EXHIBIT 10.11
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT, dated as of November 9, 2001 (the "AGREEMENT"),
is made by and among Stanford, Inc., a Delaware corporation ("STANFORD"), Dynegy
Inc., an Illinois corporation ("DYNEGY"), Enron Corp., an Oregon corporation
("ENRON"), and Chevron U.S.A. Inc., a Pennsylvania corporation (the
"STOCKHOLDER").
WHEREAS, Stockholder owns a significant percentage of the outstanding
capital stock of Dynegy;
WHEREAS, Stanford, Enron, Dynegy and certain other entities have entered
into an Agreement and Plan of Merger dated as of the date hereof (the "MERGER
AGREEMENT"), that provides for, among other things, the merger of a subsidiary
of Stanford with and into Dynegy (the "MERGER"), pursuant to which shares of
Stanford's Class B Common Stock, no par value $.01 per share ("CLASS B SHARES"),
shall be issued to Stockholder in exchange for its shares of Dynegy Class B
Common Stock, subject to the terms and conditions of the Merger Agreement;
WHEREAS, on the closing date of the Merger, ChevronTexaco Corporation, an
Affiliate of Stockholder ("CHEVRONTEXACO"), may purchase additional shares of
Stanford Class B Shares pursuant to the terms of a Subscription Agreement dated
as of the date hereof (the "SUBSCRIPTION AGREEMENT") by and between Stanford and
ChevronTexaco; and
WHEREAS, as an inducement to Stanford, Enron and Dynegy to enter into the
Merger Agreement, Stockholder agreed to enter into this Agreement to provide for
certain agreements and obligations of the parties hereto prior to and following
the closing of the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual and
independent covenants hereinafter set forth and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, each of the following capitalized terms is
defined as follows:
"AFFILIATE" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, another Person, and includes any Person acting in concert with another
Person.
"AUCTION" shall mean a sale process for 100% of the total combined voting
power of the outstanding voting securities of Stanford conducted by an
investment banking firm of national reputation selected by Stanford and
reasonably acceptable to Stockholder. An "Auction" may include either (i) a
broad or narrow solicitation of interest and may or may not involve multiple
rounds of bidding as determined by Stanford's Board of Directors or a committee
thereof or (ii) any recapitalization, combination, reverse merger or other
similar transaction.
"BLOCKING EVENT" shall occur if either (a) all of the directors elected to
Stanford's Board of Directors pursuant to the terms of the Class B Shares
present at the meeting where a Covered Transaction is considered vote against a
Covered Transaction and such Covered Transaction is otherwise approved by at
least a majority of the directors elected to Stanford's Board of Directors then
in office, or (b) any of the Class B Shares are voted against a Covered
Transaction and such Covered Transaction is otherwise approved by at least
two-thirds of those shares entitled to vote on the transaction (other than the
Class B Shares and other than shares that are beneficially owned by members of
Stanford's Board of Directors and the executive officers of Stanford or any
Subsidiary of Stanford). Notwithstanding the foregoing, no "Blocking Event"
shall be deemed to occur with respect to (a) any Covered Transaction which is a
substantially similar transaction as a Covered Transaction previously acted
upon, the intent of the parties being that repetitive submissions of
substantially similar proposals shall not result in additional Blocking Events
having occurred or (b) any event that would otherwise constitute a Blocking
Event pursuant to clause (a) or (b) of the preceding sentence with respect to
which a majority of the directors elected to Stanford's Board of Directors then
in office (other than the directors elected by the holders of the Class B
Shares) determines that such event shall not be deemed to be a Blocking Event.
"BUYOUT EVENT" shall occur upon the earlier of (a) the occurrence of a
second Blocking Event within a period of 24 consecutive months following the
occurrence of a prior Blocking Event or (b) the occurrence of a third Blocking
Event (regardless of the period of time between Blocking Events).
"CLASS A SHARES" shall mean shares of Stanford's Class A Common Stock, par
value $.01 per share.
"CLOSING" shall mean the closing of the transactions contemplated by the
Merger Agreement.
"COVERED TRANSACTION" shall mean an event specified in Article III, Section
7(b) (excluding clause (i) and (ii) thereof) of the Amended and Restated Bylaws
of Stanford.
"EFFECTIVE DATE" shall mean the effective date of the Merger.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"GOVERNMENTAL AUTHORITY" shall mean any governmental or regulatory
authority or agency.
"GOVERNMENTAL ORDER" shall mean any rule, regulation, order, writ or decree
of a Governmental Authority.
"PARENT" shall mean any Person of which Stockholder is a "subsidiary
company" as defined in PUHCA.
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"PERSON" shall mean a natural person, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a Governmental Authority.
"PUBLIC SALE" shall mean (a) an underwritten public offering of Class B
Shares (or the Class A Shares into which they are convertible) pursuant to an
effective registration statement under the Securities Act or (b) a bona fide
public sale of Class B Shares (or the Class A Shares into which they are
convertible) in an open market transaction through a broker, dealer or market
maker under Rule 144 (or any successor rule thereto) of the Securities Act.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"PUHCA EXEMPTION" shall mean an exemption under Section 3(a)(3) of PUHCA
from the registration and other requirements of PUHCA.
"QUALIFIED OFFER" shall mean a written offer by Stockholder or any
Affiliate thereof to acquire all, but not less than all, of the outstanding
voting securities of Stanford for consideration consisting solely of cash or
freely tradable securities listed on a national securities exchange or the
NASDAQ National Market (or successors thereto), which offer is accompanied by a
fairness opinion relating to such offer from an investment banking firm of
national reputation.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of the date hereof between Stockholder and Stanford.
"SEC" shall mean the Securities and Exchange Commission or any successor
organization.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"THIRD PARTY OFFER" shall mean a bona fide cash offer from any Person to
acquire all or any part of the Class B Shares (or the Class A Shares into which
they are convertible).
"THIRD PARTY OFFEROR" shall mean a Person who makes a Third Party Offer.
"TRANSFER" shall mean: (a) when used as a noun, any direct or indirect
transfer, sale, assignment, conveyance, pledge, hypothecation, encumbrance or
other disposition; and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, convey, pledge, hypothecate, encumber or otherwise
dispose of; provided that "Transfer" shall not include any such transfer to a
"Permitted Transferee" (as defined in Stanford's Restated Certificate of
Incorporation) provided that such Permitted Transferee agrees in writing to
become a party to this Agreement and to be bound by the provisions hereof;
provided, further, that "Transfer" shall include a change of control of any
Person who holds, directly or indirectly, Class B Shares (but shall not include
a change of control with respect to ChevronTexaco).
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"VOTING AGREEMENT" shall mean the Shareholder Agreement dated as of the
date hereof between Stockholder and Enron.
"WIDELY DISBURSED PUBLIC SALE" shall mean a Public Sale in which no
purchaser and its affiliates (a) acquires Class B Shares (or the Class A Shares
or other securities into which the Class B Shares are convertible) representing
more than 3% of the total combined voting power of all voting securities of
Stanford then outstanding or (b) acquire any shares to the extent that such
acquisition will increase such purchaser's and its Affiliates' combined voting
power to more than 5% of the total combined voting power of all voting
securities of Stanford then outstanding.
ARTICLE II
AGREEMENTS RELATING TO PUHCA AND ICC CERTIFICATION
2.1 Covenants of Stockholder and Stanford. Stockholder and Stanford
covenant and agree that:
(a) In furtherance of the application previously filed by Stockholder
for a PUHCA exemption, Stockholder shall amend its application with the SEC
as may be reasonably necessary or appropriate to reflect the changed
circumstances arising from the transaction contemplated by the Merger
Agreement and the related transactions by and among the Stockholder and/or
its affiliates and Stanford and/or Dynegy. In the event that after Closing
(as defined in the Merger Agreement), the SEC denies the PUHCA exemption
application (as the same may be amended in connection with the transactions
contemplated by the Merger Agreement) made under Section 2.1(a) of the
Shareholder Agreement, dated as of June 14, 1999, by and among Dynegy
(f/k/a Energy Convergence Holding Company), Illinova Corporation, an
Illinois corporation, Dynegy Holdings Inc., a Delaware corporation (f/k/a
Dynegy Inc.), and Stockholder, or revokes or revises in a manner adverse to
Stockholder an exemption previously granted, and no action Stockholder is
required to take, or will agree to take, under this Section 2.1 will enable
Stockholder to obtain an exemption or to restore the exemption previously
granted, Stanford shall have the sole responsibility to take and will take
the necessary actions to avoid Stockholder becoming a holding company
required to register under PUHCA including, without limitation, one or more
of the following: joining or becoming subject to an independent system
operator or a separate transmission company, joining or contributing assets
to a regional transmission organization, functionally separating its lines
of business, or divesting utility assets or public utility companies, in
any such event only to the extent necessary to allow perfection of an
exemption or for Stockholder to avoid the requirement that Stockholder
register as a holding company pursuant to PUHCA. In such instances,
Stockholder shall cooperate with Stanford in its efforts to obtain
perfection of an exemption from the registration requirements of PUHCA for
Stockholder, but will not be required to take any action materially
affecting Stockholder's ownership interest or minority Stockholder
protection rights (including governance and voting rights) pertaining to
Stanford, or Stockholder's ability to acquire "foreign utility companies"
under Section 33 of PUHCA.
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(b) Notwithstanding any other provision of this Section 2.1, in the
event that Stockholder acquires (other than through Stanford) a direct or
indirect interest in any public utility company or acquires voting stock in
Stanford in addition to the stock to be acquired under the Merger Agreement
and the Subscription Agreement: (i) Stanford shall not be required to
undertake any action to remedy the legal consequences under PUHCA of any
such acquisition, and (ii) Stockholder shall have the sole responsibility
to take (if it elects to do so) the necessary actions to avoid Stockholder
becoming a holding company required to register under PUHCA including,
without limitation, divestiture of the additional interests acquired by
Stockholder and modification of Stockholder's minority Stockholder
protection rights (including governance and voting rights) in any of
Stockholder's direct or indirect interests in a public utility company.
(c) Stanford agrees that it will not (nor allow any subsidiary to)
enter into transactions or to take other action that would put the
exemptions from the registration requirements of PUHCA held by Stanford or
Stockholder at risk or restrict Stockholder's ability to invest in or
acquire interests in "foreign utility companies" as defined by section
33(a)(3) of PUHCA.
(d) Stanford, Enron and Dynegy shall furnish such information and
provide such assistance, as Stockholder may reasonably request for purposes
of implementing the provisions of this Section 2.1.
ARTICLE III
LIMITATIONS ON ACQUISITIONS AND TRANSFERS
3.1 Limitations on Certain Acquisitions by Stockholder. Stanford and
Stockholder covenant and agree that:
(a) Stockholder may freely acquire, or permit any Affiliate of
Stockholder to acquire, by purchase or otherwise, any securities of
Stanford or become affiliated with any Person who owns securities of
Stanford, so long as Stockholder and its Affiliates do not collectively
beneficially own (including any securities of other Persons with whom
Stockholder or its Affiliates are affiliated) securities representing more
than 40% of the total combined voting power of the outstanding voting
securities of Stanford.
(b) From the date hereof until the first anniversary of the Closing,
Stockholder shall not, directly or indirectly, acquire, offer or propose to
acquire, solicit an offer to sell, become a "participant" in a
"solicitation" of proxies, as those terms are defined in Rule 14a-11 and
14a-1, respectively, under the Exchange Act, in respect of any voting
securities of Stanford that may be outstanding and entitled to vote
relating to any of the foregoing, or otherwise agree to acquire by purchase
or otherwise (or permit any Affiliate of Stockholder to undertake any of
such actions) any securities of Stanford in excess of 40% of the total
combined voting power of the outstanding voting securities of Stanford;
provided, however, that Stockholder may (i) make a Qualified Offer in
accordance with Section 3.1(d) if, and only if, any Person or group of
Persons (other than an Affiliate of
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Stockholder) acquires, offers, solicits an offer to sell, or otherwise
seeks or agrees to acquire by purchase or otherwise beneficial ownership
(as such term is defined in Rule 14d-1 of the Exchange Act) of any
securities of Stanford representing 15% or more of the total combined
voting power of the outstanding voting securities of Stanford or (ii)
exercise its preemptive rights pursuant to Article VI hereof.
(c) From and after the first anniversary of the Closing, Stockholder
shall not, directly or indirectly, acquire, offer or propose to acquire,
solicit an offer to sell, become a "participant" in a "solicitation" of
proxies, as those terms are defined in Rule 14a-11 and 14a-1, respectively,
under the Exchange Act, in respect of any voting securities of Stanford
that may be outstanding and entitled to vote relating to any of the
foregoing, or otherwise agree to acquire by purchase or otherwise (or
permit any Affiliate of Stockholder to undertake any of such actions) any
securities of Stanford in excess of 40% of the total combined voting power
of the outstanding voting securities of Stanford; provided, however, that
Stockholder shall be entitled to make a Qualified Offer in accordance with
Section 3.1(d).
(d) (i) In connection with any Qualified Offer, Stockholder shall
deliver the Qualified Offer in writing to Stanford. In the event that
Stanford does not accept such offer in writing within 30 days after
receipt, such offer shall be deemed withdrawn and Stockholder shall
elect for Stanford to either: (A) conduct an Auction in which
Stockholder may participate but shall have no special priority or
other rights vis-a-vis other bidders, or (B) conduct an Auction in
which Stockholder shall not participate but at the conclusion thereof
Stockholder shall have the right to acquire all of the outstanding
voting securities of Stanford at a purchase price per share equal to
105% of the purchase price per share set forth in the bid selected by
Stanford's Board of Directors and in such event, Stanford's Board of
Directors shall approve promptly and in any case within 10 days of
Stockholder's request in writing made within 10 days of the conclusion
of any such Auction (written notice of such conclusion to be given
immediately by Stanford to Stockholder) entering into a definitive
agreement with Stockholder for such a transaction containing customary
terms and conditions, and Stanford shall, within 2 days of the
approval of its Board of Directors of such an agreement, execute and
deliver the same to Stockholder; such terms and conditions shall
include a termination fee of 5 percent of the aggregate value of
Stanford as evidenced by the per share value payable by Stockholder
under the agreement and a right of Stanford to terminate the
transaction and pay such termination fee to Stockholder if Stanford's
Board of Directors determines that it is necessary for Stanford to so
terminate the agreement in order for the Board to properly discharge
its fiduciary duties. In the event of any such termination by
Stanford, Stockholder may, in its discretion, proceed with a tender or
exchange offer for all of the common stock of Stanford which
Stockholder does not own at such price as it shall choose irrespective
of any other provisions of this Agreement and shall be free to pursue
any other rights and remedies which it may then have against Stanford
arising from such termination; Stockholder shall not be obligated to
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tender its shares to such other bidder nor to vote in favor of any
other transaction in the event of such termination.
(ii) Any Auction shall be subject to the following provisions:
(A) The Auction shall be completed within 120 days after
Stanford receives the Qualified Offer and the corresponding sale
shall close within 60 days after completion of the Auction.
(B) If Stanford does not receive an offer acceptable to its
Board of Directors in an Auction conducted pursuant to Section
3.1(d)(i)(B) within 120 days after Stanford receives a Qualified
Offer, Stockholder may either (I) proceed with its Qualified
Offer (which may take the form of a tender offer or exchange
offer) and close such purchase within 60 days thereafter, or (II)
reinitiate the process by submitting a new Qualified Offer.
(C) In the event that Stockholder is not the successful
bidder in an Auction conducted pursuant to Sections 3.1(d)(i)(A)
or (B) or does not elect to purchase in the Auction, Stockholder
agrees that it shall vote its Class B Shares in favor of the
successful bidder's transaction and not exercise dissenter's
rights, shall tender its shares (in the event of a tender offer),
and otherwise shall reasonably cooperate in consummating the
transaction.
(D) Stanford and Stockholder agree that the purchase price
set forth in a Qualified Offer is highly confidential and, as
such, Stanford and Stockholder (and each of their Affiliates)
shall not, to the extent legally permissible, disclose such
purchase price to any Person without the prior written consent of
the other party.
(E) To the extent that a successful bidder proposes a
purchase price that is not solely for cash, the stock and cash
components of such bid shall be substantially equivalent in value
(on a per share basis) and the bid shall provide for sufficient
cash (or be on such other terms) such that Stockholder may
receive solely cash for its Class B Shares.
(F) In any Auction, Stanford may be a bidder.
3.2 Transfer Restrictions. Stanford and Stockholder covenant and agree that
commencing upon the Closing and for a period of one year thereafter (the
"RESTRICTED PERIOD"), Stockholder shall not Transfer any Class B Shares except
in a transaction pursuant to Section 3.1(d) hereof, Article IV hereof or a
Governmental Order. Following the Restricted Period, Stockholder shall not
Transfer or propose to Transfer any Class B Shares except in a transaction
pursuant to Article III, Article IV or a Governmental Order.
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(a) Widely Disbursed Public Sale. Following the Restricted Period,
Stockholder may Transfer any Class B Shares in one or more Widely Disbursed
Public Sales.
(b) Other Transfers. Following the Restricted Period, Stockholder may
Transfer part or all of its Class B Shares in accordance with this Section
3.2(b) and Stanford shall first be given the opportunity, in the following
manner, to purchase (or cause a Person or group designated by Stanford (a
"STANFORD DESIGNEE") to purchase) all, but not less than all, of such
offered Class B Shares:
(i) Proposed Transfer in the Absence of a Third Party Offer. If,
from time to time, at any time when Stockholder is not in receipt of a
Third Party Offer, Stockholder desires to Transfer some or all of the
Class B Shares other than pursuant to a Widely Disbursed Public Sale,
Stockholder shall deliver a written notice (the "OFFER NOTICE") to
Stanford of such intention and stating the number of Class B Shares
that Stockholder proposes to Transfer and the cash purchase price per
share for such Transfer. Stanford (or a Stanford Designee) shall have
the right for thirty (30) days from the receipt of the Offer Notice,
exercisable by written notice in accordance with Section 8.4 hereof,
to elect to purchase (or to designate the Stanford Designee to
purchase) all, but not less than all, of the Class B Shares specified
in the Offer Notice for cash at a purchase price per share as set
forth therein.
(A) If Stanford (or a Stanford Designee) does not provide
Stockholder written notice of its election to purchase within
thirty (30) days from receipt of the Offer Notice, Stockholder
may, but is not obligated to, Transfer all, but not less than
all, of the Class B Shares as specified in the Offer Notice at
the cash purchase price per share set forth therein (or at a
higher price), provided that such Transfer must be completed
within 180 days after Stockholder delivers the Offer Notice.
(B) If Stanford exercises its right to purchase the Class B
Shares specified in the Offer Notice, the closing of the purchase
of such Class B Shares shall take place within 180 days after
Stockholder delivers the Offer Notice at a time and place
reasonably specified by Stanford (or a Stanford Designee). At the
closing, Stanford (or a Stanford Designee) shall deliver to
Stockholder cash or immediately available funds in an amount
equal to the total purchase price of the Class B Shares set forth
in the Offer Notice and Stockholder (and its Affiliates) shall
deliver to Stanford (or a Stanford Designee) certificates
representing the Class B Shares, duly endorsed in blank or
accompanied by stock powers duly executed and otherwise in form
acceptable for transfer of the shares on the books of Stanford,
free and clear of liens, claims or other encumbrances of any
nature. If, for any reason other than a delay caused by
Stockholder, Stanford (or a Stanford Designee) fails to complete
the purchase of the
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Class B Shares in accordance with this clause within 180 days
after Stockholder delivers the Offer Notice, then Stockholder
(and its Affiliates) may, but is not obligated to, Transfer the
Class B Shares at such price as it shall deem appropriate,
provided that Stockholder shall complete such Transfer within 180
days thereafter. Stockholder and Stanford expressly agree that,
with respect to the first failure of Stanford to complete the
purchase of the Class B Shares as required by this clause (B),
Stockholder shall have no remedies other than (1) the rights set
forth in the immediately preceding sentence and (2) a right to
recover from Stanford on demand Stockholder's reasonable out of
pocket expenses related to the proposed sale; provided, however
that such limitation on Stockholder's remedies shall only be
applicable if Stanford exercised its right to purchase under this
clause (B) in good faith and with the written advice of a
nationally-recognized investment banking firm or financial
institution that sufficient financing would be available for such
transaction.
(ii) Transfer Pursuant to a Third Party Offer. At any time
Stockholder receives and desires to accept an unsolicited Third Party
Offer, Stockholder shall deliver a written notice (the "THIRD PARTY
OFFER NOTICE") to Stanford of such intention and stating the identity
of the Third Party Offeror, the number of Class B Shares that
Stockholder proposes to Transfer and the purchase price per share for
such Transfer. Following, receipt of the Third Party Offer Notice,
Stanford's board of directors shall determine, in its sole discretion,
whether the sale to the Third Party Offeror is acceptable and shall
deliver a written notice to Stockholder stating whether the sale to
the Third Party Offeror is acceptable within thirty (30) days from the
receipt of the Third Party Offer Notice.
(A) If Stanford advises Stockholder that the sale to the
Third Party Offeror is acceptable, then Stockholder may proceed
with the Transfer of Class B Shares in accordance with the Third
Party Offer Notice (or at a higher price).
(B) If Stanford advises Stockholder that the sale to the
Third Party Offeror is not acceptable, then Stockholder shall
have the right to require Stanford to purchase (or to designate a
Stanford Designee to purchase) all, but not less than all, of the
Class B Shares specified in the Third Party Offer Notice for cash
at a purchase price equal to 105% of the purchase price per share
as set forth in the Third Party Offer Notice. If, for any reason
other than a delay caused by Stockholder, Stanford (or a Stanford
Designee) fails to complete the purchase within 180 days from its
receipt of the Third Party Offer Notice, Stockholder may, but is
not obligated to, Transfer the Class B Shares specified in the
Third Party Offer Notice at such price as it shall deem
appropriate, provided that Stockholder shall complete such
Transfer within 180 days thereafter. Stockholder and Stanford
expressly agree that, with respect to the first
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such failure of Stanford to complete the purchase of the
Class B Shares as required by this clause (B), Stockholder
shall have no remedies other than (1) the rights set forth
in the immediately preceding sentence and (2) a right to
recover from Stanford on demand Stockholder's reasonable out
of pocket expenses related to the proposed sale; provided,
however that such limitation on Stockholder's remedies shall
only be applicable if Stanford exercised its right to
purchase under this clause (B) in good faith and with the
written advice of a nationally-recognized investment banking
firm or financial institution that sufficient financing
would be available for such transaction.
3.3 Time Periods. Whenever a provision of Article III or IV provides that
an action is to be taken within a specified period of time, such period shall be
increased to the extent reasonable to accommodate obtaining any required
approvals from any Governmental Authorities.
3.4 Additional Stockholder Covenants. Stockholder shall not seek, directly
or indirectly, to place representatives on the Board of Directors of Stanford or
seek the removal of any member of the Board of Directors of Stanford except
pursuant to the terms of the Class B Shares set forth in the Restated
Certificate of Incorporation of Stanford.
3.5 Shares Subject to the Agreement. Except as otherwise provided for
herein, all Class B Shares now or hereafter owned by Stockholder or its
Affiliates shall be subject to the terms of this Agreement.
3.6 References to Class B Shares. With respect to any Transfer, a reference
to Class B Shares herein shall be deemed to include the Class A Shares or other
securities issuable upon conversion of the Class B Shares in accordance with
Stanford's Restated Certificate of Incorporation upon the Transfer of such Class
A Shares or other securities to a third party.
3.7 Legend and Stop Transfer Order. To assist in effectuating the
provisions of this Agreement, Stockholder hereby consents:
(a) to the placement of the following legend on all certificates
certifying ownership of the Class B Shares until such Class B Shares have
been sold, transferred or disposed of pursuant to the requirements of
Article III hereof:
The shares represented by this certificate are subject to the
provisions of a Stockholder Agreement by and among Stanford, Inc.,
Dynegy Inc. and Chevron U.S.A. Inc. (and certain other parties) and
may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except in accordance therewith. A copy of said Agreement
is on file at the office of the Secretary of Stanford; and
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(b) to the entry of a stop transfer order with the transfer agent or
agents of Stanford securities against the transfer of Class B Shares except
in compliance with the requirements of this Agreement, or, if Stanford is
its own transfer agent with respect to any Class B Shares, to the refusal
by Stanford to transfer any such securities except in compliance with the
requirements of this Agreement.
ARTICLE IV
STANFORD'S BUYOUT RIGHTS
4.1 Buyout Rights. Subject to the limitations hereinafter set forth, upon
the occurrence of a Buyout Event, Stockholder's blocking rights under this
Agreement with respect to a Covered Transaction and pursuant to Article III,
Section 7 of Stanford's Amended and Restated Bylaws shall, subject to
reinstatement under clause (a)(iii) hereunder, terminate and Stockholder shall,
within 180 days after the occurrence of a Buyout Event (or such longer period as
may be required to avoid disgorgement of short swing profits under Section 16 of
the Exchange Act with respect to Class B Shares owned at the time of the Buyout
Event), at its option either:
(a) Sell (and cause its Affiliates to sell) all of the Class B Shares
(1) in a Widely Disbursed Public Sale or (2) to a third party in a private
sale, provided that any such private sale shall be subject to the following
provisions:
(i) As promptly as practicable, Stockholder shall deliver written
notice to Stanford of any proposed buyer under clause (2) of this
Section 4.1(a) and the purchase price per share and other material
terms of such proposed sale.
(ii) If, within 30 days after receipt of Stockholder's notice,
Stanford's board of directors delivers written notice to Stockholder
that a proposed buyer or terms are not acceptable, in its sole
discretion, then Stockholder shall have the right to require Stanford
to purchase (or find an acceptable buyer to purchase) all of the Class
B Shares at a purchase price equal to 105% of the purchase price
agreed to between Stockholder and the third party under clause (2) of
this Section 4.1(a).
(iii) If, for any reason other than a delay caused solely by
Stockholder, Stanford (or any acceptable buyer appointed by Stanford)
fails to purchase the Class B Shares within 180 days after the date of
the Buyout Event, then Stockholder (and its Affiliates) shall be free
to Transfer the Class B Shares at such price as it shall deem
appropriate, provided that Stockholder shall complete such Transfer
within 180 days thereafter, provided, that if Stockholder chooses not
to sell the Class B Shares after such failure, then notwithstanding
any of the provisions of this Section 4.1, the Blocking Event
triggering the Buyout Event shall not be deemed to be a Blocking Event
and Stockholder's blocking rights under Article III, Section 7 of
Stanford's Amended and Restated Bylaws shall thereupon be reinstated.
Stockholder and Stanford expressly agree that, with
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respect to the first failure of Stanford to complete the purchase of
the Class B Shares as required by this clause (iii), Stockholder shall
have no remedies other than (1) the rights set forth in the
immediately preceding sentence and (2) a right to recover from
Stanford on demand Stockholder's reasonable out of pocket expenses
related to the proposed sale; provided, however that such limitation
on Stockholder's remedies shall only be applicable if Stanford
exercised its right to purchase under this clause (iii) in good faith
and with the written advice of a nationally-recognized investment
banking firm or financial institution that sufficient financing would
be available for such transaction.
(b) Elect to retain the Class B Shares, by delivering a written
election to Stanford, provided that such Class B Shares and the directors
elected by such Class B Shares shall no longer be entitled to any blocking
rights under Article III, Section 7 of Stanford's Amended and Restated
Bylaws.
ARTICLE V
CERTAIN AGREEMENTS RELATING TO
THE MERGER AGREEMENT AND STANFORD
5.1 Sales of Class B Common Stock. Stanford covenants and agrees that it
shall not issue or agree to issue to any Person other than Stockholder or its
Affiliates any Class B Shares (or any security convertible or exchangeable into
such Class B Shares or any option, warrant or other right to acquire such Class
B Shares) without the prior written consent of Stockholder.
5.2 Restraints on Stockholders Ownership. Stanford covenants and agrees
that its shall not adopt a stockholder rights plan, "poison pill" or similar
device that prevents Stockholder from exercising its rights under Section 3.1(c)
or Article IV.
5.3 Representatives on Stanford's Board of Directors. Dynegy and Stanford
covenant and agree that they shall cause the three directors nominated by
Stockholder to be appointed to Stanford's Board of Directors pursuant to Section
3.1 of the Merger Agreement.
5.4 Waiver of Conditions in Merger Agreement; Amendments. The officers of
Dynegy and Stanford shall not waive any material condition to closing set forth
in the Merger Agreement or enter into any material amendments thereof without
the further approval of a majority of the Dynegy Board of Directors and, in
addition, a majority of the Class B Directors of Dynegy (as defined in the
Amended and Restated Articles of Incorporation of Dynegy).
ARTICLE VI
PREEMPTIVE RIGHTS
6.1 Employee Benefit Plans. In the event that Stanford issues any equity
securities pursuant to stock option, restricted stock or other employee benefit
plans, within 30 days following the end of each fiscal quarter Stanford shall
notify Stockholder in writing of all such issuances. Within 30 days after the
receipt of such notification, Stockholder may notify Stanford
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of its intent to purchase its "proportionate share" of such securities, in which
event Stanford shall issue such equity securities to Stockholder in exchange for
the purchase price. Notwithstanding the foregoing, in the event that Stanford is
subject to a stock split, reverse split, merger, share exchange or other
transaction in which the rights of Stockholder may be adversely impacted in the
event it is not able to purchase its proportionate share in a timely fashion,
the notice required by this Section shall be given in sufficient time for
Stockholder to elect to purchase equity securities and participate in such
transaction.
6.2 Other Issuances. In the event that Stanford issues any equity
securities other than as contemplated by the Merger Agreement and as described
in Section 6.1 hereof, promptly, but in all events within 30 days following each
such issuance, Stanford shall notify Stockholder in writing of such issuance.
Within 30 days after the receipt of such notification, Stockholder may notify
Stanford in writing of its intent to purchase its proportionate share of such
securities, in which event Stanford shall issue such equity securities to
Stockholder in exchange for the purchase price.
6.3 Intended Issuances. Notwithstanding the provisions of Section 6.2, in
order to enable Stanford to efficiently structure financings and other
securities issuances, to the extent that Stanford notifies Stockholder in
writing of the material terms of an intended issuance of any equity securities,
as promptly as practicable thereafter Stockholder shall notify Stanford in
writing of its election to purchase its proportionate share of such securities,
in which case Stanford shall issue such equity securities to Stockholder in
exchange for the purchase price at the time of the issuance to others. In the
event that the material terms of the intended issuance change prior to issuance,
Stanford shall promptly give Stockholder written notice thereof, and as promptly
as practicable thereafter Stockholder shall reconfirm (or reverse) its prior
election in writing.
6.4 Purchase Price. The purchase price for equity securities issued
pursuant to Section 6.1 or 6.2 shall equal: (a) in the event that the securities
are issued in an arms' length transaction based upon the market price of
Stanford's securities, at the price of such issuance, (b) if clause (a) does not
apply, at the mean closing price on the New York Stock Exchange (or other
primary market for the relevant securities) over the twenty (20) trading days
most immediately preceding the issuance, (c) if neither clause (a) or (b)
applies, at the fair market value thereof as determined for purposes of
complying with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, if a notification is required pursuant to such Act, and (d) otherwise
at the fair market value thereof, in cash, as determined in good faith by the
Board of Directors of Stanford.
6.5 Proportionate Share. For purposes of the issuance of securities to
Stockholder pursuant to this Article VI, Stockholder's "proportionate share"
shall be that number of shares or interests which preserves Stockholder's
proportionate interest in the equity value of Stanford at the same level as
prior to the issuance that triggered Stockholder's rights.
6.6 Nature of Securities. To the extent that Stockholder is entitled to
purchase Class A Common Shares pursuant to this Article VI, it instead shall be
issued Class B Common Shares
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on a one-for-one basis. To the extent that Stockholder is entitled to purchase
any other voting securities, Stanford and Stockholder shall negotiate in good
faith and agree upon the nature of the securities and, if applicable, the
restrictions on or privileges of, such securities so that the purposes of this
Agreement are effected. Stockholder shall have no preemptive rights with respect
to securities that do not participate in the earnings of Stanford or, absent a
payment or other default, in the election of directors of Stanford.
6.7 Presumption. In order to facilitate future reviews of the books and
records of Stanford, there shall be an irrefutable presumption that this Article
VI has been fully complied with by Stanford: (a) absent a filing by Stockholder
with the SEC (for instance, on a Schedule 13D) within 180 days following the end
of any fiscal year of a document stating its belief that it was not issued the
securities that it was entitled to during such fiscal year, with respect to all
issuances during such year, and (b) absent the institution of litigation against
Stanford by Stockholder prior thereto, 180 days following the last date on which
there has been any Class B Shares outstanding, with respect to all issuances.
ARTICLE VII
EFFECTIVENESS; TERMINATION
7.1 Effectiveness and Term. The provisions of this Agreement shall be
effective and terminate as follows:
(a) The provisions of Articles I, II and VIII hereof shall be
effective as of the date hereof and shall terminate on the date following
the Effective Date on which Stockholder and its Affiliates own less than
10% of the total combined voting power of all voting securities of
Stanford; and
(b) The remaining provisions (other than Articles I, II and VIII) of
this Agreement shall be effective at the Effective Date and shall terminate
on the date Stockholder and its Affiliates cease to own at least 15% of the
total combined voting power of all voting securities of Stanford.
Notwithstanding the foregoing, if the Merger Agreement is terminated in
accordance with its terms, the provisions of this Agreement shall be null and
void and of no further force or effect and this Agreement shall be deemed
terminated; provided, however, that no termination of this Agreement shall in
any way relieve any party from any liability arising as a result of any breach
of this Agreement by such party prior to the effective date of such termination.
7.2 Issuance of New Certificates. Upon a termination of the provisions of
this Agreement contemplated by Section 7.1(b), all Class B Shares subject to
this Agreement shall be relieved from the terms and conditions contained herein,
and the stock certificates of Stanford representing such Class B Shares may be
surrendered to Stanford for cancellation and issuance of a new certificate
without the legend required pursuant to Section 3.7. Such new certificates shall
be issued and delivered to Stockholder as soon as practicable and the stop
transfer order provided for in Section 3.7 shall be rescinded immediately.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Intent and Interpretation. Each of parties hereto stipulates and
acknowledges that Stanford has made, prior to the date hereof, a careful
evaluation of Stockholder, its investment objectives with regard to the Class B
Shares and its lack of intent to obtain control of Stanford by its acquisition
thereof, and the compatibility of such objectives with the objectives of
Stanford; that such factors were critical to Stanford in the decision to
consummate the Merger and thereby issue a large block of voting securities to
Stockholder; that, absent the restrictions in this Agreement, ownership of the
Class B Shares would present an unusual opportunity for Stockholder to gain
effective control of Stanford; that Stanford might have reached a different
decision with regard to the Merger and the resulting issuance of the Class B
Shares to a group of related persons had such persons been other than
Stockholder; therefore, that the restrictions set forth in this Agreement are a
material part of the consideration received by Stanford for the issuance of the
Class B Shares in the Merger, and that the primary intent of such restrictions
is to insure that such block of securities does not come to rest in the hands or
under the control of any single holder or group of holders other than
Stockholder and that the size of such block of securities is not, except as
otherwise herein provided, increased over a prescribed amount, without the
consent of Stanford. Stockholder acknowledges and agrees that such purpose and
intent are reasonable and that the restrictions set forth in this Agreement are
reasonable in view of such purpose and intent. Further, Stockholder and Stanford
agree that, should any disagreement arise in the interpretation of any such
restrictions as applied to any set of facts, such disagreement shall be resolved
by interpreting and applying each restriction in the manner that will most
nearly effectuate the purpose and intent of such restrictions as herein stated.
8.2 Specific Enforcement. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be irreparably damaged and that money
damages are not an adequate remedy in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached because, among other reasons, each such provision
relates to potential control of Stanford. It is accordingly agreed that each
party hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to specifically enforce this Agreement and the
terms and provisions hereof in any court of the United States or any state
thereof, in addition to any other remedy to which such party may be entitled, at
law or in equity. It is further agreed that none of the parties hereto shall
raise the defense that there is an adequate remedy at law.
8.3 Severability. If any term of this Agreement or the application thereof
to any party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law, provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
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8.4 Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed given (i) when made, if made by hand delivery, and upon
confirmation of receipt, if made by facsimile, (ii) one business day after being
deposited with a next-day courier, postage prepaid, or (iii) three business days
after being sent certified or registered mail, return receipt requested, postage
prepaid, in each case to the applicable addresses set forth below (or to such
other address as such party may designate in writing from time to time):
If to Stanford, Dynegy or Enron:
Dynegy Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
Telecopy: (000) 000-0000
with copies (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxxxx; Xxxxx 0000 Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy (000) 000-0000
If to Stockholder:
Chevron U.S.A. Inc.
0000 XxXxxxxx
Xxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
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with a copy to:
ChevronTexaco Corporation
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
and to:
Pillsbury Winthrop LLP
00 Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxx, Esq.
and Xxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
or to such other address as such party shall have designated by notice so given
to each other party.
8.5 Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by all of the parties hereto (or their successors).
8.6 Entire Agreement. This Agreement (together with the Merger Agreement,
the Registration Rights Agreement, the Voting Agreement, the Subscription
Agreement and the Restated Certificate of Incorporation and Amended and Restated
Bylaws of Stanford) embodies the entire agreement and understanding among the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter. There are no
representations, warranties or covenants by the parties hereto relating to such
subject matter other than those expressly set forth in this Agreement, the
Merger Agreement, the Registration Rights Agreement, the Voting Agreement and
the Subscription Agreement.
8.7 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
8.8 No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such
17
party of his or her right to exercise any such or other right, power or remedy
or to demand such compliance.
8.9 No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of and shall not be enforceable by any person or entity who or which
is not a party hereto.
8.10 Consent to Jurisdiction. Each party (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of Delaware
or any Delaware state court if any action, suit or proceeding arises in
connection with this Agreement, and (b) agrees that it will not attempt to
defeat or deny such personal jurisdiction by motion or other request for leave
from any such court.
8.11 Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of Delaware, without reference to rules
relating to conflicts of law.
8.12 Name, Captions, Gender. The name assigned this Agreement and the
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
8.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, of
the parties hereto.
8.14 Expenses. Except as expressly provided herein, each of the parties
hereto shall each bear its own expenses incurred in connection with this
Agreement and the transactions contemplated hereby.
8.15 Successors and Assigns. Stockholder shall not assign this Agreement
without the written consent of Stanford, except to an Affiliate of Stockholder
as contemplated herein; Stanford may assign this Agreement only to any successor
to substantially all of its business as a result of a merger, consolidation or
sale by Stanford. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the parties hereto have duly and validly executed this
Stockholder Agreement as of the day and year first above written.
STANFORD INC.
By: /s/ XXXX X. XXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxx
------------------------------------
Title: Executive Vice President
-----------------------------------
DYNEGY INC.
By: /s/ XXXX X. XXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxx
------------------------------------
Title: Executive Vice President
-----------------------------------
CHEVRON U.S.A. INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------------
Title: Attorney-in-Fact
-----------------------------------
ENRON CORP.
By: /s/ XXXXXXX X. XXXXX, XX.
--------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
------------------------------------
Title: Executive Vice President -
Finance and Treasurer
-----------------------------------
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