, t:hich shall be issued to the Company at a price of $1.00 per share. I-6 l o 3 i i t
PAG: 16 str 1996 00:53 EDGs 00 000-0000 00:00 ELE: 00-090-0000 00:00 [ [1))) ((1] f !NEDC Tuc/Enserch s [14433. ANEI] 09007.FIP far2 S-4 R. R. Donn111ry (212) 341-7777 A0G 3.4.1,p02 (PAGE) Section 2.2 Certain Other Actions. In connection with the organization of th) Marger Subsidiaries, as soon as practicable following the creation of the M;rg2r Subsidiaries, the Company shalls (a) designate the respective directors cnd efficers.of the Merger Subsidiaries; (b) cause the directors and officers cf th'a Merger Subsidiaries to take such steps as may be necessary or cppropriate to complete the organization of the Merger Subsidiaries (c) adopt (to ecle sharebolder of each of the Merger Subsidiaries) this Agreements (d) cruro this Agreement to be approved, and to be executed and delivered, by each Mergir Subsidiary; and (e) cause each Merger Subsidiary to perform its (bligations under this Agreement. Stetion 2.3 The Mergers. This Agreement shall constitute a plan of merger far purposes of Article 5.01 et seq. of the Texas Law'with respect to TUC, E:SERCH and the Company and, upon approval of this Agreement by the Merger Subrifiaries, this Agreement shall also constitute a plan of merger for such purp>Tes with resMct to the Merger Subsidiaries and each of the Merger Lubsidiaries shall be deemed to be a party hereto. Upon the terms and subject to th3 conditions of this Agreements (0) TUC Merger Corp, shall be merged with and into TUC (the 'TUC Merger") in tcccrdance with Secdons 5.01 and 5.03 of the Texas Law. The separate errporate existence of TUC Merger Corp. shall thereupon cease, and TUC shall be tha surviving corporation in the TUC Merger and shall continue its errporate existence under the laws of the State of Texas. As a result of the TUC Merger, TUC shall become a subsidiary of the Company.
-(b) ENSERCH Merger Co n , shall be merged with and into ENSERCH (the 'ENSERCE Margir') in accordance with Sections 5.01 and 5.03 of the Texas Law. The scparrte corporate existence of ENSERCH Merger Corp. shall thereupon cease, tnd ENSERCH shall be the surviving corporation in the ENSERCH Merger and shall cantiEue its existence under the laws of the State of Texas. As a result of th3 ENSERCH Merger, ENSERCH shall become a Subsidiary of the Company.
C:ction 2.4 Effective Time of the Mergers. The parties acknowledge that it is their mutual desire and intent to consummate ne Mergers as soon as pr cticable after the date hereof. Accordingly, the parties shall use all rnaconable ef forts to bring about the satisf action as soon as practicable of cll the conditions specified in Article Ix and otherwise to ef fect the con:ummation of the Mergers as soon as practicable. Subject to the terms hersif, as soon as practicable after all of the conditions set forth in Article Ix shall have been satisfied or waived, the parties hereto will cause tha Mergers to be consummated by the filing with the Secretary of State of the State of Texas, in accordance with the Texas Law, of articles of merger (the
- Articles of Merger *) f or the TUC Merger and the ENSERCE Merger, respeedvely, in such form as is required by, and executed in accordance with, the relevant previsions of applicable law. The Mergers shall both become effective cimultaneously and at the time (the ' Effective Time") that the Secretary of Stato of the State of Texas shall, upon such filing of the Articles of Merger, iGJu2 a certificate of merger in respect of each of the Mergers.
Siction 2.5 Articles of Incorporation. The Articles of Incorporation of TUC cs in effect immediately prior to the Effective Time shall be the Articles of Incorporation of TUC f ollowing the Ef fective Time, until duly amended, except thtt Article I of such Articles shall be deemed to be amended at the Effective Time to read as follows: 'The name of the Corporation is Texas Energy Industries, Inc." The Articles of Incorporation of ENSERCH as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of ENSERCH following the Effective Time, until duly amended. At or prior to ths Ef fective Time, the Company shall adopt Articles of Incorporation ) id ntical to the Articles of Incorporation of TUC, pursuant to which the name of ths Company will become ' Texas Utilities Company'. : Siction 2.6 Bylaws. The Bylaws of TUC as in ef fect immediately prior to the ) Effsetive Time shall be the Bylaws of TUC following the Effective Time, until - duly tmended. The Bylaws of ENSERCH as in ef fect immediately prior to the I Ef fective Time shall be the Bylaws of ENSERCE following the Ef fective Time, l until duly amended. At or prior to the Effective Time, the Company shall adopt ) Bylcss identical to the Bylaws of TUC, which shall be the Bylaws of the 1 Comp ny following the Effective Time, until duly amended. S ction 2.7 Effects of Mergers. The Mergers shall have the effects set forth in S2ction 5.06 of the Texas Law. I I-7 , I l
[ PACS 16 SEP-1996 02:42 EDGs 00-000 0000 00:00 3!Js 00-000-0000 00:00 ( (1))tuc/Easerch [1) ] TINEDG s l14433. ANNI] Form D0008. S-4 PIP 1.- 2. Donnelley (212) 341-7777 A0G 3.4.1,p02 (PAGE) ARTICLE III Conversion of Shares - ___ _ Scction 3.1 Ef fect of Mergers on Capital Stock. At the Ef fective Time, by virtu 1 of the Mergers and without any action on the part of any holder of any \ crpital stock of ENSERCH, TUC, the Company, TUC Merger Corp. or ENSERCH Merger d Corp.s s ~s X (e) Cancellation of Certain common Stock. Each share of TUC Common Stock and % ENIEiCH Common Stock (and the accompanying ENSERCB Rights), if any, that is j
- owned by TUC or ENSERCH or any Subsidiary of TUC or ENSERCH or held in troagury by ENSERCH or TUC shall be canceled and cease to exist.
(b) Conversion of TUC Common Stock and ENSERCH Common Stock. Each issued and outstanding share of TUC Common Stock (other than shares of TUC Common Stock cynesled pursuant to Section 3.1(a)) shall be converted into one share (the
*TUC Conversion Ratio") of duly authorized, validly issued, fully paid and nrnaccessable common stock, without par value, of the Company (* Company Common Etock"). Each issued and outstanding share of ENSERCH Common Stock (other than chtres of ENSERCE Common Stock canceled pursuant to Section 3.1(a)), together with any outstanding ENSERCH Rights with respect thereto, shall be converted inta cuch number of share (s) or fraction of a share (rounded to the nearest (the *ENSERCE Conversion Ratio *)
1/1000th)d fully pai and monassessable Company Common Stock equal to the quotientof duly authorized, validly issued, obttined by dividing $8.00 by the average of the closing sales prices of TUC Common Stock as reported on the New York Stock Exchange-consolidated Trr.ntictions fifth tradingTape day on each prior to of theEffective the 15 consecutive Time (the trading days preceding)the
- Average TUC Price ,
provifed that notwithstanding the actual Average TUC Price, the Average TUC Prica shall be deemed to be not less than $35 5/8 nor more than $43 5/8. Upon Kuch conversion, all such shares of ENSERCH Common Stock (and the accompanying ENSERCE Rights) shall be canceled and cease to exist, and the holder of a cartificate representing such shares shall cease to have any rights with rogpect thereto, except the right to receive the number of whole shares of Company Common Stock to be issued in consideration therefor and any cash in lieu cf f ractional shares of Company Common Stock upon the surrender of such crrtificate in accordance with Section 3.2. At the Effective Time, c2rtificates representing shares of TUC Common Stock will represent shares of Company Common Stock without any further action by the holders thereof. (c) ENSERCH Preferred Stock Unchanged. Each share of ENSERCH Preferred Stock outstr.nding at the Ef fective Time shall be unchanged in and shall remain cutstEnding after the Mergers. (d) ENSERCH Convertible Debentures. Each outstanding ENSERCH Convertible Debenture shall remain outstanding following the Mergers. ENSERCE shall take auch Ection as may be necessary so that, after the Effective Time, the ENSERCH , conv3rtible Debentures shall be convertible in accordance with their terms P c.nly for Company Common Stock. Prior to the Effective Time, the Company shall
- audorize and reserve for issuance, or otherwise provide, a suf ficient number cf shires of Company Common Stock for delivery upon such conversion of the ENSERCB Convertible Debentures outstanding as of the Ef fective Time.
-(e) Cancellation of Company Capital Stock. Each share of capital stock of tha Company issued and outstanding immediately prior to the Ef fective Time che11 be canceled and no consideration shall M delivered in exchange
'tharsfor.
(f) Treatment of Common Stock of Merger Subsidiaries. Each issued and outstanding share of common stock, without par value, of TUC Merger Corp. chall be converted into one fully paid and nonassessable share of TUC Common l Stoch and the stated capital of TUC Merger Corp. at the Effective Time shall t ' become the stated capital of TUC. Each issued and outstanding share of common stock, par value $ 0.01 per share, of ENSERCE Merger Corp. shall be converted into one fully paid and nonassessable share of ENSERCH Common Stock. 1-8 l I. i a A L.
1 1 1 I FAG: 16-SEP-1996 00:53 EDCr 00-000 0000 00:00 BLE: 00-600-C000 00:00 l[1))TI5EDCa[1443).ANRI)00009.FIP [1))?ac/Easerch Ftra 8-4 R. R. Donas11sy (212) 341 7777 AOC 3.4.1,p02 (PACE) Ciction 3.2 Exchange of certificates. (c) Deposit with Exchange Agent. As soon as practicable after the Effective Time, the Company shall deposit with a bank or trust company mutually cgrootble to ENSERCH and TUC (the ' Exchange Agent *) certlficates representing ch;rcs of Company Common Stock required to ef fect the conversions ref erred to in Section 3. lib). (b) Exchange Procedures. As soon as practicable af ter the Ef fective Time, tha Exchange Agent shall mail to each holder of record of a certificate or cartificates that, immediately prior to the Effective Time, represented out:tanding shares of ENSERCH Common Stock (the " Certificates") that were conv:rted (;ollectively, the " Converted Shares") into shares of Company Common Etock pursuant ch:11 (pecify to delivery that 3.l(b)l(1) Section shal , be aeffected, form of letter of transmittal and risk of loss and(which title to rny Cartificate shall pass, only upon actual delivery of such certificate to tha Exchange Agent) and (ii) instructions for use in effecting the surrender , of Certificates in exchange for certificates representing shares of Company Common Stock. Upon surrender of a Certificate to the Exchange Agent (or to tuch ether agent or agents as may be appointed by agreement of TUC and EN1ERCB), together with a duly esecuted letter of transmittal and such other Cocuments as the Exchange Agent shall require, the holder of such Certificate chall be entitled to receive in exchange therefor a certificate representing thi number of wnole shares of Company Common Stock that such holder has the right to receive putsuant to the provisions of this Article III. In the event cf a transfer of ownership of Converted Shares that is not registered in the tr:asi;I records of ENSERCH, a certificate representing the proper number of % th;ros of Company Common Stock may be issued to the transferee if the C rtificate representing such Converted Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such trEn;fsr and by evidence satisfactory to the Exchange Agent that any rpplienble stock transfer taxes have been paid. If any certificate shall have beta last, stolen, mislaid or destroyed, uen upon receipt of (x) an affidavit of that fact from the holder claiming such certificate to be lost, mislaid, etsien or destroyed, ty) such bond, security or indemnity as the Company or th2 Exchange Agent may reasonably require, and (x) any other documentation krcasscry to evidence and effect the bona fide exchange thereof, the Exchange Agar.t chall issue to such holder a certificate representing the number of chiros of Company Common Stock into which the shares represented by such lost, stolcn, mislald or destroyed certificate shall have been converted. Until currcndered as contemplated by this Section 3.2, each certificate shall be (eemed at any time after the Effective Time to represent only the right to rec:ivs upon such surrender a certificate representing shares of Company Common Stock and cash in lieu of any fractional shares of Company Common Stock cs contemplated by this Section 3.2. (c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made after the Effective Time with respect to compray Common Stock with a record date after the Effective Tima shall be paid to tha holder of any unsurrendered certificate with respect to the shares of Comp my Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be made to any such holder pursuant to Section 3.2(d), until the holder of record of such Certificate shall surrender such Cartificate as contemplated by Section 3.2(b). Subject to the effect of uncicimed property, escheat and other applicable laws, following surrender of cny such certificate there shall be paid to the holder of the certificates repraecnting whole shares of Company Common Stock issued in exchange therefor, without interest, (1) at the time of such surrender or as soon thereafter as m y be practicable, the amount of any cash payable in lieu of a fractional thira cf Company Common Stock to which such holder is entitled pursuant to SIction 3.2(d) and the amount of dividends or other distributions with a ricord date af ter the Ef fective Time theretofore paid with respect to such whole number of shares of Company Common Stock, and (ii) at the appropriate p yment date, the amount of dividends or other distributions with a record d;ta ef ter the Ef fective Time but prior to surrender and a payment date subrequent to surrender payable with respect to such whole number of shares of Compmy Common Stock. (d) No Tractional Securities. (i) No certificates or scrip representing fractional shares of Company Common Stock shall be issued upon the surrender f or exchange of C;rtificates, and such fractional share interests will not entitle the own:r thereof to vote or to any rights of a stockholder of the Company. I-9 1 l
)
I l
{ ll] ) r!NIDC s (14433. AMI) 00010.FIP PAC: 16 SEF-1996 00:53 EDG: 00-000 0000 00:00 BLK: 00-000-0000 00:00 Ill))Tuc/ Ens:rch h n 5-4 E. 1. Donnellty (212) 341-7777 A0G 3.4.1,p02 (PAGE) (11) As promptly as practicable following the Ef fective Time, the Exchange Agent shall determine the excess of (1) the number of full shares of Company Common Stock over (y) the aggregate number of whole shares of Company Common Stock, to be issued to the holders of FNSERCH Common Stock pursuant to Section 3.1, such excess being berein called the
- Excess ihtres.* As soon after the Effective Time as practicable, the Exchange Ag nt, as agent for the holders of ENSERCH Common Stock, shall sell the Excess Shares at then prevailing prices on the NYSE, all in the manner przvided in paragraph (iii) of thls Section 3.2(d).
(iii) The sale of the Excess Shares by the Exchange Agent shall be cricuted on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable. Until the net proceeds of such sale or sales have been distributed to the bolders of ENSERCH Common Stock, the Exchange Agent shall hold such proceeds in trust for the bilders of ENSERCH Common Stock (the *ENSERCH Trust"). The Company shall pry all commissions, transfer tares and other out-of-pocket transaction coats, including the expenses and compensation, of the Exchange Agent incurred in connection with such sale of the Excess Shares. The Exchange Agint shall determine the portion of the ENSERCH Trust to which each holder of ENSERCH Common Stock is entitled. (iv) As soon as practicable after the determination of the amount of cich, if any, to be paid to holders of ENSERCH Common Stock in lieu of any irrctional share interests, the Exchange Agent shall distribute such cmounts to such bolders of ENSERCH Common Stock in accordance with this 0cction 3.2. (a) Closing of Transfer Books. From and after the Effective Time, the stock trentfer books of both TUC and ENSERCH shall be closed (other than with rocpect to the ENSERCH Preferred Stock) and no transfer of any TUC Common Stock or ENSERCH Common Stock shall thereafter be made. If after the Effective Time any certificates evidencing shares of TUC Common Stock or ENSERCH Common Stock are presented to the Company transfer agent for registration of t:In:fer, they shall be canceled and exchanged for certificates representing the number of whole shares of Company Common Stock and the cash amount, if Ony, determined in accordance with Ms Article III. (f) Termination of Duties of Exchange Agent. Any certificates representing CompLny Common Stock deposited with the Exchange Agent pursuant to Section 3.2(c) and not exchanged within one year af ter the Effective Time pursuant to this Section 3.2 shall be returned by the Exchange Agent to the Company, which chill thereafter act as Exchange Agent. All funds held by the Exchange Agent frr payment to the holders of unsurrendered Certificates and unclaimed at the cnd cf one year from the Effective Time shall be returned to the Company, i whar:upon any holder of unsurrendered Certificates shall look as a general ! uniccured creditor only to the Company for payment of any funds to which such huld:r may be entitled, subject to applicable law. The company shall not be lirble to any person for such shares or f unds delivered to a public of ficial
. purzuant to any applicable abandoned property, escheat or sid lar law.
Section 3.3 Adjustments to Prevent Dilution. Subject to the requirements of l Article VII hereof, in the event that prior to the Effective Time there is a chrnge in the number of issued and outstanding shares of TUC Common Stock or rhtras of ENSERCH Common Stock convertible or exchangeable into Company Common Stock in the Mergers as a result of a reclassification, subdivision, , rcccpitalization, combination, exchange, stock split (including reverse stock i eplit), stock dividend or distribution or other similar transaction, the ! ENSERCH Conversion Ratio or the TUC Conversion Ratio, as the case may be, l thill be equitably adjusted to eliminate the effects of such event. ' I-10 i L
((1] FAC: 16 SEF-1996 00:53 EDC 00-000 0000 00:00 BLK 00-000 0000 00:00
!!1))FINEDC:(14433.
]Tue/Easerch ANNI]00011.FIF fora 5-4 1. 3. Conn 111ey (212) 341 7777 AOC 3.4.1.p02
<PAGE>
ARTICLE IV The Closing S;ction 4.1 Closing. The closing of the Merge [s (the " Closing") shall take plac3 at the offices of worsham, Forsythe s Wooldridge, L.L.P., 1601 Bryan Strsst, 30th Floor, Dallas, Texas 75201 at 10:00 a.m., local time, on d e cccond business day immediately following the date on which the last of the conditions set f orth in Article Ix is f ulfilled or waived, or at such other time end date and place as ENSERCH and TUC shall mutually agree (the " Closing Da t2" ) . ARTICLE V Representations and Warrantiac of Enserch ENSERCR represents and warrants to TUC as follows: ccction 5.1 Organization and Qualification. ENSERCH is a corporation duly crginized, validly existing and in good standing under the laws of the State cf T:xas, and each of ENSERCE's Subsidiaries is a corporation duly organized, , validly existing and in good standing under the laws of its jurisdiction of incrrporation. Each of ENSERCC and its Subsidiaries has all requisite corporate power and authcrity, and is duly authorized by all necessary ra;ulatory approvals and orders, to own, lease and operate its assets and properties and to carry on its business as it is 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 assets and properties makes such qualification necessary, other than such failures which, th;n taken together with all other such failures, will not have an ENSERCH Mat: rial Adverse Ef fect. E;ction 5.2-Subsidiaries. (c) Section 5.2 of the ENSERCH Disclosure Schedule sets forth a list as of the date hereof of all Subsidiaries and Joint Ventures (with the exception of EEX Jcint Ventures involving oil and gas operating agreements) of ENSERCH, including the name of each such entity and the state or jurisdiction of its incorporation. (b) Except as set forth in Section 5.2 of the ENSERCH Disclosure Schedule, noni cf the entities listed in such Section 5.2 is a "public utility company", o
- holding company *, a " subsidiary company" or an "af filiate" of any public 2(a)(7), 2(a)(8) or utilit{)compangwithinthemeaningofSection2(a)(5),
2(a)(1 (A) o the 1935 Act, respectively (c) Except ma set forth in Section 5.2 of the ENSERCH Disclosure Schedule, cll cf the issued and outstanding shares of capital stock of each Subsidiary cf ENSERCH are validly issued, fully paid, nonassessable and free of prcemptive rights and are owned directly or indirectly by ENSERCH free and clzer of any liens, claims, encumbrances, security interests, equities, chtrgis and options of any nature whatsoever, and there are no outstanding rubscriptions, options, calls, contracts, voting trusts, proxies or other commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, , inttrument or other agreement, obligating any such Subsidiary to issue, 1 dalivar or sell, or cause to be issued, delivered or sold, additional shares j cf its capital stock or obligating it to grant, extend or enter into any such i agrssment or commitment. l Sletion 5.3 Capitalization. (a) As of the date hereof, the authorized capital stock of ENSERCH consists . of 100,000,000 shares of common stock, 2,000,000 shares of preferred stock and l 2,000,000 shares of voting preference stock. 1 l 1-11 l I t i l l l
ll1))TIKEDGal14433. ANNI]00012. PIP PM: 16 SEP-1996 00:53 EDGi 00-060-0000 00:00 BI.K 00 000-0600 00:00 ((1))Tue/E:sirch Fora 5-4 t. 3. Donne 11ey (212) 341-7777 A0G 3.4.1,p02 (PACE) (b) As of the close of business on March 31, 1996, (i) 68,644,284 shares of ENSERCH Common Stock, (ii) 100,000 shares of ENSERCH Series E Preferred Stock, (iii) 75,000 shares of ENSERCH Series F Preferred Stock and (iv) no shazes of vrting preference stock of ENSERCH were issued and outstanding. _ ___ , (c) All of the issued and outstanding shares of the capital stock of ENSERCH cro validly issued, fully paid, nonassessable and free of preemptive rights. (d) Except for the ENSERCH Option, the ENSERCH Convertible Debentures, the E!SERCH Rights and as set foru in Section 5.3(s) of the ENSERCH Disclosure Schedule, there are no outstanding subscriptions, options, calls, contracts, vating trusts, proxies or other commitments, understandings, restrictions, arrrngements, rights or warrants, including any right of conversion or cxchLnge under any outstanding security, instrument or other agreement, Cblig? ting ENSERCH to issue, deliver or sell, or cause to be issued, delivered er esid, additional shares of the capital stock of ENSERCH or obligating IIISERCJ to grant, extend or enter into any such agreement or commitment. Ecetion 5.4 Authority: Non-Contravention; Statutory Approvals; Compliance. (a) Authority. (i) ENSERCH has all requisite power and authority to enter into this Agriement and, subject to the ENSERCH Shareholders Approval and the ENSERCH Required Statutory Approvals, to consummate the transactions conttmplated hereby, (ii) The execution and delivery'of this Agreement and, subject to obte.ining the ENSERCH Shareholders' Approval, the consummation by ENSERCH cf the transactions contemplated hereby have been duly authorized by all nLc 2sary corporate action on the part of'ENSERCH. (iii) This Agreement has been duly and validly executed and delivered by ENSE1CH and, assuming the due authorization, execution and delivery hereof by TUC, TXA and the company, constitutes a valid and binding obligation of ENSERCH, enforceable against ENSERCH in accordance with its terms, except es may be limited by applicable bankruptcy, insolvency, reorganization, friu'ulent conveyance or other similar laws af fecting the enforcement of cr:ditors' rights generally, and except that the availability of equitable remedies, including specific performance, may be subject to the discretion cf ccy court before which any proceedings may be brought. tiv) The ENSERCH Option has been duly and validly executed and delivered by ENSERCH and, assuming the due authorization, execution and delivery 23r;of by TUC, constitutes a valid and binding obligation of ENSERCH, (nfrrceable against ENSERCH in accordance with its terms, except as may be lixited by applicable bankruptcy, insolvency, reorganization, fraudulent couvryance or other rights generally, andsimilar except laws that affecting the enforcement the availability of creditors', of equitable remedies including specific performance, may be subject to the discretion of any court before which any proceedings may be brought. (b) Non-Contravention. Except as set forth in Section 5.4(b) of the ENSERCH Dircloture Schedule, the execution and delivery of this Agreement and the ENSERCH Option by ENSERCH do not, and the consummation of the transactions crntemplated hereby and thereby will not, violate, conflict with or result in a brstch of any provision of, or constitute a def ault (with or without notice er lap:e of time or both) under, or result in the termnation of, or ccesicrate the performance required by, or result in a right of termination, ccacallation or acceleration of any obligation or the loss of a material benzfit under, or result in the creation of any lien, security interest, chtrgi or encumbrance upon any of the properties or assets (any such visittion, conflict, breach, default, right of termination, cancellation or ccesisration, loss or creation, a
- violation") of, ENSERCH or any of its subsidiaries or, to the knowledge of ENSERCH, any of its Joint Ventures, under any provisions of 4
(1) the articles of incorporation, bylaws or similar governing documents l of ENSERCH or any of its Subsidiaries or Joint Ventures,
-I-12 l
b 1 l l l l
l(1)]FINEDGa[14433.ANNIje0013.FIF FAG: 16-SEF-1996 00:53 EDC: 00-000-0000 00:00 BLE: 00-000-0096 00:00 ((1))Tuc/Enxrch fors S-4 R. R. Donne 11sy (212) 341 7777 A0G 3.4.1.p02 i (PACE) (ii) subject to obtaining the ENSERCH Required Statutory Approvals and thi receipt of the ENSERCH Shareholders' Approval, any statute, law, crdinance, rule, regulation, judgment, decree, order, in$ unction, writ, par %it or license of any Governmental Authority applicable to ENSERCH or any cf its Subsidiaries or Joint ventures or any of their respective prrporties or assets, or (iii) subject to obtaining the third-party consents or other approvals est forth in section 5.4(b) of the ENSERCH Disclosure Schedule ( Oe
'ENSERCH Required Consents"), any note, bond, mortgage, indenture, deed of 1 trust, license, franchise, permit, concession, contract, lease or otner !
instrument, obligation or agreement of any kind to which ENSERCH or any of ' its Subsidiaries or Joint Ventures is now a party or by which it or any of its properties or assets may be bound or affected, cxcluding from the foregoing clauses (ii) and (iii) such violations as would not, in the aggregate, reasonably likely have an ENSERCH Material Adverse Efftet. (c) statutory Approvals. Except as set forth in Section 5.4(c) of the ENSERCH Disclosure Schedule, no declaration, filing or registration with, or nrtica to or authorization, consent or approval of, any Governmental Authority is n c ssary for the execution and delivery of this Agreement by ENSERCH or thi c nsummation by ENSERCH of the transactions contemplated hereby, the fsilura to obtain, make or give which would reasonably likely have an ENSERCH Matsrial Adverse Effect (the *ENSERCH undir2tood that references in this Required Statutory Approvals"), it being Agreement to " obtaining such ENSERCH Requirid Statutory Approvals shall mean making such declarations, filings or registrations giving such notices obtaining such consents or approvals and h ving such waiting periods expire as are necessary to avoid a violation of itw. ] (d) Compliance. fi) Except as set forth in Section 5.4(d) or 5.11 of the ENSERCH i Disclosure Schedule or as disclosed in the ENSERCH SEC Reports, neither l EC;ERCH nor any of its Subsidiaries nor, to the knowledge of ENSERCH, any of its Joint ventures is in violation of or under investigation with rstpect to, or has been given notice or been charged with any violation of, (ny law, statute, order, rule, regulation, ordinance or judpent (including, without limitation, any applicable environmental law, ordinance or rfgulation) of any Governmental Au dority, except for violations that do nyt have, and, would not reasonably likely have, an ENSERCH Material l Advirse Effect. (ii) Except as set forth in Section 5.4(d) or 5.11 of the ENSERCH Dicciosure Schedule, ENSERCH, its Subsidiaries and, to the knowledge of ENSERCH, its Joint Ventures have all permits, licenses, franchises and othir governmental authorizations, consents and approvals necessary to cinduct their respective businesses as currently conducted, except those th) failure to obtain which would not reasonably likely have an ENSERCH Material Adverse Effect. Srction 5.5 Reports and Financial Statements. (a) Since January 1, 1991, the filings required to be made by ENSERCH and its Subsidiaries under the Securities Act, the Exchange Act or under Texas leva (no regulations administered by the Texas Railroad Commission have been filsd with the SEC or the Texas Railroad Commission, respectively, as required by s:ch such law or regulation, including all forms, statements, reports, egrsements and all documents, exhibits, amendments and supplements cppartaining thereto, and ENSERCH and its Subsidiaries have complied in all material respects with all applicable requirements of the appropriate act and tha rules and regulations thereunder. (b) ENSERCH has made available to TUC a true and complete copy of each rrport, schedule, registration statement and definitive proxy statement filed by ENSERCH or any of its Subsidiaries with the SEC since January 1, 1991 (such documents as filed, and any and all amendments thereto, the "ENSERCH SEC R3 ports"). (c) The ENSERCH SEC Reports, including without limitation any financial stataments or schedules included therein, at the time filed, and all forms, repsrts or other documents filed by ENSERCH with the SEC af ter the date h:rsaf, did not and will not contain any untrue statement of a material fact or omit to state a I-13 m l l
((1])F!stDC(14431. ANNI]O0014,FIF FAG: 16-SEF-1996 09:51 EDG 00-000-0000 00:00 BLK 00 000 6000 00:00 for3 5-4 2. R. Dona 111sy (212) 341 7777 ACG 3.4.1,p02 [(1}}Tue/F.nsisch (PAGE) matcrial fact required to be stated therein or necessary to make the etatements therein, in light of the circumstances under which they were or will be made, not mirleading. (d) The audited consolidated finan'cial statements and unaudited interim fin ncial statements of ENSERCH included in the ENSERCH SEC Reports (collcctively, the *ENSERCH Financial Statements") have been prepared, and the cutitud st:tcments consolidated of ENSERCH financial statements included and reports, in all forms, unaudited interim or other financial filed documents by ENSERCH with the SEC after the date hereof will be prepared, in aCCordance eith CAAP applied on a consistent basis (except as may be indicated therein or in thi notes thereto and except with respect to unaudited statements as pernitted by Form 10-0) and fairly present in all material respects the finincial position of ENSERCH as of the respective dates thereof or the ratults of operations and cash flows for the respective periods then ended, as tha cise may be, subiect, in the case of the unaudited interim financial statcments, to normal, recurring audit adjustments. (e) True, accurate and complete copies of the Articles of Incorporation and Kyltws of ENSERCH, as in effect on the date hereof, have been delivered to TUC. Stetion 5.6 Absence of Certain Changes or Events; Absence of Undisclosed Liebilities. (c) Except as set forth in the ENSERCH SEC Reports or Section 5.6 of the E 2ERCH Disclosure Schedule, from December 31, 1995 through the date hereof ENSERCH and each of its Subsidiaries has conducted its business only in the crdinary course of business consistent with past practice and there has not be7n, and no fact or condition exists that would reasonably likely have, an ENSERCH Material Adverse Effect. (b) Neither ENSERCH nor any of its Subsidiaries has any liabilities or cbligations (whether absolute, accrued, contingent or o Gerwise) of a nature rcquired by GAAP to be reflected in a consolidated corporate balance sheet, cze:pt liabilities, obligations or contingencies (1) Gat are accrued or romerved against in the consolidated financial statements of ENSERCH or rafiteted in the notes thereto for the year ended December 31, 1995, or (ii) th:t were incurred after December 31, 1995 in the ordinary course of business End would not reasonably likely have an ENSERCH Material Adverse Ef fect. Section 5.7 Litigation. Except as set forth in the ENSERCH SEC Reports or as est-forth in Section 5.7 or 5.11 of the ENSERCH Disclosure Schedule, there are no claims, suits, actions or proceedings, pending or, to the knowledge of ENSERCH, threatened, nor are there, to the knowledge of ENSERCH, any invratigations or reviews pending or threatened against, relating to or Effrcting ENSERCH or any of its Subsidiaries or Joint ventures, or judgments, dicrres, injunctions, rules or orders of any court, governmental department, i commission, agency, instrumentality or authority or any arbitrator applicable i to ENSERCH or any of its Subsidiaries or Joint Ventures, that would reasonably liksly have an ENSERCH Material Adverse Effect. Srction 5.8 Registration Statement and Joint Proxy Statement. (a) None of the information supplied or to be supplied by or on behalf of ENSERCH for inclusion or incorporation by reference in (i) the registration statement on Form S-4 to be filed with the SEC by tha Company in connection with the issuance of shares of capital stock of tha Company in the Mergers (the " Registration Statement *) will, at the time tha Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact with respect to ENSERCH or its Subsidiaries required to be
- etated therein or necessary to make the statements therein with respect to i- ENSERCH or its Subsidiaries not misleading, and (ii) the joint proxy statement in definitive form relating to the mestings of the shareholders of TUC and ENSERCH, respectively, to be held l in connection with the Mergers and the prospectus relating to the Company l capital stock to be issued in the Mergers (the " Joint Proxy Statement )
will, at the date mailed to such shareholders and, as the same may be (mended or supplemented, at the time of such meetings, contain any untrue , etatement of a material fact or omit to state any material fact necessary , ' in order to make the statements therein, in light of the circumstances 1 under which they are made, not misleading. I-14 l l I l i i
i ((1))TINEDGa[14433. ANNI)00915. PIP PAC 16-stP 1996 00:53 EDC: 00-090-0000 00:00 sLK: 00 000-0900 00:00 [(lllyuc/t:sirch For3 8-4 3. 3. Donnallry (212) 341-7777 A0G 3.4.h p02 (PAGE) (b) Each of the Registration Statement and the Joint Proxy Statement, as of cuch respective dates, will comply as to form in all material respects with thi cpplicable provisions of the Securities Act and the Exchange Act and the rulsa cnd regulations thereunder. . . Gtetion 5.9 Tax Matters. 1 1 (a) Except as set forth in Section S.9(a) of the ENSERCH Disclosure ! Sch2(ule, ENSERCH and each of its Subsidiaries has filed (i) within the time 3 rnd in the manner prescribed by law, all required income Tax Returns, Texas ! f rrnchise Tax Returns and other Tax Returns calculated on or with reference to l income, profits, earnings or gross receipts and all other Tax Returns required I to be filed that would report a material amount of Tax, (ii) paid all Taxes j that are shown on such Tax Returns as due and payable within the time and in thi manner prescribed by law except for those M ing contested in good faith snd for which adequate reserves have been established, and (iii) paid all T:zas ctherwise required to be paid. (b) Except as set forth in Section 5.9(b) of the ENSERCH Disclosure schstule, as of the date hereof there are no claims, assessments, audits or cdministrative or court proceedings pending against ENSERCH or any of its subsidiaries for any alleged deficiency in Taz, and none of ENSERCH or any of its Subsidiaries has executed any outstanding waivers or comparable consents rcgtraing the application of the statute of limitations with respect to any Trzas cr Tat Returns. (c) ENSERCH has established adequate accruals for Taxes and for any j licbility for deferred Taxes in the ENSERCH Financial Statements in accordance with GAAP. J Siction 5.10 Employee Matters; ERISA. (a) Benefit Plans. (i) Section 5.10(a) of the ENSERCH Disclosure Schedule contains a true end complete list, as of the date hereof, of (A) each " employee benefit plan
- within the meaning of Section 3(3) cf ERISA that has been adopted, approved, or implemented by ENSERCH or cny of its Subsidiaries or any ENSERCH EAlSA Affiliate (including any auch plan that has been terminated before the date hereof, if ENSERCH c'r any of its Subsidiaries could have statutory or contractual
'litbility with respect to the plan on or after the date hereof) and
-occh siMlar plan, program, policy, or arrangement maintained for non-(mployee directors or other non-employees who have provided services to ENSERCH or any of its Subsidiaries; (B) each plan, program, policy, or arrangement not listed in (A) cbove that provides for bonuses, profit-sharing, incentive carpensation, deferred compensation, equity based compensation (including stock options, restricted stock, stock appreciation rights, parformance units, and dividend equivalents), boliday pay, vacation psy, severance pay, sick pay, disability benefits, dependent care knefits, flexible benefits (including any cafeteria plan governed by SIction 125 of the code), paid or unpaid leave (including sick leave, parental leave, military leave, and bereavement leave), tuition ossistance, relocation or any similar type of benefits, that has been cdopted, approved, or implemented by ENSERCH or any of its Subsidiaries (including any such plan, program, policy, or arrangement that has been i tsrminated before the date bereof, if ENSERCH or any of its I
Subsidiaries could have statutory or contractual liability with respect to the arrangement on or after de date hereof); (C) each employment contract, severance contract, parachute Egreement, or other personal service contract or arrangement with or ccTering a current or former officer or director of ENSERCH or any of its Subsidiaries; and any other employment contracts, severance contracts, parachute agreements, or personal service contracts or errangements covering current or former employees or independent contractors with respect to which (individually or in the aggregate) ENSERCH or any of its Subsidiaries is reasonably likely to have litbility on or after the date bereof that could give rise to an ENSERCH Material Adverse Effect; and j I-15 I l l f
1 I l M1))FIREDGal14433. ANN 1]00016.FIF PAG: 16-5EP-1996 00:53 EDC: 00-006 0000 00:00 BLE: 00-000-0000 00:00 Illl)Tue/InsIrch -Fora 5-4 R. 2. Donnelley '(212) 341-7777 AOC 3.4.1,p02 ) l (PAGE) l (D) each " employee pension benefit plan" (within the meaning of ERISA I Secd on 3(2)) subject to Title IV of ERISA or the minimum funding requirements of ERISA Section 302 (whether or not included in (A) Ebove) maintained or contributed to by ENSERCH or any entity required , to be aggregated therewith pursuant to code Section 414(b) or (c) (an ! 'ENSERCH ERISA Affiliata*) at any time during the sia calendar year geriod immediately preceding the date hereof (collectively, the ENSERCH Pension Benefit Plans"). (ii) For purposes of this Agreement, 'ENSERCH Benefit Plan" shall mean cach benefit plan, program, policy, contract and arrangement described in subsections (1)(A), (B) and (C) a Mve (whether or not terminated). (iii) With respect to each ENSERCH Benefit Plan and ENSERCH Pension bin 3 fit Plan, Section 5.10(a) of the ENSERCH Disclosure schedule fully and securately identifies the source or sources of benefit payments under the plan (including, where applicable, the identity of any trust (whether or ntt a grantor trust), insurance contract, custodial account, agency tgreement, or other arrangement that holds the assets of, or serves as a funding vehicle or source of benefits for, such ENSERCH Benefit Plan or ENSERCH Pension Benefit Plan. (b) Contributions. E1 cept with respect to those exceptions in existence as
- of tha date hereof and set forth in Section 5.10(b) of the ENSERCH Disclosure Schidule, all material contributions and other material payments required to htv3 been made by ENSERCH or any of its Subsidiaries or any ENSERCH ERISA Affiliate pursuant to any ENSERCH Benefit Plan or ENSERCH Pension Benefit Plan (cr to any person pursuant to the terms thereof) have been timely made or the (mount of such payment or contribution obligation has been reflected in the ,
ENIERCH Tinancial Statements, r i (c) Oualifications Compliance. Except as set forth in Section 5.10(c) of the i ENSECCH Disclosure Schedules (i) Each ENSERCH Benefit Plan and ENSERCH Pension Benefit Plan that is
-intended to be ' qualified" within the meaning of Code Section 401(a) currently meets all material requirements under the Code and has received a favsrable determination letter from the IRS to such effect, or application ftr such a determination has been made prior to the expiration of the l cpplicable remedial amendment M riod and ENSERCH agrees to make such plan
( taendments as the IRS may require in order to issue a favorable > d: termination letter. l (ii) ENSERCH and each of its Subsidiaries are in compliance with, and l csch ENSERCH Benefit Plan and ENSERCH Pension Benefit Plan is and has been j operated in compliance with, all applicable laws, rules and regulations governing such plan, including, without limitation, ERISA and the Code, except for violations that would not be reasonably likely to have an ENSERCH Material Adverse Effect. (iii) To the knowledge of ENSERCH, no individual or entity has engaged in any transaction with respect to any ENSERCH Benefit Plan or any ENSERCH Psnsion Benefit Plan as a result of which any such plan, ENSERCH or any of its subsidiaries could reasonably expect to M subject to liability , pursuant to ERISA Section 409 or Section 502, or subject to an excise tax [ pursuant to Code Section 4975, which would in either case be reasonably likely to have an ENSERCH Material Adverse Effect. i ! (iv) To the knowledge of ENSERCH, (A) no ENSERCH Benefit Plan or ENSERCH Pension Benefit Plan is rubject to any ongoing audit, investigation, or other administrative proceeding of the Internal Revenue Service, the Department of Labor, or 6 eny other federal, state, or local governmental entity, and (B) no ENSERCH Benefit Plan is the subject of any pending application for administrative relief under any voluntary compliance program of any ! governmental entity (including, without limitation, the Internal I Revenue Service's Voluntary Compliance Resolution Pro ram or Walk-in ! Closing Agreement Program, or de Department of Labor s Delinquent ! Filer Voluntary Compliance Program). I-16 5 1 ( t
~. .- .. .- . . _ - --
[ FACs 16-SEF-1996 00:53 EDG: 00-000 0000 60:00 3LE: 00 000-0000 00:00
.l[1))F!NEDCa[1443).ANBij00017.FIF il))Tue/Enserch Tsr2 8 4 1. 2. Donn111ry (212) 341 7777 A0G 3.4.1,p02 (PAGE)
(d) Liabilities. Except as set forth in Section 5.10(d) of the ENSERCH Dirclorure Schedule, with respect to the ENSERCH Pension Benefit Plans, , individually and in the aggregate, no termination or partial termination of Cny ENSERCE Pension Benefit Plan or other event has occurred, and, to the know1?dge of ENSERCH, there exists no condition or sot of circumstances, that could subject ENSERCH, any of its Subsidiaries or any ENSERCH ERISA Affiliate i to Eny liability arising under the Code, ERISA, or any other applicable law ' (including, wi n out limitation, any liability to or under any such plan or to ths PSGC, or under any indemnity agreement to which ENSERCH, an of its rubridiaries, or any ENSERCE ERISA Affiliate is a party, which lability would be rzasonably likely to have an ENSERCH Material Adverse Effect (excluding licbility for benefit claims and funding obligations payable in the ordinary course and liability for PBCC insurance premiums payable in the ordinary crurse). (e) Welfare Plans. Except as set forth in Section 5.10(e) of the ENSERCH Discleture Scladule, no ENSERCE Benefit Plan that is a ' welfare plan' (within thz meining of ERISA Section 3(1)) provides benefits for any retired or former employtes (other than'as required pursuant to ERISA Section 601). (f) Documents Made Available. ENSERCH has made available to TUC a true and crrrtet copy of each collective bargaining agreement to which ENSERCH is a ptrty er under which ENSERCH has obligations; and, with respect to each ENIERCH Benefit Plan and each ENSERCH Pension Benefit Plan, ENSERCH has made cv iltble to TUC a true and correct copy of each of the following, as r applicables. (i) the current plan document (including all amendments adopted since the most recent restatement) and its most recently prepared summary plan diacription and all summaries of material modlfications prepared since the mo2t recent summary plan description, (ii) annual reperts or Code Section 6039D information returns. (IRS Form . 5500 Series), including financial statements for the last three years, (iii) each reisted trust agreement, insurance contract, service provider cintract or investment management agreement (including all amendments to etch such document), (iv) the most recent IRS determination letter with respect to the - qualified status under code Section 401(a) of such pinn, and
-( v ) actuarial reports or valuations for the last three years.
'(g) Payments Resulting Trom Mergers. Other than as set forth in Section
'$.10(g) of the ENSERCE Disclosure Schedule, the consummation or announcement of any transaction contemplated by this Agreement will not (either alone or upon the occurrence of any additional or further acts or events) result in any l (i) payment (whether of severance pay or otherwise) becoming due from TUC or ENSERCE or any of its Subsidiaries to any current or former officer or dirsctor thereof or to the trustee under any
- rabbi trust" or other funding strengement, (ii) benefit under any ENSERCH Benefit Plan being established or becoming tec31erated, vested or payable, except for a payment or benefit that would havs been payable under Oe same terms and conditions without regard to the trrnsactions contemplated by this Agreement, or (iii) payment (whether of severance pay or otherwise) becoming due from TUC cr ENSERCH or any of its Subsidiaries to any current or former employee of ENSERCE below the level of of ficer which such payments aggregated for i such employees and former employees as a group would be reasonably likely
. to have an ENSERCH Material Adverse Ef fect.
(h) Punded Status of Plans. Except as set forth in Section 5.10th) of the INSERCE Disclosure Schedule, (i) each ENSERCH Pension Benefit Plan has assets thst, as of the date hereof, have a fair market value equal to or erceeding
- thm present value of the accrued benefit obligations thereunder on a terranation basis, as of the date hereof, based on the actuarial methods, ttblas and assumptions theretofore utilized by such plan's actuary in prYparing such plan's most recently prepared actuarial valuation report, i sacspt to the extent that applicable law would require the use of different ceturrial assumptions if such plan was to be terdnated as of the date hereof, 2-17 I- ,
i 1 i I l
I. l(11lf1NEDGt[14433. ANNI]00018FIF PAG: 16 SIF 1996 00:53 IDGs 00-009 0000 09:09 SLE: 00-000-0000 00:00 ([1))yue/I:sirch fors 8-4 2. 2. Donn111sy (212) 341 7777 AoG 3.4.1,p02 (PACE) cnd (ii) no ENSERCH Pension Benefit Plan has incurred any ' accumulated funding d2ficiency" (within the meaning of ERISA Section 302). (i) Nultiemployer Plans. _ (i) Except as set forth in Section 5.10(i) of the ENSERCH Disclosure Echedule, no ENSERCH Benefit Plan is or was a "multiemployer plan" (within tha meaning of ERISA Section 4001(a)(3)), a multiple employer plan drrcribed in Code Section 413(c), or a
- multiple employer welfare errangement* (within the meaning of ERISA section 3(40)); and none of ENSERCH, any subsidiary thereof or any ENSERCH ERISA Affiliate has been cbligated to contribute to, or otherwise has or has had any liability eith r:cpect to, any multiemployer plan, multiple employer plan, or multiple employer welfare arrangement.
(ii) With respect to any ENSERCH Benefit Plan or ENSERCH Pension Benefit Pir.n that is listed in Section 5.10(i)-of the ENSERCH Disclosure Schedule es a multiemployer plan, none of ENSERCH, any Subsidiary thereof or any ENSERCH ERISA Affiliate has made or incurred a ' complete withdrawal" or a "p;rtial withdrawal,' as such terms are defined in ERISA Sections 4203 and 4205, therefrom at any time during the six calendar year period immediately prsceding the date of this Agreement and the transactions contemplated by this Agreement will not, in and of themselves, give rise to such a
" complete withdrawal" or
- partial withdrawal.*
(j) Modification or Termination of Plans. Except as set forth in Section 5.10(j) of the ENSERCH Disclosure Schedule or as permitted under Section 7.10 (i) neither ENSERCH nor any Subsidiary of ENSERCH is subject to any irgal, contractual, equitable or other obligation to establish as of any
'dzte any employee benefit plan of any nature, including without limitation cny pension, profit sharing, welfare, post-retirement welfare, stock option, stock or cash award, non-qualified deferred compensation or cxscutive compensation plan, policy or practices and (ii) ENSERCH or one or more of its Subsidiaries or any ENSERCH ERISA Affiliate have the right to, in any manner, and without the consent of any employee, beneficiary or dependent, employees' organization or other person, terminate, modify or amend any ENSERCH Benefit Plan or ENSERCH Prasion Benefit Plan (or its participation in any such ENSERCH Benefit Plan er ENSERCH Pension Benefit Plan) at any time sponsored, maintained or contributed to by ENSERCH or any of its Subsidiaries or any ENSERCH ERISA Affiliate, ef fective as of any date before, on or af ter the Ef fective Time except to the extent that any retroactive amendment would be prohibited by ERISA Section 204(g) or would adversely affect a vested accrued benefit or e previously granted award under any such Plan not subject to ERISA section 204(g).
(k) Reportable Events; Claims. Except as set forth in Section 5.10(k) of the ENSERCH Disclosure Schedules (1) no event constituting a ' reportable event" (within the meaning of ERISA Section 4043(c)), for which the 30-day notice requirement or penalty hrs not been waiwed by the PBGC, has occurred with respect to any ENSERCH P:nsion Benefit Plan, and (ii) no liability, claim, action or litigation has been made, commenced or, to the knowledge of ENSERCH, threatened, by or against ENSERCH or any of its subsidiaries or any ENSERCH ERISA Affiliate with respect to any ENSERCH Benefit Plan or any ENSERCH Pension Benefit Plan (other than for benefits or PSGC premiums payable in the ordinary course) that would rsesonably likely have an ENSERCH Material Adverse Effect. (1) Labor Agreements. Except as set forth in the ENSERCH SEC Reports or as sst forth in Section 5.10(1) of the ENSERCH Disclosure Schedules (i) neither ENSERCH nor any of its Subsidiaries is a party to any collective bargaining agreement or other current labor agreement with any 1cbor union or organization. There is no current union representation quistion involving employees of ENSERCH or any of its Subsidiaries, nor dots ENSERCH or any of its Subsidiaries know of any activity or proceeding cf any labor organization (or representative thereof) or employee group (or rspresentative thereof) to organize any such employees; I-18 1 l
((1)]FINEDCsl14433. ANNI]C0019. PIP PAG 16-SEP 1996 00:53 EDGs 00-000 0000 00:00 BLK 00 000-0000 00:00 [l1))Tuc/E:sirch Fir 2 S-4 2. I. Dona 111ry (212) 341- m 7 AOC 3.4.1,p02 , 1 (PAGE) (ii) there is no unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure against ENSERCH or any of its Subsidiaries pending, or to the knowledge of ENSERCH ; er cmy of its Subsidiaries, threatened, that has, or would be reasonably 1 lik:1y to have, an ENSERCH Material Adverse Effect; j I (iii) there is no complaint, lawsuit or proceeding in any forum by or on beh:1f of any present or former employee, any applicant for employment or i cicsses of de foregoing alleging breach of any express or implied contract 1 cf ceplopent, any law or regulation governing employment or the ' tgrnination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship against ENSERCH or any of it: Subsidiaries pending, or to the knowledge of ENSERCH or any of its s'ubridiaries, threatened, that has, or would be reasonably likely to have, en ENSERCH Material Adverse EffectJ , (iv) there is no strike, dispute, slowdown, work stoppage or lockout panding, or to the knowledge of ENSERCH or any of its Subsidiaries, thrratened, against or involving ENSERCH or any of its Subsidiaries that hts, or would be reasonably likely to have, an ENSERCH Material Adverse Effset; (v) ENSERCH and each of its Subsidiaries are in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and htclth, except for non-compliance that does not have, and would not be rsstonably likely to have, an ENSERCH Material Adverse Effects and (vi) there is no proceeding, claim, suit, action or governmental ' l invcatigation pending ur, to the knowledge of ENSERCH or any of its Rub 3idiaries, threatened, in respect to which any current or former dir2ctor, officer, employee or agent of ENSERCH or any of its Sabsidiaries is er may be entitled to claim indemnification from ENSERCH or any of its sub2idiaries pursuant to their respective articles of incorporation or by-icss, as provided in the indemnification agreements listed on Section 5.10(1) of the ENSERCH Disclosure Schedule or pursuant to applicable Texas or other law that has, or would be reasonably likely to have, an ENSERCH M;t3 rial Adverse Effect. j tretion 5.11 Environmental Protection. (a) Compliance. (i) Except as set forth in the ENSERCH SEC Reports or in Section 5.ll(a) of the ENSERCH Disclosure Schedule, ENSERCH and each of its Subsidiaries is in compliance with all applicable Environmental Laws (as hereinaf ter , except where the failure to be so in compliance would not ' d3 fined)ly likely have an ENSERCH Material Adverse Effect. rassonab ! (ii) Except as set forth in the ENSERCH SEC Reports or in Section 5.11(a) of the ENSERCH Disclosure Schedule, neither ENSERCH nor any of it Sub2idiaries has received any written communication from any person or Govsrnmental Authority that alleges that ENSERCH or any of its Subsidiaries is not in compliance with applicable Environmental Laws, except where the 'L failure to be so in compliance would not reasonably likely have an ENSERCH
- Mitsrial Adverse Effect.
(b) Environmental Permita. Except as set forth in the ENSERCH SEC Reports or in Srction 5.11(b) of the ENSERCH Disclosure Schedule, ENSERCH and each of its i Subzidiaries has obtained or applied for all environmental, health and safety j pirmits and authorizations (collectively, " Environmental Permits") necessary ' for the construction of their facilities and the conduct of their operations, end all such permits are in good standing or, where applicable, a renewal cpplication has been timely filed, is pending and agency approval is expected to be obtained, and ENSERCH and its Subsidiaries are in compliance with all
't2ris and conditions of all such Environmental Permits and are not ';egstred to maka any expenditure in order to obtain or renew any Environmental PerrLts, cxcept where the failure to obtain or be in compliance with such Environmental Pirzits and the requirement to make such expenditures would not reasonably liksly have an ENSERCH Material Adverse Effect.
I-19 i B 4 w 4 3 l l i
l iI
)
FAC: 16-SEF-1996 00:53 EDC: 00-000-0000 09:00 sLE: 00-009-0000 00:00 l Il1))Jfuc/Ensischl] FIEtDCa[14433.ANNIje0920 Fir 3 5-4 PIP 1. 2. Donnelley (212) 341-7777 A0G 3.4.1,p02 l (PAGE) (c) Environmental Claims. Except as set forth in the ENSERCH SEC Reports or Section 5.ll(c) of the ENSERCE Disclosure Schedule, there is no Environmental
- Clain (as hereinafter defined) pending, or to the knowledge of ENSPRCH and its Lubridiaries, threatened-l (1) against ENSERCH or any of its Subsidiaries or Joint Ventures, )
(ii) against any person or entity whose liability for any Environmental Cliia ENSERCH or any of its Subsidiaries or Joint Ventures has or may have l rutained or assumed either contractually or by operation of law, or (iii) against any real or personal property or operations that ENSERCH or ! I cny of its Subsidiaries or Joint Ventures owns, leases or manages, in whole or in part, that, if adversely determined, would be reasonably likely to j h1v3 an ENSERCH Material Adverse Effect. j (d) Releases. Except as set forth in the ENSERCH SEC Reports or Section 5.ll(c) or 5.ll(d) of the ENSERCH Disclosure Schedule, ENSERCH has no knicledge of any kelease of any Bazardous Material that would be reasonably lik:ly to f orm the basis of any Environmental claim against ENSERCE or any Subridiaries or Joint Ventures of ENSERCH, or against any person or entity whnse liability for any Environmental Claim ENSERCH or any Subsidiaries or Jtint Ventures of ENSERCH has or may have retained or assumed either contrictually or by operation of law, except for Releases of Bazardous Mat; riels the liability for which would not reasonably likely have an ENSERCH Mitcrial Adverse Effect. (a) Predecessors. Except as set forth in Section 5.ll(e) of the ENSERCE Dircloture Schedule, ENSERCE has no knowledge, with respect to any predecessor , cf ENSERCH or any Subsidiary or Joint Venture of ENSERCB, of any Environmental l Citina pending or thraatened, or of any Release of Ratardous Materials that would be reasonably likely to form the basis of any Environmental claims that could have, or that would reasonably likely have, an ENSERCH Material Adverse Eff:ct. (f) Disclosure. ENSERCH has disclosed to TUC all material facts that ENSERCH i r:cconably believes form the basis of an ENSERCH Material Adverse Effect tricirg from the cost of pollution control equipment currently required or kn:wn to be required in de future, current remediation costs or remediation crita known to be required in the future, or any other environmental matter eff:cting ENSERCH or its Subsidiaries that would have, or that would II2ronibly likely have, an ENSERCH Material Adverse Effect. Ocction 5.12 Regulation as a Utility. (a) ENSERCH is regulated as a gas utility in the State of Texas and in no ethir state. No subsidiary company or affiliate of ENSERCH is subject to ragul tion as a gas utility or a public utility in the State of Texas. (b) Except as set forth in Section 5.12 of the ENSERCH Disclosure Schedule, n ithtr ENSERCH nor any subsidiary company or affiliate of ENSERCH is subject to rsgulation as a public utility or public service company (or similar d2 sign: tion) by any other state in the United States or by any foreign country. (c) As used in this Section 5.12 and in Section 6.12, the terms ' subsidiary comp:ny" and " affiliate" shall have the respective meanings ascribed to them in tha 193 5 Act. j Kaction 5.13 Vote Required. The approval of this Agreement by the holders of at 1 sect two-thirds of the outstanding shares of ENSERCH Common Stock (the j "ENSERCH Shareholders' Approval") is the only vote of the holders of any class or esries of the capital stock of ENSERCE required to approve this Agreement, ths M rgers and the other transactions contemplated hereby. Siction 5.14 Opinion of Financial Advisor. ENSERCH has received the oral opinion of Morgan Stanley & Co. (* Morgan Stanley"), on the date hereof, to the affset that, as of the date hereof, the ENSERCH Conversion Ratio is f air from a finincial point of view to the holders of ENSERCE Common Stock. I-20 l
1 PAG: 16-SEF-1996 00:53 fDG 00-000-0000 00:60 BLE: 00-000 0000 00:00 l[1])]TINEDG[14433. (1] Tue/E:serch ANNI]00021.FIF for2 8-4 2. R. Donn111ay (212) 341-7777 A0G 3.4.1,p02 (PAGE) SIction 5.15 Insurance. Except as set forth in Section 5.15 of the ENSERCH ' Disclosure Schedule, ENSERCH and each of its Subsidiaries (since its tcquisition) is, and has been continuously since January 1, 1991, insured in such (mounts and against such risks and losses as are customary for. companies . l conducting the respective businesses conducted by ENSERCH and its Subsidiaries during such time period. Except as set forth in Section 5.15 of the ENSERCH s Di: closure Schedule, neither ENSERCH nor any of its Subsidiaries has received eny nitice of cancellation or termination with respect to any material _ iniurrnce policy thereof. All material insurance policies of ENSERCH and its N,;j g Sub idiaries are valid and enforceable policies. ; Srction 5.16 ownership of TUC common Stock. ENSERCH does not " beneficially own" (as such term is defined in Rule 13d-3 under the Exchange Act) any shares of TUC Common Stock. ARTICLE VI Representations and Warranties of TUC TUC represents and warrants to ENSERCH as follows: S ction 6.1 Organization and Qualification. TUC is a corporation duly orgrnized, validly existing and in good standing under the laws of the State of T*xas, and each of TUC's Subsidiaries is a corporation duly organized, v lidly existing and in good standing under the laws of its jurisdiction of incirporation. Each of TUC and its subsidiaries has all requisite corporate pow 2r and authority, and is duly authorized by all necessary regulatory cpprovals and orders, to own, lease and operate its assets and properties and to czrry on its business as it is now being conducted, and is duly qualified Cnd in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its assets and properties makes ruch qualification necessary, other than such f ailures which, when taken tog 1ther with all other such failures, will not have a TUC Material Adverse Effret. s:ction 6.2 Subsidiaries. (c) Section 6.2 of the TUC Disclosure Schedule sets forth a description as of ths date hereof of all subsidiaries and Joint Ventures of TUC, including thi n me of each such entity, the state or jurisdiction of its incorporation, a trisi description of the principal line or lines of business conducted by cach such entity and TUC's interest therein. (b) Ezeept as set forth in Section 6.2 of the TUC Disclosure Schedule, none cf the entities listed in Section 6.2 is a "public utility company", a
'h iding company", a " subsidiary company" or an "af filiate" of any public f utilit{)
2(a)(1 company (A) of thewithin 1935 the Act,meadng of Section 2(a)(5), 2(a)(7), 2(a)(8) or respectively (c) Except as set forth in Section 6.2 of the TUC Disclosure Schedule, all of tha issued and outstanding shares of capital stock of each Subsidiary of TUC sre validly issued, fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by TUC free and clear of any licna, claims, encumbrances, security interests, equities, charges and options l of rny nature whatsoever, and there are no outstanding subscriptions, options, calls, contracts, voting trusts, proxies or other commitments, understandings, rostrictions, arrangements, rights or warrants, including any right of conysrsion or exchange under any outstanding security, instrument or other (grasment, obligating any such Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of its capital stock or obligsting it to grant, extend or enter into any such agreement commitment. Ssetion 6.3 Capitalization. i (a) As of the date hereof, the authorized capital stock of TUC consists of t 500,000,000 shares of TUC Common Stock and 50,000,000 shares of TUC serial, prsfarence stock, par value S25 per share. 1-21 l 1 l i 4 l i L
1 [ll))FIKEDGa[14433.ANNIj00022. PIP PAGs 16.stF.1996 02:32 EDGE 60-006-0000 00:00 SLK: 00-000-0000 00:00 ((!!]Tue/Enserch Fir 2 5-4 R. R. Donaallry (212) 341 7777 ACG 3.4.1.p02 (PAGE) (b) As of the close of business on March 18, 1996, (i) 225,841,037 shares of TUC Common Stock, and (ii) no shares of TUC serial preference stock, par value
$25 per share, were issued and outstanding.
(c) All of the issued and outstanding shares of the capital stock of TUC are v:lidly issued, fully paid, nonassessable and free of preemptive rights. (d) Except as set forth in Section 6.3(a) of the TUC Disclosure Schedule, th2r2 are no outstanding subscriptions, options, calls, contracts, voting trusts, proxies or other understandings, restrictions, arrangements, rights or c:rr2nts, including any right of conversion or exchange under any outstanding accurity, instrument or other agreement, ob11 gating TUC to issue, deliver or cell, or cause to be issued, delivered or sold, additional shares of the cepitti stock of TUC or obligating TUC to grant, extend or enter into any such (greement or commitment. 0Getion 6,4 Authority; Non-Contravention; Statutory Approvals; Compliance. (a) Authority. (i) TUC has all requisite power and authority to enter into this Agreement and, subject to the TUC Shareholders Approval and the TUC R1 quired Statutory Approvals, to consummate the transactions contemplated birsby. (ii) The execution and delivery of this Agreement and, subjset to obtaining the TUC Shareholders' Approval, the consummation bt TUC of the trcnsactions contemplated hereby have been duly authorized by all necessary corporate action on the part of TUC. (iii) This Agreement has been duly and validly executru a04 delivered by TUC and, assdng the due authorization, execudon and deliv.Yy hereof by ENSERCH, TXA and the Company constitutes the valid ar.4 binding obligation of TUC, enforceable against TUC in accordance with its terms, except as could be limited by applicable bankruptcy, insolvency, reorganization, frcudulent conveyance 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 (ny court before which any proceeding therefor may be brought. (iv) The ENSERCH Option has been duly and validly executed and delivered by TUC and, assuming the due authorization, execution and delivery thereof by.ENSERCH, constitutes a valid and binding obligation of TUC, enforceable (grinst TUC in accordance with its terms, except as may be limited by rpplicable bankruptcy, insolvency, reorganizadon, fraudulent conveyance or o n sr similar law. affecting the enforcement of creditors' rights gnacrally, and except that the availabilit of equitable remedies, including specific performance, may be sub ect to the discretion of any crurt before which any proceedings may be rought. (b) Non-Contravention. Except as set forth in Section 6.4(b) of the TUC Dieclosure Schedule, the execution and delivery of this Agreement and the ENSERCH Option by TUC do not, and the consummation of the transactions ctatst plated hereby and thereby will not, result in any Violation by TUC or (ny of its Subsidiaries or, to the knowledge of TUC, any of its Joint ventures, under any provisions of (i) the articles of incorporation, bylaws or similar governing documents of TUC or any of its Subsidiaries or Joint Ventures, (ii) subject to obtaining the TUC Required Statutory Approvals, any ststute, law, ordinance, rule, regulation, judgment, decree, order, l injunction, writ, permit or license of any Governmental Authority I applicable to TUC or any of its Subsidiaries or Joint Ventures or any of I 22ir respective properties or assets, or j (iii) subject to obtaining the third-party consents or other approvals l sat forth in Section 6.4(b) of the TUC Disclosure Schedule (the "TUC any note, bond, mortgage, indenture, deed of trust, R1 quired franchise licsnse, Consents",),permit, concession, contract, lease or other , instrument, obligation or agreement of any kind to which TUC or any of its [ Subsidiaries or Joint Ventures is now a party or by which it or any of*its preperties or assets may be bound or af fected, I-22 I i
I PAGI 16-SEP-1996 09:54 EDG: 00-060-0000 00:00 SLKs 00-090-0000 00:00 ; ((1))Tuc/Enserch1))FINEDGa[14413.ANKI)00023.FIF l1 Frrli 8-4 R. R. Donas11ey (212) 341-7777 A0G 3.4.1,p02 (PAGE) excluding from the foregoing clauses (ii) and (iii) such violations as would not, in the aggregate, reasonably likely have a TUC Material Adverse Effect. (c) Statutory Approvals. Except as set forth in Section 6.4(c) of the TUC Disc 1:sure Schedule, e , declaration, filing or registration with, or notice to er tuthorisation, consent or approval of, any Governmental Authority is n:cserary for the execution and delivery of this Agreement by TUC or the cIn1ummation by TUC of the transactions contemplated hereby, the failure to 3*-m,, rbtain, make or give which would reasonably likely have a TUC Material Adverse g Eff:ct (the 'TUC Required Statutory Approvals"), it being understood that s , r:fstrnces in this Agreement to " obtaining" such TUC Required Statutory -l ! Appravals shall mean making such declarations, filings or registrations; ! giving such noticer obtaining such consents or approvalas and having such i tziting periods expire as are necessary to avoid a violation of law. l (d) Compliance. (i) Except as set forth in Section 6.4(d) of the TUC Disclosure Schedule or es disclosed in the TUC SEC Reports, neither TUC nor any of its Subsidiaries nor, to the knowledge of TUC, any of its Joint Ventures, is in violation of or under investigation with respect to, or has been given notice or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any rpplicable environmental law, ordinance or regulation) of any Governmental Autiority, except for violations that do not have, and, would not rOcronably likely have, a TUC Material Adverse Effect. (ii) Except as set forth in Section 6.4(d) of the TUC Disclosure Schroule, TUC, its subsidiaries and, to the knowledge of TUC, its Joint V;ntures have all permits, licenses, franchises and other governmental authorizations, consents and approvals necessary to conduct their racpective businesses as currently conducted, except those the f ailure to cbtain which would not reasonably likely have a TUC Material Adverse Effret. S:ction 6.5 Reports and Financial Statements. (a) Since January 1, 1991, the filings required to be made by TUC and its subsidiaries under the Securities Act, the Exchange Act, applicable Texas laws end rsgulations administered by the Public Utility Commission of Texas and the Trz2s Railroad commission, or the 1935 Act have been filed with the SEC, the T:xma Public Utility commission, the Texas Railroad Commission or the Nuclear R gulttory Commission, respectively, as required by each such law or r gulation, including all forms, statements, reports, agreements and all d cuments, exhibits, amendments and supplements appertaining thereto, and TUC rnd its subsidiaries have complied in all material respects with all rpplicable requirements of the appropriate act and the rules and regulations ther nnder. (b) TUC has made available to ENSERCH a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by TUC with the SEC since Januar 1, 1991 (such documents as filed, and any and all amendments thereto, the {TUC SEC Reports"). (c) The TUC SEC Reports, including without limitation any financial stetzments or schedules included therein, at the time filed, and all forms, r5 ports or other documents filed by TUC with the SEC after the date hereof, did not and will not contain any untrue statement of a material fact or omit > to etcte a material f act required to be stated therein or necessary to make tha statements therein, in light of the circumstances under which they were mada, not misleading. (d) The audited consolidated financial statements and unaudited interim finincial statements of TUC included in the TUC SEC Reports (collectively, the "TUC rinancial Statements") have been prepared, and the audited consolidated fin ncial statements and unaudited interim financial stater.ents of TUC as includ;d in all forms, reports or other documents filed with the SEC after the dsta hireof will be prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto and except with rsspect to unaudited statements as permitted by Form 10-0) and fairly preernt in all material respects the financial position of TUC as of the Isrpactive dates thereof or the results of operations and cash flows for the I-23 I l I i l
-{l1))FINEDGil14433.Ars!)00024.FIF - FAG: 19-SEF !t96 19:07 EDC: 00 000-0000 00:00 3LK 00 000-0000 00:00
((1))Tuc/Esserch For2 5-4 R. R. Conne11sy (212) 341-7777 A0G 3.4.1,p02
-(PACE) respective periods then ended, as the case may be, subject, in the case of the l untuCited interim financial statements, to normal, recurring audit 1 Edjustments.
i J (e) True,-accurate and complete copies of the Articles of Incorporation and : Byltw2 of TUC, as in effect on the date hereof, have been delivered to ENSERCE. ' 3:etion 6.6 Absence of Certain Changes or Events: Absence of Undisclosed Liabilities. (a) Escept as set forth in the TUC SEC Reports or Section 6.6 of the TUC - Dirclasure Schedule, from December 31, 1995 through the date hereof TUC and
. ecch of its Subsidiaries has conducted its business only in the ordinary !
course of business consistent with past practice and there has not been, and ' no fact or condition exists that would reasonably likely have, a TUC Material Adverre Effect. i
-(b) Neither TUC nor any of its Subsidiaries has any liabilities or cbligttions (whether absolute, accrued, contingent or otherwise) of a nature-riquired by CAAP to be reflected in a consolidated corporate balance sheet, saczpt liabilities, obligations or contingencies that are accrued or reserved i against in the consolidated financial statements of TUC or reflected in the !
nstas thereto for the year ended December 31, 1995, or that were incurred aftar December 31, 1995 in the ordinary course of business and would not , rsesonably likely have a TUC Materini Adverse Effect. ! Caction 6.7 Litigation. Except as set forth in the TUC SEC Reports or as set ferth in Section 6.7 of the TUC Disclosure Schedule, there are no claims, guits, actions or proceedings, pending or, to the knowledge of TUC, , threstened, nor are there, to d e knowledge of TUC, any investigations or e revi ws pending or threatened against, relating to or affecting TUC or any of , its Subsidiaries or Joint ventures, or judgments, decrees, injunctions, rules cr criers of any court, governmental department, commission, agency,
.in:trumentality or authority or any arbitrator applicable to TUC or any of its Sub2idiaries or Joint ventures, that would have, or would reasonably likely hava, a TUC Material Adverse Effect. ;
S:rction 6.8 Registration Statement and Joint Proxy Statement. i j (a) None of the information supplied or to be supplied by or on behalf of f TUC for inclusion or incorporation by reference in ; (i) the Registration Statement will, at the time the Registration l Ststement becomes effective under the Securities Act, contain any untrue i ststement of a material fact or omit to state any material fact required to ' be stated therein or necessary to make the statements therein not nisleading, and j (ii) the Joint Proxy Statement will, at the date the Joint Prory Statement is mailed to the shareholders of TUC and ENSERCE and, as the same l may be amended or supplemented, at the time of the meetings of such i shareholders to be held in connection with the Mergers, contain any untrue
- l statement of a material f act or omit to state any material f act with
- l. rarpect to TUC or its Subsidiaries necessary in order to make the l . statements therein with respect to TUC or its subsidiaries, in light of the circumstances under which d ey are made, not misleading.
1 (b) Each of the Registration Statement and the Joint Proxy Statement, as of such res pctive dates, will comply as to form in all material respects with j
- th2 applicable provisions of the Securities Act and the Exchange Act and the l rules and regulations thereunder.
83ction 6.9 Tax Matters. (a) Except as set forth on Schedule 6.9(a) of the TUC Disclosure Schedule, TUC cnd each of its subsidiaries has filed (1) within the time and in the mannar prescribed by law, all rquired income Tax Returns, Texas franchise Tax R3 turns and other Tax Beturns calculated on or with reference to income, profits, earnings or gross receipts and all other Tax Returns required to be filsd that would report a material amount of Tax, (ii) paid all Taxes that are shown on such Tax Returns as due and payable within the time and in the manner prescribed by law except for those being contested in good faith and for which ediquste reserves have been established, and (iii) paid all Taxes otherwise i r$ quired to be paid. ! (, I-24 i l l L t l 1 l i l
i
. ll1)]f!NEDCa[14433. ANNI]O9025.PIF PAG: 16-$EF-1996 01:47 EDC: 00-000-0000 00:00 SLK 90 000-0000 00:00
[{!!)ruc/tasirch For2 6-4 2. R. Donnelley (212) 341-7777 A0G 3.4.1,p02 , (PAGE) . l ! (b) Except as set forth on Schedule 6.9(b) of the TUC Disclosure Schedule, ! as of the date hereof there are no claims, assessments, audits or i coministrative or court proceedings pending against TUC or any of its subJidiaries for any alleged deficiency in Taz, and none of TUC or any of its __ Subsidiaries has exacuted any outstanding waivers or comparable consents , rigntding the application of the statute of limitations with respect to any . Ttzas or Tax Returns. (c) TUC has established adequate accruals for Taxes and for any liability i far d2ferred Taxes in the TUC Financial Statements in accordance with GAAP. I SEction 6.10 Employee Matters; ERISA. Ezespt as disclosed in the TUC SEC Reports or Section 6.10 of the TUC l Disclosure Schedule and except as would not, individually or in the aggregate, be ressonably espected to result in a TUC Material Adverse Effects (a) Each TUC Benefit Plan that is an " employee pension benefit glan* as CsfinId in Section 3(2) of ERISA and is intended to be ' qualified within the ! - me+ning of Code Section 401(a) ("TUC Pension Benefit Plan') and each trust undar each such TUC Pension Benefit Plan which is intended to be exempt from ] f dzrcl income taxation under Code section 501, has received a f avorable i d3 tar %ination letter from the IRS to such effect, or is the subject of a I prsviously submitted and currently Mnding application for an IRS l d2 termination. TUC has operated each TUC Benefit Plan in material compliance l tith all applicable laws, rules and final regulations governing such plans, including tRISA and the code. (b) A12 material contributions required to have been made to the TUC Benefit P1Lns prior to the date hereof have been made. As of the date hereof, each TUC 1 P;nrion Benefit Plan which is subject to the funding requirements of Code i l Section 412 has assets that have a fair market value equal to or exceeding the l prostat value of the accrued benefit obligations thereunder on a termination M ais, based on the actuarial methods, tables and assumptions theretofore utilized by such plar's actuary in preparing such plan's most recently pr pired actuarial valaation report. (c) TUC has not incurred any liability to the PBGC (other than liability for insurtnce premium paymente payable thereto). (i(d)
) n1Ezeept as set forth
" Reportable iT Section Event,' 6.10(d) as defined of thehas in ERISA, TUC Disclosure occurred with Schedule, respect to :
cny ef the TUC Benefit Plano for which the 30-day notice requirement or l Pen:tity has not been waived by the PBGC; (ii) there are no pending claims i
-(othrr than routine claims for benefits or claims pursuant to domestic .
reittions orders) or lawsu!.ts which have been asserted or instituted against i tha casets of any of the t'.usts under the Plans by present or former participants, their present or former spouses, their beneficiaries, the Dep&rtment of Labor, the Internal Revenue Service or any other party; and j (iii) TUC has not engaged in any prohibited transactions with respect to any TUC BInefit Plan, any or all of which would teasonably likely have a TUC Mitarial Adverse Effect. Caction 6.11 Environmental Matters. Except as disclosed in the TUC SEC RIports and except as would not, individually or in the aggregate, be ! :sescenably expected to result in a TUC Material Adverse Ef fect, (i) TUC and its Subsidiaries are in compliance with all applicable Environmental Laws and tha tsras and conditions of all applicable Envlronmental Permits, (ii) there tre no Environmental claims against the Company or any of its subsidiaries, I and (iii) no Bazardous Materials have been released, discharged or disp sed of. c.n any of the properties owned or occupied by TUC or its Subsidiaries in any mann'ir or quantity which requires investigation, assessment, monitoring, rcmediation or cleanup under currently applicable Environmental Laws. ! ssetion 6,12 Regulation as a Utility. (a) TUC is a public utility holding company as defined in the 1935 Act exsupt from all provisions of the 1935 Act, except section 9(a)(2), by order cf Ga SEC pursuant to section 3(a)(1) of the 1935 Act. Texas Utilities I-25 i I l e i 4 l
1 H i])TINEDCa[14433.ANEI)00026 FIF PAC: 16-StF 1996 01:47 EDC: 00 006-0090 00:00 stE: 00-000 0000 00:00 l[1))Tue/ Ens;rch Firm 8-4 3. 3. Donne 11ey A0G 3.4.1,p02 (212) 341 7777 (PAGE) E1:ctric Company, a subsidiary of TUC, is regulated as a public utility in the f;tata of Tezas and in no other state and Texas Utilities ruel company. a sub:1 diary of TUC, is regulated as a gas utility in the state of Texas and in na ether state. Neither TUC nor any other subsidiary company or af filiate of TUC is regulated as a public utility or a gas utility in the state of Texas. (b) Ezeept as set forth in section 6.12 of the TUC Disclosure Schedule, nrither TUC nor any subsidiary company or affiliate of TUC is subject t; regulction as a public utility or public service company (or similar Casignation) by any other state in the United states or by any foreign country. esction 6.13 vote Required. The approval of this Agreement by the holders of rt 1srat two thirds of the outstanding shares of TUC Common stock (the 'TUC shircholders' Approval *) is the only vote of holders of any class or series of tha crpital stock of TUC required to approve this Agreement, the Mergers and th; c u er transactions contemplated hereby. srction 6.14 opinion of Financial Advisor. TUC has received the oral opinion cf Barr Devlin s Co. Incorporated (*Barr Devlin"), on the date hereof, to the affcct that, as of the date hereof, the TUC Conversion Ratio is fair to the i h:lders of TUC Common stock. mection 6.15 Insurance. (c) Except as set forth in section 6.15 of the TUC Disclosure schedule, TUC cnd ccch of its subsidiaries is, and has been continuously since January 1, 1991, insured in such amounts and against such risks and losses as are cu*tomary for companies conducting the respective businesses conducted by TUC tad its subsidiaries during such time period. (b) Except as set forth in section 6.15 of the TUC Disclosure schedule, neithir TUC nor any of its subsidiaries has received any notice of cinesllation or termination with respect to any material insurance policy thIr:st. - (c) All material insurance policies of TUC and its subsidiaries are valid cnd reforceable policies. SLction 6.16 Ownership of ENSERCH Common stock. TUC does not " beneficially own" (as such term is defined in Rule 13d-3 under the Exchange Act) any shares cf ENIERCH Common stock. Ecction 6.17 NRC Acticci. Except as set forth in Section 6.17 of the TUC Diecirsure schedule, Tt'; is not in violation of, is not under investigation with reJpect to, has nit been given notice of or been charged wita any actual er potential violation of, and is not the subject of any ongoing proceeding, inquiry, special inspei tion, diagnostic evaluation or other Nuclear Regulatory Commission action (incl ading rulemakings of general application that may aff:ct the conduct of T'C's business regarding the Comanche Peak Nuclear Power Pltnt) of which TUC has actual knowledge under the Atomic Energy Act, any cpplicable regulations hereunder or the terms and conditions of any license yrrntrd to TUC regardiny the Comanche Peak Nuclear Power Plant (collectively, NRC Actions"), which NR" Actions would have, or TUC reasonably believes would raceonably likely have, s TUC Material Adverse Effect. j I-26 I i 1 l l I 4 l s h l
-ll1))TINEDG (14413. ANNI]e0027.FIF FAC 16-SEF 1996 01:47 EDC: 00-000 0000 00:00 SLK 00 000-0000 00:00 lll))Tuc/Instsch Fors 8-4 2. R, Dons 211ry (212) 341-7777 A0G 3.4.1 p02 (PAGE)
ARTICLE VII Conduct of Business Pending the Mergers Af ter th's date hereof and priot to the Effective Time or earlier termination of this Agreement, ENSERCS shall, and shall cause its Subsidiaries to, and TUC rhall, and aball cause its subsidiaries to, comply with the provisions of this Article VII to the extent applicable to each of G em, provided however, that tha provisions of this Article VII shall not apply to the Distribution Sub idiaries and ENSERCH shall not be obligated to cause the Distribution rubridiaries to comply with the obligations of this Article VII. section 7.1 ordinary Course of Business. ENSERCH shall, and shall cause its Sub2idiaries to, and TUC shall, and shall cause itc subsidiaries to, conduct thzir respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use all commercially reasonable ef forts to preserve their respective business organizations and goodwill, preserve the goodwill and relationships with customers, suppliers, distributors and others having business dealings with them and, subject to prudInt management of workforce needs and ongoing programs currently in force, kssp available the services of their present officers and employees. 81ction 7.2 Dividends. ENSERCH shall not, nor shall it permit any of its Subsidiaries tos (a) declare or pay any dividends or make other distributions in respect of any of their capital stock other than to ENSERCH or its Subsidiaries and other thin (1) stated dividends on the respective series of ENSERCH Preferred Stock, (ii) regular quarterly dividends on the ENSERCH Common Stock with usual rscord and payment k..es not, during any calendar year, in excess of $.05
.per share per quarter, and (iii) as provided for in Article VIII hereof to consummate the trtnsactions contemplated herebys (b) split, combine or reclassify any of their capital stock or issue or tuthorize or propose the issuance of any other securities in respect of, in licu of, or in substitution for, shares of their capital stocks or (c) redeem, repurchase or otherwise acquire any shares of their capital strek, other than (il redemptions, purchases or acquisitions permitted by the respective terms of any series of preferred stock, (ii) in connection with refunding of preferred stock with preferred stock or debt at a lower cost of f unds, (iii) intercompany acquisitions of capital stock, or (iv) in connection with the administration of employee benefit and dividend reinvestment plans as in effect on the date hereof in the ordinary course of the operation of such plans.
Srction 7.3 Issuance of Securities. ENSERCH shall not, and shall not permit cny of its Subsidiaries to, issue, agree to issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of their capital stock or any class or any securities convertible into or exchangeable for, or any rights, warrants or options to icquire, any such shares or conysrtible or exchangeable securities except fors (a) the issuance of capital stock upon the conversion of the ENSERCH Convertible Debentures, ". (b) the issuance of common stock or other securities by ENSERCH pursuant to ths plans and arrangements listed in Section 7.3 of the ENSERCE Disclosure Schsdule, in each case in the ordinary course of the operation of such plans and arrangements in accordance with Geir current terms, or (c) issuances by a wholly owned Subsidiary of its capital stock to a direct or indirect parent. I-27
1 i 1))TIEEW [14 413. ANNI]00028. PIP P m 16 SEP 1996 01:47 EDG 00-000-0000 00:00 3LK 00 000 0000 00:00 i i 1))Tue/ Ens:rch TIr2 3-4 3. 3. Connellsy (212) 341-7777 A0G 3.4.1,p02 l (PAGE) S:ction 7.4 Charter Documents. ENSERCH shall not amend or propose to amend its crticles of incorporation or bylaws in any way adverse to TUC, except to i thi cztent that any document setting forth the terms of a series of preferred ctock permitted to be issued in accordance with this Article VII constitutes. _
}
cn tmendment to the articles of incorporation, caction 7.5 No Acquisitions. ENSERCH shall not, nor shall it permit any of its Subsidiaries to, acquire, or publicly propose to acquire, or agree to acquira, by merger or consolidation, by purchase or otherwise, a substantial V equity interest in or a substantial portlon of the assets of any business or l Eny corporation, partnership, association or other business organization or divi = ion thereof or otherwise acquire or agree to acquire any assets, except c3 contemplated in the 1996 capital spending and investment budget for ENSERCH cnd it3 Subsidiaries of $134 million (the 'ENSERCH 1996 Budget") or as crntcaplated in the 1997 capital spending and investment budget for ENSERCH ! rnd its Subsidiaries, which budget shall be of a similar nature as the ENSERCH 1996 Budget, the amount of which budget shall be approved with the consent of l TUC, thich consent shall not unreasonably be withheld (the "ENSERCH 1997 l Budict"). TUC acknowledges that ENSERCH is negotiating for the acquisition of a 16% interest in a joint venture that will construct a gas distribution systma in santiago, Chile, and agrees that it will not unreasonably withhold its consent to such acquisition. l SIction 7.6 Capital Expenditures. Except as required by law. ENSERCH shall not, nor shall it permit any of its Subsidiaries to, make any capital
, czpenditures, except for normal extensions to or replacements of properties in {
thi crdinary course of business consistent with prior practice and those c ntemplated in the ENSERCH 1996 Budget or in the ENSERCH 1997 Budget. KGction 7.7 No Dispositions. ENSERCH shall not, nor shall it permit any of its subsidiaries to. mell, lease, license, encumber or otherwise dispose of cny csiets that ara - 'srial, except for normal extensions to or replacements cf prrperties in t 4 ordinary course of business consistent with prior prretice and those contemplated in the ENSERCH 1996 Budget or in the ENSERCH 1997 Budget and except for property subleased by EEX 5:ction 7.8 Transfer of Assets to the Distribution Subsidiaries. Except as etherwise consented to in writing by TUC, ENSERCH will not, and will not per=it any of its Subsidiaries to, sell, lease, license or otherwise transfer to cny of the Distribution Subsidiaries any assets that are material, in the Eggrcgite, to ENSERCH and its subsidiaries (other than the Distribution B esidiaries) taken as a whole. TUC acknowledges that ENSERCH is considering th) cele of ENSERCH Development Corporation and agrees that it will not unrsaronably withhold its consent to such sale. S ction 7.9 Indebtedness. ENSERCH shall not, nor shall it normit any of its subaidiaries to, incur or guarantee any indebtedness (including any debt borrow:d or guaranteed or otherwise assumed, including, without limitation, thi iaguance of debt securities), except fors (c) thort-term indebtedness in the ordinary course of business consistent with past practice, (b) long-term indebtedness in connection with the refinancing of existing indsbtsdness either at its stated maturity or at a lower cost of funds, (c) toditional long-term indebtedness aggregating not more than $125 million, or i (d) indebtedness in connection with the refanding of preferred stock as permitted in Section 7.2. Srction 7.10 Compensation, Benefits. Except as set forth in Section 7.10 of th3 ENSERCH Disclosure Schedule, as may be required by applicable law or as cont 2mplated by this Agreement, ENSERCH shall not, nor shall it permit any of its Subsidiaries to, enter into, adopt or amend or increase the amount of or ecesicrate the payment or vesting of any benefit or amount payable under any c ployle benefit plan or any other contract, agreement, commitment, errengnment, plan or policy maintained by, contributed to or entered into by ENSERCH or any of its Subsidiaries, or increase, or enter into any contract, Egrecment, commitment or arrangement to I-28 l
)
i l l l
i FACs 16 SEP 1996 01:47 IDCs 00-000-0000 00:00 BLK 00 000-0000 00:00 l l ((1) ] FIEtDG a [14 433. ANNI] nGr30029.f 11]Tue/E;serch 5-4 f? 1. 1. Donnelly (212) 341 7771 AOC 3.4.1,p02 j (PAGE) i iter sse in any manner, the compensation or fringe beaefits, or otherwise to I cat:nd, expand or enhance the engagement, employment or any related rights, of ! any director, officer or other employee of ENSERCH or any of its Subsidiaries, ) cze:pt for normal increases in the ordinary course of business consistent with i pa2t practice that, in the aggregate, do not result in a material increase in l benIfits or compensation expense to ENSERCH or any of its Subsidiaries, or I cntar into or amend any employment, severance, or special pay arrangement with l rocpect to the termination of employment or other similar contract, agreement I er errengement with any director or of ficer or other employee other than in l thi crdinary course of business consistent with past practice. 1 Ocetion 7.11 1935 Act. Except as required or contemplated by this Agreements (3) ENSERCE shall not, nor shall ENSERCH permit any of its Subsidiaries to, I cnA wa in any activities that cause it to become a
- holding company" under the 1 1* % nqts b) TUC shall not, nor shall TUC permit any of its Subsidiaries to, engage in eny activities that cause it to lose its esemption from registration as a
*hrlding company" under the 1935 Act; and (c) no party shall, nor shall any party permit any of its Subsidiaries to, cngigs in any activities that would require the approval of the SEC under Section 9(a)(2) of the 1935 Act, except for the transactions contemplated by this Agreement.
E ction 7.12 Accounting.' No party shall, nor shall any party permit any of its Subsidiaries to, make any changes in its or their accounting methods,
'cac:pt as required by law, rule, regulation or GAAP.
Section 7.13 Taz-Free Status. No party shall, nor shall any party permit any cf its Subsidiaries to, take any actions that would, or would M reasonably
- lik:1y to, adversely affect the status of the Mergers as tax-free under Section 351 of the Code.
Diction 7.14 insurance. ENSERCH shall, and shall cause its Subsidiaries to, cnd TUC shall, and shall cause its Subsidiaries to, maintain with financially rraponsible insurance companies (or through self-insurance not inconsistent ti d cuch party's past practice) insurance in such amounts and against such ticks and losses as are customary for companies engaged in the same industry tnd guch other businesses as conducted by such party and its Subsidiaries, fretion 7.15 Cooperation, Notification. Each of ENSERCH and TUC shall and th:11 cause its Subsidiaries (directly or acting through its parent company r:prxantative) tos (c) confer on a regular and frequent basis with one or more representatives cf thi other party to discuss material operational matters and ne general , ctetus of its ongoing operations, (b) promptly notify the other party of any significant changes in its businiss, properties, assets, condition (financial or otherwise), prospects or re:ults of operations, (c) tovise the other party of any change or event that has had or, to the kneelcoge of such party, would reasonably likely have an ENSERCH Material Advcrra Effect or a TUC Material Adverse Effect, and (d) consult with each other prior to making any filings with any state or isd:ral court, administrative agency, commission or other Governmental Authirity in connection with this Agreement and the transactions contemplated hiriby, and promptly after each such filing provide the other with a copy th rio!. Ocction 7.16 Rate Matters. (a) Except as set forth in Section 7.16 of the ENSERCH Disclosure Schedule, ENSERCB shall not make, or permit any Subsidiary to make, any filing to change ? , . its rates on file with any Governmental Authority that could have a material i e4v:rce effect on the benefits associated with h e business combination providra herein. 2-29 i i I I l 4 i i l l l t
1[1])TINEDGtl14433. ANNI)00030,FIF FAGS 16 SfF 1996 01:47 EDG 00-000 0000 00:00 BLK 00-600 0000 00:00 ((1))Tue/Enserch Far2 S-4 1. 3. Donsellry (212) 341 7777 A0G 3.4.1,p02 (PAGE) (b) Except as set forth in Section 7.16 of the TUC Disclosure Schedule, TUC ahill not make, or permit any subsidiary to make, any filing to change its rates on file with any Governmental Au2ority that could have a material cdv:rs3 effect on the benefits associated with the business combination I provided herein. Eaction 7.17 Third-Party Consents. Each of ENSERCH and TUC shall, and shall \) ciu22 its subsidiaries to, use all commercially reasonable efforts to obtain ell ENSERCE Required Consents or TUC Required Consents, as the case may be. .C((' Eich pirty shall promptly notif y the other party of any f ailure or prospective \ failurs to obtain any such consents and, if requested by the other party, ' chill provide to the other party copies of all ENSERCH Required Consents or 4 TUC Required consents, as G e case may be, obtained by such party. Brction 7.18 Tax-Ezempt Status. No party shall, nor shall any party permit rny subsidiary to, take any action that would ?ikely jeopardize the esclusion - f rom gross income, for purposes of federal income taxation, of the interest on I tha eutstanding revenue bonds issued for the benefit of ENSERCH or TUC, as the ! ccea may be, which qualify on the date hereof under Code Section 142(a) as "cra;pt f acility bonds" or as tax-exempt industrial development bonds under Srction 103(b)(4) of the Internal Revenue Code of 1954, as amended prior to th3 Tim Reform Act of 1966. i Srction 7.19 Permits. Each of ENSERCH and TUC shall use commercially r aron;ble ef forts to maintain in ef fect all existing material permits purguint to which such party operates. Ecction 7.20 Certain Information Relating to Customers. Without limiting the l rpplic: tion of the Confidentiality Agreement, dated April 1, 1996, between l E_SE1CH and TUC (the ' Confidentiality, Agreement *) no party shall, nor shall ' i cny party permit any of its Subsidiaries to, use any Information (as defined i in d 2 Confidentiality Agreement) in connection wi n any solicitation, I i m uAry, proposal, arrangement, understanding or agreement with any person releting to the provision of electric or gas utility service by ENSERCH or any cf its Subsidiaries, on the one hand, or TUC or any of its Subsidiaries, on th2 other hand, to commercial and industrial customers in the service tsrritsry of the other party. Ecction 7.21 Certain Restrictions in Respect of TUC. I i (a) Dividends: Changes in Stock. TUC shall not (i) engage in any material j rJpurchase at a premium recapitalization, restructuring or reorganization with- rsspect to its capital stock, including, without limitation, by way of j cny av traordinary dividends on or other extraordinary distributions in respect i et rny of its capital stock, or (ii) amend any materlal term or provision of 1 th3 TUC Common Stock. (b) Material Acquisitions. TUC shall not, and shall not permit any of its Sub11 diaries to, acquire or agree to acquire by merging or consolidating with, l cr by purchasing a substantial portion of the assets of or equit cny cther manner, any business or any corporation, partnership,associationy in, or by or 0 2 3r business organization or division dereof, or otherwise acquire or agree to acquire any assets if the entering into of a definitive agreement relating i to or the consummation of such acquisition, merger or consolidation would (A) irpose any material delay in the obtaining of, or significantly increase the ritk of not obtaining, any authorizations, consents, orders, declarations or rpprov:1s of any Governmental Authority necessary to consummate the Mergers or i u n sxpiration or termination of any applicable waiting period, (B) ! significantly increase the risk of any Governmental Authority entering an ordir prohibiting the consummation of the Mergers or (C) significantly
'incr2cce the risk of not being able to remove any such order on appeal or l cthirwise.
(c) Other Actions. TUC shall not, and shall not permit any of its Sub2idiaries to, take or fail to take any other action which would reasonably J be czpacted to prevent or materially impede, interfere with or delay the ' MIrgsrs. 1-30 l l \ l t h I
1 PACS 20-SEF 1996 04:57 EDGi 00 000-0000 00:00 BLK 00-000-0000 00:00 Ill))f15EDGal14431. [1))Tue/Esserch ANNI]D0031.FIF Form S-4 R. 3. Donnellry (212) 341-7777 A0G 3.4.1,pO2 (PACE) ARTICLE VIII Additional Agreements
~~~
SIction 8.1 Access to Information. (S) Upon reasonable notice, each of ENSERCH and TUC shall, and shall cause its Subsidiaries to, afford to Lbe officers, directors, employees, tec2untants, counsel, investment bankers, financial advisors, consultants and eth:r representatives of the other (collectively,
- Representatives")
r cirnable access, during normal business bours throughout the period prior to th1 Effective Time, to all of its properties, books, contracts, commitments Cnd records (including, but not limited to, Tax Returns) and, during such period, each shall, and shall cause its Subsidiaries to, furnish promptly to th) sthers (1) a copy of eaco report, schedule and other document filed by it or any of its Subsidiaries wi d the SEC and any other doc *tment pertaining to the trrnsactions contemplated bereby filed with any Covernmental Authority that is not filed as an exhibit to an SEC filing or described in an SEC filing, end (ii) all information concerning itself, its subsidiaries, directors, officers and abareholders and such matters as may be reasonably requested by the other party in connection with any filings, applications or cpprovals required or contemplated by this Agreement. (b) without limiting the application of the Confidentiality Agreement, all documents and information furnished pursuant to Section s.l(a) (ii) shall be cubjsct to the Confidentiality Agreement. Srction 8.2 Joint Proxy Statement and Registration Statcaent. ; (a) Preparation and Filing. (i) As promptly as reasonably practicable af ter the date bsleof, the parties aball prepare and file with the Src the Registration Statement and th) Joint Proxy Statement (together the ' Joint Proxy / Registration Statement"). (ii) The parties aball take such actions as may be reasonably required to ciure the Registration Statement to be declared ef fective under the Securities Act as promptly as practicable after such filing. (iii) The parties shall also take such action as may be reasonably required to cause the shares of Company Common Stock issuable in connection 1 with the Mergers to be registered or to obtain an exemption from l registration under applicable state ' blue sky' or securities laws: 1 provided, however, dat none of the Company, ENSERCH or TUC shall be
- required to register or qualify as a foreign corporation or to take any ethtr action that would subiect it to general service of process in any jurisdiction in which it will not, following the Mergers, be so subject.
(iv) Each of the parties aball furnish all information concerning itaelf th t is required or customary for inclusion in the Joint Proxy / Registration Statement. (v) No representation, warranty, covenant or agreement contained in this Agr:ement is made by any party hereto with respect to information supplied by cny other party hereto for inclusion in the Joint Proxy / Registration Statement. I (vi) The Joint Prory/ Registration Statement shall comply as to form in all material respects with the Securities Act, the Exchange Act and the rules and regulations thereunder. (vii) The parties aball take such action as may be reasonably required to ciure the shares of Company Common Stock issuable in the Mergers to be cpproved for listing on the NYSE. (b) Letter of TUC's Accountants. Following receipt by Deloitte & Touche, L.L.P., TUC's independent auditors, of an appropriate request from ENSERCH pureutnt to SAS No. 72, TUC shall use best efforts to cause to be delivered to ENSERCE a letter of Deloitte & Touche, L.L.P., dated a date within two businiss days before the effective date of the Registration Statement, and cidrsesed to ENSERCH, in form and substance reasonably satisfactory to ENSERCH end customary in scope and substance for ' cold comfort" letters delivered by I-31 i l l i e z I l
i l l HI))PINEDGe[14431.ANE!]00032.FIP PAG: 16 SEP-1996 01:47 EDGs 00-000 0060 00:00 BLKs 00-000-0000 00:00 Ill))Tuc/taserch Ftra 5-4 R. 3. Doanellsy (212) 341 7777 A0G 3.4.1,p02 l (PAGE) ; l !, ind: pendent public accountants in connection with registration statements and i proxy statements similar to the Joint Prozy/ Registration Statement. I (c) Letter of ENSERCR's Accountants. Following receipt by Deloitte s Touche, r L.L.P., ENSERCB's independent auditors, of an appropriate request from TUC 6 ,. purru:nt to SAS Wo. 72, ENSERCH shall use best efforts to cause to be l dalivsred to TUC a letter of Deloitte s Touche, L.L.P., dated a date within , twi business days before the ef fective date of the Registration Statement, and ,l todrcased to TUC, in form and substance reasonably satisfactory to TUC and r , customary in scope and substance for " cold comfort' letters delivered by I
' ini: pendent public accountants in connection with registration statements and =
l prery statements similar to the Joint Prozy/ Registration Statement. , l -(d) Fairness opinions. It shall be a condition to the mailing of the Joint f i Prcry Statement to the shareholders of ENSERCH and TUC and to the obligation ! ! cf us Company to request ef fectiveness of the Registration Statement that (1) ; ! ENSERCH shall have received an opinion f rom Morgan Stanley, dated the date of - ! th's Jrint Proxy Statement, to the effect that, as of the date thereof, the I- ENSERCE Conversion Ratio is fair from a financial point of view to the holders i l Of ENSERCH Common Stock, and (ii) TUC shall have received an opinion from Barr ' i Devlin, dated the date of the Joint Proxy Statement, to the effect that, as of ' tha $nto thereof, the TUC Conversion Ratio is fair from a financial point of view to the holders of TUC Common Stock. Section 8.3 Regulatory Matters. , (a) ESR Tilings. Each party hereto shall file or cause to be filed with the r Fedir21 Trade Commission and the Department of Justice an ! required to be filed by their respective ' ultimate parent { companies notifications under the
- RSR Act, and the rules and regulations promulgated thereunder with respect to th3 transactions contemplated hereby, and shall respond promptly to any requ
- 2ts for additional information made by either of such agencies. .
l (b) Tax Ruling. TUC and ENSERCE each hereby agree to cooperate with the I other party and to use its best efforts to file a request as soon as j pr:cticable, and in no event later than 60 days af ter the date hereof, to l c.btain the tax ruling contemplated by Section 9.1(g).
'(c) Other Regulatory Approvals.
(i) Each party hereto shall cooperate and use its best efforts promptly to prepare and file all necessary permits consents, approvals and
. CuMorizations of all Governmental Authorkties and all other persons nic ssary or advisable to consummate the transactions contemplated by this Agreement, including, without limitation, the TUC Required Statutory Approvals, the ENSERCE Required Statutory Approvals, and the Texas Railroad l Commission Review except to the extent uat TUC, in its sole discretion,
! wiives the requirement of the Texas Railroad Commission Review. Further, L rctarding the Texas Railroad Cosuaission Review, it is agreed that the L parties will, within 30 days of esecution of this Agreement, report the' I tr nsaction to the Texas Railroad Commission and jointly request that the i T:sts Railroad commission enter an order determining that this transaction I is in the public interest. I (ii) ENSERCH shall have the right to review and approve in advance all chtracterizations of the information relating to ENSERCH, on the one hand, I cnd TUC shall have the right to review and approve in advance all I characterizations of the inf ormation relating to TUC, on the other hand, in I cither case, which appear in any filing made in connection with the trcnsactions contemplated by this Agreement or the Mergers, j i (iii) TUC and ENSERCE shall each consult with the other with respect to ! th.3 obtaining of all such necessary or advisable permits, consents, j cpprovals and authorizations of Governmental Authorities, j l 1 l
. S2ction s.4 shareholder Approval, j l (c) Approval of ENSERCH Shareholders. ENSERCH aball, as promptly as
- rsazondly practicable af ter the date hereof l 1-32 i t
l L 1 ) s l l
. .~ - _ , - . . , . - .. . . - . . . -. . -- --
l l' l l!] ] TINEDG e [14433. ANNI) 00033 FIF PACS 16 517 1996 01:40 EDCs 64 000 0000 00:00 BLK: 00-000 0000 00:00 l l ll1))Tue/ttsIrch rtra 8 4 3. R. Dona 111ry (212) 341-7777 A0G 3.4.1,p02 (PAGES (i) take all steps reasonably necessary to duly call, give notice of, l crnvrne and hold a special meeting of its shareholders (the 'ENSERCH Special Meeting *) for the purpose of securing the ENSERCE Shareholders' j Appstval, (ii) distribute to its shareholders the Joint Proxy Statement in eccordance with applicable federal and state law and its Articles of Isecrporation and Bylaws, (iii) recommend to its shareholders the approvpl of the ENSERCH Merger, , this Agreement and the transactions contemplated hereby, and , I (iv) cooperate and consult with TUC with respect to each of the foregoing I matters, provided that nothing contained in this Section 8.4 (a) shall , rrquire n e Board of Directors of ENSERCH to take any action or refrain i from taking any action that such Board determines in good faith with > rritten advice of counsel could reasonably be expected to result ir. a breach of its fiduciary duties under applicable law. l (b) Approval of TUC Shareholders. TUC shall, as promptly as reasonably i ! . practicable after the date hereof ; 5 l (i) take all steps reasonably necessary to duly call, give notice of, i crnvene and hold a special meeting of its shareholders (the 'TUC Special M2cting") for the purpose of securing the TUC Shareholders' Approval, l r
' (ii) distribute to its shareholders the Joint Proxy Statement in l tecordance with applicable federal and state law and its Articles of Incrrporation and Bylews, .
(iii) recommend to its shareholders the approval of the TUC Merger, this Agr ement and the transactions contemplated hereby, and , (iv) cooperate and censult with ENSERCE with respect to each of the ferracing matters, provided that nothing contained in this Section 8.4(b) 3 l 'Khall require the Board of Directors of TUC to take any action or zeirain . f from takhg any action that such Board determines in good f aith with written advice of counsel could reasonably be expected to result in a ! br:tch of its fiduciary duties under applicable law. > l i (c) It shall be a condition to the obligation of TUC to hold the TUC Special l Melting that the opinion of Barr Devlin referred to in Section 8.2(d)(ii) ! tht11 not have been withdrawn, and it shall be a condition to the obligation ! of ENSERCH to hold the ENSERCH Special Meeting that the opinion of Morgan ' l Stcn12y referred to in Section 8.2(d)(i) shall not have been withdrawn.
- Section 8.5 Directors' and of ficers' Indemnification.
I (a) Indemnification. To the fullest extent not prohibited by law, the j Compiny agrees that for a period of sis (6) years after the Effective Time, i ell rights to indemnification existing as of the Effective Time in favor of i l thm current and former directors, officers and employees of ENSERCH and its t l Subsidiaries (at the Effective Time) (each an ' Indemnified Party') as provided I for in their respective Articles of Incorporation or Bylaws shall continue in full force and effect. After the Effective Time, the Company will consent to >
- thi establishment by ENSERCE and its Subsidiaries of such additional '
t indemnification arrangements in favor of ENSERCB's and its Subsidiaries' l dircetors and officers as may be necessary so that they will have the benefit l ci tha maximum indemnification arrangements available to the directors and ' officars of the Company and TUC for all events or actions occurring subsequent l~ to tha Effictive Time. l (b) Insurance. For a period of six (6) years after the Effective Time, the t Comp!ny shall cause to M maintained in effect the policies of directors' and officsrs' liability insurance maintained by ENSERCH and its Subsidiaries (at tha Effective Time) provided that the Company may substitute therefor policies of at least the same coverage containing terms that are no less advantageous with respect to matters occurring prior to the Effective Time to the extent such liability insurance can be maintained annually at a cost to the Company not grsater 2an 200 percent of the current aggregate annual premiums for n e policias currently maintained by ENSERCH and its Subsidiaries for its dirsetors' and officers' liability insurances provided, further, that if such insurance cannot be so maintained or obtained at such cost, the Company shall maintain or obtain as much of i l I" I-33 i
._ . _. _ 4 _ .
1 l l l l[1))FIKEDC:[144)).hENI)S00)4.FIF PAC: 16-SEP-1996 01:45 EDGs 00 000-0090 00:00 BLKs 60 000-0000 00:00 I Illljtuc/D.strch rarz s-4 2. 1. Doane11sy (212) 341 7 m A0G 3.4.1,p02 !. -(PAGE) l l Euch insurance for ENSERCH and its Subsidiaries as can be so maintained or < l tbtained at a cost equal to 200 percent of the current annual premium for l ! directors' and officers' liability insurance. , _. ~ ~ ~ . , (c) Successors.' In the event that the Company, ENSERCH or any of its Subaidiaries or any of their respective successors or assigns I (il consolidates with or sierges into any other person and shall not be [ th3 continuing or surviving corporation or entity of such consolidation or merger, or
- (ii) transfers all or substantially all of its properties and assets to
- - any person,
. + l thin and in each such case, proper provision shall be made so that such { ! euccassors and assigns shall assume the obligations set forth in this section i i 8.5. (d) The provisions of this Section 8.5 are intended to be for the benefit ( of, and shall be enforceable by, each Indemnified Party, his or her heirs and 7
- his or her representatives. ;
t 1 S ction S.6 Disclosure Schedules. f (a) On or prior to the date of this Agreement, TUC shall have delivered to ! EN!ERCE Secuan 6.4(c) of the TUC Disclosure Schedule and ENSERCH shall have ' ) delivsred to TUC Section 5.4(c) of the ENSERCH Disclosure Schedule. ' i (b) within seven days following the date of this Agreement, (i) TUC shall l l' dzlivsr to ENSERCH all schedules required to be delivered it in connection i with this Agreement (the 'TUC Disclosure Schedule *) other an Section 6.4(c) i cf th* TUC Disclosure Schedule and (ii) ENSERCH shall deliver to TUC all i schidules required to be delivered by it in connection with this Agreement (ths *ENSERCH Disclosure Schedule,*) other than Section 5.4(c) of the ENSERCH ! Dieclosure schedule and for a period of 21 days following the date of I cxicution of this Agreemant (the "Due Diligence Period *), each of TUC and , . ENSERCH shall provide to the other party and its Representatives access i l . purrut.nt to Section 8.1 in order for the other party to complete its due l diligince investigation of the party providing access pursuant to Section 8.1. Eithir TUC or ENSERCE may terminate dis Agreement durlng the Due Diligence , PIriod in the manner contemplated b Section 10.l(i) (in the case of a ! . tsrmination by TUC) or Section 10.1 j) (in the case of a termination by r i 'ENSERCH): provided, however, that it is expressly understood and agreed that I if Amither TUC nor ENSERCE terminates this Agreement pursuant to and in ? ! tecordance with the provisions of Sections 10.lti) or 10.l(j), as the case may [ , be, then TUC may not thereafter assert a failure of the condition set forth in I Sections 9.2(b) or (d) or terminate this Agreement pursuant to Section i i 10.l(h)(i) and ENSERCE m3 not thereaf ter assert a f ailure of the condition j ett farth in Sections 9.3 b) or (d) or terminate this Agreement pursuant to l r Sectitn 10.l(g)( , based on any information uncovered by it or provided to it. i l during the Due D igence Period ' t t (c) The Disclosure Schedules, when so delivered, shall constitute an l intigral part of this Agreement and shall modify or otherwise affect the i ro2ptetive representations, warranties, covenants or agreements of the parties ! hirsto contained herein to the extent that such representations, warranties, ! ccvinints or agreements expressly refer to the Disclosure Schedules, i i (d) An} and all statements, representations warranties or disclosures set j .- forth in the Disclosure Schedules shall be deemed to have been made on and as l of tha date of this Agreement. (e) Without limiting the application of the Confidentiality Agreement, the partiss shall use their best efforts to keep the Disclosure Schedules confidential. esction 8.7 public Announcements. TUC and ENSERCH shall cooperate with each ) othtr in the development and distribution of all news releases and other public information disclosures with respect to this Agreement or any of the j trinasetions contemplated hereby and shall not issue any public announcement or statenant prior to consultation with the other party, however, each party racognizes the other party's obligations I-34 i i f I i i I 1 i l
i i i i PACS 16 SEP 1996 02:32 EDGs 80-000 6000 00:00 SLK8 00-000 0000 00:00 [([1])Tyc/EasIrch.1))FINEDG8[1443). [ ANNI)00035.717 Fora 8 4 2. R. Donaillsy (212) 341 7777 A0G 3.4.1,pc2 I -(PAGE) impoled by law or any applicable national securities exchange, and will end:cvor to accommodate such obligations. Section 8.8 Rule 145 Affiliates. ENSERCH and TUC shall each identify in a , _ . _ _ _ _ Icttar to the other all M rsons who are, at the closing Date, ' affiliates" of
- r. tuch party as such term is used in Rule 145 under the Securities Act. ENSERCH
' ced TUC shall use their reasonable ef forts to cause their respective af filiates to deliver to the Company on or prior to the closing Date a written
.cgreement to the effect thats (i) any future disposition by such person of any company Common Stock ;
auch person receives as the result of the Mergers will be accomplished in cccordance with Rule 145(d) under the Securides Act; and (ii) such person agrees that appropriate legends shall be placed upon the ; cartificates evidencing ownership of the Company Common Stock that such person receives as a result of Oe Mergers. esction 8.9 Employment Agreement Consultation. ENSERCH and TUC shall consult with nach other prior to entering into, or amending, any individual employment
' cr osverance agreements af ter the date hereof as contemplated or permitted in i
, cccordance with Section 7.10. Each of ENSERCE and TUC shall promptly furnish i to thz other, upon reasonable request by the other, detailed information, tog 3ther with underlying documentation, with respect to all such existing or preposed individual employment or severance agreements or amendments thereto. I S1ction 8.10 Stock option and Bonus Plans. Th2 following provisions shall apply to each stock option plan, stock bonus plan end similar plans of ENSERCE under which the delivery of ENSERCE Common Stock is required to be used for purposes of the garment of benefits, grant of escris or exercise of options (each a " Stock Plan , and all of which are Caecribed in Section 8.10 of the ENSERCE Disclosure Section): i (a) (1) ENSERCH shall take such action as may be necessar i ef t3r the date hereof, no further grants of stock, options,y or so other that from and rights " ' thall be made under any Stock Plan, and after the Effective Time, outstanding i options to purchase shares of ENSERCH Common Stock shall be exercisable to - !- purchase a number of shares of Company Common Stock as may be determined by I
- j. gpplying the ENSERCE Conversion Ratio set forth in Article III hereof; and (ii) the Company shall (A) to the extent required under applicable SEC rules, take all j corporate action necessary or appropriate to obtain shareholder cpproval at an annual meeting selected by the Company with respect to a ruch Stock Plan to the extent such approval is required to enable such Stock Plan to comply with Rule 16b-3 promulgated under the Exchange Act, I (B) reserve for issuance under such Stock Plan or otherwise provide a sufficient number of shares of company Common Stock for delivery upon
-azercise of options under such Stock Plan which are outstanding on the
- date hereof, and (C) as soon as practicable after the Effective Time, file one or more registration statements under the Securities Act with respect to the shares of Company Common Stock issuable upon the exercise of currently outstanding options under such Stock Plan to the extent such filing is required under applicable law and use its best efforts to maintain the ef f ectiveness of such registration statement (s) (and the current status a of the prospectuses contained therein or related thereto) so long as such options remain outstanding.
l- ! in(b) To the extent ENSERCE Commonthat thetochange Stock options in any Stock exercisable Plan from in Company optionsStock Common exercisable does l [ not adequately reflect the economic effect of the fluctuations in the value of t EEX Common Stock, the Company will appropriately adjust the terms of such l Stock Plan in an equitable manner which does not impair the value of the , rights of the option holder or result in neither a net financial benefit nor l estriment to the Company. 2-35 l j i 1 4 i
? l PAC 16 stF 1996 01:48 EDG 00-000 0000 00:00 SLE: 00-000-0000 00:00 1 l[1))FIstDCs[14433. [1))Tue/tasirch ANN 2l00936. Fors PIP: 8-4 3. 1. Dons 111sy (212) 341-7777 AOC 3.4.1.p02 ! I
- (PACE) .)
l 85ction 8.11 No Solicitations. (c) No party hereto shall, and each such party shall cause its subsidiaries nst to, permit any of its Representatives to, and shall use its best efforts i to ciuse such persons not to, directly or indirectly, initiate, solicit or ;{
- cacourage, or take any action to facilitate the making of any. offer or ,
~
- prrposal that constitutes or is reasonably likely to lead to any Takeover Proposal .or in the event of any unsolicited Takeover Proposal, engage in *
- nigstiadons,or provide any confidential information or data to any person !
relating to any Takeover Proposal. (b) ENSERCE and TUC shall notify the other orally and in writing of any such inquiries, offers or proposals (including, without limitation, the terms and conditions of any such proposal and the identity of the person making itg within 24 hours of the receipt thereof and shall give the other ten days e4vince notice of any agreement to be entered into with or any inf ormation to i be supplied to any person making such inquiry, offer or proposal. ' l (c) Each party hereto shall immediately cease and cause to be terminated all ' l . existing discussions and negotiations, if any, with any other persons j cc:nducted heretofore with respect to any Takeover Proposal. i (d) Notwithstanding an thing in this section 8.11 to the contrary, unless l tha ENSERCH Shareholders Approval has been obtained ENSERCE may, and unless h th3 TUC Shareholders' Approval has been obtained, TUC may, to de extent that ; l tha Board of Directors of such party determines in good faith with the written sovice of outside counsel that a f ailure to do so could reasonably be espected - , i to rssult in a breach of its fiduciary duties under applicable law, I participate in discussions or negotiations with, furdsh inf ormation to, and T aficrd access to the properties, books and records of such party and its Subsidiaries to any person in connection with a possible Takeover Proposal' f I with respect to such party by such person. ; ! Stetion 8.12 Transition Management. (a) As promptly as practicable af ter the date hereof, TUC and ENSERCH shall , create a special transition management task force (the
- Task Force") that
- ahill be comprised of representatives from each of the primary business -l functions of each company.
(b) The functions of the Task Force shall include (i) to serve as a conduit for the flow of information and documents between the comu nies and their ; Sub2idiaries as contemplated by Section 7.15, (ii) to revlow and evaluate
. prcposed exceptions to the restrictions on the conduct of business pending the ,
7 Mergsrs set forth in Article VII, and (iii) development of regulatory plans l sad roposals, corporate organizational and management plans, workforce l j comb nation proposals, and such other matters as they deem appropriate, i ! (c) From time to time, the Task Force shall report its findings to the Chief .l l:. Estcutive Officers of ENSERCH and TUC, each of n on shall report on such mattsrs as he shall deem appropriate to his respective board. .i Ssetion 8.13 Expenses. Subject to Section 10.3, all costs and espenses i incurred in connection with this Agreement and the transactions contemplated .!
- i. h2rsby shall be paid by the party incurring such expenses, except that those
- expenses incurred in connection with printing the Joint Proxy / Registration -
S ta te. ment, as well as the filing fee relating thereto, shall be shared equally i [ by TUC and ENSERCH. l 'S*ction 8.14 Employee senefit Matters. Following the Closing, the Company-
- shall cause ENSERCH to maintain the level of benefits provided to the , Empicyees and all former employees of ENSERCE and its Subsidiaries that is in
[ . ef fset as of the date hereof (other than benefits under any Stock Plan) until , l ths Company shall provide benefits to such employees and former employees on a I basis consistent with the provision of benefits provided otherwise to other (sployees and former employees within the Company system.
. Ssetion 8.15 other Agreements.
t (a) Distribution. Prior to the Closing, ENSERCH will take a,ll action
- l. n2cessary to effect the Distribution pursuant to the terms'of the Distribution
- Agretment, including, without limitatlon, entering into the Listribution 1-36
)
i l I l i i 1: 4 1
l I I f(1])f!5EDGil14433. ANNI]O9037.F17 FAC 16-SEP 1996 01:48 EDG 00-000-0000 00:00 SLK 00 000 0000 00:00 ! ((11)fue/Easerch FarJ 5-4 E. 3. Donnelley (212) 341 7777 A0G 3.4.1,p02 i (PAGE) Agreement and voting its shares of LSEPO and EEX in favor of the merger of EEX with cnd into LSEPO (the ' Preliminary Merger *) and the other transactions contemplated by the Distribution Agreement. ENSERCH shall take all reasonable cetions necessary to comply prompu y with all legal requirements that may be impo ed on it with respect to the Distribution, unless ENSERCH determines in good f aith after receipt of written advice of outside counsel that the Distribution would result in a substantive violation of applicable Texas law r:leting to corporate distributions and Texas and federal laws relating to frrudulent conveyances or transfers. (b) Tax Agreements. Prior to the Closing Time, ENSERCH and LSEPO will enter into the Tax Allocation Agreement substantially in the form attached hereto as Ezhibit B (the " Tax Allocation Agreement *) and the Tax Assurance Agreement rubitantially in the form attached hereto as Exhibit C (the " Tax Assurance i Agrsement'), in each case with such amendments as consented to in writing by TUC. i (c) ENSERCH Notes. TUC and ENSERCH each hereby agree to cooperate with the I ethIr party and ENSERCH will use its reasonable best efforts to maintain, and TUC or the Company, as the case may be, shall take such actions as are n:caseary to meet, the quantitative parameters necessary for ENSERCH to maintain the rating issued by two Nationally Recognized Statistical Rating
'OrgInirations (as defined in Rule 15c-3 of the Exchange Act) of the ENSERCH Notca at or above their present level.
SIction B.16 Covenant to Satisfy conditions. (a) Each of the Company, ENSERCH and TUC shall take all reasonable actions n:cS :ary to comply promptly with all legal requirements that may be imposed on it with respect to this Agreement.
. (b) Subject to the terms and conditions hereof, and taking into account the circumstances and giving due weight to the materiality of the matter involved cr tha action required, the Company, ENEERCH and TUC shall each use its best ef fsrts to take or cause to be taken all actions, and to do or cause to be dina c11 things, necessary, proper or advisable under applicable laws and r:gul tions to consummate and make effective the Mergers and the other trLn3:ctions contemple'.ed bereby (subject to the ENSERCH Shareholders' Appr val and the TUC Snareholders' Approval), including fully cooperating with u; other in obtaining the ENSERCH Required Statutory Approvals, the TUC Required Statutory Approvals and all other approvals and authorizations of any Grvstnmental Authorities necessary or advisable to consummate the transactions cont;mplated hereby.
(c) TUC and ENSERCH shall cause the Company, and the Company shall cause TUC MirgJr Corp. and ENSERCH Merger Corp., to comply with their respective oblig tions under this Agreement. TUC and ENSERCH shall cause de Company to 1:4ua shares of Company Common Stock in connection with the Mergers that are validly issued, fully paid, nonassessable and free of preemptive rights. ARTICLE IX Conditions Srction 9.1 Conditions to Each Party's Obligation to Effect the Mergers. The I rcrpective obligations of each party to effect the Mergers or cause the MJrg rs to be ef f ected shall be subject to the satisf action on or prior to the CloJing Date of the following conditions, except, to the extent permitted by rpplicable law, that such conditions may be waived in writing pursuant to i arction 10.5: 1 (a) Shareholder Approval. The TUC Shareholders' Approval and the ENSERCH Shsrsholders' Approval shall have been obtained. (b) No Injunction. No temporary restraining order or preliminary or psrmanent injunction or other order by any federal or state court preventing coniummation of either Merger shall have been issued and continue in effect, I cnd either Merger and the other transactions contemplated hereby shall not h2va been prohibited under any applicable federal or state law or regulation. 1-37 l l
.((1))TINEDCa[14433. ANNI]D0010.FIF PACS 16-5f 7-1995 02:32 EDC: 00 000 0000 00:00 BLE: 08-000 0000 00:00
((1))Tuc/Easerch Ftr) 5 4 3. R. Donnellry (212) 341-7777 AOC 3.4.1.p02 (PAGE) (c) Registration Statement. The Registration Statement shall have become ef fective in accordance with the provisions of the Securities Act, and no stop crter suspending such effectiveness shall have been issued and remain in eff:ct. -- - (d) Listing of Shares. The shares of Company Common Stock issuable in the Merg:rs pursuant to Article III shall have been approved for listing on the NYSE upon offirial .sotice of issuance. (o) Statutory Appros:1s. The TUC Required Statutory Approvals, the ENSERCE Required Statutory Approvals, and the Texas Railroad Commission Review, unless tnived by TUC in accordance with the provisions of Section 8.3(c)(1), and any clecrence under the ESR Act or matters related thereto shall have been obt;ined at or prior to the Effective Time, any such approvals (or in the case cf tha Texas Railroad Commission Review, the satisfaction of any one of (i) through (v) of the definition thereof) shall have become or resulted in Final Ord:rs at or prior to the Effective Time, and no such Final Order shall impose tar %3 or condltions that would have, or would be reasonably likely to have, a matarial adverse effect on the business, operations, properties, assets, crndition (financial or otherwise), prospects or results of operations of EZSERCE and its Subsidiaries taken as a whole (in the case of the obligation cf TUC to ef fect the TUC Merger or to cause ENSERCH Merger Corp. to ef fect the ENIERCH Merger) or of TUC and its Subsidiaries taken as a whole and determined Cs if the Mergers had taken place (in the case of the obligation of ENSERCH to Gff:ct the ENSERCE Merger or to cause TUC Merger Corp. to effect the TUC Marg 3r). (f) Consummation of the Distribution. The Preliminary Mercer shall have been compl:ted and the Distribution shall have become effective in accordance with th3 L rms of the Distribution Agreement and each of the agreements centemplated thereby. (g) Tax Ruling. (i) The Internal Revenue Service shall have issued and not rivsk'd a ruling (the " Ruling") reasonably satisfactory to ENSERCH and TUC to th3 cffect that the Distribution will result in no taxable gain to ENSERCH or its chareholders. Reasonable satisfaction shall include the right to receive a remronably satisfactory opinion of counsel on the transaction upon which the Ruling is contingent. (ii) TUC shall have received a reasonably satisfactory repzesentation of ENlERCH that no material tax liability will be incurred by ENSERCH as a r:ruit of the Distribution notwithstanding the tax-free nature of the Distribution. (h) Tax Agreements. The Tax Allocation Agreement and the Tax Assurance Agrcement shall have become effective in accordance with their terms. Cection'9.2 Conditions to Obligation of ENSERCE to Effect the Mergers. The obligition of ENSERCH to effect the Mergers or cause the Mergers to be cff:cted shall be further subject to the satisfaction, on or prior to the Cleeirg Date, of the following conditions, except as may be waived by ENSERCH in criting pursuant to Section 10.5: (a) Performance of Obligations of TUC. TUC shall have performed in all mat: rial respects its agreements and covenants contained in or contemplated by this Agreement required to be performed by it at or prior to the Effective Time. j (b) Representations and Warranties. The representations and warranties of ! TUC sat forth in this Agreement shall be true and correct in all material rarpects as of the date hereof and as of the Closing Date as if made on and as I of th3 Closing Date, except as otherwise contemplated by this Agreement. I i (c) Closing Certificates. ENSERCH shall have received a certificate signed ! by th) Chief Executive Officer and Chief Financial Officer of TUC, dated the I Cleging Date, to the effect that, to each such of ficer's knowledge, the conditions set forth in Sections 9.2(a) and (b) have been satisfied. 1-3B l 1 i l I
, - ~ , - . _ - . - ~. _~. _ = - ~ ~~ .-- - - .. . _. - _ , -. . PAG: 16-stP 1796 01:44 EDGi 00-000-0900 00:00 31Kr 00-600-0000 00:09
.ll1))Tuc/Eas'sschTINEDGall4433.Arsi)00039.
Ill)) Fore 6 4 PIP
- 3. R. Doan:11ty (212) 341-7777 -AoG 3.4.1,pO2 (PAGE)
I (d) TUC Material Adverse Effect. No TUC Material Adverse Effect shall have i occurred and there shall exist no fact or circumstance that would have, or rould be reasonably likely to have, a TUC Material Adverse Effect. , i
.(e) Tax Opinion. ENSERCE shall have received an opinion of counsel, in form i
! Knd substance satisfactory to ENSERCH, dated the closing Date, which opinion i may be based on appropriate representations of ENSERCE and TUC, in form and * (@3 trace reasonably satisf actory to such counsel, to the ef fect that the M:rg2rs will be tas-free transactions described in Code section 351 and that EN2ERC3 and the shareholders of ENSERCE who exchange their shares solely for 1 stock of the Company will recognize no gain or loss for federal income tax i i purpores as a result of the consummation of the Mergers. (f) TUC Required Consents. The TUC Required Consents shall have been cbtatned except those that in the aggregate would not result in and would not rsatonably be likely to result in a TUC Material Adverse Effect. Biction 9.3 Conditions to obligation of TUC to Effect the Mergers. The obligstion of TUC to ef fect the Mergers or cause the Mergers to be effected j chill be further subject to the satisf action, on or prior to the Closing Date,
- - ef tha following conditions, except as may be waived by TUC in writing t pur2uint to Section 10.5
- ,
(a) Performance of Obligations of ENSERCE. ENSERCE shall have performed in i all material respects its agreements and covenants contained in or cantemplated by this. Agreement required to be performed by it at or prior to . zth3 Effective Time. ' l
?
(b) Representations and Warranties. The representations and warranties of - i fENSERCH set forth in this Agreement shall be true and correct in all material ragpects as of the date hereof and as of the Closing Date as if made on and as of tha closing Date, except as otherwise contemplated by this Agreement. (c) Closing Certificates. TUC shall have received a certificate signed by th3 Chief Executive Officer and Chief Financial officer of ENSERCH, dated the Cloaire Date, to the ef fect that, to each such officer's knowledge, the e cruditions set forth Ln Sections 9.3(a) and (b) have been satisfied. I (d) ENSERCE Material Adverse Effect. No ENSERCE Material Adverse Effect shall have occurred and there shall exist no fact or circumstance that would hivs, or would be reasonably likely to have, an ENSERCE Material Adverse Effset, provided that for purposes of this Section 9.3(d), the Distribution subsidiaries shall not be taken into account in dete M ning an ENSERCE l Material Adverse Ef fect. { [' (e) Tax Opinion. TUC shall have received an opinion of counsel, in form and i rubstance satisf actory to TUC, dated the Closing Date, which opinion may be , baard on appropriate representations of ENSERCE and TUC, in form and s @ stance r l rassenably satisfactory to such counsel, to the effect that the Mergers will ; i' be tra-free transactions as described in Code Section 351 and that TUC will r r: cognize no gain or loss for federal income tax purposes as a result of the ! I centummation of the Mergers. ' (f) ENSERCE Required Consents. The ENSERCE keguired Consents shall have been ' obtained except those that in the aggregate wouAd not result in and would not rassonably be likely to result in an ENSERCE Material Adverse Ef fect, provided, however, that for purposes of this Section 9.3(f), the consent of , e tha holders of the ENSERCH Notes shall not constitute an ENSERCE Required ,
.Consant. ;
I-39 r I [ i i l f i ( m l 4 i
1 I l FAG: 16 SEF 1966 02:31 EDGi 00-090-0000 00:00 SLE: 00 000-0000 00:60 ((1)])FINEDCs[14433.
!!1] Tuc/Easerch ANNI l0*049.FIF Fors 8-4 3. R. Donnelley (212) 341 7777 A0G 3.4.1,p02 (PAGE)
ARTICLE X Termination, Amendment and Waiver Section 10.1 Termination. This Agreement may be terminated and the Mergers thandoned at any time prior to the Closing Date, whether before or after rpprovcl by the shareholders of the respective parties hereto contemplated by his Agreements (c) by mutual written consent of the Boards of Directors of TUC and ENSERCH: (b) by ENSERCH or TUC, by written notice to the other, if the Effective Time Ehril not have occurred on or before March 31, 19973 provided, however, that i ruch d;te shall automatically be changed to September 30, 1997 if, on March 31, 1997a (1) the conditions set forth in Sections 9.l(e) and (g) have not been satisfied or waived; (ii) the other conditions to the consummation of the transactions cint:mplated hereby are then. capable of being satisfieds and (iii) any approvals required by sections 9.l(e) and (g) that have not yet i bezn obtained are being pursued with diligences provided, further, that the right to terminate this Agreement under this Section 10.l(b) shall not be sv ilable to any party whose failure to fulfill any obligation under this Agrsement has been the cause of, or resulted in, d e failure of the Effretive Time to occur on or before the termination dates (c) by ENSERCH or TUC, by written notice to the other party if the ENSERCH rhtrrhsiders' Ap (pecitl Meeting, proval shall not including anyhave been obtained adjournments thereof at aor duly if held ENSERCH 2e TUC thirshtiders' Approval shall not have been obtained at a duly held TUC Special Meating, incluung any adjournments thereofs (d) by ENSERCH or TUC, if any state or federal law, order, rule or regulsdon is adopted or issued, that has the ef fect, as supported by the writtcm opinion of outside counsel for such party, of prohibiting either of thi Mergers, or by ENSERCH or TUC, if any court of competent jurisdiction in th2 United States or any State shall have issued an order, judgment or decree permanintly restraining, enjoining or otherwise prohibiting either of the Merg2r2, and such order, judgment or decree shall have become final and n:n:ppsalables (e) by ENSERCH, upon two days' prior notice to TUC, if, as a result of a trad3r offer or any written offer or proposal with respect to a merger, sale of a material portion of its assets or other business combination teach, a
*Fu-in;ss Combination ),
nf filictes (provided,"however, that the Distribution pursuant to thein each case by a party other than TUC or any of its Dietribution Agreement and related transactions shall not be deemed to be a tutinses Combination), the Board of Directors of ENSERCH determines in good fcith that the fiduciary obligations of such directors under applicable law requirs that such tender of fer or other written of fer or proposal be accepted; providro, however, that (i) the Board of Directors of ENSERCH shall have been advised in writing by outside counsel that, notwithstanding a binding commitment to consummate in Cgreement of the nature of this Agreement entered into in the proper ersreise of their applicable fiduciary duties, such fiduciary duties would i stro require the directors to reconsider such commitment as a result of i cuch tender offer or such written offer or proposal, and
]
(ii) prior to any such termination, ENSERCH shall, and shall cause its Isapsetive financial and legal advisors to, negotiate with TUC to make such edjuttments in the terms and conditions of this Agreement as would enable E2SERCH to proceed with the transactions contemplated hereins (f) by TUC, upon two days' prior notice to ENSERCH, if, as a result of a 1 tandsr offer or any written offer or proposal with respect to a Business i combination, in each case by a party other than ENSERCH or any of its affilistes, the Board of Directors of TUC determines in good faith that the fiducisry obligations of such directors 2-40 l t 1
PAG: 16-5t7-1996 01:41 IDC: 00-000-0000 00:00 BLKs 00 000-0000 00:00 , IllllFINEDGe[14433. 1))Tuc/Elsirch- April 00041. PIP ~Ftra S 4 1. 2. Dotasiley (212) 341-7777 Aoc 3.4.1,p02 (FAGE) L undir applicable law require that such tender offer or other written offer or proposal be accepted; provided, however, that (i) the Board of Directors of TUC shall have been advised in writing by -. -. - - - e cutside counsel that, notwithstanding a binding commitment to consummate an l agreement of the nature of this Agreement entered into in the proper l casreise of their applicable fiduciary duties, such fiduciary duties would i algo require the directors to reconsider such commitment as a result of ' 'j guch tender offer or such written offer or proposal, and (ii) prior to any such termination, TUC shall, and shall cause its rarpetive financial and legal adviscre to, negotiate with ENSERCH to make i Euch adjustments in the terms and coc itions of this Agreement as would l Enible TUC to proceed with the tranr.ctions contemplated hereins j (g) by ENSERCH, by written noticc . 7UC, if (i) there shall have been any mate;ial breach of any representation or t ustranty, or any material breach of any covenant or agreement, of TUC hsreunder, and such breach shall not have been remedied within twenty (20) 1 drys after receipt by TUC of notice in writing from ENSERCH, specifying the nIture of such breach and requesting- that it be remedied, or (ii) the Board of Directors of TUC shall withdraw or modify-in any manner l materially adverse to ENSERCH its approval or recommendation of this Agreement or the Mergers or resolve to take such actions (h)'by TUC, by written notice to ENSERCH, if (1) there shall have been any material breach of any representation or -l ctrranty, or any material breach of any covenant or agreement, of ENSERCH ' hsreunder, and such breach shall not have been remedied within twenty (20) , I CCys after receipt by ENSERCH of notice in writing from TUC, specifyin( the nsture of such breach and requesting that it be remedied, or , (ii) the Board of Directors of ENSERCH shall withdraw or modify in any' i manner materially adverse to TUC its approval or recommendation of this Agreement or the Mergers or resolve to take such actions , (1) by TUC by written notice (~hich notice shall specify TUC's reasons in l rectonable detail) delivered to ENSERCH prior to 5:00 p.m. on May 4, 1996, if ,
.(A) TUC in the due diligence investigation contemplated by Section 8.6 shall i uncover, or the ENSERCH Disclosure Schedules delivered to TUC subsequent to i tha date of this Agreement shall disclose, information that, as of the date of
'this Agreement, has not been previously disclosed in an ENSERCH SEC Report or J th t has not previously been disclosed by ENSERCH or any of its -
' 1:pr:sentatives to TUC and (R) such information in the aggregate reflects a
. sctarial adverse change in the business,-operations, properties, assets, condition (financial or otherwise), prospects or results of operations of 9 ENiERCH and its Subsidiaries taken as a whole, as compared to the information thst was disclosed in an ENSERCH SEC Report or by EMSERCH or any of its f Brprssentatives,to TUC prior to the date of this Agreements or (j) by ENSERCH by written notice (which notice shall specify ENSERCH's I rsasens in reasonable detail) delivered to TUC prior to 5:00 p.m. on May 4, 1996, if (A) ENSERCH in the due diligence investigation contemplated by .
Szction 8.6 shall uncover, or the TUC Disclosure Schedules delivered to . ENSERCH subsequent to the date of this Agreement shall disclose, information that, as of the date of this Agreement, has not been previously disclosed in a TUC SEC Report or that has not previously been disclosed by TUC or any of its R3ptssentatives to ENSERCH and (B) such information in the aggregate reflects i- a material adverse change in the business, operations, properties, assets, condition (financial or otherwise), prospects or results of operations of TUC- ,
. and its Subsidiaries taken as a whole, as compared to the information that was disclosed in a TUC SEC Report or by TUC or any of-its Representatives to ENSERCH prior to the date of this Agreement.
Szetion 10.2 Ef f ect of Termination. In the event of termination of this ,
. Agreement by either TUC or ENSERCH pursuant to Section 10.1, there shall be no litbility on the part of either TUC or ENSERCH or their respective officers or-diractors hereunder, except that ;
l 2-41 i l l 1 t t h i' l
r l l l 11 THEDGa[14413.ME1]00043.P17 FAGr 16 SEP-1996 01:48 EDG 00-000 0060 00:00 SLK 00 400-0000 00:00 Il1])Tue/Ensrch
] Fira 5 4 E. 1. Do m 111y (212) 341 7777 A0G 3.4.1.p02 <PAGE)
(a) Section 7.20, Section 8.1(b), Section 8.6(d), Section 8.13, Section 10.3 and Section 11.2 shall survive and (b) no such termination shall relieve any party from liability by reason cf any willful breach of any agreement, representation, warranty or covenant contained in this Agreement. 8:ction 10.3 Certain Damages, Payments and Expenses. (n) Damages Payable Upon Termination for Breach or Withdrawal of Approval. If this Agreement is terminated pursuant to Sections 10.1(g)(i) or (11) or sections 10.1(h)(i) or (ii) (breacn of representation, warranty, cov:nant or agreement or withdrawal of board recommendation), then the brsiching party or party whose board has withdrawn its recommendation shall promptly (but not later than five business days af ter receipt of notice that thm omount is due from the other party) pay to the other party, as liquidated d; mages, an amount in cash equal to O e of out-of-pocket expenses and fees incurred by the other party arising out of, in connection with or related to th2 Mergers or the transactions contemplated by this Agreement not in excess cf $15 million ('Out-of-Pocket Expenses'), provided, however, that if this Agr@cment is terminated by a party as a result of a willful breach of a rtpr:sentation, warranty, covenant or agreement by the other party, the non-brciching party may pursue any remedies available to it at law or in equity Ltd shall, in addition to the amount of Out-of-Pocket Expenses set forth cbovs, be entitled to recover such additional amounts as such non-breaching party may be entitled to receive at law or in equity. (b) Other Termination Payments. 5 (i) If this Agreement is terminated (A) pursuant to Sections 10.1(e) or 10.l(f) (fiduciary out), (B) pursuant to Section 10.1(c) (failure to obtain shareholder cpproval), following a failure of the shareholders of TUC to grant the recessary approval described in Section 6.13 or a failure of the thereholders of ENSERCH to grant the necessary approval described in Section 5.13, (C) as a result of a material breach of Section 8.4 (approv2A of chareholders), or
'(D) pursuant to section 10.1(g)(ii) or section 10.1(h)(ii) (board withdrawal of approval) cnd (ii) with respect to any termination referred to in clausi. (i)LA), (C) or (D) above, at d e time of such termination (or, in the case of an;r tsrmination referred to in clause (i)(B) above, prior to the TUC Special MJsting or the ENSERCH Special Meeting, as the case may be), there shall h:ve been a third-party tender offer for shares of, or a third-party offer er proposal with respect to a Business Combination involving ENSERCH or TUC (ce the case may be, the " Target Party") or the affiliates thereof which, et the time of such termination (or of the meeting of TUC's shareholders or thi meeting of ENSERCB's shareholders, as the case may be) shall not have ,
be:n (x) rejected by the Target Party and its Board of Directors and (y) 1 withdrawn by the third-party, l thin Target Party shall pay the other party a termination fee equal to the l Ciffsrence between $42.5 million and the out-of-Pocket Expenses incurred by th3 other party. (c) Expenses. (i) The parties agree that the agreements contained in this Section 10.3 cra an integral part of the transactions contemplated by this Agreement and constitute liquidated damages and not a penalty. (ii) If one party f ails to promptly pay to the other any amounts due under this Section 10.3, such defaulting party shall pay the costs and-sapenses (including reasonable legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, together wi n interest on the amount of any unpaid fee at the publicly announced prime rate of citibank, N.A. in effect from time to time from the date such fee was required to be paid. 2-42 l I l
((1))TINEDGel14433.ANE!]09643. PIP PAC: 16 5EP-1996 03:17 EDC: 00-000-0000 00:00 BLE: 00-000-0000 00:00 ((1))Tue/Easerch Farm S 4 E. 3. Donnelley (212) 341 7777 ACG 3.4.1,p02 (PAGE) (d) Limitation of rees. Notwithstanding anything herein to the contrary, (i) thz tggregate amount payable by TUC and its affiliates pursuant to section 10.3(a) and Section 10.3(b) shall not exceed 642.5 million and (ii) the cggr: gate payable by ENSERCH and its affiliates pursuant to Section 10.3(a), S.ctirn 10.3(b) and the terms of the ENSERCH Stock Option Agreement shall not
- cresco $42.5 million, yor purposes of this Section 10.3(d), the amount payable pursuint to the terms of Ge ENSERCH Option shall be the amount that would be gaid pursuant to Section 7 (a) thereof determined as if TUC had esercised the put' of the entire ENSERCH Option on the Termination Date (" Option Value*).
If th) sum of the aggregate amount payable by ENSERCH and its affiliates purruint to Sections 10.3(a) and (b) and the Option Value exceeds $42.5 million, (1) TUC's out of Pocket Expenses shall be paid in full and the amount p2y ble pursuant to Section 10.3(b) and the option Value shall be reduced in equti amounts so that such aggregate amount shall be equal to $42.5 million (previded, however, that the option value shall not be reduced below the Option Value which would result if the number of shares covered by the ENSERCH Optien was 10,000 shares and, in such case, the amount payable pursuant to S2ction 10.3(b) shall be reduced by the amount otherwise allocable to the option Value) and (ii) and the nu h r of shares purchasable upon the exercise of th1 ENSERCH Option shall be correspondingly reduced as provided in the ENSERCH Option Agreement. Siction 10.4 Amendment. (c) This Agreement may be amended by the parties hereto pursuant to action of thiir respective Boards of Directors, at any time before or af ter approval hir sf by the shareholders of ENSERCH or TUC and prior to the Effective Time, but after such approvals, no such amendment shall (i) alter or change the amount or kind of shares, to be received or Exchanged for or on conversion of any class or series of capital stock of sither corporation as provided under Article II, or > (ii) alter or change any of the terms and conditions of this Agreement if
'cny of the alterations or changes, alone or in the aggregate, would matsrially and adversely af fect the rights of holders of TUC Common Stock, Company Common Stock or the ENSERCH Common Stock.
(b) This Agreement may not be amended except by an instrument in writing signtd on behalf of each of the parties hereto. s:ction 10.5 Waiver. At any time prior to the Effective Time, the p rties h:rsto may (i) extend the time for the performance of any of the obli ntions or cther acts of the other parties hereto, (ii) waive any inaccuracies in the reprarentations and warranties contained herein or in any document delivered purcu nt hereto and (iii) waive compliance with any of de agreements or conditions contained herein. Any agreement on the part of a party hereto to cny cuch extension or waiver shall be valid only if set for G in an instrument in writing signed by a duly authorized officer of such party. ARTICLE XI General Provisions Ssetion 11.1 Non-Survival of Representations, Warranties, Covenants and 1 Agrssments. All representations, warranties, covenants and agreements in this Agretment shall not survive the Mergers, except the covenants and agreements contained in this Section 11.1 and in Article III (Cenversion of Shares), SIctitn 8.l(b) (Access to Information), Section 8.5 (Directors' and officers Ind1mnification), Section 8.10 (Inc 5tive, Stock and Other Plans), Section 0.14 (Employee Benefit Matters), u in 8.15(c) (ENSERCH Notes), Section 10.3 (Cartein Damages, Payments and Expenses) and Section 11.7 (Parties In Intsrtst), each of which shall survive in accordance with its terms. f I-43 l i 8 i i
[ PACS 16 stP 1996 03:36 EDC: 00-000-0000 00:00 BtKs 00 000 0000 00:00
![1)))TINEDG(14433.
!!) Twe/ttstrch ANN!)D0044.FIF Tars 8-4 2. 1. Donne 11sy (312) 341 7777 AOC 3.4.1,p02
' (PAGE) t arction 11.2 Brokers.
(a) TUC represents and warrants that, except for Barr Devlin, no broker, findIr or investment bank is entitled to any brckerage, finder's or other fee. ._ or commission in connection with the Mergers or the transactions contemplated t- by this Agreement based upon arrangements made by or on behalf of TUC. 1(b) ENSERCH represents and warrants that, except for Morgan Stanley, no brok2r, finder or investment bank is entitled to any brokerage, finder's or oth2r f ee or commission in connection with the Mergers or the transactions erntcaplated by this Agreement based upon arrangements made by or on behalf of ENSERCH. Stetion 11.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (a) if delivered personally, or (b) if ccnt by overnight courier service (receipt confirmed in writing), or (c) if I d211vsred by f acsimile transmission (win receipt confirmed), or (d) five (5) ! drys after king mailed by registered or certified mail (return receipt l
. requssted) to too parties, in each case to the following addresses (or at such ' ethsr address for a party as shall be specified t ' like notice):
(i) if to TUC or the Company: Tsras utilities Company 1601 Bryan Street Dillas, Texas 75201 Attne Erle Nye, President and Chief Executive Fax: (214) 812-4600 with a copy to: Worsham, forsythe & Wooldridge, L.L.P.
'1601 aryan St., 30th Floor Dallas, Texas 75201 Attention s Robert A. Wooldridge, Esq. 1 Fcas (214) 880-0011 and LGBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street Ngw York, N.Y. 10019 Attention: Douglas W, Hawes, Esq. Fsx: (212) 424-8500 (11) if to ENSERCE: ETSERCH Corporation 300 South St. Paul
- D311as, Texas 75201-5598 Attention
- William T. Satterwhite, Esq.
Senior Vice President and General Counsel rams (214) 573-3430 with a copy.to ! 'Covington a surling 1201 Pennsylvania Avenue,.N.W. ! 'W2shington, D.C. Attention David N. Brown, Esq. Fax (202) 662-6291
'I-44 l.
l l i 4 4 s i
- r. l l I
- l. a
y!)]TINEDCa[14433.ANNIl00045.FIP PAGr 16-$EP-1996 02:40 'EDG: 00 000 0000 60:00 BLE: 00-090 0000 00:00
.Ill))Tuc/Easerch. Ftr2 8 4 1. R. Donne 11sy (212) 341 7777 Aos 3.4.1,p02
- (PACE) osction 11.4 Miscellaneous.
(c) This Agreement, including the documents and instruments referred to hirtiz, (1) constitutes the entire agreement and supersedes all other prior
.EgrGiments and understandings, both written and oral, among the parties, .
tny cf them, with respect to the sub ect matter hereof other than the i Cxnfit:ntiality Agreement, (ii) shal not be assigned by operation of law or 4 eth rrise, and (iii) shall be governed by and construed in accordance with the n icTa of the state of Texas applicable to contracts executed in and to be fully ~s performed in such state, widout giving ef fect to its conflicts of laws I statutes, rules or principles. 1, (b) The invalidity or unenforceability of any provision of this Agreement shall'not affect the validity or enforceability of any other provision of this Agreement, which'shall remain in full force and effect. The parties hereto ths11 negotiate in good f aith to replace any provision of thls Agreement so hald invalid or unenforceable with a valid provision that is as similar as possible in substance to the invalid or unenforceable provision. section 11.5 Interpretation. When reference is made in this Agreement to Articiss, sections or Exhibits, such reference shall be to an Article, Section er Exhibit of this Agreement, as the case may be, unless otherwise indicated. l Thi ttble of contents and headings contained in this Agreement are for i rsisr intcr nce purposes retation of thisand shall not Whenever Agreement. affect in any theway wordsthe "meaning include ,or" includes", or
' *inel ding" are used in this Agreement, they shall be deemed to be followed by th2 tords "without limitation. Whenever *or" is used in this Agreement it l Chill be construed in the nonexclusive sense. '
saction 11.6 counte nartst Effect. This Agreement may be executed in one or mors counterparts, each of which shall be deemed to be an original, but all of thich chall constitute one and the same agreement. S ction 11.7 Parties in Interest. This Agreement shall be binding upon and inurs colely to the benefit of each party hereto, and, except for rights of Zidamnified Parties and their heirs and representatives as set forth in Stctiem 8.5, nothing in this Agreement, express or implied, is intended to conf:r upon any person any rights or remedies of any nature whatsoever under er by reason of this Agreement. Ocction 11.8 specific Performance. The parties hereto agree that irreparable dtmagi would occur in the event that any of the provisions of this Agreement were not performed in accordance with Geir speelfic terms or were otherwise broschtd. It is accordingly agreed that the parties hereto shall be entitled to sa injunction or injunctions to prevent breaches of this Agreement and to enferc:a specifically ne terms and provisions hereof in any court of the U2itcd States or any state having urisdiction, this being in addition to any j sth2r remedy to which they are en tied at law or in equity. ,
]
Section 11.9 rurther Assurances. Each party hereto shall execute such furth3r documents and instruments and take such further actions as may ] l ressenibly be requested by any other party hereto in order to consummate the 1
)
, ' MIrgira in accordance wi2 the terms hereof. l I srction 11.10 Release of TKA,'Inc. TKA Inc. is hereby released from all obligstions and liabilities under the original Agreement. I-45 I I i i
- ~. _
i i
. .. . . .- .n, -. .n.. . - ~ . - - . . . ~ . - . ~ . - . . ~ . . . . . . . ~ .
l l' j 114433. ANNI]00046. PIP PACS ll SEP-1996 22:15- EDC: 00-000 0000 00:00 SLE: 00-000-0000 00:00 " l ll1))TINEDG Illtuc/Eastreb rors S 4 ' t. 1. Domailley (212) 341-7777 A0G L4.1.p02 , 1 (PAGE> i i . . c. In Witness Whereof, ENSERCB, TUC, TXA and TUC Be ding Company have caused this Agreement to be signed by their respective of icers thereunto duly authorized as of the date first written above. I Enserch Corporation
./s/ Da/id W. Biegler l By:
^Namespavid W. Biegler i Title Chairman and President, Chief Executive Officer i
f Texas Utilities Company j
/s/ Erle Nye :
By: i , Wase:Erle Nye i-
Title:
President and Chief. I f Executive TUC Bolding Company (formerly TXB, l Inc) '
/s/ B. Jarrell Gibbs.
, By: , !: Name:B. Jarrell Gibbs !
Title:
President , , ' , , i p 4. .,g, TXA, Inc. . ! /s/ B. Jarrell cibbs By Name:B. Jarrell Gibbs
Title:
Prasident 1-46 > I t-3 a i i i I I i i i I t l i l 1 1 I d-J 4 d l. I l i
j PAes 19 8EF 1996 19:0$ EDGi 00-000-0000 00:00 ELKS 00 600 0000 00:00 l [1] [1 tuc/Eng
] )] TIEEDC rch s [14433.EXA] 00001.FIP Forn 8 4 3. R. Donne 11ey (212) 341-7777 A0G 3.4.1,P04
-(PAGE)
EXRIBIT A TO ANNEX I ] AGREEMENT AND PLAN OF DISTRIBUTION ACREEMENT AND PI.AN OF DISTRIBUTION, dated as of - , 1996 (' Agreement'), ccorg ENSERCE Corporation, a Texas corporation ('ENSERCE*), Enserch Explaration, Inc., a Texas corporation and an approximately 83% owned cubrifiary of ENSERCE ("EEX'), Lone Star Energy Plant Operations, Inc. , a T:xrs corporation and an indirect wholly owned subsidiary of ENSERCH (*LSEPO*), and TUC Bolding Company, a Texas corporation 50% of whose outstinding capital stock is owned by Texas Utilities Company, a Texas etrporation ('TUC") and 50% of whose outstanding capital stock is owned by ENSE2CH (" Bolding Company'). i RECITALS WBEREAS, ENSERCH, TUC, Bolding Company and TXA, Inc., a wholly owned
- Kub idiary of TUC, have entered into an Amended and Restated Agreement and
- Plas cf Merger, dated as of April 13, 1996 (the ' Merger Agreement"), providing far the merger of a wholly owned subsidiary of solding Company with and into TUC cnd the merger of a separate wholly owned subsidiary of Boldinn Company with Cnd into ENSERCE (together, the ' Mergers');
WHEREAS, it is a condition to the Mergers that EEX will merge with and into LSEPO in a reorganisation described in Section 368(a) of the Internal Revenue Cod) in which LSEPO is to be the surviving corporation and is to change its name to Enserch Exploration, Inc. (*Nea EEX') (the ' Preliminary Merger")3
'WHEREAS, as m'further condition to the Mergers, immediately prior to the Effective Time (as defined in Section 2.2 of the Merger Agreement) of the
'Merg rs, subject to the satisfaction or waiver of the conditions set forth in Ard cle VI of this Agreement, the Board of Directors of ENSERCH expects to mak2 a distribution (the ' Distribution *) in accordance with Article 2.38 of .
th2 T: mas Business Corporation Act (the 'TBCA') to the holders of Common Stock cf ENIERCB, par value $4.45 per share (the 'ENSERCH Common Stock"), on a pro rtta basis, of all of the outstanding shares of Common Stock, par value 6.01-per there, of New EEX (the 'New EEX common Stock') then owned by ENSERCH. WHEREAS, the purpose of the Distribution is to make possible the Mergers by div32 ting ENSERCH of all of its shares of New EEX Common Stocks and WHEREAS, this Agreement sets forth or provides for certain agreements among ENSERCH, Bolding Company, EEX and LSEPO h consideration of the separation of th3 ownership of New EEX. NOW, THEREFORE,'in consideration of the premises, and of the respective
- r:prssentations, warranties, covenants and agreements set forth herein the -
parties hereto hereby agree as follows: - ARTICLE I . -F Definitions
~ Stetion 1.l Definitions,
~
j (a) Terms Defined by Reference to Merger Agreement. The following terms are difinto in the Merger Agreement and are used herein with the same meanings Environmental claims ' Exchange Act-Governmental Authority M;terial Contract Srcurities Act I-A-1 , i I l l 1 l l . I t l 4 l 1
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r . i t l ((1))FINEDGal!4431.EXA]00002.FIF ' PAG 16-SEP 1996 02:15' EDG 00-006-0000 00:00 '3LKs 00-000-0000 00:00 ((1))Tuc/Easerch Fora 3-4 3. 2. Donas11sy (212) 341 7777 A0G 3.4.1.p04
.(PAGE)-
j (b) As used in this Agreement, the following terms shall have the following sezzings:
" Affiliate" means any Person that, directly or indirectly, controls, or is owstrelled by or under common control with, another Person. Por the purposes i l of this definition, " control' (including the terms
- controlled by" or "under !
comm:n control with"), as used with respect to any Person, means the power to l dirset or cause the direction of the management and policies of such Person, ! idirictly or indirectly, whether through the ownership of voting securities or i by ctntract or otherwise. Without limiting the generality of the foregoing, a 'j Subsidiary of a Person is an Affiliate of that Person. 1 "D%zeges" shall have the meaning set forth in Section 7.l(a).
' Distribution Effective Time" shall have the meaning set forth in s'ection 2.S. l
' Documents" shall have the meaning' set forth in Section 7.l(a).
*EEX Companies" means EEX and its Subsidiaries.
i.
*EN2ERCE Companies' shall mean ENSERCE and its Subsidiaries.(other than EEX Compinies and LSEPO).
*Iolding Company Parties' means Bolding Company and ENSERCE together.
'Indianified Party" shall have the meaning set forth in Section 7.3(a).
" Indemnifying Party' shall have the meaning set forth in Section 7.3(a). )
l *Iniurance Program
- shall have the meaning set forth in Section 2.3(e)(i). i
*Mirger Parties" means EEX Companies and LSEPO.
Psrron" means any individual, sole proprietorship, partnership, joint ventura, trust, unincorporated organization, association, limited liability com pt:y, corporation, company, ' institution, entity, party, or Governmental -
Audirity.
*Prczy/ Registration Statement" shall have the meaning set forth in Section I l 6.4. '
*ascard Date" shall have the meaning set forth in Section 2.4 hereof.
l 'fEC8 seams Securities and Exchange Commission.
*fuhridiary" of a Person means a Person of which more than fifty percent of j th2 outstanding equity interests with ordinary voting power are owned,
'directly or through one or more intermediaries,' by the first Person.
"Trx Allocation Agreement' shall have the meaning set forth in Section 3.1. i
*Ttz Assurance Agreement' shall have the meaning' set forth in Section 3.1. -
! ' Third Party Clain" shall have the meaning set forth in Section 7.3(a).
' 'Trinsfer Agent" shall mean Barris Trust company of New York, transfer agent
'for ENSERCE Common Stock, which has been appointed by ENSERCE to distribute ths Nsw EEX common Stock in the Distribution.
I-A-2 l l (- l- I a I l l l r b I i e i i t-i
PAG: 16 5t7 1996 03:09 EDG: 09-000-0000 00:00 BLKi 00-600 0000 00:00 l ((1] )) TINEDG e [14433. EXA] 00003. 1] Tue/Eas:rch Firs 8 4 PIP 3. 2. Donne 11ry (212) 341-7777 A0G 3.4.1,p04 (PACE)
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ARTICLE II Mechanics of Distribution S ction 2.1 Terms of Preliminary Merger. Th3 Preliminary Merger will be effected pursuant to the terms of an (gr:ement and plan of merger to be entered into among EEX and LSEPC in cccardance win the terms hereof and the TBCA. Srction 2.2 Allocation of Assets and Liabilities. WhIn the Preliminary Merger takes effect under the TBCA, all of the assets tnd liabilities of the Merger Parties shall be allocated to and vested in New EEX ca the surviving corporation of the Preliminary Merger. Ecction 2.) Transition Matters. It is the intention of the parties to separate the operations of the ENSERCH Comp nies and the Merger Partles as of the Distribution Effective Time. To this (nd, the ENSERCH Companies and the Merger Parties will take all commercially reasonable steps to ef fectuate such separation, including the trr ination of all contractual obligations, services, guarantees and other fincncial accommodations between the parties in accordance with the terms thir of unless the continuation of such arrangements are approved by Bolding Complay. Until such separation is effectuated, the parties agree as follows: (a) Contracts Contracts in existence between any of the Merger Parties and any of the ENfERCE Companies at the Dittribution Effective Time will continue in ccc2rsance with their terms, subject to amendment or termination to the extent provided therein or as otherwise may occur in accordance with their terms. (b) Services Services to the Merger Parties as have historically been provided by the ENSERCH Companies to the Merger Parties shall be sub3ect to continuation, r;vicion or termination in the discretion of each of the applicable ENSERCE Companies and Merger Parties. (c) Guaranties Eur:ty and performance bonds and other guaranties executed by any of the EN'ERCE Companies on behalf of any of the Merger Parties shall continue in (f fect to de extent the terms thereof are applicable and enforceable and may (thirwise be amended, modified or terminated in the discretion of each of the ENIERCH Companies and the Merger Parties. (d) Employee Benefit Plans Employee benefit plens sponsored by any of the ENSERCH Companies shall be crendid, to the extent necessary, to provide for the transfer of plan assets end liabilities with respect to transferred participants from such plans to airilcr plan. to be adopted by the Merger Parties. Nothing in this Agreement th:11 be construed to affect the right of the Merger Parties to modify, amend er ttrainate any employee benefit plan adopted by the Merger Parties. (a) Insurance Claims (i) Insurance. EN$ERCH has maintained an insurance program which includes covsrage for EEX and LSEPO, their respective Subsidiaries and predecessor companies and their respective officers, directors, employees and agents (* Insurance Program"). At the Distribution Effective Time, ENSET P shall assign to New EEX all rights to payments for claims covered by tLe Inrurance Program insofar as such payments relate to periods prior to the Distribution Effective Time. Without the prior written consent of New EEX, both prior to and after the Distribution Effective Time, ENSERCE will take no Ection that could adversely I-A-3 I
PaGs 19 8t7-1996 19:06 EDCs 00-000 0000 00:00 BIX: 00 060 0000 00:00 I (lll l FIJEDG a [14433.EXA) 00004. 1})Tuc/Ensirch Fire 8 PIP 4 1. 2. Donn:11ry (212) 341 7777 A0G 3.4.1.p04 I (PAGE) affret'the coverage provided by the Insurance Program nor will ENSERCH fail to cet with knowledge that such failure could adversely affect the coverage prrvided by the Insurance Program. New EEX shall be responsible for tequiring such insurance coverage as it deems necessary for periods after ths Distribution Effective Time. ENSERCR.shall cooperate wi d EEX in an i erdIrly transfer of responsibility for acquiring such insurance. 1 1
'(ii) Claims. New EEX shall be solely responsible for administering claims i trising under the Insurance Program. If a claim is reasonably anticipated !
to 11volve liability in an amount greater than $250,000 or if such claim is litigated, New EEX shall notify ENSERCE in writing of such claim or litigation. i (iii) Additional Premiums. Premiums for portions of the Insurance Prograa era adjusted af ter the termination of the policy period. If an adjustman, ; is required, New EMX will prumptly reimburse ENSERCE for any additional d premiums which result from EEX, LSEPO and their subsidiaries and predecessor companies being covered under the Insurance Program and ENSERCH thall promptly pay New EEX any return premium which results from EEX, LSEPO ' Cnd their subsidiaries and predecessor companies being covered under the Iniurance Program. Ocetion 2.4 Mechanics of Distribution. Th3 Distribution shall be effected by the distribution to holders of record of ENSERCH Common Stock, as of the close of the stock transfer books on the . r3cIrd date designated by or pursuant to the authorization of the Board of f Dir1ctars of ENSERCE (the ' Record Date'), of certificates representing the number of shares of New EEX Common Stock owned by ENSERCE at the Distribution Ef fictive Time divided by the number of shares of ENSERCE Common Stock outatnading at the Record Date. No certificate or scrip representing frretional shares of New EEX Common Stock shall be issued as part of D12tribution and in lieu of receiving fractional shares, each holder of i ENSERCH Common Stock who would otherwise be entitled to receive a fractional ; thira cf New EEX Common Stock pursuant to the Distribution will receive cash ,
'frr Euch fractional share. ENSERCE shall instruct the Transfer Agent to d;tarmine the number of whole shares and fractional shares of New EEX Common .
Stick cllocable to each holder of record of ENSERCE Common Stock on the Record Date, to aggregate all such fractional shares into whole shares and to sell . th3 whnle shares obtained thezeby in the open market at then prevailing prices !
-en beh lf of holders who otherwise would be entitled to receive fractional ;
th2re interests and to distribute to each such holder such holder's ratable chir 3 sf the total proceeds of such sale, after making appropriate deductions cf th3 amount required for Pederal tax withholding purposes and after i (educting any applicable transfer taxes. ENSERCE shall bear the costs of i commissions incurred in connection with such sales. Section 2.5 Timing of Distribution. Prirr to the Distribution Effective Time, subject to the satisfaction or criv:r of the conditions set forth in Article VI, the Board of Directors of E*SERCE shall formally declare the Distribution and pay it by delivery of
.c;rtificates for New EEX Common Stock to the Transfer Agent for delivery to th3 h lders entitled thereto. The Distribution shall be deemed to be effective upIn artification by ENSERCE to the Transfer Agent that the Distribution has born d:clared-and Oat the Transfer Agent is authorized to proceed with the '
distribution of New EEX Common Stock, which notification ENSERCH agrees to d:livsr promptly following such declarations (the " Distribution Effective Tin 3'). ARTICLE III Tax Agreements. . 2 action 3.1 Tax Matters. Prior to the Distribution Effective Time, the parties hereto shall execute i cid daliver (1) an Agreement relating to past and future tax sharing and ; c:rtain issues associated therewith substantially in the form attached to the i Margar Agreement as Exhibit B (the ' Tax Allocation Agreement") and (ii) an , Agreencnt containing covenants intended to protect the tax-free status of the Distribution substantially in the form attached to the Merger Agreement as Exhibit C (the " Tax Assurance Agreement'). I-A-4 l r I l
l [11])FINEDGs[14413.EXA]00005. PIP PAGs 16 SEP 1996 02:16 EDGs 00-000-0000 00:00 BLK 00 000-0000 00,00 Ill))Tuc/ Ens;rch Fir 3 S-4 3. 3. Donailliy (212) 341-7777 A0G 3.4.1,p04 (PAGE) ARTICLE IV Representations and Warranties SIction 4.1 Representations and Warranties of ENSERCH. -- -- ENSERCH represents and warrants to the Merger Parties as follows: (c) Organization ENSERCH is a corporation duly organized, validly existing and in good stindi;g under the laws of the State of Texas and has all requisite corporate pwir cnd authority to own and operate its properties and to carry on its pusin ss as now being conducted. (b) Authority EN2ERCH has all requisite power and authority to execute this Agreement and ta ciniummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby h173 been duly authorized by all necessary action on the part of ENSERCH. This Agr:em;nt has been duly executed and delivered by ENSERCH and constitutes a leg:1, valid and binding obligation of ENSERCE enforceable against it in Cecard;nce with its terms, except as may be limited by applicable bankruptcy, incolv:ncy, reorganization, fraudulent conveyance or other similar laws effecting the enforcement of creditors' rights generally, and except that the Oviilcbility of equitable remedies, including specific performance, may be rubj;ct to the discretion of any court before which any proceedings may be brrught. (c) Eo Conflict Th2 czecution, delivery and perf ormance by ENSERCH of this Agreement will tot cratravene, violate, result in a breach of or constitute a default under (1) cny provision of applicable law or of the articles of incorporation or by-1Cr3 ef ENSERCE, (ii) any judgment, order, decree, statute, law, ordinance, rulo er regulation applicable to ENSERCH or any of its properties or assets, or (iii) any Material contract to Which ENSEECH is a party or by which ENSERCH cr (my of its properties is bound. (d) Approvals ND consent, approval order, authorization of, or registration, declaration er filing with, any Governmental Authority is required in connection with the 0; king or performance by ENSERCH of this Agreement, subject to compliance with cpplic ble securities laws. SIction 4.2 Representations and Warranties of LSEPO. LSEPO represents and warrants to ENSERCE and Holding Company as follows: (c) Organisation LSEPO is a corporation duly organized, validly existing and in good standing undIr the laws of the State of Texas and has all requisite corporate power and cuthirity to own and operate its properties and to carry on its business as now being conducted. (b) Authority LSEPO has all requisite power and authority to execute this Agreement and to crniummate the transactions contemplated bereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby hiv3 been duly authorized by all necessary action on the part of LSEPO. This Agriement has been duly executed and delivered by LSEPO and constitutes a legtl, valid and binding obligation of LSEPO enforceable against it in ecc:rdsnee with its terms, except as may be limited by applicable bankruptcy, in7olv:ncy, reorganization, fraudulent conveyance or other similar laws aff4cting the enforcement of creditors' I-A-5 i i I 4 f (
{ [1])TINEDGi[1443b EzA)00006.FIF FAGS 15 SE7 1996 03:16 EDGs 00-000 0000 00:00 But 00 000 0000 00:40 ((1]Jyuc/Easerch FIra 8 4 3. R. Donnelliy (212) 341-7777 A0G 3.4.1,p04 (PAGE) rights generally, and except that the availability of equitable remedies, including specific performance, may be subject to the discretion of any court befora which any proceedings may be brought. (c) to Conflict , Th3 caecution, delivery and performance by LSEPO of this Agreement will not ctatr:vene, violste, result in a breach of or constitute a default under (1) cty prrvision of applicable law or of the articles of incorporation or by-laws af LSEPO or (ii) any judgment, order, decree, statute, law, ordinance, rule or rIguletion applicable to LSEPO or any of its properties or assets, or (iii) rny Material Contract to which LSEPO is a party or by which LSEPO or any of its prrperties is bound. (d) Approvals no consent, approval order, authorization of, or registration, declaration er filing with, any Governmental Authority is required in connection with the taking or performance by LSEPO of this Agreement, subject to compliance with gpplicable securities laws. Srction 4.3 Representations and Warranties of EEX. EEX represents and warrants to ENSERCE and Bolding Company as follows: (c) Organization EEX is a corporation duly organized, validly existing and in good standing undir the laws of the State of Texas and has all requisite corporate power and cuch3rity to own and operate its properties and to carry on its business as gow being conducted. (b) Authority EEX has all requisite power and authority to execute this Agreement and to
$3ncummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby hava been duly authorized by all necessary action on the part of EEX, subject ts (~h'reholder approval. This Agreement has been duly executed and delivered by EEX and constitutes a legal, valid and binding obligation of EEX caf tre-Table against it in accordance with its terms, except as may be limited by cpplicable bankruptcy,' insolvency, reorganization, fraudulent conveyance or s2ar gimilar laws af f ecting the enf orcement of creditors' rights generally, cnd czcept that the availability of equitable remedies, including specific performance, may be subject to the discretion of any court before which any prse s'ings may be brought.
(c) to Conflict Th3 czecution, delivery and performance by EEX of this Agreement will not co?.trsvene, violate, result in a breach of or constitute a def ault under (i) cry pr: vision of applicable law or of the articles of incorporation or by-laws cf EEX or (ii) any judgment, order, decree, statute, law, ordinance, rule or , r:gulation applicable to EEX or any of its properties or assets, or (iii) any Matsriel contract to which EEX is a party or by which EEX or any of its properties is bound. (d) Approvals Na consent, approval order, authorization of, or registration, declaration or filing with, any Governmental Authority is required in connection with the c: king or performance by EEX of this Agreement, s:ction 4,4 Representations and Warranties of Bolding Company. Holding Company represents and warrants to the other parties bereto as folloras (c) Organization Holding Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has all requisite csrpor:te power and authority to perform this Agreement. I-A-6 I l 1 i I
PAGs 19 8t7 1996 10:08 EDGs 00-000 9000 00:00 SLKs 00-800-0000 00:00 l[1))TINEDGsl14433.EXA]D0007.FIP [1))Tue/ Ens _rch F;ra 8-4 1. 3. Donnell:y (212) 341-7777 A0G 3.4.1,p04 (PAGE) (b) Authority , Bolding Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated bereby. The
)j czzcution and delivery of this Agreement and the consummation of the j trnn:Sctions contemplated bereby have been duly authorised by all necessary I corporate action on the part of Bolding Company. This Agreement has been duly CC;cuted and delivered by Bolding Company and constitutes a legal, valid and binding obligation of Holding Company enforceable against it in accordance tith its terms, except as may be limited by applicable bankruptcy, insolvency, reorginization, fraudulent conveyance or other similar laws affecting the )
(nf arcement of creditors' rights generally, and except that the availability ; of equitable remedies, including specific performance, may be subject to the , discr tion of any court before which any proceedings may be brought. ! (c) No Conflict ) Th> esecution, delivery and performanco by Bolding Company of this Agreement I will tot contravene, violate, result in a breach of or constitute a default ' undir (i) any provision of applicable law or of the articles of incorporation er by laws of Holding Company, (ii) any judgment, order, decree, statute, law, crdiurnce, ru?e or regulation applicable to Bolding Company or any of its 1 prfperties or assets, or (iii) any Material Contract to which Bolding Company ! is e party or by which Holding Company or any of its properties is bound. I (d) Approvals No consent, a er filing with,pproval order, authorization any Gov;znmental Authority isof, or registration, requirea declaration in connection with the making or performance c~y Bolding Company of this Agreement, subject to compliance with applicable securities laws. ARTICLE V Certain Covenants and Agreements C;ction 5.1 Expenses. Thi reasonable expenses incurred by the Merger Parties in connection with th3 Preliminary Merger and the Discribution will be paid by ENSERCE. Siction 5.2 Further Actions. Th2 parties agree that if after the Distribution Effective Time, either party holds books, records or other essets which by the terms hereof were Lntrnded to be assigned, transferred and delivered to, or retained by, the ethrr party, such party shall promptly assign, transfer and deliver or cause to b2 assigned, transferred and delivered such books, records or other assets to the other party. Without limitation of the foregoing, ENSERCH shall deliver to 0c7 EEX all books, records and documents in the possession or control of any ENSERCH Company relating to the business of EEK or LSIPO that New EEX may l1 r:teinably request. 2:ction 5.3 Use of Name. Th2 parties hereto agree that each of ENSERCB, New EEX, and each of their r::p ctive Affiliates shall have the right to use the name 'Enserch" (however c pitclised) in its corporate name and in its activities without payment of tny royalty or other remuneration to any other party hereto or any Affiliate of cny other party heretos provided that no party shall grant to any Person nit cn Affiliate a license or other right to use, or otherwise allow such persin to use, the name Enserch. S;ction 5.4 Certain Covenants. LSEPO acknowledges that it will be allocated and vested in the properties tnd cssets of EEX in the Preliminary Merger without any representation or wirrcnty, in *as is" condition and on a "where is' basis. I-A-7 1 l l l l l I I i i
I !!!1]TINEDGa[14433.EXA]D0008. PIP FACs 19-5EP-1996 19:08 EDGi 00-000-0000 00:00 BLKs 00-000 0000 00:00 ((1))tue/ Ens:rch Mr3 8 4 2. R. Dona 311sy (212) 341 7777 A0G 3.4.1.p04 (PAGE) ARTICLE VI Conditions Thi obligations of ENSERCH and New EEX to consummate the Distribution shall b3 cubject to the f ulfillment of each of the following conditions, S:ction 6.1 Tax Allocation Agreement and Tax Assurance Agreement. Thi Tax Allocation Agreement shall have been executed and delivered by each cf E!SERCB, New EEX and TUC, and the Tax Assurance Agreement shall have been cz:cuted and delivered by each of ENSERCH and New EEX. SIction 6.2 Certain Transsetions. Prior to the Distribution Ef fective Time, the Preliminary Merger shall have beta consummated. 8:ction 6.3 Conditions to Mergers Satisfied. E2ch condition to the closing of the Mergers set forth in Article IX of the MargIr Agreement, other than those conditions relating to the Distribution or thrce conditions that by their nature are designed to be performed on the date of th3 closing of the Mergers, shall have been satisfied or waived. 5:ction 6.4 Registration of New EEX Shares. Any registration statement and proxy statement (together, a
'Pr7xy/ Registration Statement") flled by EEX and New EEX with the SEC pursuant to tha securities Act, or the Exchange Act, in connection with the issuance of N;7 EEX Common Stock in the Distribution shall have become effective under the C::curities Act or Exchange Act, as applicable, and shall not be the subject of (my ctop order or proceeding by the SEC seeking a stop order.
S:ction 6.5 Regulatory Approvals. r4 temporary restraining order, preliminary or permanent injunction or other erdir issued by any court of competent jurisdiction or other legal restraint er pr:hibition preventing the consummation of the Distribution shall be in cff;ct (each party agreeing to use all reasonable efforts to have any such crd:r reversed or injunction lifted). ARTICLE VII Indemnification Srction 7.1 General ini(a) Fromand emnify andbold after the Distribution harmless Effective the Bolding CompanyTime, New EEX Parties agrees and their to respective Cir:ctors, 4 eg;intt any and all losses, costs and damages (collectively *Damagesofficers, ), asemployees, affiliates, agents and assigns, as applicable, incurred, for or on account of or arising from or in connection with or cth3rwise with respect ton (i) any breach of or any inaccuracy in any representation or warranty of th) EEX Companies contained in this Agreement or the Tax Allocation Agr:ements (ii) any breach or nonperformance of any covenant of the Merger Parties er New EEX contained in this Agreement or as specifically provided for in th2 Tax Allocation Agreement whether to be performed before or after the Distribution Effective Times 1-A-8 i
a ((1 FAG 19 8EF-1996 19:08 EDC: 00-000 0006 00:00 Blas 00 000-0000 00:00 [ [1))ruc/
} } F7KEDG Ens;rch s !!4433.EXA) 00009. FIF Firs 8-4 3. R. Donnelliy (212) 341 7777 A0G 3.4.1,p04 (PAGE)
(iii) the assets owned by the EEX Companies or New EEX (including Damages r: lated thereto arising prior to or after the Distribution Effective Time), c.nd activities conducted by the EEX Companies or New EEX, at or prior to thi Distribution Ef fective Time except as specifically provided for in the T:x Allocation Agreements (iv) any regulatory or compliance violation, or other liability, that crises out of events, actions or omissions to act of any nature by any of ths EEX Companies or New EEX relating to the Preliminary Merger, this Agreement or the Tax Allocation Agreement or the transactions provided for th: rein or occurring before or after the Distribution Effective Times (v) to the extant enforceable, any untrue statement or alleged untrue etctement of any material f act contained in the Prozy/ Registration Statement, or any omission or alleged omission to state therein a material fret required to be stated therein or necessary to make the statements th1 rein, in light of the circumstances under which they were made, not nialeading; but only in each case to the extent based upn information with rcipect to the EEX Companies or New EEX furnished in writing by or on bihalf of the Merger Parties or New EEX, expressly for use in the Prozy/ Registration Statement; (vi) any Environmental claim with respect to any facility, site, location er business (whether past or present and whether active or inactive) owned, cperated or leased by any of the EEX Companies or New EEX before or after d3 Distribution Effective Time; (vii) any outstanding surety or performance bond for the benefit of the EEX Companies or New EEX that has been guaranteed by ENSERCE to the extent ENSERCH has not been released therefrom It being understood that ENSERCH will remain liable for Damages caused by actions of LSEPO prior to the Distribution Effective Time with regard to thi matters covered by clauses (1), (iii), (iv), (v) and (vi) above and t;htll retain all right and title to any claim of LSEPO relating to the matters covered by such clauses arising out of an action occurring prior to th) Distribution Effective Time and that the indamnities for Damages with r2Jpect to New EEX contained herein do not apply to Damages with respect to LCEPO occurring prior to the Distribution Effective Time (b) ENSERCH agrees to indemnify and hold harmless the Merger Parties and New EEX cnd their respective directors, officers, employees, affiliates, agents cid essigns, as applicable, against any and all Losses, as incurred, for or on eccount of or aris h g from or in connection with or otherwise with respect to (1) any breach of or inaccuracy in any representation or warranty of EN;ERCH or Bolding Company contained in any of this Agreement or ne Tax Allocation Agreements (ii) any breach or nonperformance of any covenant of ( A) Holding Company cintained in this Agreement or as specifically provided for in the Tax Allocation Agreement whether to be performed Mfore or after the Dirtribution Effective Time or (B) ENSERCH or any of its post Distribution rubsidiaries contained in this Agreement or as specifically provided for in th) Tax Allocation Agreement to be performed after the Distribution Effective Times (iii) except for Losses as to which any of the Holding Company Parties cra entitled to indemnification pursuant to the terms of Section 7.l(a) h!reof, any liability arising frsm the assets of ENSERCH subsequent to the Margeras and (iv) to the extent enforceable, any untrue statement or alleged untrue statement of any material f act contalned in the Proxy / Registration ! Stetement, or any omission or alleged omission to state therein a material l fret required to be stated therein or necessary to make the statements l thIrein, in light of the circumstances under which they were made, not ' aisleading; but only in each case to the extent based upon information with respect to the Holding Company Parties furnished in writing by or on behalf l of Holding Company or any of the ENSERCH Companies, expressly for use in ths Proxy / Registration Statement; provided, that (i) New EEX shall not be obligated to indemnify any Holding Compiny Party or other Person hereunder with respect to any such matter to the cztent that the Damages were caused by any action by any I A-9
)
FACs 16 SEP 1996 02:17 EDGs 00 000-0000 00:00 BLKs 00 000-0000 00:00 [1))yuc/Ensach!)
] fIREDGa[14433.EXA]O9019.FIP Fira 5 4 1. R. Donne 11ty (212) 341-7777 A0G 3.4.1,p04 (PAGE>
ENSERCH Company, other than Damages resulting from ENSERCB's ownership of the commo3 stock of EEX or any result or effect thereoft and (ii) ENSERCH shall Ett be obligated to indemnify the Merger Parties or New EEX or any other P r::a hereunder with respect to any such matter to the extent that the D3 2gis.were caused by,any action by the EEX Companies or New EEX. Ecction 7.2 Termination of Indemnification. Tht obligations to indemnify and hold harmless any party (i) pursuant to (i) and (b)(1) shall terminate on the second annlversary of the S ctitns dits 7.1(a)i) herwof, (i pursuant to Section 7.1(a)(v) and (b)(iv) shall terminate on th) first anniversary of the date hereof and (iii) pursuant to the other citus2s of Section 7.l(a), and (b) shall not terminates provided, however, th t Euch obligations to indemnify and hold harmless shall not terminate with rocpect to any item as to which the person to be indemnified shall have, befers the expiration of the applicable period, previously made a claim by (clivary of a notice (pursuant to section 7.3 hereof in the case of Third Party Claims) specifically identifying such claim to the party providing the izdemnification. S:ction 7.3 Procedure. (a) Any party seeking any indemnification provided for under this Agreement (th] ' Indemnified Party') in respect of, arising out of or involving a claim mad 7 by any person against the Indemnified Party (a Third Party Claim'), shall notify in writing (and to the extent received,' deliver copies of all ril ted notices and documents (including court papers) to the party from whom indemnification is sought (the " Indemnifying Party') of the Third Party Claim within fifteen business days after receipt by such Indemnified Party of written notice of the Third Party Claims provided, however, that failure to giva cuch notification shall not affect the indemnification provided hereunder Lxc:pt to the extent the Indemnifying Party shall have been actually Pr$1udiced as a result of such failure (except that the Indemnifying Party t h:11 not be liable for any expenses incurred during the period in which the i Indemnified Party failed to give such notice if such Indemnified Party failed l to give such notice within the allotted fifteen business days). Thereafter, I th7 Indemnified Party shall deliver to the Indemnifying Party, within five '
'buriness days' time after the Indemnified Party's receipt thereof, copies of all ether notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Clalm.
(b) If a Third Party Claim is made against an Indemnified Party, the Indamnifying Party shall be entitled to participate in the defense thereof rnd, if it so chooses (except as provided in Section 7.3(c)), to assume the i difence thereof with experienced counsel selected by the Indemnifying Party cad IIasonably satisf actory to the Indemnified Party. Should the Indemnifying P rty so elect to assume the defense of a Third Party Claim, the Indemnifying P rty shall not be liable to the Indemnified Party for any legal expenses (ccc:pt as provided below and in Section 7.3(c)) subsequently ancurred by the Indemnified Party in connection with the defense thereof. Notwithstanding the ' Indemnifying Party's election to assume the defense of such Third Party claim, ' th) Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such action at its own expense; provided, , howIver, that the Indemnifying Party shall bear the reasonable fees, costs, osd expenses of such separate counsel if (i) the use of counsel chosen by the i Indemnifying Party to represent the Indemnified Party would present such c:umac1 with a conflict of interest that would preclude such counsel from 6 2Jprisenting the Indemnified Party pursuant to legal canons of ethics or other tpplicable laws (ii) the Indemnifying Party shall not have employed counsel rsarinably satisfactory to the Indemnified Party to represent it within 30 dry 3 citer notice to ne Indemnifying Party of the institution of such Third PIrty Claim or (iii) the Indemnifying Party shall authorize the Indemnified P1rty to employ separate counsel at the Indemnifying Party's expense. If the Indemnifying Party chooses to defend or prosecute a Third Party Claim, each p1rty hereto shall cooperate in the defense or prosecution thereof. Such coop; ration shall include the retention and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information , thich are reasonably relevant to such Third Party claim, and making employees cv211 ble (subject to reimbursement by the Indemnifying Party of actual expinres incurred therewith) on a mutually convenient basis to provide soditiinal information and explanation of any material provided hereunder. If thi Indemnifying Party chooses to defend or prosecute any Third Party Claim, th3 Indemnifled Party shall agree to any settlement, compromise or discharge of euch Third Party Claim which the Indemnifying Party may recommend and which by its terms I-A-10 I
FACs 16 SEP-1996 02:17 EDGi 00 000 0000 00:00 SLKs 00 000 0000 00:00 ( { 1))] ((1] Tue/ FINEDG Ins;rch s [144 33. EXA]Fir] 00011.717 8 4 8. 8. Donnellry (212) 341-7777 A0G 3.4.1,p04 (PAGE) I tblig:tes the Indemnifying Party to pay the full amount of the liability in i conn'ction with such Taira Party claim and releases the Indemnified Party complatal in connection with such Third Party Claim. Whether or not the Indamnif y ng Party shall have assumed the def ense of a Third Party Claim, so Itag ca t e Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party with respect to the applicable claims, the l Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party claim without the Indemnifying P:rty's prior written consent, which consent may not be withheld unless, in th) Indemnifying Party's good-faith judgment, such settlement, compromises or 01 ch;rge is unreasonable in light of such Third Party Claim against, and scfcca:s available to, the Indemnified Party. (c) Notwithstanding anything set forth in section 7.3 to the contrary, in thi ev:nt an Indemnified Party reasonably believes and so notifies the Indemnifying Party in writing that the applicable claim, even if fully indemnified for, is reasonably likely to have a material adverse effect on the ! Indntnified Party's business, financial condition or results of operations, th;n the Indemnify 1cg Party shall not have the right to assume the defense of cuch claim but shall have the right to employ separate counsel and to p;rticipate in the defense of such action at its own expense. In such an ky:nt, the Indemnified Party and its counsel shall consult, wheneves r0crtn:bly practicable, wi d the Indemnifying Party and its counsel with rcipect to the status of the claim .no any related litigation. ARTICLE VIII Nonsolicitation; Proprietary Information l 8:ction 8.1 Nonsolicitation. (c) From and after the Distribution Effective Time, except as required by lem, neither New EEx nor any of its subsidiaries nor any of their respective l rrprc cntatives shall, at any time, make use of, divulge or otherwise i Ci:clsre, directly or indirectly, any trade secret, confidential information cr sth:r proprietary data (including any customer list employee data, record { ce fin 7nclal information constituting a trade secret) concerning the ENSERCH : Compa51os including without limitation, the business or policies of ENSERCH or i cny cf its post Distribution Effective Time Subsidiaries, other than information tnst is an asset of New EEX. i ! (b) rotwithstanding any other provision of this Agreement, it is understood
- i I
and (greed that the remedy of indemnity payments pursuant to Article VI and eth:r remedies at law would be inadequate in the case of any breach of the cov:naTts contained in Section 8.1(a) and that each of Bolding Company and ENSERCH shall be entitled to equitable relief, including the remedy of epecific performance, with respect to any breach or attempted breach of such cov:ntate. ARTICLE Ix Termination, Amendment and Waiver S:ction 9.1 Termination. Citrithstanding anything to the contrary in this Agreement, this Agreement mty b3 terminates and the transactions contemplated hereby abandoned at any time prior to the Distribution Effective Time by ENSERCH in the event the M:rg:r Agreement is terminated by any party thereto in accordance with the l t:rns thereof. 8:ction 9.2 Amendment and Waivers. This Agreement may not be amended except by an instrument in writing signed on bahtlf of each of the parties hereto. By an instrument in writing, the p;rtiss hereto may waive compliance by any other party with any term or provision of this Agreement that such other party was or is obligated to comply with or perform. I A-11 i l l
f- ! ((1)) r!stDG e [144 33.EXA] 00012. PIP PACS 16-82P 1996 02:35 EDC: 00-000-0000 00:00 SLKs 00-000-0600 00:00 ((1)]Tue/tasach Far2 8 4 1. R. Donnelley (212) 341 7777 AOC 3.4.1.p04 (PACE) ! ARTICtE X ( ' General Provisions Srction 1051 Counterparts. l 1 For the convenience of the parties hereto, this Agreement may be esecuted in s orp2rcts counterparts, each such counterpart being deemed to be an original instruzent, and which' counterparts shall together constitute the same Agrtement. Szetion 10.2 Governing Law.
.This Agreement shall be governed by and construed in accordance with the Itw2 of the State of Texas, without reference to its conflicts of law
' principles.
Szetion 10.3 Notices. Any notice, request, instruction or other document to be given bereunder by ray party to any other party aball be in writing and shall be deemed to have boss duly given (i on the first business da cf trtramission if) transmitted by f acsimile,y occurrina (ii) on deon or afbusiness first ter the date day .l occurring on or after the date of delivery if delivered personally or (iii) on j L: th2 first business day following the date of dispatch if dispatche . by Federal ,1 Exprsas or other next-day courier service. All notices hereunder ta all be i , - given cs set forth below, or pursuant to such other instructions as may be . i ossigtated in writing by the party to receive such notices If to any of the
- j. ENSEICE Companies:
I t c/o ENSERCI Corporation ' i 300 South St. Paul t' 'D211as Texas 75201-5598 f Attent1ons william T. Satterwhite,'Esq. Senior Vice-President s General' Counsel i ! .F** (214) 573-3430 l If to any of the Merger Parties e/o Enserch Exploration, Inc. - 6688 N. Central Expressway, Suite 1000 ? l Dallas, Texas 75206-3922 i' i Attention Michael C. Fortado, Esq. i Vice President and General Counsel j Ftzs (214) 890-4709 j I, with a copy to
- Jickson & Walker, L.L.P.
901 Main Street, Suite 6000 Dallas, Texas 75202 Attentions Byron F. Egan, Esq. l Fsxe (214) 953-5822 ,
~
ip I-A-12 l I i i l > 1 i i l f
'i l
. 4 ; i a ! I 1 l~ l
' flll1FINEDC (14433.EXAl'0013. PIP - PACS 16 8EP*1996 03:17 EDC: 00 000-0000 00:00 BLKs 00-000-0000 00:00
((1])?ue/Easisch -Ftra s-4 3. 3. Donne 11sy (312) 341-7777 AOC 3.4.1.p04 (PAGE) If to Holding Companys ! c/o Texas utilities Company l L' ergy Plaza
. 1601 aryan street D211as Texas 75201 Attentionss.Jarrellcibbs rtas (214) 812 1313 with a copy tos l Worsham, Forsythe & Wooldridge, L.L.P.
Erergy Plaza
.1601 aryan St.,'30th rioor Dillas, Texas 75201 Attentions Robert A. Wooldridge, Esq. j l
l FEx: (214) 800-0011 End l' LCBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th street l' N2w York, N.Y. 10019 i l Attentions Douglas W. Rawes, Esq. f -rcas (212) 424-0500 ,
. Srction 10.4 Captions.
All article, section and paragraph captions herein are for convenience of l rtistrace only, do not constitute part of this Agreement and shall not be [ dimmed to limit or otherwise affect any of the provisions bereof. j i l _C.ction 10.5 Assignment.
- Exc:pt as aapressly provided herein, nothing contained in this Agreement is ir, tended to confer on any person or entity other than the parties hereto and i their respective successors and permitted assigns any benefit, rights or .l i
remedies under or by reason of dis Agreement, except that the provisions of ' r Article VIII hereof shall inure to the benefit of de persons referred to i tharcia. Stction 10.6 Survival of Representations. Tha representations and warranties contained in this Agreement shall survive I l th3 Distribution Effective Time. 1 1-A-13 I l l i l l t l i i 4 4 5 0 i j
- FACs 16-stF.1996 03:10 'EDGs 00-000 0000 00:00 BIK: 00 000-0000 00:00 111))FIREDCi[14433.EXA)00014.FIF l1))Fuc/Emairch Ptra 3-4 - R. 1. Donn1111y- (212) 341 7771 AOC 3.4.1,p04 j (FACE) i In Witness whereof, this Distribution Agreement has been duly executed and ,
l d211varad by the duly authorized officers of the parties hereto as of the date r ( -' - first written above. ENSERCH Corporation --- - - - -
- Bye- ,
.utmes -+
Titles 'i ENSERCE Esploration, Inc.
}
l Eyl , ?'l ,. ! N.f ma s .
' Titles ;
[- l 1,ona Star Energy Plant Operations, h ! - IEc.
-sy N1wa s Titles.
t
' TUC Boloing Company )
e l Sys !' rame i Titles i I A 14 k i
.i I
't f
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r I i [l1))FINEDCi[14433.EX3]00001.FIF PAC: 19-sEF-1996 19:09 EDC 00-000-0000 00:08 StK 00-000-0000 00:00 I ((1))Tue/Enserch Form S-4 3. 2. Donnelley (212) 341-7777 A0G 3.4.1,p03 j (PAGE) EXHIBIT B TO ANNEX I TAX ALLOCATION AGREEMENT TAX ALLOCATION AGREEMENT (the " Agreement") dated as of , 1996, among ENSERCH Corporation, a Texas corporation ("ENSERCE*), Enserch Exploration, Inc., a Texas corporation ("New EEX') formerly named Lone Star Energy Plant ,
- Optrations, Inc. ('LSEPO*), and Texas Utilities Company, a Texas corporation l l ( TUC"). l WHEREAS, ENSERCH is currently the common arent of an affilluted group of !
corpor tions (the *016 ENSERCH Group") with n the meaning of Section 1502 of l th2 Internal Revenue Code of 1986, as amended (the ' Code") filing conIolidated, combined or unitary income tax returns (' Consolidated Returns"), purtuint to which ENSERCH and one or more other members of the affiliated Group pay Taxes (as defined herein) on a consolidated basis (" Consolidated T:xas"); I WHEREAS, ENSERCH, TUC, and TUC Holding Company, a Texas corporation owned fifty percent (50%) by TUC and fifty percent (50%) by ENSERCH (" Holding , Comp;ny'), have entered into an amended and restated agreement and plan of 1 mergir dated as of April 13, 1996 (the 'EC/TUC Plan of Merger") providing for, j cmong other things, the merger of a wholly-owned subsidiary of Holding Company , tith End into TUC and the merger of a separate wholly-owned skbsidiary of j ! Holding Company with and into ENSERCH (collectively, the 'EC/TUC Merger"); WHEREAS, on or about , Enserch Exploration, Inc., a Texas corporation 1c ("EEX') has merged into LSEPO (the " Preliminary Merger'), which merger was structured to be a tax-free reorganization under Section 368(a) of the Code in i thich LSEPO changed its name to Enserch Exploration, Inc.; ! WHEREAS, ENSERCH plans to distribute all of its stock of New EEX to its th rtholders (the " Distribution") in a transaction intended to qualify as a j t:x-free spin-of f under Seccion 3 55 of the Code, pursuant to a distrik tion j (gr:ement among ENSERCH, EEX, LSEPO and Holding Company (the " Distribution Agr:ement'); WHEREAS on the begtnning of the first da after the date on which the i i Distributdon occurs (the " Distribution Date{), New EEX and its subsidiaries ' (crl1 ctively, the 'New EEX Group") will cease to be members of the Old l ENiERCH Group; WHEREAS, ENSERCH and New EEX desire to allocate the liability for the Taxes of members of the Old ENSERCH Group for any Tax Period (incluMag short Tax P2riods and any portion of any Tax Period) which period (or portion) ends on er before the Distribution Date (a " Pre-Distribud on Tax Period") among the members of the Old ENSERCH Group in a manner consistent with the various tax milocation agreements and practices of the Old ENSERCH Group as in effect on j ( th3 Distribution Date, and to provide for certain other Tax-related matters; j NOW, THEREFORE, in consideration of the mutual covenants contained herein, tha parties hereto agree as follows. ARTICLE I certain Definitions Tha following terms used herein shall have the meanings set forth below (such terms used herein sball have the meanings set forth below (such terms to l l be (quilly applicable to the singular and plural forms of the terms defined or 1 rsistred to below): 1.1. ' Agreement" shall have the meaning set fortb in the recitals to this Agrstment. 2-B-1 l a l
l [1 ) ) TINEDC s l 14433.EX3) 00003. PIP PAC 16-8EP.1996 03:46 EDCs 90 000 0000 00:00 SLK 00-000-0000 00:00 ((1))Tuc/ Ens;rch for] 5-4 1. R. Donnt11ey (212) 341 7777 AOC 3.4.1,p03 (PACE) 1.21. *New EEx* shall have the meaning set forth in the recitals to this Agr:ement. 1.22. "New EEX Group
- shall have the meaning set forth in the recitals to this Agreement.
1.23. "Old ENSERCH Group
- shall have the meaning set forth in the recitals to this Agreement.
1.24. "Other Tazes" meras all Taxes other than Inconie Taxes. 1.25. " Post-Distribution Tax Period" means any Tax Period ending after the Distribution Date. 1.23. " Pre-Distribution Tax Period" shall have the meaning set forth in the r: cit:1s to this Agreement. 1.27. " Proceeding" means any audit or other examination, judicial or cdminictrative proceeding relating to liability for or refu-os or adjustments with K6spect to Other Taxes or Income Taxes. 1.28. " Property Taxes" shall have the meaning set forth in Section 3.2(a)(1) of this Agreement. 1.29. " Refund" means any refund of Income Taxes or other Taxes, including cny r duction in liabilities for such taxes. 1.30. " Tax Assurance Agreement" means that certain Tax Assurance Agreement betwern ENSERCH and New EEX dated as of the date of this Agreement. 1.31. " Tax Period" means any twelve month period which constitutes the t siblo year of a party hereto. 1.32. " Tax Return" means'any report, return, declaration or other infrrmation or filing required to be supplied to any taxing authority or juri:Ciction with respect to Income Taxes or Other Taxes, including, without limitP. tion, any documents with respect to or accompanying payments of cetimated Income Taxes or Other Taxes, or with respect to or accompanying requs2ts for the extension of time in which to file any such report, return, , dLcl retion or other document. 1.33. Taxes" means any and all taxes, levies or other like assessments, charg2s or fees, including, without limitation, any excise, real or personal property, gains, sales, use, license, real estate or personal property trincisr, net worth, stock transfer, paylo11, ad valorem and other govstnmental taxes and any withholding obligation imposed by or payable to the U.S., or any state, county, local or foreign government or subdivision or torney thereof, and any interest (whether paid or received), penalties or cddiM ons to tax attributable thereto. 1.34. " Taxing Authorities" means any governmental authority which imposes, or is responsible for the imposition of, a Taz. 1.33. " Transfer" means any transfer of assets by a merber of the Old ENSERCH Group which occurs to effectuate the Distribution or the EC/TUC Merger and a which may give rise to deferred intercompany gain or gain pursuant to Code J s2ction 311(b). ] 1.36. " Treasury Regulations" mean both the final and temporary Income Tax rtgulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulstions). ; 1.37. "TUC" shall have the meaning set forth in the recitals to this Agreement. 1.38. "TUC Group
- means the consolidated group of which TUC or any successor is ths " common parent" within the meaning of Section 1504 of the Code and the Trstrury Regulations promulgated under Section 1502 of the Code and any Kub2idiary of a member of such consolidated group.
1-2-3 i t
. . . ~ - - , - - .-. . -- - - ... . ~ . . .
((1)lTINEDGel14433.E18]00004.FIF FAC4 16-SEF-1996 02:46 EDGs 00 000-0000 00:00 BLK 00-000-0000 00:00 [Ill)Tuc/Easerch Tora 8-4 3. R. Donas11ey (212) 341-7777 A00 3.4.1,p03 l (PAGE) ARTICLE II , t I- Termination of Prior Tax Sharing Agreements ; 2.1 Termination of Prior Tax Sharing Agreements. This AGREEMENT shall take l i eff&ct on the Distribution Date and shall supersede all other agreements, t'h:th3r or not written, in respect of any Income Taxes or Other Tazes between or tuong any members of the ENSERCH Group, or their respective predecessors or i successors, except to the extent necessary to effectuate sections 4.1, 5.1, 5.2 and 6.1 of tais Agreement. All such replaced agreements shall terminate as : cf ths Distribution Date, and any rights or obligations created thereunder tharsby shall be settled in the normal course. ARTICLE III Return Preparation, Piling and Payment of Taxes 3.1 Control of Tax Matters. (t) Return Preparation and Piling.
-(i) Pre-Distribution Tax Period. New EEX hereby irrevocably designates, and agrees to cause each of its subsidiaries to so designate, ENSERCH as its agent to take any and all actions, necessary or incidental to the przparation of Consolidated Returns and the filing of such Consolidated i R2 turns and claims for RefLnds or forms relating to any Pre-Distribution TIE Periods provided, however, that ENSERCH agrees to consult with New EEX as to the proper treatment of any item or items includible in such Centolidated Return that relates to members of the New EEX Group includible in guch Consolidated Return.
(ii) Separate Company Beturns. Each company that was a member of the Old ENSERCH Group shall be responsible for filing all of its Tax Returns for , ths Tax Period which includes the Distribution Date, other than any = Consolidated Returns. , 3.2 Cooperation and Pecord Retention. (a) New EEX agrees to cooperate with ENSERCH, and will cause each of its sub2idiaries to so cooperate, in a timely manner consistent with existing prtctice in filing any return consent contemplated by this Agreement. New EEX airo agrees to take, and will cause the appropriate subsidiary to take, such e cctitu or cctions as ENSERCH may reasonably request, including but not limited to thi filing of requests for the extension of time within which to file Consolidated Returns, and to cooperate in connection with any refund claim
. with respect to any Pre-Distribution Tax Period. New EEX further agrees to ,
furnish timely and to cause each of its subsidiaries to so furnish, ENSERCH ! with tny and a[1 information reasonably requested by ENSERCH in order to carry
'out the provisions of this Agreement. Without limiting the generality of the forsgoing sentence, New EEX specifically agrees to provide to ENSERCH promptly, but in any event within 10 days of receipt thereof, copies of any correspondence or notices received from the Internal Revenue Service or any .
oth2r Taxing Authority with respect to any Consolidated Return of the Old h ENSERCH Group for a Pze-Distribution Tax Period. e (b) ENSERCH and New EEX shall cooperate fully, as and to the extent' reasonably requested by the other party, in connection with any Proceeding. Buch cooperation shall include the retention and (upon the other party's ; rsqusst) the provision of records and information which are reasonably relevant to any such Proceeding, and making employees available on a mutually conv*nient basis to provide additional information and explanation of any I' material provided hereunder. ENSERCH and New EEX agree (1) to retain all books and records with res pct to Tax matters pertinent to the Old ENSERCH Group and tha New EEX Group relating to any Pre Distribution Tax Period, and to abide by all record retention agreements entered into with any Taxing Authority, and i
-(11) to give the other party reasonable written notice prior to destroying or discerding any such books and records and, if the other party so requests, ENSERCH or New EEX, as the case may be, shall allow the requesting party to taka possession of such books and records. ENSERCH and New EEX furuer I-B-4 l
l i
((1llFINEDGr[14433.EXB}00005.FIF FAG: 16 SEF 3996 02:46 EDG 00-000-0000 00:00 BLK 00-000-0900 00:00 ((llltuc/ Ens rch ForJ S-4 1. R. Donnellry (212) 341-7777 AoG 3.4.1,p03 (PAGE) eckn wledge and agree that any such books and records necessary to establish thi rmount of any loss carried forward or other Tax Return items shall be ratsined until de expiration of the statute of limitations in respect of the y0:r in which such loss or other items are utilized. -. . _ _ _ ARTICLE IV Refunds and Contests 4.1 Refunds of Income Taxes or Other Taxes. The New EEX Group shall be cctitled to all Refunds attributable to the New EEX Group, and ENSERCH shall be entitled to all Refunds attributable to the ENSERCH Group or the Old ENSERCH Group (other than those attributable to the New EEX Group). For this purpose, Refunds attributable to the New EEX Group shall means Refunds dit4rmined pursuant to the prior tax sharing agreement between ENGERCH and EEX, which agreement is attached hereto, and Refunds attributable to the Old ENSERCH Group shall mean Refunds determined pursuant to such tax sharing Cgrrement (other than those attributable to the New EEX Group). A party riesiving a Refund to which another party is entitled pursuant to this AGREEMENT shall ay the amount to which such other party is entitled within tan days after e receipt of the Refund 4.2 Contests. (a) Except as provided below, in the event that any deficiencies or Refund clcies arise with respect to an Income Tax Liability with respect to any Crntclidated Return of the Old ENSERCH Group for a Pre-Distribution Tax P1riod, ENSERCH shall Control, and have the authority to resolve, all procredings with respect thereto; provided, however, that ENSERCH shall allow, to the extent feasible, the participation and consultation of New EEX in conn;ction with any such deflciencies or Refund claims that relate to New EEX. In the event that New EEX believes the resolution of any such issue by ENSERCH to be clearly unfair to New EEX, it may submit the issue to an Independent Accounting Firm for binding arbitration with respect to such issue and the tmount owed by the respective parties hereunder in respect of the issue. New EEX's right to indemnity hereunder shall be conditioned on New EEX's compliaree with this Agreement, except that New EEX shall be required to give n:tice to TUC upon the receipt of oral or written notice by New EEX from any gEvsrnmental authority or agent thereof of an issue that may result in Taxes for which a claim for indemnity from TUC, ENSERCH or New EEX may be made, undIr this Agreement. (b) New EEX and ENSERCH agree to cooperate in all reasonable respects with ralpect to Tar deficiencies or Refund claims described in Section 4.2 of this Agrcement, which cooperation shall include executing and filing such waivers, l con: cats, forms, court petitions, refund claims, complaints, powers of I tttarney and other documents needed from time to time in order to defend, j prozccute or resolve such deficiencies or claims. ARTICLE V Indemnification for Taxes 1 5.1 New EEX Group Income Taxes. The New EEX Group shall pay, and shall l indrmnify and hold the TUC Group harmless against, (i) all Income Tax Licbilities of any member of the New EEX Group for all Ta1 Periods (including l Tax Periods or portions thereof during which any member of the New EEX Group i ecs a member of the Old ENSERCH Group but excluding all Income Tax Liabilities arising from the Distribution as provided for in section 5.3 hereof) and (ii) all Income Tax Liabilities incurred pursuant to Treasury Regulation Section 1.1502-6 or any comparable state, local or other provision providing for esv ral liability as a result of any member of the New EEX Group having been a member of any consolidated, combined, unitary or other group (other than the Old ENSERCH Group and the TUC Group). For purposes of clause (1) of this ecction 5.1, the Income Tax Liabilities of any member or members of the New EEX Group for any Pre-Distribution Tax I-B-5 l' l l 1
1 l l [{!])f!NEDGe[14433.EXa]00006.717 FAG 18 SEP-1996 02:46 EDG 00 000-0000 00:00 BLKs 00 000 0000 00:00 ) ((1))Tue/Easerch Fors S-4 3. 2. Donnellty (212) 341 7777 A0G 3.4.1,p03 (PAGE) l i l P3riod shall be determined pursuant to the prior tax sharing agreement between ENSERCH and EEX, which agreement is attached hereto. 5.2 The ENSERCH Group and TUC Group Income Taxes. ENSERCH shall pay, and chill indemnify and hold the New EEX Group harmless against, (i) all Income T:s Liabilities of any member of the Old ENSERCH Group or the TUC Group (other thin Income Tax Liabilities of any member of the New EEX Group for any Tax l P:riod) but excluding all Income Tax Liabilities arising from the Distribution es previded for in Section 5.3 hereof and (ii) all Income Tax Liabilities incurred pursuant to Treasury Regulation Section 1.1502-6 or any comparable etsta, local or other provision providing for several liability as a result of rny member of the Old ENSERCH Group or the TUC Group (other than any member of thi Caw EEX Group) having been a member of any other consolidated, combined, unitary or other group. For purposes of clause (i) of this section 5.2, the Income Tax Liabilities of any member or members of the Old ENSERCH Group for cny Pre-Distribution Tax Period shall be determined pursuant to the prior tax ch2 ring agreement between ENSERCH and EEX, which agreement is attached hereto. 5.3 Distribution Tax Liabilities. ENSERCH and the New EEX Group shall pay, thxil indemnif y and hold the other harmless f rom and against, any and all lirbility for Taxes that, directly or indirectly, results to any person from tha Distribution (the
- Distribution Tax Liabilities") in excess of their prcportionate share. The proportionate share of ENSERCH shall be thirty-six percJnt (36%) and the proportionate share of the New EEX Group shall be sixty-frur percent (64%). Notwithstanding the foregoing, the New EEX Group shall p:y, end shall indemnify, defend and hold ENSERCH harmless from and against, tny tnd all Distribution Tax Liabilities if the Distribution Tax Liabilities wert the result of a Lreach of the Tax Assurance Agreement by New EEX, and ENlERCH shall pay, and shall indemnify, defend and hold the New EEX Group hirmless from and against, any and all Distribution Tax Liabilities if de Dietribution Tax Liabilities were the result of any of the following events occurring after the Distribution, or the result of a breach of any of the fellowing representations, unless such events or breach have been determined, pur; Lint to an IRS ruling or opinion of mutually satisfactory nationally-r: cognized counsel, to not adversely affect the Distributions (1) the failure of EN!ERCH to continue a significant portion of its historic business and to urs e sipificant portion of its historic assets in a business; (ii) the liquidation or merger of ENSERCH or TUC with or into the Holding Company, and Erlding Company represents that it has no present plan or intention to merge ENSERCH or Holding Company, within the two year period following the Diatribution Date, into any entity that is unaffiliated with Holding Companyl (iii) the acquisition by Holding company or its agents or affiliates of Calding Company common stock from former holders of ENSERCH common stock, oth r than pursuant to TUC's existing, or Holding Company's (as successor),
stock repurchase plan, or any other TUC or Holding Company plan contemplating treultr market purchases, and Holding Company represents that, except to the extant otherwise provided in this (iii), it has no current plan or intention to (cquire, during the six month period following the Distribution Date, Osiding company common stock from the former holders of ENSERCH common stock; or (iv) the approval by Holding Company of the termination, without cause, of tha cperation contracts which comprise the business of Lone Star Energy Plant Op3r;tions, Inc. by the partnershlps that own the cogeneration plants that are l 23 rubject of such operation contracts for so long as Enserch Development ' Corporation is a partner in such partnerships. The determination of whether th2 Distribution Tax Liabilities were the result of any of the above-described brecches shall be definitively determined by a mutually selected Independent Accounting Firm within sixty (60) days of notification of a claim for indImnity hereunder. In the event that Distribution Tax Liabilities were the rseult of both a breach of the Tax Assurance Agreement by New EEX, and any of thm ovents or representations described (1), (ii), (iii) and (iv) of this Siction 5.3, then ENSERCH and the New EEX Group shall each pay their proportionate share, as set forth in this Section 5.3, of ne resulting Distribution Tax Liabilities. 5.4 Other Taxes. (a) Except as otherwise provided in Section 5.3, above, ENSERCE shall cgzinst, all pay liab111 ties for all Other Taxes attributable to the income,and shall indemnify and hold the New EEX Group harmless property or activities of any member of the Old ENSERCH Group or the TUC Group i (odar than, in both cases, a member of the New EEX Group), including all ) OthI Taxes, if any, arising from the Transfer and the Distribution. Except as ) previded in the preceding sentence, the New EEX Group shall pay, and shall I-B-6 l i
((1)]FINEDGa[14413.EXB100007. PIP PAG: 16 SEP-1996 02:47 EDC: 00-000 0000 00:00 31Ks 00-000 0000 00:00 Torn 8-4 3. 3. Donnellty (212) 341 7777 ACG 3.4.1,p03 ((11)Tuc/Enserch (PAGE) indemnify and hold the TUC Group harmless against, all liabilities for all Oth*r Taxes attributable to the income, property or activities of any member of the New EEX Group. (b) To the extent that the Indemnifying Party is required to indemnify cnother party pursuant to this Article V, the indemnifying Party shall pay to thi Indemnified Party, no later than 10 days prior to the due date of de relavant Tax Return or estimated Tax Return or 10 days after the Indemnifying Psrty receives the Indemnified Party's calculations, whichever occurs later, ths tmount that the Indemnifying Party is required to pay the Indemnified Ptrty. The Indemnified Party shall suMit its calculatlons of the amount . required to be paid pursuant to this Article V, showing such calculations in cuf ficient detall so as to permit the Indemnifying Party to understand the calculations. If the Indemnifying Party disagrees with such calculations, it must notify the Indemnified Party of its disagreement in writing within 15 d:ys of receiving such calculations. Any dispute regarding such calculations shall be resolved in accordance with this Agreement. ARTICLE VI General Provisions 6.1. Computations. (a) General. Other than determinations of whether there are any indemnity tbligations under this Agreement, all computations or recomputations of Income T x Liability and all determinations, computations or recomputations of any
- r. mount or any payment (including, but not limited to, computations of the
. cmount of the Income Tax Liability, the amount or effect of any loss, credit er d: duction, the effect of a Pederal statutory Tax rate change for a taxable yacr, and the amount of any interest, penalties or additions imposed with racpect to any Income Tar) with respect to any Consolidated Return shall be priptred by ENSERCH and submitted to New EEX for consultation. Any discqreement as to such computations after submission to New EEX by ENSERCH chill be resolved by a nationally recognized accounting firm, with ex prtise in T x, independent of each of Oe parties hereto. Without limiting the far: going, ENSERCH shall calculate the taxable income of the Old ENSERCH Group in recordance with the existing and historic methodology used by the Old ENSERCH Group in calculating taxable income of the Old ENSERCH Group and in secrrdance with the prior tax sharing agreement between ENSERCH and EEX, a crpy of which is attached hereto.
(b) Excess Foreign Losses. Excess foreign losses in respect of all Pre-Distribution Tax Periods shall be determined in accordance with Treasury Rigulation section 1.1502-9. (c) State Taxes. If there is a proposed refund or proposed deficiency in crnn:ction with any State Tax relating to a Pre-Distribution Period, ne afiscted entity of the Old ENSERCH Group shall be primarily responsible for th2 control and resolutien of any such matter. If the matter relates to a R3 fund, the affected entity shall be entitled to such Refund and if the matter rzletes to a deficiency, n e affected entity shall be liable for such d3ficiency. The affected entity shall inform and keep ENSERCH and New EEX advised of the progress and disposition of any such matter. 6.2. Offsets. No payment shall be required to be made by either party to the other pursuant to this Agreement to the extent that there is an amount then due and psytble under this Agreement to the party that is to make such payment. 6.3. Assignment. N3ither this Agreement nor any of the rights, interest or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or othsrwise by any of the parties without the prior written consent of I-B-7 t l
.1
. . _ _ . . . - . - . _ ~ . - - - _ - ~ . . , - - - _ . . . - ~.m -. _-m.. - .-. --m____~
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g FAG: 16-$t7 1996 02:47 EDG 00-000-0000 00:00 BLK: 00-000 AcG 0000 00:00 3.4.1,p03 ((1]lf1NEDGa[14433.txs]00000.71F Form 8-4 1. R. Donne 11ey (212) 341-7777 s ((!)lTue/gaserch . f. (PAGEs th) other parties. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hsrato and their respective successors and assigns. -- _ _ . . . I 6.4. survival. . . Th2 provisions of this' AGREEMENT shall survive the effective date of the Mergsr and remain in full force until all periods of limitations, including cny estensions or waiver periods, for all Tas Periods of EN3ERCH and New EEX
. Prior to or including the effective date of the Merger have espired. T 1
- 8.5. Notices. ,
Any notices, payments or other comununications required by this Agreement shall be made as provided in the notice section of the Merger Agreements for ho3evtr, copies of such notices, payments or other comununications shall, both NJw EEX and ENSERCH, be sent to the attention of the director of tases. 6.6. Governing Law.
~
This Agreement' ahall be governed by and construed ira accordance with the I laws of the State of Tesas i 6.7. Entire Agreement. i l This Agreement (a) constitutes the entire agreement and supersedes all prior -.; i sgramment and understandings, both written and oral, among the parties with rw pect to the subject matter of this Agreement and (b) is not intended to ' crafsr upon any person other than the parties hereto any rights or remedies. Tha ptrties agree that.to the estent the provisions of any other agreements , snicuted in connection with the Distribution or the Merger are inconsistent ; with the provisions hereof, the provisions of this Agreement shall preva1J., i 6.8. Severability. If any provision of this Agreement or the application of any such provision
" to sity person circumstances shall be held invalid, illegal or unenforceable in eny rsspect by a court of competent jurisdiction, such invalidity, illegality.
or uninforceability shall not affect any other provision hereof, ti ( 6.9. Headings,
- i. Tha headings of the sections of this Agreement are inserted for convenience
.only tad shall not constitute a part thereof or affect in any way the meaning . i l
or interpretatis of this Agreement. 6.10 counterparts. This Agreement may be esecuted simultaneously in two or more counterparts, ecch of which shall be deemed an original, but all of which together shall constitute one and the same instrument. I-B-8 t. l l' ___ _ , _ ._ , . . _ _ ~ _
((1))P!lftDGe[14433.EXs)60010. PIP PAG: 19 SEP 1996 19:00 EDG: 00-000-0000 00:00 BLE: 00-000-0000 08:04 l ll1)]Tue/Ensirch fir 2 5-( R. R. Donn111sy (212) 341-7777 A0G 3.4.1,p03 (PAGE) l l TAX SEARING AGREEMENT THIS AGREEMENT, effective as of January 1, 1995, is between ENS'.aCH 9erporation, a Texas corporation ("ENSERCH"), and Enserch Exploration, Inc.
.,)e ' Company").
INTRODUCTION A. ENSERCH is t%e common parent of an affiliated group of corporations 1 thin the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as 4 3endid (the " Code',, 1 4 'be Company is a member of said affiliated group. B. ENSERCH and the Company deem it appropriate to define the method by which th] F&deral income tax liability of the affiliated group shall be shared amongst the affiliated group of corporations. ACCORDINGLY, ENSERCH and the Company hereto agree as follows:
- 1. Definitions Tha following terms as used in this Agreement shall have the meanings set forth belows (s)
- Consolidated Return" shall mean a consolidated Federal income tax rsturn filed pursuant to Section 1501 of the code.
(b)
- Consolidated Tax Liability" shall mean the consolidated Federal income tax liability of the ENSERCH Group for any taxable year for which th3 ENSERCH Group files a Consolidated Return.
(c) *ENSERCH Group
- shall mean the af filiated group of corporations ritiln the meaning of Section 1504(a) oi the Code of which ENSERCH is a common parent.
(d) ' Gain Group" shall mean a Member Group whose income exceeds d; ductions, computed as if it had filed a separate (or subgroup Con:olidated Raturn) Federal income tax return for the applicable taxable y:cr. (a) " Loss Group
- shall mean a Member Group whose deductions exceed I income, computed as it it had filed a separate (or subgroup Consolidated ,
Riturn) Federal income tax return for the applicable taxable year. J l (f) ' Member' shall mean each includible corporation as defined in Section l 1504(b) of the code. ! (g)
- Member Group" shall mean a group comprised of one or more Members of j th) ENSLRCH Group. Generally, a Member shall not be part of more than one ,
Member Group. However, the part of ENSERCH attributable to Lone Star Gas l l Company, a division of ENSERCH, and the part of ENSERCH attributable to l Loni Star Pipeline Company, a division of ENSERCH, shall be included in the j utility Member Groups the part of ENSERCH, attributable to Enserch ; Processing Company, a division of ENSERCH, shall be included in the l processing Me eer Groups the part of ENSERCH, attributable to Consolidated 1 En2crch Exploration Company, a division of ENSERCH, shall be included in i thi exploration Member Groups and the remaining part of ENSERCH shall j comprise the corporate Member Group. A listing of the Member Groups is 1 attiched as Exhibit A. j (h) " Separate Return Tax claim" shall mean the Federal income tax claim ' (before Tax Credits) attributable to the activities of a Loss Group, computed as if it had filed a separate (or subgroup Consolidated Return)
)
i Fid;ral income tax return for the applicable taxable year and its losses wIr2 deductible in that year. (1) " Separate Return Tar Liability" shall mean the Federal incane tax litbility (before Tax Credits) attributable to the activities of a Gain Group, computed as if it had filed a separate (or subgroup Consolidated R; turn) Tederal income tax return for de applicable taxable year. (j)
- Tax credits" shall mean those nonrefundable credits including, but not limited to, those discussed in IRC Sections 29, 38, 41 and 53, 1-B-10 l
l
l l ) i PACS 20 SEP-1996 04:57 EDG 00-000-0000 00:00 SLKs 00-000-0000 00:00 . {[1))Tuc/Eastich1))TINEDGs[14433.E13]00011.FIP l( fors 8-4 R. 2. Donnelley (212) 341-7777 A0G 3.4.1,p03 '1 (PACE) (k) ' Net Minimum Tax' shall mean the tax imposed by Section $5 of the Cods. > (1) "AMT Basis
- shall mean adjustment and preferences of each Member
! . Group under section 56 and section 57 of the Code, i
- 2. Tax Allocations
-(a) At ENSERCH's direction, each Member Group shall either pay to or receive from ENSERCH its Separate Return Tax Liability or reimbursable Separate Return Tax Claim and Tax Credits. ENSERCH shall pay to and receive from the Internal Ravinue Service (IRS) the Federal income tax liabilities and refunds of the
- l ENSERCH Group.
- I .
i (b) Each Gain Group shall pay its separate Return Tax Liability. !- (c-1)'In the event ENSERCH Group has a Consolidated net income each Loss ' ! Group shall receive its separate Return Tax Claim no later than 90 days after filing of ENSERCH Consolidated Return, l' . .(c-2) In the event ENSERCH Group has a consolidated net operating loss, each I Loss Group shall be reimbursed a portion of its separate Return Tax Claim. The I l reimbursement shall be determined by multiplying the Gain Groups' Separate , R1 turn Tax Liabilities by a fraction, the numerator being the Loss Group's Siptrate Return Tax Claim and the denominator being the sum of the Loss l Grtups' Separate Return Tax Claims. If the consolicated net operating loss can i' be carried to prior years, in whole or part, the IRS refund shall be shared
; c=ongst those Loss Groups to which the net operating loss is attributable
!. using the formula outlined in this paragraph. (c 3) If a consolidated net operating loss is carried over and reduces . , C nsclidated Tax Liability, the reduction of Consolidated Tax Liability shall i l be shared amongst those Loss Groups to which the net operating loss is ! l ' sttributable using the formula outlined in paragraph (c-2) for the year in which loss is generated. l l- '(d)'A' Loss Group shall not be reimbursed for its al.ocable share of a l con 2olidated net op rating loss until such loss is used to reduce consolidated Ttz Liability or obtain an IRS refund. l' ,
. (e-1) A Member Group shall be reimbursed for'its Tax Credits, but only af ter '
each Loss Group has received its separate Return Tax Claim and the Tax Credits ara used to reduce Consolidated Tax Liability. In the event ENSERCH Group ,
. carriss over Tax credits, each Member Group shall be reimbursed only for that ;
portion of such credits used. The reimbursement shall be determined by ' i
'sultiplying the reduction of Consolidated Tax Liability by a f raction, the ,I' numerator Ming the Member Group's Tax Credits and the denominator being the sum of all Member Groups' Tax credits. ;
i -- (e-2) If Tax credits are carried over and reduce consolidated Tax Liability, , tbs reduction of Consolidated Tax Liability shall be shared amongst those , , 1 Mimber Groups to which the Tax credits are attributable using the formula l l- outlined in paragraph (e-1) for the year in which the credits are generated.
.(f) in the event ENSERCH Group has Net Minimum Tax liability, each Member Group shall be allocated its share of.such liability. The allocation shall be datermined by multiplying the Net Minimum Tax by a fraction, the numerator being the Member Group's AMT Basis and the denominator being all Member Group 2' AMT Basis. If a Gain Group's AMS Basis does not exceed 75% of its Fadsrel taxable income, then its AMT Basis shall be considered to be zero.
3.' Miscellaneous Provisions ! (a) This Agreement contains the entire understanding of the parties hereto I' with respect to the subject matter contained herein. No alteration, amendment i or modification of any of the terms of this Agreement shall be valid unless ; mada by an instrument signed in writing by an authorized officer of each party j h2reto. I I-B-11 ' .. I ! l 3 { d 1
~
. m,._.__.._. .. __ . _ . _ _ _ . . . . . . . . . __._... ~.m. . m. . . _ _ . . . . _ _ . _ _ -_ .
i 8 PACS 20 SEP-1996 85:05 EDC: 00-000 0000 00:00 sts: 00-000-0000 00:00 : (l1)]rINEDGi[14433.txs]00012. 1))he/tasirch PIP fors 3 4 1. R. Donne 11ey (212) 341-7777 A0G 3.4.1,p03 I (PAGE>,
. (b) This Agreement has been made in and shall be construed and enforced in I accordince with the laws of the State of Texas.
'(c) This Agreement shall be binding upon and inure to the benefit of each - --- -
p2rty hereto and its respective successors and assigns, i (d) The headings of the paragraphs of this Agreement are inserted for (: .cenytnience only and shall not constitute a part hereof. , l l (e) The Tas Allocations shall reflect amended consolidated Federal income t&E rsturn items, Internal Revenue Service adjustments agreed to by ENSERCH (' and en other adjustments as finally determined by proper governmental author ties. In Witness Whereof, the parties hereto have caused this Agreement to be duly i sascuted and their respectlve corporate seals to be af fixed hereto. j Enserch Corporation j . . . . . . . . . . ./. s ./. . R.....'
, L.Jay-
.................. By........./.s/..Keith Mond l
Asst.' Corporate Secretary Titles Vice President and , Corporate Tax Counsel, ; l . . Enserch Emploration, Inc. i I
. Attests -
! . . . . . . . .~./.. s............................
/. .F , W . Fraley III By. . . . . . ./.. s/. .J . W . Pinkerton .f t ........................ y Corporate Secretary Titles Vice President and Controller I-B-12
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i-l FM 19 827-1996 19:00 EDGs 20 SEF 1996 07:03^ BIJs 00 000-0000 00:00 i' Ill))FINEM(14433.EX5)00013.FIF 1))Tec/tas;rch rara 5 4 R.R. Donnelley (212) 341 7777 EDITOR Y2.7-1 kPAGE). . _ EXXIBIT A- (~ l
'ATTACEMENT TO TAX SHARING AGREEMENT I )
l Member Groups include the following (inclusive of their respective 1 l subsidiaries where applicable): E::SERCE'(Corporate, Tower, House)' CS Insurance Company ! E2ssrch Exploration, Inc. (EEX Group) t Lona star Gas company (Utility Group) .i Loam star Energy Co. Ensa.rch Development Corp. l E32srch Processing Company (Processing Group)
-Con 2olidated Enserch Exploration company (Exploration Group) ;
'I-8-13
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I I l t ((1]pINEDGs!!4433.fXC]000fl. PIP PAC 18 SEP 1996 21:$1 EDG: 00-000 0000 00:00 BLE: 90 000 0000 09:00 ((1))Tuc/ErsIrch ron 84 t. R. Doan:llry (212) 341-7777 AOC 3.4.1,p02
<PAGE)
EXHIBIT C TO ANNEX 2 TAX ASSURANCE AGREEMENT THiS TAX ASSURANCE ACREEMENT (this ' Agreement'), dated as of , 1996, ) is by .cnd between ENSERCH CORPORATION, a Texas corporation ("ENSERCH"), and 1 ENSERCH EXPLORATION, INC., a Texas corporation that was formerly named Lone I stir Eaergy Plant Operations, Inc. ("New EEX"). l RECITALS ,
- 1. New EEX is a corporation more than 80 gercent of the common stock, par eclus $.01 per share ("New EEX Common Stock ), of which is owned by ENSERCH.
- 2. Due to ENSERCH's compelling business considerations, ENSERCH's Board of Dir:ctors has determined that it is in the best interests of ENSERCH and its thircholders to effect the distribution to the shareholders of ENSERCH of all of th3 New EEX Common Stock owned by ENSERCH (the " Distribution").
- 3. Iew EEX's Board of Directors has determined that the Distribution is in thi best interests of New EEX and its shareholders.
- 4. It is fundamental to achieving the business benefits to both ENSERCH and N?T EEX that the Distribution qualify as a tax-free spin-off under Section 355 cnd other applicable sections of the Code.
- 5. In furtherance of the Distribution, ENSERCH and New EEX have entered into thic Agreement, which contains certain restrictions on the activities of New EEX c.fter the Distribution designed to preserve the tax-free status of the Distribution.
UOW, THEREFORE, in consideration of the premises and the representations, utrrsnties, covenants and agreements contained herein, and for other good and , valutble consideration, the receipt and sufficiency of which are hereby > ccknowledged, ENSERCH and New EEX, both intending to be legally bound, hereby tgroo as follows: ARTICLE 1 8:ction 1.1 Certain Definitions. Capitalized terms used but not defined in this Agreement shall have the meanings specified in the Request for Ruling filco with the Internal Revenue Service (* IRS") on June 12, 1996, by and on beh2lf of ENSERCH, New EEX and Texas Utilities Company relating to the tinrbility of the Distribution. In addition, the following terms shall have ths meaning specified belows
' Distribution Time" shall mean the time at which the Distribution becomes effictive upon notification by ENSERCH to the transfer agent for the New EEX Common Stock that the Distribution has been declared and that the transfer (g:nt is authorized to proceed with the distribution of New EEX Common Stock.
"Psrmitted Option" shall mean an option granted under a Stock Incentive Plan to purchase New EEX Common Stock that (1) has an exercise price equal to or grsetsr than the market price of New EEX Common Stock on the date of grant and (ii) is not exercisable h fore the termination of the Restricted Stock Period.
"RLetricted Asset Period' shall mean the period beginning at the Distribution Time and ending on the second anniversary of the Distribution Time.
"R2rtricted Stock Period" shall mean the period beginning at the Distribution Time and ending on the six month anniversary of the Distribution Time.
I-C-1 I i i f 1 I r i
l l t ! l1))FINEDGel14433.txC]00002. PIP PAGs 19-SEP-1996 19:11 EDC: 00-000-0000 00:00 515: 00-006 0000 00:00 [ 1}}Tuc/Eas;rch Tors 5-4 1. 1. Donas11sy (212) 341-7777 ACG 3.4.1,P02 l l l t (PAGE) j l i ' Rights" means rights issued to holders of New EEX Common Stock entitling ; th2 holder, among other things, (i) upon the occurrence of certain events to l I purchLse from New EEX shares of preferred stock of New EEX and (ii) upon the l I l occurrance of certain further events, to receive New EEX Common Stock-(or, in . c:rttin circumstances, other consideration) having a purchase price equal to I tro times the exercise price of the Rights, and " Rights Plan" means any plan or agreement pursuant to which Rights are issued
' Stock Incentive Plan" shall mean the Enserch Exploration, Inc. Revised and Sk' A
Amendid 1996 Stock Incentive Plan or any similar plan approved by the Board of
' Dirtetors of New EEX. ,)
'Subiidiary" of any person means any corporation not less than 80% of whose l
voting stock and total number of shares of all other classes of stock is cwnid, directly or indirectly, by the person. ARTIctE 2 i Business Covenants of New EEX Srction 2.1 Continuity of Business Enterprise. Except as otherwise provided in Sretion 2.2 below, New EEX covenants and agrees with ENSERCH that during th2 R3rtricted Asset Period it will continue to own at least fifty percent (50%) of the f air market value of its properties, determined both with rsisrince to New EEX only and with reference to New EEX and its subsidiaries en e censolidated basis, at the time of the Distribution. fcction 2.2 Exceptions. Notwithstanding any other provisions of this
- Agr!ement, in determining whether New EEX continues to own at least fifty perc
- nt (50%) of the fair market value of New EEX's properties for purposes of SIction 2.1 above, the following transactions shall be disregardedi (a) production and sale of oil and gas in the ordinary course of l buriness; (b) acquisitions and dispositions in the ordinary course of business i
I (c) exchanges which are fully tax-free to New EEX pursuant to Section 1031 of the Code of active business properties for other active business prop 3rties of like kind; I (d) transfers of business properties to joint ventures, partnersh2ps, tax
- pirtnerships or other joint arrangements, whether or not elections nader
' SIction 761 of the Code are then in effect, so long as New EEX has eignificant active participation in the activities of the ventures and, in l thy case of a limited partnership, is the managing general partners (a) transfers to one or more Subsidiaries under Section 351 of the Codes provided that not more than forty percent (40%) of New EEX's properties are co transferred; (f) dispositions of busir ,as properties if within six (6) months after thi dispositions the proceeds from such dispositions are utilized, or commitments are made, for the acquisition of other business properties of similar value that further the same active business operations of New EEX (g) New EEX financing of acquisitions or operations through hypothecations, mortgages or grants of securlty interests in or other liens on assets, creation of production payments, transfers associated with lecting arrangements, and other financing arrangements; and (b) unilateral termination of agreements by third parties; S1ction 2.3 LSEPO Business. During the Restricted Asset Period, New EEX will - t:k's no action voluntarily to cease to continue directly to own and operate tha buziness that LSEPO operated immediately bef ore the Preliminary Merger. Th3 axceptions provided in Section 2.2 (other than 2.2(h)) shall not apply to tha LSEPO Business. I-C-2 i i i i l i l I
((1))rINEM 114433.11C)00003.FIF FAG 16 sEF-1996 08:45 EM: 00-000 0000 00:00 BLKi 00 000-0000 00:00 ((1))Tuc/Easerch F:r2 5-4 3. 3. Donnellry (212) 341-7777 A0G 3.4.1,p02 1PAGE) ARTICLE 3. Stock (Equity) Covenants of New EEX
.Section 3.1 Continuity of Interest. Except as otherwise provided in Section 3.4 below, New EEX covenants and agrees with ENSERCH that during the Rnstricted Stock Period New EEX will not, directly or indirectly, undertake, cuthorize, approve, facilitate or consummate any transaction involving:
(c) the repurchase of New EEX Common Stocks (b) the issuance of shares of New EEX Common Stock (whether pursuant to th) czercise of options or the grant of stock under a Stock Incentive Plan er ctherwises provi3ed that the lapse of forfeiture restrictions on stock pr:viously issued y ursusnt to a Stock Incentive Plan shall not be deemed an iciuance of stock); or
. (c) the acquisition by any person of outstanding New EEX Common Stock (thither by (1) rodeeming Rights, (2) finding a tender offer to be a "pirmitted offer" under any such Rights Plan or otherwise causing any such pl n to be inappli cable or neutralised with respect to any proposed ecquisition, or (1) approving any proposed acquisition transaction for the Purpose of any applicable statute or regulation or any " fair price" or othar provision of New EEX's articles of incorporation or bylaws, or i oth;rwise): j i
unites in each case, an the aggregate or cumulatively, the shares of New EEX Common Stock repurchased, issued or acquired does not exceed 3.0 percent of th] number of shares of New EEX Common Stock outstanding immediately prior to th3 Dictribution. Excenit as otherwise provided in Section 3.4 below, New EEX civcnints and agrees with ENSERCH that during the Restricted Stock Period New EEX till not,. directly 3r indirectly, issue any options, rights, warrants or cccurities exercisable or convertible into any New EEX Common Stock. Section 3.2 Other New EEX Stock. New EEX covenants and agrees with ENSERCH th:t, during the Restrf.cted Stock Period, New EEX will not issue any class or rCrics of capital stoca other than New EEX Common Stock (*Other New EEX or issue any reptions, rights, warrants or securities exercisable or
. crnvirt Ltock")ible into any JLher New EEX Stocks provided that the foregoing shall .Lat cpply to, or restJict the issuance of, Rights or Other New EEX Stock which may be issued or deltvered pursuant to Rights.
Section 3.3 Liqul6ation. New EEX covenants and agrees with ENSERCH that, New EEX will not, during the Restricted wit rtike, authori Stock Period [11 ze, approve, tate or consummate any transactiondirectly or indirectly, fac r girding the dissolution or liquidation of New EEX or any announcement of any intact regarding the foregoing. S:ction 3.4 Exceptions. Notwithstanding the restrictions contained in e- Breties s.1 above or any other provision of this Agreement, such restrictions Lall not apply with respect to the followings (a) the granting of Permitted Options under a Stock Incentive Plans (b) issuance of other options, warrants or similar instruments to purchase capital stock of New EEX at a price that exceeds the market price cf New EEX Common Stock at the time issuance is ainthorized, provided that cuch options, warrants or similar instruments may not be exercised during ths Restricted Stock Periods c) in(New EEX Common Stock;any split-up of the New EEX Common Stock or any share dividend paid (d) the issuance of Rights or stock pursuant to a Rights Plan; and (0) issuance by New EEX of debt convertible into New EEX Common Stock, thich debt (1) carries a market rate of interests (ii) has a conversion prica that exceeds by not less than 5% the market price of New EEX Common Stock immediately prior to the pricing of the debt offering; and (iii) may not be converted into New EEX Common Stock during the Restricted Stock Psriod.
~
I-C-3 i l e I
[v l i l{1))f!NEDG:{14433.EXC100094. PIP PAG: 19 SEP-1996 19:11 EDC: 00-000-0000 00:00 BLK 00-000-0000 00:00 Fors 3-4 3. R. Donne 11ey (212) 341 7777 A0G 3.4.1,p02 ((1))Tuc/Easerch ? (PAGE) l ! ARTICLE 4. l ( Naiver' of Restrictions ! 'Rection 4.1 Ruling or opinion. Notwithstanding the foregoing, the restrictions upon New EEX contained in Article 2 and Article 3 shall not apply , i if (s) New EEX or ENSERCH is a party to a ruling from the National Office of I l th2 IRS, based on a ruling request satisfactory to New EEX and ENSERCB, that .' I J-th3 transaction that otherwise would be restricted under this Agreement will ' not cause the Distribution to be taxables or (b) New EEX or ENSERCH secures an opinion of counsel satisfactory to New EEX and ENSERCH in form and substance estisfactory to New EEX and ENSERCH to the effect that the proposed trtnstetion that otherwise would be restricted under this Agreement will not etuce the Distribution to be taxable ARTICLE 5. Representations 82ction 5.1 No Plan or Intention. New EEX represents and warrants that as of tha date hereof, it has no plan or intention of engaging in any transaction I that would violate either Article 2 or Article 3 of this Agreement. ARTICLE 6. Miscellaneous ( Ctetion 6.1 Survival. The representations, warranties, covenants and Agramments contained herein shall survive the Distribution. No investigation ,
'or:other examination by ENSERCH or representatives of ENSERCE shall affect the ters of survival of the representations, warranties, covenants and agreements
- set forth in this Agreement.
Srction 6.2 Notices. Any notice, demand, claim or other communication under *
-this Agreement shall be in writing and shall be deemed to have been givens
- j. s (a) upon the delivery or mailing thereof, as the case may be, if d211vered personally or sent by registered or certified mail, return rcceipt requested, postage prepaids e i
- (b) on the date on which delivery thereof is guaranteed by the carrier if d211vered by a national courier guaranteeing delivery within a fixed number
!' of days after sending; l
. tc) five days after the mailing thereof if mailed postage prepaid by any ,
other methods or (or on the date on which f acsimile transmission thereof is confirmed 'OK" by the receiving machine if transmitted by f acsimile machine and confirmed 3 by delivery by one of the prior methods; l
'but, in each case, only if addressed to the parties in the following manner at i tha following addresses or facsimile numbers (" TAX *) (or at such other address .i' or other number as a party may specify by written nodce to the other):
ENSERCE:ENSERCH Corporation 300 5. St. Paul Street TX 75201-5598 Dallaskons-WilliamT.Satterwhite, Esq. Attent Senior Vice President and General Counsel Faro (214) 573-3430 I-C-4 l r h s F , L i V n
l i ! lill)TINEDGe[14433.EXC]90006.FIF PAGs 16-SIF-1996 03:02 EDG: 00-000-0000 00:00 RLK 00-000-0000 00:00 fors 5-4 1. 3. Donn211sy (212) 341-7777 A0G 3.4.1,p02 ([1)]Tuc/Enserch ( (PAGE) (nforceability 'of this Agreement, including that provision, in any other juritdiction. To the extent permitted by applicable law, each party waives any i prevision of applicable law that renders any provision hereof prohibited or uninforceable in any respect. If any provision of this Agreement is held to be i un:nisreeable for any reason, it shall be adjusted rather than voided, if p szible, in order to achieve the intent of the parties to the extent re.0ible. SIction 6.10 Further Assurances; Cooperation. Each party shall from time to time, ct the request of the other party, take such actions as the other party may rstsonably request in order to effectuate the purpose and intent of this Agrsectnt. Without limiting the generality of the foregoing, the parties shall i cooper:te with each other and take such actions as either party may reasonably l requsrt to obtain any IRS ruling or opinion of counsel contemplated by this Agrocment. In sodition, each party shall keep, maintain and preserve books, ricordi and documentation necessary in or applicable to the determination of l licbilities pursuant to this Agreement and the establishment of the Distribution as a tax-free distribution until the expiration of all applicable etstutas of limitation. Finally, the parties to this Agreement expressly agree ! for all purposes to treat the Distribution as a tax-free distribution and (i) to not knowingly act (or to not knowingly refrain from acting), except where rrquirrd by law to do so, in a manner inconsistent with such treatment of the l Distribution or the intent to qualify it as a tax-free distribution and (ii) to tak2 any and all such actions reasonably available to such party to support cnd d2 fend such treattent and qualification of the Distribution. Siction 6,11 Counterparts. This Agreement may be executed in one or more count 5rparts, each of which shall be deemed to be an original, but all of thich together shall constitute one and the same instrument. S;ction 6.12 Good Faith obligation. Any right to be exercised under this Agreement must be exercised in good fai n and any obligation imposed under this Agreement must be discharged in good f aith. In' Witness Whereof, ENSERCH and New EEX have caused their respective duly ruthorized of ficers to execute this Agreement as of the day and year first cbovo written. Enserch Corporation By: Names Titles s Enserch Exploration, Inc. By: Names
Title:
I-C-6 i 1 i l 1 l t I , ! l ! I
I ((1llr1NE m [14413.AsgII]G0001. PIP PACS 16 SEP 1996 02:31 . E m 00 000 0000 00:00 BLKs 00-000-0000 00:00 ((1))Tuc/Eassrch Trrs 8-4 1. I. Donn111ey (212) 341-7777 ACC 3.4.1,p01 (PAGE>. I ANNEX II l STOCK OPTION AGREEMENT l 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 und3r the laws of the State of Texas ("Enserch'). WITNESSETH T H A Ts
.WHEREAS, concurrently with the execution and delivery of this Agreement, Enzerch, 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 Agramment and Plan of' Merger, dated as of April 13, 1996, (the " Merger I
Agraement'), which provides, inter alia, upon the terms and subject to the canditions thereof, for the merger of TXA, Inc. with and into Enserch or, in i cartain circumstances, the merger of two newly formed, wholly-owned I i aub31 diaries of-TxB, Inc. with and into TUC and Enserch respectively (in l sithir case, the " Merger").
)
WHEREAS, as a condition to TUC's willingness to enter into the Herger i
,Agrscment, TUC has requested that Enserch agree, and Enserch has so agreed, to l
l grtnt to TUC en option with respect to certain shares of Enserch' common i btock, on the terms and subject to the conditions set forth herein; l NOW THEREFORE, to induce TUC to enter into the Merger Agreement, and in consideration of the representations, warranties, covenants and agreements crnteined berein, in the Merger Agreement, the parties hereto, intending to be icgtlly bound, hereby agree as follows:
- 1. Grant of Option. -
I (a) Subject to the receipt of all regulatory approvals and orders required < r by applicable law, Enserch hereby grants TUC an irrevocable option (the i , "Ensarch Option") to purchase up to 3,363,570 shares, subject to adjustment as ' ! prsvided in Section 11 (the "Enserch Shares"), of common stock, par value 44.45 per share, of Enserch (the 'Enserch Common Stock") (being 4.9% of the l l number of shares of Enserch Common Stock outstanding as of March 31, 1996) in th3 manner set forth below, at a price (the " Exercise Price') per Enserch Shara of $16 3/8. , l (b) The Esercise Price shall be payable, at TUC's option, as follows:
-(i) in cash, or
. (ii) subject to the receipt of all approvals of any Covernmental Authority required for Enserch to acquire, and TUC to issue, TUC Shares (as d3 fined below) from TUC, in shares of common stock, without par value, of '
l TUC ('TUC Shares *)) in either case in'accordance with Section 4 hereof. (c) Notwithstanding the foregoing, in no event shall the number of Enserch l Shtras for which the Enserch Option is exercisable exceed 4.9% of the number 5 of issued and outstanding shares of Enserch Common stock. (d) As used herein, the ' Fair Market Value" of any share shall be the l average Eschinge of the*NYSE (the dail{) closing duringsales price the ten for trading NYSE such share days on the New prior to the York fifthStock NYSE i 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 macnings set f orth in the Merger Agreement. I 11-1 l l i l 4 1 o l l 1
l l ((1])flutDG(14433.ANNII]00002.FIF FAGS 16 517 1996 03:34 EDc 00-900-0000 00:00 315 : '00-000-0000 00:00 Ill))he/EasIrch Fora 5-4 3. 2. Donnellsy (212) 341-7777 AOC 3.4.1,p01 1 1 i (PAGE) ' l l 2. Exercise of option. ( (a The Enserch Option may be exercised by TUC, in whole or in time)orfromtimetotimeaftertheMergerAgreementbecomesterm[ nable art, at any by TUC undir circumstances which could entitle TUC to a payment under section 10.3(b) of ths Merger Agreement, regardless of whether the Merger Agreement is cctually terminated or whether there occurs a closing of any Business Combination involving a Target Party or a closing by which a Target Party becom2s a subsidiary (any such event by which the Merger Agreement becomes so m tertinable by TUC being referred to berein as a ' Trigger Event'). t I (b) (i) Enterch shall notify TUC promptly in writing of the occurrence of any Trigger Event, it being understood that the giving of such notice by , i l Ense :h shall not be a condition to the right of TUC to exercise the Enserch e
' Opt' . _ 1 e
l (ii) In the event TUC wishes to exercise the Enserch option, TUC shall 6311ver to Enserch written notice (an 'Esercise 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 $ tander of the applicable aggregate Exercise Price, TUC, to the extent ' permitted by law and Enserch's organizational documents, and provided that tha conditions to Enserch's obligations to issue the Enserch Shares to TUC i hirsunder set forth in section 3 have been satisfied or waived, shall be dromed to be the holder of record of the Enserch shares issuable upon such azarcise, notwithstanding that the stock transfer book of Enserch shall l thin be closed or that certificates representing such Enserch shares shall i" not then be actually delivered to TUC. r
'(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 N tice delivered at least two business days prior to the date of the
'f Clasing.
(c) The Enserch Option shall terminate upon the earliest to occur ofei (i) the' Effective Time of the Merger; i (ii) the termination of the Merger Agreement pursuant to section 10.1 thtreof other than under circumstances which could entitle TUC to a payment i j undir section 10.3(b) of the Merger Agreements and s l (iii) 180 days following any termination of the Merger Agreement upon or - 2! during the continuance of a Trigger Event or, if at the espiration of such ,' L f i 100 day priod, the Enserch Op d on cannot be exercised by reason of any ; applicable judgment, decree, order, law or regulation, ten business days ., citer such impediment to exercise shall have M en removed or shall have ! become final and not subject to appeal,'but in no event under this clause " (iii) later than September 30, 1997. j t (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 natorial breach of any of its covenants or agreements, contaLned in this t ' Agreement or in the Merger Agreement.
- 3. Conditions to Closing. The obligation of Enserch to issue the Enserch
(:, j Khsrss to TUC hereunder is subject to the conditions that I (a) all waiting periods, if any, under the ESR Act applicable to the j issurnee of the Enserch shares hereunder shall have expired or have been tsrzinated; (b) the Enserch Shares, and any TUC Shares which are issued in payment of ths Exercise Price, shall have been approved for listing on the NYSE upon officini notice of issuance (c) all consents, approvals, orders or authorizations of, or registrations, i dzclarations or filings with, any federal, state or local administrative rgincy or commission or other federal, state or local Covernmental Authority, if any, required in connection with the issuance and acquisition of the j' Enserch Shares hereunder shall 11-2 ! l, l ! i
r l l I j fil))FINEDGs[1443).ANNII)o0001.717 FAG 16 STF-1996 02:37 EDC: 00-000-0000 00:00 SLK 00-600-0000 00:00 Fors 5-4 3, 1. Donn111ey (212) 341-7777 A0G 3.4.1,p01 l l(1))Tuc/Enserch l (PAGE) l hzve been obtained or made, including, without limitation, any required l rpproval of the SEC under Sections 9 and 10 of the 1935 Act, any required l Epprovcl of the Texas Railroad Commission or the Texas Public Utilities
-Commiezion, as the case may be, of (1) the issuance of the Enserch Shares by En23rch (11) the acquisition of Enserch Shares by TUC and (iii) the i ccquisition by Enserch of the TUC Shares constituting the Exercise Price l h:rcunder; and (d) no preliminary or permanent injunction or other order by any court of competsnt jurisdiction prohibiting or otherwise restraining such issuance r shall be in effect.
The conditions set forth in paragraph (b) above may be waived by Enserch, in th3 care of TUC Shares, and by TUC, in the case of Enserch Shares, in the sole digeration of the waiving party.
- 4. Closing. At any closing, (a) Enserch shall deliver to TUC or its designee a single certificate in dsfinitive form representing the number of Enserch Shares designated by TUC in its Essrcise Notice, such certificate to be registered in the name of TUC and to bier the legend set forth in Section 123 and (b) TUC shall deliver to Enserch the aggregate price for the Enserch Shares to d2tignated 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 csztificates representing the number of TUC Shares being issued by TUC in conrideration uereof, determined in accordance with Section 4(c).
(c) In Shares Enttrch the event that TUC pursuant issues TUC to Section Shares 4(b)(ii), to Enserch the number in consideration of TUC Shares to beofso icruid shall be equal to the quotient obtained by dividings (i) the product of (x) the number of Enserch Shares with respect to which ths 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 prrcading the date the Exercise Notice is delivered to Enserch. (d) Enserch shall pay all expenses, and any and all United States Federal, st:ta and local tszes, and other chargers that may be payable in connection with the preparation, issue and delivery of stock certificates under this Eacticn 4
- 5. Representations and Warranties of Enserch. Enserch represents and i carrrnts to TUC that (a) Subject to any required regulatory approvals, Enserch has the corporate pow 1r and authority to enter into this Agreement and to carry out its obligstions hereunder, subject in the case of the repurchase of the Enserch Kh2rss pursuant to Section 7(a) to applicable law and the provisions of Enssrch Articles of Incorporation, as amended (the "Enserch Articles');
(b) this Agreement has been duly and validly executed and delivered by Entarch, and assuming the due au uorization, execution and delivery hereby by TUC, constitutes a valid and binding obligation of Enserch, enforceable tgsinst Enserch in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or onsr similar laws af fecting the enforcement of creditors' rights generally, tnd except that the availability of equitable remedies, including specific parformance, may be subject to the discretion of any court before which any proc 21 ding therefor may be brought; (c) Enserch has taken all necessary cormarate action to authorize and rsssrve 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 Enstrch option will have reserved 3,363,570 authorized and unissued Enserch Shirss, such amount being subject II-3
?
l l , I i ( 3 I I i
l l l
~l(1))FINEDGs(14433. ANN!!!00004.FIF thC 16 SIF-1996 02:30 'IDG 00-000-0000 00:09 31Ju 00-000-0000 00:00. ,
for2 S-4 R. R. Donnell*y (212) 341 7777 A0G 3.4.1,p01 )
. ((1))Tuc/Enserch J L(PAGE> )'
to cdjustment as provided in Section 11, all of which, upon their issuance and
~
d311vtry in accordance with the terms of this Agreement, will be validly issuid, fully paid and nonassessables
~
[ (d) upon delivery of the Enserch' Shares to TUC upon the exercise of t5e ~ ' '1 Ensarch option, TUC will acquire the Enserch Shares free and clear of all claims, liens, charges, encumbrances and security interests of any nature' \ th2tsoevers (e) except as described in Section 5.4(b) of the Enserch Disclosure Schedule
.to ths Merger Agreement, the execution and delivery of this Agreement by Enserch does not, and, subject to compliance with applicable law and the Entarch Articles with respect to the repurchase of the Enserch Shares pursuant to arction 7(a),.the consummation by Enserch of the transactions contemplated 'harzby will not violate, conflict with, or result in a breach of any provision of, er 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 gecaleration of any obligation or the loss of a material benefit under, or the ersstion of a lien, pledge, security interest or other encumbrance on assets l (eny such conflict, violation, default, right of termination, cancellation or I
! secsisration, loss or creation, hereinafter a " violation *) of Enserch or any of its Subsidiaries, pursuant to (1) 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, t
obligation, instrument, permit, concession, franchise, license of Enserch er its Subsidiaries or to which any of them is a party (any of the forsgoing in effect on the date hereof being. referred to as a
- Material contract ), or (iii) any jud ment, order,' decree, statute, law, ordinance, rule or regulation appl cable to Enserch or its properties or assets,
. which violation, in the case of each of clauses (ii) and (iii), could l roeconably be espected to have a Enserch Material Adverse Effect (except that l - no r5 presentation or warranty is given concerning any violation of a Material ]
ContrLct with respect to the repurchase of Enserch Shares pursuant to Section i 7(a))# j
~(f) except as described in Section'5.4(c) of the Enserch Disclosure Schedule to ths Merger Agreement or Section 3 hereof, the execution and delivery of this Agreement by Enserch does not, and the performance of this Agreement by i
Enisrch 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 J behslf, has issued, sold or offered any security of Enserch to ary person
, undir circumstances that would cause d e issuance and sale of Enserch Shares,. ! as cratemplated by this Agreement, to be subject to the registration . ; rsquirements of de Securities Act as in ef fect on the date hereof, and, '
.tsruming the representations and warranties of TUC contained in Section 6(g) ,
ars true and correct, the issuance, sale and delivery of the Enserch Shares hsraunder would be exempt from the registration and prospectus delivery t j r:quirements of the Securities Act, as in effect on the date hereof (and i Enssrch shall not take any action which would cause the issuance, sale, and ' dilivsry of Enserch Shares hereunder not to be exempt from such requirements); end I. (h) ~ an TUC Shares acquired pursuant to this Agreement will be acquired for Enserch'y ! own account, for investment purposes only, and will not be acquired ! by Enterch with a view to the public distribution thereof in violation of nay j spplicable provision of the Securities Act. l 6 Representations and Warranties of TUC. TUC represents and warrants to Ensarch that (a) TUC has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunders 11-4 l l-i- I I-1 -! 1 i a I a l
I l l ((1))TINEDCi[14433. ANN 11]t0005. PIP PAGs 16-SEP-1996 02:38 EDC: 00-000-0000 00:09 BLK: 00-000 0000 00:00 ((1))Tuc/Ensirch Firs 5-4 2. R. Donnellty (212) 341 7777 AOC 3.4.1,p01
- (PACE) l l (b) this Agreement has been duly and validly executed and delivered by TUC, cnd estuming the due authorization, execution and delivery hereof, constitutes e valid and binding obligation of TUC, enforceable against TUC in accordance eith its terms, except as may be limited by applicable bankruptcy, insolvency, rarrg niration, or other similar laws af fecting the enforcement of creditors i rights generally, and except that the availability of eguitable remedies, including specific performance, may be subject to the discretion of any court befors which any proceeding may be broughts (c) prior to any delivery of TUC Shares in consideration of the purchase of Enscrch Shares pursuant hereto, TUC will have taken all necessary corporate cetion 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 nonassessables (d) upon any delivery of such TUC Shares to Enserch in consideration of the purchare of Enserch Shares pursuant hereto, Enserch will acquire the TUC Shtrss free and clear of all claims, liens, charges, encumbrances and security intsrast of any nature whatsoever; (a) sacept as described in Section 6.4(b) of the TUC Disclosure Schedule to ths MIrger Agreement, the execution and delivery of this Agreement by TUC does n:t, rnd the consummation by TUC of the transactions contemplated hereby will nit, violate, conflict with, or result in the breach of any provision of, or conttitute a default (with or without notice or a lapse of time, or both) undsr, or result in any violation by TUC or any of its subsidiaries, pursuant ts (i) any provision of the Articles of Incorporation or Bylaws of TUC, (ii) any provisions of any loan or credit agreement, note, mortgage, ind "ntur e , leasde instrument, per t,TUC benefit plan concession, or otherlicense franchise, agreement, of TUC obligation, or any of its cubridiaries or to which any of them is a party, or (iii) any judgment, order, decree, statute, law, ordinance, rule or r3rulation applicable to TUC or its properties or assets, which violation, in the case of each of clauses (ii) or (iii) would have a TUC M2tarici Adverse Effects (f) cacept as described in Section 6.4(c)~ of the TUC Disclosure Schedule to th3 Marger Agreement or Section 3 hereof, the execution and delivery of this Agriement by TUC does not, and the consummation by TUC of the transactions contctplated hereby will not, require any consent, approvals authorization or permit of, or filing with or notification to, any Governmental Authority; and (g) cny Enserch Shares acquired upon exercise of the Enserch option will be ccquired for TUC's own account, for investment purposes only and will not be, Lad thi Enserch option is not being, acquired by TUC with a view to the public distribution thereof, in violation of any applicable provision of the SIcurities Act.
- 7. Cartain 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 "Ripurchase Period *), Enserch (or any successor entity thereof) shall, if piriitted by applicable law, the Enserch Articles and Bylaws and Enserch's Mitcrial Contracts (but notwithstanding any insufficiency in the number of Enzarch Shares authorized for issuance upon the exercise of the Enserch Option), repurchase from TUC all or any portion of the Enserch option, at the prica set forth in subparagraph (1) below, or, (y) at any time prior to March 31, 1997 (provided that such date shall have extended to Septehr 30, 1997 undir the circumstances where the date after which either party may terminate th2 M;rger Agreement pursuant to Section 10.1(b) of the Merger Agree *ent has besn extended to September 30, 1997), Enserch (or any successor entity thirtof) shall, if permitted by applicable law, the Enserch Articles and Entsrch's 11-5 l l I i i i I 1 I
- ~ , . _ .
I t l ([1))TINEDGi[14433. ANN!!)00006.FIF FAC 16-SfF 1996 03:14 ?DG 00-000-0000 00:00 BLE: 00-000-0000 00:00 ( [11))Tuc/E'serch Forz 8-4 1. R. fonnelley (212) 341 7777 A0G .3.4.1,p01 ! '< PACE) (; M;tarial Contracts, repurchase from TUC all or any portion of the Enserch
)
Sharas purchased by TUC pursuant to the Enserch Option, at the p2 ice set forth in subparagraph (ii) belows l (i) the difference between the
- Market / Offer Price" (as defined below) far chares of Enserch Common Stock as of the date TUC gives notice of its s.
intent to exercise its rights under this Section 7 and the Exercise Price, \ i multiplied by the number of Enserch Shares purchasable pursuant to the + l Enterch 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 (1), Mtrket/ Offer Price
- shall mean, as of any date, the higher of (x) the prica per share offered as of such date pursuant to any tender or exchange offer or other offer with respect to a Business Combination involving
-Ensarch 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 Ensarch Common Stock as of such date.
(ii) the product of (x) the sum of (A) the Exercise Price paid by TUC per Enterch Share acquired gursuant to the Enserch Option, and (B) the difference between the Offer Price" (as defined below) and the Exercise Prica, 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 Siction 8. For purposes of this clause (ii), the " Offer Price" shall be the highzst price per share offered pursuant to a tender or exchange offer or ethtr Business Combination offer involving Enserch as the Target party during the Repurchase Period prior to the delivery by TUC of a notice of re purchase. (b) Redelivery of TUC Shares. If TUC shall have previously elected to purchare Enserch Shares pursuant to the exercise of the Enserch Option by the issu:nce 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 rrspect to the Exercise Price only and without limitation to its obligation to pay additional consideration under clause (B) of Section 7(c)(ii)(2)) redeliver the certificates for such TUC Shares to TUC, free and clsar of all, liens, claims, charges and encumbrances of any kind or nature whit 2oevers provided, however, dat if at any time less than all of the Enstrch Shares so purchased by TUC pursuant to the Enserch Option are to be rrpurchased by Enserch pursuant to Section 7(a)(y), then (i) Enserch shall be obligited to redeliver to TUC the same proportion of such TUC Shares as the number of Enserch Shares that Enserch is den obligated to repurchase bears to ths 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 Shtres 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. radalivered to TUC by Enserch. - (c) Payment and Redelivery of Enserch Options or Shares. In the event TUC exzrcises its rights under this Section 7, Enserch shall, within ten business days thereaf ter, pay ths required amount to TUC in immediately available f unds End TUC shall surrender to Enserch the Enserch Option or the certificate or csrtificates evidencing the Enserch Shares purchased by TUC pursuant hereto, and TUC shall warrant that it owns the Enserch Option or such shares and that thz Enserch Option or such shares are then free and clear of all liens, claias, damages, charges and encumbrances of any kind or nature whatsoever.
>(d) TUC ' Call". If TUC has elected to purchase Enserch Shares pursuant to tha azercise 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 rs-quire, at any time or from time to time prior to March 31, 1997 (provided that such date shall be extended to Septe h r 30, 1997 under the circumstances th3re the date af ter which either party may terminate the Merger Agreement pursuint to Section 10.1(b) of the Merger Agreement has been extended to Sipttaber 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 annus on such amount from the Closing Date relating to the Szchinge 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 pariod or declared and payable to shareholders of record on a date during such psriod.
(e)-Repurchase Price Reduced at TUC's Option. In the event the repurchase prics specified in Section 7(a) would subject the purchase of the Enserch Option or the Enserch Shares purchased by TUC pursuant to the 11-6 l
1 l 1 I FAG: 16-SEF 1996 03:45 EDC: 00 000 0000 00:00 BLKs 00 000-0000 00:00 [ [1)Tue/EasIrch. ((1) )] FINEDG i [ 14433. ANNII] 00007. Fors 3-4 717
- 1. 3. Count 11sy (212l 341-7777 AOC 3.4.1,p01 i (PAGE) 4
)
! En& arch Option to a vote of the shareholders of Enserch pursuant to applicable i l Igw cr the Enserch Articles, then TUC may, at its election, reduce the rcpurchase price to an amount which would permit such repurchase without the , nicassity for such a shareholder vote. -- - 1
- 0. Voting of Shares. Following the date hereof and prior to the fifth i gnniv2rsary of the date hereof (the " Expiration Date*), each party shall vote
- e2y s: hares of capital stock of the other party acquired by such party pursuant 3 i
to this Agreement (* Restricted Shares'), including any TUC Shares issued i purrutnt to section 1(b), or otherwise beneficially owned (within the meaning 1
. of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as '
(mendsd (the 'Eschange Act")), by such party on each matter submitted to a veta of shareholders of such other party for and against such matter in the arme pro ortion as the vote of all other shareholders of such other party are
.votsd (w ether by proxy or otherwise) for and against such matter.
- 9. Restrictions on Transfer.
l (a) Restrictions on Transfer. Prior to the Expiration Date, neither party , thzll, directly or indirectly, by operation of law or otherwise, sell, assip, i pitoga, or otherwise dispose of or transfer any Restricted Shares beneficially I
'.ownzd by such party, other than (i) pursuant to Section 7, or (ii) in '
&ccordance wi 2 Section 7(b) or Section 10. I (b) Permitted Sales. Following the termination of the Merger Agreement, a p?.rty 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 rpprsved or recommended, or otherwise determined to be f air to and in the best intar:sts of the shareholders of the other party, by a majority of the members cf th:n Board of Directors of such other party, which majority shall include a majcrity of directors who were directors prior to the announcement of such tend:r or exchange offer.
- 10. Registration Rights.
. (e) Following the termination of the Merger Agreement, either party hereto th3t owns Restricted Shares (a " Designated Holder") may by written notice (the
'Rrgistration Notice") to the other party (the " Registrant') request the' ;
R:gistrant to register under the Securities Act all or any part of the 1 isstricted Shares beneficially owaed by such Designated Bolder (the
*Rigistrable Securities") pursuant to a bona fide firm commitment underwritten l i , public of fering, in which the Designated Bolder and the underwriters shall <
tffzet as wide a distribution of such Registrable Securities as is reasonably l pr:cticable and shall use their best ef forts to prevent any person (including i eny Group (as used in Rule 134-5 under the Exchange Act)) and its affiliates I from purchasing through such offering Restricted Shares representing more than 1 1% of the outstanding shares of common stock of the Registrant on a fully ' dilutsd basis (a
- Permitted Offering").
(b) The Registration Notice shall include a certificate executed by the i Designated Bolder and its proposed managing underwriter, which underwriter rh.nl1 be an investment banking firm of nationally recognized standing (the
'Minzger"), stating that (i) the offsring,y have and a good faith intention to commerce promptly a Permitted (ii) the Manager in good faith believes that, based on the then-
.prsvailing market conditions, it will be able to sell the Registrable
- - Sscurities at a per share price equal to at least 80% of the then Fair M.Irket Value of such shares.
(c) The Registrant (and/or any person designice4 by the Registrant) shall thsr:upon have the option exercisabla by wri'. ten nodce delivered to the Designited Holder within ten business days af ter the receipt of the Rigistration Notice, irrevocably to agree to purchase all or any part of the R1gistrable Securities proposed to be so sold for cash at a price (the " Option Prics") equal to the product of (i) the number of Registrable Securities to be ao purchased by the Registrant and (ii) the then Fair Market Value of such thsres. II-7 l l i
PAG: 16-SEP 1996 03:46 EDC: 00 000 0000 GO 00 BLD 00 000 0000 00:00
- 1. 1. Connelley A0G 3.4.1,p01 l(l1))TINEDGs(14411.
1))Tuc/Elserch ANN 11180008FIF for3 8 4 (212) 341-1777
=
(PAGE) (d) Any purchase of Registrable Securities by the Registrant (or its d: signee) under Section ll(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 cny reasonable date and time designated by the Registrant and/or such d2rignee in such notice within twenty business days after delivery of such notics, and any payment for the shares to be so purchased shall be made by d:livsry at the time of such closing in immediately available funds. (e) If the Registrant does not elect to exercise its option pursuant to this 8:ction 10 with respect to all Pegistrable Securities, it shall use its best i efforts to effect, as promptly as practicable, the registration under the 82curities Act of the unpurchased Registrable Securities proposed to be so ! solds provided, however, that (i) neither party shall be entitled to demand more than an aggregate of tTo 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 riquest 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 Rrgistrant, such information would be required to be disclosed if a rigistration statement were filed at that times (B) the Registrant is required under the Securities Act to include tudited financial statements for any period in such registration statement and such financial statements are not yet available for inclusion in such registration statements or (C) the Registrant determines, in its reasonable judgment, that such rrgistration would interfere with any financing, acquisition or other material transaction involving the Registrant or any of its af filiates. (f) The Registrant shall use its reasonable best efforts to cause any RIgistrable 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 er qualification in effect in such jurisdictions provided, however, that the Brgistrant shall not be required to qualify to do business in, or consent to ginsrcl 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 a holdsr as, in the reasonable judgment of counsel for the Registrant, is nicsasary to enable the Registrant to include in such registration statement all material facts required to be disclosed with respect to a registration thsrtunder. (h) A reyistration effected under this section 10 shall be effected at the R2gietrant s expense, except for underwriting discounts and commissions and tha fees and these of counsel to the Designated Holder, and the Registrant thsll provide to the underwriters such documentation (including certificates, opinions of counsel and " comfort
- letters from auditors) as is customary in conniction with underwritten public of ferings as such underwriters may rsesonably require.
(i) In connection with any registration effected under this Section 10, the parties agree (1) to indemnify each other and the underwriters in the customary manners 1 (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 nrcessary, participating in road-show presentations). (j) The Registrant shall be entitled to include (at its expense) additional chtres of its common stock in a registration ef f ected 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. II-8 l l r-
lll]lFINEDGel14413.ANNII]09009. PIP PAGs 20 $rt.1996 04:18 EDG 00-000 0000 00:00 SLK 00 000 0000 00:00 Pora 5-4 R. R. Donne 11ey (212) 341-7777 A0G 3.4.1,p01
'((1))Tuc/Enserch (PAGE) 11, Adjustment of Number of Enserch Shares. l (a) Without limitation to any restrictions on Enserch contained in this j Agralment or in the Merger Agreement, in the event of any change in Enserch j Common Stock by reason of stock dividends, splitups, mergers (other than the Mergsr), recapitalizations, combinations, exchange of shares or the like, the
! . typs and number of shares or securities subject to the Enserch Option, and the purchase price per share provided in Section 1, shall be adjusted (pprspriately 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 chinged) representing 4.9% of the outstanding Enterch Common Stock for the cggragate Exercise Price calculated as of the date of this Agreement as f provided in Section 1. (b) If, as a result of the application of the limitations on pays +ents contained in section 10.3(d) of the Merger Agreement, the maximum payment upon th2 '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 i Srction 7(a) of this Agreement were exercisso on the Termination Date (as ; defined in the Merger Agreement), result in such maximum payment as so ! limited.
- 12. Beatrictive Legends. Each certificate representing shares of Enserch j Common Stock issued to TUC hereunder, and TUC Shares, if any, delivered to En2srch at a closing, shall include a legend in substantially the following ,
foras 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 LANS, AN D MAY BE REOFFERED OR SOLD ONLY IF SO REGISTESf.D OR IF AN t EXEMPTION FROM 3UCH REGISTRATION IS AVAILABLE. SUCH SECURITIES 7.AE 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 NEICH MAY BE
- OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed thats (i) securities st:te the reference to Sky or Blue the laws resale restrictions in the of theshall above legend Securities be removedAct and by i d: livery of substitute certificate (s) without such reference if TUC or Enlerch, as the case may be, shall have delivered to the other party a copy of a letter from the staf f of the SEC, cv an opinion of counsel, in form and substance satisf actory to the other party, to the effect that such legend is not required for purposes of G o Securities Act or such laws (ii) the reference to the provisions to this Agreement in the above lagend shall be removed by delivery of substitute certificate (s) without i 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 ne retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in i thi preceding clauses (i) and (ii) are both satisfied. l 1 In todition, such certificates shall bear any other legend as may be required by Icw Certificates representing shares should in a registered public offsring pursuant to section 10 shall not be required to bear the legend set f orth in this Section 12. 13 Binding Effects No Assignment No Third Party Beneficiaries. (a) This Agrstment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted asr.igns. (b) Except as expressly provided for in this Agreement, neither this Agratment nor the rights or obligations of either party hereto are assignable, asecpt by operation of law,' or with the written consent of the other party. II-9 i
FAG 16 SEP.1996 Ch 46 EDC: 00-000-0000 00:00 RLE: 00 000-0000 00:00 Ill) (1) FINER l1443). ANN!!]00011.FIP tuc/E;serch fors 8 4 1. 2. bonne11ry (212) 341-7777 A0G 3.4.1,p01 (PACE) cith a copy to LeBoeuf, Lamb, creene & Mackae, L.L.P. 125 West 55th Street - Cew York, N.Y. 10019 Attentions Douglas W. Hawes, Esq. .i
- 3. If to Enserch tos l Sy Mails cad Hands En+erch Corporation 300 South St. Paul j D:llas, Texas <
Attentions William T. Satterwhite, Esq. I with a copy to: Covington a surling 1201 Pennsylvania Avenue, N.W. W;rhington, D.C. 20044 Attentions David Brown, Esq.
- 17. Coverning Laws Choice of Forum. This Agreement shall be governed by and con: trued in accordance with the laws of the State of Texas applicable to l cgreements made and to be performed entirely within such State and without '
r:g:rd to its choice of law principles.
- 10. Interpretation.
(s) >fhen reference is made in this Agreement to Articles, Sections or , Exhibits, such reference shall be to an Article, Section or Exhibit of this i Agr ement, as the case may be, unless otherwise indicated. j b) The table of contents and heading contained in this A reement are for resrrncepurposesandshallnotaffectinanywaythemeanfngor l intOrpretation of the Agreement. (c) Whenever the words ' include,'
- includes,* or " including' are used in W 3 Agreement, they shall be deemed to be followed by the words 'without 117t.its tion . "
(d) Whenever 'or" is used in this Agreement it shall be construed in the non:xclusive sense.
- 19. Counterparts: Effect. This Agreement may be executed in one or more i count:rparts, each of which shall be deemed to be an original, but all of I thich shall constitute one and the same agreement.
- 20. Amendments: Waiver. This Agreement may be amended by the parties hereto End the terms and conditions hereof may be waived only by an instrument in criting signed on behalf of each of the parties hereto, or, in the case of a i caivar, 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 cz2rcise of such rights, and for the expiration of all statutory waiting p:riods; and (b) to the extent necessary to avoid any liability under Section 16(b) of tha Exchange Act by reason of such exercise.
II-11 l 1 I t
[(1))PINEDCal!4431.ANNIIl000124P17 FAC 24 SEP-1996 04:59 EDC: 00-000-0000 00:00 312: 00-000-0000 00:00 ((1])?ve/tisereb Pors 8-4 R. R. Donnelley (212) 341-7777 AOC 3.4.1,p01 l (PACD l In Witness Whereof, the parties hereto have caused this Agreement to be j l cazeutzd by their respective duly authorized officers as of the date first j tbove critten Enserch Corporation
/s/ David W. Biegler By: i Names David W. Biegler l
Title:
Chairman and President, l Chief Executive Officer i 1 Texas Utilities company
/s/ Erle Nye By Names Erle Nye Titles President and Chief Executive 11-12 l 1
i t i l I i r i l i l
l l1] ) fistDG s !!4431. ArfK111100001. FIF PAGs 19-stP 1996 19:56 EDG 00 000 0000 00:00 SLE: 00 000-0000 00:00 ((1))Tuc/f.mich Fora S-4 3. 2. Donnelley (212) 341 7777 A0G 3,4.1,P01 (PAGE> ANNEX III OPINION OF BARR DEVLIN & CO. INCORPORATED [ September 23, 1996] Th3 Board of Directors T:xas utilities company Entrgy Plaza 1601 br Dalles,yan Texas Street 75201-3411 De:r Members of the Boards W2 understand that Tesas Utilities Company, a Texas corporation ("TUC") and ENSERCH Corporation, a Texas corporation (*ENSERCE*), have determined to enter 1 into a strategic business combination. The terms and conditions of the 1 busin:ss combination are set f orth in the Amunded and Restated Agreement and l Pltn of Merger, dated as of April 13, 1996 ( the " Plan of Merger"), among TUC, EISERCH and TUC Holding Company, a Texas corporation (the ' Company"), 50% of wh aa capital stock is owned by TUC and 50% of whose capital stock is owned by ETSERCH. The Plan of Merger provides for, among other dings, (1) the merger of TUC Mar er Corp., a Texas corporation and a wholly owned subsiciary of the Compiny, w th and into TUC (the TUC Merger"), (ii) the merger of Enserch 1 M;rg2r Corp., a Texas corporation and a wholly owned subsidiary of the ! Compiny, wlth and into ENSERCH (the *FNSERCH Merger'), and (iii) immediately j prior to the ENSERCH Merger, the merger (the " Preliminary Merger") of Enserch , Explcration, Inc., (*EEX'), I rith end into Lone Star Energy Operations,an approximately 83% owned Inc. ('LSEPO , subsidiarg)of a wholly ownedENSERCH 1 gubsidiary of FMSERCH whose name is to be changed to Enserch Exploration, Inc. ("N72 EEX I holdigs of) common stock of ENSEkCHin the Preliminary (*ENSERCHMerger, and theStock") Common subsequent on ada.oribution pro rata to the basis (the ' Distribution') of ENSERCHis entire interest in New EEX. The ) ENSECCH Merger and the TUC Merger are referred to herein, collectively, as the i
*Mitg rs.* Pursuant to the Plan of Merger, each issued and outstanding share cf us common stock of TUC ("TUC Common Stock") will be converted into one chira (the 'TUC Conversion Ratio') of common stock of the Company (" Company Common Stock"), and each issued and outstanding share of ENSERCH Common Stock will be converted into that fraction of a share (the *ENSERCH Conversion R; tic *) of Company Common Stock obtained by dividing $8.00 by the average clo:ing sales price of TUC Cormon Stock as reported on the New York Stock i Exchinge consolidated Transactions Tape on each of the 15 consecutive trading l drys preceding the fifth trading day prior to the consummation of the Mergers !
(22 Average TUC Price"); provided, however, in no event will the Average TUC ; Prics be deemed to be less than $35.625 or more than 643.625. The terms and ! cinditions of the Mergers are set forth in more detail in the Plan of Merger. C pitalized terms used herein without definition shall have the respective metnings assigned to such terms in the Plan of Merger. W3 have been requested by TUC to render our opinion with respect to the f=irnsss, from a financial point of view, of the TUC Conversion Ratio to the holdIrs of TUC Common Stock.
, In arriving at our opinion, we have, among other things:
(1) Reviewed the Annual Reports, Forms 10-K and the related financial information for the three-year period ended December 31, 1995 and unaudited finincial information for the quarterly periods ended March 31, 1996 and Juni 30, 1996, for ENSERCH3 (2) Reviewed the Annual Reports, Forms 10-K and the related financial information for the three-year period ended December 31, 1995 and unaudited finincial information for the quarterly periods ended March 31, 1996 and Jun) 30, 1996, for TUC# (3) Reviewed certain other filings with the Securities and Exchange Commission and other regulatory authorities made by ENSERCH and TUC during tha last three years; III-2 l l-l i i i
( { 1]) f!NEM s [1443 ) . ANNIII) 00002.FIF FAG: 19 8tF 1916 14:52 EDGs 00 000 0000 00:00 212 : 00-000-0000 09:00 ((1))tue/Easereb fors 8 4 3. R. Doaselley (212) 341 7777 A0G 3.4.1,p01 (PAGE) ? (4) Reviewed certain internal information, including financial forecasts, reltting to the business, earnings, capital expenditures, cash flow, assets End prospects of ENSERCH as adjusted pro forma to reflect the Distribution (*ENSERCH As Adjusted") furnished to us by ENSERCH; (5) Conducted discussions with members of senior management of TUC and ENSERCH concerning their respective businesses, regulatory environments, prospects, strategic objectives and possible operating and administrative cyn:rgies which might be realised for the benefit of the company following , he Mergeras (6) Reviewed the historical market prices and trading activity for shares of El8ERCH Common Stock with those of certain publicly traded companies which we deemed to be relevants (7) Compared the results of operations of ENSERCH As Adjusted with those af c:rtain companies which we deemed to be relevant; (8) Compared the proposed financial terms of the Mergers with the fin ncial terms of certain business combinations which we deemed to be relsvants giv(9)ingAnalyzed ef f ect the to valuation of sharesusing the Distribution, of ENSERCH Common Stock, various valuation after methodologies which we deemed to be appropriates (10) Considered the pro forma effect of the Mergers on the company's erpitalisation, earnings and cash flows (11) Compared the pro forma effect of the Mergers on the company's ccrnings per share with corresponding current and projected values for TUC on a stand-alone basias (12) Reviewed the Plan of Mergers (13) Reviewed the Registration Statement, including the Joint Proxy St&tement/ Prospectus of TUC and ENSERCH dated the date hereof; and (14) Reviewed such other studies, conducted such other analyses, con:idered such other financial, economic and market criteria, performed tuch other investigations and taken into account such other matters as we d:emed necessary or appropriate for purposes of this opinion. In r:ndering our opinion, we have relied, without independent verification, upon the accuracy and completeness of all financial and other information publicly available or otherwisa furnished or made available to us by TUC and ENSERCH and have further relied upon the assurances of management of TUC and E2SERCH that they are not aware of any facts that would make such information iniccurate or misleading. With respect to the financial projections of TUC and i ENSERCH As Adjusted (including, without limitation, projected cost savings i ben fits), re have relied upon the assurances of management of TUC and ENSERCH ] th:t such prvjections have b en reasonably prepared and reflect the best ' currently available estimates and judgments of the respective management of TUC [nd ENSERCH as to the future financial performance of TUC and ENSERCH As Adju tid, as the case may be, and as to the projected outcomes of legal, r gul: tory and other contingencies. In arriving at our opinion, we have not 2cd) cr been provided with an independent evaluation or appraisal of the ce2sts or liabilities (contingent or otherwise) of TUC or ENSERCH, nor have we mais cny physical inspection of the properties or assets of TUC or ENSERCH. We h va ersumed that the Mergers will be tax-free transactions as described in 14etion 351 of the Internal Revenue code of 1986, as amended (the " Code"), and tha rtgulations thereunder and that the Distribution shall qualify as a tax-frs3 Cpin-off within the meaning of Section 355 of the Code. We have also assumed that the TUC Merger will be accounted for as a combination of comp;nies under common control using historical costs in a manner similar to a l Proltng of interests and the INSERCH Merger will be accounted for by the purchare method of accounting. Our opinion herein is necessarily based upon fin ncial, stock market and other conditions and circumstances existing and disclo2ed to us as of the date hereof. Wi have acted as financial advisor to TUC in connection with the Mergers and will r$ceive certain fees for our services. In addition, we have in the past ; rcadirid certain investment banking and financial advisory services to TUC for which we received customary compensation. III-2 l i l
- - - - ~
ll111FINEDGal14433, 1])fuc/Ensisch ANN!!!)0v003,FIPPACS 19-$t7 1996 14:52 EDG 20 stF 1996 01:07 SLEs 00 900 0000 00:09 Fora 5-4 3.3, Donnellsy (212) 341 7771 EDITot V2,7 1 *** (PACE) Our advisory services and the opinion expressed herein are provided solely for the use of TUC's Board of Directors in evaluating the Mergers and are not provided on behalf of, or intended to confer rights i.s remedies upon, any stockholder of TUC,- ENSERCE or any person other than TUC's Board of Directors. Emerpt for its publication in the Joint Proxy Statement / Prospectus dated the _ _ . , . _ _ dite hereof which is being distributed to holders of TUC Common Stock and ENsERCH common stock in connection with approval of the Mergers, our opinion say tct be published or otherwise used or referred to without our written onest, This opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should act with roepset to the Mergers. Bsesd upon and subject to the foregoing, our experience as investment bInktre and other factors we deem relevant, we are of the opinion that, as of tha dite hereof, the TUC Conversion Ratio to be offered in connection with the Mirgsrs is fair, from a financial point of view, to the holders of TUC Common 3tock. Very truly yours,
/8/ BARR DEVLIN & CO. INCORPORATED 7 Barr Devlin & Co. Incorporated t-l III*)
i i I i I. l l l i
+
F i q l A l-
l l l l ((1])flutDGs[144)). ANN!Y]00001.t!F FAC 20 stF-1996 05:00 EDGs 00-000 0000 00:00 BLE: 00 000-0000 00:00 [ll))Tuc/Easerch fors 8 4 R. 3. Donnelley (212) 341 7777 A0G 3.4,1,p03 (PACE) I. ANNEX IV OPINION OF MORGAN STANLEY & CO. INCORPORATED l-l [ September 23, 1996] torro of Directors i ENSERCH Corporation 300 south st. Paul Street l Dallas, TX 57201 Mimbers of the Roards W2 understand that'ENSERCP Corporation (*ENSERCH" or the ' Company *), Texas ~ Utilities Company ("TUC"), and TUC Holding Company ('TUC solding"), a corporation 50t of whose capital stock is owned by ENSERCH and 50% of whose capltnl stock is owned by TUC, have entered into Mended and Bestated l Agrasment and Plan of Merger, dated as of April 13, 1996 (the " Plan of Mirgsr"), which provides, among other things, for (i) the merger of TUC Merger Corp., a wholly owned subsidiary of TUC Holding, with and into TUC (the 'TUC l Margrr"), (ii) the merger of Enserch Merger Corp., a wholly owned subsidiary cf TUC Holding, with and into ENSERCH (de 'ENSERCH Merger ), and (iii) [ immediately prior to the ENSERCH Merger, the merger (the
- Preliminary Merger")
of Enterch Exploration, Inc., a corporation of which approximately 83% of the cutst with nding common cnd into Lone stock (the 'EEX Star Energy common Plant Stock',) isInc. Operations owned by ENSERCH ('LSEPO'), a wholly('EEX"), cwntd subsidiary of ENSERCH whose name is to be changed to Enserch Exploration, Inc. ('New EEX') in the Preliminary Merger, and the subsequent
' distribution to the holders of common stock of ENSERCH ("ENSERCH Common Stock') on a pro rata basis (the ' Distribution") of ENSERCH's antire interest in Nr2 EEX, in accordance with the terms of the Distribution Agreement, gub:tantially in the form attached as Exhibit A to the Plan of Merger, to be entarid into among ENSERCH, LSEPO, EEX and TUC Holding (the ' Distribution Agr:ement'). The ENSERCH Merger and the TUC Merger are referred to herein, collectively, as the " Mergers." Pursuant to the Plan of Merger, each issued
.cnd cutstanding share of the common stock of TUC ("TUC Common stock') will be convirted into one share (the 'TUC Conversion Ratio") of common stock of TUC Calding ("TUC Holding Common Stock"), and each issued and outstanding share of l ENBELCH Common Stock will be converted into a certain fraction of a share (the
*ENSERCH Conversion Ratio *) of TUC Rolding Common Stock obtained by dividing
$8.00 by the average closing sales price of TUC Common Stock as reported on thz NIw York Stock Exchange Consolidated Transactions Tape on each of the 15 ctnsicutive ciniummation trading of days preceding(the the Mergers the fifth trading)
Average TUCdayPrice prior to the, provided, however, in no svent will the Average TUC Price be deemed to be less than $35.625 or more thin $43.625. The terms and conditions of the Mergers and the Distribution are mors fully set forth in the Plan of Merger. Capitalized terms used herein without definition shall have the respective meanings assigned to such terms ! in th3 Plan of Merger. You have asked for our opinion as to whether the ENSERCH Conversion Ratio pursuint to the Plan of Merger is f air f rom a financial point of view to the holicrs of ENSERCH Common Stock.
' yor purposes of the opinion set forth berein, we haves I
( (1) analyzed certain publicly available financial statements and other ; information of the Company, LSEPO, EEX and TUCp < (11) analyzed certain internal financial statements and other financial and operating data concerning the Company, LSEPO, EEX and TUC prepared by j tha managements of the Company and TUC; I IV-1 l l I l l 9 l l l
r I l ((1))TINEDGs[14413,ANNIV)S0003.F17 FAGS 20 stP 1996 05:01 EDG 00-000-0000 00:00 BLE: 00 000 0000 00:00 ill]Ituc/ u sir b fors 8 4 3. 3. Donsolity (212) 341 7777 A0G 3.4.1,p03 (PAGD Basso on the foregoing, we are of the opinion on the date hereof that the E!SERCH Conversion Ratio pursuant to the Plan of Merger is fair from a finIncial point of view to the holders of the ENSERCH Common Stock, very truly yours, Morgan Stanley & Co. Incorporated , syi O. Griffith Sexton , Advisory Director IV-3 e i
+
I i 1 0 f I l t 1 i 1 e 1 l i I t I~ _ ,
FAGS 19 8EF 1996 19:18 EDG 00 00b 6000 00:00 BLK: 00 006-0000 00:00 l[1))f15EDG(14433.ARNYJ00001. [1))Tuc/Easirch form PIP S-4 3. 3. Donat11sy (212) 341 7777 A0G 3.4.1,p04 (PAGE) ANNEX V EMPLOYMENT AGREEMENT THIS AGREEMENT by"and between Texas Utilities Company (the ' Company'), and D. W. Biegler (the Ezecutive") is entered into as of the loth day of asptember, 1996. WITNESSETH : WHEREAS, ENSERCH Corporation ('ENSERCH*) and the Company have entered into in Amended and Restated Agreement and Plan of Merger whereupon the closing of such transaction, ENSERCH will become a subsidiary of a successor to the Comp ny; WHEREAS, the Company desires to employ the Executive for a term beginning on th:s closing of the acquisition, and the Executive is willing to serve in the employ of the Company beginning at such time, upon the terms and conditions provided in this Agreement; WHEREAS, the Executive currently serves as an executive of ENSERCH and the " Comp;ny recognizes the importance of the substantial experience and qu:lifications of the Executive in performing his duties and responsibilities, cnd the Company considers it essential to the best interests of the Company to tek) Eppropriate steps to assure that the Company will continue to have cvsil 21e the Executive's services following the acquisitions NOW, THEREFORE, in consideration of the mutual covenants contained in this Agr:cment, the parties agree as follows: ARTICLE 1
- De finitions All words and phrases defined shall have the meanings described below unless in thi context some other meaning is clearly intended 1.1 ' Agreement' means this agreement.
1.3
- Board' means the Board of Directors of the Company.
1.3 *Cause' for termination of the Executive means (a) an act or acts of dishonesty or material violation of a company policy by, or at the directica ef, the Executives (b) willful failure or refusal of G e Ezeeutive to perform scryices as properly required by the Company (c) any action or failure tc act en th3 part of the Executive which is intended to result in material injury to th2 arsets, business or prospects of the Company; or (d) the conviction of the Ex:cutive of a felony 1.4
- Closing" means the Closing of the Merger Agreement as therein defined.
1.5 " Effective Date" means the date of the closing as defined in the Merger Agrs:mant. 1.6 *cood Reason" for the Executive to terminate the Executive's employment Eht11 means (a) an adverse change in the Executive's status or position (s) from that da:cribed in Article IV hereof including, without limitation, any adverse chinge in the Executive's status or position as a result of a material diminution in the Executive's duties or responsibilities, or a material chinge in the Executive's business location or the assignment to the Enscutive of any duties or responsibilities which are inconsistent with such status or position (s), or a substantial increase in the Executive's buciness travel, or any removal v-1 i I e i 1 I l ! i
l l FAQs 19 srP-1996 19:19 EDGs 00-000-0000 00:00 stK: 00 000-0000 00:50 Il1)))Tue/taserchflut
) m !!443).Asuvjo0002.tIF -
fors 5-4 R. 3. Donnelley (212) 341-7777 A0G 3.4.1,p04 (PAGE) of the Ezeeutive from or any failure to reappoint or reelect the Executive to such position (s) (escept in connection wlth the terminating of the 1 Ezrcutive's employment for Cause, disability or retirement or as a result cf the Executive a death or by the Executive other than for Good Reason):
)
(b) a reduction by the Company in the Executive's base salary as set farth herein, or in the number of vacation days to which the Executive is I thrn entitled under.the Company's normal vacation policy; , (c) the taking of any action by the Company (includin the elimination of a plan without providing substitutes therefor or the re uction of the Ex2cutive's awards thereunder) that would diminish or the failure by the Company to take any action which would maintain the aggregate projected value of the Executive's awards under the Company's Annual Incentive Plan and the Deferred and Incentive Compensation Plans (d) the taking of any action by the Company that would diminish or the feilure by the Company to take any action which would maintain the aggregate value of the benefits provided the Executive under the Company's a medica), health, dental, accident, disability, life insurance, stock
. purchase or retirement plans; itle)lure the of taking the of any action company byany to take the action Companythatthat would would diminish or the maintain indemnification or insurance for of ficers' liability; or .
(f) any purported termination by the Company of the Ezecutive's , esployment that is not effected pursuant to a Notice of Terminations and isr purposos of this Agreement, such purported termination shall not be
'afixctive.
1.7 " Merger Agreement" means the Amended and Bestated Agreement and Plan of hzrg r among ENSERCH, the Company and TUC Bolding Company dated as of April
. 11, 199G. ,
1.8 ' Minimum Annual salary" means that salary described in section 6.1. i 1.9
- Notice of Termination" means a notice specifying the termination I prsvision in this Agreement relied upon and setting forth in reasonable detail th2 frets and circumstances claimed to provide a basis for termination of the 4 Earcutive's employment under the provision so specified. A Notice of T3rmination for Cause shall contain a written description of the particulars cf thz act or omission of wnich the Executive is accused in the good faith opinion of the Company.
ARTICLE II Employment Thi Company hereby agrees to employ the Executive and the Executive hereby tgress to become employed with the Company upon the terms and conditions set forth in this Agreement. ARTICLE III Term of Agreement Th3 term of employment shall be for a period f rom the Ef fective Date until th3 sicond anniversary of the Ef fective Date. In the event that the Merger Agracment does not close, for any reason, this Agreement shall not become 'i sf ftetive and shall have no force or ef fect whatsoever. Any termination of the Enscutive's employment with the Company during its term shall be subject to tha provisions of Article VIII hereof. ARTICLE IV Duties Th3 Executive during the term of this Agreement shall report to the Chief i Erscutive Officer of the Company. V-3 i
)
I {
'l' I
FACs 16 $EP 1996 00:53 EDG: 00-000-9000 00:00 SLE: 00-000-0000 00:00 l([1))f!BEDGsl14433,ANNVje0003 1)lfur/E serch FIF form 5 4 3. I, Dona 111sy (212) 341-7777 A0G 3.4.1,p04 (PAGE) ; , 4 ARTICLE V }. [ Extent of Service t l Th3 Esecutive shall be amployed on a full time basis. Therefore, during the ( t period of his employment, except for illness, vacation periods and leaves of ,; ab; Eco authorized under the employment policies of the Company, the Executive i thall devote all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement. However, the E3:cutive may devote a small but reasonable amount of time to pursue and 2 monitor personal investments and Executive may continue to serve on the boards of directors of the companies or organizatioLs currently served by the , Erscutive. ARTICLE VI f Compensation f or services rendered by the Executive under this Agreement, the Company will pay and provide to ne Ezeeutive compensation and benefits during the tarm of this Agreement, which compensation and benefits (1) initially shall be as est forth in this Article VI and (ii) shall not at any time during the term cf this Agreement be less than as set fosth in this Article VI. E.1 Minimum Annual salary. During the term of this Agreement the Company ths11 pay the Executive base salary on a semi-monthly basis calculated and bas?d upon the Minimum Annual Salary for the Executive of $600,000, which may be increased from time to time by no Company at the Company's sole discretion. The term ' Minimum Annual Salary" as used in this Agreement shall include all increases granted by the Board. 6.2 Cash Incentivu compensation. The Executive shall be entitled to i participate in the Company's Annual Incentive Plan or a successor plan or crr<ngement of the Company providing for incentive compensation of executive efficers of the Company, such participation to be subject to the terms and conditions of such plan. Aggregate awards under such plan for the calendar y21r 1997 shall be the greater of amounts determined in accordance with that ! plan and $330,000. l [ 5.3 Executive and Incentive Compensation Arrangenents. The Executive shall be entitled to participate in any executive and intentive compensation arrnagements of the Company including, but not limited to, the Company's Annual Incentive Plan, the Deferred and Incentive Cortensation Plan and the talary Deferral Plan (recognizing that such plans may'3e discontinued, merged
. cith other plans or amended from time to time), and sucu 9ther plans and .
crringements which may be approved in the future that are generally available ! to senior executives of the Company all on the terms and conditions of such picn2 and arrangements. ; i4 6.4 Retirement Plan. The Executive shall be entitled to participate in the Compiny's retirement program, provided, however, the Executive's knefit shall be the greater of (a) the combined benefit the Executive is entitled to r:csive from the Company's retirement program and the ENSERCH retirement
. programs or (b) the benefit the Executive would have been entitled to receive undir the combination of the ENSERCH retitement program and the Company's rstirement program ultimately adopted for the remainder of the ENSERCE employees. The retirement benefit under (a) and (b) above shall include any supplemental or restoration plans that compensate for benefit limitations undar the tar qualified plans.
6.5 other Company Compensation Programs.' The Executive shall be entitled to
- participate in all other employee benefit plans, esecutive retention incentive
~
i programs and other compensation and fringe benefit prgrams adopted and aponiored by the Company for which he is eligible by virtue of Ms employment by the Company. Such participation shall be subject to, and consistent with, un terms and conditions of such plans and programs. Service with ENSERCH ah211 be deemed service with the Company in determining eligibility and bensfit levels under the Company's plans and programs (other than the
. Comp ny's retirement program).
V-3 l t l t 'l i
I i PACS 16 SEP 1996 10:04 EDC 00-600-0000 00:00 ELKS 00 000-6000 00:00 Ill])TINEDCs(14433.ANNVje0004. (1)lfve/l;serch PIPFora 9 4 3. R. tonnel187 (212) 341 7777 AoG 3.4.leP04 (PACEP t
. ARTICLE VII Working racilities'and Expenses
'~
7.1 office racilities. The Company shall furnish the Esecutive with"a privste of fice and a private secretary to be selected by the Executive and all
. eth3r assistance and accommodations as are suitable to the character of the Eszcutive's position with the Company and adequate for the performance of his duties under this Agreement.
7.2 Espenses. The Esecutive is authorized to incur reasonable expenses for tha promotion of the business of the Company including expenses for j sntertainment, travel and other similar items..The Cospany shall pay or . raimburse the Executive for all reasonable itees of expense incurred by the i Executive in performing his obligations under this Agreement. The Executive j
. must, however, in each case provide adequate substantiation of the expense 1
- that has been incurred by the Executive, i
ARTICLE.VIII Compensation Upon Termination 8.1 Compensation @ on Termination Under specified Circumstances. If the Compt.ny terminates n e Executive's e gloyment other than (a) for causes or (b) ; upon h e Esecutive's inability to fully perform his duties and rarponsibilities with the company by reason of his disabilitys or (c) if the " Esicutive terminates his employment for Good Reason (which termination may be af fteted by retirement for GoM Reason prior to the Esecutive's normal
. rrtirement date), then the Company shall pay the Executive (without regard to tha provisions of any benefit plan) in a lump sum on or before the tenth- ;
i businiss day following the date of termination (" Payment Date") an amount squsl to the sum of de following paragraphs (i) through (iii), reduced by any l cf such amounts already paids i (i) The Executive's full base salary through the date of termination at -l l ths rate in effect just prior to the time Notics of Termination is given, ; plus any earned vacation time, plus any benefits or awards which pursuant ' to the terms of any plans have been earned or become payable, but which htva not yet been paid to the Executive (provided that Mnefits or awards 5 undst plans shall M paid in accordance with the terms of the plans); plus. (ii) Any severance benefits customarily provided by the Company as well ; as any o ner then vested benefits of the Executive (which shall M paid in i eccstdance with, and subject to, the terms of the applicable plans); plus l l (iii) Any other unpaid amounts owing under this Agreement. 8.2 Notice of Termination. An termination b- the Compan or by the ,- Erscutive for Good Reason follo ing the Effect we Date sha 1 be communicated b by written Notice of Termination to the other party hereto. ARTICLE 1X Payment of Legal Fees ; l In the event that either party initiates a legal proceeding to enforce any right or obligation provided for herein, the non-prevailing party in such precasding shall reimburse the prevailing party his or its reasonable legal fass End expenses incurred in connection with such proceeding. The
' rsimbursement of such legal fees and expenses shall be made within 30 days >
- af ter the prevailing party's request for payment accompanied by evidence of ths fses and expenses incurred.
V-4 ll
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{[1]lFINEDGil14433.ANr/)00005.f!P PAG 16-stP 1996 08:53 EDG 00-000-0000 09:00 BLE: 00-000 0000 00:00 ll!)]Tuc/taserch Fors S-4 3. 2. Donne 11ey (212) 141-7777 A0G 3.4.1.p04 (PAGE) ARTICLE X Modification and Waiver 10.1 Amendment of Agreement. This Agreement may not be modified or amended exc pt by an instrument in writing signed by the parties to this Agreement. 10.2 Waiver. No term or condition of this Agreement shall be deemed to have v,;'~ , berm crived, nor shall there be any estoppel against the enforcement of any g provision of this Agreement, ascept by wrltten instrument of the party charged ) with e:iver or estoppel. No written waiver shall be deemed a continuing waiver te* uniscs the continuing nature of the waiver is expressly stated therein. Each w:ivar shall operate only as to that specific term or conditions it will not be dimmed a waiver of future conditions or as to any act other than that ! apacifically waived. ARTICLE XI Arbitration Any controversy or claim arising out of or relating to this Agreement, or brosch of it, shall be settled by arbitration in Dallas, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, end judgment upon the award rendered by the arbitrator may be entered in any crurt of competent jurisdiction. ARTICLE XII General Provisions 12.1 rederal Income Tax withholding. The Company shall withhold from any comp?niation and benefits payable under this Agreement all federal, state, ' city, or other taxes as shall be required under any law or governmental ragulttion or ruling. 12.2 successors: Enforceability. (c) fuccessor Must Assume. The Company will make reasonable efforts to requirs any successor (whether direct or indirect, by purchase, merger, conrolidation, liquidation, dissolution or otherwise) to all or substantially cil cf the aggregate business and/or assets of the Company (including crn:rlidated subsidiaries) to expressly assume and agree to perform this Agr:ement in the same manner and to the same extent that the company would be requirid to perform as if no succession had taken place. Notwithstanding the czprsas assumption of, or the failure to assume, 21s Agreement by any Eucc3ssor, W e Agreement shall be binding upon and shall inure to the benefit cf th2 Company, its successors and assigns. (b) Agreement Enforceable After Executive's Death. This A reement shall inurs to the benefit of and be enforceable by the Executive s personal or icgt1 representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. ] 12.3 Nonassignability. Except as provided in Sections 12.2 and this Section 12.3, neither this Agreement or any right or interest granted in it shall be assi;nable by either the Company or the Executive, or their successors or ripresentatives, without the oder's prior written consent. This Section shall ! not preclude the Executive from designating a beneficiary to receive any j ben 3 fit payable under this Agreement upon his death, or the executors, ; administrators, or other legal representatives of the Executive or his estate from casigning any rights under Gis Agreement to the person or persons cntitled to them. 12.4 No Attachment. Except as required by law, no right to receive payments und:r this Agreement shall be subject to anticipation, computation, Elitnation, sale, assignment, encumbrance, charge, pledge, or V-5 l l i i l I
[(1])TINEDGel14413.AINVje0006, PIP PAG: 19-8tP 1996 10:40 EDG 00-000-6000 00:00 315 00-000-0060 00:00 For2 8-4 3. I. Donn311ry (212) 341-7777 A0G 3.4.1,p04 ((1))Tec/taserch-(PAGE) hypothecation or to execution, attachment, levy, or similar process or c22ignment by operation of law. Any attempt, voluntary or involuntary, to cff ct any such action shall be null, void and of no effect. 12.5 Interest. All payments due under this Agreement and unpaid shall bear inter:st at the rate of los per annum, compounded daily, beginning on the next caruirg day after the Payment Date or such other date as they may be due. 12.6 Delivery of Notices. Any notice required to be given under this Agr:ement shall be in writing and shall be deemed to have been given and riciived upon the earlier of ti) receipt by the party to which the notice is ctat End (ii) delivery of the no'. ice to the address for notice designated by tha ptrty to which the notice is sent. Any address may be changed from time to time by serving notice to the other party as required in this Section. 12.7 Severability. If, for any reason, any provision of this Agreement is hsid invalid, that invalidity shall not af fect any other provision of this A7rsement not also held invalid, and each other provision shall to the full catant consistent with law continue in full force and effect. 12.8 Headings..The headings of Articles and sections are included solely for convinience of reference. The descriptive heading shall not control the morning or interpretation of any of the provisions of this Agreement. i 12.9 Governing taw. This Agreement has been executed and delivered in the ! St te of Texas, and its validity, interpretation, performance, and enforcement chill be governed by the laws of that State. ...g 12.10 counterparts. This Agreement may be executed in one or more count:rparts, each of which shall be deemed an original but all of which togsther shall constitute a single Agreement. ARTICLE XIII Entire Agreement This Agreement shall constitute the entire agreement of the parties with r:rpect to the matters covered hereby, and shall supersede all prior written cnd cral agreements pertaining to the subject matter bereof. Th1 parties have caused this Agreement to be executed on the date first crittin in this Agreement. Texas Utilities company
/s/ Erle Nye By:
i
/s/ David W. Biegler EXECUTIVE V-6 s l
i I i I r
FACs 19 $tP 1996 19:20 EDGs 00-000-0000 00t90 aLK 00-000-0000 00:00 [1]l)Tue/Enserch11 f!KEDG s. [14433.MNVI)00001.FIP Fors 5-4 2, R. Donne 11ey (212) 341 7777 ACG 3.4.1 p03 (PAGE) ANNEX VI EMPLOYMENT AGREEMENT THIS AGREEMENT by and between Texas Utilities services Inc. (the ' Company'), r_nd M. E. Descoe (the *Ezecutive") is entered into as of the 10th day of 81pt(mber, 1996. WITNE85ETH WIEREAS, ENSERCH Corporation (*ENSERCH") and Texas Utilities Company (*TUC") h2ve r.ntered into an Amended and Restated Agreement and Plan of Merger I wharsupon the closing of such transaction, .ENSERCH will become a subsidiary of .
.a succ*ssor to TUC; l i
WHEREAS, the Company desires to employ the Executive for a term beginning on tha closing of the acquisition, and the Executive is willing to serve in the ; erploy of the company beginning at such time, upon the terms and conditions . pravidtd in this Agreement; 1 WHEREAS, the Executive currently serves as an executive of ENSERCH and the Compiny recognizes the importance of the substantial experience and qualifications of the Executive in performing his duties and responsibilities, ced th2 Company considers it essential to the best interests of the Company to taka rppropriate steps to assure that the company will continue to have , availtble the Executive's services following the acquisitions . Now, THEREFORE, in consideration of the mutual covenants contained in this Agrrement, the parties agree as follows: ARTICtE 3 . l Definitions All words and phrases defined shall have the meanings described below unless . in tha contazt some other meaning is clearly intended. 1.1 ' Agreement" means this agreement. 1.2 ' Board" means the Board of Directors of the Company. 1.3 'Cause" for termination of the Executive means (a) an.act or acts of dightnisty or material violation of a Company policy by, or at the direction
- of, tha Executives (b) willful failure or refusal of ne Executive to perform ssrvicss as properly required by the Companys (c) any action or failure to act >
on th2 part of the Executive which is intended to result in material injury to th2 assets, business or prospects of the Company; or (d) the conviction of the ' Extcutive of a felony 1.4 ' Closing' means the Closing of the Merger Agreement as therein defined. 1,5 "Ef fective Date* means the date of the closing as defined in the Merger Agrscaint.
- 1.6 *Cood Reason'. for the Executive to terminate the Executive's employment ehtll means -
1 (a) an adverse change in the Executive's status or position (s) from that i dsscribed in Article IV hereof including, without limltation, any adverse
- chtnge in the Executive's status or position as a result of a material dicinution in the Executive's duties or responsibilities, or a material chtnge in the Executive's business location or the assignment to the Exacutive of any duties or responsibilities which are inconsistent with such status or position s), or a substantial increase in the Executive's business travel, or any(removal VI-l
'1 ~
1~ i
.l I
I e ; L h i l I. l
((11)f2FEDGr(14433.AzuvIl00602.f17 PAG 19 817-1996 19:59 EDC: 00-000 0000 00:00 SLE: 09 000-0000 00:00 lin))Tue/taxrch torn 5 4 1, 2. Im11ey (212) 341 7777 AOC 3.4.1,P03 (PAGE) of the Executive from or any failure to reappoint or reelect the Executive to such position (s) (except in connection wlth the terminating of the Etzcutive's employment for Cause, disability or retirement or as a result cf the Executive's death or by the Executive other than for Good Reason): - - (b) a reduction by the Company in the Esecutive's base salary as set frrth herein, or in the number of vacation days to which the Executive is thrn entitled under the Company's normal vacation policy; (c) the taking of any action by the Company (including the elimination of a plan without providing vubstitutes therefor or the reduction of the Ezzcutive's awards therocader) that would diminish or the failure by the Company to take any actica which would maintain the aggregate projected value of the Executive's awards under the company's Annual Incentive Plan end the Deferred and Incentive Compensation Plans (d) the taking of any action by the Company that would diminish or the f:ilure by the Company to take any action which would maintain the cggregate value of the benefits provided the Executive under the Company's midical, health, dental, accident, disability, life insurance, s toc k purchase or retirement plans: (s) the taking of any action by the company that would diminish or the failure of the Company to take any action that would maintain ind mnification or insurance for officers' liabilitys or (f) any purported termination by the Company of the Executive's employment that is not effected pursuant to a Notice of Terminations and for purposes of this Agreement, such purported termination shall not be cff ctive. 1.7 " Merger Agreement" means the Amended and Restated Agreement and Plan of M rgrr among ENSERCH, TUC and TUC Holding Company dated as of April 13, 1996. 1.8 " Minimum Annual salary
- means that salary described in Section 6.1. ,
1.9 ' Notice of Termination" means a notice specifying the termination previcion in this Agreement relied upon and setting forth in reasonable detail thJ ficts and circumstances claimed to provide a basis for termination of the Ez2cutive's employment under the provislon so specified. A Notice of TJrmination for Cause shall contaln a written description of the particulars cf tha act or omission of which the Executive is accused in the good faith opinien of the Company. ARTICLE II Employment i Th3 Company hereby agrees to employ the Executive and the Executive hereby cgrsse to become employed with the Company upon the terms and conditions set irrth in this Agreement. ARTICLE III l Term of Agrement Th3 term of employment shall be for a period from the Effective Date until
- tha accond anniversary of the Effective Date. In the event that the Merger
- Agrsement does not close, for any reason, this Agreement shall not become l cifsetive and shall have no force or effect whatsoever. Any termination of the Ex cutive's employment with the Company during its term shall be subject to th2 provisions of Article IX hereof.
I ARTICLE IV Duties l Tha Executive during the term of this Agreement shall be employed as Senior I Vica President, reporting to the Chief Executive Of ficer of de Company. The Ez:cutive agrees to perform all of the duties normally incident 4 VI-2
'I.
PACS 16 stt.1996 15:12 EDC: 06 000 0000 00:00 3LE: 00-006-0900 00:00 1 1})Tuc/Ensisch ((1) ) f 2Wf DC i l14413. AltNVJFors] 809003. 717 i 4 3. 2. Donne 11ey (212) 341 7777 A0G 3.4.1,p03 i
<PAGE) to those of fices f or as long as be shall hold those of fices and to perform all oth:r duties and responsibilities as may be prescribed by the Chief Executive Of ficsr from time to time.
ARTICLE V i Extent of service ! Th3 Esecutive shall be employed on a full time basis. Therefore, during the period of his employment, except for illness, vacation periods and leaves of l (b:rnce authorized under the employment policies of the Company, the Executive rbs11 devote all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement. However, the Extrutive may devote a small but reasonable amount of time to pursue and monitor personal investments and Executive may continue to serve on the boards cf directors of the companies or organizations currently served by the Enscutive. ARTICLE VI Compensation
- For services rendered by the Executive under this Agreement, the Company will pay and provide to ne Executive compensation and benefits during the tsra of this Agreement, which compensation and benefits (i) initially shall be es sst forth in thia Article VI and (ii) shall not at any time during the term Cf this Agreement be less than as set forth in this Article VI.
6.1 Minimum Annual salary. During the term of this Agreement the Company th:11 pay the Executive base salary on a semi-monthly basis calculated and bis d upon the Minimum Annual Salar for the Executive of $280,000, which may be increased from time to time by ' e Company at the company's sole discrstion. The term " Minimum Annual Salary" as used in this Agreement shall include all increases granted by the Board. 6.2 Cash Incentive Compensation. The Executive shall be entitled to pirticipate in the Company's Annual Incentive Plan or a successor plan or crringement of the Company providing for incentive compensation of executive offic3rs of the Company, such participation to be subject to the terms and conditions of such plan. Aggregate awards under such plan for the calendar yccr 1997 shall be the greater of amounts determined in accordance with that plcn cnd $112,000. 6.3 Executive and Incentive Compensation Arrangements. The Executive shall be entitled to participate in any executive and incentive compensation errengements of the Company including, but not limited to, the Company's Annu:1 Incentive Plan, the Deferred and Incentive Compensation Plan, and the a:1ery Deferral Plan (recg nizing that such plans may be discontinued, merged eith other plans or amended from time to time), and such other plans and erringements which may be approved in the future that are generally available to e:nior executives of the company all on the terms and conditions of such Plens and arrangements. 6.4 Retirement Plan. The Executive shall be entitled to participate in the Comp:ny's retirement program, provided, however, the Executive's benefit shall , be ths greater of (a) the combined benefit the Executive is entitled to rictive from the Company's retirement program and the ENSERCH retirement programs or (b) the benefit the Executive would have been entitled to receive undIr the combination of the ENSERCH retirement program and the Company's retirement program ultimately adopted for the remainder of the ENSERCH waployees. The retirement benefit under (a) and (b) above shall include any cupplemental or restoration plans that compensate for benefit limitations undar the tax qualified plans. 6.5 other Company Compensation Programs. The Executive shall be entitled to pirticipate in all other employee benefit plans, executive retention incentive progrtma and other compensation and fringe benefit programs adopted and rpontored by the Company for which he is eligible by virtue of his employment by th2 Company, provided, however, the Executive shall be entitled to four casks vacation. Such participation shall be VI-3 I 1 s
. [(1))fistDGs[14433.AusV1]00004.717 - PAC: 16-stF 1995 00:39 EDGs 00-000 0000 00:00 SLK 00-000-0000 00:00 (l1)]ruc/Easereb Fors 8-4 1. 3. Doane11ey. (212) 341-7777 AOC 3.4.1,p03 (PACE >-
subjset to, and consistent with, the terms and conditions of such plans and programs. Service with ENsERCH shall be deemed service with the company in ditarmining eligibility and benefit levels under the company's plans and programs (other than the Company's retirement program). ARTICLE VII Retention Bonuses Tha Company will, within ten (10) days after the date earned, pay to the Exscutive an employment bonus in the following installments (" Retention Bonus Pzyments')s (1) an installment equal to $140,000 if the Executive continues his amployment with the Company (uninterrupted other than by normal vacation, holidays, weekends, sica leave or other standard provisions for employee lasve) after the Effective Date until the date six months after the Effective Dates and (ii) an installment equal to $280,000 if (a) the Executive continues his Caployment with the Company (uninterrupted, other than the exceptions in
-- (i ) aMye) until the date eighteen months after the Ef fective Date, or (b)
'tha Executive terminates his employment with the Company on a date thirteen months or more after the Effective Date but prior to the date eighteen months after the Effective Date.
An unearned Retention Bonus Payment shall not be payable in the event the Ezicutive voluntarily terminates his employment wig the Company prior to thirteen months after the Effective Date or is terminated for Cause. A tsrzination of emplo m nt by the Executive for Good Reason shall not be deemed ; a vcluntary termination of employment for purposes of this Article VII. The
~Brtrntion Bonus Payments are not includable as defined compensation for purposes of pension or welfare benefit determinations.
In the event the Executive dies or the Executive's employment with the CompIny is terminated as a result of his total disability (which shall mean l ths Executive's incapacity to perform all of his normal duties of emplopent with the Company on a full-time basis for more than six months due to physical or mental illness), than the Executive shall be entitled to a pro rata part of ths Retention Bonus Payment proportional to the Executive's service after the mergrr date through the date of death or disability to the service required to , earn the applicable Retention Bonus Payment. In making this calculation in the case of the Executive's disability, the Executive's service shall be deemed to
. h2v3 ceased upon the first date Gat the Executive ceased to perform his ?
emplcyment duties by reason of the disability. j ARTICLE VIII Working Facilities and Expenses 8.1 office racilities. The Company shall furnish the Executive with a private office and a private secretary to be selected by the Executive and all oth2r assistance and accommodations as are suitable to the character of the Executive's position with the Company and adequate for the performance of his 4 dutits under this Agreement, j 8.2 Expenses. The Executive is authorized to incur reasonable expenses for th3 promotion of the business of the Company including expenses for entsrtainment, travel and other similar items. The Company shall pay or reimburse the Executive for all reasonable items of expense ' incurred by the Ezicutive in performing his obligations under this Agreement. The Executive must, however, in each case provide adequate substantiation of the expense that has been incurred by the Executive. VI-4 l k
I i 1 t i
!((1])fistDCs[14433.ANNY1]D0005.t17' PAC: 16-str.1996 16:57 EDC: 00 000-0000 00:00 atsts 00 000 0000 00:00 - l
((1)]Tuc/EIstich fors 3-4 8. R. Donne 11ey.. (212) 341 7777 - AOC 3.4.1,p03 : i (PAGE) '
' ARTICLE IX Compensation Upon Termination !
- - . . . . . _ r 9.1 Compensation Upon Termination Under specified Circumstances. If the !
.Comptny terminates he Esecutive's employment other than (a) for Causes or (b) 1 upon no Executive's inability to fully perform his duties and rarponsibilities with the Company by reason of his disabilitys or (c) if the Erscutive terminates his employment for Good Reason (which termination may be ,
effected by retirement for Good Reason prior to the Executive's normal rstirement date), then the Company shall pay the Executive (without regard to ( e
-ths provisions of any benefit plan) in a lump sum on or before the tenth t
- businass day following the date of termination (" Payment Date*) an amount j g ual to the sum of the following paragraphs (i) through (iii), reduced by any ?
cf such amounts already paid:- ; (1)'The Esecutive's full base salary through the date of termination at !
' ths rate in ef fect just prior to tho time Notice of Termination is given, ;
plus any earned vacation time, plus any benefits or awards which pursuant ; to the terms of'any plans have M en earned or become payable, but which - hsva not yet been paid to the Executive (provided that k nefits or awards und.ar plans r~-11 w paid in accordance with the terms of the plans); plus j t (11) Any savesance benefits' customarily provided by the Company as well i as Eny cuer then vested benefits of the Executive (which shall M paid in _gccordance with, and subject to, the terms of the applicable plans); plus $ (iii) Any other unpa'diamounts owing under this Agreement. 9.2' Notice of Termination. Any termination by the company or by the { Esscutive for Good Reason following the Ef fective Date shall be communicated ;
- by written Notice of Termination to the other party hereto. ;
f ARTICLE X { Payment of Legal Fees . f In the event that either party initiates a legal proceeding to enforce any - $ right or obligation provided for herein, the non-prevailing party in such procasding shall reimburse the prevailing party his or its reasonable legal . c foes tnd esponses incurred in connection with such proceeding. The raimbursement of such legal fees and expenses shall be made within 30 days
- afts the prevailing party's request for payment accompanied by evidence of tha,fass'and expenses incurred. !
ARTICLE XI
- Modification and Waiver i r
11.1 Amendment of Agreement. This Agreement may not be modified or amended -! except by an instrument in writing signed by the parties to this Agreement. l 11.2 Waiver. No term or condition of this Agreement shall be deemed to have bein waived, nor shall there be any estoppi against the enforcament of any ; provision of this Agreement, except by written instrument of the p rty charged with waiver or estoppel. No written waiver shall be deemed a continuing waiver
- unless the continuing nature of the waiver is expressly stated therein. Each waivar shall operate only as to that specific term or conditions it will not
-be dammed a waiver of future conditions or as to any act other than that spacifically waived.
VI-5 i i l l l 1 i ) i i i l 4 i I' I i
l
~
((1))fIrtDCs[14413.ANWV!]00006.FIF FACE 16 8tF.1996 09:40 EDG 00 000-0000 00:00 81.Ks 00-000 0000 00:00 ((1)]Tue/taserch fors 3-4 3. 3. Donne 11ey (212) 341 7777 A0G 3.4.1,p03 (PAGE) ARTICLE XII Arbitration Any controversy or claim arising out of or relating to this Agreement, or brecch of it, shall be settled by arbitration in Dallas, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, tnd judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. ARTICLE XIII General Provisions 13.1 rederal Income Tax Withholding. The company shall withhold from any compen2ation and benefits payable under this Agreement all federal, state, city, cr other tazes as shall be required under any law or governmental rrguistion or ruling. 13.2 Successors; Enforceability. (a) Successor Must Assume. The company will make reasonable efforts to r:quira any successor (whether direct or indirect, by purchase, merger, coniolidation, liquidation, dissolution or otherwise) to all or substantially cil of the aggregate business and/or assets of the company (including conaslidated subsidiaries) to expressly assume and agree tc perform this Agr:ement in the same manner and to the same extent that the Company would be requirid to perform as if no succession had taken place. Notwithstanding the czpr2es assumption of, or the failure to assume, 21s Agreement by any g_ucca:ror, this Agreement shall be binding upon and shall inure to the benefit of th3 Company, its successors and assigns. (b) Agreement Enforceable Af ter Executive's Death. This A reement shall inuro to the benefit of and be enforceable by the Executive a personal or 1rg:1 representatives, esecutors, administrators, successors, heirs, diatributees, devisees and legatees. 13.3 Nonassignability. Except as provided in Sections 13.2 and this Section 13.3, neither this Agreement or any right or interest granted in it shall be azzign;ble by either the company or the Executive, or their successors or r' pre:entatives, without the oder's prior written consent. This'Section shall-nat preclude the Executive from designating a beneficiary to receive any ben: fit payable under this Agreement upon his death, or the executors, rdministrators, or other legal representatives of the Executive or his estate from essigning any rights under Gis Agreement to the person or persons cntitled to them. 13.4 No Attachment. Except as required by law, no right to receive payments undIr this Agreement shall be subject to anticipation, computation, clitn: tion, sale, assignment, encumbrance, charge, pledge, or hypothecation or to es:cution, attachment, levy, or similar process or assignment by operation of lew. Any attempt, voluntary or involuntary, to effect any such acd on shall be null, void and of no effect. 13.5 Interest. All payments due under this Agreement and unpaid shall bear intarsst at the rate of 10% per annum, compounded daily, beginning on the next onIuing day after the Payment Date or such other date as they may be due. 13.6 Delivery of Notices. Any notice required to be given under this Agresment shall be in writing and shall be deemed to have been given and racsived u p n the earlier of (i) receipt by the party to which the notice is 2 nt and (ii) delivery of the notice to the address for notice designated by tha pirty to which the notice is sent. Any address may be changed from time to time by serving notice to the other party as reg 21 red in this Section. VI-6 l l l l
I~ ~ l l
' I l[11]T3NEDCr[14433.AprY1]D0007. PIP PACS 19 5tt 1996 19:43 EDCs 60-000-0000 00:00 315 : 00 000-9000 00:00
-((1))Tuc/nserch Fors 5-4 3. 3. Donas11sy < (212) 341 7771 AOC 3.4.1,p03 j l- '
. <PAGE N hald13.7invalid, severability.
thatIf,idity invalshall not af fect any other provision of thisfor any reason, any provision of this Agreement is Agrsement not also held invalid and each other provision Jhall to the full satent consistent with-law cont 1nue in full force and ef fect. i 13.8 naadings. The hwadings of Articles and sections are included solely for 4 convenience of reference. The descriptive heading shall not control the meining or interpretation of any of the provisions of this Agreement, 13.9 Governing Law. This Agreemen't has been esecuted and delivered in the [ Stata of Tesas, and its validity, interpretation, performance, and enforcement ' [ shall be governed by the laws of that state. - 13.10 counterparts. This Agreement may be esecuted in one or more [ counterparts, each of which shall be deemed an original but all of which , togsther shall constitute a single Agreement. t ARTICLE XIV Entire Agreement This Agreement shall constitute the entire agreement of the parties with h
. ' reapset to the matters covered hereby, and shall supersede all prior written end oral agreements pertaining to the subject matter hereof, j I
Thz parties have caused this Agreement to be executed on the date first writtsn in this Agreement. > t . Texas Utilities Services Inc.
/s/ Erle Nye Bye-l
/s/ Michael E. Bescoe .f EXECUTIVE VI-7 )
s P L i i l I i I i l 1 1 1 i I
.]
I((1)]f!NEDCa[14413.AWNY!Il00001. PIP PAG: 19 5tP-19H 19:34 EDG 00-000-0000 00:00 SLKs 60-000 0000 00:00 . ((11]Tuc/ElsIrch fors 5 4 2. 3. Donas11sy (212) 341 7777 AOC 3.4.1,p01 (PACE) ANNEX VII EMPLOYMENT AGREEMENT TEIS AGREEMENT by and between Texas Utilities Company (the " Company"), and W. T. satterwhite (the *Ezecutive") is entered into as of the 10 2 day of Scptember, 1996. WITNE88ETH - WHEREAS 'ENSERCH Corporation ("ENSERCE*) and the Company have antered into
. En Amended and Bestated Agreement and Plan of Mercer whereupon the closing of such transaction, the company will become a subsidiary of a successor to the CompIny; WHEREAS, the Company desires to employ the Executive for a term beginning on tha closing of the acquisition, and the Executive is willing to serve in the i employ of the company beginning at such time, upon the terms and conditions i provided in this Agreements l WHEREAS, the Executive currently serves as an executive of ENSERCH and the ;
Comptny recognises the importance of the substantial experience and -t t guilificationsoftheExecutiveinkerforminghisdutiesandresponsibilities, and the company considers it essent al to the best interests of the company to tsk3 Eppropriate steps to assure that the Company will continue to have f available the Executive's services following the acquisitions (
+
WOW, TBEREFORE, 'in coasideration of the mutual covenants contained in this j
- Agrstment, the parties agree as follows:
. ARTICtE 1 4 Definitions l All words and phrases defined shall have the meanings described below unless in tha context some other meaning is clearly intended.
1.1 " Agreement
- means this agreement. i 1.2 "Boarda means the Board of Directors of the Company.
1.3 *Cause" for termination of the Executive means (a) an act or acts of I I dishonesty or material violation of a Company policy by, or at the direction of, the Esecutive; (b) willful failure or refusal of ne Executive to perform sarvices as properly required by the Company; any action or failure to act en th2 part of the Executive wMch is intended (c)to result in material injury to ths Essets, business or prospects of the Company; or (d) the conviction of the Erscutive of a felony
'1.4
- Closing" means the Closing of the Merger Agreement as therein defined.
1.5
- Effective Date* means the date of the closing as defined in the Merger Agratment.
1.6 " Good Reason" for the Executive to terminate the Ezecutive's employment shall means. L (e) an adverse change in the Executive's status or position (s) from that ! dnscribed in Article IV hereof including, without lid tation, any adverse chinge in the Executive's status or position as a result of a material dL=inution in the Executive's duties or responsibilities, or a material chinge in the Esecutive's business location or the assignment to the Exscutive of any duties or responsibilities which are inconsistent with such status or position (s), or a substantial increase in the Executive's business travel, or any removal VII-l l f e f l l s 4
{ { 11 ) FINE 14 s (144 )) . ANNVII) S 0002.717 FACs 19-SEF-1996 19:34 EDC: 09 060 0000 09:00 Bl.Kr 09-000-0009 00:09 {[1)]Tuc/tasereb Fors 3-4 3, 1. Donne 11ry (212) 341 7777 Acc 3.4.1,p01 (PACE) ef the Executive from or any failure to reappoint or reelect the Executive to cuch position (s) (escept in connection wlth the terminating of the Extcutive's employment for Cause, disability or retirement or as a result of the Executive a death or by the Executive other than for Good Reason); (b) a reduction by the Company in the Executive's base salary as set
.forth herein, or in the number of vacation days to which the Executive is
. thin entitled under the Company's normal vacation policys (c) the taking of any action by the crepany (including the elimination of a plan without providing substitutes therefor or the reduction of the Ez;cutive's awards thereunder) that would diminish or the failure by the Company to take any action which would maintain the aggregate projected value of the Executive's awards under the Company's Performance Incentive Pltns (d) the taking of any action by the Company that would diminish or the failure by the Company to take any action which would maintain the cggregate value of the benefits provided the E;ecutive under the Company's medical, health dental, accident, disability, life insurance, stock purchase or retirement plans; the taking of any action by the Company that would diminish or the isle) lure of the Company to take any action that would maintain indemnificntion or insurance for officers' liabilitys or (f) any purported termination by the Company of the Executive's employment that is not effected pursuant to a Notice of Terminations and for purposes of this Agreement, such purported termination shall not be effective. ,
1.7 " Merger Agreement" means the Amended and Restated Agreement and Plan of Mergir among the Company, ENSERCH and TUC Holding Company dated as of April 13, 1996. 1.8 " Minimum Annual salary" means that salary described in section 6.1. 1.9 " Notice of Termination" means a notice specifying the termination provision in this Agreement relied upon and setting forth in reasonable detail thi facts and circumstances claimed to provide a basis for termination of the Exicutive's employment under the provision so specified. A Notice of T:rmination for cause shall contain a written description of the particulars af tha act or omission of which the Executive is accused in the good faith opinien of the Company. ARTICLE II Employment Th2 Company hereby agrees to employ the Executive and the Executive hereby egrssa to become employed with the Company upon the terms and conditions set forth in this Agreement. ARTICLE III Term of Agreement Th3 term of employment shall be for a period from the Effective Date until th3 occond anniversary of the Effective Date. In the event that the Merger Agrsement does not close, for any reason, this Agreement shall not become efftetive and shall have no force or effect whatsoever. Any termination of the Erscutive's employment with the company during its term shall be subject to tha provisions of Article IX hereof, t ARTICLE TV Duties , Thn Executive during the term of this Agreement shall be employed as Extcutive Vice President, reporting to the Chief Executive Officer of the Compiny. The Executive agrees to perform all of the duties normally VII-2 l l I I l f l
[(1))TINEDGs[1443).ANNVi!)00001. PIP PAGs 17-5tt 1996 01:17 IDG 00-009-0000 00:00 But 00 000 0000 00:00 lj!))Tue/f.asach form S-4 E. R. Doanilley (212) 341-7777 AOC 3.4.1,p01 (PAGE)
.t incidInt to those of fices for as long as he shall hold those of fices and to N perform all other duties and responsibilities as may be prescribed by the C,hief Executive officer from time to time, ARTICLE V '
\
Extent of service ; Th2 Executive shall be employed on a full time basis. Therefore, during the ; period of his employment, except for illness, vacation periods and leaves of cb2cnc3 authorized under the employment policies of the Company, the Executive i chill devote all of his business time, attention, skill and efforts to the frithful performance of his duties under this Agreement. However, the Ezicutive may devote a & mall but reasonable amount of time to pursue and monitor personal investments and Executive may continue to serve on the boards , of directors of the companies or organizations currently served by the ! E:acutive. ARTICLE VI Compensation For services rendered by the Executive under this Agreement, the Company will p:y and provide to the Ezeeutive compensation and benefits during the tira of this Agreement, which compensation and benefits (i) initially shall be ca mat forth in this Article VI and (ii) shall not at any time during the term
.cf this Agreement be less than as set forth in this Article VI.
6.1 Minimum Ennual Salary. During the term of this Agreement the Company chill pay the Executive base salary on a semi-monthly basis calculated and bared upon the Minimum Annual Salary for the Executive of $282,000, which may be increased from time to time by the Company at the Company's sole di2cr: tion. The term ' Minimum Annual Salary' as used in this Agreement shall includa all increases granted by the Board. 6.2 Cash Incentive Compensation. The Executive shall be entitled to p;rticipate in the Company's Performance incentive Plan or a successor plan or crrang: ment of the Company providing for incentive compensation of executive of ficirs of the Company, such participation to be subject to the terms and conditions of such plan. Aggregate awards under such plan for the calendar y@rr 1997 shall be the greater of amounts determined in accordance with that ! pita cnd $112,800. 6.3 Executive and incentive Compensation Arrangements. The Executive shall be entitled to participate in any executive and incentive compensation crrctgements of the Company including, but not limited to, the Company's Annu1 Incentive Plan, the Deferred and Incentive Compensation Plan and the 821try Deferral Plan (recognizing that such plans may be discontinued, merged i with other plans or amended from time to time), and such other plans and erringements which may be approved in the future that are generally available to scnior executives of the Company all on the terms and conditions of such plena cnd arrangements, , 6.4 Retirement Plan. The Executive shall be entitled to participate in the i Company's retirement program, provided, however, the Executive's benefit shall i be th3 greater of (a) the combined benefit the Executive is entitled to t r:ctiva from the Company's retirement program and the ENSERCH retirement progrsas or (b) the benefit the Executive would have been entitled to receive und r the combination of the ENSERCH retirement program and the Company's rstircment program ult.mately adopted for the remainder of the ENSERCH employ:es. The retirement benefit under (a) and (b) above shall include any ruppl(mental or restoration plans that compensate for benefit limitations undir the tas qualified plans. l 6.5 other Company Compensation Programs. The Executive shall be entitled to ptrticipate in all other employee benefit plans, executive retention incentive i i progrtas and other compensation and f ringe benefit programs adopted and rponsored by the Company for which he is eligible by virtue of his employment by ths ] VII-3 l l I 4
- s
i j ((1] l fINEDG s [14433. ANWVII]00004. PIP PAG: 16-SEP+1996 10:22 EDGs 00 000-0900 00:00 SLK 00 600-0000 00:00 l lilllfuc/Lisirch Fors 8-4 2. 3. Donne 11ey (212) 341 7777 AOC 3.4.1,P01 l l (PAGE) l 1 Compiny. Such participation shall be subject to, and consistent with, the I taras and condltions of such plans and programs, service with ENSERCH shall be I d:rmed service with the Company in determining eligibility and benefit levels J undir the Company's plans and programs (other than the Company's retirement - - i progrta). ARTICLE VII Retention Bonuses Thi company will, within ten (10) days after the date earned, pay to the Ezrcutive an employment bonus in the following installments (* Retention Bonus P:yments'): (i) an installment equal to $141,000 if the Executive continues his caployment with the Company (uninterrupted other than by normal vacation, bolidays, weekends, sick leave or other standard provisions for employee 1sare) after the Effective Date until the date six months after the Eftective Date; and (iAt an installment equal to 5282,000 if the Executive continues his employ.*ent with the Company (uninterrupted, other than the exceptions in (1) above, until the date eighteen months af ter the Ef fective Date. An unearned Retention Bonus Payment shall not be payable in the event the Extcutive voluntarily terminates his employment win the Company prior to the cpplicable bonus date or is terminated for Cause. A termination of employment i by th:2 Executive for Good Reason shall not be deemed a voluntary termination i of emplopent for purposes of this Article VII. The Retention Bonus Payments i era not includable as defined compensation for purposes of pension or welfare be23 fit determinations. In the event the Executive dies or the Executive's employment with the Comp;ny is terminated as a result of his total disability (which shall mean the Executive's incapacity to perform all of his normal duties of emplopent Tith the Company on a full-time basis for more than six months due to physical or mental illness), then the Executive shall be entitled to a pro rata part of th3 Ritention Bonus Payment proportional to the Executive's service af ter the mergst date through the date of death or disability to the service required to c:In the applicable Retention Bonus Payment. In making this calculation in the es:a of the Executive's disability, the Executive's service shall be deemed to h va ceased upon the first date hat the Executive ceased to perform his employment duties by reason of the disability. ARTICLE VIII ' Working Facilities and Expenses 8.1 office racilities. The Company shall furnish the Executive with a private office and a private secretary to be selected by the Executive and all j cth2r assistance and accommodations as are suitable to Lbe character of the Ex:cutive's position with the Company and adequate for the performance of his I dutiss under this Agreement. , 1 8.2 Expenses. The Executive is authorized to incur reasonable expenses for j thi promation of the business of the Company including expenses for i sntsrtainment, travel and other similar items. The company shall pay or I rsimburse the Executive for all reasonable items of expense incurred by the Ex:cutive in performing his obligations under this Agreement. The Executive mu2t, however, in each case provide adequate substantiation of the expense thtt has been incurred by the Executive. ARTICLE IX i Compensation Upon Termination 9.1 Compensation Upon Termination Under Specified Circumstances. If the Comp ny terminates the Executive's employment other than (s) for Causes or (b) up:n the Executive's inability t- fully perform his duties VII-4 s i l i l
l I I
][1)] FINEW l144 33. ANWI!]00005.FIF 'FAC: 16 SEP 1996 10:23 E m 00 000-0000 00:00 SLE: 00 000 0000 00:00 .
((11]Tue/Esserch For2 5 4 R. I, Donne 11sy (212) 341 7777 A0G 3.4.1,p01 1 (PAGE) tna responsibilities with the Company by reason of his disabilitys or (c) if '! tha Executive terminates his empir/ ment for Good Reason (which termination may be af f ected by retirement for Good Reason prior to the Executive's normal , sctirement date), then the Company shall pay the Esecutive (without regard to l
- tha provisions of any benefit plan) in a lump sum on or before the tenth '
. busingse day following the date of termination ("Psyment Date") an amount equal to the sum of the following paragraphs (1) through (iii), reduced by any 8 of such amounts already paid: W (i) The Executive's full base salary through the date of termination at j th* rate in effect just prior to the time Notice of Termination is given, se, plus any earned vacation time, plus any benefits or awards which pursuant to the terms of any plans have M en earned or become payable, but which hiva not yet been paid to the Executive (provided that benefits or awards- i uniar plana shall M paid in accordance with the terms of the plans)# plus !
(ii) Any severance benefits customarily provided by the Company as well ' es Eny oder then vested benefits of the Executive (which shall M paid in j
-sceordance with, and subject to, the terms of the applicable plans); plus (iii) Any other unpaid amounts owing under this Agreement.
l 9.2 Notice of Termination. Any termination by the Company or by the l Ezzcutive for Good Reason following the Ef fective Date shall be communicated by written Notice of Termination to the other party hereto. ; ARTICLE X Payment of Legal Fees In the event that either party initiates a legal proceeding to enforce any right or obligation provided for herein, the non-prevailing party in such procacding shall reimburse the prevailing party his or its reasonable legal f a=s End expenses incurred in connection with such proceeding. The
.raimbursement of such legal fees and expenses shall be made within 30 days - .af tsr the prevailing party's request for payment accompanied by evidence of tha fres and empenses incurred.
ARTICLE XI
~ Modification and waiver 11.1 Amendmert of Agreement. This Agreement may not be modified or amended l l azo:pt by an instrument in writing signed by the parties to this Agreement. )
( . 11.2 Waiver. No term or condition of this Agreement shall be deemed to have j be2n waived, nor shall there be any estoppel against the enforcement of any prsvision of this Agreement, except by written instrument of the party charged with raiver or estoppel. No written waiver shall be deemed a continuing waiver unisms the continuing nature of the waiver is espressly stated therein. Each c:ivsr shall opsrate only as to that specific term or conditions it will not l be ditmed a waiver of future conditions or as to any act other than that rpecifically waived. 1 [ ARTICLE XII Arbitration
]
Any controversy or claim arising out of or relating to this Agreement, or ! breach of it, shall be settled by arbitration in Dallas, Texas in accordance ! I with the Commercial Arbitration Rules of the American Arbitration Association, '
- l. End judgment upon the award rendered by the arbitrator may be entered in any !
! . court of competent jurisdiction. j l ' I VII-5 l l d t E
_ . . _ _ ,_._ m _ . _ _ . ._ . FAC: 16 stt 1996 10:23 EDC: 00-000-0000 00:00 sLE: 000000 0000 00:00 M[1] 1 ] TINEW 1))?se/Essarch [14433. Ansvi!) c Frrn 0006.717 5-4 . - 1. 3. Donselley l212).341-7'77 ..A0G 3.4.1,p01 , (PhGE>' ARTICtE XI!! General Provisions. 13.'1 yederal' Income Taz withholding. The Company shall withhold from any compensation and benefits payable under this Agreement all federal, state, city, or other taxes as shall be required under any law or governmental , regulation or ruling. 13.2 successors; Enforceab111ty. , (al Successor Must Assume. The Company will make reasonable ef forts to r$ quire any successor (whether direct or indirect, by purchase, merger, consolidation, liquidation, dissolution or otherwise) to all or substantially all of the aggregate business and/or assets of the company (including consolidated subsidiaries) to espressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be
- required to perform as if no succession had taken place. Notwithstanding the express assumption of,. or the f ailure to assume, 21s Agreement by any I successor, this Agreement shall be binding upon and shall inure to the benefit [
of the Company, its successors and assigns. (b) Agreement Enforceable After E'mecutive's Death. This A reement shall inure to the benefit of and be enforceable by the Executive s personal or
.itgal representatives,- executors, administrators, successors, heirs, distributees, devisees and legatees. ;
' 11.3 Monassignability, Except as provided in sections .13.2 and this Section i 13.3, neither this Agreement or any right or interest granted in it shall be-assignable by either the Company or the Executive, or their successors or '
rrprssentatives, without the o uer's prior written consent. This section shall nst preclude the Executive from designating a beneficiary to receive any i bensfit payable under this Agreement upon his death, or the executors, ; administrators, or other legal representatives of the Executive or his estate from assigning any rights under his Agreement to the person or persons antitled to Gen. , 13.4 No Attachment. Except as required by law, no right to receive payments ! undar this Agreement shall be subject to anticipation, computation, alienttion, sale, assignment, encumbrance,. charge, pledge, or hypothecation or
. to anecution, attachment, levy, or similar process or assignment by operation
. cf Itw. Any attempt, voluntary or involuntary, to ef fect any such action shall i be null, void and of no effect.
f13.5 Interest. All payments due under this Agreement and unpaid shall bear .) int
- rest at the rate of 10% per annum, compounded daily, beginning on the next ;
, caruing day after the Payment Date or such other date as they may be due. [
i 13.6 Delivery of Notices. Any notice required to be given under'this ; '8: ; Agreement shall be in writing and shall be deemed to have been given and
. rsesived upon the earlier of (1) receipt by the party to which the notice is
-82nt and (ii) delivery of the notice to the address for notice designated by.
the party to which the notice is sent. Any address may be changed from time to time by serving notice to the other party as required in this section. 13.7 severability. If, for any reason, any provision of this Agreement is ']
' hald invalid, that invalidity shall not affect any other provision of this Agresment not also held invalid, and each other provision shall to the full i satant consistent with law continue in full force and ef fect. _j 13.8 Headings. The headings of Articles and Sections are included solely for .'
convinience of reference. The descriptive heading shall not control the I morning or interpretation of any of the provisions of this Agreement. 13.9 Governing Law..This Agreement has been executed and delivered in the State of Texas, and its validity, interpretation, performance, and enforcement shall be governed by the laws of that state. l
.VII-6 l'
i l l i ! I 4 4
-j l
8 t , , , - + - - - -i
4
- 1 jf 2NEDCal14433.ANNV11)00007. PIP ' - PACS 19 SEP.1996 19:37' EDC: 00-000 0000 00:00 BLE: 00-000 0000 00:00-1 Ifue/taserch form S-4 3, 2. Donselley, (212) 341-7777 AOC 3.4.1,p01 (PAG D 13.10 counterparts. This Agreement may be executed'in one or more counterparts, each of which shall be deemed an original but all of which togsther shall constitute a single Agreement. - . . . ..
ARTICLE XIV i Entire Agreement This Agreement'shall constitute the entire agreement of the parties with .l raepect to the matters covered hereby, and shall supersede all prior written 't 4the oral agreements pertaining to the subject matter bereof.
.The parties have caused this Agreement to be executed on the date first a written in this Agreement.
Texas Utilities Company
/s/ Erle Nye Bys
/s/ William T. Satterwhite ..I EXECUTIVE f t
VII.7 l
- P r _
I
. 'h i .
t i 1 i.
't i
s 1 I 3 B l t h I e f 1 1 l 4 l
. 1
_. _ . ._ . _ . . _ . _ _ ._ ,. _ .~~ l
s
. ! !!))FINEDG s t 14433. ANVI!!) 00001. FIP PAG: 16-SEF-1996 09:38 'rDG: 00-000-0000 00:00 BLK: 00-000-0000 00:00 ll1))Tue/tastich Fora 5-4 1. R. Donaillay (212) 341-7777 A0G 3.4.1,p01 (PACE) r'
! ANNEX VIII RESTATED ARTICLES Or 1NCORPORATION Or TUC BOLDING COMPANY ARTICLE I. , Tha name of the Corporation is Texas Utilities Company. ARTICLE II. l Tha purposes for which the Corporation is formed are to subscribe for, . Purchase, invest in, hold, own, assign, pledge and otherwise deal in and dispoze of shares of capital stock, bonds, mortgages, debentures, notes and' j othar securities, obligations, contracts and evidences of indebtedness of public utility companies and other foreign or domestic corporations: to
.crginize or promote or facilitate the organization of subsidiary corporations; to aid in any manner permitted by law any corporation in which the Corporation j owna shares of stock or in wk.ich the Corporation has any other legal or i equitt.ble interests and to do all such things as may be necessary,
! spprcpriate, convenient or incidental to the foregoing purposes. l -- ARTICLE III. I: Tha post office address of the registered office of the Corporation is 1601 [ - Brytn street, Dallas, Texas 75201, and the name of its registered agent at
- such todress is Peter B. Tinkham, ARTICLE IV.
Tha duration of the Corporation is perpetual. ARTICLE V. l Thi affairs of'the Corporation shall be managed by a board of directors, who ! thall be chosen by ballot at the annual meeting of the shareholders, or any ! .. septing of shareholders held in place thereof and shall serve until their successorsareelectedunlessremovedashere1nprovidedfor.
'Victacies in the board of directors, except vacancies in the board of
- -dirscters caused by an increase in the number of directors, may be filled by ths board at any meeting. Vacancies in the board of directors arising from an inerstse in the number of directors shall be filled at a meeting of the th2rtholders called for the purpose of filling such vacancies. Any or all of
,, thz directors may at any time be removed, whether cause be assigned for such l removs1 or not, by the vote of the holders of a majority in aggregate number cf thz shares of stock of the Corporation then outstandlag, given at a special mesting called for the purpose of considering any such action, l VIII l: i
r. I i ~ l ((1))TINEDGs[14433.ANVIIIl00002. PIP PAG: 16-SEP.1996 17:25 EDG 00-000 0000 00:00 BLKs 00-000-0000 00:00 l [{1)]hc/Ensirch fora s.4 E. R. Donnality (212) 341 7777 A0G 3.4.1,p01 i l (PAGE) l Tha number of directors presently constituting the board of directors of the ! Corporation is ten and the names and addresses of the persons now serving as l dire'etors are as follows: , i (TABLE) l (CAPTION) ( NAME ADDRESS (S> (C) J. S. Farrington......... .... .................... . Dallas, Texas Brysrd u. Friedman.. . .... ..................... ... Fort worth, Texas , Karney Laday.................... ......... .......... Dallas, Texas l William M. Griffin......... ......... ........ . .... Hartford, Connecticut M:rgaret N. Mazey.................................... Austin, Texas Jt2ws A. Middleton. .................... ............ Los Angeles, California l Erle Nye..................... ....................... Dallas, Texas l J. E. Oesterreicher.............................. ... Dallas, Texas i Charles R. Perry.... ................ .......... .... Odessa, Texas Hsrbert H. Richardson......................... . .... College Station, T- Ms
</ TABLE) l ARTICLE VI.
Tha total number of shares that may be issued by the Corporation is five hundrrd fifty million (550,000,000) shares, of wblch fifty million (50,000,000) shares are classified as serial preference stock having the par valus of $25 per share, and five hundred million (500,000,000) shares are clr.scified as common stock without par value. l Tha descriptions of the different classes of stock of the Corporation and i thi prsferences, designations, relative rights, privileges, powers, roetrictions, limitations and qualifications of said classes of stock are as follows: ! DIVISION A--PREFERENCE STOCK '
- 1. 51 ries and Limits of variations between series. Subject to the provisions of Division B of this Article VI (which provisions, however, shall not continue effective as to any shares which are redeemed or repurchased and rs:tcrad to the status of authorized but unissued shares), the preference j stock may be divided into and issued in one or more series f rom time to time '
cm hsriin provided, each series to be so designated as to distinguish the sh rss thereof from the shares of all other series and classes. The authorized number of shares of any such series, the designation of such series, and the tsrmi and characterisdes thereof (in those respects in which the shares of 1 on) earies may vary from the shares of other series as herein provided) shall i be fix d at any time prior to the issuance thereof by resolution or ' ratolutions of the board of directors of the Corporation. The preference stock of sll series shall be of the same class and of equal rank and shall be idLntical in all respects, except that there may be variations in the following particulars: ) 1 (a) The rate at which annual dividends are to accrue on the shares of i euch series, hereinafter referred to as the ' fixed dividend rates" (b) The terms and conditions on which the shares of such series may be rsamcmed, and the amount payable in respect of the shares of such series in case of the redemption thereof at the option of the Corporation (the amount to fixed being hereinafter referred to as the " fixed redemption price"), end the amount payable in respect of the shares of such series in case of the redemption thereof for any sinking fund of such series, which amounts in rsspect of any series may, but need not, vary according to the time or circumstances of such action; (c) The amount payable in respect of the shares of such series in case of liquidation, dissolution or winding up of the Corporation (the amount so fizid being hereinaf ter referred to as the ' fixed liquidation price"), and
'tha amount payable, if any, in addition to the fixed liquidation price for asch series, in case such liquidation, dissolution or winding up be voluntary (the amount so fixed being hereinafter referred to as the " fixed liquidation premium"), which amounts in respect of any series may, but need not, vary according to the time or circumstances of such action; VIII-2 i
l i j l
ll1))f1NEDG(14413.ANYI11]00003.FIF PAGs II Sff-1!96 22:08 EDG 00 000-0000 00:00 SLK 00-000-0600 00:00 1(1))Tuc/Enserch Tora 3 4 1. 2. Donne 11ey (212) 341-7777 A0G L4.1,p01 (PACE) (d) Any requirement as to any sinking fund or purchase fund for, or the tsdemption, purchase or other retirement by the Corporation of, the shares of guch series; and __ _, (c) The right, if any, to exchange or convert the shares of such series into shares of any other series of the preference stock, or, to the extent pirnitted by law, into shares of any otler class of stock of the Corporation, and the rate or basis, time, manner and conditions of exchange or conversion or the .mathod by which the same shall be determined.
- 2. Dividends, out of the assets of the Corporation legally available for dividsmos, the holders of the preference stock of each series shall be e ntiti:d, in preference to the holders of the common stock, to receive, but only when and as declared payable by the board of directors, dividends at the fix44 dividend rate for such series, and no more, payable quarterly in each yter, on the dividend payment dates established for such series, or otherwise es tha board of directors may determine, to shareholders of record as of a dita nrt exceeding thirty (30) days nor less than ten (10) days preceding such dividind payment dates, and such dividends on the preference stock shall be cumulative, so that, if in any past dividend period or periods full dividends upon e.tch series of the outstanding preference stock at the fixed dividend.
reta or rates therefor shall not have been paid, the deficiency (without l intcrset) shall be paid or declared and set apart for payment h fore any divid:nds shall be paid upon or set apart for the common stock (other han a dividind payable in common stock of d e Corporation). Dividends on all shares i of thi preference stock of each series shall commence to accrue and be cumulctive from the dividend date for such series next preceding the date of ingui cf the initial shares of such series, or from said date of issue, if th t be a dividend date or from a date fixed by the board of directors at the time the relative rights and preferences of such series are fixed and
#< scrmined. Any dividends paid on the preference stock in any amount less than f'il cumulative dividends accrued or in arrears upon all preference stock outactmding shall, if more than one series be outstanding, be divided between Chi different series in proportion to the aggregate amounts which would be
(.istributable to the preference stock of each series if full cumulative
' dividends were declared and paid thereon.
- 3. Preference on Liquidation, etc. In the event of any liquidation, dierolution or winding up of the Corporation, the holders of the preference stock cf each series shall have a preference over the holders of the common stock until the fixed liquidation price per share for such series, plus, in caso ruch liquidation thz fixed liquidation, dissolution premium per or winding share for uk sucshall have series, ifbeen any, voluntary together [n ell cares with unpaid accumulated dividends, if any, shall have been paid or dietributed or declared and set apart for papent or distribution, but the hrldira of the preference stock shall be entitled to no further participation in cny such distribution. If upon any such liquidation, dissolution or winding up, 22 assets distributable among 2e holders of the preference stock shall be intufficient to permit the payment of the full preferential amounts cforasiid, then the entire assets of the comoration to be distributed shall be distributed among the holders of each serles of the preference stock then outztrnding, ratably in proportion to the full preferential amounts to which th y are respectively entitled. Nothing in this Section 3 shall be deemed to prsvcnt the purchase or redemption of preference stock in any manner permitted by Section 4 of this Division A, nor shall anything in this section 3 be dmsmed to prevent the purchase or redemption by the Corporation of shares of its common stock if the requirements of Section 6 of thls Division A shall be
, complisd with. No such purchase or redemption shall be deemed to be a liquid tion, dissolution or winding up of the Corporation or a distribution of i esasts to its common shareholders wiuin the meaning of this Section 3 whether er nit shares of common stock so redeemed or purchased shall be retired, nor thsil a consolidation or merger of the Corporation or a sale or transfer of tubstentially all of its assets as an entirety be regarded as a liquidation, dis 2clution or winding up of the Corporation within the meaning of this SzctLcn 3.
- 4. Redemption and Repurchase. The Corporation may at any time or from time j to time, by resolution of the board of directors, redeem (subject to any terms 1 of a ptrticular series restricting refunding or redemption thereof) all or any 1 p;rt of the preference stock, or of any series thereof, by paying in cash the fizrd redemption price applicable thereto plus the amount of unpaid i tecurulated dividends, if any, to the date of such redemption. If less than l cll the shares of one series of preference stock is to be redeemed, the shares l to be redeemed shall be selected ratably or by lot, in such manner as may be i prarcribed by resolution of the board of directors, by an VIII-3 i
i i 1 1
[(1])f1NtDC:(14433.ANVIII)00004.FIF FACs 16-SEF 1996 09:41 EDC: 00 000-0000 00:00 BLE: 00-000-0000 00:00 ((1)]Tuc/Enserch Fors 8-4 R. R. Conn 111Jy (212) 341-7777 A0G 3.4.1,p01 (PAGE) intspendent bank or trust company selected for that purpose by the board of dir ctors. Notice of such redemption shall be mailed to each holder of rtdeemable shares being called, not less than twenty (20) nor more than fifty (50) days before the date fixed for redemption, at his address as it appears - - - - - - on the stock transfer books of the Corporation, with postage thereon prepaid. Such notice of redemption of such shares shall set forth the series or part thiroef to be redeemed, the date fixed for redemption. the redemption price, cnd the place at which the shareholders may obtain payment of the redemption prics upon surrender of their respective share certificates. From and after th3 Cate fixed in any such notice as the date of redemption, unless default chill be made by the Corporation in providing funds sufficient for such raremption at the time and place specified for the payment thereof pursuant to acid notice, all dividends on the shares so redeemed shall cease to accrue, s cnd all rights of the holders of such shares as shareholders of the Corporation, except only the right to receive the redemption f unds to which thsy are entitled, shall cease and determine. Th3 Corporation may, on or prior to the date fixed for any redemption, i d: posit with any bank or trust company in the State of Texas, or any bank or j trust company in the United States duly appointed and acting as a transfer i EgInt of the Corporation, as a trust fund, a sum sufficient to redeem shares c211td for redemption, with irrevocable instructions and authorigy to such
. bank or trust company to give or complete the notice of redemption thereof and 1 to pry, on or after the date fixed for such redemption, to the respective h:1dirs of shares, as evidenced by a list of holders of such shares certified ]
by th2 Corporation by its President or a Vice President and by its Secretary 1 er (n Assistant Secretary, the redemption price upon the surrender of their raopective share certificates. Thereafter, from and after the date fixed for redemption, such sharea shall be deemed to La redeemed and dividends thereon ghtl1 cease to accrue after such date fixed for redemption. Such deposit shall be diemed to constitute full pa p nt of such shares to their holders. Thrzz:fter, from and after the date fixed for redemption, such shares shall no longIr be deemed to be outstanding, and the holders thereof shall cease to be shirtholders with respect to such shares and shall have no rights with respect ' thereto except the right to receive from the bank or trust company payment, without interest, of the redemption price of such shares plus the amount of I 1 unplid accumulated dividends upon the surrender of their respective csrtificates therefor, and any right to convert such shares which may exist. In care the holders of such sures shall not, within six (6) years siter such scposit, claim the amount deposited for redemption thereof, such bank or trust i compIny shall upon demand pay over to the Corporation the balance of such l Amount so deposited, togener with any interest accrued thereon, which shall become the property of the Corporation, and such bank or trust company shall th2rcupon be relieved of all responsibility to the holders thereof. Nithing contained in this Section 4 shall limit the right of the Corporation to purchase or otherwise acquire shares of the preference stock to the extent per;itted by law. Shires of preference stock of the Corporation redeemed or purchased by the Corporation shall be restored to the status of authorized but unissued shares of preference stock without designation, and may from time to time be reissued ca provided in Section 1 of this Division A. All such redemptions and purchases of preference stock of the Corporation shall be effected in . Eccordance with the laws of the State of Texas governing redemption or purchtse or redeemable shares.
- 5. Voting Rights. The holders of the preference stock shall not be entitled to vote except (a) as expressly conferred in Article VII hereof, or (b) as may from time to time be mandatorily provided by the laws of Texas, or (c) for the elsetion of one-third (adjusted to the nearest whole number) of the board of
,. dirictors or two directors, whichever is greater, when and as dividends on any I cf th3 outstanding preference stock shall be in def ault in an amount equivalent to four (4) full quarterly dividends and thereafter until no divid*nds on any preference stock shall be in default or until dividends on l cny cf the outstanding preference stock shall be in def ault in an amount equivalent to eight (8) full quarterly dividends, whichever event shall first occur, or (d) for the ele; tics sf the smallest number of directors necessary to thzt a majority r; the full board shall have been elected by the holders of th3 preference stock when and as dividends on any of the outstanding prsfarence stock shall be in default in an amount equivalent to eight (8) full quarterly dividends, and thereafter until no dividends on any preference stock th211 be in default. l l VIII-4 h i I
PACS 16-SEP 1996 09:42 EDG 00-000-6000 00:00 BlK 00-000-0000 00:00 ((1]H7uc/Easerch((l)ftsEDGal1443).ANVIII]00005.FIP Forn 8-4 3. 3. Donnellsy (212) 341-7777 A0G 3.4.1,p01 (PAGE) Tha terms of office of all persons who may be directors of the Corporation St tny time when a right to elect members of the board of directors shall. accrua to the holders of the preference stock shall terminate upon the alcetion of their successors, except that if the holders of the common stock , 'shtll not have elected the remaining directors of the Corporation, then, and only in that event, the directors of the Corpos.ation in office just prior to tha right of the holders of preference stock to elect the members of the board cf dirsetors shall elect the remaining directors of the Corporation. Th3reaf ter, during the continuance of any right of the holders of preference Stock to elect the members cf the board of directors, as provided above, the - remaining directors, whether elected by directors, as aforesaid, or whether originzlly or later elected by holders of the common stock, shall continue in office until their successors are elected by holders of the common stock and r thall qualify. The term oJ office of the directors so elected by the holders of tha preference stock, voting separately as a class, and of Oe directors alseted by the holders of the common stock, voting separately as a class, or elected by directors, as aforesaid, shall be until the right of the holders of the prsference stock to elect directors shall terminate, as provided above, and until their successors shall have been elected and shall have qualified. Upon the termination of the right of the holders of the preference stock to eloct members of the board of directors, as provided above, the voting power
.of tha holders of the preference stock and the holders of the common stock
!
- chill revert to the status existing before the first dividend. payment date on.
which dividends on any of.the preference stock were not paid in full, but cl%cys subject to the same provisions for vesting such right in the holders of thi preference stock in case of further like default or def aults in the prymelt of dividends thereon. Upon termination of any such voting right u pn p?yment of all accumulated and defaulted dividends on the preference stock, tha tsras of office of all Mrsons who have been elected directors of the Corporation by vote of the holders of the preference stock as a class, purzutnt to such voting right, shall termirate as hereinabove provided, and th3 rrsulting vacancies shall be filled by the vote of a majority of the remaining directors.
'In case of any vacancy in the office of a director occurring among the dirsctors elected by the holders of the preference stock, vodng as a class, th3 remaining directors elected by the holders of the preference stock, by affirmative vote of a majority thereof, or the remaining director so elected -if there be but one, may elect a successor or successors to hold office for thz unespired term or terms of the director or directors whose place 6? places th211 be vacant. In case of any vacancy in the office of a director occurring r.mong the directors elected by the holders of the common stock, voting aspirately as a class, or elected by directors, as aforesaid, the remaining
- dir$ctors so elected, by affirmative vote of a majority thereof, or the i
rt.maining director so elected if there be but one, may elect a successor or l sucesssors to hold office for the unexpired term or terms of the director or ! dirsctors whose place or places shall M vacant. , i . . i Whtnever dividends on the preference stock shall be in default, as provided i in this section 5, it shall M the duty of the President, a Vice President or 1 ths Sscretary of the Corporation, or in the event of their failure to do so j within twenty (20) days of such default, tL a privilege is granted any holder ; of prsierence stock who shall first demand the right so to do by written 1 l nodca to the Corporation, forthwith to cause notice to be given to the i holdsrs of the preference stock and to the holders of the common stock of a l meating to be held at such time as the Corporation's of ficers, or such holder of prsference stock, as the case may be, may fix, not less than tan (10) nor more than sixty (60) days after the accrual of such privilege, for the purpose tot elseting directors. Each holder of record of preference stock, or his legal
. rspresentative, shall be entitled at such meeting to one vote for each share of prsference stock standing in his name on the books of the corporation. At each meeting of shareholders held for such purpose, the presence in person or by proxy of the holders of a majority of the common stock shall be required to . constitute a quorum of the common stock for the election of directors, and the j prssence in M rson or by prosy of the holders of a majority of the preference
, stock shall M required to constitute a quorum of the pref erence stock for the t 1sisction of directors: provided, however, that the absence of a quorum of the l- holdars of stock of einer the pref erence stock or the common stock shall not
'pravsnt the election at any such meeting or adjournment thereof of directors ;
by such other class, if the necessary quorum of the holders of stock of such j i othar class is present in person or by proxy at such meeting or any <j l' - r.djournment thereof, and de directors so elected and qualified shall i constitute the board of directors with a majority of the directors so elected l end qualified constituting a quorum for meetings of the board until such time as tha other class of shareholders shall-VIII-5' l 1 1 1
. . - - - . ~ .
((1))f1NEDG (14433.ArVIII]09006.FIP PAC: 16-SEF 1996 09:43 EDG 00-000-0000 00:00 SLK 00-000-0000 00:00 ( [l1))Tue/taserch Fors 8 4 3. R. Donne 11ey (212) 341 7777 A0G 3.4.1,p01 (PACE) siset those directors which it has a right to elects and provided, further, , that in the absence of a quorum of holders of stock of c1Lher class, a l majority of the holders of the stock of the class, which lacks a quorum, who t are present in person or by prory~shell have power to adjourn the election of ; tha directors to be electad by such class from time to time without notico oth:r than announcement at the meeting, until the requisite quorum of holders of such class shall be present in person or by proxy, but such adjournment ' shall not be made to a date beyond the date for the mailing of the notice of , l .ths nast annual meeting of the Corporation or special meeting in lieu thereox.
- l. 6. Restrictions on Certain Corporation Action. So long as any shares of any
! series of the preference stock shall remain outstanding, the Corporation shall not, without de authorization of the holders of not less than two-thirds of tha issued and outstanding shares of preference stock, voting as a class at a meiting called for the purpose of approving such actions (a) Create, authorise or issue any class stock ranking prior to the . preference stock in respect to dividends or liquidation rights (other than ; stock issuable upon conversion of obligations or securities, or upon the , czarcise of warrants, rights or options to purchase, authorized pursuant to p (bL below); (b) Create, authorize or issue any obligation or security convertible j, into, or any warrants, rights or options to purchase or subscribe to, any , i stock ranking prior to the preference stock in respect to dividends or l liquidation rights; l l (c) Materially alter the provisions hereof relative to the preference r steck, or any series thereof, which would change the express terms and ' provisions of such stock, including any change in the provisions of Section 3 and 6 of this Division As provided, however, that if such material change Epportains to outstanding shares of one or more, but not all, of such series, then for the purposes of this Section 6 such change shall be deemed e to be authorized if holders of two-thirds of the shares affected shall vote favorably with respect thereto. DIVISION B--DESCRIPTION OF ISSUED SERIES D1 VISION C--COMMON STOCK fnbject tc the rights expressly conferred upon the holders of preference steck, under prescribed conditions, by this Article VI, and subordinate tharsto, the holders of the cosuson stock alone shall:
- 1. Receive all dividends declared by the board of directors.
- 2. Receive all assets of the Corporation available for distribution to . !
its shareholders in the event of any liquidation, dissolution or winding up of the Corporation. The board of directors, by vote of a ma_jority of the members thereof, may distribute in kind to the holders of sne common stock such remaining assets of the Corporation, or may sell, transfer or otharwise dispose of all or any of the remaining property and assets of the Corporation to any other corporation or other purchaser and receive payment tharefor wholly or partially in cash or property or stock or obligau ons of such purchaser, and may sell all or any part of the consideration received !- thirefor and distribute the same or the proceeds thereof to the holders of I tha common stock.
- 3. Possess exclusively full voting power for the election of directors I
( and for all other purposes, except as set forth in Division A-5 of this j l Saction VI. ARTICLE VII. Tha holders of a majority of the aggregate number of shares of the outstanding stock of the Corporation, entitled to vote upon any matter to be tetto upon, present in person or by pz'ty, shall constitute a quorum for the
- transaction of business at any meeting of shareholders, but less than a quorum shall have power.to adjourn. At all meetings of the shareholders, each shartholder entitled to vote shall be entitled to one vote for each share of i stock held by him and recorded in his name on the record date for such i mesting, and may vote and otherwise
-VIII-6 l
I i I 1 4 l
FAG: 18-SEP-1996 22:07 EDG: 00 000-0000 $0:00 BLK: 00-000-0000 00:00 Il1))Tue/tzserchl))FIREDGe[14433.ANY111)t0007.FIP Ftra 8-4 1. 3. DonnIllsy (212) 341-7777 ACG 3.4.1,p01
< PACE) cet either in person or by proxy, except that in all elections for directors every shareholder entitled to vote shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as c ere are dirsctors to be elected, or to cumulate such shares and give one candidate as -~ --
many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them en the same principle among as many crndidates as he shall think fit. Any shareholder who intends to cumulate his votos shall give written notice of such intention to the secretary of the Carporation on or before the day preceding the election at which such charrholder intends to cumulate his votes. Unless otherwise provided by etstute or by the articles of incorporation of the Corporation, when a quorum is prssent at any meeting, a majority of the stock represented thereat shall dicid2 any question before such meeting. ARTICLE VIII. Upon any issue for money or other consideration of any stock, or any eccurities convertible into stock, of any class whatsoever of the Corp ration thtt may be authorized from time to time, no holder of stock of any class ch:11 have any preemptive or other right to subscribe for, purchase or receive gny proportionate or other share of stock or securities so lasued, but the board of directors may dispose of all or any portion of such stock or occurities as and when it may determine f ree of any such rights, whether by ef fering the same to shareholders or by sale or oder disposition as said board may deem advisable. The consideration received by de Corporation from tha issuance and sale of any additional shares of common stock without par
'vtlu2 shall be entered in de capital stock account.
ARTICLE IX. Thi corporation shall reimburse or indemnif y any former, present or future Lirtetor, of ficer or employee of the Corporadon, or any person who may have cervid at its request as a director, of ficer or employee of another c:rporation, or any former, present or future director, officer or employee of th) Crrporation who shall have served or shall be serving as an administrator, l Eg;Ct or fiduciary for the Corporation or for another corporation at the ' requ;2t of the Corporation (and his heirs, executors and administrators) for j er (grinst all expenses and liabilities incurred by him or them, or imposed on j his cr them, including, but not limited to, judgments, settlements, court crata and attorneys' f ees, in connection wiu_, or arising out of, the defense cf (ny action, suit or proceeding in which he may be involved by reason of his being or having been such director, officer or employee, except with respect to matters as to which he shall be adjudged in such action, suit or proceeding j to be liable because he did not act in good faith, or because of dishonesty or . conflict of interest in the performance of his duty. l Es former, present or future director, officer or es.ployee of the I Corporation (or his heirs, executors and administrators) shall be liable for cny cct, omission, step or conduct taken or had in good faith, which is r: quired, authorized or approved by an order or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any i etLIr federal or state statute regulating the Corporation or its subsidiaries, er tny amendments to any thereof. In any action, suit or proceeding based on cny set, omission, step or conduct, as in this paragraph described, the , provisions hereof shall be brought to the attention of the court. In the event thtt the foregoing provisions of this paragraph are found by the court not to ( , j i con;titute a valid defense, each such director, officer or employee (and his hwirs, executors and administrators) shall be reimbursed for, or indemnified ratinct, all expenses and liabilities incurred by him or them, or imposed on hLa or them, including, but not limited to, judgments, settlements, court crata and attorneys' fees, in connection wi u., or arising out of, any such Lctien, suit or proceeding based on any act, omission, step or conduct taken or hid in good f aith as in this paragraph described. Th2 foregoing rights shall not be exclusive of other rights to which any such director, officer or employee (or his heirs, executors and caministrators) may otherwise be entitled under any bylaw, agreement, vote of thirsholders or otherwise, and shall be available whether or not the director, officar or employee continues to be VIII-7 l 1 l e a l
1))F1NEDCr[14433.ANV111)00008. PIP FAC: 16 SEF 1996 09:43 EDCs 08+888-6960 00:00 BLK 00-000-0000 00:00 [ l[1])Tuc/Ensuch l ' Fors 8-4 3. 2. Donaslity (212) 341-7777 ACG 3.4.1,p01 i (PACE) e diractor, officer or employee at the time of incurring such expenses and liabilities. In furtherance, and not in limitation of the foregoing provisions of this Article IX, the Corporation may indemnify and may insure any such percens to the fullest extent permitted by the Texas Business Corporation Act, es amended from time to time, or the laws of the State of Texas, as in effect from time to time. ARTICLE A. J
~A director of the Corporation shall not be liable to the Corporation or its rhartholders for monetary damages for any act or omission in Ge director's cip: city as a director, except that this provision does not eliminate or limit I ths liability of a director to the extent the director is found liable fors (a) a breach of the director's duty of icyalty to the Corporation or its ghtreholders;-
(b) an act or omission tot in good faith that constitutes a breach of duty of the director to the Corporation or an act or omission that involves intantional misconduct or a knowing violation of the laws (c) a transaction from which the director received an improper benefit, whzther or not the benefit resulted from an action taken within the scope i of the director's offices or i (d) an act or omission for which the liability of the director is r szpressly provided for by an applicable statute. , If the laws of the State of Texas are amended to authorize action further ' alininating or limiting the personal liability of directors, then the ] ' lirbility of a director of ne Corporation shall be eliminated or limited to ths fullest extent permitted by such laws as so amended. Any ren al or modification of this Article X shall not adversely affect any rlght of pritcction of a director of the Corporation existing at the time of such t r:pe21 or modification. A/TICLE XI. Any property of the Corporation not essential to the conduct of its ccrporate business may be sold, exchanged or otherwise disposed of by
- Eu ntrity of its board of directors, and the Corporation may sell, exchange or t
- i. ethirvise dispose of any (but less than all or substantially all) of its
. propsrty essantial to Oe conduct of its corporate business and purposes, purru?nt to the affirmative vote of a majority of the board of dlrectors and tha holders of a majority in aggregate number of the shares of the stock of thD Corporation then outstanding and entitled to vote, for such consideration sad u Mn such terms as may be approved by a majority of the board of directors
- and the holders of a majority in aggregate number of shares of stock of the Crrpration then outstanding and entitled to vote. For the purposes of this
. Aruele XI, the term " property" shall embrace all property of the Corporation, whith*r real, personal or mixed, and shall include, but shall no be limited to, shares of stock, warrants, script, bonds, debentures, notes, obligations, cortgiges, contracts and other securities or evidences of indebtedness of any '
kind or description whatsoever. ARTICLE XII. Pursuant to the affirmative vote, in person or by proxy, of the holders of a i
~ majority in aggregate number of the shares of stock of d e Corporation then =
)
c:utattnMng and entitled to vote (1) any or every statute of de State of Tzzas hereafter enacted, whereby the rights, powers or privileges of the . ! Carporation are or may be increased, diminished or in any way affected, or , Charoby the rights, powers or privileges of the shareholders of corporations orgtnized under the law under which the Corporation is organized are incrstsed, diminished or in any way affected, or whereby effect is given to i th:s action taken by any part less than all of the shareholders of any such ! corporation shall apply to the Corporation, and shall be binding upon not only }
' tha Corporation but upon every shareholder thereof, to the same extent as if p ruch statute had been in force at the date of the making and filing of the chartar of the Corporation and/or (2) amendments to these articles of incorporation authorized at the time of the making of such amendments by the laws of the state of Texas may be made, except in cases where a different vote er consent is required by statute or by the provisions of these articles of l incorporation.
VIII-s j f f i i I l l i
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l l ' i [- [Il))FINEDGr[14433.ANVIII)D0009. PIP PAC. 16-517-1996 69:44 EDC: 00-000 0000 00:00 BLE 60-080 0000 00:09 l
- ((1))Tuc/userch Fors 8-4 B. 1. Doanelley (212) 341-7777 ACG 3.4.1,p01 ,
~. (PAdE)
ARTICLE XIII, r Tha bylaws of the Corporation may be altered, changed or amer.ded as provided r by statuter or~at'any meeting of the-board of directors by affirmative vote of ; a majority of all of the directors, if notice of the proposed change has been dalivared or mailed to the directors at least ten days before the meetings . ..-
-providtd that the board of directors shall not make or alter any bylaw fixing ;
th.31r number, qualifications, classification, or term of office.'
- f ARTICLE XIV. h- r The Corporation has heretofore complied with the requirements of law as to ?
tha initial minimum capital requirements without which it could not commence ! businnes under the Texas Business Corporation Act. I I l VIII-9 i l i L i t
;i l
I I i l l I i l L I t - l l I l l;
d e (111)f1EDGil1441).hWWIX)90001. PIP ' PACS 18 SEP-1996 22:06 EM: 00 004-0000 00:00 SLE: 00-000-0000 00:00 ((1))Tuc/Eastreb Fir 2 3-4 3. 3. I:onnelley (212) 341 7777 A0G 3.4.1,p53 (PAGE) ANNEX IX RESTATED BYLAWS __. OF TUC BOLDING COMPANY 26ction 1. Place of Meetings of Shareholders. All meetings of the thirtholders shall be held at the registered of fice of the Corporation in Dsllas, Texas, or at such other place within or without the State of Texas as may be stated in the call and notice, section 2. Annual Meeting of Shareholders. The annual meeting of the thirtholders for the election of directors and the transaction of such other business as may properly come before such meeting shall be held on the third Frid:y in May of each year, at ten o' clock in the forenoon, or at such other hour as may h named in the notice of meeting, unless such day is a legal
. holiday, in which case such meeting shall be held on the next business day. In the event that such annual meeting for any reason is not held on the date ,hsrein provided for, a subsequent meeting may be held in place thereof and any businssa transacted or elections held at such meeting shall be as valid as if transacted or held at the annual meeting. Any such subsequent meeting shall be csiltd in the same manner as provided for special meetings of shareholders.
Srction 3. Special Meetings of Shareholders. Special meetings of the ghtrsholders may be called by the chairman of the board, the president, the board of directors or the holders of not less than one-tenth of all the shares cntitled to vote at such meetings. Sretion' 4. Notice of Meetings of Shareholders. Written notice of all' mestir gs, stating the place, day and hour of the meeting and, in case of a r pcial meeting, the purpose or purposes for which the meeting is called, shall be delivered to the shareholders of record entitled to vote at such me2 tings not less than ten nor more than sixty days before the meeting. If mailed,.such notice shall be deemed to be delivered when deposited in the UnitId States mail addressed to the shareholder at his address as it appears on thi stock transfer books of the Corporation, with postage thereon prepaid. A ctiver of notice in writing signed by the person or persons entitled to such nttics, whether before or after the meeting, shall be equivalent to the giving cf auch notice. sS&ction 5. voting List for Meetings. The officer or agent having charge of tha stock transfer books of the Corporation shall make, at least ten days befsrs each meeting of shareholders, a complete list of the shareholders
' cntitled to vote at such meeting or any adjournment thereof, arranged in alphtbetical order, with the address of and the number of shares held 3y + ach, which list, for a period of ten days prior to such meeting, shall be LJpt on file at the registered office of ne Corporation and shall be subject to inIpection by any shareholder during regular business hours. Such list shall also be produced and kept open at the t h and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the assting. The original stock transfer books shall be prima facie evidence as to who tre the shareholders entitled to examine such list or to vote at any me: ting of shareholders. Failure to comply with any requirements of this Ssetion 5 shall not affect the validity of any action taken at such meeting.
Srction 6. Quorum at Meetings of Shareholders. The holders of a majority of ths shares entitled to vote, present in person or by proxy, shall constitute a quarua at any meeting of shareholders, but less than a quorum shall have power to adjourn any meeting from time to time. Except as otherwise provided by statute or by the articles of incorporation or these bylaws, with respect to any matter, other than the election of directors, the af firmative vote of the holdsrs of a majority of the shares entitled to vote on that matter, present in person or by prozy, shall be the act of the shareholders. Stetion 7. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment
'thsrsof, or to receive payment of any dividend, or for any other proper purpote, the board of directors may fix in advance a record date for any such dstermination, such date to 1X-1
((1))PINEDC(14433.AsB11]00002.FIF FAC: 16-SEF it98 10:16 EDC: 00-000-0060 00:00 BLK: 00-000-0000 00:50 Forn 8-4 R. 2. Donnelley (212) 341-7771 A0G 3.4.1,p03 ll!)lfuc/Enserch (PAGE) 1 . be not more than sixty days and, in case of a meeting of s.sreholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. Siction 8. Presiding Officer and Secretary. The president of the Corporation . I' shs11 preside at, and the secretary shall keep the records of, each meeting of ' i shir; holders. In the absence of either such officer, his duties shall be parformed by another officer of the Corporation appointed at the meeting. S$ction 9. Form of Certificates of Stock and Transfer of Sharsa. Certificates of stock of the Corporation shall be of such form and device as the board of directors may from time to time determine. The stock of ths Corporation shall be transferable only on the books of the Corporation by tha holders in person or by attorney on surrender of the certificates therefor prop:szly endorsed. The board of directors may appoint one or more transfer [ cgsnts and one or more registrars of the stock. The Corporation shall be satitled to treat the holder of record of any shares of the Corporation as the ownir thereof for all purposes, and shall not be bound to recognize any equittble or other claim to, or interest in, such shares of any rights omriving from such shares, on the part of any other person, unless and until such other person becomes the holder of record of such shares, whether or not th2 Corporation shall have either actual or constructive notice of the j intarsst of such other person. l srction 10. siping of certificates of stock. Certificates of stock of the C2rporation shall be signed by the president or a vice president and either tha escretary or an assistant secretary, and shall be sealed with the seal of ' th2 Crrporation or a facsimile thereof. The signatures of such officers upon a' cartificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the Corporation itself or an employee of the Corp ration. In case any officer who , hns signed or whose facsimile signature has wen placed upon such certificate thtl1 have ceased to be such officer before such certificate is issued, it may i be issued by the Corporation with the same effect as if he were such officer ' at tha date of its issuance. SIction 11. Directors. The board of directors shall consist of ten members. Mastings of the board of directors shall be held at the time and place fixed by resolution of the board of directors or upon the call of the chairman of ui board or the president or the executive committee. The secretary or efficir performing his duties shall give two days' notice of all meetings of l dirrctors by mail or telegram to the last known address of each director, ! previded that a meeting may be held without notice immediately after the canus1 election, and notice need not be given of regular meetings held at such I time as may be fixed by a resolution of the board. Meetings of the directors ! may be held at any time without notice if all directors are present or if l those not present waive notice either before or after the meeting. At any. j mesting of directors a majority of the whole number of directors shall < constitute a quorum, but less than a quorum shall have power to adjourn the i mesting from time to time. sscti.) 12. Officers.'The board of directors, as soon as may be after the annuti meeting each year, may elect one of their number chairman of the board, ths11 elect a president of de Corporation, shall elect one or more vice prssidents, a secretary and a treasurer, and may elect one or more assistant ! stcrstaries and assistant treasurers and such other officers as they may from , time to time deem proper. The same person may be elected to and hold more than i ona office, except that the president and the secretary shall not be the same person. The term of office of all officers shall be one year, or until their i rarpective successors are chosen and qualified, but any officer may be removed. 4 l from office for or without cause at any time by the board of directors. 4 Whinsver any vacancy shall occur in any office by death, resignation, increase in tha number of of fices of the Corporation, or otherwise, the same shall be fillsd by the board of directors, and the officer so elected shall hold office - until his successor is chosen and qualified. The officers of the Corporation l rhtll have such powers and duties as usually pertain to their offices, 4 rarpsetively, as well as such powers and duties as may from time to time be crnfarred by the board of directors. S1ction 13. Executive Committee. The board of directors, as soon as may be
, after the annual meeting each year, may appoint an executive committee to censist of the chairman of the board, the president and such number of the directors as the board may from time to time determine. Such executive
- committee shall have and may exercise all the powers of the board during the intsrvals between its meetings which may be lawfully IX-2 I
i l 4 l 1 - L
PAG: 16 SEP 1996 10:18 EDG 00-000-0000 00:00 815: 00 000-0000 00:00
.l[1))FINEDGi[14433.AN51X]00003.FIF
[1])Tuc/EnsIrch Fors S-4 3. R. Connelley (212) 341-7777 A0G 3.4.1,p03 (PACE) d31tgsted, subject to such limitations as may be provided by resolution of the board of directors. The board shall have the power at any time to change the I member: hip of such committee and to fill vacancies in it. The executive
~ committee may elect a chairman and may make rules for the conduct of its l bu2inics and appint such committees and assistants as it may deem necessary. !
A majority of the members of such committee shall constitute a quorum. , l 81ction 14. Audit Committee. The board of directors, as soon as may be after i tha Ennual meeting each year, shall appoint an audit committee to consist of I such Lumber of the nonofficer members of the board of directors as the board I may from time to time determine. Such audit committee shall select and l nominate to the board, for its consideration, a firm of certified public tecoustants to audit the books of account and records of the Company and to perform related services for the ensuing year, and said committee shall diteuts the audit work with the auditors appointed to perform the audit and l th:11 perform such other services as the board shall direct from time to time l by riculution of the board of directors. The audit committee may elect a ] chtirman and may make rules for the conduct of its business and appoint such ; committees and assistants as it may deem necessary. A majority of the members of ruch committee shall constitute a quorum. S1ction 15. yinance Committee. The board of directors, as soon as may be cit:r the annual meeting each year, shall appoint a finance committee to consist of such number of the nonofficer me h rs of the board of directors as th2 board may from time to time determine. Such finance committee shall review (ad IIcommend to the board, for its consideration, major financial und:rtakings and policies and said committee shall perform such other services as th) board shall direct from time to time by resolution of the board of dirtettre. The finance committee may elect a chairman and muy make rules for the conduct of its business and appoint such committees and assistants as it may dien necessary. A majority of the members of such committee shall - con 2titute a quorum. j 8:ction 16. Nominating Committee. The board of directors, as soon as may be citar the annual meeting each year, shall appoint a nominating committee to . contist of such number of the nonofficer members of the board of directors as th* brard may from time to time determine, such nominating committee shall celect and recommend to the board, for its consideration, persons as nominees far election as directors of the company and shall consider among other things tha performance of incumbent directors in determining whether to nominate them frr rcelection, and said committee shall perform such other services as the board shall direct from time to time by resolution of the board of directors. Thi nominating committee may elect a chairman and may make rules for the cLcduct of its business and appoint such committees and assistants as it may diem necessary. A majority of the members of such committee shall constitute a gurrum. Section 17. Organization and compensation Committee. The board of directors, t es soon as may be af ter the annual meeting each year, shall ap int an crginitation and compensation committee to consist of such nu r of the n:nnificer members of the board of directors as the board may f rom time to time determine. Such organization and compensation committee shall review and ricommend to the board, for its consideration, the organization of the Company, the duties and remuneration of officers and senior management, and tha compensation plans in which such officers and senior mantgement are cligible to participate, and said committee shall perform such other services es th3 board shall direct from time to time by resolution of the board of dir:ctors. The organization and compensation committee may elect a chairman and may make rules for the conduct of its business and appoint such committees End assistants as it may deem necessary. A majority of de members of such committee shall constitute a quorum. 8:ction 18. Nuclear Committee. The board of directors, as soon as may be citar the annual meeting each year, may appoint a nuclear committee to consist of ruch number of the Mrectors as the board may from time to time determine. Such nuclear committee shall review and generally oversee, and make reports rad ricommendations to the board in connection with, the construction and operstion of the Company's nuclear generating units, shall discuss shall matters with Company personnel and consultants, may commission, undertake, riesive and review studies and reports on such matters and shall perform such oth1r services as the board shall direct from time to time by resolution of ths board of directors. The nuclear committee may elect a chairman and may maks rules for the conduct of its business and appoint such committees and cesictants as it may deem necessary. A majority of the members of such committee shall constitute a quorum. IX-3 t f-l l
l l1]) FINEDG a [14433.FJNIX] 00004. PIF FAC: 16-SEF-1996 21:59 EDG 00-000-6009 00:00 BLE: 00 000 0000 00:00 ((1))Tuc/Easerch form 5-4 3. 2. Donne 11ey (212) 341-7777 A0G 3.4.1,p03 (PAGE) Siction 19. Other Committees. The board of directors may, by resolution ptsesd by a majority of the whole board, establish other committees, each committee to consist of one or more directors, which committees shall have cuch power and authority and shall perform such functions as may' be provided in tuch resolution. Each committee may elect a chairman and may make rules for th3 crnduct of its business as it may deem necessary. A majority of the membirs of each committee shall constitute a quorum. Each committee shall act only on the affirmative vote of a majority of the members present at a me: Ling. 8:ction 20. Transactions with the Corporation.'A director of this C4rpiration shall not be disqualified by his office from dealing or crutricting with this Corporation, either as a vendor, purchaser or otherwise, i not shall any transaction or contract of this Corporation be void or voidable ) by rceson of the fact that any director or any firm of which any director is a i member, or any corporation of which any director is a shareholder or director, ! is in any way interested in such transaction or contract, provided that such 1 trinrection or contract is or shall be authorized, ratified or approved either j (1) by vote of the majority of a quorum of the board of directors or of the cascutive committee, without counting in such majority or quorum any director c@ interested or a member of a firm so interested or a shareholder or director of c corporation so interested; or (2) by vote at a shareholders' meeting of tha holders of a majority of all the outstanding shares of the apital stock of ths Corporation entitled to vote thereon or by writing or writings signed by a majority of such holders: nor shall any director be liable to account to 2:3 Corporation for any profits realized by him from or through any trin;cction or contract of this Corporation authorized, ratified or approved, cs afaresaid, by reason of the fact that he or any firm of which he is a member or any corpration of which he is a shareholder or director was intersated in such transaction or contract. Nothing herein contained shall crosts any liability in the events above described or prevent the tuthorization, ratification or approval of such contracts in any other mauser Provided by law Section 21. Insurance, Indemnification and other Arrangements. Without further specific approval of the shareholders of the Corporation, the Crrporation may purchase, enter into, maintain or provide insurance, indemnification or other arrangements for the benefit of any person who is or esa a director, officer, employee or agent of the Corporation or is or was scrying another entity at the request of the Corporation as a director, effic:r, employee, agent or otherwise, to the fullest extent permitted by the Irw2 of the state of Texas, including without limitation Axt. 2.02-1 of the T213 Business Corporation Act or any successor provision, against any litbility asserted against or incurred by any such person in any such capacity or arising out of such person's service in such capacity whether or not the , Crrp: ration would otherwise have the power to indemnify against any such 1 licbility under the Texas Business Corporation Act. If the laws of the state of T:xas are amended to authorize the purchase, entering into, maintaining or providing of insurance, indemnification or other arrangements in the nature of f thors permitted hereby to a greater extent than presently permitted, then the Crrporation shall have the power and authority to purchase, enter into, maintcin and provide any additional arrangements in such regard as shall be parmitted f rom time to time by the laws of the state of Texas without further t approval of the shareholders of the Corporation. No repeal or modification of I such laws or this Section 21 shall adversely affect any such arrangement or right to indemnification existing at the time of such repeal or modification. I SIction 22. Compensation of Directors. The board of directors shall have powtr to authorize the payment of compensation to the directors for services to thm Corporation, including fees for attendance at meetings of the board of directors or the executive committee and all other committees, and to datsrsine the amount of such compensation and fees. Stetion 23. Amendment of Bylaws. These bylaws may be altered, changed or ! r.mendid as provided by statute, or at any meeting of the board of directors by Effirmative vote of a majority of all of the directors, if notice of the propoted change has been delivered or mailed to the directors at least ten n ys before de meetings provided that the board of directors shall not make or alter any bylaw fixing their number, qualifications, classification, or tara of office. IX-4 l l l l
i
. PAG: 20-SEP 1994 04:41 EDG 00-009-0000 00:00 BLK: 00-000 0000 00:00 (l1))]TINEDGsl14413.ANNX]00001.
[ 1] Tue/E:serch' PIP fors 8-4 2. 3. Donas11ey (212) 341-7777 A0G 3.4.1,p02 (PAGE) ANNEX X ARTICLES OF AMENDMENT BY THE SHAREHOLDERS TO THE RESTATED ARTICLES OF INCORPORATION OF ENSERCH CORPORATION Pursuant to the provisions of Article 4.04 of the Texas Business Corporation Act, the undersigned ENSERCH Corporation (the " Corporation") adopts the following Articles of Amendment to its Restated Articles of Incorporation. Article One: The name of the corporation is ENSERCH Corporation. Article Two: In the first sentence of the first paragraph of ARTICLE SIX of tha RIstated Articles of Incorporation of the Corporation, *$4.45" is hereby chingId to "$0.01", so that the par value per share of the common Stock h2rasiter be $0.01 instead of $4.45. Ths remaining provisions of Article Six of the Restated Articles of Incorporation of the Corporation, including without limitation Division A, = Division B, Division C and Division D thereof, shall remain unchanged and in full force and effect. The designations, preferences, limitations and relative end other rights of the authorized and outstanding shares of Preferred Stock End Voting Preference Stock are not changed by this Amendment. Article Threes'The foregoing amendment (the " Amendment") to the Restated-Articles of Incorporation was adopted by the shareholders of the Corporation en - . The designation and number of outstanding shares of each class entitled to vote on the Amendment were as follows:
< TABLE)
(CAPTION)- NUMBER OF CLASS SEARES (S) . (C) Common Stock.'........................................................ [ ]
</ TABLE)
Thz number of s' hares of Common Stock that voted for the Amendment was tad the number of shares of Common Stock that voted against the Amendment was Article Fours All autstanding shares of the Corporation's Common Stock, par valua $4.45 per share (' Existing Common Stock'), are reclassified and convarted, effective as of the issuance of a certificate of amendment by the. 'sacrstary of State of the State of Texas upon the filing of these Articles of Amendment, into shares of the Corporation's Common Stock, par value $0.01 per Ehtre ("New common Stock"), on the basis of one share of New Common Stock for each outstanding share of Existing Common Stock. Certificates representing shares of Existing Common Stock will represent shares of New Cossoon Stock without any further action by the holders thereof. Article Six: The Amendment effects a change in the stated capital of the Corporation by reducing the par value per share of the Corporation's Common Stock from $4.45 to $0.01. The amount of stated capital of the Corporation, based upon the shares of Existing Common Stock outstanding and entitled to vote on the Amendment, was reduced by $ from $ before the Amendment to S- after the Amendment, and the $ by which stated capital was reduced is hareby transferred to the surplus of the Corporation. In Witness Whereof, the undersigned has executed these Articles of Amendment of tha Corporation this day of , 1996. Enserch Corporation By: Its Chairman and President Dstad X-1
..m -- ... . .
FAGe 17 517-1996 11:00 EDG 00 000-0900 00:00 BLKs 00-000-0000 00:00 IlljlFINEDGil14433.ANNII]00001.FIF 1))Tuc/Ensisch fors 8 4 3. 3. Donne 11ey (212) 341-7777 ACG 3.4.1,p02 (PACE) ANNEX XI RESTATED ARTICLES OF INCORPORATION OF LONE STAR ENERGY PLANT OPERATIONS, INC. SECTION ONE Loni Star Energy Plant Operations, Inc. (the " Company"), pursuant to the previsions of Article 4.07 of the Texas Business Corporation Act, as amended
.(thi "TBCA"), hereby adopts Restated Articles of Incorporation that accurately copy the Articles of Incorporation and all amendments thereto that are in efftet immediately prior hereto (collectively, the "Old Articles") and as furth3r amended by such Restated Articles of Incorporation as hereinafter set forth and which contain no other change in any provision thereof.
SECTION TWO Tha Restated Articles of Incorporation restate and integrate and further rmend the Old Articles by substituting for the provisions of the Old Articles in thair entirety the provisions of the Restated Articles of Incorporation set ' farth in Section Five of these Restated Articles of Incorporation. The further
~tmendments effected by the Restated Articles of Incorporation affect the Old Articles as follows: (i) amend Article One (name), Article Three (purpose),
Article Four (authorized shares), Article Five (preemptive rights), Article SIvin (power to amend Bylaws), Article Eight (voting rights), Article Nine (rsgietered office and agent), Article Ten (directors), and Article Eleven (linitation of director liability); (ii) delete all of Article Six (commencement of business): (iii) add Articles Eight (meetings of th rstolders), Nine (business combinations) and Ten (amendments): and (iv) rtnumber the Articles. Further, the capital stock of the Company is hereby reclassified and^
- crnvirted as follows: the outstanding ten (10) shares of the company's Common Atock, par value $100 per share, are hereby reclassified and converted into i tan (10) shares of the company's Common Stock, par value $.01 per share. The tsclassification and conversion decreases the stated capital represented by th2 outstanding Common Stock from $1,000 to $.10.
t SECTION TEREE Eich amendment made by the Restated Articles of Incorporation has been . affrcted in conformity with the provisions of the TBCA, and such Restated ' Articles of Incorporation and each amendment made by the Restated Articles of Inccrporation were duly adopted by the holder of all of outstanding capital stock of the Company by a written consent dated September 10, 1996. 1 ) SECTION FOUR Tha number of shares outstanding was 100 and the number of shares entitled to vste on the Restated Articles of Incorporation as so amended was 100, the holdar of which has signed a written consent to the adoption of such Restated Articles of Incorporation as so amended pursuant to Article 9.10 of the TBCA. i SECTION FIVE , Tha Old Articles are hereby superseded by the following Restated Articles of l Incorporation, which accurately copy the entire text thereof as amended as cbove set forth , XI-l I i i l i 4 i a s w -
}
[ [1] ) FINEDG s (144 33. ANKI!] 00002. FIF FAGS 17 SIF-1996 10:57 EDC: 00-000-0000 00:00 BI.K 00-000-0000 00:00 ((1))Tuc/Erserch ftr3 8-4 1. 1. Donn211sy (212) 341-7777 A0G 3.4.1,p02 (PAGE) RESTATED ARTICLES Or INCORPORATION Or
' LONE STAR ENERGY PLANT OPERATIONS, INC.
ARTICLE ONE Ths name of the corporation (the ' Company") is Lone Star Energy Plant Oper&tions, Inc. ARTICLE TWO Tha period of its duration is perpetual. ARTICLE THREE Th'a purposes for which the Company is organized ares (1) To engage in all phases of the gas and oil business and related cetivities, including without limitation engaging in exploration, drilling, divslopment, and production of gas and oil properties; (2) To store, transport, buy and sell, gas, oil, salt, brine and other nintral solutions and liquefied minerals; (3) To explore for, produce, purchase and sell, store, process and manufacture, transport and distribute gas, oil and all oder minerals; (4) To manufacture, produce, purchase or otherwise acquire, sell or dianose of, distribute, mortgage, pledge, lease, repair, install, operate, d231 in and with, whether as principal or agent, products, goods, tppliances, wares, merchandise, fixtures, plants, structures, machinery, cc.d materials of every kind and description, to lend money for the carrying cut of such purposes, and to take and hold real and personal property for the payment of such funds so loaned; (5) To engage in the business of operation and maintenance of cogineration and other power production projects; and (6) To transact any or all lawful business for which corporations may be incorporated under na Texas Business Corporation Act, as amended and in ef fset from time to time (the "TBCA*). ARTICLE FOUR (A) Authorized Capital Stock. The aggregate number of shares of all classes of stock the company shall have authority to issue is 410,000,000 consisting of cnd divided intos (1) one class of 400,000,000 shares of Common Stock, par value $0.01 per share ( the " Common Stock"); and i (ii) one class of 10,000,000 shares of Preferred Stock, no par value (the "Prsferred Stock"), which may be divided into and issued in one or more saries, as hereinafter provided. (B) Series. The Preferred Stock may be divided into and issued in, at any time tnd from time to time, one or more series as the Board of Directors shall l dstsrmine pursuant to the authority hereby vested in it. The Board of Dirsctors shall have the authority to establish series of unissued shares of Prsfarred Stock, at any time and from time to time, by fixing and determining tha disignations, preferences, limitations and relative rights of XI-2 i I f i I l
( ll] )f!NEDG s [14433. ANNXI] 00003.FIP PM: 17-8EF 1996 10:50 EDC: 00-000-0000 00:00 Bl.Es 00-000 0000 00:00 l [l1l}he/Ensuch For2 S-4 3. 3. Donns11ey (212) 341-7777 AOC 3.4.1,p02 (PAGE) I tha Ehares of the series, subject to and within the limitations of the TBCA c.nd the Articles of Incorporation, including without limitation the followings (a) the number of shares constituting the series and the distinctive _ , _ dssignation of that series; I (b) the dividend rate on shares of the series, the dividend payment ! ditss, whether dividends shall be cumulative (and, if so, from which date l or dates), non-cumulative, or partially cumulative, and the relative rights i of priority, if any, of payment of dividends on the shares of the series (c) the amount payable to the holders of shares of the series upon any voluntary or involuntary liquidation of the companys (d) the preference in the assets of the company over any other class, cltsses or series of shares upon the voluntary or involuntary liquidation of the Companys (e) whether the shares of the series are redeemable at the option of the Company, the shareholder or another person or upon occurrence of a dt2ignated event and, if so, the price payable upon redemption of shares of thi series and the terms and conditions on which such shares are radiemables (f) the provisions of the sinking fund, if any, for the redemption or purchase of shares of the series: (g) the voting rights, if any, of the shares of the seriess (h) the terms and conditions, if any, on which such shares may be converted, at the option of the Company, the shareholder or another person or upon occurrence of a designated event, into shares of any other class or series; (i) the terms and conditions, if any, on which such shares may be ~ sxchanged, at the option of the Company, the shareholder or another person cr upon occurrence of a designated event, for shares, obligations, indcbtedness, evidences of ownership, rights to purchase securities or othtr securities of the company or one or more other domestic or foreign corporations or other entities or for other property or for any combination of the foregoing; and (j) any other special rights and qualifications, limitations or rastrictions perdtted by the TBCA to be granted to or imposed on the series. Any of the desipations, preferences, limitations and relative rights of the ghtrsa of any series so established may be made dependent upon f acts rezesrtainable outside the Articles of Incorporation, which facts may include futura acts of the Company, provided that de manner in which such facts shall opertte upon the designations, preferences, limitations and relative rights of us shares of any series shall M set forth in the resolution or resolutions estrblishing the series. All shares within the same series of Preferred Stock shall be identical s'zcapt as to the date of issue and the dates f rom which dividends on shares of tha caries issued on different dates will cumulate, if cumulative. The Board of Directors shall have the authority to increase or decrease the number of thtras within each series of Preferred Stockt provided, that the Board of l Dirsctors may not decrease the number of shares within a series to less than ' tha number of shares within such series that are then outstanding. (C) Preemptive Rights. No shareholder of the Company shall by reason of the sharsholder's holding shares of any class or series have any preemptive or prefsrential right to purchase or subscribe to any shares of any class or sariss of the Company, now or hereafter to be au d orized, or any notes, d1bentures, bonds or other securities convertible into or carrying options or wirrt3ts to purchase shares of any class or series, now or hereafter to be Luthorized, whether or not the issuance of any such shares, or such notes, dibtntures, bonds or other securities, would adversely af fect the dividend or voting rights of such shareholders, other than such rights, if any, as the Board of Directors in its discretion may fizs and the Board of Directors may issus shares of any class or series of the Company, or any notes, debentures, bonds or other securities convertible into or carrying options or warrants to purch*se shares of any class or series, without offering'any such shares of cny class or series, either in whole or in part, to the existing shareholders j of tny class or series. XI.3 i l l
l l ((1))FINEDGil14433.ANMXIj00004.FIF PAGs 17 SIF-1996 19:58 EDCs 00-000-0000 00:00 BLE: 00-000-0000 00:00 ((3)]Tue/I:sirch Ftra 5 4 1. R. Donn311sy (212) 341 7777 A0G 3.4.1,p02 (PAGE) (D) Subordination of Common Stock. The Common Stock shall be subject and rubordinate to the rights, privileges and preferences of any series of Prciarred Stock to the extent set forth in the resolution or resolutions of l ths Board of Directors establishing the series. (E) Other Provisions Applicable to Capital Stock. (a) Each outstanding share of Common Stock shall be entitled to one vote cn cach matter submitted to a vote at a meeting of shareholders, except as l othirwise provided by the TBCA or as set forth in the resolution or rseolutions of the Board of Directors establishing any series of Preferred Stock. [ (b) At each election for directors of the Company (" Directors'), every i th reholder entitled to vote at such election shall have the right to vote th2 number of shares owned by such shareholder for as many persons as there j ers Directors to be elected and for whose election such shareholder has a l right to votes provided that cumulative voting in the election for Dirsetors is prohibited. (c) In the event of any dissolution, liquidation or winding up of the Company, but subject to the rights of the holders of any series of l Prsferred Stock, holders of Common StocY shall be entid ed to receive pro i rcta all of the remaining assets of the Company available for distribution to its shareholders. (d) Subject to the rights of the holders of Preferred Stock as set forth in the resolution or resolutions of the Board of Directors establishing any s4 ries of Preferred Stock, dividends may be paid upon Common Stock to the cxclusion of Preferred Stock out of any assets of the Company available thIrefor. ARTICLE FIVE Th2 straat address of the Company's registered office is 6688 North Central Exprsasway, suite 1000, Dallas, Texas 75206, and the name of its registered c.g;nt at that address is Michael G. Fortado. ARTICLE SIX (A) Number. The number of Directors constituting the Board of Directors of th1 Company shall be fixed from time to time by the Board of Directors by the ef firmative vote of not less than a majority of the continuing Directors (as Orfinrd in Article Ten) but shall not M less than three (3), subject to such l rigits to elect additional Directors under such specified circumstances as may be gr:nted to holders of Pref erred Stock. (B) Required vote to Elect Directors. With respect to the election of Dircctors, the act of the shareholders electing the Directors shall be a vote cf tha holders of a majority of the outstanding shares entitled to vote in the sicction of Directors. (C) Term. Directors shall hold office until their respective successors shn11 have been elected and qualified. (D) Removal. Directors may be removed from office, with or without cause, only by the affirmative vote of the holders of not less than a majority of the outstanding shares entitled to vote in the election of Directors, if notice of tha intention to act upon such matter shall have been given in the notice calling for the meeting. (E) Vacanciess Increase in Number of Directors. Subject to such rights to alset Directors under specified circumstances as may be granted to holders of Preisrred Stock, newly created directorships resulting from any inrrease in tha number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other reason shall be filled solely by the affirmative vote of a majority of the Continuing Directors, even though less than a quorum of the Board of Directors. No d;crarse in the number of Directors constituting the Board of Directors shall thortin the term of any incumbent Director. XI-4 i l I ! l i i i I
((1))f!NEDGll14433.ANNII]99005.FIF PAC: 18-SEF-1996 22:25 EDC: 00-090-0000 00:00 ELE: 00 000 0000 00:00 l ((1))Tue/Essarch torn 8-4 3. 2. Donnelley (212) 341-7777 ACC 3.4.1,p02 (PAGE) (F) Current Directors. The number of Directors constituting the Board of Directors is five, subject to being increased or decreased as set forth above. Th3 ntnes and addresses of the persons who are to serve as Directors and their
. classification ares (TABLE)
(CAPTION > I NAME ADDRESS l (S) (C) D.W. B iog 1 e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 0 Sou th S t . Paul Street, l Dallas, TX 75201 - ' G.E. Bryan................................. ... 300 South St. Paul Street, Dallas, TX 75201 D.R. Long...................................... 300 South St. Paul Street, Dallas, TX 75201 W.T. Satterwhite......... .................... 300 South St. Paul Street, Dallas, TX 75201 M.E. Rescoe.................................... 300 South St. Paul Street, Dallas, TX 75201
-(/ TABLE)
ARTICLE SEVEN
. To the fullest extent permitted by law, a Director shall not be liable to ths company or its shareholders for monetary damages for any act or omission in his capacity as a Director. Any repeal or modification of this Article - shall be prospetive only and shall not adversely af fect any limitation of the personal liability of a Director existing at the time of the repeal or ;
Eodification. The provisions of this Article shall not be deemed to limit or preclude indemniiication of a Director by the company for any liability of a Director that has not been eliminated by the provisions of nis Article. ARTICLE EIGHT (A) Power to Alter, Amend or Repeal Bylaws. The power to alter, amend, surpend or repeal the Bylaws or to adopt new Bylaws shall be vested in, and , shall require the af firmative vote of not less a majority of the continuing ! Directors (as defined in Article Ten) provided that any Bylaw or amendment ' thirsto as adopted by the Board of Directors may be altered, amended, curpruded or repealed by the af firmative vote of the holders of not less than 66 2/3% of the outstandhg Voting Stock (as defined in Article Ten) or a new Byltw in lieu thereof may be adopted by vote of such shareholders. No Bylaw 22t has been altered, amended or adopted by such a vote of the shareholders may ha altered. amended or repealed by vote of the Directors until two years shall have expired since such action by such vote of shareholders. ; I (B) Bylaw Stock Ownership Restrictions. The Board of Directors shall have i , dba power and authority, f rom time to time, to adopt, alter or amend the Bylaws to add or amend such provisions as in their judgment may be necessary or appropriate to ensure that the Company and its snareholders satisfy the
- citizenship or other requirements impsed by any federal or state law relating to the ownership, possession or leaslng of gas, oil or other minerals, land, vessels or any other property, licenses or rights of any nature whatsoever in which the Company or any of its subsidiaries may have or hereafter have, or
( sesk to have, any right or interest. Without limiting such general powers, the
' Board of Directors shall have the power and authority, from time to time, to i
adopt, alter or amend the Bylaws to add or. amend provisions that for such ' purpore impose restrictions on the transfer or registration of transfer of the 1
- s. hares of the Company, including without limitation restrictions that: "
.(1) obligate the holders of the restricted shares to offer to the Company I or to any other holders of shares of the company or to any other person or .
.to cny combination of the foregoing, a prior opportunity, to be exercised ]
within a reasonable time, to acquire the restricted shares; (2) provide that the company or the holders of any class of shares of the Company must consent to any proposed transfer of the restricted shares or approve the proposed transferee of the restricted shares before the trcnsfer may be effected; l (3) prohibit the transfer of the restricted shares to designated persons or classes of persons: or l j - (4) maintain any tax or other status or advantage to the company. L XI-5 i l a l l 4 l 5
((1)) FINE m {14433.ANKXI]00006.FIF FAG: 17-SEF-1996 10:59 t m 00-000-0000 00:00 BLK 00-000-0000 00:00 Fors 8 4 R. R. Donne 111y (212) 341 7777 ACC 3.4.1.p02 (Ill)Tuc/ Ens:rch
<PAGE)
ARTICLE NINE (A) No Shareholder Written Consent Action. Any action required or permitted to be taken by the shareholders of the Company must be ef fected at a duly - callso annual or special meeting of such holders and may not be effected by cny consent in wr$ ting by such holders. a (B) Special Meetings of Shareholders. Subject to such rights to call special me~etags of shareholders under specified circumstances as may be granted to hsid2rJ of Preferred Stock, special meetings of shareholders may be called anly by the Chairman of the Board or the President of the Company, at the rtqusst in writing or by vote of not less than a majority of the Continuing Dir:cters (as defined in Article Ten) or at the request of the holders of not less than 50% of the outstanding shares entitled to vote at the meeting, and not by any other M rsons. Any request for a special meeting made by the Board of Dir$ctors shall state the purpose or purposes of the proposed meeting, ard busin21s transacted at the meeting shall be confined to the objects stated in th2 notice of the meeting. ARTICLE TEN In addition to any other vote of shareholders required by the TBCA, the Articlas of Incorporation or otherwise, the affirmative vote of the holders of
~ n:t lass than 80% of the outstanding shares of " voting Stock" (as hereinafter dRfinTd) of the Company,' including the affirmative vote of the holders of not ices than 50% of the outstanding shares of voting Stock not " Beneficially own d*(as hereinafter defined), directly or indirectly, by any 'Related P rton" (as hereinafter defit.ed), shall be required for de approval or guthrrization of any " Business Combination" (as hereinafter defined) in which (my R;1ated Person has an interest (except proportionately as a shareholder of 'tha Company); provided, that the 50% vothy requirement referred to above (htll not im applicable if the Business Co,mbination is approved by the affirmative vote of the holders of not less than 90% of de outstanding shares cf Voting Stocks provided further that the 80% requirement referred to above ghill not be appilcable ife (1) The Board of Directors by a vote of not less than a majority of the "Crntinuing Directors' (as hereinafter defined) then holding office (a) expressly approved in advance the acquisition of outstanding shares of Vating Stock that resulted in the Related Person becoming a Related Person cr (b) approved the Business Combination prior to the Related Person involved in the Business Combination having become a Related Persons (2) The Business Combination is solely between the Company and another ccrporation, 100% of the Voting Stock of which is owned, directly or indirectly, by the company, or (3) All of the following conditions have been mets (a) the Business Combination is a merger or consolidation, the consammation of which is prrposed to take place within one (1) year after the date of the trEnsaction that resulted in the Related Person becoming a Related Person End the cash or fair market value of the property, securities or other conrideration to be received per share by holders of Common Stock in the ,'
Business Combination is not less than the highest per share price (with tppropriate adjustments for recapitalizations and for stock splits, reverse ; stock splits and share dividends, and including any brokerage commissions, t trsnsfer taxes and soliciting dealer fees) paid by the Related Person in acquiring any of its holdings of Common Stocks (b) the consideration to be i rcesived by such holders is either cash or, if the Related Person shall hivs acquired the majority of its holdings of Common Stock with a form of conrideration other than cash, the same form of consideration with which tha Related Person acquired such majority; (c) after such Related Person h2s become a Related Person and prior to consammation of such Business Combinations (1) except as approved by a majority of the ' Continuing Dir5ctors" (as hereinafter defined), there shall have been no failure to diclare and pay at the regular date therefor any full quarterly dividends (whither or not cuculative) on any outstanding shares of Preferred Stock, (ii) there shall have been no reduction in the annual rate of dividends psid per share on the Company's Common Stock (adjusted as appropriate for rzerpitalizations and for stock splits, reverse stock splits and share dividends) except as j XI-6 i
~
i l
I l [ ((1))TINEDGe[14433.AWNI1]00007.tIP PAG: 17 SEP 1996 10:59 EDCs 00 000-0000 00:00 BLE: 00-000-0000 00:00 l 1[11)Tue/Enserch fors 8 4 1. 2. Dona 1111y (212) 341-7777 A0G 3.4.1,p02 (PAGE) spproved by a majority of the Continuing Directors, (iii) such Related . Psrscn shall not have become the Beneficial Owner of any additional shares ! of V2 ting Stock of the Company except as part of the transaction that i rsiulted in such Belated Person becoming a Related Person, and (iv) such ! Rsitted Person shall not have received the benefit, directly or indirectly l (excipt proportionately as a shareholder), of any loans, advances, l guirintees, pledges or other financial assistance or any tax credits or i cthtr tax advantages provided by the company, whether in anticipation of or ' in connection with such Business Combination or otherwise; and (d) a proxy i statiment, that complies with the requirements of the " Exchange Act" (as l hirsinafter defined) and the rules and regulations thereunder (or any J eubsequent provisions replacing the Exchange Act, rules or regulations), , chill be mailed to all shareholders of record not less than forty (40) days 1 prior to the consummation of the Business combination for the purpose of soliciting shareholder approval of the Business Combination and shall < , contain at the f ront thereof, in a prominent place, any recommendations as ) to the advisability (or inadvisability) of the Business Combination that l l ths Continuing Directors, or any of them, may choose to state and, if ' l dicmed advisable by a majority of the Continuing Directors, an opinion of a ! rzputable investment banking firm as to the fairness (or unfairness) of the ! tar:s of such Business combination from the point of view of the remaining thrreholders of the company (such investment banking firm to be selected by a majority of the continuing Directors and to be paid a reasonable fee for its services by the Company upon receipt of such opinion). For the purposes of this Article
' Affiliate," when used to indicate a relationship to a specified person, th111 mean a person that directly, or indirectly Grough one or more intsraediaries, controls, or is controlled by, or is under common control with, the specified person.
*Aarociate," when used to indicate a relationship with a specified person, thall mean (a) any corporation, partnership or other organization of which the spacified person is an officer or partner or is, directly or indirectly, the Ben:ficial owner of five percent or more of any class of equity securities, (b) rny trust or other estate in which the specified person has a substantial ben 2ficial interest or as to which the specified person serves as trustee or in a similar fiduciary capacity, (c) any relative or spouse of the specified perton, or any relative of that spouse, who has the same home as the specified per:on or who is a director or officer of the Company or any of its parents or sub:idiaries, and (d) any person who is a director or officer of the specified person or any of its parents or subsidiaries (other than the Company or any Eubaidiary of the Company).
'Baneficial owner" and " Beneficially own," when used with reference to any Voting Stock, shall mean (a) that the person or any of its Affiliates or Associates beneficially owns, directly or indirectly, within the meaning of Rule 13d-3 under the Exchtnge Act as in ef fect on September 10, 1996; (b) that the person or any of its Affiliates or Associates has (i) the right to ecquire (whether that right is exercisable immediately or only af ter the psastge of time and whether that right is contingent or absolute) pursuant to rny (greement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding (but neither thst M rson nor any such Affiliate or Associate shall be deemed to be the B1nsflcial Owner of any shares of Voting Stock solely by reason of a revocable proxy granted with respect to shares for a particular meeting of shareholders pursuint to a public solicitation of proxies for that meeting, if neither that pirzon nor any such Affiliate or Associate is otherwise deemed the Beneficial 1 Ownsr of those shares); or
]
(c) that are beneticially owned, directly or indirectly, within the meaning , of Rule 13d-3 under the Exchange Act as in effect on September 10, 1996 by any l oth*r person with which the person or any of its Af filiates or Associates has I cny egreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than solely by reasons of a revocable proxy given in response to public proxy or consent solicitation made pursuant to the L rpplicable rules under the Exchange Act ', or disposing of any shares of Voting Stocks XI-7 l l l
PACS 17 SEP-1996 11 60 EDG 00-080 0000 00:00 BLKi 00-000 0000 00:00
.' lll])FINEDCa[14433.ANKII]00001.71F
[1))Tuc/Easerch Firs 8-4 E. E. totnellsy (212) 341-7777 AOC 3.4.1 p02 , (PAGE) provided, however, that in the case of any employee stock ownership or similar plan cf the Company or of any Subsidiary in which the beneficiaries thereof , po2 cars the rignt to vote any shares of voting Stock held by that plan, no ! tuch plan and no trustee win respect thereto (or any Affiliate of that trustue), solely by reason of that capacity as trustee, shall be deemed for > thi purposes hereof to Beneficially own any shares of voting Stock held under , Eny tuch plan. ,
*Euainess Combination
- shall mean (a) any merger, consolidation or share occh:nge involving the Company or a Subsidiary, (b) any sale, lease, exchange, mortgtge, pledge, transfer or other disposition of all or any ' Substantial Part (as hereinafter defined) of the assets either of the Company (including
' without limitation any voting securities of a subsidiary) or of a Subsidiary, (c) any sale, lease, exchange, transfer or other disposition of assets having a fair market value of $5,000,000 or more to the Company or a subsidiary, (d) i tha issuance or transfer by the Company or a subsidiary (other than by way of a pro rata distribution to all shareholders) of any securities of the company or a Subsidiary, (e) any reclassification of securities (including any reverse stock split).or recapitalization by the Company, the effect of which would be to increase the voting power (whe der or not currently exercisable) of a TRsistad Person, (f) any plan or proposal for the liquidation or dissolution of thm Company, (g) any series or combination of transactions having, directly or indirrctly, the same ef fect as any of the foregoing, and (b) any agreement, contreet or other arrangement providing, directly or indirectly, for any of tha foregoing. >
a
- Continuing Director shall mean any member of the Board of Directors who is not ca Af filiate or Associate of a Related Person and who was a member of the Escrd of Directors immediately prior to the time that the Related Person bactme a Related Person, and any successor to a Continuing Director who is not En Affiliate cr Associate of the Related Person and is recommended to succeed ,
. a Continuing Director by a majority of Continuing Directors then serving as b members of the Board of Directors. Provisions hereof requiring approval by Continuing Directors shall not be deemed satisfied unless there la at least cni Crntinuing Director.
t
*Erchange Act" shall mean the . Securities Exchange Act of 1934, as amended from time to time. ;
*other consideration to be received," for purposes of subparagraph (3) of this Article, shall include without limitation Common Stock retained by the a comptny's existing public shareholders in the event of a Business Combination ,
in thich the Company is the surviving corporation. partnership, joint i
- person" vsnture,, shallunincorporated trust, mean any individual, sole proprietorship,11mited organization, association, liability '
corporation, company, institution, entity, party or governmental congn "R31sted Person" shall mean and include any person or ' group
- of persons (as such term is used in Regulation 13D-C under the Exchange Act), and each
- Affiliate and Associate of any such person, that individually or collectively is ths Beneficial owner in the aggregate of not less than 10% of the outettading Voting Stock, other than the Company or any employee benefit plen(s) sponsored by the Company.
" Subsidiary" shall mean, with respect to any person, a person in which the paracn directly or indirectly owns at least a majority of the outstanding voting securities or other equity interests having the power, under ordinary circumstances, to elect a majority of the directors, or otherwise to direct tha management and policies, of such person, and any person that is affiliated with such person.
*rubstantial Part" shall mean more than 5% of the book value of the total esssts of the person in question as of the end of the most recently completed fiscal year or, in the case of voting Stock of a subsidiary, 10% or more of tha outstanding shares of such Subsidiary's Voting Stock.
- voting Stock" shall mean all outstanding shares of capital stock of the Comprny or other person entitled to vote generally in the election of Dirtetors, considered for the purposes of this Article as a single class. If tlta Company has Voting Stock entitled to more or less than one vote for any l
such share, each reference in this XI-8 l l' o l
((1)]FIEEDC(14413.ANNII)00009.FIP PAG: II-SEP-1996 22:10 EDC: 00-000-0000 00:00 BLK 60-000-0000 00:00 ,
- 3. 2. Dorcallsy A0G 3.4.1,p02
([1))Tue/E serch Form S-4 (212)'341 7777 (PACE) Article to a proportion or percentage of shares of Voting Stock shall be calculated by reference to the portion or percentage of votes entitled to be cast by the holders of such shares. yor the purpose of this Article, a majority of the Contbluing Directors chall have the power to determine, on tne basis of information known to them, ofs (a) the number of shares of Voting Stock of which any person is the Binsficial owner, (b) whether a person is a Belated Person, (c) whether a person is an Affiliate or Associate of another person, (d) whether a person hse an agreement, arrangement or understanding with another as to the matters rsferred to in the definition of Beneficial owner herein, (e) whether the c m ts subject to any Business combination constitute a substantial Part, (f) wh3thir any Business Combination is one in which a Related Person has an intzrsst (except proportionately as a shareholder of the company), (g) the fair market value of property other than cash or stock, (b) the highest per abnra price in accordance with this Article, (i) whether the applicable etnditlons set forth in this Article have been met with respect to any yuminiss Combination, and (j) such other matters with respect to which a datarmination is required under this Article. A majority of the Continuing Directors then in office shall have the right to dJmand that any person who those Directors reasonably believe is a Related Parson (or holds of record shares of Voting Stock Beneficially Owned by any Rsicted Person) supply the Company with complete information about (a) the rscord owner (s) of all shares Beneficially owned by the persons who those Dirsctors reasonably believe is a Related Person, (b) the number of, and class er asries of, shares Beneficially owned by any such person who those Directors rstarnably believe is a Belated Person and held of record by each such record own r and the number (s) of the stock certificates (s) evidencing such shares End (c) any other factual matter relating to the applicability or effect of this Article as may reasonably be requested of such person, and that person chall furnish that information within ten days after receipt of the demand. ARTICLE ELEVEN Th2 provisions set forth in Articles Sir, Eight and Nine hereof may not be (mendid, altered, changed, repealed or rescinded in any respect unless such cetion is approved by the affirmative vote of the holders of not less than 75% of all shares of ' Voting Stock" (as defined in Article Ten), considered for purpores of this Article as one class the amendment, alteration, change, repeal or racision of this Article and Article Ten hereof shall require both ruch 75% vote and the affirmative vote of the holders of not less than 50% of cuch Voting Stock, excluding the vote of any shares owned by a *Related 1srcon' (as defined in Article Ten), if any (such 50% voting requirement shall nrt be applicable if such amendment, alteration, change, repeal or racision is rpproved by the offirmative vote of the holders of not less than 90% of such Voting Stock). The voting requirement contained in this Article and in Articles Six, Eight, Nine and Ten hereof shall be in addition to voting requirements imposed by lar, other provisions of these Articles of Incorporation or any desir. nation of preferences in favor of certain classes or a:srise of classes of sha'es of capital stock of the Company. EXECUTED as of the ir ch day of September, 1996. Lone Star Energy Plant Operations, Inc.
/s/ J. W. Pinkerton By:
Vice President Its: XI-9
i Il
=[(1])FINEDGal1443).AHII)C0010.71F PAG: 20-SEP 1996 05:01 EDG: 00-000-0000 00:00 BLK 00-000-0000 00:00
[11))Tuc/EnsIrch For: $-4 R. R. Donne 111y (212) 141-7777 A0G 3.4.1,p02 (PAGE) l STATEMENT OF RESOLUTION l ESTABLISHING AND DESIGNATING A SERIES OF SHARES l OF LONE STAR ENERGY PLANT OPERATIONS, INC. --
$200 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK, NO PAR VALUE PER SHARE Purruant to the provisions of Article 2.13 of the Texas Business Corporation Act, cnd pursuant to Article tour of M ts Articles of Incorporation, the undIrrigned, Lone Star Energy Plant ' erations, Inc. (the ' Company"), hereby rubmits the following statement for the purposes of establishing and d:cignating a series of shares and fixing and determining the relative rights cnd preferences thereof:
I. The name of the Company is Lone Star Energy Plant Operations, Inc. II. The following resolution establishing and designating a series of shares rnd fixing and determining the relative rights and preferences thereof was duly tdopted by the Board of Directors of the Company effective September 10, 1996: RESOLVED, that pursuant to the authority conferred upon the Board of Dirsctors of this company by the provisions of the Restated Articles of Incorporation of this Company, the Board of Directors hereby creates a new cirice of Preferred Stock of the Company which shall consist of 1,000,000 chiras of no par value, which shall M designated and known as $200 Series A Junior Participating Preferred Stock, and dat in addition to the preferences, j rights, voting powers and the restrictions or qualifications of all shares of
- Prif rred Stock regardless of series, described and expressed in the Restated Articles of Incorporation of the company, the Board of Directors hereby d c1cres that the shares of the $200 Series A Junior Participating Pref erred Stock shall have the terms, conditions, rights and preferences, as follows:
- 1. Designation. The shares of such series shall be desipated "$200 Series A Junior Participating Preferred Stock" (herein called " Series A Preferred Stock").
- 2. Enmber. The number of shares of Series A Preferred Stock shall be 1,000,000, which number may be increased or decreased by resolution adopted by th2 B;ard of Directors; provided, however, that no decrease shall reduce the number of authorized shares of Series A Preferred Stock to less than the number of shares then issued and outstanding plus the number of shares iccuible upon the exercise of outstanding rights, options or warrants or upon cinvsrsion of outstanding securities issued by the Company.
- 3. Dividends. Subject to the rights of the holders of any shares of any oth:r series of Preferred Stock (or any similar stock) of the Company with rsspect to dividends, but in preference to the holders of shares of the Common Stock, par value $0.01 per share (the ' Common Stock"), of the Company or of tny other class or series of stock of the company ranking junior to the Series A Pr$ferred Stock, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of ,
funds legally available for the purpose, dividends for each Quarterly Dividend P riod (as hereinafter defined) equal (rounded to the nearest cent) to the j gr2 ster of (a) $20 or (b) subject to the provision for adjustment hereinafter u;t forth, 200 times the aggregate per share amount of all cash dividands, and , 200 times the aggregate per share amount (payable in cash, based upon the fair I mark:t value at the time the non-cash dividend or other distribution is i d:c1tred as determined in good faith by the Board of Directors) of all non- J cash dividends or other distributions other than a dividend payable in shares cf Common Stock or a subdivision of the outstanding shares of Common Stock (by raclresification or otherwise), declared (but not withdrawn) on the Common Stock during the immediately preceding Quarterly Dividend Period, or, with Itzpect to the first Quarterly Dividend Period, since the first issuance of cny there or fraction of a share of Series A Preferred Stock. In the event the compcny shall at any time after September 10, 1996 (the " Rights Declaration (1) declare any dividend on Common Stock payable in shares of Common Da Stockta " ,) (ii) subdivide the outstanding Common Stock, or (iii) combine the outstrnding Common Stock into a smaller number of shares, then in each such clso the amount to which holders XI-10 ; l i i l i
((1] )TIKEDG a [14433. ANrxt ) 000ll .FIF FAC: 19 stF 1996 19:28 EDc 00-000-0000 00:00 BLE: 00-000-0000 00:00 ((1))Tuc/taserch Trt: 8-4 3. 1. Donn111ey (212) 341-7777 A0G 3.4.1,p02 (PAGE> of chares of Series A Preferred Stock were entitled immediately prior to such tw nt under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of thirss of Common Stock outstanding immediately af ter such event and the d1 nominator of which is the number of shares of Common Stock that were
- out:t;nding immediately prior to such event.
At u2ed herein "Ouarterly Dividend Period" shall mean a period of three month 1 which shall commence on February 1, May 1, August 1 and November 1 in cach ysar (or in the case of original issuance, from the date of original 1stur.nce) and shall and on and include the day next prececing the first date of thi next Quarterly Dividend Period. The first day of each such Quarterl Dividard Period shall be the dividend payment date for the regular quarter divid:nd payable for the preceding Quarterly Dividend Period, except that a fir 2t dividend on shares of Series A Preferred Stock shall be payable on the qutrtsrly pa pent date next succeeding the expiration of 30 days after the dits of initial issue of any shares of the Series A Preferred Stock. Dividends on the Series A Preferred Stock, if any, shall be cE*ulative so th:t no dividend (other than a dividend payable in Common Stoc' or other distribution shall be paid or declared or made on, and no amou, shall be applica to the purchase or redemption of, the Common Stock or a..y other class of stock ranking junior to the Series A Preferred Stock as to dividends or cessts unless (i) full cumulative dividends for all past Ouarterly Dividend P2riods have been paid or declared and set apart for payment, and full cumulctive dividends for the then current Quarterly Dividend Period shall have been or simultaneously therewith shall be paid and declared on outstanding S riss A Preferred Stock, and (ii) after giving effect to such payment of dividrnd, other distribution, purchase or redemption, the aggregate capital of tha Company applicable to all capital stock outstanding ranking junior to the Strics A Preferred Stock as the dividends or assets plus the consolidated rurplus of the company and its subsidiarien shall exceed the aggregate amount payible on involuntary dissolution, liquidation or winding up of the Company on all shares of the Series A Preferred Stock and all stock ranking prior to Cn a parity with the Series A Preferred Stock as the dividends or assets to be sutrttading af ter the payment of such dividend, other distribution, purchase or ridemption. Determinations made with respect to the declaration and payment of dividends and other distributions shall W made in accordance with h e provisions of the Texas Business Corporation Act, as amended and in effect at th2 time (the 'TBCA*). f
- 4. Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series A Prsfarred Stock shall, subject to the prior and superior rights of the holders of r.ny shares of any other series of Preferred Stock (or any similar stock) of th3 Company, be entitled to receive the greater of (a) 5200 per share, or (b) in cmount per share, subject to the provision for adjustment hereinafter set fcrth, equal to 200 times the aggregate amount to be distributed per share to l hildirs of Common Stock, plus in either instance accrued dividends to the date i of distribution, whether or not earned or declared. In the event the Company chill at any time af ter the Rights Declaration Date (1) declare any dividend en Common Stock payable in shares of Common Stock, (ii) subdivide the outitending Common Stock, or (iii) combine the outstanding Common Stock into a cmallar number of shares, then in each such case the amount to which holders ,
of thIres of Series A Preferred Stock were entitled immediately prior to such syrnt pursuant to clause (b) of the preceding sentence shall be adjusted by ( , multiplying such amount by a fraction the numerator of which is the number of thirss of Common Stock outstanding immediately after such event and the 6: nominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. No distribution shall be made to the holders of shares of Common Stock or eny other stock ranking junior to the Series A Preferred Stock upon liquidation, distribudon or winding up, unless, prior thereto, the holders of l cher3s of Series A Preferred Stock shall have received the amounts set forth ! obov3. If the assets available for distribution to holders of shares of Series A PI1farred Stock shall not be sufficient to pay in full the amounts so datartined to be payable on all shares of the series A Preferred Stock in the cvsnt of such voluntary or involuntary dissolution, liquidation or winding up, es thn case may be, then the assets available for payment shall be distributed ratably among the holders of the Series A Preferred Stock of all series in accordnnce with the amounts so determined to be payable on the sharea of each ceries in the event of voluntary or involuntary dissolution, liquidation or winding up, as the case may be, in proportion to the full preferential amounts to thich they are respectively entitled. Af ter payment to the holders of the Seriss A Preferred Stock of he full preferential I XI-11 I i 4 l l t l
. .- - . . ~ ~ ~ . - .- - ~~. - -. - -- -. .
PAC: 20 SEP 199610:55 EDGs 60-000-0000 00:00 Buts 00 000-0900 00:00 [ ((1] ] FINfDC i [14433. ANNXi] 02012. (1))Tuc/tasirch Fm 8 4 FIF E. R. Donnelhy (212) 341-7777 PMT 3.4.1,p01 (PAGE) trounts hereinbefore provided for, the holders of Series A Preferred Stock will have no other rights or claims to any of the remaining assets of the compIny either upon distribution of such assets or upon dissolution,
' liquidation or wlnding up. The sale of all or substantially all of the prop 2rty of the Company to, or the merger.or consolidation of the Company into - cr with, any other corporation, or the purchase or redemption by the Company of any shares of its Preferred Stock, or its Series A Preferred Stock or its Common Stock or any other class of its stock shall not be deemed to be a distribution of assets or a dissolution, liquidation or winding up for the purposes of this paragraph.
- 5. optional Redemption. So long as full cumulative dividends on all
' outstanding shares of Series A Preferred Stock for all dividend periode ending on or prior to the date fixed for redewption shall have been paid or declared r.nd set apart for payment and subject to any applicable requirements of Texas icw cnd ue rights of the holders of any shares of any other series of Prefarred Stock (or any similar stock) of the Company, the Company shall have I tha option to redeem the whole or any part of the Series A Preferred Stock at any time on at least 3b days notice in accordance with the provisions of the precidures for redemptions set forth in the TBCA at a redemption price equal ,
to the greater of (a) 8200 and (b), subject to the provision for adjustment h:rrinafter set forth, 200 times the " current per share market price" of the Common Stock on the date of mailing of the notice of redemption, together with unptid accumulated dividends to the date of such redemption. In the event the Compiny shall at any time after the Rights Declaration Date (1) declare any-
- divifend on Common Stock payable in shares of Common Stock, (ii) subdivide the cutstanding Common Stock or (iii) combine the outstanding Common Stock into a taaller number of shares, then in each such case the amount to which holders inf theres of Series A Preferred Stock were otherwise entitled immediately.
prior to such event under the preceding sentence shall be adjusted by , tultiplying such amount by a fraction the numerator of which is the number of shirls of Common Stock outstanding immediately after such event and the dscominator of which is the number of shares of Common Stock that were 4 cutstanding ihnediately prior to such event. The " current per share market prics' on any date shall be deemed to be the average of the closing price per shirs of such Common Stock for the 10 consecutive " trading days" (as such term is hsreinafter defined) immediately prior to such date. The closing price for ,
; scch day shall be the last sale price, regular way, or, in case no such sale takrs place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated tren action reporting system with respect to securities listed or admitted to trLiing on the New York Stock Exchange or, if the Common Stock is not listed or comitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listrd or admitted to trading on the principal national securities exchange on ubich the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities tachtnge, the last quoted price or, if not so quoted the average of the high bid end low asked prices in the over-the. counter market, as reported by the N1tignal Association of Securities Dealers, Inc. Automated Quotations System
('NASDAQ*) or such other system then in use or, if on any such date the Common t Strck is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on t such date no such market maker is making a market in the Common Stock, the fair value of the common Stock on such date as determined in good faith by the BoIrd of Directors of the Company shall be used. The term ' trading day" shall
- scan a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business er, if the Common Stock is not listed or admitted to trading on any ,
national securities eschange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York are not authorized or cbligated by law or executive order to close.
- 6. Treasury Shares. So long as any shares of the Series A Preferred Stock are outstanding, shares of the Series A Preferred Stock which are purchased, radiemed or otherwise acquired by the Company shall not be reissued, or i othirvise disposed of, as shares of Series A Preferred Stock.
- 7. Conversion. Other than as set forth above, the Series A Preferred Stock shall not have any conversion or exchange rights.
XI-12 - l l i l i l 1
I~ t I i [ (1] ] FINEDG s [144 33. ANEXI] C0013. F17 FAG: 19-SEF-1996 19:20 EDGs 00-000-0000 00:00 sLE: 00-000-0000 00:00 l ((1))Tue/Enserch Fora S-4 1. I. Donielley (212) 341 7777 AOC 3.4.1,p02 ! (PAGE) 8 Voting Rights. , (A) Each share of Series A Preferred Stock shall entitle the holder I l thIreof to 200 votes on all matters submitted to a vote of the shareholders - - - -- - ! of the Company..In the event the Company shall at any time after the Rights i Declaration Date, (1) declare any dividend on Common Stock payable in ' j ghtres of Common Stock, (ii) suMivide the outstanding Common Stock, or ! '(iii) combine the outstanding Common Stock into a smaller number of shares, s-,, N N
' thin in each such case the number of votes to which holders of shares of f- Series A Preferred Stock were entitled inesdiately prior to such event shtll be adjusted by multiplying such number by a fraction, the numerator
\-
- 3. g l-of which is the nueer of shares of Common Stock outstanding immediately i
after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The series A Preferred Stock shall have no voting rights other than tbs voting rights set forth herein, in the Restated Articles of Incorporation of the Company or as otherwise provided by Texas law.
- 9. Consolidation, Merger, etc. In case the Company shall enter into any l conzolidation, merger, combination or other transaction in which the shares of
. Common Stock are exchanged for or converted or changed into other stock or escurities, shall be cash madeand/or othereach so that property,ies share A ofPreferred Ser Stock shall at the samethen in any such case proper prevision c - time be similarly exchanged for or converted or changed into an amount per thira, subject to the provision for adjustment hereinafter set forth, equal to 200 times the aggregate amount of stock, securities, cash and/or any other preperty-(payable in kind), as the case may be, for which or into which each shtra of Common Stock is exchanged for or converted or changed. In the event th3 Company shall at any time after the Rights Declaration Date (i) declare
, ray dividend on Common Stock payable in shares of Common Stock, (11) subdivide ( th:3 outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in th2 preceding sentence with respect to the exchange or conversion or change , of th res of Series A Preferred Stock shall be adjusted by multiplying such Knount by a fraction,.the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is tha number of shares of Cosumon Stock that were outstanding immediately prior to such event.
- 10. Amendment. No change shall be made in any of the rights or preferences of th3 Series A Preferred Stock at the time outstanding without de
, affirmative vote of at least two-thirds the votes entitled to be cast with l rarpect to the shares of the Series A Preferred Stock outstanding on the 1 i rccord date for such meeting in addition to any other vote, if any, as may be required for such change under the applicable provisions of the Restated 1 Articles of Incurporauon and the laws of the State of Texas at the time Epplicable thereto. IN WITNESS WHEREOF, this Statement of Resolution is executed on behalf of j tha Company by its President this loth day of September, 1996 , Lone Star Energy Plant Operations, Inc. Bys J.W. Pinkerton i Vice President
+
XI-13 h h L' i i i
~
i
FAGi 17 SEP-1996 02:26 EDGs 00-000-0000 00:00 BLKi 00 000-0000 00:00 Ill))fINEDGsl14433.ANNXI!]00001. 1])Yue/Ensisch fors PIP 84 3. R. Donne 11ey (212) 341-7777 A0G 3.4.1,p04 (PAGE) ANNEX XII BYLAWS OF LONE STAR ENERGY PLANT OPERATIONS, INC., A CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS PURPOSE AND SCOPE OF BYLAWS Thtse Bylaws shall constitute the private laws of LONE STAR ENERGY PLANT OPERATIONS, INC., a corporation duly incorporated under the laws of the State of T:xas (herein called the ' Company'), for the administration and regulation of the affairs of the Company. In the event any provision of these Bylaws is or may be in conflict with any gpplicable law of de United States or the State of Texas, or of any order, rule, regulation, decree or judgment of any governmental body or power or court having jurisdiction over the Company, or over the subject matter to which such provision of these Bylaws applies or may apply, such provision of l thiss Bylaws shall be inoperative to the extent only that the operation th:rsof unavoidably confilets with such law or order, rule, regulation, decree or judgment, and shall in all other respects be in full force and effect. ARTICLE I Offices SIction 1. The registered office of the Company shall be at 6688 North C:ntrml Erpressway,.in the City of Dallas, County of Dallas, State of Texas, cnd the registered agent of the Company at such address shall be Michael G. Frrtido or such other person as the Board of Directors may from time to time dssignate. 81ction 2. The Company may also have offices at such other places both eithin and without d e State of Texas as the Board of Directors may from time to time determine or the business of the Company may require. ARTICLE II Meetings of Shareholders Siction 1. All meetings of the shareholders shall be held at the registered of fica of the Company or at such other place either within or without the Stats of Texas as shall be designated f rom time to time by the Board of Dirtetors. s:ction 2. The annual meeting of shareholders shall be held on the second Tusedly of May in each year, at 2:00 P.M., for the election of a Board of Dirsctors and the transaction of such other business as may properly be brought before the meeting Scction 3. Special meetings of the shareholders may only be called by the Chlirman of the Board or the President, at the request in writing or by vote of not less than a majority of the Continuing Directors (as defined in Article T:n of the Restated Articles of Incorporation of the Company) of the Board of Dirretors, or the holders of not less than 50% of all the outstanding shares , entitled to vote at the meetings, and not by any other persons. Business ! trin2teted at all special mea dngs shall be confined to the objects stated in th3 notice of meeting. Srction 4. Written or printed notice stating the place, day and hour of the mesting, and, in case of a special meeting, the purpose or purposes for which I th2 meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by cr at the direction of the Chairman, the Corporate Secretary, or the ef ficsr or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be dzlivared when deposited in XII-l I i L F I I I L l
((1))TINEDGi[14433.ANNKI!]00002.FIF PACS 17 SEF-1996 02 27 EDG 09-000 0000 00:00 31J: 00 000-0000 00:00 ((1]!hc/taserch Fors 3-4 1. R. Donn211ry (212) 341 7777 A0G 3.4.1,p04 (PAGE> thi United states mail addressed to the sharehclder at his address as it [ppetre on the stock transfer books of the Company, with postage thereon prsp:1d. Section 5. The officer o agent having charge of the stock transfer books for Ehares of the Company shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote et cuch meeting or any adjournment thereof, arranged in alphabetical order, trith the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the rigictered office of the Company and shall be subject to inspection by any thirch51 der at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be gubjrct to the inspection of any shareholder during the whole time of the me: ting. The original stock transfer books shall be prima-f acie evidence as to who cre the shareholders entitled to examine such list or transfer books or to vata et any meeting of shareholders, s:ction 6. The holders of a majority of the shares issued and outstanding cnd intitle6 to vote thereat, present in person or represented by written proxy, shall constitute a quorum at all meetings of ne shareholders for the tr nzrction of business. If, however, such quorum shall not be present or
.r:pr: rented at any meeting of the shareholders, the shareholders entitled to vita thereat, present in person or represented by proxy, shall have power to (djrurn the meeting from time to time, without notice other than announcement et thi meeting, until a quorum shall be present or represented. At such (djturned meeting at which a quorum shall be present or represented any businiss may be transacted which might have been transacted at the meeting as originally notified.
2:ction 7. Each outstanding share, of any class, shall be entitled to as many votes per share as the Articles of Incorporation shall provide, on each matter submitted to a vote at a meeting of shareholders, except to the extent th t the voting rights of the shares of any class or classes are limited or d;nied by the Articles of Incorporation or these Bylaws. The vote inr the s1cetion of Director and, upon demand by any shareholder, the vote upon any qusation i+ fore thw s9? ting shall be by ballot. Cumulative voting is expressly prohibit - Sect t2 ft .ny meeting of the holders, every shareholder having the right to vv4 be ) ? entitled to vote in person or by proxy executed in writing by such cha. *v <a or by his duly authorized attorney-in-f act. No proxy shall be v lid after si sen (11) months from the date of its execution unless otherwise prtvided is t a proxy. All proxies shall be revocable unless expressly provided 1 ain to be irrevocable and are coupled with an interest and shall be filed witn the Corporate Secretary of the Company prior to or at the time cf the meeting at which they are to M voted. Siction 9. When a quorum is present at any meeting, matters brought before thi meeting shall be determined by the shareholders in the following manners
;s) with respect to any matter, other than the election of Directors or a atttsr for which the affirmative vote of a specified portion of the shares catitled to vote is required by the statutes or the Articles of Incorporation, thi Ect of the shareholders shall be the af firmative vote of the holders of a majority of the shares entitled to vote on, and voted for or against, that matter at a meeting of shareholders at which a quorum is present and (b) with rzepect to the election of Directors, the act of the shareholders electing the Dirs.ctors shall be a majority of all outstanding shares entitled to vote in tha alection of Directors, unless in each case the question is one upon which, by espress provision of the statutes or of the Articles of Incorporation or of n'ssa Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The th2rcholders present at a duly organized meeting may continue to t ransact businiss until adjournment, notwithstanding the withdrawal of enough chir: holders to leave less than a quorum.
S2ction 10. The Chairman shall preside at all meetings of the shareholders. In his absence, the President or an officer of the Company designated by the Boird of Directors shall preside and perform the duties of the Chairman at auch meeting. He shall appoint two inspectors of voting to serve at each such mesting. Before acting at any meeting, the inspectors shall be sworn ! faithfully to execute their duties with strict impartiality and according to thi best of their ability. The inspectors shall determine the number of shares outattnding, the voting XII-2 1
i J < PAGs 20 317 1996 11:40 EDG 00-000-0000 00:00 BLKi 90-000-0000 00:00 ll1])rINEDGs[14433.ANNXII]00003. 1))Tuc/ Ens:rch PIP Fira 5-4 2. 1. Donnelliy (212) 341-7777 PKT 3.4.1,p02 (FACE) pow;r af each, the shares represented at the meeting, the existence of a qu;rua, the qualification of the voters, the authenticity, validity and effect nf prizies, receive votes and ballots, hear and determine all challenges and qu;2tians in any way arising in connection with the vote, count and tabulate all votes and determine and announce the result of the voting. -- q Srction 11. At an annual meeting of the shareholders, only such businers l thill be conducted as shall have been properly brought before the meeting. To I be preperly brought before an annual meeting, business must be specified in th) nitice of meeting (or any supplement thereto) given by or at the direction ! cf thi Board, otherwise properly brought before the meeting by or at the ' dirtetion of the Board, or otherwise properly brought before the meeting by a ! chirchilder. In addition to any other applicable requirementn, for business to j be prtperly brought before an annual meeting by a shareholder, the shareholder Fult h2ve given timely notice thereof in writing to the Corporate Secretary. i To be timely, a shareholder's notice must be delivered to or mailed and ] r:ctiv6d at the principal executive offices of the Company, not less than fifty (50) days nor more than seventy-five (75) days prior to the meetin ;
'provid:d, however, that in the event that less than sixty-five (65) days notics or prior public disclosure of the date of the meeting is given or made to ch2reholders, notice by the shareholder to be timely must be so received nTt 1cter than the close of business on the 15th day following the day on t hich cuch notice of the date of the annual meeting was mailed or such public di:cle;ure was made. A shareholder's notice to the Corporate Secretary shall ect forth as to each matter the shareholder proposes to bring before the tnnuti meeting (1) a brief description of the business desired to be brought bef#ra the annual meeting and the reasons for conducting such business at the ccen:1 meeting, (ii) the name and record address of the shaniholder proposing cuch business, (iii) the class and number of shares of the company which are ben ficially owned by the shareholder, and (iv) any material interest of the ch:riholder in such business.
N:tgithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures cct frrth in this Section 113 provided, however, that nothing in this Section 11 chill be deemed to preclude discussion by any shareholder of any business prrperly brought before the annual meeting in accordance with said procedure. - Tha chairman of an annual meeting shall, if the facts warrant, determine and scci ra to the meeting that business was not properly brought before the
;ccting in accordance with the provisions of this Section 11, and if he should cs estarmine, he shall so declare to the meeting and any such business not perperly brought before the meeting shall not be transacted.
S ction 12. Only persons who are nominated in accordance with the following pr:caiures shall be eligible for election as Directors. Nominations of persons isr cirction to the Board of Directors of the company may be made at a meeting -
-cf th:reholders by or at the direction of the Board of Directors by any ,
gominating committee or person appointed by the Board or by any shareholder of l the Company entitled to vote for the election of Directors at the meeting who romplits vlth the notice procedures set forth in this Section 12. Such comin tions, other than dose made by or at the direction of the Board, shall be 3AC3 pursuant to timely notice in writing to the Corporate Secretary. To be tLacly, a shareholder's notice shall be delivered to or mailed and received at th3 principal executive offices of the company not less than fifty (50) days nir core han seventy-five (75) days prior to the meetings provided, however,
. th t la the event that less than sixty-five (65) days' notice or prior public Circic;ure of the date of the meeting is given or made to shareholders, notice by th2 shareholder to be timely must be so received not later than the close cf butiness on the 15th day following the date on which such notice of the dits c:t the meeting was mailed or such public disclosure was made. Such i char:b11 der's notice to the Corporate Secretary shall set forth (a) as to each !
p;rron whom the shareholder proposes to nominate for election or re-election
&S a Director, (1) the name, age, business address and residence address of th2 pirson, (ii) the principal occupation or employment of the person, (iii) tia c1 css and number of shares of capital stock rf the Company which are ben ficially owned by the person, and (iv) any otmar information relating to ;
i th2 person that is required to be disclosed in solicitations for proxies for slcctirn Act of 1934of Directors T as amended,'a(suant l and (b) to asRegulation 14A undergiving the Securities Exchange . to the shareholder the notice (1) l ! th2 n:re and record address of shareholder and (ii) the class and number of ! chiros of capital stock of the Company which are beneficially owned by the ghirebilder. The Company may require any proposed nominee to furnish such j j 1 X11-3 I i l I l
f PACS 20-SEF-1996 10:54 EDCs 00-000-0000 00:00 su 00-000 0000 00:00
' j (1])Tue/Enserch (1))FINEDC s [144 )3. ANNXII) 00044.FIF nre 8 4 3. R. Donne 11ry (212) 341 7777 FMT 3.4.1,p01 (PAGE) cther information as may reasonably be required by the Company to determine the cligibility of such proposed nominee to serve as Director of the Company.
C3 person shall be eligible for election as a Director of the company unless gominited in accordance with the procedures set forth herein. Th2 chairman of the meeting shall, if the facts warrant, determine and d:clere to the meeting that a nomination was not made in accordance with the irrcgiing procedure, and if he should so determine, he shall so declare to the matting and the defective nomination shall be disregarded. ARTICLE III Directors 8:ction 1. The powers of the company shall be exercised under the authority of, cod the business and affairs of the Company shall be managed under the direction of, its Board of Directors who may do all such lawful acts and thirgs as are not by statute or by the Articles of Incorporation or by these Byliwi directed or required to be exercised or done by the shareholders. SIction 2. The number of Directors constituting the Board of Directors of thn Company shall be fixed from time to time by the Board of Directors by the ef firrative vote of not less than a majority of the Continuing Directors (as difir;d in Article Ten of the Restated Articles of Incorporation of the CompTry ) , but shall not be less than three (3), subject to such rights to citet additional Directors under ;ach specified circumstances as may be grerted to holders of Pref errrJ Sto:k. Directors need not be shareholders or rrcitcnts of the State of Texas. A person shall be ineligible to be a Director tf th3 Company after the date of tbs annual meeting of shareholders of the Comp;ny in the year in which such person's seventieth birthday occurs. Unless ho chill resign or become ineligible, each Director shall hold office until his successor shall be elected and shall qualify. B*ction 3. Any Director may resign at any time either by oral tender of rscignation at any meeting of the Board of Directors or by giving written nTtic2 thereof to the Corporate Secretary. Resignations shall take eff ect when tend: red or at the time specifisd in the tender and, unless otherwise epecified, the acceptance of a resignation shall not be necessary to make it cif:ctive. S;ction 4. Any Director may be removed either for or without cause, at any rpecial meeting of shareholders by the affirmative vote of the holders of r;Jrr3 of not less than a majority of the shares entitled to vote for such remov;1, if notice of the intention to act upon such matter shall have been given in the notice calling for such meeting. Any vacancy occurring in the
' Board of Directors may be filled by the affirmative vote of a adjority of the ram 11 ming Directors even though such remaining Directors shall be less than a qu% rum of the Board of Directors. A Director elected to fill a vacancy shall be clicted for the unexpired term of his predecessor in office. Any Lir;ctorship to km filled by reason of an increase in the number of directors cm przvided in Section 1 hereof shall be filled solely by the affirmative vote cf ust less than a majority of the continuing Directors for a term of office contiruing until the next annual meeting of shareholders provided that the BLard of Directors may not fill more than two such directorships between any two cuccessive annual meetings of shareholders 8:ction 5. The Board of Directors, by resolution adopted by a najority of the full Board of Directors, may designate from among its members one or more committees, each of which shall be comprised of one or more of its members, cid may designate one or more of its members as alternate members of any committee, who say, subject to any limitations imposed by the Board of Dirretors, replace absent or disqualified members at any meeting of that committee. Any such committee, to the extent provided in such resolutions or is thi Articles of Incorporation or the Bylaws, shall have and may exercise c11 cf the authority of the Board of Directors, provided that no committee of thi Brard of Directors shall have the authority of the Board of Directors in rsisrrnee tos (1) amending the Articles of Incorporation, except that a committee may, to the extent provided in the resolution designating that committee or in the Articles of Incorporation or the Bylaws, exercise the ruthority of the Board of Directors vested in it in accordance with Article 2.13 ef the Texas Business Corporation Act ("Act"); (2) proposing a reduction af th) stated capital of the Company in the manner permitted by Article 4.12 cf tL3 Acts (3) approving a plan of merger or share exchange of the Companys (4) r: commending to the shareholders the sale, lease, or exchange of all or rub;t:ntially all of the property and assets of the Company XII-4 i
l I i
ll1])TINEDCal14433.ANrx!!]00005.717. PAC: 16 SIP-1996 10:48 EDC: 00-000 0000 00:00 BLRs 00 000-0090 00:00 ((1))yuc/Ensuch Ftr3 8-4 1. R. Donazilry (212) 341-7777 A0G L t.1,p04 (PACE) cth2rvise than in the usual and regular course of its business; (5) recommending to the shareholders a voluntary dissolution of the Company or a , rsvocation thereof,-(6) amending, altering, or repealing the Bylaws of the
~
Compahy or-adopting new Bylaws of the Companys (7) filling vacancies in the Botrd of Directors: (8) filling vacancies in or designating alternate members r of cny such committees (9) filling any directorship to be filled by reason of cn increase in the number of Directors: (10) electing or removing officers of ths Company or members or alternate members of any such committees (11) fixing thD compensation of any member or alternate members of such committees or (12) cltsring or repealing any resolution of the Board of Directors that by its tsrai provides that it shall not be so amendable or repealables and, unless l such resolution designating a particular committee, the Articles of- - Incorporation, or the Bylaws expressly so provide, no committee of the Board
- of Directors shall have the au dority to authorize a distribution or to &
'cuthorire the issuance of shares of the company.
MEETINGS OF THE BOARD OF DIRECTORS i 82ction 6. The Directors of the Company may hold their meetings, both regular and special, either within or without the State of Texas. S3ction 7. The first meeting of each newly elected Board of Directors shall be h21d without further notice immediately following the annual meeting of i
.shtr holders, and at the same place, unless by unadmous consent of the
-Dir:ctors then elected and serving such time or place shall be changed. #
Srction 8. Regular meetings of the Board of Directors may be held with or I _ sithout notice at such time and place as shall from time to time be determined ! by ths Board of Directort. Srction 9. Special meetings of the board of Directors may be called on I tarnty.four (24) hours' notice to each Director, or such shorter period of ? i time as the person calling the meeting deems eppropriate in the circumstances, sith r Mrsonally, or by mail, or by telegrams special meetings shall be ; c211c3 by the Chairman or, in the event of the inability of the chairman to - act, the President or the Corporate Secretary in like manner and on like nstics on the written request of two Directors. Neither the business to be tron 2teted at, nor the purpose of, any special meeting need be specified in a , i notics or waiver of nodce. , t Siction 10. At all meetings of the Board of Directors the presence of a ' majtrity of the Directors shall constitute a quorum for the transaction of businise and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. Any action , required or permitted to be taken at a meeting of ths Board of Directors may ! be without a meeting if a consent in writing, setting forth the action so . tak:n, is signed by all members of the Board of Directors. If a quorum shall Ret be present at any meeting of Directors, the Directors present thereat may
- Edjcurn the meeting from time to time, without notice oLher than announcement ,
l ct tha meeting, until a quorum shall be present. I Saction 11. The Board of Directors shall have authority to establish, from time to time, the amount of compensation which shall be paid to its members for their services as Directors. ARTICLE IV j [. Notices l Szction 1. Whenever under the provisions of the statutes or of the Articles of Incorporation or of these Bylaws, notice is required to be given to any l Dirsetor or shareholder, and no provision is made as to how such notice shall-be given, it shall not be construed to a n an notice, but any such notice may be givsn in writing, by mail, postage prepaid, addressed to such Director or chartholder at such address as appears on the books of the Company. Any notice rsquired or permitted to be given by mail shall be deemed to be given at the time then the same shall be thus deposited in the United States mails as l aforesaid. x11-s l i l i i i l l
F W 16-SEF-1996 10:49 I m 00-000-0000 00:00 BLK 00-000 0000 00:00 l l[11)f1NEDCa[14433.ANNXII]D0006. (1))Tue/ Ens:rch Form S 4 PIP 2. 3. Donazllry (212) 341-7777 AOC 3.4.1,P04 1 (PAGE> I I srction 2. Whenever any notice is required to be given to any shareholder or Dirsctor of the Company under the provisions of the statutes or of the Articiss of Incorporation, or of these Bylaws, a waiver thereof in writing rign:d by the person or persons entitled to such notice, whether before or - - citar the time stated in such notice, shall be equivalent to the giving of ruch Eztice. Attendance of a Director at a meeting shall constitute a waiver cf notice of such meeting, except when a Director attends a meeting for t's crprcas purpose, in writing filed at the meeting, of objecting to the tr:nscction of any business on the grounds that the meeting is not lawfully , ctlled or held. I 1 ARTICLE V ) Officers section 1. The officers of the Company shall be a Chairman, a President, one er mors Executive vice Presidents, Senior vice Presidents or Vice Presidents, j o Gzn:ral Counsel, a Controller, a Corporate Secretary and a Treasurer, all of whom rhall be elected by the Board of Directors. Any two or more of fices may be held by the same person. Each such officer shall have such authority and perfera such duties in the management of the Company as may be determined by r:colution of the Board of Directors. 8:ction 2. The Board of Directors may elect or appoint such other officers tto cg:nts as it shall deem necessary, who shall hold their offices for such t:rm cnd who shall have such authority and perform such duties as may be
.pr3:cribed by the Board of Directors or the Chairman. The power to appoint cuch other of ficers and agents may be delegated by the Board of Directors to thm Ch:irman to the extent the Board may delineate by resolution, section 3. Each officer of the Company shall hold office until his successor is chscen and qualified in his stead or until his death or until his recign: tion, retirement or removal from office. Any officer or agent elected er cppointed by the Board of Directors may be removed by the Board of Dir0 stirs whenever in its judgment the best interests of the Company will be scry 4 thereby, but such removal shall be without prejudice to ne contract rights, if any, of the person so removed. Election or appointment of an cificar or agent shall not of itself create contract rights.
S;ction 4. The Chairman shall be the chief executive officer of the Company. 1 Da th:11, subject to the direction and control of the Board of Directors, be ' thtir representative and medium of communication. He shall see that all crd:ra, resolutions and policies adopted by the Board of Directors are carried - into effect. He shall preside at all meetincs of shareholders and at all ' meltings of the Board of Directors. He shall be in complete charge with cttttd;nt responsibility and accountability of the entire Company and its eficirs. S:ction 5. The President shall be the chief operating officer of the Comp ny. Be shall, subject to the direction of the Chairman, have ritponribility for such operations and functions assigned to him; and in the ab2snes of the Chairman, shall preside at all meetings of the shareholders and ct cil meetings of the Board of Directors. SIction 6. Each Executive Vice President shall have such powers and rsrpon21b111 ties, and shall perform such duties, as delineated by the Board or by th3 Chairman. They shall be directly responsible to such officer as the l Osirman may from time to time prescrik. l Ssetion 7. The Senior Vice President, Chief Financial Officer, shall have cuch powers and responsibilities and shall perform such duties, as delineated by ths Board of Directors or by the Chairman. Be shall be responsible to the Chairm:n in said performance. 8:ction 8. Other Senior Vice Presidents shall have such powers and rsspon2ibilities, and shall perform such duties, as delineated by the Board or by ths Chairman. They shall M directly responsible to such of ficer as the ChEirm n may from time to time prescrik. XII-6 l l I r
[ { !] ) FINEDG r [1443 ). ARWXII) 00007. PIP PAG: 16-SEP 1996 10:49 EDC: 00-090-0000 00:00 BLEa 00 000 0000 60:00 ((1}]Tue/Ess:rch Ptra 8-4 , R. R. Donne 11sy (212) 341 7777 A0G 3.4.1,p04 (PAGE) Section 9. The General Counsel shall have general control over all matters of a legal nature concerning the Company and shall perform such duties as i cilineated by the Board or by the Chairman. He shall be directly responsible ; to th2 Chairman in said performance. Section 10. Each Vice President shall have such powers and responsibilities, 1 rad chall periorm such duties, as may be delineated by the Board or the l Ch irman. They shall be directly responsible to such officer as the Chairman i may from time to time prescribe. j Giction 11. The Controller shall be in general control of the accounts of i th) l prcpire Company, shall berequired and interpret responsible for the making accounting, financialof adequate audits [ shall and statistica 1 ctstcments, and shall be directly responsible to such officer and perform such l cthzr duties as the Board or Chairman may from time to time prescribe. j Sretion 12. The Corporate secretary shall attend all meetings of t he Board j af Directors and shareholders and act as secretary thereof and shall record ; cll votes and the minutes of all proceedings of d e Board of Directors and I thtribolders in a book for that purpose maintained and kept in his custody. He " I thill keep in his custody the st.al of the company and shall in general perform c11 the duties incident to the office of secretary of a Company. He shall act cs Trrnsfer Agent of the Company and/or Registrar of its capital stock and sth:r securities; provided that the Board of Directors may by resolution cppiint one or more other persons or corporations as Transfer Agents and/or Rigistrars or as Co-Transfer Agents and/or Co-Registrars. Be shall be directly rs;ponsible to such officer and shall perferm such other duties as the Board er Ch irman may from time to time prescribe. s:ction 13. The Treasurer shall have custody of all the funds and securities of tha company and shall keep full and accurate accounts of receipts and dicbursements. Be may endorse checks, notes and other obligations on behalf of tha Company for collection and shall deposit the same, together with all monics and other valuable effects, to n e credit of the Company in banks or I d politories as the Board of Directors may designate by resolution or as may be catablished in accordance with Article VIII of these Bylaws. Be shall be ] dirretly responsible to such officer as the Chairman may from time to time d2cignate and shall perform all duties incident to the office of Treasurer of a Company or as the Board or Chairman shall designate. Dection 14. The Board of Directors may appoint one or more Assistant Crrporate Secretaries, Assistant Treasurers and Assistant Controllers and such ath;r appointive officers as may be appropriate and required. They shall be dir:ctly responsible to such officer and aball perform such duties as the Board or Chalrman may from time to time designate. ARTICtE VI Certificates Representing Shares Ecction 1. The shares of stock of the Company shall be deemed personal est:ta, and shall be transf erable only on the Moks of the Company in such . l mann:r as these Bylaws prescribe. stetion 2. Every shareholder in the Company shall be entitled to have a esrtificate or certificates representing the number of shares owned by him. Tha cartificates of shares of stock of the Company shall be numbered and shall be entered in the books of the Company as they are issued. They shall erhibit th2 holder's name rad number of shares, and shall be signed by the Chairman, th3 President or a Vice President, and the Treasurer or an Assistant Treasurer end bear the corporate seals but the signatures of such officers and the seal of th2 Company upon such certificates may be facsimiles, engraved or printed th3ra such certificate is signed by a duly authorized Transfer Agent or Co-Trtntfer Agent and a Registrar or Co-Registrar. l S ction 3. The Board of Directors may make such rules and regulations as it j may diem expedient concerning the issue, transf er, conversion, and i i _ rcgistration of certificates for shares of the capital stock of the Company, I XII-7 1 I I l l l l l 1 l
((1)]f1EEDCs[14413.ANFXII]00008. PIP PAG: 16 5EP-1996 10:41 EDGs 00-900 0000 00:00 8LKs 00 000-0900 00:00 [11))Tuc/tcrch Fors 3-4 3. I. Donne 111y (212) 341-7777 AOC 3.4.1,p04 (PAGE> S:ction 4. The Board of Directors may direct a new certificate representing chtras to be issued in place of any certificate theretofore issued by the Comptny alleged to have been lost or destroyed, upon the making of an ef fid2Vit of that f act by the person claiming the certificate to be lost or 630troyed. When authorising such issue of a new certificate, the Board of Dirretors, in its discretion and as a condition precedent to the issuance th:rrof, may require the owner of such lost or destroyed certificate, or his Icg21 representative, to advertise the same in such manner as it shall require cnd/ar give the company a bond in such form, in such sum, and with such surety or cureties as it may direct as indemnity against any claim that may be made tgtinrt the Company and its Transfer Agents and Registrars and its Co-Transfer ) Agtnts and Co-Registrars with respect to the certificate alleged to have been lost or destroyed. SIction 5. Transfers of shares of stock shall be made on the books of the Comp:ny only by the person named in the certificate or by attorney, lawfully ctnstituted in writing, and upon surrender of the certificate therefor. ) 22ction 6. The Board of Directors may close the stock transfer books of the l Comprny for a period not to exceed sixty (60) days for the purpose of Ortsrmining shareholders entitled to notice of or to vote at any meeting of sh2rrholders or any adjournment thereof, or entitled to receive payment of any distribution and share dividend, or in order to make a determination of thtr: holders for any purpose, provided that if such books shall be closed for thi purpose of determlning shareholders entitled to notice of or to vote at a char > holders' meeting, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of so closing the stock transfer books, the Board of Directors may fix a date in advance, not exceeding sixty (60) days preceding the date of any meeting of shareholders, or the date for th'2 payment of any distribution and share dividend or the date for the slictment of rights, or the date when any change or conversion or exchange of crpitcl stock shall go into effect, as a record date for the respective ditzrmination of the shareholders entitled to notice of, and to vote at, any cuch meeting, or entitled to receive payment of any such distribution and Ehiro dividend, or to any such allotment of rights, or to exercise rights in ra pect of any such change, conversion or exchange of capital stock and in such case such shareholders and only such shareholders as shall be chtr holders of record on the date so fixed shall be entitled to such notice of, rad to vote at, such meeting, or to receive payment of such distribution tnd chare dividend, or to receive such allotment of rights, or to exercise cuch rights, as the case may be, notwithstanding any transfer of any shares of stock on the books of the Company after any such record date fixed as cfrrstaid. In the absence of any designation with respect thereto by the Board cf Directors, the date upon which the notice r4 a meeting is mailed or raiolutions declaring a distribution and share dividend are adopted shall be th2 r; cord date for such determination in regard to meetings of shareholders er 6:clarations of distributions and share dvidends. 8:ction 7. The Company shall be entitled to treat the holder of record of tmy rhare or of stock as the holder in fact thereof and, accordingly, shall nit be bound to recognize any equitable or other claim to or interest in such th+rs on the part of any other person, whether or not it shall have express or othIr notice thereof, save as expressly provided by the laws of Texas. S:ction 8. Bonds, debentures and other evidence of indebtedness of the Comprny shall be signed by the Chairman, the President or any Vice President c:nd the Treasurer or an Assistant Treasurer and shall bear tne corporate seal tnd when so executed shall be binding upon the Company, but not o d erwise. The stel of the Company thereon may be facsimile, engraved or printed, and where tny cuch bond, debenture or oder evidence of indebtedness is authenticated with the manual signature of an authorized officer of the Company or trustee appointed or named by an indenture of trust or other agreement under which such recurity is issued, the signature of any of the Company's of ficers ' r,uthorized to execute such security may be facsimile. srction 9. In case any officer who signed, or whose facsimile signature has bcsn placed on any certificate representing shares of stock, bond, debenture er evidence of indebtedness of W s Conpany rhall cease to be an officer of thi company for any reason before the same has been issued or delivered by the Comp:ny, such certificate, bond, debenture or evidence of indebtedness may navartheless be issued and delivered as though the person who signed it or whota f acsimile signature had been placed thereon had not ceased to be such officar. XII-8 , i l-i i l l 1 ! i l
- 1
< 4 I i
((1))FistDCs[14433.ANEXII]00009. PIP PAGs 16-stt-1996 10:50 EDGs 00-000-0000 00:00 SLK 00-000 0000 00:00 [11])Tuc/Ensrch Tore S 4 1. R. Donnelley (212) 341-7777 A0G 3.4.1,p04 (PAGE) ARTICLE VII Deeds and Other Instruments of Conveyance _, _
@cction 1. Deeds and other instruments of the Company conveying land or any i int rs:t in land shall be signed by the Chairman, de President or a Vice PrG31Ccat or attorney-in-fact of d e Company when authorized by appropriate r sslution of the Board of Directors or shareholders, and when required by 1:w, shall be attested by the Corporate Secretary or an Assistant Corporate Occrat ry and shall bear the corporate seal, and when so executed shall be binding upon the Company, but not otherwise.
ARTICLE VIII checks, Drafts and Bills of Exchange S ction 1. The Chairman or the President of the Company may from time to time setablish General Bank Accounts, Depository Bank Accounts, and such Sp;ci:1 Bank Accounts as in the judgment of ei Oer of them may be needed in carrying on and dispatching the business of the Company. All checks, drafts end bills of exchange issued in the name of the Company and calling for the p;yment of money out of said General Accounts, Depository Accounts, or Special Accrunts of the Company shall be signed by the Controller or Assistant i C:ntroller, or such agents and employees as the Chairman or the President may ! from time to time designate and authorize to sign for the Controller, and crunt:rsigned by the Treasurer or any Assistant Treasurer, or such agents and empityees as the Chairman or the President may from time to time designate and cuth2rire to sign for the Treasurer; and when so designated by the Chairman or th7 President, the signature of the Treasurer or an Assistant Treasurer may be offix d by the use of a check-signing machines provided that for the purpose ef trensferring funds from any bank or depository at which the Company has funds on de osit to any other bank or depository of the Company for credit to thi company a account, a form of check having plainly printed upon its face
" DEPOSITORY TRANSPER CEECK,' and being by its wording payable to a bank or frpo itory for credit to the account of the Company, is hereby authorized, and tuch checks shall require no signature other than the name of the Company print d at the lower right cornert and further provided that checks, drafts
[ (nd bills of exchange issued in the name of the Company in the amount of
$25,000.00 or less need bear only one signature and that being the signature
.cf th) Treasurer or an Assistant Treasurer, affixed either manually or by the up2 of a check-signing machine, or the manual signature of such agents and empiryees as the Chairman or the President may from time to time designate and ruthorize to sign for the Treasurers and provided further that checks and frif ts issued in the name of the Company and calling for the payment of prodIction revenue or royalties need bear only one signature and that being the cipature of the Treasurer or an Assistant Treasurer, af fixed either manu 11y or by the use of a check-signing machine, or the manual signature of such rgents and employees as the Chairman or the President may from time to time desipate and authorize to sign f or the Treasurer; and provided further th:t checks and drafts issued in the name of the Company and calling for payment of money out of Special Bank Accounts established for the payment of i
dividinds need bear only one signature and that being the signature of the Tr:2 urer or an Assistant Treasurer, affixed either manually or by the use of a chick-siping machine, or the manual signature of such agents and employees e Cs thi Chairman or the President may from time to time designate and authorire ( , to sign for the Treasurers and fur der provided that no person authorized to l oign checks or drafts may sign a check or draft payable to himself. When in such cpplicable manner, but not otherwise, every check, draft or bill of exchinge issued in the name of the Company and calling for the payment of monJy out of the General Bank Accounts, Depository Bank Accounts, and Special Brnk Accounts of the Company shall be valid and enforceable according to its wording, tenor and effect, but not otherwise. Provided, however, that for the purprze of transferring funds between accounts of the Company, from accounts of th3 Company to accounts of subsidiaries and affiliates, from accounts of ths Company for the purpose of investment of corporate funds, and from cccounts of the Company for the payment of dividends, the Treasurer or an Assistant Treasurer, or such agents and employees as the Chairman or the President may from time to time designate and authorize, may make such
.trcn3fer of funds by bank wire transfers through oral or written instructions cnd for the purpose of transferring funds from accounts of the Company to cecounts of other third
! XII-9 l l l l 1 l 4 4 l l I
I l[1])TINEDC:114433.ANEXII]00010. PIP PACS 16-SEP-1996 10:50 EDC 00-000-0000 00:00 BLK: 00-000 0000 00:00 ((1))hc/twrch Fir 2 S-4 E. R. Donn111ey (212) 341 7777 AOC 3.4.1,p04 (PACE) p:rtiss, such funds may be transferred by bank wire transfers but only upon i written instructions from the Treasurer or an Assistant Treasurer, or such : egInts and employees as the Chairman or the President may from time to time ,I d22ignate and authorize to sign for the Treasurer, and countersigned by the Controller or Assistant controller, or such agents and employees as the Chiirman or the President may from time to time designate and authorize to cign for the Controller. j s,ction 2. The Treasurer of the Company may establish special bank accounts I dcgignated as Agent's Account in such bank or banks as in his judgment may be I nacted in carrying on and dispatching the business of the Company, provided th*.t the Treasurer in establishing and maintaining ruch accounts shall keep only such funds therein and in such amount as may be required for the local i n:rds of such accounts and provided that checks or drafts issued against or j drrwn on such accounts shall be valid and binding on the company according to - th2ir wording, tenor and effect when signed by either the Treasurer of the Compiny or by such agent or employee of the Company as may be designated by thD Treasurer in writing to such bank or when signed in such manner and by s'uch agent or employee of the Company as may be designated by the Chairman or ths President of the Companys and further provided that checks and drafts ictusd in the name of the Company against funds in such Agent's Account in the tmount of $1,000.00 or more must be countersigned by two persons authorized to
' cign such checks or draf ts.
ARTICLE IX yiscal Year , srction 1. The fiscal year shall begin on the first day of January in each I
. y2cr.
ARTICLE X Distributions and Share Dividends ccction 1. Distributions and share dividends upon the outstanding shares of
. th2 Company, subject to the provisions of the Articles of Incorporation, if Cny, may be declared by the Board of Directors at any regular or special 1 mesting. Distributions may be paid in cash or property, and share dividends may be paid in shares of the authorized but W asued shares or in treasury thir:s, of the Company subject to the provisions of the Articles of Incorporation.
ARTICLE XI Reserves ccction 1. There may be created by resolution of the Board of Directors out of the earned surplus of the Company such reserve or reserves as the Directors from time to time, in their discretion, think proper to provide for contingencies, or to equalize dividends, or to repair or maintain any property cf the Company, or for such other purpose as the Directors shall think ben:ficial to the Company, and the Directors may modify or abolish any such r:strve in the manner in which it was created. ARTICLE XII Seal s:ction 1. The Company's seal shall have inscribed thereon the name of the Company, the year of the organization and the words " Corporate Seal, Texas.' S:id seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. XII-10 i I l f r
((11]f!NEDGi[14433.ANKKII]00011.FIF FAC: 20-5EF 1996 05:01 EDG 00-000-0600 00:00 BLKs 00-000-0000 00:09 rrra 5-4 3. 2. Donnelley (212) 341 7777 A0G 3.4.1,p04 ((1))Tuc/ Ens:Ich (PAGE) g s ARTICLE XIII Indemnification Srction 1. The Company shall indemnify. and advance or reimburse reasonable , czpenses incurred by, any person who (1) is or was a director, officer, 5\ geployee or agent of the corporation, or (2) while a director, officer, M employee or agent of the Company, its divisions or subsidiaries, is or was s,_,
%g carving at the request of the company, pursuant to a resolution adopted by the Borrd of Directors, as a director, officer, partner, venturer, proprietor, }
trustre, employee, agent or similar functionary of another foreign or domestic %, Company, partnership, joint venture, sole proprietorship, trust, employee bensfit plan or other enterprise, to the fullest extent that a Company may or is required to grant indemnification to a director under the Act. The Company, puriu2nt to a resolution adopted by the Board of Directors, may indemnify any such persons to such further extent as permitted by law. Action by the Board cf Directors to amend, mcaify or terminate this ARTICLE XIII, Section 1. shall be prospective from the effective date of such action and any rights or obligrtions resulting from an event or events occurring prior thereto shall be govsrned by the provisions of this ARTICLE XIII, Section 1, as of the date of such event or events. ARTICLE XIV Amendments Srction 1. The power to alter, amend, suspend or repeal the Bylaws or to (dopt new Bylaws shall be vested in, and shall require the approval of, the ma$crity of Continuing Directors then in of fices provided, however, that any Bylzw or Amendment thereto as adopted by the Board of Directors may be citared, amended, suspended or repealed by the vote of the holders of 66 2/34 cf the shares entitled to vote for the election of Directors or a new Bylaw in litu thereof may be adopted by vote of such shareholders. No Bylaw which has be:n altered, amended or adopted by such a vote of the shareholders may be altsred, amended, suspended or repealed by vote of the Directors until two y:cra af ter such action by vote of the shareholders. ARTICLE XV Restrictions on Foreign Ownership s:ction 1. The purpose of this Article XV is to limit ownership and control ,. cf shares of any class of capital stock of the Company by persons who are not Eligible Citizens in order to permit the Company or any of its subsidiaries to conduct its business as a U.S. Mineral Lessee. The Board of Directors is b2rtby authorized to adopt such resolutions, and to effect any and all other mensures reasonably necessary or desirable (consistent with applicable law and thi provisions of the Articles of Incorporation) to fulfill de purpose and i plement the restrictions of this Article XV, including without limitation, r: quiring, as a condition precedent to the transfer of shares on the records of the Company, representations and other proof as to the identity of existing i or prospective shareholders and persons on whose behalf of shares of any class ' cf c:pital stock of the company or any interest therein or right thereof are er tre to be held and as to whether or not such persons are Eligible Citizens. S:ction 2. Any transfer, or attempted or purported transfer, of any shares of tny class of capital stock issued by the Company or any interest therein or right thereof, which would result in ne ownership or control by one or more non-Eligible Citizens of the shares of any class of capital stock of the compzny or of any interest or right there h will, until such condition no long2r erists, be void and will be ineffective as against the company and the Compiny will not recognize the purported transferee as a shareholder of the Comp ny for any purpose other uan the transfer of such shares to a person who is en Eligible Citizen provided, however, that such shares may nevertheless be dremed to be shares held or owned by non-Eligible Citizens for the purposes of this Article XV. XII-11 I l l l I I [
i ((1))f!NEDC(14413.hNEXI!]00012.FIP PAG: 20-SEP-1996 05:09 EDC: 00-000-0000 00:00 BLKs 00 000-0000 00:00 Form S 4 3. R. Donn111sy (212) 341-7777 A0G 3.4.1,p04 ((1))Tue/Enserch (PACE) S;ction 3. No shares of the outstanding capital stock of the Company or any class thereof transferred to, or acquired or held by, a non-Eligible Citizen sh:11 be entitled to receive or accrue any rights with respect to any dividrnds or other distributions of assets declared payable or paid to the h:16:rs of such capital stock during such period, rurdermore, no shares held , by or for the benefit of any non-Eligible Citizen will be entitled to vote j with respect to any matter submitted to stockholders of the Company so long as 1 I tuch crndition exists. I Section 4. If at any time (i) the Company is named, or is threatened to be , nimed, as a party in a judicial or administrative proceeding that seeks the , cinc211ation or forfeiture of any property, lease, right or license in which j th3 Company has an interest or (ii) if, in the opinion of the Board of Directors, the Company's ability to hold any property, lease, right or license . tould be prohibited or restricted because of the nationality, citizenship, )' racid:nce, or other status, of any shareholder of the Company (or, in the case cf a thareholder which is a Company, partnership or association, of any chiraholder, owner, partner or me h r of such shareholder), the Company may rod 3au the shares held by such shareholder at the then Current Market Price End upon such terms as shall be determined by the Board of Directors, in their cola discretion. SIction 5. ' Current Market Price" per share of capital stock of the Company on sny date is the average of the Quoted Prices of such class of capital stock duritg the four trading weeks before the date in question. In the absence of en3 or more such quotations, the Board of Directors shall determine the currtnt market price on the basis of such quotations as it considers I cppropriate. pa4tnership or
' Eligible cth;r Citizen entity)
- means whose any person ownership, holding(including a Company, or control of shares ln the Company would not, by reason of such person's citizenship or the citizenship of its members or owners or otherwise, (1) disqualify me Company or any of its Sub:idiaries from owning, acquiring, holding, possessing, or leasing oil, gas er ather minerals, mineral deposits, land, vessels or any other property,
.lic ntes, or rights of any nature whatsoever in federal lands or leases under fttir:1 laws and regulations in effect from time to time, or (2) violate any eth;r qualifications as the Board of Directors deems in its reasonable dicerstion are necessary or appropriate to permit the company and its sub;idiaries to engage in any other business activities f or which there may be qu211fications or restrictions on shareholders of the company or any of its iubsidiaries applicable under federal or state law. A person is an Eligible Citizrn if the applicable following requirement is mets (1) for an individual, ,
thtt he is native-born, naturalized or a derivative Citizen of the United St&tas or otherwise qualifies as a United States citizens (2) for a Company, ! thit is organized or existing under the laws of the United States, a state,. thD District of Columbia or United States territory or possession, that at least 75% of the ownership interest in, and the voting power over, the company is bald by Eligible Citizens, that the Company's president or other chief Cz1cutive of ficer and the chairman of its Mard of directors are United States citizins and that no more than a minority of the number of directors required ta constitute a quorum are non-United States citizens: (3) for a partnership, th:t all of the interests in the partnership, are owned by Eligible Citizens, [
~
(4) for a trust, that each of its trustees and each of its beneficiaries is an Eligible Citizens and (5) for an association, joint venture, or other entity, l thtt cll members, venturers or other equity participants are Eligible Citizens End that such association, joint venture or other entity is capable of holding i laness or other interest in federal minerals or lands under the laws of the United States.
' Quoted Price
- means, with respect to any class of capital stock of the Company, the last reported sales price regular way or, in case no such r2 ported sale takes place on such day, the average of the closing bid and cakId prices regular way for such day, in each case on the principal national eccurities exchange on which the shares of such class of capital stock are the listed last saleorprice admitted toway regular trading or, ifshares for such not listed or admitted as published to trading,if by NASDAQ, or such lest price is not so published by NASDAO or if no such sale takes place on cuch day, the mean between the closing bid and asked prices for such shares as published by NASDAO or in the absence of any of the foregoing, the fair market vslu.a as determined by the Board of Directors.
- Subsidiary" means any Company more than 50% of the outstanding capital
! stock of which is owned by d e Company or any subsidiary of the Company. XII-12 3 t i I
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[{1)) Fgra 8 4 ? 1. 1. Donai11sy ' 341 7777 (212) A00 3.4.1,p04 (PACD i 8 0.8. Mineral Lessee
- means any company or other entity directly or l acquiring, holding, possessing, or leasing oil, gas or 1 t -
indirtetly othsr minerals, owningdneral u deposits, lands, vessels or any other property, lic!nies, or rights of any nature whatsoever in federal lands or leases under _, _ . _ _ , fadtrtl laws and regulations in effect from time to time, including, without li itation, the Mineral Leasing Act of 1920, as amended, 30 U.S.C.A. (S)181 et ] seq. i
- XII-115 i
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- 1. Donnelley (212) 341-7777 A0G 3.4.1,p03 ;
l (PAGE) J PART II l INFORMATION NOT REQUIRED IN PROSPECTUS l ITEM 20. INDEMNIFICATION Or DIRECTORS AND OFTICERS. Article IX of the Restated Articles of Incorporation of the Company provides ma follows:
"The Corporation shall reimburse or indemnify any former, present or future director, officer or employee of the Corporation, or any person who may have served at its request as a director, officer or employee of enother corporation, or any former, present or future director, officer or scployee of the Corporation who shall have served or shall be serving as an c.dministrator, agent or fiduciary for the Corporation or for another corporation at the request of the Corporation (and his heirs, executors and camlnistrators) for or against all expenses and liabilities incurred by him or them, or imposed on him or them, including, but not limited to, judgments, settlements, court costs and attorneys' fees, in connection with, or arising out of, the defense of any action, suit or proceeding in which he ray be involved by reason of his being or having been such dircctor, officer or employee, except with respect to matters as to which h.3 shall be adjudged in such action, suit or proceeding to be liable becruse he did not act in good faith, or because of dishonesty or conflict of interest in the performance of his duty.
"No former, present or future director, officer or employee of the Corporation (or his heirs, esecutors and administrators) shall be liable for any act, omission, step or conduct taken or had in good faith, which is required, authorized or approved by an order or orders issued pursuant to tha Public Utility Holding Company Act of 1935, the rederal Power Act, or tny other federal or state statute regulating the Corporation or its cub:idiaries, or any amendments to any thereof. In any action, suit or proceeding based on any act, omission, step or conduct, as in this ptrigraph described, ne provisions hereof shall be brought to the .
sttention of the court. In the event that the foregoing provisions of this p rrgraph are found by the court not to constitute a valid defense, each Auch director, officer or employee (and his beirs, executors and administrators) shall be reimbursed for or indemnified against, all expenses and liabilities incurred, by h[m or them, or imposed on him or them, including, but not limited to, judgments, settlements, court costs end attorneys' fees, in connection with, or arising out of, any such cetion, suit or proceeding based on any act, omission, step or conduct takin or had in good faith as in this paragraph described.
"The foregoing rights shall not be exclusive of other rights to which any cuch director, officer or employee (or his heirs, executors and caministrators) may otherwise be entitled under any bylaw, agreement, vote of chareholders or otherwise, and shall be available whether or not the dirrctor, officer or employee continues to be a director, officer or (mployee at the time of incurring such expenses and liabilities. In furtherance, cad not in limitation of the foregoing provisions of this Article IX, the Corporation may indemnify and may insure any such persons to the fullest extent permitted by the Texas Business Corporation Act, as (mended from time to time, or the laws of the State of Texas, as in effect from time to time."
< ~ Article 2.02 1 of the Texas Business Corporation Act permits the Company, in cartein circumstances, to indemnify any present or former director, officer, employee or agent of the Company against judgments, penalties, fines, esttirments and reasonable expenses incurred in connection with a proceeding in which any such person was, is or is threatened to be, made a party by rearon of holding such of fice or position, but only to a limited extent for oblig:tions resulting from a proceeding in which d e person is found liable on tha basis that a personal benefit was improperly recelved or in circumstances in which the person is found liable in a derivative suit brought on behalf of tha Company. Article X of the Rastated Articles of Incorporation of the Company provides as follows:
"A director of the Corporation shall not be liable to the Corporation or !
ita shareholders for monetary damages for any act or omission in the . dirretor's capacity as a director, except that this provision does not l alirinate or limit the liability of a director fors (a) a breach of a director's duty of loyalty to the Corporation or its shareholders; 11-1 f i
l {[1])PINEDGa[14433.II)00002. PIP PAGs 17 SEP 1996 02:16 EDGs 00-000-0000 00:00 BiK 00 000 0000 00:00 ({1))Tuc/Ensarch form S-4 1. R. Donne 11sy (212) 341 7777 AOC 3.4.1,p03
< PACE) t (b) an act or omission not in good faith that constitutes a breach of duty of a director to the Corporation or an act or omission that involved intentionni misconduct or a knowing violation of the laws (c) a transaction from which a director received an improper benefit, whether or not the benefit resulted from an . action taken within the scope of the director's offices or (d) an act or omission for which the liability of a director is czpressly provided for by an applicable statute.
If the laws of the state of Texas are amended to authorize action further slicinating or limiting the personal liability of directors, then the litbility of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by such laws as so amended. Any repeal or modification of this Article X shall not adversely affect any right of protection of a director of the Corporation existing at the time of such rapeal or modification." stction 21 of the Company's Bylaws provides as follows:
'Section 21. Insurance, Indemnification and Other Arrangements. Without further specific approval of the shareholders of the corporation, the errporation may purchase, enter into, maintain or provide insurance, indamnification or other arrangements for the benefit of any person who is er was a director, officer, employee or agent of the corporation or is or wts serving another entity at the request of the corporation as a director, efficer, employee, agent or otherwise, to the fullest extent permitted by tha laws of the state of Texas, including without limitation Art. 2.02-1 of th) Texas Business Corporation Act or any successor provision, against any licbility asserted against or incurred by any such person in any such c7picity or arising out of such person's service in such capacity whether or not the coqoration would otherwise have the power to indemnif y against any such liability under the Texas Business Corporation Act. If Ge laws of the state of Texas are amended to authorize the purchase, entering into, maintaining or providing of insurance, indemnification or other trr:ngements in the nature of those permitted hereby to a greater extent th;n presently permitted, then the corporation shall have the power and ruthority to purchase, enter into, maintain and provide any additional trr;ngements in such regard as shall be permitted from time to time by the icws of the state of Texas without further approval of the shareholders of tha corporation. No repeal or modification of such laws or this Section 21 thtl1 adversely af fect any such arrangement or right to indemnification existing at the time of such repeal or modification."
Th2 Company will enter into agreements with certain of its officers and dir:ctors wMch provide, among other things, for their indemnification by the Company to the fullest extent permitted by Texas law, unless a final cdjudication establishes that the indemnitee's acts were committed in bad frith, were the result of active and deliberate dishonesty or that the ind mnitee personally gained a financial profit to which the indemnitee was not icgally entitled. These agreements will further provide, under certain circumstances, for the advancement of expenses and de implementation of other crrtngements for the benefit of the indemnitee. Th3 company will have insurance covering its exp nditures which might arise in connection with its lawful indemnification of its directors and officers for their liabilities and expenses. Of ficers and directors of the Company will , cleo have insurance which insures them against certain other liabilities and arpsnies. Und2r Sect. - 8.5 of the Plan of Merger, the parties have agreed that the l Company wili (i) lndemnify, defend and hold harmless to the fullest extent pcrmitted by applis ble law, the present and former officers, directors and l employees of ENSERCB ? any of their respective subsidiaries against certain 1 licbilities (a) arising sit of actions or omissions occurring at or prior to i tha Effective Time that a.e based on or arise out of such service as an i officar, director or empic'ee or (b) that are based on, arise from or pertain to thi transactions conteml lated by the Plan of Merger, and (ii) maintain policies of directors' and 6icers' liability insurance for a period of six yscre after the Effective Time. in addition, to the fullest extent permitted i by 1sw, all existing rights of indemnification in favor of the employees, j tgants, of ficers and directors of ENSERCH will continue in full force and ' sffset for not less than six years from the Effective Time. It is currently capscted that at or af ter the Ef fective Time, the Company will adopt indimnification arrangements in favor of its directors, officers and employees idIntical to those in ef fect at TUC immediately prior to the Ef fective Time. 812 *The Plan of Merger--Indemnification" in de Joint Proxy stctsment/ Prospectus which forms a part of this Registration statement, j II-2 I t
l }' i v l l ((111FlEEDGe[14433.II]D0003.FIF PAG: 20 SEP,1996 11:41 EDG 00-000-0000 06:00 BLKs 00 000-0000 00:00 [(1))fue/tas:rch Fir 2 s-4 2. R. Donnellty (312) 341 4 777 F>rf 3.4.1,p02 (PAGE) l ITEM 21. EXHIBITS. (TABLE) (CAPTION) EXRIBIT _. NUMBER DESCRIPTION OF DOCUMENT l ....... ....................... (C) (S) 2(a) Amended and Restated Agreement and Plan of Merger dated as of April 13, 1996 (attached as Annes I). 2(b) Stock Option Agreement dated as of April 13, 1996 (attached as Annex II). 2(c) Form of Agreement and Plan of Distribution (included as Exhibit A to the Plan of Merger). 3(a) Restated Articles of Incorporation of the Company (attached as Annex VIII). 3(b) Restated Bylaws of the Company (attached as Annex IX). 5(a) Opinion re Legality of Worsham, Forsythe & Wooldridge, L.L.P. Sta) Opinion re Tax Matters of Reid & Priest LLP. 8(b) Opinion re Tax Matters of King & Spalding. 10(a) Form of Tax Allocation Agreement (included as Exhibit B to the Plan of Merger). 10(b) Form of Tax Assurance Agreement (included as Exhibit C to the Plan of Merger). 10(c) Employment Agreement between TUC and David W. Biegler (attached as Annex V). 10(d) Employment Agreement between Texas Utilities Services Inc. and Mchael E. Rescoe (attached as Annez VI). 10(e) Employment Agreement between TUC and William T. Batterwhite (attached as Annex VII). 15(a) Letter of Deloitte & Touche LLP regarding unaudited interim financial information. 15(b) Letter of Deloitte & Touche LLP regarding unaudited interim financial information. 23(a) Consent of Worsham, Forsythe & Wooldridge, L.L.P. (included in Exhibit 5(a)). 23(b) Consent of Reid & Priest LLP (included in Exhibit 8(a)). 23(c) Consent of King a Spalding (included in Exhibit 8(b)). 23(d) Consent of Deloitte & Touche LLP. 23(e) Consent of Deloitte & Touche LLP. 23(f) Consent of Barr Devlin & Co. Incorporated. Consent of Morgan Stanley & Co. Incorporated. 23 23(n(p)) Consent of Arthur Andersen LLP. 23(1) Consent of DeGolyer & MacNaughton. 24(a) Powers of Attorney (see Page 11 5). 99(a) Form of Proxy / Direction to be used in connection with the Special Meeting of Shareholders of TUC. 99(b) Form of Proxy / Direction to be used in connection with the Special Meeting of Shareholders of ENSERCE. 99(c) Report of Barr Devlin & Co. Incorporated (attached as Annex III). 99(d) Report of Morgan Stanley & Co. Incorporated (attached as Annex IV). 99(e) Questions and Answers for Shareholders of TUC.
</ TABLE)
ITEM 22. UNDERTAKINGS. Thi undersigned registrant hereby undertakess (1) To file, during any period in which offers or sales are being made, a po3t.stfactive amendment to this registration statements (i)-To include any prospectus required by Section 10(a)(3) of the S:curities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the ef fcctive date of the reglstration statement (or the most recent post. affsetive amendment thereof) which, individually or in the aggregate, riprcsent a fundamental change in the information set forth in the r:gistration statement. Notwithstanding the foregoing, any increase or d1 crease in volume of securities offered (if the total dollar value of etcurities offered would not exceed that which was registered) and any d:viction from the low or high end of the estimated maximum offering range C:y be reflected in the form of prospectus filed with the Commission purruant to Rule 424(b) if, in de aggregate, the changes in volume and I prica represent no more than a 20 percent change in the maximum aggregate i effering price set forth in the ' Calculation of Registration Fee" table in ' th2 sffective registration statements II.3 l 1 i l r l l 1
i ! l l ((11)TINEDC s (14433 I!]D0004. PIP PACS 17 SEP-1996 00:46 EDCs 00-000-0000 00:00 BLE: 00 000-0000 00:00 [{1))Tuc/EIsIrch fora 5-4 R. R. Donns11ty (212) 341 7777 A0G 3.4.1,p03 (PAGE) I (iii) To include any material information with respect to the plan of diztribution not previously disclosed in the registration statement or any matsrial change to such information in the registration statements Ptsvided, however, that paragraphs (1)(i) and (1)(11) do not apply if the rcgirtration statement is on Form S-3, Form S-8 or Form T-3, and the infctmation required to be included in a post-effective amendment by those t pcr:grrphs is contained in periodic reports filed by the registrant pursuant ts $1ction 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incrrporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the S2curities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered thirsin, 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 cny rhares of Company Common Stock which are not issued in the Mergers or tha Conversion. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant s annual report pursuant to ! esetion 13(a) or 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 thirsin, and the of fering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) That prior to any public reoffering of the securities registered htriunder arough use of a prospectus which is part of this registration ct traent, by any person or party who is deemed to be an underwriter within tha meaning of Rule 145(c), the issuer undertakes that such reaffering prorpectus will contain the information called for by the applicable riqistration form with respect to reof ferings by persons who may be deemed unairwriters, in addition to the information called for by the other items of the applicable form. (6) That every prospectus: (i) that is filed pursuant to paragraph (5) immediately preceding, or (ii) that purports to meet the requirements of Daction 10(a)(3) of the Act and is used in connection with an offering of e(curities subject to Rule 415, will be filed as a part of an amendment to thi registration statement and will not be used undl such amendment is offsetAve, and that, for purposes of determining any liability under the - cccurities Act of 1933, each such post-effective amendment shall-be deemed to be a new registration statement relating to the sseurities of fered thirzin, and O e offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (7) To respond to requests for information that is incorprated by rsisrence into the 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 ef frctive date of the registration statement through the date of responding to the request. (8) To supply by means of a post-effective amendment all information concsrning a transaction, and the company being acquired involved therein, thtt was not the subject of and included in the registration statement when it became effective. Intofar as indemnification for liabilities arising under the securities Act of 1933 may be permitted to directors, officers and controlling persons of the rsgistrant pursuant to the provisions described in item 20, or otherwise, the ragistrant has been advised that in the opinion of the Securities and Exchange commission such indemnification is against public policy as empressed in the Act and is, therefore, unenforceable. In the event that a claim for indrmnification against such liabilities (other than the payment by the rzgistrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or procssding) is asserted by such director, officer or controlling person in conn ction with the securities being registered, the registrant will, unless i in tha opinion of its counsel the matter has been settled by controlling i prcc dent, submit to a court of appropriate jurisdiction the question whether 1 such indemnification by it is against public policy as expressed in the Act rnd will be governed by the final adjudication of such issue. II-4 l t I i
=- .
i . i .. ,'l , PAC: 18 SEP-1996 22:31' EDC: 00-800-0000 00:00 BLK 00*000-0000 00:00 i
>{l1)]FINEDGal14433.II]00005.
[1))Tue/tearsch PIP Fors 8 4 .R. I Donn111ey (212) 341-7777 - A0G 3.4.1,p03 (PAGE) POWER OF ATTORNEY
.. Ezch director and/or officer of tne registrant whose signature appears below-harsby appoints the' Agents for Service named in this registration statement,
- -rad sich of them severally, as his/her attorney.in fact to sign in his/her l.
nune sad behalf, in any and all capacities stated below, and to file with the s&curities and Enchange Commission, any and all amendments,. including post. l
;effsetive amendments, to this registration statement, and the registrant.
'hartby also appoints each such Agent for Service as its attorney.in. fact with thB s.uthority to sign and file any such amendment in its name and behalf.
I' SIGNATURES. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,.THE REGISTRANT l.. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE l_ UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS, AND THE STATE l ..OF TEXAS ON THIS 20TH DAY OF SEPTEMBER, 1996
.TUC Holding Company
/s/ H. Jarrell Gibbs i RY8 H. Jarrell Gibbs l
President PURSUANT TO THE REQUIRENENTS OF THE SECURITIES ACT OF 1933, THIS
' REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLONING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
-SIGNATURE TITLE DATE Jarrell Gibbs President and September.20,
........./.s/..H.
. ......................... Princip:1 Executive 1996 (H. JARRELL GIBBS) Officer r.
- ' Treasurer and September 20,
......../.s/... Peter B. Tinkham
........................- Principal Financial 1996 i (PETER B. TINKHAM)' Officer i >
l ........../.s/..Cathryn Hulen Controller and Principal September 20, 1996 (CATERYN HULEN) Accounting Officer
....../.s/... Robert September 20,
. . . . . . A.
. . . Wooldridge
' Director 1996 (ROBERT A. WOOLDRIDGE)
II.5 i i j l s .. I l-i I i i I I 1 i h
]
--,ev--
i i
)V 1] TINEDCs(144)3.II)00006.FIF FAC 20-817-1996 11:42 EDGE 00-000 0000 00:00 BLKs 00-000-0000 00:00 1] Tuc/ Ens;rch F1ra 5 4 1. R. Donnellry (212) 341-7777 FMT 3.4.1,p02 (FAGE)
Th3 following exhibits are filed with or incorporated by reference in this Regittration Statement. (TAILE) (CAPTION) EXEIBIT LUMBER DESCRIPTION OF DOCUMENT 1 (C) (S) ' 2(c) Agreement and Plan of Merger dated as of April 13, 1996, as amended (attached as Annex I). 2(b) Stock Option Agreement dated as of April 13, 1996 (attached as Annex ' II). 2(c) Form of Agreement and Plan of Distribution (included as Exhibit A to the Plan of Merger). ; 3(a) Restated Articles of Incorporation of the Company (attached as Annes 1 VII). 3(b) Restated Bylaws of the Company (attached as Annex VIII). 5(c) Opinion re Legality of Worsham, Forsythe & Wooldridge, L.L.P. 8(s) Opinion re Tax Matters of Beid & Priest LLP. 8(b) Opinion re Tax Matters of King & Spalding. 10(c) Form of Tax Allocation Agreement (included as Exhibit B to the Plan of Merger). 10(b) Form of Tax Assurance Agreement (included as Exhibit C to the Plan of Merger). 10(c) Employment Agreement between TUC and David W. Biegler (attached as Annex V). 10(d) Employment Agreement between Texas Utilities Services Inc. and Mchael E. Rescoe (attached as Annex VI). 10(c) Employment Agreement between TUC and William T. Satterwhite (attached as Annex VII). Letter of Deloitte a Touche LLP regarding unaudited interim 15(a) financial information. 15(b) Letter of Deloitte & Touche LLP regarding unaudited interim financial information. 23(c) Consent of worsham, Forsythe s Wooldridge, L.L.P. (included in Exhibit 5(a)). 23(b) Consent of Beid & Priest LLP (included in Exhibit O(a)). 23(c) Consent of King & Spalding (included in Exhibit 8(b)). 23(d) Consent of Deloitte & Touche LLP. 23(e) Consent of Deloitte & Touche LLP. 23(f) Consent of Barr Devlin & Co. Incorporated. 23(g) Consent of Morgan Stanley & Co. Incorporated. 23(h) Consent of Arthur Andersen LLP. 23(1) Consent of DeGolyer & MacNaughton. 24(c) Power of Attorney (see Page II-5). 99(c) Form of Proxy / Direction to be used in connection with the Special Meeting of Shareholders of TUC. 99(b) Form of Proxy / Direction to be used in connection with the Special Meeting of Shareholders of ENSERCH. 99(c) Report of Barr Devlin & Co. Incorporated (attached as Anner III). 99(d) Report of Morgan Stanley & Co. Incorporated (attached as Annex IV). 99(o) Questions and Answers for Shareholders of TUC.
</TAILE)
II-6 i l I l j l l 1 i
EDGAR only EDG 20 stP 1996 05:11 BLK 00-000-0000 00:00 (({[1)]rINEDC[14433tx5A]00001. 11)?uc/EnsIrch PIP for2 5 4 R.R. Donn111*y (212) 141 7777 EDITOR V2.7-1 *** (PAGE) Exhibit 5(a) WORSHAM, FORSYTHE & WOOLDkIDGE, L.L.P. Attorneys and Counselors at Law 1601 Bryan Street, 30th Floor Dallas, Texas 75201 Telephone (214) 979 3000 Fax (214) 880 0011 September 20, 1996 TUC Bolding Company 1601 Bryan Street Dallas, Texas 75201 Ladies and Gentlemens Referring to the proposed issuance and delivery by TUC Bolding Company (Corpiny) of up to 242,142,685 shares of its common stock, without par value (Stock), pursuant to the terms of the Amended and Restated Agreement and Plan of M rgsr, dated as of April 13, 1996, by and among the Company, Texas Utilities Compiny and ENSERCH Corporation (Plan of Merger), as contemplated by the Ra%igtration Statement on Form S.4 (Registration Statement) to be filed by the Comp ny with the Securities and Exchange Commission (Commission) under the Escurities Act of 1933, as amended, on or about the date hereof, we are of the opinisn that:
- 1. The company is a corporation duly organized and validly existing under the laws of the State of Texas.
- 2. All requisite action necessary to make the Stock validly issued, fully paid and nonassessable will have been taken whens (a) ne Stock shall have been issued and delivered in accordance with the Plan of Merger or pursuant to the Conversion (as defined in the Registration Statement);
and (b) the Articles of Merger shall have been duly filed with the Secretary of State of the State of Texas in accordance with the Texas Business Corporation Act as contemplated by the Plan of Merger and Certificates of Merger shall have been issued by such official. We hereby consent to the filing of this opinion with the Commission as an (1hibit to the Registration Statement and to the use of our name as counsel in l th2 RIgistration Statement. Very truly yours, WORSEAM, FORSYTHE
& WOOLDRIDGE, L.L.P. ,
By ./.s/..Neil D. Anderson A Partner l l 1 i I l
l' _ EDGA1 only , EDCs 20-SEP 4996 11:10 SLK 00-000-0000 00:00 , l[1))FisrDCa[14433.EX8A]e0091. [1))Tue/Ensirch PIP rarn 54 3.R. Dann111ty (21$l 341-7777 EDITot V2.7 1 ... ! (PAGE) r EXHIBIT 8(a) REID & PRIEST LLP
'A New York Registered Limited Liability Partnership
~-* ~~-~ 40 West 57th Street New York, New York 10019-4097 Telephone 212 603 2000
! Facsimile 212 603-2001 l September 20, 1996 l Tazas Utilities Company Energy Plaza l
'1601 Pryan Street Dallas, Texas 75201 l Ladies and Gantlement Reference is made to the joint proxy statement and prospectus (the l
' *Prespectus') which constitutes part of the registration statement on Form S-4 (tha Registration Statament'), to be filed by TUC Bolding Company ("nolding Comp 45y"), Texas Utilities Company ('TUC') and ENSERCH Corporation ("ENSERCH') ,__ witn the Securities and Exchange Commission ('SEC") on or about the date hereof und:r the Securities Act of 1933, as amended, in connection with (1) the merger l cf Enserch Exploration, Inc., an 83% subsidiary of ENSERCR, with and into Lone l Sttr Energy Plant Operations, Inc. (*LSEPO"), an indirectly wholly-owned anbiidiary of ENSERCE, and the change of the name of LSEPO to Enserch Exple: ration, Inc. (*New EEX*), (ii) the distribution to the holders of ENSERCH common stock on a pro rata basis of all of ENSERCE's interest in New EEX, (iii) th1 merger of TUC Merger Corp. and Enserch Merger Corp., wholly-owned cub 2idiaries of Bolding Company, with and into TUC and ENSEMCH, respectively,
- rnd (iv) the registration of Holding Company common stock (collectively, the i 'Trc2caction').
We have acted as your spcial tax counsel with respect to the l Trnnstetion. We are of the opinion that the statements under the caption
- 'Cartmin United States Federal Income Tax Consequences
- in the Prospectus l cin titute an accurate description, in general terms, of certain of the material FId:rti income tax consequences that may be relevant to holders of 20C stock and
- ENIERCE stock. Such statements are conditioned upon the receipt of a ruling from
- thi Internal Revenue Service and opinions of counsel, which in turn are based upon certain representations to be received by the management of TUC and ENSERCS.
We hereby consent to the use of our name under the captions 'Certain
' United States rederal Income Tax Consep ences' and ' Legal Matters' in the I Prorpectus and the filing of this opinion with the SEC in connection with the l- Registration Statement, very truly yours,
/s/ REID & PRIEST, LLP REID 6 PRIEST LLP I
h l I I l l
a i ((1 EDGAR only - EDGs 20-SEF 1996 69:44 BLKs 00-000-0000 00:00
.((1])Tue/EnsischFINEDGe[14413.Er03]00001.FIF'
)) Ftra 8-4 R.2. Donnelliy (212) 341-7777 EDITot v2.7 1 l t
l
.(PAGE)
Exhibit 8(b) ( l' KING & SPALDING ) i l 1730 Pennsyivania Avenue, N.W. + Washington, D.C. 20006 4706 1 1 ( Telephones 202/737 0500 racsimile: 202/626 3737 ; i 1
%l l September 19, 1996 'N ,
! l-
.e*
ENSERCH Corporation . 300 South St. Paul Street Ds111a, Texas 75201 t Ras Registration Statement on Form S 4 of l TUC Bolding Company ; j .Lidies and Gentlemens This opinion is delivered to you in connection with the Registration i ! Statement on Form S.4 (the ' Registration Statement") to be filed with the l Sicurities and Exchange Commission by TUC Holding Company (' Holding Company') is c!nnection with the merger of TUC Merger Corp. and ENSERCH Merger Corp.,
' wholly. owned subsidiaries of Holding Company, with and into Texas Utilities Company ("TUC') and ENSERCH Corporation ('ENdERCH*), respectively (the i
*Trtniaction") l
[ INFORMATION RELIED UFON In rendering the opinion expressed herein, we have examined such documents as w> have deemed appropriate. Specifically, we have examined, among other dicuments, the orig hals or drafts, as may be applicable, of (i) the l Regi:tration Statement, including the Joint Proxy Statement / Prospectus for TUC , CLd ENSERCE (the " Joint Proxy Statement *); (ii) the Amended and Restated l Agrimment and Plan of Merger, dated April 13, 1996, among ENSERCH, TUC, and < l Esiding EntsrchCompany; Explorat ion,(iii) the ("EEK"), Inc. Agreement andStar Lone PlanEnergy of Distribution among ENSERCH, Plant Operations, Inc. l ("LSEPO'), and holding Companys (iv) the Tax Allocation Agreement among
- ENIERCH, Enserch Exploration, Inc., formerly named LSEPO ("New EEX'), and TUCI c(v) the Tax Assurance Agreement between ENSERCH and New EEX; (vi) the
.Rigistration Statement on Form S-4 to be filed with the Securities and '
Exchange Commission by LSEPO3 (vii) the
^
'I l
1 i [ i l i i f' I
'l i
l l
,s .
t/ fIntDG (14433.EXIs]00002. PIP EDGA1 only EDC: 20 5EP-1996 11:28 BLKs 00-000-0000 00:00 l[1])Tue/EnsIrch [1)) Ftra S+4 1.1. Donnellty (212) 341 7777 EDITOR V2.7 1 ne (PAGE) ENSERCH Corporation SIpt: ber 19, 1996 Piga 2 Agroostnt and Plan of Merger among LSEPO, EEX, and ENSERCH3 (viii) the Trust Agrten*nt for ENS Boldings Trust, dated December 31, 1994, between ENSERCH and ENS H21 dings Limited Partnership; (1x) the Amendment and Termination of Trust Agr3tment for ENS Holdines Trust bstween ENSERCH and ENS Holdings Limited Partn3rship; (x) the Rights Agreement, dated August 29, 1996, between LSEPO and [terris Trust Company of New York); and (zi) the Rights Agreement, dated March 26, 1996, between ENSERCH and Harris Trust Company of New York. We understand thtt ENSERCE has provided to us all documents and materials submitted or presanted to the ENSERCH Board of Directors in connection with the Transaction, as w:11 as the draft resolutions and minutes of the ENSERCH Board of Directors rslating to the Transaction. In cur examination of the documents and in our reliance upon them in issuing this opinion, we have assumed, with your consent, that all documents submitted to us as photocopies or by telecopy faithfully reproduce the originals thereof, that the originals are authentic, that all such documents rubmitted to us have beun or will be duly executed and validly signed (or filsd, where applicable) to the extent required in substantially the same form cs th2y have been provided to us, that each executed document wlll constitute thz legal, valid, binding and enforceable agreement of the signatory parties,. thr.t ell representations and statements set forth in the documents are and will remain true, correct, and complete in all material respects, and that all
' obligrtions imposed on the parties by any of the documents have been or will be performed or satisfied in accordance with their terms in all material rstpects. We have further assumed that, for our examination in connection with .this opinion, you have disclosed to us all of the documents, arrangements or undsratandings that are material to the Transaction.
De also have obtained such additional information and representations, upon thich we have relied in rendering this opinion, as we have deemed relevant and Excsegary, through consultations with various representatives of ENSERCH and through a written certificate from.ENSERCH dated September 19, 1996, verifying th3es facts that have been represented to us. However, we have had no such cen2ultations with any representative of TUC and have not yet obtained written cartificates from TUC or from any shareholder of TUC or any shareholder of ENSERCE to verify certain relevant facts. This opinion is based upon the terumption that we will obtain a written certificate from TUC comparable in all caterial respects to the certificate of ENSERCH dated September 19, 1996, and that we will obtain representations from any shareholders of TUC or ENSERCH that own five percent or more of the common stock of TUC or ENSERCH, respectively, immediately prior to the consummation of the Transaction, that will support an epinien that the shareholders of ENSERCH s l l l I I l l l t I f 4 i
y EDGA2 only EDGa 20-SEP 1996 11:30 812 : 00 000-0000 00:00 l[1))rINEDG (1))Tue/Ensirch (14433.tx05]00003.firPIP 3 8-4 R.R. Donne 111y (212) 341-7777 EDITOR V2.7-1 *** (PAGE) ENSERCH Corporation 8:ptember 19, 1996 Fig 3 3 1 cnd TUC will own at least 80 percent of the common stock of Eolding Company following the Transaction, we will require such written certificate and r:procentations prior to rendering our final opinion on the tax consequences of thJ Transaction, which opinion is to be delivered as a condition to the closing of the Transaction. 1 I OPINION Dr. sed on the foregoing, it is our opinion that the statements contained in tha Joint Proxy Statement in the section captioned "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" fairly present in all material respects the infarmation set forth therein and fairly summarise the matters referred to th:rsin. This opinion is based on current authorities and upon facts and assumptions as of this date. It is subject to change in the event of a change in the cpplicable law or a change in the interpretation of such law by the courts or by the Internal Revenue Service. There can be no assurance that legislative er coministrative changes or court decisions will not be forthcoming that would significantly modify this opinion or cause its withdrawal. We are under nD ebligation to inform you of any such changes or decisions. In addition, cur cpinion is based gslaly on the documents that we have examined, the cdditional information that we have obtained, and the representations referred ts h: rein that we have assumed with your consent to be true on the date i hirref. Our opinion cannot be relied upon if any of the material facts cintsined in such documents or any such additional information is, or later b comes, materially inaccurate or if any of the representations referred to birrin are, or later become, materially inaccurate or if the written ccrtificates required to be delivered prior to the closing of the Transaction cr2 tot delivered. Our opinion represents our legal judgment and has no of ficial LLitus of any kind. Finally, our opinion is limited to the tax matters v specifically covered thereby. This letter is furnished by us as counsel for ENSERCH and is solely for the be3Gfit of ENSERCE. We consent to the filing of this opinion as an exhibit to tha Registration Statement in connection with the Transaction and to the use cf tur name in the Joint Proxy Statement. Very truly yours,
/s/ KING & SPALDING KING & SPALDING l
1 l 1 1
1
.I EDGAR only - EDC: 20-stF 1996 13:10 812 : 00 000 0000 00:00 j l[1))f!NEDG(14433EX15A)00001.FIF
[1))T:c/EIsisch Ftr2 8 4 R.R. Donnellsy (212) 341-7777 EDITOR V2.7 1.-*** ', l (PAGE) ' l EKHIBIT 15(a) . 1 lTUC N 1 ding Companya _ .. , j 1
,W2 htve reviewed, in accordance with standards established by the American !
Institute of Certified Public Accountants, the unaudited interim condensed ;
. canrolidated financial information of Tesas Utilities Company and subsidiaries 1 for the periods ended March 31, 1996 and 1995, and June 30, 1996 and 1995, as
- indicited in our reports dated May 7, 1996, and August 6, 1996, respectively; ,
breture we did not perform an audit, we expressed no opinion on that ,
, interession. l w's are aware that our reports referred to above, which were included in the 1Outrtsrly Reports of Texas Utilities Company on Form 10-0 for the quarters ended ;
Mtrch 31,.1996 and June 30, 1996, are being incorporated by reference in this i P.cgistration statement. W2 also are aware that the aforementioned reports, pursuant to Rule 436(c) under thz sicurities Act of 1933, are not considered a part of the Registration Statm ent prepared or certified by an accountant or a report prepared or ;
- csrtified by an accountant within the meaning of Sections 7 and 11 of that Act. >
l DELOITTE & TOUCBE LLP kptember 20, 1996' 1 1
'I
~
l l l I I a ) I I L l ' i l l 1 f- ) i l
EDGAR only EDGs 20-SEP 3996 13:11 BLK 00-000-0000 00:00 Ill))FINEDCs[14433.Er155]00901. (11]Tuc/Ensuch TaraPIP S-4 3.t. Donnallry (212) 341 7777 EDITOR V2.7 1 "* A PAGEP [LETTEREEAD OF DELOITTE & TOUCHE LLP APPEARS BERE] EXHIBIT 15(b) _ i l TUC IMiding Companys i W3 hire reviewed, in accordance with standards established by the American In2titute of Certified Public Accountants, the unaudited interim condensed conro11 dated financial information of ENSERCH Corporation and subsidiaries and Ensarch Esporation, Inc. and subsidiaries for the periods ended March 31, 1996 rnd 1995, and June 30, 1996 and 1995, as indicated in our reports dated May 1, 1996, and July 29 1996 respectively; because we did not perform an audit, we ! sapressed no opinion on,that information. wa are aware that our reports referred to above, which were included in the Ouarterly Reports on Form 10-0 of ENSERCE Corporation and Enserch Exploration, s Inc., respectively, for the quarters ended March 31, 1996 and June 30, 1996, are being incorporated by reference in this Registration Statement.
- W1 siso are aware that the aforementioned reports, pursuant to Rule 436(c) under j tha S*curities Act of 1933, are not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or l
certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCEE LLP'
' September 30, 1996 I
D:laitte Touche
- TohmItsu Intsrnational I
l l l I
.f
. - _ m _.
1 ((!l)r1NEDGtl14413.tr23D]#0001.FIF EDGAR on1 EDG It-Srt-1996 10:49 SI.K 00-000-0000 00:00 ((11]Tuc/Ensirch Fors 8 4 3.1. Donn11131 (212) 141-7777 0'F2tDG , (PAGE)- I ( EXHIBIT 23(d) INDEPENDENT AUDITORS' CONSENT l W1 consent to the incorporation by reference in this Registration Statement of TUC tolding Company on Form s-4 of our report dated February 29, 1996 appearing l in the Annual Report on Form 10-K of Texas Utilities Company for the year ended Dicembwr 31, 1995 and to the reference to us under the heading
- Experts" in the J2 int Proxy Statement for Texas Utilities Company and ENSERCH Corporation and Prm pectus for TUC Holding Company which is part of this Registration Statement.
DELOITTE & TOUCHE LLP Dilles, Texas Ecptzaber 20, 1996 i b 1 l l l I i
... . - , ... . .n, . . . , . . . ~ . . ~ . . . . . . _ . ~ . . . ~ . . . ~ . . .~ .. ..-. -. - . ~ . .
FINEDGs[14433.EX235)00001. PIP EDGAR only. EDC: 18-SEF-1996 17:04 315e 00-000-0000 00:00 '1
.!!!))Tue/Eastreb.
((1)] For2 8-4 1.1. Donn111ry (212) 341 7777 EDITOR V2.7 1 *** (PAGE)' ] ! EXHIBIT 23(e)- l l l
.!NDEPENDENT AUDITORS' CONSENT i
W2 consent to the use in this Registration Statement of TUC Holding Company on
-Farm S.4 of our reports on ENSEBCE Corporation and subsidiaries and Enserch Exploration, Inc. and subsidiaries dated February 9, 1996 and of our report on Lcca Star Energy Plant Operations, Inc. dated June 19, 1996, incorporated by refctsace in d e Joint Proxy Statement for Texas Utilities Company and ENSERCH Company (" Joint Proxy Corprration and Prosp)ctus Statement / Prospectus whichforisTUC partHoldin of is Registration Statement, and to the l rafsrince to us under the heading "Esperts" in such Joint Proxy.
Stttement/ Prospectus. DELOITTE & TOUCHE LLP Dslits, Texas
,8 Ptr.mber 20, 1996 L
f h s a I t s 9 i i i ~ 9 1 i i b h I l i L
l [1)1FINEDGi[14413.EK23F)f0091.FIF EDCAR only EDC: 20 SEP 1996 11:29 BLKs 00-006-0009 00:00 [1))Tuc/Ensirch for2 8 4 1.1. Donm 1137 (212) 341-7777 EDITot V2.7 1 *** (PAGE) EXHIBIT 23(f) CONSENT OP BARR DEVLIN & CO. INCORPORATED
- ~~
We hereby consent to the use of our opinion in the Joint Proxy - Statement / Prospectus of Texas Utilities Company and ENSERCH Corporation included in this Registration Statement of TUC Holding Company and to all references to cur firm included in or made a part of this Registration Statement. In giving such consent, we do not thereby admit that we come within the category of parrons whose consent is required under Section 7 of the Securities Act of 1933 or ths rules and regulations adopted by the Securities and Exchange Commission th*.rtunder . BARR DEVLIN & CO. INCORPORATED NW York, New York S;ptciber 20, 1996
, - - - . .- v.. . ..- a.. ., n.n.-.- . - ~ ~ . . ~ ~ . - . ~ - . . . ~ _ ~ . . - . _, -
ll f EDGAR only EDG 20-stF-1996 04:53 stJts 60-000-0000 00:00 j (( 1))Tue/Enstrch ((1) ] FINEDC s [14433. EX33C] Firs00001. 8-4 FIFR.R. Donn211sy (212) 341 7777 EDITot V2.7-1 "* . (PAGE)
; CONSENT Of MORGAN STANLEY 6 CO. INCORPORATED Srptember 20, 1996 ENSERCH Corporation-i 300 South St. Paul Street
! ~ Dalles, TX 75201 I. . . Dear Sirss Wa hereby consent to the inclusion in the Registration Statement of TUC on Form S-4, with respect to the proposed ierger
. of Holding Ensarch Company.("TUC Merger Corp.,Holding")ly a whol owned subsidiary of TUC Holding, wlth and into l
ENIERCH Corporation, and certain related transactions, of our opinion letter rppscring as Annex IV to the Proxy Statement / Prospectus which is a part of the Ragistration Statement, and to the references of our firm name therein. In giving such consent, we do not thereby admit that we come within the category of i perscas whose consent is required under Section 7 of the Securities Act of 1933, es encaded, or the rules and reguiations adopted by the Securities and Exchange ] Commission thereunder nor do we admit that we are experts with respect to any I part of such Registration Statement within the meaning of the term " experts" as ( '
.used in the Securities Act of 1933, as amended, or the rules and regulations of I - ths Sicurities and Exchange Commission thereunder.
I. Very truly yours, i MORGAN STANLEY & CO. INCORPORATED . I i BY
./.s/.. Christopher L. Ryan Vice President 1 1 e f
t s k i l , I- , i i i i ! i i l A i r t I I I 7 i l 1 i i i _ . . , _ , - i
PAG: 18 817-1956 22:16 EDGs 00-600-0000 00:00 OLK 00-000-0200 00:00 Il11)TINIDGi(14433.EX23B]00001.f!P [1))Tuc/Eisuch Tora 5 4 1. 1. Donailliy (212) 341 7777 A0G 3.4.1,p01 (PAGO EXHIBIT 23(H) CONSENT Or INDEPENDENT PUBLIC ACCOUNTANTS
- ~
A3 independent public accountants,~we bereby consent to the incorporation by referrnce in TUC Holding Company's registration statement on Form S-4 of our rfp:rt on the financial statements of Dalen Corporation as of December 31, 1994 and 1993, and for the three years in the period ended December 31, 1994, ditcd February 24, 1995, included in ENSERCH Corporation's Form 8-K dated May
. 2 6, 1995, and to all references to our firm included in this registration ,
Stattment. l
.d Arthur Andersen LLP l
Dallas, Texas 8?pteuiber 18, 1996 l l l i l l l 1 I i L I i
ll1))TINEDGa[14433.EX231]D0001.FIF PACS 10-SEP-1996 02:57 EDGs 00-000-0000 00:00 SLKi 00-000-6000 00:00 l It1))tisc/Esssrch Tors 8 4 .3. 3. Donn111ey (212).341-7777 A0G 3.4.1,p01 (P AGE t l EXHIBIT 23(I) September 19, 1996
~ ~" ~ "~
TUC Atolding company . Enargy Plaza - >
=
1601 Bryan Street DM las, TX 75201 ;
'I I Gintismens wm hereby consent to (a) the incorporation by reference in the Registration ,
statement on Form s*4 of TUC Holding Company to be filed on or about September 19, 1996 (*S-4 Registration Statement") of information from our reserves .
. reports as of January 1, 1996, appearing in the ENSERCH Corporation Annual !
Rsport on Form 10-K for the fiscal year ended December 31, 1995 ("ENSERCH 1995 ! Fors 10-K"), (b) the incorporation by reference in the S-4 Registration ,
. stattment of information from our reserves reports as of January 1, 1996, i appatring in the Enserch Exploration, Inc. Annual Report on Form 10-K for the !
fiscal year ended December 31, 1995 (* Exploration 1995 Form 10-K") and (c) to - -+ 5 tha references to us in the ENSERCH 1995 Form 10-K, the Exploration 1995 Form f 10-K a.nd S-4 Registration Statement. -[ very tru'ly yours, DeGolyer and MacNaughton I l > l b i l' i I i l i l F f l I.
'l i
i i I t 1 i l i a e f' 1 l
I EDGA1 only EDG: 20 stF 1996 06:39 312: 00 000 0000 00:00 l 1(1))TINEDGs[14431.II99A100001.FIF. (1))Tuc/Ensisch rar2 8 4 1.2. Donn111ry (212) 341-7777 EDIT 01 V2.7 1 , (PAGE) i EXHIBIT 99(a) (, l l I P TEXAS UTILITIES COMPANY , R ENERGY PLAEA J l 0 1601 Bryan Street l x Dallas, Texas 75201 3411 , Y l l This Proxy is solicited on Behalf of the Board of Directors . The undersigned hereby appoints J.S. Farrington and Erle Nye, and each s of th30, Proxies with power to appoint a substitute, and hereby authorizes them i to represent and to vote all shares of common stock of Texas Utilities Company 'l l hsid of record by the undersigned on September 17, 1996 at the special meeting I of sh reholders of the company to be held in the Grand Ballroom of the Harvey Hotsl/ Downtown, Live Oak and Olive Streets, Dallas, Texas, on Friday, November , 15, 1996, and at any adjournments or postponements th'riof, and to vote, as 1 dir*ct d on the reverse side of this card, on the Agreement and Plan of Merger (*Pltn of Merger") described in the accompanying Joint Proxy Stataarint/ Prospectus and, in their discretion, upon all such other matters incid:nt to the conduct of said meeting as may properly come before said meeting or c.ny adjournments or postponements thereof. (Continued, and to be signed and dated, on reverse side) This proxy when properly executed will be voted in the manner directed herein. If no direction is made, this proxy will be voted FOR the Plan of Merger. Please mark your votes as indicated in this example. [x] Ths Bo2rd of Directors recommends a vote FOR the Plan of Merger. FOR AGAINST ABSTAIN Approval of Plan of Merger [_] [_] [_] , NOTE: Please sign names exactly as printed hereon. Joint owners ; should each sign. In signing as - attorney, administrator, , executor, guardian, officer, I partner or trustee, please give I full title as such. Receipt is i acknowledged of the notice of j meeting and joint proxy i statement / prospectus. Sign:ture( s ) Date t l . I i I
( (1] ) rIEEDG r [14433.EI99 A) 00002. PIP EDGAR enly EDG 19 SEP-1996 20:09 BLKs 00 000-0000 00:00 ((1))Tuc/Enserch Tora 8 3 R.R. Donnelley (212) 341-7777 EDITOR V2.7 1 *** (PAGE) EMPLOYEES 8 THRIFT PLAN OF THE TEKAS UTILITIES COMPANY SYSTEM PROXY SPECIAL MEETING OF SKAREHOLDERS PARTICIPANTS IN THE EMPLOYEES' THRIFT PLAN OF THE TEKAS UTILITIES COMPANY SYSTEM MAY VOTE THE SKARES OF COMMON STOCK HELD IN THEIR PLAN ACCOUNTS AT THE SPECIAL MEETIhG OF SHAREHOLDERS OF TEKAS UTILITIES COMPANY BY USING THIS CONFIDENTIAL VOTING INSTRUCTION CARD TO GIVE VOTING INSTRUCTIONS TO THE TRUSTEE FOR SUCH PLAN, MELLON BANK N.A., PRIOR TO 5:00 PM (NEW YORK TIME) ON NOVEMBER 7, 1996. THESE CONFIDENTIAL VOTING INSTRUCTIONS WILL BE SEEN ONLY BY AUTHORIZED PERSONNEL APPOINTED BY THE TRUSTEE. IF THIS CARD i IS NOT TIMELY RECEIVED BY THE TRUSTEE, THE SKARES REPRESENTED BY THIS CARD , l WILL BE VOTED BY THE TRUSTEE IN THE SAME PERCENTAGE AS SKARES HELD BY ! PARTICIPANTS FOR NEICH THE TRUSTEE HAS kECEIVED TIMELY VO".ING INSTRUCTIONS. The undersigned hereby instructs the trustee to execute the proxy solicited on babalf of the Board of Directors of Texas Utilities Company for the special meeting of shareholders of Texas Utilities Company to be held in the Grand Ballroom of the Harvey Hotel / Downtown, Live Oak and Olive Streets, Dallas,' Tazas, on Friday, November 15, 1996, and at any adjournments or postponements thereof, and to authorize the Prozies named therein to vote, as directed on the l' -reverse side of this card, on the Agreement and Plan of Merger (" Plan of f Margsr") described in the accompanying Joint Proxy Statement / Prospectus and, in ! i their discretion, upon all such o der matters incident to the conduct of said i I seating as may properly come before said meeting or any adjournments or l postponements hereof. l (Continued, and to be signed and dated, on reverse side) i l This card when properly executed will instruct the trustee to vote in the manner directed herein. Tha execution and return of this card, with no direction given, will constitute instructions to vote FOR the Plan of Merger. Please mark your votes as indicated in this example. [X] Tha Board of Directors recommends a vote FOR the Plan of Merger. FOR AGAINST ABSTAIN Approval of Plan of Merger [_] [_] [_] l i i NOTE: Please sign names exactly l as printed hereon. In signing i as administrator, executor or ' guardian, please give full title as such. Receipt is acknowledged of the notice of meeting and joint proxy statement / prospectus. Signature (s) Date ' i a h 1
,,. , ,,. _r... _ . . . . ~ , , _ _ -
I PAGs 10-stP 1996 02:43 EDG 20 SEP 1996 06:42 BLK 00 000-0000 08:00 ) l[11)FINEW[14431.FC]00001. [1])fue/Ensirch PIP For2 S-4 R.E. Donn1112y (212) 341-7777 EDITOR V2.7-1 *** i i (PAGE) l EXHIBIT 99(b) PROXY PROXY ENSERCH CORPORATION __ PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION FOR SPECIAL MEETING NOVEMBER 15, 1996 Thi undersigned hereby appoints D. W. Biegler and T. W. Luce, III, or either cf th:2, the attorneys and prozies of the undersigned, each with full power of rub 2titution, to vote on behalf of the undersigned at the Special Meeting of Shircholders of ENSERCH Corporation, to be held at 301 SouG Harwood Street, D211cs, Texas, on Friday, November 15, 1996, at 2:00 p.m., and at any tdjturnments or p atponements thereof, all the shares of Connon Stock of the Carp rition in tne name of the undersigned or which the undersigned may be antitlso to vote on the proposal to approve the Amended and Restated Agreement end Plta of Merger and all transactions contemplated therein (" Plan of Merger") cod tha proposal to amend the Restated Articles of Incorporation of the i Corporction (' Articles Amendment"), each as described in the accompanying Joint Proxy Statement / Prospectus and, in their discretion, upon all such other acttars as may properly come before said meeting; hereby revoking any proxy or , 'pr:xiss heretofore given by the undersigned. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SEAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. IT IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (Continued and to be signed on reverse side.) 5 I l
)
l l l l-l
'.______-._ .._.m__.s_ ~__m__ . _ _ . _ . . _ . . _ _ . _ . _ . _ _ _ . _ _ _ _ _ _ _ _ , _ , _ _ _ , _ _ _ . , , . _ _ , i l
-i Ill))FIREDGs[14433.PC)$0002.FIF' PAGs 18-stP-1996 02:40 EDG: 20-5t7 1996 01:50 315 : 00-000 0000 00:00
((1])Tue/EnsIrch ' Fors 3-4. 1.2. Donne 11sy (212) 141 7777 EDITOR V2.7 1 "* l i
-APAGE)
ENSERCE CORPORATION-PLEASE MARK VOTE IN OVAI, IN THE FOLLONING MANNER USING DARK INK ONLY. 0
-Tb3 Board'of Directors recommends a vote FOR AGAINST ABSTAIN
..ths Pltn of Merger. FOR
- 1. Approval of Plan of Merger 0 0 0 I
- Tha Board of Directors recommends a vote FOR I
.the Articles Amendment. FOR AGAI!;ST ABSTAIN 3, Approval of the Articles Amendment 0 0 0
-3. In their discretion, upon such other matters as may properly come before the i i seating. !
.j Dated: 1996 I i
E i Signature of Sharsholder(s) t THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS BEREON. EXECUTORS, - ADMINISTRATORS, TRUSTEES, ETC., { i SEOULD GIVE FULL TITLE AS SUCE. IF . r ! THE SIGNER IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY DULY t AUTEORIZED OFFICER. , i h
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' FACs 20 SEF-1996 12:28 EDC: 20 $ty.1996 12:33 sLK 001 000-6000 00:00 l[11]FINEDCs[21503.TX)00001.FIP (1]1TCC/ENSERCS .OsA ~ E.R. Donnellsy. (214) 521 4767 EDIIo1 v2.7 1 ***
(PAGE) EXEIBIT 99(e n QUESTIONS AND ANSWERS FOR SHAREBOLDERS OF TEXAS UTILITIES COMPANY RELATING TO TEE ACOUISITION OF ENSERCE CORPORATION BY TEXAS UTILITIES COMPANY i Tha information' contained herein is designed to provide a guide to some of the issuss discussed in detail in the Joint Proxy Statement / Prospectus dated 5 Ssptember 23, 1996 delivered herewith. This information does not purport to be - complete and does not serve as a substitute for reading the Joint Proxy ' StatemInt/ Prospectus. This information is qualified in its entirety by
- j. rsisrtnce to the Joint Proxy Statement / Prospectus.
QWEAT AM I BEING ASitED TO VOTE ON? .. i A As you may already know, Texas Utilities Company "TUC") (isition will behas agreed to ! acquire ENSERCE Corporation (*ENSERCE"). This acqu ! secomplished pursuant to an Amended and Restated Agreement and Plan of l Marger, dated as of April 13, 1996. You are being asked to approve this Flrn of Merger. ) On WHAT IS TEE POSITION OF THE TUC BOARD OF DIRECTORS WITE RESPECT TO THIS
. MATTER?- . -
'As Th3 TUC Board of Directors has unanimously approved the Plan of Merger and recommends that you vote FOR the Plan of Merger, j Os WBAT DOES TEE PLAN OF MERGER PROVIDE FOR7 As A new holding company, which will retain the Texas Utilities Company name
. -(' Company"), has been created in order to effect the acquisition of
'ENSERCE. TUC (including its current subsidiaries) and ENSERCH will become wholly owned subsidiaries of the Company.
Os WEAT BAPPENS TO MY TUC SHARES AND THE ENSERCE SEARES IN TEIS TRANSACTION? As Yrur TUC shares will automatically be converted into shares of the Company c3 a one-for-one basis.' Thus, you will continue to own the same number of ' you can retain the same stock certificate. ENSERCE . shtres. In factwi[1 receive approximately one-fif th of a share of Company Ehireholders i cosamon stock for each share of ENBERCE common stock they hold. OsWILL TEE NEW TEXAS UTILITIES COMPANY BE ANY DIFFERENT?' .
- An- Tha Company will be essentially the same with identical articles of incorporation and bylaws as TUC. Its common stock will be listed on the t 'Zew York, Chicago and Pacific stock exchanges, just as shares of TUC
! common stock are currently listed. The major substantive difference will I be that the Company will have a new subsidiary company, ENSERCE. Os WEO IS ENSERCH AND WHAT DO THEY DO? i As ENSERCE is an integrated company focused on natural gas which is h3tdquartered in Dallas, Texas. Its major current business segments are
, astural gas and oil exploration and productions natural gas transmission, githering, processing and marketir.g and natural gas distribution and sitetric power generation. ENSERCE owns and operates Lone Star Gas and Lone Star Pipeline Company. ENSERCE's exploration and production company, Enserch Exploration, Inc., will be spun off to the ENSERCE shareholders prior to this transaction. The ENSERCE businesses that will be part of the trrasaction had total assets at June 30, 1996 of approximately $1.6 billion. For the six months ended June 30, 1996, they had revenues of approximately $993 million and net income of approximately $16 million.
t I I j I e , .- - = r- 9
4 I 1 PAG 19-8f7 1996 10:12 EDGi 60 000-0000 00:00 SLKs 00 000-0000 00:00 I l[11]TINEDGi[2180).YI]D0002. [1)]WC/EESERCE PIP Oth 3. R. Donnelley (214) 521-4767 A0G 3.4.1,p01 1 (PAGE) Q: WHAT ARE THE REASONS FOR THIS TRANSACTION 7 As The TUC Board of Directors believes that this transaction offers i significant strategic and financial benefits to TUC and its shareholders and customers, includirgs
~
. Creater financial strength and flexibility
. Enhanced customer service and operationar efficiencies
. Maintenance of competitive rates ,
. Coordination of diversification programs J
. Better utilization of resources
. Integration of corporate and administrative functions. 1 J
Os WILL I HAVE TO PAY ANY TAXES AS A RESULT OF THIS TRANSACTION? As One of the conditions to the consummation of the transaction is the receipt of opinions of counsel for TUC and ENSERCH substantially to the effect that it will be treated as a tax + free transaction. Of course, individual tax consequences may vary and each TUC shareholder is urged to I consult his or her own tax advisor to determine the particular tar j consequences to him or her, including the application and effect of I federal, state, local and foreign tax laws I l Os WHEN WILL THE TAANSACTION BECOME EFFECTIVE? 1 As We expect it to be consummated in late 1996. In addition to the approval I of the Plan of Merger by the TUC and ENSERCH shareholders, consummation is cubject to a number of conditions, including opproval of the transaction j by the Securities and Exchange Commission, tic Federal Trade Commission rad the U.S. Department of Justice, and receipt of a favorable tax ruling i on the spin-off. l Q: WHAT WILL HAPPEN IF I DO NOT VOTE? l As To approve the Plan of Merger, affirmative votes must be received from the j holders of more than 66-2/3% of the outstanding shares of TUC common stock. Thus, your failure to vote is in effect a vote against the Plan of Merger. Abstentions also count as negative votes. Os MY SHARES ARE HELD IN
- STREET NAME." WILL MY BROKER VOTE MY SHARES FOR ME?
As Only if you give your broker written instructions on how to vote. Absent ruch instructions, your shares held in street name will not be voted. THEREFORE, WE STRONGLY URGE YOU TO VOTE. Os WHAT DO I DO WITH MY STOCK CERTIFICATE FOR TEXAS UTILITIES COMPANY COMMON STOCK?
)
As The certificate you now hold will continue to represent the same number of ' thares in the company and you do not have to send it in for exchange. Os WHO SHOULD I CALL FOR ADDITIONAL INFORMATION OR IF I MISPLACE MY PROXY CARD? As You should call representatives of TUC's proxy solicitor, D. F. King 6 Co.,'Inc., at their toll-free telephone numbers 1 800-659-5550. SHAREHOLDERS ARE URGED TO CAREFULLY REVIEW THE ACCOMPANYING JOINT PROXY i STATEMENT / PROSPECTUS IN ITS ENTIRETY. YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE PROXY CARD DELIVERED HEREWITH. 2 l l f f I
l I I ((1] ] TIIEDG r [144 31.C01tESP1] 00001.FIP EDGA2 caly EDC: 20-SEP 1996 05:10 BLKs 00 000-0000 00:00 ((1))Tue/Enssich Tera $=4 R.R. Dcc.n111sy (212) 341-7777 EDITOR V2.7-1 m (PAGE) TUC Holding Company l Energy Plaza I 1601 Bryan Street ; Dallas, Texas 75201 < Srcurities and Exchange Commission Division of Corporation Finance 430 Fifth Street, N.W. Washington, D.C. 20549 September 20, 1996 Via EDGAR Ladiss and Gentlemens On behalf of TUC Holding Company (the " Company"), enclosed herewith for filing is the Company's Registration Statement on Form S-4 (the l
'Brgistration Statement") relating to the shares of common stock of the Company i . to bra issued in connection with h e mergers (the ' Mergers") of two wholly owned subsidiaries of the Company with and into Texas. Utilities Company ("TUC") and ENSERCH Corporation ('ENSERCH"). This Registration Statement also contains the dsfinitive Joint Proxy Statement of TUC and ENSERCH (the " Joint Proxy
- Statstent') to be used in connection with the special meetings of shareholders of TUC and ENSERCH both of which are scheduled to be held on November 15, 1996.
Tha Preliminary Joint Proxy Statement was previously filed with the Commission on July 22, 1996 and September 12, 1996. l l The Company is submitting under separate cover a copy of the Joint ' ! Proxy Statement marked to show changes from the Joint Proxy Statement filed on ' Srptember 12, 1996. TUC has transmitted $1,486,816.14 by Fedwire to the Commission's accgunt at Mellon Bank in Pittsburgh, Pennsylvania in payment of the additional i fee for the filing of the Registration Statement. TUC's account (RFB) number is
- 00097561.
The Company hereby requests that the effectiveness of the Registration
' Statement be accelerated to September 23, 1996 at 12:00 noon, Washington time, or as soon thereafter as possible.
l' very truly yours, TUC HOLDING COMPANY ; I Bys/.s/..H. Jarrell Gibbs H. Jarrell Gibbs President ces H. Roger Schwall ! I l 1 , 4 l-i I
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