EXHIBIT 2
THIS AGREEMENT IS SUBJECT TO ARBITRATION
UNDER THE TEXAS GENERAL ARBITRATION ACT
SHARE OPTION AGREEMENT
THIS SHARE OPTION AGREEMENT (this "Agreement") is made and entered into
this 1st day of October, 2002, by and between CAP ROCK ENERGY CORPORATION
(the "Company"), a Texas corporation, and XXXXXX X. XXXXXXXX and XXXXXX X.
XXXXXX, Trustees (together with their successors, the "Trustees") of the CAP
ROCK ENERGY CORPORATION SHAREHOLDERS' TRUST (the "Trust") dated of even date
herewith.
BACKGROUND
A. The Trust is presently the owner of record of 346,958 shares of
common stock, $.01 par value, of the Company and may, through stock splits or
other means, hereafter acquire additional shares of the common stock, $.01
par value of the Company (collectively, the "Shares");
B. The Trust desires to grant to the Company, and the Company desires to
obtain from the Trust, the exclusive option to purchases all of the Shares
upon and subject to the terms and conditions hereinafter set forth.
TERMS AND CONDITIONS
In consideration of the sum of $10.00 in cash paid by the Company to the
Trust, the mutual benefits to be derived and the representations and
warranties, conditions and promises herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
1. OPTION GRANT. The Trust hereby grants to the Company the right to
purchase, at the option of the Company and on the terms and conditions
hereinafter set forth (the "Option"), all of the Shares at the Option Price
during the Option Term (as such terms are respectively defined in Sections 2
and 3 of this Agreement).
2. OPTION PRICE. The purchase price (the "Option Price") for the Shares
shall be the average of the Current Per Share Market Price (as such term is
hereinafter defined) of the Shares for thirty (30) consecutive Trading Days
(as such term is hereinafter
defined) ending five Trading Days preceding the delivery of the Exercise
Notice (as such term is defined in Section 4 of this Agreement) by the
Company to the Trustees, as adjusted pursuant to Section 9 of this Agreement.
The "Current Per Share Market Price" means the closing price for each day
which shall be the last sale price, regular way, or, in case no sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the American Stock Exchange or, if the Shares are not listed or admitted to
trading on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Shares are listed
or admitted to trading or, if the Shares are not listed or admitted to
trading on any national securities exchange, the last sales price, or if not
so reported, then the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by the NASDAQ or such other system then in use of, if on any such date the
Shares are 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 Shares, which professional market maker shall be selected by
the Trustees. The term "Trading Days" means a day on which the American Stock
Exchange or other principal national securities exchange on which the Shares
are listed or admitted to trading is open for the transaction of business or,
if the Shares are not listed or admitted to trading on any national
securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in the State of Texas are not authorized or
obligated by law or executive order to close.
3. OPTION TERM. The term of the Option (the "Option Term") shall
commence on the date of this Agreement and shall continue until the earlier
of (i) the date on which the Trust no longer owns any of the Shares; or (ii)
the date of expiration of the Escheat Notice (as such term is defined in
Section 5 of this Agreement). If upon expiration of the Option Term, the
Company has failed to exercise the Option and properly purchase the Shares,
the Option shall terminate.
4. OPTION EXERCISE. The Option is exercisable in whole, but not in part
(except that in the event not all of the shares escheat at one time, the
option is exercisable as to those shares as they escheat), and may be
exercised at any time during the Option Term by the Company delivering a
written notice of such exercise (the "Exercise Notice") to the Trustees. The
Trustees agree not to take, and will refrain from taking, any action during
the Option Term which would have the effect of preventing or disabling the
Trust from delivering the Shares to the Company upon exercise of the Option
and otherwise performing its obligations under this Agreement.
5. NOTIFICATION OF ESCHEAT. If the Trustees decide to allow any of the
Shares to escheat to the State of Texas, before implementing that decision
they shall provide notice of such decision to the Company (the "Escheat
Notice") and the Company shall have a period of ten (10) business days from
the delivery of each Escheat Notice to exercise the Option in accordance with
the terms of this Agreement. Notwithstanding
anything to the contrary herein contained, if the Company does not exercise
the Option within the required time period, the Trustees may proceed to allow
the Shares to escheat to the State of Texas.
6. CLOSING. The consummation of the purchase and sale of the Shares
(the "Closing") shall take place at the principal executive offices of
the Company in Midland, Texas, at 10:00 a.m. (local time) on the tenth
(10th) business day after the date of the delivery of the Exercise Notice,
or at such other place, time or date as the parties hereto shall mutually
agree.
7. PAYMENT AND DELIVERY OF CERTIFICATES. At the Closing, (i) the
Company will pay to the Trust the Option Price for the Shares by delivery of
a confirmed wire transfer of funds, bank cashier's check or other form of
immediately available funds and (ii) the Trust will deliver or cause to be
delivered to the Company a certificate or certificates representing the
Shares, duly endorsed or accompanied by stock powers duly executed in blank.
8. DISPOSITION LIMITATIONS. During the Option Term, the Trust agrees
not to sell, transfer, pledge, assign or otherwise dispose of, or enter into
any contract, option or other arrangement with respect to the sale, transfer,
pledge, assignment or other disposition of, any of the Shares to any person
other than to the Company, an Affiliate of the Company (as such term is
hereinafter defined) pursuant to this Agreement, the beneficial holders as
they are located, or pursuant to a tender offer or other repurchase offer by
the Company or an Affiliate of the Company. As used in this Agreement, the
term "Affiliate of the Company" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, the Company, and a person shall be deemed to
control another person (including the Company) if the controlling person is
the beneficial owner (as defined in Rule 13d-3 under the Securities Act of
1934, as amended) of ten percent (10%) or more of any class of voting
securities (or other voting interests) of the controlled person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled person, whether through ownership of
securities, through serving as an officer or director, by contract or
otherwise.
9. ADJUSTMENTS. If, on or after the date of this Agreement, there shall
occur any stock dividend, stock split, recapitalization, combination or
exchange of shares, merger, consolidation, reorganization or other change or
transaction of or by the Company as a result of which shares of any class of
stock or other securities shall be issued in respect of any of the Shares, or
if any of the Shares shall be changed into the same or a different number of
shares of the same or another class of stock or other securities, or upon any
other acquisition of any securities of the Company in any other manner, and
whether in compliance with the provisions of this Agreement or otherwise, any
such shares or other securities shall, from and after their receipt or
acquisition by the
Trust, constitute additional Shares and shall be subject to the Option as if
originally included thereunder.
10. NOTICE DELIVERY REQUIREMENTS. All notices or other communications
which are required or permitted hereunder shall be in writing and shall be
delivered either personally or by telegram, telex, telecopy or similar
facsimile means, by registered or certified mail (postage prepaid and return
receipt requested), or by express courier or delivery service, addressed as
follows:
If to the Company:
Cap Rock Energy Corporation
000 X. Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx, President
Telecopy: 000-000-0000
If to the Trust:
Cap Rock Energy Corporation Shareholders' Trust
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx X. Xxxx
Telecopy: 000-000-0000
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner
hereinabove set forth. Notices shall be deemed given when received, if sent
by telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand-delivered, sent by express courier or delivery
service, or sent by certified or registered mail.
11. FURTHER ASSURANCES. The parties hereto agree (i) to furnish upon
request to each other such further information; (ii) to execute and deliver
to each other such other documents; and (iii) to do such other acts and
things, all as the other party hereto may at any time reasonably request for
the purpose of carrying out the intent of this Agreement and the documents
referred to herein.
12. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay on the
part of any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. To the maximum extent permitted by
applicable law, (i) no claim or right arising out of this Agreement or the
documents referred to herein can be discharged by one party hereto, in whole
or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party hereto; (ii) no waiver which may be given
by a party hereto shall be applicable except in the specific instance for
which it is given; and (iii) no notice to or demand on one party hereto shall
be deemed to be a waiver of any obligation of such party or of the right of
the party giving such notice or demand to take further action without notice
or demand as provided in this Agreement or the documents referred to herein.
13. ENTIRE AGREEMENT AND MODIFICATION. This Agreement is intended by
the parties to this Agreement as a final expression of their agreement with
respect to the subject matter hereof, and is intended as a complete and
exclusive statement of the terms and conditions of that agreement. This
Agreement may not be modified, rescinded, or terminated orally, and no
modification, rescission, termination or attempted waiver of any of the
provisions hereof (including this Section) shall be valid unless in writing
and signed by the party against whom the same is sought to be enforced.
14. LIMITATIONS ON ASSIGNMENTS. The Company shall not, during the term
of this Agreement, assign, transfer or otherwise dispose of any of its rights
hereunder to a person other than an Affiliate of the Company, without the
prior written consent of the Trust. An Affiliate of the Company to whom any
rights hereunder may have been transferred in accordance with this Agreement
shall not, during the term of this Agreement, assign, transfer or otherwise
dispose of any of its rights hereunder to a person other than the Company or
another Affiliate of the Company, without the prior written consent of the
Trust.
15. PERSONS BOUND. This Agreement shall apply to and be binding in all
respects upon, and shall inure to the benefit of the parties hereto and their
permitted successors and assigns. Nothing expressed or referred to in this
Agreement is intended or shall be construed to give any person or entity
other than the parties to this Agreement, and their permitted successors and
assigns, any legal or equitable right, remedy or claim
under or with respect to this Agreement, or any provision hereof, it being
the intention of the parties hereto that this Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement, their successors and assigns, and for the benefit
of no other person or entity.
16. SEVERANCE. In the event any court of competent jurisdiction shall
hold any provision of this Agreement invalid or unenforceable, such holding
shall not invalidate or render unenforceable any other provisions hereof. Any
provision of this Agreement held invalid or unenforceable only in part or
degree shall remain in full force and effect to the extent not held invalid
or unenforceable.
17. SECTION HEADINGS, CONSTRUCTION. The headings of articles and
sections contained in this Agreement are provided for convenience only. They
form no part of this Agreement and shall not affect its construction or
interpretation. All references to articles and sections in this Agreement
refer to the corresponding articles and sections of this Agreement. All words
used herein shall be construed to be of such gender or number as the
circumstances require. Unless otherwise specifically noted, the words
"herein," "hereof," "hereby," "hereinabove," "hereinbelow," "hereunder," and
words of similar import, refer to this Agreement as a whole and not to any
particular section, subsection, paragraph, clause or other subdivision hereof.
18. CONSENT OR PERMISSION NOT TO BE UNREASONABLY WITHHELD. Except as
otherwise expressly stated herein, whenever the consent or permission of a
party hereto is required hereunder, such consent or permission shall not be
unreasonably withheld or delayed.
19. TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
20. GOVERNING LAW. THIS AGREEMENT AND ALL RIGHTS ARISING HEREUNDER
SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND ENFORCED IN
ACCORDANCE WITH SUCH LAWS. IN THE EVENT ANY CONTROVERSY ARISES OUT OF OR
RELATES TO THIS AGREEMENT, THE TRUSTEES AND REPRESENTATIVES OF THE COMPANY
SHALL FIRST MEET IN MIDLAND, TEXAS, AND ATTEMPT TO NEGOTIATE A RESOLUTION OF
THEIR DISPUTE. IN THE EVENT SUCH NEGOTIATION SHALL FAIL TO RESOLVE ANY SUCH
CONFLICT, THE PARTIES HEREBY AGREE TO SUBMIT TO ARBITRATION ADMINISTERED BY
THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS THEN CURRENT COMMERCIAL
ARBITRATION RULES. ANY SUCH CONTROVERSY SHALL BE SUBMITTED IN DALLAS, TEXAS,
TO A PANEL OF THREE (3) ARBITRATORS, ONE CHOSEN BY EACH PARTY AND THE THIRD
UNDER THE AMERICAN ARBITRATION RULES. AT LEAST TWO (2) OF THE ARBITRATORS
SHALL HAVE EXPERIENCE WITH SECURITIES. THE ARBITRATORS WILL HAVE NO AUTHORITY
TO AWARD PUNITIVE OR OTHER DAMAGES NOT MEASURED BY THE PREVAILING PARTY'S
ACTUAL DAMAGES AND MAY NOT, IN ANY EVENT, MAKE ANY RULING, FINDING, OR AWARD
THAT DOES NOT CONFORM TO THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE
PARTIES SHALL FAITHFULLY
OBSERVE THIS AGREEMENT AND SUCH RULES, AND WILL ABIDE BY AND PERFORM ANY
AWARD RENDERED BY THE ARBITRATORS, AND A JUDGMENT OF ANY COURT HAVING
JURISDICTION MAY BE ENTERED ON THE AWARD. THE PROVISIONS OF THIS SECTION 20
ARE A MATERIAL INDUCEMENT FOR BOTH THE COMPANY AND THE TRUST ENTERING INTO
THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN. THE COMPANY AND THE
TRUST EACH HEREBY ACKNOWLEDGE THAT IT HAS REVIEWED THE PROVISIONS OF THIS
SECTION 20 WITH ITS INDEPENDENT LEGAL COUNSEL.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to
constitute but one and the same agreement.
SIGNATURES
To evidence the binding effect of the covenants and agreements described
above, the Company (by its duly authorized officer) and the Trust (by the
Trustees) have caused this Agreement to be executed and delivered as of, but
not necessarily on, the date first written above.
CAP ROCK ENERGY CORPORATION
By: /s/ XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx, President
CAP ROCK ENERGY CORPORATION
SHAREHOLDERS' TRUST
/s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxxxx, Trustee
/s/ XXXXXX X. XXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxx, Trustee
