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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
FOR
ILLINOVA CORPORATION
an Illinois corporation
IRS Employer Identification No. 37-1319890
SEC File Number 1-11327
500 SOUTH 27TH STREET
DECATUR, ILLINOIS 62521
(217) 424-6600
June 14, 1999
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ITEM 5. OTHER EVENTS.
On June 14, 1999, Illinova Corporation, an Illinois
corporation ("Illinova"), and Dynegy Inc., a Delaware corporation ("Dynegy"),
agreed to combine in a transaction in which each of Illinova and Dynegy will
become wholly owned subsidiaries of Energy Convergence Holding Company, a newly
formed Illinois corporation ("Newco"). Energy Convergence Acquisition
Corporation, an Illinois corporation and a wholly owned subsidiary of Newco,
will be merged with and into Illinova, and Dynegy Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Newco, will be merged with
and into Dynegy. The terms of the Merger are set forth in an Agreement and Plan
of Merger (the "Merger Agreement") dated as of June 14, 1999 among Newco,
Illinova, Energy Convergence Acquisition Corporation, Dynegy and Dynegy
Acquisition Corporation.
In the combination, each share of Illinova common stock, no
par value per share, will be converted into one share of Newco common stock, no
par value per share (the "Newco Common Stock"), and each share of Dynegy common
stock, par value $.01 per share, and Dynegy Series A Participating Preferred
Stock, par value $.01 per share (collectively, the "Dynegy Stock"), will be
converted into the right to receive either $16.50 in cash or 0.69 of a share of
Newco Common Stock pursuant to an election process and the pro ration of
approximately $1.1 billion among Dynegy shareholders electing to receive cash.
The cash portion of the consideration received by Dynegy's shareholders will be
approximately 40% of the total consideration. The combination is intended to
constitute a tax-free contribution under the Internal Revenue Code of 1986, as
amended.
Dynegy has three large shareholders, Nova Gas Services (U.S.)
Inc., an affiliate of BG plc and Chevron U.S.A. Inc., which collectively own
approximately 76% of Dynegy's outstanding equity securities. Of these
shareholders, Nova and BG will be electing to receive the maximum amount of cash
possible and Chevron will be electing to receive the maximum amount of Newco
Common Stock possible. Because of the size of Nova's and BG's ownership
positions, some pro ration of the cash portion of the consideration will occur.
To the extent that Nova and BG would receive Newco Common
Stock in the combination they instead will receive Newco Series A Convertible
Preferred Stock. Newco's Series A Convertible Preferred Stock is convertible
into Newco Common Stock at the election of the holder and is subject to
redemption at the election of Newco after three years. Holders generally are
entitled to vote together with holders of Newco Common Stock in proportion to
the economic interest of such shares. Similarly, to the extent that Chevron
would receive Newco Common Stock, it will receive Newco Class B Common Stock. In
general, the terms of the Newco Class B Common Stock provide Chevron board
representation, certain rights and limitations with respect to purchases and
sales of Newco securities and certain "blocking rights" with respect to large
transactions by Newco. In addition, the terms require that Chevron, should its
ownership interest ever exceed 40% of Newco's equity securities, offer to
purchase the remaining equity securities of Newco in accordance with established
procedures.
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Consummation of the combination is subject to various
conditions, including: (i) receipt of necessary approvals by the stockholders of
each of Illinova and Dynegy; (ii) the expiration or termination of applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended; (iii) the exemption of the acquisition by Chevron of Newco's Class B
Common Stock under the Public Utility Holding Company Act and the receipt of
necessary Federal Energy Regulatory Commission and Illinois Commerce Commission
approvals; (iv) the consummation by Illinova of its previously announced sale of
its Clinton nuclear facility; (v) registration of the shares of Newco Common
Stock to be issued in the merger under the Securities Act of 1933, as amended;
and (vi) satisfaction of certain other conditions.
The foregoing summary of the combination is qualified in its
entirety by reference to the texts of the Merger Agreement, Shareholder
Agreement and other documents that are filed as exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger.
10.1 Subscription Agreement between Energy
Convergence Holding Company and Chevron
U.S.A. Inc.
10.2 Stock Purchase Agreement between Energy
Convergence Holding Company and British Gas
Atlantic Holdings BV and related Guaranty by
British Gas Overseas Holdings Limited.
10.3 Voting Agreement between Illinova and BG
Holdings, Inc.
10.4 Voting Agreement between Illinova and NOVA
Gas Services (U.S.) Inc.
10.5 Voting Agreement between Illinova and
Chevron U.S.A. Inc.
10.6 Shareholder Agreement of Energy Convergence
Holding Company with Chevron U.S.A. Inc.
10.7 Registration Rights Agreement (NOVA Gas
Services (U.S.) Inc. and British Gas
Atlantic Holdings BV).
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10.8 Registration Rights Agreement (Chevron
U.S.A. Inc.).
99.1 Bylaws of Energy Convergence Holding
Company.
99.2 Text of joint press release dated June 14,
1999, issued by Illinova and Dynegy.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ILLINOVA CORPORATION
Date: June 14, 1999 By: /s/ Larry Altenbaumer
------------------------------
Larry Altenbaumer
Chief Financial Officer
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Exhibit Index
2.1 Agreement and Plan of Merger.
10.1 Subscription Agreement between Energy
Convergence Holding Company and Chevron
U.S.A. Inc.
10.2 Stock Purchase Agreement between Energy
Convergence Holding Company and British Gas
Atlantic Holdings BV and related Guaranty by
British Gas Overseas Holdings Limited.
10.3 Voting Agreement between Illinova and BG
Holdings, Inc.
10.4 Voting Agreement between Illinova and NOVA
Gas Services (U.S.) Inc.
10.5 Voting Agreement between Illinova and
Chevron U.S.A. Inc.
10.6 Shareholder Agreement of Energy Convergence
Holding Company with Chevron U.S.A. Inc.
10.7 Registration Rights Agreement (NOVA Gas
Services (U.S.) Inc. and British Gas
Atlantic Holdings BV).
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10.8 Registration Rights Agreement (Chevron
U.S.A. Inc.).
99.1 Bylaws of Energy Convergence Holding
Company.
99.2 Text of joint press release dated June 14,
1999, issued by Illinova and Dynegy.
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AGREEMENT AND PLAN OF MERGER
BY
AND
AMONG
ILLINOVA CORPORATION,
ENERGY CONVERGENCE HOLDING COMPANY,
ENERGY CONVERGENCE ACQUISITION CORPORATION,
DYNEGY ACQUISITION CORPORATION
AND
DYNEGY INC.
Dated as of June 14, 1999
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") dated as of June
14, 1999, is by and among Illinova Corporation, an Illinois corporation
("ILLINOVA"), Energy Convergence Holding Company, an Illinois corporation
("NEWCO"), Dynegy Acquisition Corporation, a Delaware corporation ("DAC"),
Energy Convergence Acquisition Corporation, an Illinois corporation, ("IAC" and,
together with DAC, Illinova and Newco, the "ILLINOVA COMPANIES"), and Dynegy
Inc., a Delaware corporation ("DYNEGY").
WHEREAS, the respective Boards of Directors of Illinova, Dynegy and DAC
deem it advisable and in the best interests of their respective stockholders
that DAC merge with and into Dynegy (the "DAC MERGER") upon the terms and
subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of Illinova, Dynegy and IAC
deem it advisable and in the best interests of their respective stockholders
that IAC merge with and into Illinova (the "IAC MERGER" and, together with the
DAC Merger, the "MERGERS") upon the terms and subject to the conditions set
forth herein;
WHEREAS, the Board of Directors of Illinova deems it advisable and in
the best interests of its stockholders that Illinova enter into the Voting
Agreements (herein defined) and such Board has approved the delivery and
performance of the Voting Agreements;
WHEREAS, the Board of Directors of Dynegy deems it advisable and in the
best interests of its stockholders that certain of Dynegy's stockholders enter
into the Voting Agreements;
WHEREAS, simultaneously with the execution of this Agreement, Chevron
U.S.A. Inc., a Pennsylvania corporation ("CHEVRON"), has entered into a
Subscription Agreement (the "SUBSCRIPTION AGREEMENT") with Newco, by which
Chevron will purchase shares of Newco Common Stock (as defined) for an aggregate
consideration of at least $200 million and up to $240 million at the price per
share set forth therein immediately after the closing of the Mergers;
WHEREAS, simultaneously with the execution of this Agreement, Newco and
British Gas Atlantic Holdings BV, a Netherlands corporation ("BGAH"), have
entered into a Stock Purchase Agreement (the "BG STOCK PURCHASE AGREEMENT"), by
which Newco has agreed to purchase all of the issued and outstanding capital
stock of BG Holdings, Inc., a Delaware corporation ("BG HOLDINGS"), from BGAH
immediately prior to the closing of the Mergers, in return for a combination of
cash and Series A Convertible Preferred Stock (as defined herein) such that BGAH
will receive the same combination of cash and Series A Convertible Preferred
Stock as consideration for the Dynegy Common Stock it owns through BG Holdings
as it would have had it been a holder of Dynegy Common Stock in the DAC Merger;
WHEREAS, such Boards of Directors have approved the Mergers;
WHEREAS, for federal income tax purposes, the parties intend that the
Mergers will qualify as contributions of stock of Illinova, Dynegy and other
assets to Newco under the
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provisions of Section 351 of the United States Internal Revenue Code of 1986, as
amended, and any regulations thereunder or any successor statutes thereto (the
"CODE"); and
WHEREAS, for financial accounting purposes, it is intended that the
Mergers will be accounted for as a purchase of Illinova by Dynegy.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, including the exhibits, each of the
following capitalized terms is defined as follows:
"ACTION" means a suit, claim, action, proceeding or investigation.
"AGGREGATE COMMON STOCK CONSIDERATION" is defined in Section 4.1(c).
"AGGREGATE MERGER CONSIDERATION" is defined in Section 4.5(a).
"AGGREGATE MERGER STOCK CONSIDERATION" is defined in Section 4.1(i).
"AGREEMENT" is defined in the preamble to this Agreement.
"AMENDED AND RESTATED NEWCO ARTICLES" means the amended and restated
articles of incorporation of Newco, in the form of Exhibit A.
"AMERGEN" means AmerGen Energy Company, L.L.C., a Delaware limited
liability company.
"ANCILLARY AGREEMENTS" means any other agreement executed and delivered
in connection herewith, including the Voting Agreements, Registration Rights
Agreements, BG Stock Purchase Agreement, Guaranty of British Gas Overseas
Holdings dated the date hereof, Subscription Agreement and the Shareholder
Agreement.
"APPROVALS" is defined in Section 9.1(d).
"ASSESSMENT" is defined in Section 8.16.
"ATOMIC ENERGY ACT" means the Atomic Energy Act of 1954, as amended,
including any regulations promulgated thereunder and any successor statutes
thereto.
"AUDIT" means any audit, assessment of Taxes, other examination by any
Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"AWARDS" is defined in Section 4.6(c).
"BG AND NOVA SHORTFALL AMOUNT" is defined in the Subscription
Agreement.
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"BG HOLDINGS" is defined in the recitals to this Agreement.
"BG STOCK PURCHASE AGREEMENT" is defined in the recitals to this
Agreement.
"BGAH" is defined in the recitals to this Agreement.
"CASH CONSIDERATION" is defined in Section 4.1(c).
"CASH ELECTION SHARES" is defined in Section 4.1(d).
"CERTIFICATE OF MERGER" is defined in Section 2.2.
"CHEVRON" is defined in the recitals to this Agreement.
"CLOSING" is defined in Section 4.7.
"CLOSING DATE" is defined in Section 4.7.
"CODE" is defined in the recitals to this Agreement.
"COMMON STOCK CONSIDERATION" is defined in Section 4.1(c).
"CONFIDENTIALITY AGREEMENTS" means the Confidentiality Agreements,
dated May 13, 1998, and December 29, 1998, between Illinova and Dynegy.
"CUSTOMARY POST-CLOSING CONSENTS" is defined in Section 5.4(b)(i).
"DAC" is defined in the preamble to this Agreement.
"DAC MERGER" is defined in the recitals to this Agreement.
"DAC SURVIVING CORPORATION" is defined in Section 2.1(a).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"DISCLOSURE SCHEDULES" is defined in Section 12.10(a).
"DYNEGY" is defined in the preamble to this Agreement.
"DYNEGY ACQUISITION PROPOSAL" means any offer or proposal for, or any
indication of interest in, a merger or other business combination directly or
indirectly involving Dynegy or any Dynegy Subsidiary or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than (i) the Transactions and (ii) any such offer, proposal or
indication of interest with respect to Dynegy's business related to the
fractionation and processing of natural gas to produce natural gas liquids, and
the transporting and marketing of such natural gas liquids.
"DYNEGY BALANCE SHEET" is defined in Section 5.7.
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"DYNEGY BALANCE SHEET DATE" is defined in Section 5.7.
"DYNEGY BENEFIT PLANS" is defined in Section 5.11(a).
"DYNEGY BREACH" is defined in Section 11.1(d).
"DYNEGY CASH NUMBER" means the sum of (i) the product of the number of
shares of Dynegy Stock outstanding as of the Election Date and 0.4 and (ii) the
quotient of the BG and Nova Shortfall Amount pursuant to the Subscription
Agreement and $16.50.
"DYNEGY COMMON STOCK" means the common stock, par value $.01, of
Dynegy.
"DYNEGY COMMON STOCK CERTIFICATE" is defined in Section 4.1(j).
"DYNEGY DE MINIMIS SHARES" is defined in Section 4.1(d).
"DYNEGY DIRECTOR NOMINEES" is defined in Section 3.3(c)(i).
"DYNEGY DISCLOSURE SCHEDULE" is defined in the introductory paragraph
to Article V.
"DYNEGY ENGAGEMENT LETTERS" is defined in Section 5.19.
"DYNEGY ERISA AFFILIATE" is defined in Section 5.11(a).
"DYNEGY MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, development or occurrence causing, resulting in or having (or with
the passage of time likely to cause, result in or have) a material adverse
effect on the financial condition, business, assets, properties, or results of
operations of Dynegy and its Subsidiaries, taken as a whole.
"DYNEGY POWER GENERATION FACILITIES" means Dynegy's power generation
facilities listed in Item 2 in the Annual Report on Form 10-K of the Dynegy SEC
Reports for the year ended December 31, 1998.
"DYNEGY PREFERRED STOCK" is defined in Section 5.2(a).
"DYNEGY PREFERRED STOCK CERTIFICATE" is defined in Section 4.1(j).
"DYNEGY PUBLIC STOCKHOLDERS" is defined in Section 5.21.
"DYNEGY QUALIFYING FACILITIES" means power generation facilities in
which Dynegy owns an interest that are Qualifying Facilities.
"DYNEGY SEC REPORTS" is defined in Section 5.5.
"DYNEGY SPECIAL MEETING" is defined in Section 8.12(a).
"DYNEGY STOCK" means the Dynegy Common Stock and Dynegy Preferred
Stock.
"DYNEGY STOCK CERTIFICATES" is defined in Section 4.1(j).
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"DYNEGY STOCK OPTIONS" is defined in Section 4.6(a).
"DYNEGY STOCKHOLDERS' APPROVAL" is defined in Section 5.16.
"DYNEGY SUPERIOR PROPOSAL" is defined in Section 11.1(h).
"DYNEGY UNREGULATED FACILITIES" means the power generation facilities
in which Dynegy owns an interest that are either (i) Qualifying Facilities or
(ii) owned by "exempt wholesale generators" or "foreign utility companies" as
defined in PUHCA.
"EFFECTIVE TIME" is defined in Section 2.2.
"ELECTION" is defined in Section 4.1(c).
"ELECTION DATE" is defined in Section 4.4(d).
"ENFORCEABLE" an agreement is "enforceable" if it is the legal, valid
and binding obligation of the applicable Person enforceable against such Person
in accordance with its terms, except as such enforceability may be subject to
the effects of bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights of creditors and general principals of
equity.
"ENVIRONMENTAL LAWS" means federal, state, local and foreign
environmental protection, health and safety or similar laws, statutes,
ordinances, restrictions, licenses, rules, regulations, permit conditions and
legal requirements imposing liability or establishing standards of conduct for
protection of the environment, including the Federal Clean Water Act, Safe
Drinking Water Act, Resource Conservation and Recovery Act, Clean Air Act, Toxic
Substances Control Act, Outer Continental Shelf Lands Act, Comprehensive
Environmental Response, Compensation and Liability Act, and Emergency Planning
and Community Right to Know Act, each as amended and currently in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCESS PARACHUTE PAYMENTS" is defined in Section 5.9(b).
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended, including any regulations promulgated thereunder and any successor
statutes thereto.
"EXCHANGE AGENT" is defined in Section 4.4(a).
"EXCHANGE FUND" is defined in Section 4.5(a).
"EXCHANGE RATIO" is defined in Section 4.1(c).
"EXPENSES" means all reasonable out-of-pocket expenses (including all
reasonable fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
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preparation, printing, filing and mailing of the Registration Statement, the
Proxy Statement/Prospectus, the solicitation of stockholder approvals, requisite
filings under the HSR Act and all other matters related to the consummation of
the Transactions.
"FERC" means the Federal Energy Regulation Commission.
"FORM OF ELECTION" is defined in Section 4.4(b).
"GAAP" means United States generally accepted accounting principles in
effect on the date hereof.
"GOVERNMENTAL AUTHORITY" means any governmental or regulatory authority
or agency.
"HAZARDOUS SUBSTANCES" means any chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, mixed hazardous waste
substances, petroleum, petroleum products or any substance regulated under any
Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, including any regulations promulgated thereunder and any
successor statutes thereto.
"IBCA" means the Illinois Business Corporation Act of 1983, as amended.
"ICC" means the Illinois Commerce Commission.
"IAC" is defined in the preamble to this Agreement.
"IAC COMMON STOCK" means the common stock, no par value, of IAC.
"IAC MERGER" is defined in the recitals to this Agreement.
"IAC SURVIVING CORPORATION" is defined in Section 2.1(b).
"ILLINOVA" is defined in the preamble to this Agreement.
"ILLINOVA ACQUISITION PROPOSAL" means any offer or proposal for, or any
indication of interest in, a merger or other business combination directly or
indirectly involving Illinova or any Illinova Subsidiary or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than the Transactions.
"ILLINOVA AVERAGE PRICE" means the mean average of the closing prices
on the New York Stock Exchange, Inc. of the Illinova Common Stock over 20
consecutive trading days ending on the Election Date.
"ILLINOVA BALANCE SHEET" is defined in Section 6.7.
"ILLINOVA BALANCE SHEET DATE" is defined in Section 6.7.
"ILLINOVA BENEFIT PLANS" is defined in Section 6.11(a).
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"ILLINOVA BREACH" is defined in Section 11.1(c).
"ILLINOVA COMMON STOCK" means the common stock, no par value, of
Illinova.
"ILLINOVA COMPANIES" is defined in the preamble to this Agreement.
"ILLINOVA CONSIDERATION" is defined in Section 4.2(c).
"ILLINOVA DIRECTOR NOMINEES" is defined in Section 3.3(c)(i).
"ILLINOVA DISCLOSURE SCHEDULE" is defined in the introductory paragraph
to Article VI.
"ILLINOVA DISSENTING SHARES" is defined in Section 4.2(e).
"ILLINOVA ENGAGEMENT LETTERS" is defined in Section 6.19.
"ILLINOVA ERISA AFFILIATE" is defined in Section 6.11(a).
"ILLINOVA MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, development or occurrence causing, resulting in or having (or with
the passage of time likely to cause, result in or have) a material adverse
effect on the financial condition, business, assets, properties, or results of
operations of Illinova and its Subsidiaries, taken as a whole.
"ILLINOVA POWER GENERATION FACILITIES" means Illinova's power
generation facilities listed in Item 2 in the Annual Report on Form 10-K of the
Illinova SEC Reports for the year ended December 31, 1998.
"ILLINOVA SEC REPORTS" is defined in Section 6.5.
"ILLINOVA SPECIAL MEETING" is defined in Section 8.12(b).
"ILLINOVA STOCK OPTIONS" is defined in Section 4.6(b).
"ILLINOVA STOCK CERTIFICATE" is defined in Section 4.2(d).
"ILLINOVA STOCKHOLDERS' APPROVAL" is defined in Section 6.16.
"ILLINOVA SUPERIOR PROPOSAL" is defined in Section 11.1(j).
"ILLINOVA UNREGULATED FACILITIES" means the power generation facilities
in which Illinova owns an interest that are either (i) Qualifying Facilities or
(ii) owned by "exempt wholesale generators" or "foreign utility companies" as
defined in PUHCA.
"INDEMNIFIED PARTY" is defined in Section 8.3(a).
"INSPECTED PARTY" is defined in Section 8.16.
"INSPECTING PARTY" is defined in Section 8.16.
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"INTEGRATION COMMITTEE" is defined in Section 7.3(b).
"INTELLECTUAL PROPERTY" is defined in Section 5.18.
"INTERIM AGREEMENT" means the Interim Agreement relative to the Clinton
Nuclear Power Station, dated March 31, 1999, by and among IPC, PECO and AmerGen.
"IPC" means Illinois Power Company, an Illinois corporation.
"LIENS" is defined in Section 5.2(b).
"MERGERS" is defined in the recitals to this Agreement.
"NEWCO" is defined in the preamble to this Agreement.
"NEWCO CLASS B COMMON STOCK" means the Class B Common Stock, no par
value, of Newco, to be issued pursuant to the Amended and Restated Newco
Articles.
"NEWCO COMMON STOCK" means the Class A Common Stock, no par value, of
Newco, to be issued pursuant to the Amended and Restated Newco Articles.
"NOVA" means Nova Gas Services (U.S.) Inc., a Delaware corporation.
"NRC" means the Nuclear Regulatory Commission.
"NUCLEAR ADVISORY COMMITTEE" is defined in Section 7.3(a)(ii).
"NUCLEAR FACILITY" means IPC's nuclear facility in DeWitt County,
Illinois.
"NUCLEAR FACILITY AGREEMENTS" means (i) the Management Services
Agreement, dated January 15, 1998, by and between IPC and PECO, as amended to
the date hereof, (ii) the Incentive Compensation Agreement to Amend the
Management Services Agreement, dated May 19, 1998, by and between IPC and PECO,
and (iii) the Interim Agreement.
"NYSE" is defined in Section 8.14.
"ORDER" means any order, judgment or decree of any court or any other
Governmental Authority.
"PBGC" is defined in Section 5.11(b).
"PECO" means PECO Energy Company, a Pennsylvania corporation.
"PERSON" means 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.
"POWER ACT" means the Federal Power Act, as amended, including any
regulations promulgated thereunder and any successor statutes thereto.
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"PREDECESSOR COMPANY STOCK OPTIONS" is defined in Section 4.6(b).
"PREFERRED STOCK CONSIDERATION" is defined in Section 4.1(h).
"PRINCIPAL POWER FACILITIES" means the following facilities owned by
Illinova: Baldwin Power Station, Havana Power Station, Hennepin Power Station,
Vermilion Power Station, Wood River Power Station, Oglesby Gas Turbine,
Stallings Gas Turbine, and Tilton Energy Center.
"PROXY STATEMENT/PROSPECTUS" is defined in Section 5.17.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"QUALIFYING FACILITIES" means a "qualifying cogeneration facility" or
"qualifying small power production facility," as defined in PURPA.
"REGISTRATION STATEMENT" is defined in Section 5.17.
"REGISTRATION RIGHTS AGREEMENTS" means (i) the Registration Rights
Agreement by and among Newco, BGAH and Nova, dated the date hereof, as amended
from time to time, and (ii) the Registration Rights Agreement, by and between
Newco and Chevron, dated the date hereof, as amended from time to time.
"REPLACEMENT PLANS" is defined in Section 8.11.
"RETAINED EMPLOYEES" is defined in Section 8.11.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
including any regulations promulgated thereunder and any successor statutes
thereto.
"SERIES A CONVERTIBLE PREFERRED STOCK" means the Series A Convertible
Preferred Stock of Newco to be authorized pursuant to the Statement of
Resolution Establishing Series A Convertible Preferred Stock of Newco, in the
form of Exhibit B.
"SHAREHOLDER AGREEMENT" means the Shareholder Agreement, dated as of
the date hereof, among Newco, Illinova, Dynegy and Chevron.
"STAFF" is defined in Section 9.3(f)(iii).
"STAFF OBJECTION" is defined in Section 9.3(f)(iii).
"STOCK ELECTION SHARES" is defined in Section 4.1(f)(i).
"SUBSCRIPTION AGREEMENT" is defined in the recitals to this Agreement.
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"SUBSIDIARY" means, with respect to any party, any Person of which (x)
at least a majority of the securities or other interests having by their terms
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such Person is directly or indirectly
beneficially owned or controlled by such Person or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries, or (y) such
party or any Subsidiary of such party is a general partner of a partnership or a
manager of a limited liability company.
"SURVIVING CORPORATIONS" is defined in Section 2.1(b).
"TAX AUTHORITY" means the Internal Revenue Service and any other
domestic or foreign Governmental Authority responsible for the administration of
any Taxes.
"TAX RETURNS" means all originally filed or amended federal, state and
local tax returns, declarations, statements, certifications, notices, reports,
schedules, forms, claim for refund and information returns relating to Taxes,
including any schedule or attachment thereto.
"TAXES" means all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"TERMINATION DATE" means May 31, 2000.
"TRANSACTIONS" means the transactions contemplated by this Agreement.
"VOTING AGREEMENTS" means the Voting Agreements, dated as of the date
hereof, between Illinova and each of Nova, BG Holdings and Chevron under which
such parties have among other things agreed to support the DAC Merger upon the
terms and conditions set forth therein.
"VOTING AGREEMENT PARTIES" is defined in Section 5.21.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act
of 1988 including any regulations promulgated thereunder and any successor
statutes thereto.
ARTICLE II
THE MERGERS
Section 2.1 The Mergers.
(a) Upon the terms and subject to the conditions hereof, at
the Effective Time, DAC shall merge with and into Dynegy and the separate
corporate existence of DAC will thereupon cease and Dynegy will be the surviving
corporation in the DAC Merger (sometimes referred to as the "DAC SURVIVING
CORPORATION"). The DAC Merger will have the effects set forth in Section 259 of
the DGCL, including the DAC Surviving Corporation's succession to and assumption
of all rights and obligations of Dynegy and DAC.
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(b) Upon the terms and subject to the conditions hereof, at
the Effective Time, IAC shall merge with and into Illinova and the separate
corporate existence of IAC will thereupon cease and Illinova will be the
surviving corporation in the IAC Merger (sometimes referred to as the "IAC
SURVIVING CORPORATION" and, together with the DAC Surviving Corporation, the
"SURVIVING CORPORATIONS"). The IAC Merger will have the effects set forth in
Section 11.50 of the IBCA, including the IAC Surviving Corporation's succession
to and assumption of all rights and obligations of Illinova and IAC.
Section 2.2 Effective Time of the Mergers.
Subject to the provisions of this Agreement, as soon as practicable on
or after the Closing Date, the parties shall file articles or a certificate of
merger (individually, a "CERTIFICATE OF MERGER" and collectively, the
"CERTIFICATES OF MERGER") executed in accordance with the relevant provisions of
the DGCL and the IBCA and shall make all other filings or recordings required
under the DGCL and the IBCA, as applicable, to effect both Mergers. Each Merger
shall become effective at such time as is specified in the applicable
Certificate of Merger (the time at which both Mergers have become fully
effective is referred to as the "EFFECTIVE TIME").
Section 2.3 Tax and Accounting Treatment.
The parties intend that (i) the Mergers will constitute a contribution
of assets to Newco under Section 351 of the Code, (ii) the Mergers will be
accounted for as a purchase of Illinova by Dynegy for financial accounting
purposes, and (iii) the Mergers will be treated as a reverse acquisition of
Illinova by Dynegy whereby the consolidated group of corporations of which
Dynegy is the parent for purposes of Treasury Regulation Section 1.1502 is
considered remaining in existence pursuant to Treasury Regulation Section
1.1502-75(d)(3)(i).
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 Certificate/Articles of Incorporation.
(a) The certificate of incorporation of Dynegy in effect
immediately prior to the Effective Time will be amended and restated to be
substantially identical to the certificate of incorporation of DAC and such
amended and restated certificate of incorporation will be the certificate of
incorporation of the DAC Surviving Corporation at and after the Effective Time
until thereafter amended in accordance with its terms and the DGCL.
(b) The articles of incorporation of Illinova in effect
immediately prior to the Effective Time will be amended and restated to be
substantially identical to the articles of incorporation of IAC and such amended
and restated articles of incorporation will be the articles of incorporation of
the IAC Surviving Corporation at and after the Effective Time until thereafter
amended in accordance with their terms and the IBCA.
(c) The articles of incorporation of Newco as amended and in
effect as of the date hereof (which shall continue in effect (other than
amendments to the name of Newco) until the Effective Time), will continue to be
the articles of incorporation of Newco at and after the Effective Time until
thereafter amended in accordance with their terms and the IBCA; provided,
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however, each party acknowledges and agrees that the Board of Directors of Newco
will prior to the Effective Time adopt a resolution pursuant to Section 6.10 of
the IBCA to authorize and establish the Series A Convertible Preferred Stock.
Section 3.2 Bylaws.
(a) The bylaws of DAC Surviving Corporation shall be amended
at the Effective Time to be identical to the bylaws of DAC as in effect
immediately prior to the Effective Time will be the bylaws of the DAC Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by the certificate of incorporation of the DAC Surviving Corporation
and the DGCL.
(b) The bylaws of IAC as in effect immediately prior to the
Effective Time will be the bylaws of the IAC Surviving Corporation until
thereafter amended in accordance with their terms and as provided by the
articles of incorporation of the IAC Surviving Corporation and the IBCA.
(c) The bylaws of Newco as amended and in effect as of the
date hereof (which shall continue in effect until the Effective Time) will be
the bylaws of Newco until thereafter amended in accordance with their terms and
as provided by the articles of incorporation of the Newco and the IBCA.
Section 3.3 Directors and Officers.
(a) At and after the Effective Time, the directors and
officers of the DAC Surviving Corporation will be the same as the directors and
officers of Dynegy immediately prior thereto, until their respective successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the DAC Surviving Corporation's
certificate of incorporation and bylaws.
(b) At and after the Effective Time, the directors and
officers of the IAC Surviving Corporation will be the same as the directors and
officers of Illinova immediately prior thereto, until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the IAC Surviving
Corporation's articles of incorporation and bylaws.
(c) Newco's Board, Committees, Executive Officers.
(i) Prior to the Effective Time, (A) Illinova's Board
of Directors will select from among the current members of
Illinova's Board of Directors seven individuals (the "ILLINOVA
DIRECTOR NOMINEES") for nomination as directors of Newco,
which nominees will include Mr. Charles Bayless, and (B)
Dynegy's Board of Directors will select from among the current
members of Dynegy's Board of Directors seven individuals
(including three nominated by Chevron) (the "DYNEGY DIRECTOR
NOMINEES") for nomination as directors of Newco, which
nominees will include Mr. C.L. Watson and who shall serve as
Chairman of the Board of Directors if he is willing and able
to do so. Prior to the Effective Time, Illinova will cause
Newco and its directors to nominate and elect the Dynegy
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Director Nominees and the Illinova Director Nominees to be
directors of Newco for a term expiring at Newco's next annual
meeting of shareholders following the Effective Time, subject
to being renominated as a director at the discretion of
Newco's Board of Directors. If at any time prior to the
Effective Time, any Dynegy Director Nominee or Illinova
Director Nominee is unable to serve as a director at the
Effective Time, the Board of Directors that designated such
individual as provided herein will designate another
individual to serve in such individual's place.
(ii) The composition of the committees of Newco's
Board of Directors immediately subsequent to the Effective
Time (including the chairman thereof) will be as designated
prior to the Effective Time in a manner consistent with the
bylaws of Newco and reasonably acceptable to Illinova and
Dynegy with the objective being that the committees initially
have approximately equal representation from among the Dynegy
Director Nominees (each of which committee's members shall
include at least one nominee of Chevron) and the Illinova
Director Nominees; provided that the Nominating Committee of
Newco initially shall be constituted of three members of which
two will be independent members of, and will be designated by,
the Dynegy Board of Directors and one will be an independent
member of, and will be designated by, the Illinova Board of
Directors.
(iii) Effective as of the Effective Time, Newco's
Board of Directors shall elect the officers of Newco, provided
(A) C.L. Watson shall be elected President and Chief Executive
Officer if he is willing and able to serve, and (B) absent
cause, the remaining officers shall be elected by the Board of
Directors if so required by Newco's bylaws, upon the
recommendation of, or, if not required to be so elected, as
appointed by, the President and Chief Executive Officer in
each instance to serve until the earlier of such officer's
resignation or removal or until such officer's successor is
duly elected.
ARTICLE IV
CONVERSION OF SHARES
Section 4.1 Conversion of Dynegy Capital Stock.
As of the Effective Time, by virtue of the DAC Merger and without any
action on the part of DAC, Dynegy, Newco or the holders of any of the capital
stock described below:
(a) Each outstanding share of DAC Common Stock will be
converted into and become one share of common stock of the DAC Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and, except as provided in Section 4.1(b), shall constitute the only
shares of the DAC Surviving Corporation's capital stock.
(b) All shares of Dynegy Common Stock that are held in
Dynegy's treasury will be canceled and no cash, Newco capital stock or other
consideration shall be delivered in exchange therefor. All shares of Dynegy
Common Stock owned by Illinova, Newco or any of
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their Subsidiaries shall be canceled except for shares owned by BG Holdings, all
of which shall be converted into an aggregate of 613 shares of DAC Surviving
Corporation common stock, and continue to remain outstanding and shall not be
converted into the Common Stock Consideration as contemplated by Section 4.1(c).
(c) Subject to the provisions of Section 4.1(e), each
outstanding share of Dynegy Common Stock (other than shares of Dynegy Common
Stock to be treated in accordance with Section 4.1(b)) will be converted into
either (x) $16.50 in cash (the "CASH CONSIDERATION") or (y) 0.69 (the "EXCHANGE
RATIO") fully paid and non-assessable shares of Newco Common Stock (the "COMMON
STOCK CONSIDERATION" and, together with the Cash Consideration, the "AGGREGATE
COMMON STOCK CONSIDERATION"), in each case as the holder thereof shall have
elected or be deemed to have elected (an "ELECTION") in accordance with Section
4.1(d).
(d) (i) Subject to the procedures set forth in Section 4.4,
each holder of record of shares of Dynegy Common Stock
outstanding immediately prior to the Election Date who makes a
valid election to receive Cash Consideration pursuant to
Section 4.4 will be entitled to receive the Cash Consideration
in respect of such shares. In addition, each holder who would,
absent such an election, be entitled to receive a fractional
share of Newco Common Stock (the "DYNEGY DE MINIMIS SHARES")
shall be deemed to elect Cash Consideration to the extent of
such fractional shares. (Collectively the shares described in
the two preceding sentences shall be the "CASH ELECTION
SHARES.") All other holders of record of shares of Dynegy
Common Stock outstanding immediately prior to the Election
Date will be deemed to elect to receive the Common Stock
Consideration in respect of such shares.
(ii) Notwithstanding the foregoing, solely for
purposes of calculating the number of shares of Dynegy Common
Stock to receive Cash Consideration and Common Stock
Consideration under Section 4.1(e), the shares of Dynegy
Common Stock held by BG Holdings will be deemed to be Cash
Election Shares, even though as a result of Section 4.1(b),
its shares of Dynegy Common Stock will be converted into
shares of common stock of the DAC Surviving Corporation.
(e) Notwithstanding anything in this Agreement to the
contrary:
(i) the number of shares of Dynegy Common Stock to be
converted into the right to receive the Cash Consideration
will be equal to the Dynegy Cash Number, and
(ii) the number of shares of Dynegy Common Stock to
be converted into the right to receive the Common Stock
Consideration will be equal to (x) the number of shares of
Dynegy Common Stock outstanding immediately prior to the
Effective Time (ignoring for this purpose any Dynegy Common
Stock held as treasury shares) less (y) the Dynegy Cash
Number.
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(f) To the extent the aggregate number of Cash Election Shares
exceeds the Dynegy Cash Number, the Cash Consideration shall be prorated as
follows:
(i) all shares of Dynegy Common Stock in respect of
which Elections to receive Common Stock Consideration have
been made or deemed to have been made (the "STOCK ELECTION
SHARES") will be converted into the right to receive the
Common Stock Consideration; and
(ii) the Cash Election Shares will be converted into
the right to receive the Cash Consideration or the Common
Stock Consideration in the following manner:
(A) the Dynegy De minimis Shares shall be
converted into Cash Consideration;
(B) the number of Cash Election Shares,
other than Dynegy De minimis Shares, covered by each
Form of Election to be converted into Cash
Consideration will be determined by multiplying the
number of Cash Election Shares covered by such Form
of Election by a fraction, (I) the numerator of which
is the Dynegy Cash Number less the number of shares
of Dynegy Common Stock converted into cash pursuant
to clause (A) and (II) the denominator of which is
the aggregate number of Cash Election Shares less the
number of shares of Dynegy Common Stock converted
into cash pursuant to clause (A); and
(C) all Cash Election Shares not converted
into Cash Consideration in accordance with clause (A)
or (B) will be converted into the right to receive
the Common Stock Consideration.
(g) The Exchange Agent, in consultation with Illinova and
Dynegy, will make all computations to give effect to this Section 4.1.
(h) At the Effective Time, each outstanding share of Dynegy
Preferred Stock will be converted into the right to receive 0.69 shares of Newco
Class B Common Stock (the "PREFERRED STOCK CONSIDERATION").
(i) Notwithstanding the foregoing, (i) for each share of
Common Stock Consideration Nova otherwise would be entitled to receive, in lieu
thereof it shall receive that number of shares of Newco Series A Convertible
Preferred Stock equal to the quotient of the Illinova Average Price divided by
$50.00 and (ii) to the extent Chevron is entitled to receive Common Stock
Consideration, in lieu thereof it shall receive one share of Newco Class B
Common Stock for each share of Newco Common Stock it was to receive
(collectively, together with the Common Stock Consideration and the Preferred
Stock Consideration, the "AGGREGATE MERGER STOCK CONSIDERATION").
(j) Except as contemplated by Section 4.1(b), the Dynegy Stock
which is converted will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and the holder of a certificate
that, immediately prior to the Effective Time,
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represented outstanding shares of Dynegy Common Stock ("DYNEGY COMMON STOCK
CERTIFICATE") and Dynegy Preferred Stock ("DYNEGY PREFERRED STOCK CERTIFICATE"
and, together with the Dynegy Common Stock Certificates, the "DYNEGY STOCK
CERTIFICATES") will cease to have any rights with respect thereto, except the
right to receive, upon the surrender of (i) a Dynegy Common Stock Certificate,
the applicable Aggregate Common Stock Consideration to which such holder is
entitled pursuant to this Article IV, and (ii) a Dynegy Preferred Stock
Certificate, the Preferred Stock Consideration to which such holder is entitled
pursuant to this Article IV. Until surrendered as contemplated by this Section
4.1, each Dynegy Stock Certificate will be deemed, at any time after the
Effective Time, to represent only the right to receive upon such surrender the
applicable Aggregate Merger Consideration as contemplated by this Article IV.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time, the outstanding shares of Illinova Common Stock, Dynegy Common
Stock or Dynegy Preferred Stock have been changed into a different number of
shares or a different class because of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio and the Cash Consideration will be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(k) No dividends or other distributions with a record date
after the Effective Time will be paid to the holder of any unsurrendered Dynegy
Stock Certificate with respect to the Aggregate Merger Stock Consideration
represented thereby until the holder of record of such Dynegy Stock Certificate
has surrendered such Dynegy Stock Certificate in accordance with Section 4.5.
Subject to applicable laws, following surrender of any such Dynegy Stock
Certificates, there will be paid to the record holder of the certificate or
certificates representing the Aggregate Merger Stock Consideration issued in
exchange therefor, without interest, (i) the amount of dividends or other
distributions with a record date on or after the Effective Time theretofore paid
with respect to such Aggregate Merger Stock Consideration, and (ii) if the
payment date for any dividend or distribution payable with respect to such
Aggregate Merger Stock Consideration has not occurred prior to the surrender of
such Dynegy Stock Certificate, at the appropriate payment date therefor, the
amount of dividends or other distributions with a record date on or after the
Effective Time but prior to the surrender of such Dynegy Stock Certificate.
(l) All Aggregate Merger Consideration issued upon the
surrender of Dynegy Stock Certificates in accordance with the terms hereof will
be deemed to have been issued in full satisfaction of all rights pertaining to
such Dynegy Stock Certificates and the Dynegy Stock formerly represented
thereby, and from and after the Effective Time, there will be no further
registration of transfers effected on the stock transfer books of the DAC
Surviving Corporation of shares of Dynegy Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Dynegy
Stock Certificates are presented to the DAC Surviving Corporation for any
reason, they will be canceled and converted as provided in this Article IV.
Section 4.2 Conversion of Illinova Common Stock.
As of the Effective Time, by virtue of the IAC Merger and without any
action on the part of IAC, Illinova, or Newco, or the holders of any of the
capital stock described below:
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(a) Each outstanding share of IAC Common Stock will be
converted into and become one share of common stock of the IAC Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only shares of the IAC Surviving
Corporation's capital stock.
(b) All shares of Illinova Common Stock that are held in
Illinova's treasury and shares of Illinova Common Stock owned by Dynegy or any
of its Subsidiaries will be canceled and no cash, Newco capital stock or other
consideration shall be delivered in exchange therefor.
(c) At the Effective Time, each outstanding share of Illinova
Common Stock will be converted into one share of Newco Common Stock (the
"ILLINOVA CONSIDERATION").
(d) All Illinova Common Stock, when converted, will no longer
be outstanding and will automatically be canceled and retired and will cease to
exist, and the holder of a certificate that, immediately prior to the Effective
Time, represented outstanding shares of Illinova Common Stock ("ILLINOVA STOCK
CERTIFICATE") will cease to have any rights with respect thereto, except the
right to receive, upon the surrender of an Illinova Stock Certificate, the
Illinova Consideration to which such holder is entitled pursuant to this Article
IV. Until surrendered as contemplated by this Section 4.2, each Illinova Stock
Certificate will be deemed, at any time after the Effective Time, to represent
only the right to receive upon such surrender the Illinova Consideration as
contemplated by this Article IV.
(e) Holders of shares of Illinova Common Stock who have
complied with requirements for perfecting dissenters' rights under Section 11.70
of the IBCA will be entitled to exercise such rights with respect to the shares
as to which such rights have been perfected ("ILLINOVA DISSENTING SHARES"), to
the extent available under Section 11.70 of the IBCA. Illinova Dissenting Shares
shall be entitled to receive such consideration as will be determined under
Section 11.70 of the IBCA, and upon receipt of such consideration, such Illinova
Dissenting Shares will cease to be issued and outstanding. Shares of Illinova
Common Stock that are outstanding immediately prior to the Effective Time and
with respect to which dissenters' rights under the IBCA may be, but have not yet
been, perfected, will, if and when such dissenters' rights can no longer be
legally perfected or exercised under the IBCA, be converted into Newco Common
Stock.
(f) No dividends or other distributions with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Illinova Stock Certificate with respect to the Illinova Consideration
represented thereby until the holder of record of such Illinova Stock
Certificate has surrendered such Stock Certificate in accordance with Section
4.5. Subject to applicable laws, following surrender of any such Illinova Stock
Certificates, there will be paid to the record holder of the certificate or
certificates representing the Illinova Consideration issued in exchange
therefor, without interest, (i) the amount of dividends or other distributions
with a record date on or after the Effective Time theretofore paid with respect
to such Illinova Consideration, and (ii) if the payment date for any dividend or
distribution payable with respect to such Illinova Consideration has not
occurred prior to the surrender of such Illinova Stock Certificate, at the
appropriate payment date therefor, the amount of dividends or other
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distributions with a record date on or after the Effective Time but prior to the
surrender of such Illinova Stock Certificate.
(g) All Newco Common Stock issued upon the surrender of
Illinova Stock Certificates in accordance with the terms hereof will be deemed
to have been issued in full satisfaction of all rights pertaining to such
Illinova Stock Certificates and the Illinova Common Stock formerly represented
thereby, and from and after the Effective Time, there will be no further
registration of transfers effected on the stock transfer books of the IAC
Surviving Corporation of shares of Illinova Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Illinova
Stock Certificates are presented to the IAC Surviving Corporation for any
reason, they will be canceled and exchanged as provided in this Article IV.
Section 4.3 Conversion of Newco Capital Stock.
At the Effective Time, by virtue of the Mergers and without any action
on the part of IAC, DAC, or Newco, or the holders of any of the capital stock
described below:
(a) Each outstanding share of Newco Common Stock issued and
outstanding immediately prior to the Effective Time will be canceled and no cash
or other consideration will be delivered in exchange therefor.
(b) Each outstanding share of Series A Convertible Preferred
Stock of Newco will remain issued and outstanding.
Section 4.4 Dynegy Common Stock Procedures.
(a) Newco shall authorize one or more transfer agent(s)
reasonably acceptable to Dynegy to receive Elections and to act as Exchange
Agent hereunder (the "EXCHANGE AGENT") with respect to each Merger.
(b) Newco shall prepare, for use by Dynegy's Common
Stockholders in surrendering Certificates, a form (the "FORM OF ELECTION")
pursuant to which each Dynegy Common Stockholder may make an Election. The Form
of Election shall be mailed to the Dynegy Common Stockholders as of the record
date for the Dynegy Special Meeting and shall accompany the Proxy
Statement/Prospectus.
(c) Dynegy shall use all reasonable efforts to make the Form
of Election available to all Persons who become Dynegy Common Stockholders of
record between such record date and the Election Date.
(d) An Election shall have been properly made only if the
Exchange Agent shall have received, by 5:00 p.m., Eastern time, two business
days (the "ELECTION DATE") prior to the Effective Time, or at such other time as
Dynegy and Illinova agree, a Form of Election properly completed and signed and
accompanied by the Dynegy Common Stock Certificate or Certificates to which such
Form of Election relates (or by an appropriate guarantee of delivery of such
Certificate or Certificates as set forth in such Form of Election from a member
of any registered national securities exchange or of the National Association of
Securities Dealers, Inc.,
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or a commercial bank or trust company having an office or correspondent in the
United States, provided such Certificate or Certificates are in fact delivered
by the time set forth in such guarantee of delivery).
(e) Any Dynegy Common Stockholder may at any time prior to the
Election Date change such holder's Election by written notice received by the
Exchange Agent at or prior to the Election Date accompanied by a properly
completed Form of Election. Newco shall have the right in its sole discretion to
permit changes in Elections after the Election Date.
(f) Any Dynegy Common Stockholder may at any time prior to the
Election Date revoke such holder's Election by written notice received by the
Exchange Agent at or prior to the Election Date or by withdrawal prior to the
Election Date of such holder's Certificates previously deposited with the
Exchange Agent. Any revocation of an Election may be withdrawn by notice of such
withdrawal delivered at or prior to the Election Date. Any Dynegy Common
Stockholder who has deposited a Dynegy Common Stock Certificate or Certificates
with the Exchange Agent shall have the right to withdraw such Certificates by
written notice received by the Exchange Agent at or prior to the Election Date.
Newco shall obtain from the Exchange Agent an agreement to return all Forms of
Election and accompanying Dynegy Common Stock Certificate or Certificates to the
Dynegy Common Stockholders submitting the same if this Agreement is terminated
in accordance with its terms.
(g) Newco, with Dynegy's consent, shall have the right to make
rules, not inconsistent with this Agreement's terms, governing the validity of
Forms of Election, the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Section 4.1, the issuance and
delivery of certificates for Newco Common Stock into which shares of Dynegy
Common Stock are converted in the DAC Merger, and the payment for shares of
Dynegy Common Stock converted into the right to receive the Cash Consideration
in the DAC Merger.
Section 4.5 Surrender and Payment.
(a) At or prior to the Effective Time, Newco will deposit with
the Exchange Agent for the benefit of the holders of Dynegy Stock, for exchange
in accordance with this Section 4.5, the following consideration (the "AGGREGATE
MERGER CONSIDERATION"): (i) certificates representing shares of Newco Common
Stock representing the applicable portion of the Aggregate Common Stock
Consideration, (ii) certificates representing shares of Newco Class B Common
Stock representing the Preferred Stock Consideration and a portion of the
Aggregate Common Stock Consideration to be paid in accordance with Section
4.1(i), (iii) certificates representing Series A Convertible Preferred Stock of
Newco representing the applicable portion of the Aggregate Common Stock
Consideration to be paid in accordance with Section 4.1(i) and (iv) the Cash
Consideration. At or prior to the Effective Time, Newco will deposit with the
Exchange Agent for the benefit of the holders of Illinova Common Stock, for
exchange in accordance with this Section 4.5, certificates representing shares
of Newco Common Stock representing the Illinova Consideration. The stock
certificates and cash described above are referred to as the "EXCHANGE FUND."
The Exchange Agent, pursuant to irrevocable instructions, will deliver the
Aggregate Merger Consideration and the Illinova Consideration out of the
Exchange Fund. No interest will be paid or will accrue on any cash amount
payable upon the
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surrender of any Dynegy Stock Certificates or Illinova Stock Certificates.
Except as contemplated by Section 4.5(d), the Exchange Fund shall not be used
for any other purpose.
(b) Promptly after the Effective Time, but not later than five
business days thereafter, Newco will send, or will cause the Exchange Agent to
send, to each holder of a Dynegy Stock Certificate or Illinova Stock Certificate
a letter of transmittal and instructions for use in effecting the exchange of
such Dynegy Stock Certificates or Illinova Stock Certificates for certificates
representing the Aggregate Merger Consideration or the Illinova Consideration
owing to such holder.
(c) If any shares of Newco Common Stock are to be issued
and/or cash to be paid to a Person other than the registered holder of the
Dynegy Stock Certificate or Certificates or Illinova Stock Certificate or
Certificates surrendered in exchange therefor, it will be a condition to such
issuance that the Dynegy or Illinova Stock Certificate or Certificates so
surrendered will be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such issuance will pay to the Exchange
Agent any transfer or other taxes required as a result of such issuance to a
Person other than the registered holder or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(d) Any Aggregate Merger Consideration or Illinova
Consideration that remains unclaimed by the holders of Dynegy Stock or Illinova
Common Stock one year after the Effective Time will be returned to Newco, upon
demand, and any such holder who has not exchanged such holder's Dynegy or
Illinova Stock Certificates in accordance with this Section 4.5 prior to that
time will thereafter look only to Newco, as a general creditor thereof, to
exchange such Dynegy or Illinova Stock Certificates or to pay amounts to which
they are entitled pursuant to Section 4.1 and Section 4.2. If any Dynegy or
Illinova Stock Certificates are not surrendered within six years after the
Effective Time, the Aggregate Merger Consideration or Illinova Consideration, as
the case may be, issuable in respect of such Dynegy or Illinova Stock
Certificates, and the amount of dividends and other distributions, if any, which
have become payable and which thereafter become payable on the Aggregate Merger
Consideration or Illinova Consideration evidenced by such Dynegy or Illinova
Stock Certificates as provided herein will, to the extent permitted by
applicable law, become the property of Newco, free and clear of all claims or
interest of any Person previously entitled thereto. Notwithstanding the
foregoing, none of Newco or either Surviving Corporation will be liable to any
holder of Dynegy or Illinova Stock Certificates for any amount paid, or
Aggregate Merger Stock Consideration or Illinova Consideration, cash or
dividends delivered, to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(e) If any Dynegy or Illinova Stock Certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Dynegy or Illinova Stock Certificate to be lost, stolen or
destroyed and, if required by Newco, the posting by such Person of a bond in
such reasonable amount as Newco may direct as indemnity against any claim that
may be made against it with respect to such Dynegy or Illinova Stock
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Dynegy or Illinova Stock Certificate the Aggregate Merger
Consideration or Illinova Consideration, as the case may be, and, if applicable,
cash and unpaid dividends and other distributions on any Aggregate
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Merger Consideration or Illinova Consideration, as the case may be, deliverable
in respect thereof pursuant to this Agreement.
Section 4.6 Stock Options.
(a) At the Effective Time, automatically and without any
action on the part of either Surviving Corporation, Newco or any holder of
outstanding employee or director stock options of Dynegy outstanding at the
Effective Time (the "DYNEGY STOCK OPTIONS"), Newco will assume each Dynegy Stock
Option and it will become an option to purchase that number of shares of Newco
Common Stock obtained by multiplying the number of shares of Dynegy Common Stock
issuable upon the exercise of such option by the Exchange Ratio at an exercise
price per share equal to the per share exercise price of such Dynegy Stock
Option divided by the Exchange Ratio and otherwise upon the same terms and
conditions as such outstanding options to purchase Dynegy Common Stock;
provided, however, in the case of any Dynegy Stock Option to which Section 421
of the Code applies because of the qualifications under Section 422 or 423 of
the Code, the exercise price, the number of shares of Newco Common Stock
purchasable pursuant to such Dynegy Stock Option and the terms and conditions of
exercise of such Dynegy Stock Option will comply with Section 424(a) of the
Code.
(b) At the Effective Time, automatically and without any
action on the part of either Surviving Corporation, Newco or any holder of
employee or director stock options of Illinova outstanding at the Effective Time
(the "ILLINOVA STOCK OPTIONS" and, together with the Dynegy Stock Options, the
"PREDECESSOR COMPANY STOCK OPTIONS"), Newco will assume each Illinova Stock
Option and it will become an option to purchase one share of Newco Common Stock
for each share of Illinova Common Stock issuable upon the exercise of such
Illinova Stock Option and otherwise upon the same terms and conditions as such
outstanding options to purchase Illinova Common Stock; provided, however, in the
case of any option to which Section 421 of the Code applies because of the
qualifications under Section 422 or 423 of the Code, the exercise price, the
number of shares purchasable pursuant to such Illinova Stock Option and the
terms and conditions of exercise of such Illinova Stock Option will comply with
Section 424(a) of the Code.
(c) At the Effective Time, the Dynegy Stock Options and
Illinova Stock Options will vest and become immediately exercisable to the
extent set forth in Schedule 4.6(c). At the Effective Time, each outstanding
award (including restricted stock, phantom stock, stock equivalents and stock
units) ("AWARDS") under any employee incentive or benefit plans, programs or
arrangements and non-employee director plans currently maintained by Dynegy or
Illinova which provide for grants of equity-based awards shall be amended or
converted into a similar instrument of Newco, in each case with such adjustments
to the terms of such Awards, such that the Awards become non-forfeitable to the
extent as determined by Illinova's Board of Directors or Dynegy's Board of
Directors, as the case may be, as of the Effective Time, and otherwise as are
appropriate to preserve the value inherent in such Awards with no material
detrimental effects on the holders thereof. The other terms of each Award, and
the plans or agreements under which they were issued, will continue to apply in
accordance with their terms.
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(d) Newco will take all corporate actions necessary to reserve
for issuance a sufficient number of shares of Newco Common Stock for delivery
upon exercise of Predecessor Company Stock Options assumed by Newco pursuant to
Section 4.6(a) and Section 4.6(b).
(e) As promptly as practicable after the Effective Time, Newco
will file a Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Newco Common Stock subject to
Predecessor Company Stock Options and will use all reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(f) As of the Effective Time, Newco will assume each Dynegy
and Illinova stock option plan providing for the issuance or grant of options
with such amendments thereto as may be required to reflect the Mergers,
including the substitution of Newco Common Stock for Dynegy Common Stock and
Illinova Common Stock, as applicable, thereunder; provided that after the
Effective Time, no more options or other awards will be issued under any such
plans.
Section 4.7 Closing.
The closing (the "CLOSING") of the Transactions will take place at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 711 Louisiana Street,
Suite 1900, Houston, Texas, on the second business day (the "CLOSING DATE")
after which all of the conditions listed in Article IX are satisfied or waived,
or at such other date, place and time as Illinova and Dynegy otherwise agree.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DYNEGY
Except as listed in the disclosure schedule delivered to Newco
contemporaneously with the execution hereof (the "DYNEGY DISCLOSURE SCHEDULE"),
Dynegy represents and warrants to Illinova and Newco as follows:
Section 5.1 Organization and Qualification.
(a) Dynegy is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of Dynegy's properties or the nature of its
business makes such qualification necessary, except in jurisdictions, if any,
where the failure to be so qualified would not result in a Dynegy Material
Adverse Effect. Dynegy has all requisite corporate or other power and authority
to own, use or lease its properties and to carry on its business as it is now
being conducted. Dynegy has made available to Illinova a complete and correct
copy of its certificate of incorporation and bylaws, each as amended to date,
and Dynegy's certificate of incorporation and bylaws as so made available are in
full force and effect. Dynegy is not in default in the performance, observation
or fulfillment of any provision of its certificate of incorporation or bylaws.
(b) Each of Dynegy's Subsidiaries is a Person duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, is duly qualified to do
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business as a foreign Person and is in good standing in each jurisdiction in
which the character of such Subsidiary's properties or the nature of its
business makes such qualification necessary, except in jurisdictions, if any,
where the failure to be so qualified would not result in a Dynegy Material
Adverse Effect. Except as disclosed in Section 5.1(b) of the Dynegy Disclosure
Schedule, none of Dynegy or such Persons is a "public utility company," a
"holding company," a "subsidiary company" or an "affiliate" of any public
utility company or holding company within the meaning of Sections 2(a)(5),
2(a)(7), 2(a)(8), or 2(a)(11) of PUHCA. Each of Dynegy's Subsidiaries has the
requisite corporate or other similar power and authority to own, use or lease
its properties and to carry on its business as it is now being conducted and as
it is now proposed to be conducted. Dynegy has made available to Illinova a
complete and correct copy of the certificate of incorporation and bylaws (or
similar organizational documents) of each of Dynegy's Subsidiaries, each as
amended to date, and each certificate of incorporation and bylaws (or similar
organizational documents) as so delivered is in full force and effect. No
Subsidiary of Dynegy is in default in the performance, observation or
fulfillment of any provision of its articles of incorporation or bylaws (or
similar organizational documents). Except as listed on Section 5.1(b) of the
Dynegy Disclosure Schedule, other than Dynegy's Subsidiaries, Dynegy does not
beneficially own or control, directly or indirectly, 5% or more of any class of
equity or similar securities of any Person.
Section 5.2 Capitalization.
(a) The authorized capital stock of Dynegy consists of
400,000,000 shares of Dynegy Common Stock and 50,000,000 shares of preferred
stock, par value $.01 per share, of which 8,000,000 shares have been designated
and issued as the Series A Participating Preferred Stock (the "DYNEGY PREFERRED
STOCK"). At May 12, 1999, 152,864,662 shares of Dynegy Common Stock were issued
and outstanding. As of March 31, 1999, (i) 154,086,298 shares of Dynegy Common
Stock were issued and outstanding, (ii) 7,815,363 shares of Dynegy Preferred
Stock were issued and outstanding, (iii) options to acquire 18,175,186.25 shares
of Dynegy Common Stock were outstanding under all stock option plans and
agreements of Dynegy or its Subsidiaries, and (iv) warrants to purchase 6,228
shares of Dynegy Common Stock were outstanding. All such shares are duly
authorized, validly issued, fully paid and nonassessable, and free of preemptive
rights. Except as set forth above, and except for this Agreement, as set forth
on Section 5.2(a) of the Dynegy Disclosure Schedule, and pursuant to the terms
of the Dynegy Preferred Stock, there are no outstanding subscriptions, options,
rights, warrants, convertible securities, stock appreciation rights, phantom
equity, or other agreements or commitments obligating Dynegy to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of its capital stock of
any class.
(b) Except as listed in Section 5.2(b) of the Dynegy
Disclosure Schedule, Dynegy is the record or beneficial owner of all of the
outstanding equity interests of each Dynegy Subsidiary, there are no irrevocable
proxies with respect to any such equity interests, and no equity interests of
any Dynegy Subsidiary are or may become required to be issued because of any
options, warrants, rights to subscribe to, calls or commitments relating to, or
securities or rights convertible into or exchangeable or exercisable for, equity
interests of any Dynegy Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which Dynegy or any Dynegy Subsidiary is or
may be bound to issue additional equity interests of any Dynegy Subsidiary or
securities convertible into or exchangeable or exercisable for any
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such equity interests. Except as listed in Section 5.2(b) of the Dynegy
Disclosure Schedule or with respect to equity interests in Subsidiaries of
Dynegy the sole assets of which are Dynegy Unregulated Facilities and whose
equity has been pledged or otherwise encumbered as a condition of non-recourse
financing of Dynegy Unregulated Facilities, all of such equity interests are
duly authorized, validly issued, fully paid and nonassessable and Dynegy owns
them free and clear of all liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind (collectively, the "LIENS").
Section 5.3 Authority.
Dynegy has full corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it is or will be a party
and, subject to obtaining the Dynegy Stockholders' Approval under Section 8.12,
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
Dynegy is or will be a party, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
Dynegy's Board of Directors, and no other corporate proceedings on Dynegy's part
are necessary to authorize this Agreement and the Ancillary Agreements to which
Dynegy is or will be a party or to consummate the transactions contemplated
hereby or thereby, other than the Dynegy Stockholders' Approval as contemplated
by Section 8.12. This Agreement has been, and the Ancillary Agreements to which
Dynegy is or will be a party are, or upon execution will be, duly and validly
executed and delivered by Dynegy and, assuming the due authorization, execution
and delivery hereof and thereof by the other parties hereto and thereto, is, or
upon execution will be Enforceable against Dynegy.
Section 5.4 Consents and Approvals; No Violation.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by Dynegy of its obligations hereunder will
not:
(a) subject to obtaining the Dynegy Stockholders' Approval as
contemplated by Section 8.12, conflict with any provision of Dynegy's
certificate of incorporation or bylaws or the certificates of incorporation or
bylaws (or other similar organizational documents) of any of its Subsidiaries;
(b) subject to obtaining the Dynegy Stockholders' Approval as
contemplated by Section 8.12, require any consent, waiver, approval, order,
authorization or permit of, or registration, filing with or notification to:
(i) any Governmental Authority, except for (x)
required regulatory approvals listed in Section 5.4(b) of the
Dynegy Disclosure Schedule and (y) approvals that are
ministerial in nature and are customarily obtained from
Governmental Authorities after the Effective Time in
connection with transactions of the same nature as are
contemplated hereby ("CUSTOMARY POST-CLOSING CONSENTS"), or
(ii) except as listed in Section 5.4(b) of the Dynegy
Disclosure Schedule, any third party other than a Governmental
Authority, other than such
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non-Governmental Authority third party consents, waivers,
approvals, orders, authorizations and permits that would not
(x) result in a Dynegy Material Adverse Effect, (y) impair the
ability of Dynegy or any of its Subsidiaries, as the case may
be, to perform its obligations under this Agreement or any
Ancillary Agreement or (z) prevent the consummation of any of
the transactions contemplated hereby and thereby;
(c) result in any violation of or the breach of or constitute
a default (with notice or lapse of time or both) under, or give rise to any
right of termination, purchase, first refusal, cancellation or acceleration or
guaranteed payments or a loss of a material benefit under, any provisions of any
note, lease, mortgage, license, agreement or other instrument or obligation to
which Dynegy or any of its Subsidiaries is a party or by which Dynegy or any of
its Subsidiaries or any of their respective properties or assets may be bound,
except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) result in a Dynegy Material Adverse Effect, (ii) materially impair the
ability of Dynegy or any of its Subsidiaries to perform its obligations under
this Agreement or any Ancillary Agreement or (iii) prevent the consummation of
any of the transactions contemplated hereby and thereby. Solely for this Section
5.4(c), an obligation by Dynegy to dispose of (and resulting disposal of) any of
its ownership interests in any or all of the Dynegy Qualifying Facilities will
not be deemed to be a Dynegy Material Adverse Effect;
(d) violate the provisions of any material order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Dynegy
or any Subsidiary of Dynegy;
(e) result in the creation of any Lien upon material
properties or assets or on any shares of capital stock of Dynegy or its
Subsidiaries under any agreement or instrument to which Dynegy or any of its
Subsidiaries is a party or by which Dynegy or any of its Subsidiaries or any of
their properties or assets is bound; or
(f) result in any holder of any securities of Dynegy being
entitled to appraisal, dissenters' or similar rights.
Section 5.5 Dynegy SEC Reports.
Dynegy has filed with the SEC, and has made available to Illinova, true
and complete copies of each form, registration statement, report, schedule,
proxy or information statement and other document (including exhibits and
amendments thereto), including its Annual Reports to Stockholders incorporated
by reference in certain of such reports, required to be filed with the SEC since
December 31, 1995 under the Securities Act or the Exchange Act (collectively,
the "DYNEGY SEC REPORTS"). As of the respective dates that such Dynegy SEC
Reports were filed, each Dynegy SEC Report, including any financial statements
or schedules included therein, (a) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No event has
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occurred between the date of the most recent Dynegy SEC Report filed and the
date hereof that would require the filing of a Current Report on Form 8-K.
Section 5.6 Dynegy Financial Statements.
Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Dynegy (including any related notes
and schedules) included (or incorporated by reference) in its Annual Reports on
Form 10-K for each of the three fiscal years ended December 31, 1996, 1997 and
1998, and any subsequent Dynegy SEC Report, have been prepared from, and are in
accordance with, the books and records of Dynegy and its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the SEC's published rules and regulations, have been
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto and subject, in the case of quarterly financial
statements, to normal and recurring year-end adjustments) and fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Dynegy and its
Subsidiaries as of the date thereof and the consolidated results of operations
and cash flows (and changes in financial position, if any) of Dynegy and its
Subsidiaries for the periods presented therein (subject to normal year-end
adjustments and the absence of financial footnotes in the case of any unaudited
interim financial statements).
Section 5.7 Absence of Undisclosed Liabilities.
Except for such liabilities or obligations as (i) were accrued or fully
reserved against in the consolidated balance sheet of Dynegy at March 31, 1999
(the "DYNEGY BALANCE SHEET"), (ii) are of a normally recurring nature and were
incurred after March 31, 1999 (the "DYNEGY BALANCE SHEET DATE") in the ordinary
course of business consistent with past practice or (iii) as described in the
Dynegy Disclosure Schedule or in the Dynegy SEC Reports, neither Dynegy nor any
of its Subsidiaries has any liabilities or obligations of any nature (matured or
unmatured, fixed or contingent) which are, individually or in the aggregate, of
a nature required to be disclosed on the face of a balance sheet prepared in
accordance with GAAP and are material to the business of Dynegy and its
Subsidiaries, taken as a whole. As of the Dynegy Balance Sheet Date, there were
no material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) which are not adequately provided for in the Dynegy Balance Sheet as
required by said Statement No. 5.
Section 5.8 Absence of Certain Changes.
Except as contemplated by this Agreement, as listed in Section 5.8 of
the Dynegy Disclosure Schedule or as disclosed in the Dynegy SEC Reports, since
the Dynegy Balance Sheet Date, (a) Dynegy and its Subsidiaries have conducted
their business in all material respects in the ordinary course consistent with
past practices, (b) there has not been any change or development, or combination
of changes or developments that, individually or in the aggregate, would have a
Dynegy Material Adverse Effect, (c) other than as would be permitted by Section
7.1(b), there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
Dynegy, or any repurchase, redemption
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or other acquisition by Dynegy or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
Dynegy or any of its Subsidiaries, (d) there has not been any amendment of any
term of any outstanding security of Dynegy or any of its Subsidiaries, and (e)
there has not been any change in any method of accounting or accounting practice
by Dynegy or any of its Subsidiaries, except for any such change required
because of a concurrent change in GAAP or to conform a Subsidiary's accounting
policies and practices to those of Dynegy.
Section 5.9 Taxes.
(a) Except as listed in Section 5.9(a) of the Dynegy
Disclosure Schedule and for matters that would not have a Dynegy Material
Adverse Effect:
(i) Dynegy and each of its Subsidiaries have timely
filed or will file or cause to be timely filed, all material
Tax Returns required by applicable law prior to or as of the
Closing Date. All such Tax Returns and amendments thereto are
or will be true, complete and correct in all material
respects;
(ii) Dynegy and each of its Subsidiaries have paid
whether or not shown on any Tax Return, or where payment is
not yet due, have established, an adequate accrual for the
payment of all material Taxes and no claim has been made by
any Tax Authority in a jurisdiction where Dynegy or any of its
Subsidiaries do not file tax returns that it is or may be
subject to taxation in that jurisdiction;
(iii) No Audit is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, Dynegy or any
of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of Dynegy or any of its Subsidiaries
that if raised with respect to any other period not so audited
could be expected to result in a material proposed deficiency
for any period not so audited. No material deficiency or
adjustment for any Taxes has been threatened, proposed,
asserted or assessed against Dynegy or any of its
Subsidiaries. There are no liens for Taxes upon the assets of
Dynegy or any of its Subsidiaries, except liens for current
Taxes not yet delinquent;
(iv) Neither Dynegy nor any of its Subsidiaries has
given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes or have executed
powers of attorney with respect to Tax matters, which will be
outstanding as of the Closing Date; and
(v) Section 5.9(a) of the Dynegy Disclosure Schedule
lists all material Tax sharing, Tax indemnity, or similar
agreements to which Dynegy or any of its Subsidiaries is
party, is bound by, or have any obligation or liability for
Taxes.
(b) Section 5.9(b) of the Dynegy Disclosure Schedule lists (1)
the name of each employee, former employee or other person who is or was
providing services to Dynegy or any Dynegy Subsidiaries and who, in connection
with the Transactions, will receive, or will or may become entitled to receive
in the future or upon termination of such person's employment,
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any payments (including accelerated vesting of Dynegy Options or other
equity-based awards) which could reasonably be expected to constitute "excess
parachute payments" with respect to such person within the meaning of Section
280G of the Code ("EXCESS PARACHUTE PAYMENTS"), (2) with respect to each such
person, the maximum amount of Excess Parachute Payments which could reasonably
be expected to be so received (determined in accordance with proposed
regulations of the IRS promulgated under Section 280G of the Code), and (3) with
respect to each person who is entitled to receive a "gross-up payment" in
respect of excise taxes imposed on such Excess Parachute Payments under Section
4999 of the Code, a reasonable estimate of the amount of such gross-up payment.
(c) The Code Section 338(h)(10) election made in connection
with the purchase of Destec Energy, Inc. is effective for both Federal and State
income tax purposes to cause the tax basis of the assets acquired to reflect
allocated purchase price. Dynegy and each of its Subsidiaries including Destec
Energy, Inc. have timely filed or caused to be filed all elections and forms
required to be filed to make such election valid, such acquisition qualified for
elective treatment under Code Section 338(h)(10), and to its knowledge the
allocation of purchase price among the assets was proper.
Section 5.10 Litigation.
Except as disclosed in the Dynegy SEC Reports or Section 5.10 of the
Dynegy Disclosure Schedule, (i) as of the date hereof, there is no Action (or
group of related Actions) pending or, to Dynegy's knowledge, threatened against
or directly affecting Dynegy, any Subsidiaries of Dynegy or any of the directors
or officers of Dynegy or any of its Subsidiaries in their capacity as such, that
could reasonably be expected to result in an adverse judgment in excess of
$1,000,000; and (ii) there is no Action (or group of related Actions) pending
or, to Dynegy's knowledge, threatened against or directly affecting Dynegy, any
Subsidiaries of Dynegy or any of the directors or officers of Dynegy or any of
its Subsidiaries in their capacity as such, that could reasonably be expected to
have a Dynegy Material Adverse Effect, if adversely determined. Neither Dynegy
nor any of its Subsidiaries, nor any officer, director or employee of Dynegy or
any of its Subsidiaries, has been permanently or temporarily enjoined by any
Order from engaging in or continuing any conduct or practice in connection with
the business, assets or properties of Dynegy or such Subsidiary, nor, to the
knowledge of Dynegy, is Dynegy, any Subsidiary or any officer, director or
employee of Dynegy or its Subsidiaries under investigation by any Governmental
Authority. Except as disclosed in the Dynegy SEC Reports or in Section 5.10 of
the Dynegy Disclosure Schedule, there is no Order or order of any arbitrator or
mediator enjoining or requiring Dynegy or any of its Subsidiaries to take any
action of any kind with respect to its business, assets or properties.
Notwithstanding the foregoing, no representation or warranty in this Section
5.10 is made with respect to Environmental Laws, which are covered in Section
5.12.
Section 5.11 Employee Benefit Plans; ERISA.
(a) Section 5.11(a) of the Dynegy Disclosure Schedule lists
all employee benefit plans or arrangements of any type (including plans
described in Section 3(3) of ERISA and all bonus plans, stock option, stock
purchase, restricted stock, incentive, deferred compensation, and all
employment, termination, severance or other arrangements), sponsored,
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maintained or contributed to by Dynegy or any trade or business, whether or not
incorporated, which together with Dynegy would be deemed a "single employer"
under Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA (a
"DYNEGY ERISA AFFILIATE") within six years prior to the Effective Time ("DYNEGY
BENEFIT PLANS").
(b) With respect to each Dynegy Benefit Plan: (i) if intended
to qualify under Section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination letter
from the Internal Revenue Service with respect to its qualification, and its
related trust has been determined to be exempt from tax under Section 501(a) of
the Code and, to Dynegy's knowledge, nothing has occurred since the date of such
letter to adversely affect such qualification or exemption; (ii) each such plan
has been administered in substantial compliance with its terms and applicable
law, except for any noncompliance with respect to any such plan that could not
reasonably be expected to result in a Dynegy Material Adverse Effect; (iii) (x)
as of the date hereof, neither Dynegy nor any Dynegy ERISA Affiliate has engaged
in, and Dynegy and each Dynegy ERISA Affiliate do not have any knowledge of any
Person that has engaged in, any transaction or acted or failed to act in any
manner that would subject Dynegy or any Dynegy ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA in excess of $1,000,000; and (y)
neither Dynegy nor any Dynegy ERISA Affiliate has engaged in, and Dynegy and
each Dynegy ERISA Affiliate do not have any knowledge of any Person that has
engaged in, any transaction or acted or failed to act in any manner that would
subject Dynegy or any Dynegy ERISA Affiliate to any liability for a breach of
fiduciary duty under ERISA that could reasonably be expected to result in a
Dynegy Material Adverse Effect; (iv) no disputes or Actions are pending, or, to
the knowledge of Dynegy or any Dynegy ERISA Affiliate, threatened that could
reasonably be expected to result in a material liability that would have a
Dynegy Material Adverse Effect; (v) neither Dynegy nor any Dynegy ERISA
Affiliate has engaged in, and Dynegy and each Dynegy ERISA Affiliate does not
have any knowledge of any Person that has engaged in, any transaction in
violation of Section 406(a) or (b) of ERISA or Section 4975 of the Code for
which no exemption exists under Section 408 of ERISA or Section 4975(c) of the
Code or Section 4975(d) of the Code that could reasonably be expected to result
in a Dynegy Material Adverse Effect; (vi) there have been no "reportable events"
under Section 4043 of ERISA for which the 30 day notice requirement of ERISA has
not been waived by the Pension Benefit Guaranty Corporation (the "PBGC"); (vii)
all contributions due have been made on a timely basis (within, where
applicable, the time limit established under Section 302 of ERISA or Code
Section 412); (viii) no notice of intent to terminate such plan has been given
under Section 4041 of ERISA and no Action has been instituted under Section 4042
of ERISA to terminate such plan; (ix) except for defined benefit plans (if
applicable), such plan may be terminated on a prospective basis without any
continuing liability for benefits other than benefits accrued to the date of
such termination; and (x) neither Dynegy nor any Dynegy ERISA Affiliate has
incurred any liability under Title IV of ERISA other than liabilities that would
not cause a Dynegy Material Adverse Effect. All contributions made or required
to be made under any Dynegy Benefit Plan have been made on or before their
required due date and all such contributions meet the requirements for
deductibility under the Code, and all contributions which are required and which
have not been made have been properly recorded on the books of Dynegy or a
Dynegy ERISA Affiliate.
(c) No Dynegy Benefit Plan is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of
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the Code). No event has occurred with respect to Dynegy or a Dynegy ERISA
Affiliate which could subject Dynegy to any liability or Lien with respect to
any Dynegy Benefit Plan or any employee benefit plan described in Section 3(3)
of ERISA maintained, sponsored or contributed to by a Dynegy ERISA Affiliate
under ERISA or the Code.
(d) Except as listed in Section 5.11(d) of the Dynegy
Disclosure Schedule, no employee of Dynegy or any of its Subsidiaries is covered
by any severance plan or similar arrangement.
(e) Except as listed in Section 5.11(e) of the Dynegy
Disclosure Schedule, none of the Dynegy Benefit Plans that are "welfare plans,"
within the meaning of Section 3(1) of ERISA, provides for any benefits payable
to or on behalf of any employee or director after termination of employment or
service, as the case may be, other than elective continuation required pursuant
to Code Section 4980B or coverage which expires at the end of the calendar month
following such event. Each such plan that is a "group health plan" (as defined
in Code Section 4980B(g)) has been operated in compliance with Code Section
4980B at all times, except for any non-compliance that would not, or insofar as
reasonably can be determined could not, give rise to a Dynegy Material Adverse
Effect.
Section 5.12 Environmental Liability.
Except as listed in Section 5.12 of the Dynegy Disclosure Schedule:
(a) The businesses of Dynegy and its Subsidiaries have been
and are operated in material compliance with all Environmental Laws, except for
any violations which could not reasonably be expected to result in a Dynegy
Material Adverse Effect.
(b) Neither Dynegy nor any of its Subsidiaries has caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances at any of its properties or facilities, except for any such action
which could not reasonably be expected to have a Dynegy Material Adverse Effect
and, to Dynegy's knowledge, no such action has occurred at any property or
facility owned, leased or operated by Dynegy or any of its Subsidiaries, except
for any such action that could not reasonably be expected to have a Dynegy
Material Adverse Effect.
(c) Neither Dynegy nor any of its Subsidiaries has received
any written notice from any Governmental Authority or third party or, to the
knowledge of Dynegy, any other written communication alleging or concerning any
material violation by Dynegy or any of its Subsidiaries of, or responsibility or
liability of Dynegy or any of its Subsidiaries under, any Environmental Law
which could reasonably be expected to have a Dynegy Material Adverse Effect.
There are no pending, or to Dynegy's knowledge, threatened Actions with respect
to the businesses or operations of Dynegy or any of its Subsidiaries alleging or
concerning any violation of or responsibility or liability under any
Environmental Law that, if adversely determined, could reasonably be expected to
have a Dynegy Material Adverse Effect, nor does Dynegy have any knowledge of any
fact or condition that could give rise to such an Action.
(d) Dynegy and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities
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under all Environmental Laws with respect to the operation of the businesses of
Dynegy and its Subsidiaries; there are no pending or, to Dynegy's knowledge,
threatened Actions seeking to modify, revoke or deny renewal of any of such
approvals, permits, licenses, registrations and authorizations; and Dynegy does
not have knowledge of any fact or condition that is reasonably likely to give
rise to any Action to modify, revoke or deny renewal of any of such approvals,
permits, licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the
foregoing, except as would not cause a Dynegy Material Adverse Effect, (i) to
Dynegy's knowledge, all off-site locations where Dynegy or any of its
Subsidiaries has transported, released, discharged, stored, disposed or arranged
for the disposal of Hazardous Substances are licensed disposal sites as required
by law, (ii) to Dynegy's knowledge, all underground and above ground storage
tanks, and the operating status, capacity and contents of such tanks, located on
any property owned, leased or operated by Dynegy or any of its Subsidiaries are
listed in Section 5.12(e) of the Dynegy Disclosure Schedule and (iii) to
Dynegy's knowledge, no PCB-Contaminated Electrical Equipment, as defined in 40
C.F.R. Section 761.3, is used or stored at any property owned, leased or
operated by Dynegy or any of its Subsidiaries.
(f) To Dynegy's knowledge, no claims have been asserted or
threatened against Dynegy or its Subsidiaries as a result of any release or
disposal at any of the properties currently or previously owned or operated by
Dynegy, its Subsidiaries, or a predecessor in interest, or at any disposal or
treatment facility which received Hazardous Substances generated by Dynegy, its
Subsidiaries, or any predecessor in interest which could reasonably be expected
to result in a Dynegy Material Adverse Effect.
(g) To Dynegy's knowledge, no claims have been asserted or
threatened against Dynegy or its Subsidiaries for any personal injury (including
wrongful death) or property damage (real or personal) arising out of exposure to
Hazardous Substances used, handled, generated, transported or disposed by Dynegy
or its Subsidiaries at property currently or previously owned or operated by
Dynegy or its Subsidiaries, except as could not reasonably be expected to result
in a Dynegy Material Adverse Effect.
(h) To Dynegy's knowledge, Dynegy has made available to
Illinova all material non-privileged internal and external environmental audits,
evaluations, assessments and studies in the possession of Dynegy (i) pertaining
to Hazardous Substances used, handled, generated, transported or disposed by
Dynegy or its Subsidiaries at property owned or operated by Dynegy or its
Subsidiaries, or (ii) concerning compliance by Dynegy or its Subsidiaries with
Environmental Laws.
Section 5.13 Compliance with Applicable Laws.
Except as would not individually or in the aggregate result in a Dynegy
Material Adverse Effect, Dynegy and each of its Subsidiaries hold all approvals,
licenses, permits, registrations and similar type authorizations necessary for
the lawful conduct of its respective businesses, as now conducted, and such
businesses are not being, and neither Dynegy nor any of its Subsidiaries has
received any notice from any Person that any such business has been or is being,
conducted in violation of any law, ordinance or regulation, including any law,
ordinance or
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regulation relating to occupational health and safety, except for possible
violations that either individually or in the aggregate have not resulted and
would not result in a Dynegy Material Adverse Effect; provided, however, no
representation or warranty in this Section 5.13 is made with respect to
Environmental Laws, which are covered exclusively in Section 5.12.
Section 5.14 Labor Matters; Employees.
(a) Except as listed in Section 5.14(a) of the Dynegy
Disclosure Schedule, (i) (A) none of Dynegy or any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Dynegy or any of
its Subsidiaries and (B) none of the employees of Dynegy or any of its
Subsidiaries are represented by any labor organization and none of Dynegy or any
of its Subsidiaries have any knowledge of any current union organizing
activities among the employees of Dynegy or any of its Subsidiaries nor does any
question concerning representation exist concerning such employees, and (ii)
except as would not cause a Dynegy Material Adverse Effect (A) there is no labor
strike, dispute, slowdown, work stoppage or lockout actually pending or, to
Dynegy's knowledge threatened against or affecting Dynegy or any of its
Subsidiaries and, during the past five years, there has not been any such
action, (B) Dynegy and its Subsidiaries have each at all times been in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (C) there is no unfair labor practice charge or
complaint against any of Dynegy or any of its Subsidiaries pending or, to the
knowledge of Dynegy, threatened before the National Labor Relations Board or any
similar state or foreign agency, (D) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or other grievance
procedure relating to Dynegy or any of its Subsidiaries, (E) neither the
Occupational Safety and Health Administration nor any corresponding state agency
has threatened to file any citation, and there are no pending citations,
relating to Dynegy or any of its Subsidiaries, and (F) there is no employee or
governmental claim or investigation, including any charges to the Equal
Employment Opportunity Commission or state employment practice agency,
investigations regarding Fair Labor Standards Act compliance, audits by the
Office of Federal Contractor Compliance Programs, sexual harassment complaints
or demand letters or threatened claims.
(b) Except as listed in Section 5.14(b) of the Dynegy
Disclosure Schedule, since the enactment of the WARN Act, none of Dynegy or any
of its Subsidiaries has effectuated (i) a "plant closing" (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of Dynegy or
any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of Dynegy or any of its
Subsidiaries, nor has Dynegy or any of its Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law, in each case
that could reasonably be expected to have a Dynegy Material Adverse Effect.
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Section 5.15 Material Contracts.
(a) Except as set forth in the Dynegy SEC Reports or as
permitted pursuant to Section 7.1, neither Dynegy nor any of its Subsidiaries is
a party to or bound by (i) any agreement relating to the incurrence of debt
(including sale and leaseback and capitalized lease transactions and other
similar financing transactions) or its guaranty providing for payment or
repayment in excess of $10,000,000, but excluding open option, future and
forward positions with respect to the purchase, sale or delivery of commodities
and securities; (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or (iii) any non-competition agreement
or any other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any portion of
the business of Dynegy and/or its Subsidiaries is or would be conducted or
through which Dynegy and/or its Subsidiaries can restrict the conduct of
business by any other Person.
(b) Except as listed in Section 5.15(b) of the Dynegy
Disclosure Schedule or disclosed in the Dynegy SEC Reports, to Dynegy's
knowledge, no event of default (or an event which, with notice or lapse of time
or both notice and lapse of time, would constitute an event of default) exists
under any material note, lease, mortgage, deed of trust, license, agreement or
other instrument or obligation to which any Person which owns or leases any of
the Dynegy Power Generation Facilities is a party or by which any of the Dynegy
Power Generation Facilities is subject or bound.
Section 5.16 Required Stockholder Vote or Consent.
The only vote of the holders of any class or series of Dynegy's capital
stock necessary to consummate the Transactions is the approval and adoption of
this Agreement by the holders of a majority of the votes entitled to be cast by
holders of the Dynegy Common Stock and the Dynegy Preferred Stock, voting
together as a single class, with each share of Dynegy Common Stock being
entitled to one vote per share and each share of Dynegy Preferred Stock being
entitled to a number of votes per share equal to the number of shares of Dynegy
Common Stock into which such share of Dynegy Preferred Stock is then convertible
(the "DYNEGY STOCKHOLDERS' APPROVAL").
Section 5.17 Proxy Statement/Prospectus; Registration Statement.
None of the information to be supplied by Dynegy for inclusion in (a)
the joint proxy statement relating to the Dynegy Special Meeting and the
Illinova Special Meeting (also constituting the prospectus in respect of Newco
Common Stock into which shares of Dynegy Stock will be converted) (the "PROXY
STATEMENT/PROSPECTUS") Newco, Dynegy and Illinova are to file with the SEC, and
any amendments or supplements thereto, or (b) the Registration Statement on Form
S-4 (the "REGISTRATION STATEMENT") that Newco is to file with the SEC in
connection with the Mergers, and any amendments or supplements thereto, will, at
the respective times such documents are filed and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any
amendment or supplement thereto is first mailed to stockholders of Dynegy and
Illinova, at the time such stockholders vote on approval and adoption of this
Agreement and at the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act, contain any
untrue statement of a
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material fact or omit to state any material fact required to be made therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
Section 5.18 Intellectual Property.
Dynegy or its Subsidiaries own, or are licensed or otherwise have the
right to use, all patents, patent rights, trademarks, rights, trade names, trade
name rights, service marks, service mark rights, copyrights, technology,
know-how, processes and other proprietary intellectual property rights and
computer programs ("INTELLECTUAL PROPERTY") currently used in the conduct of the
business of Dynegy and its Subsidiaries, except where the failure to do so would
not, individually or in the aggregate, have a Dynegy Material Adverse Effect. No
Person has notified either Dynegy or any of its Subsidiaries that their use of
the Intellectual Property infringes on the rights of any Person, subject to such
claims and infringements as do not, individually or in the aggregate, give rise
to any liability on the part of Dynegy and its Subsidiaries that could have a
Dynegy Material Adverse Effect, and, to Dynegy's knowledge, no Person is
infringing on any right of Dynegy or any of its Subsidiaries with respect to any
such Intellectual Property. No Actions are pending or, to Dynegy's knowledge,
threatened that Dynegy or any of its Subsidiaries is infringing or otherwise
adversely affecting the rights of any Person with regard to such other Person's
Intellectual Property.
Section 5.19 Brokers.
No broker, finder or investment banker (other than Lehman Brothers
Inc., the fees and expenses of which Dynegy will pay) is entitled to any
brokerage, finder's fee or other fee or commission payable by Dynegy or any of
its Subsidiaries in connection with the Transactions. True and correct copies of
all agreements and engagement letters currently in effect with Lehman Brothers
Inc. (the "DYNEGY ENGAGEMENT LETTERS") have been provided to Illinova.
Section 5.20 Tax-Free Reorganization.
Neither Dynegy nor, to its knowledge, any of its affiliates has taken
or agreed to take any action that would prevent the DAC Merger and the other
Transactions from constituting a contribution of assets under Section 351 of the
Code.
Section 5.21 Fairness Opinion.
Dynegy's Board of Directors has received a written opinion of Lehman
Brothers Inc. that, based upon and subject to the matters discussed therein, as
of the date of such opinion, the Aggregate Common Stock Consideration to be
offered to the holders (the "DYNEGY PUBLIC STOCKHOLDERS") of the Dynegy Common
Stock (other than the holders of Dynegy Stock who are parties (the "VOTING
AGREEMENT PARTIES") to the Voting Agreements) in the DAC Merger is fair, from a
financial point of view, to the Dynegy Public Stockholders. The opinion of
Lehman Brothers Inc. also provides that, based upon and subject to the matters
discussed therein, including specifically their analysis of the respective fair
market values of the Series A Convertible Preferred Stock and the Newco Class B
Common Stock based on assumptions they believe are reasonable and the effect on
such value of the terms pursuant to which the Series A Convertible Preferred
Stock and the Newco Class B Common Stock will be issued, which
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include, among other things, certain restrictions on the transfer of such
shares, Lehman Brothers Inc. also is of the opinion, as of the date of such
opinion, that, from a financial point of view, (a) fair market value of the
Series A Convertible Preferred Stock to be issued to BGAH and Nova for each
share of Dynegy Common Stock is not greater than the fair market value of the
Common Stock Consideration to be offered to the Dynegy Public Stockholders in
the DAC Merger for each share of Dynegy Common Stock and (b) the fair market
value of the Newco Class B Common Stock to be issued to Chevron for each share
of Newco Common Stock is not greater than the fair market value of the Common
Stock Consideration to be offered to the Dynegy Public Stockholders in the DAC
Merger. True and correct copies of such opinions have been made available to
Illinova.
Section 5.22 Year 2000 Issues.
The disclosures set forth in the Dynegy SEC Reports concerning
potential computer hardware and software problems associated with the Year 2000
are true and correct in all material respects as of the respective dates of
filing and the date hereof.
Section 5.23 Takeover Laws.
Dynegy and its Board of Directors have each taken all action required
to be taken by it to exempt this Agreement and the Transactions from, and this
Agreement and the Transactions are exempt from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination" or other anti-takeover laws and regulations of any state, including
the State of Delaware, and including Section 203 of the DGCL.
Section 5.24 Dynegy Unregulated Facilities.
Set forth in Section 5.24 of the Dynegy Disclosure Schedule is a true,
accurate and complete list of (i) all of the Dynegy Unregulated Facilities, (ii)
the direct or indirect equity interests therein of Dynegy or any of its
Subsidiaries, and (iii) to Dynegy's knowledge, the direct or indirect equity
interests in any Dynegy Unregulated Facility that is a Qualifying Facility of
any "electric utility holding company," "electric utility," or any combination
thereof. For purposes hereof, the terms "electric utility" and "electric utility
holding company" shall mean a Person primarily engaged in the generation or sale
of electric power within the meaning of 18 C.F.R. Section 292.206, other than
electric power solely from facilities exempt under PUHCA as "exempt wholesale
generators" or "foreign utility companies."
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ILLINOVA
Except as listed in the disclosure schedule delivered to Dynegy
contemporaneously with the execution hereof (the "ILLINOVA DISCLOSURE
SCHEDULE"), each of Illinova, Newco, DAC and IAC, jointly and severally,
represent and warrant to Dynegy as follows:
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Section 6.1 Organization and Qualification.
(a) Illinova is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of Illinova's properties or the nature of
its business makes such qualification necessary, except in jurisdictions, if
any, where the failure to be so qualified would not result in an Illinova
Material Adverse Effect. Illinova has all requisite corporate or other power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted. Illinova has made available to Dynegy a complete and
correct copy of its and Newco's articles of incorporation and bylaws, each as
amended to date, and Illinova's and Newco's articles of incorporation and bylaws
as so made available are in full force and effect. Illinova is not in default in
the performance, observation or fulfillment of any provision of its articles of
incorporation or bylaws.
(b) Each of Illinova's Subsidiaries is a Person duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business as a foreign
Person and is in good standing in each jurisdiction in which the character of
such Subsidiary's properties or the nature of its business makes such
qualification necessary, except in jurisdictions, if any, where the failure to
be so qualified would not result in an Illinova Material Adverse Effect. Except
as disclosed in Section 6.1(b) of the Illinova Disclosure Schedule, none of
Illinova or such Persons is a "public utility company," a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company or holding
company within the meaning of Sections 2(a)(5), 2(a)(7), 2(a)(8), or 2(a)(11) of
PUHCA. Each of Illinova's Subsidiaries has the requisite corporate or other
similar power and authority to own, use or lease its properties and to carry on
its business as it is now being conducted and as it is now proposed to be
conducted. Illinova has made available to Dynegy a complete and correct copy of
the certificate of incorporation and bylaws (or similar organizational
documents) of each of Illinova's Subsidiaries, each as amended to date, and each
certificate of incorporation and bylaws (or similar organizational documents) as
so delivered is in full force and effect. No Subsidiary of Illinova is in
default in the performance, observation or fulfillment of any provision of its
certificate of incorporation or bylaws (or similar organizational documents).
Except as listed on Section 6.1(b) of the Illinova Disclosure Schedule, other
than Illinova's Subsidiaries, Illinova does not beneficially own or control,
directly or indirectly, 5% or more of any class of equity or similar securities
of any Person.
Section 6.2 Capitalization.
(a) The authorized capital stock of Illinova consists of
200,000,000 shares of Illinova Common Stock, no par value and the authorized
capital stock of Newco consists of 1,000 shares of common stock, no par value,
of which 1,000 are issued and outstanding. As of March 31, 1999, (i) 69,919,287
shares of Illinova Common Stock were issued and outstanding and (ii) stock
options to acquire 611,200 shares of Illinova Common Stock were outstanding
under all stock option plans and agreements of Illinova. As of the date hereof,
1,000 shares of Newco Common Stock were issued and outstanding. All outstanding
shares of Newco and Illinova are duly authorized, validly issued, fully paid and
nonassessable, and free of preemptive rights. Except as set forth above, and
other than this Agreement and the Ancillary Agreements,
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there are no outstanding subscriptions, options, rights, warrants, convertible
securities, stock appreciation rights, phantom equity, or other agreements or
commitments obligating Illinova or Newco to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock of any class.
(b) Except as listed in Section 6.2(b) of the Illinova
Disclosure Schedule, Illinova is the record or beneficial owner of all of the
outstanding equity interests of each Illinova Subsidiary, there are no
irrevocable proxies with respect to any such equity interests, and no equity
interests of any Illinova Subsidiary are or may become required to be issued
because of any options, warrants, rights to subscribe to, calls or commitments
relating to, or securities or rights convertible into or exchangeable or
exercisable for, equity interests of any Illinova Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which Illinova or any
Illinova Subsidiary is or may be bound to issue additional equity interests of
any Illinova Subsidiary or securities convertible into or exchangeable or
exercisable for any such equity interests. Except as listed in Section 6.2(b) of
the Illinova Disclosure Schedule or with respect to equity interests in
Subsidiaries of Illinova Generating Company, the sole assets of which are
Illinova Unregulated Facilities and whose equity has been pledged or otherwise
encumbered as a condition of non-recourse financing of Illinova Unregulated
Facilities, all of such equity interests are duly authorized, validly issued,
fully paid and nonassessable and Illinova owns them free and clear of all Liens.
Section 6.3 Authority.
Each Illinova Company has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is or will
be a party and, subject to obtaining the Illinova Stockholders' Approval under
Section 8.12, to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to which such Illinova Company is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by such Illinova Company's Board of Directors, and no
other corporate proceedings on such Illinova Company's part are necessary to
authorize this Agreement and the Ancillary Agreements to which such Illinova
Company is or will be a party or to consummate the transactions contemplated
hereby or thereby, other than obtaining the Illinova Stockholders' Approval as
contemplated by Section 8.12. This Agreement has been, and the Ancillary
Agreements to which such Illinova Company is or will be a party are, or upon
execution will be, duly and validly executed and delivered by the applicable
Illinova Company and, assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto and thereto, is, or upon
execution will be Enforceable against the applicable Illinova Company.
Section 6.4 Consents and Approvals; No Violation.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by each Illinova Company of its obligations
hereunder will not:
(a) subject to obtaining the Illinova Stockholders' Approval
as contemplated by Section 8.12, conflict with any provision of the articles of
incorporation or bylaws of Illinova
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or the certificates of incorporation or bylaws (or other similar organizational
documents) of any of its Subsidiaries;
(b) subject to obtaining the requisite Illinova Stockholders'
Approval as contemplated by Section 8.12, require any consent, waiver, approval,
order, authorization or permit of, or registration, filing with or notification
to:
(i) any Governmental Authority except for (x)
required regulatory approvals listed in Section 6.4(b) of the
Illinova Disclosure Schedule and (y) Customary Post-Closing
Consents, or
(ii) except as listed in Section 6.4(b) of the
Illinova Disclosure Schedule, any third party other than a
Governmental Authority, other than such non-Governmental
Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (x) result in an
Illinova Material Adverse Effect, (y) impair the ability of
Illinova or any of its Subsidiaries, as the case may be, to
perform its obligations under this Agreement or any Ancillary
Agreement or (z) prevent the consummation of any of the
transactions contemplated hereby and thereby;
(c) except as listed in Section 6.4(c) of the Illinova
Disclosure Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any right
of termination, purchase, first refusal, cancellation or acceleration or
guaranteed payments or a loss of a material benefit under, any provisions of any
note, lease, mortgage, license, agreement or other instrument or obligation to
which Illinova or any of its Subsidiaries is a party or by which Illinova or any
of its Subsidiaries or any of their respective properties or assets may be
bound, except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) result in an Illinova Material Adverse Effect, (ii) materially impair
the ability of Illinova or any of its Subsidiaries to perform its obligations
under this Agreement or any Ancillary Agreement or (iii) prevent the
consummation of any of the transactions contemplated hereby and thereby;
(d) violate the provisions of any material order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Illinova
or any Subsidiary of Illinova;
(e) result in the creation of any Lien upon any material
properties or assets or on any shares of capital stock of Illinova or its
Subsidiaries under any agreement or instrument to which Illinova or any of its
Subsidiaries is a party or by which Illinova or any of its Subsidiaries or any
of their properties or assets is bound; or
(f) result in any holder of any securities of Illinova being
entitled to appraisal, dissenters' or similar rights other than as contemplated
by Section 4.2(e).
Section 6.5 Illinova Reports.
The filings required to be made by Illinova and its Subsidiaries
(including with respect to filings under PUHCA, Illinova's "subsidiary
companies") since January 1, 1996, under PUHCA,
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the Atomic Energy Act, applicable Illinois laws and regulations, the Power Act
and the Natural Gas Act have been filed with the appropriate Governmental
Authority, and, as of the date of such filings, complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. Copies of such filings have been made available to
Dynegy. Illinova has filed with the SEC, and has made available to Dynegy, true
and complete copies of each form, registration statement, report, schedule,
proxy or information statement and other document (including exhibits and
amendments thereto), including its Annual Reports to Shareholders incorporated
by reference in certain of such reports, required to be filed with the SEC since
December 31, 1995 under the Securities Act or the Exchange Act (collectively,
the "ILLINOVA SEC REPORTS"). As of the respective dates that such Illinova SEC
Reports were filed, each Illinova SEC Report, including any financial statements
or schedules included therein, (a) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No event has occurred between the date of the most recent
Illinova SEC Report and the date hereof that would require the filing of a
Current Report on Form 8-K.
Section 6.6 Illinova Financial Statements.
Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Illinova (including any related
notes and schedules) included (or incorporated by reference) in its Annual
Reports on Form 10-K for each of the three fiscal years ended December 31, 1996,
1997 and 1998 and any subsequent Illinova SEC Report, have been prepared from,
and are in accordance with, the books and records of Illinova and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the SEC's published rules and regulations, have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated in the notes thereto and subject, in the case of quarterly
financial statements, to normal and recurring year-end adjustments) and fairly
present, in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of Illinova
and its Subsidiaries as of the date thereof and the consolidated results of
operations and cash flows (and changes in financial position, if any) of
Illinova and its Subsidiaries for the periods presented therein (subject to
normal year-end adjustments and the absence of financial footnotes in the case
of any unaudited interim financial statements).
Section 6.7 Absence of Undisclosed Liabilities.
Except for such liabilities or obligations as (i) were accrued or fully
reserved against in the consolidated balance sheet of Illinova at March 31, 1999
(the "ILLINOVA BALANCE SHEET"), (ii) are of a normally recurring nature and were
incurred after March 31, 1999 (the "ILLINOVA BALANCE SHEET DATE") in the
ordinary course of business consistent with past practice or (iii) as described
in the Illinova Disclosure Schedule or in the Illinova SEC Reports, neither
Illinova nor any of its Subsidiaries has any liabilities or obligations of any
nature (matured or unmatured, fixed or contingent) which are, individually or in
the aggregate, of a nature required to be disclosed on the face of a balance
sheet prepared in accordance with GAAP and are material to the business of
Illinova and its Subsidiaries, taken as a whole. As of the Illinova Balance
Sheet
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Date, there were no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which are not adequately provided for
in the Illinova Balance Sheet as required by said Statement No. 5.
Section 6.8 Absence of Certain Changes.
Except as contemplated by this Agreement, as listed in Section 6.8 of
the Illinova Disclosure Schedule or as disclosed in the Illinova SEC Reports,
since the Illinova Balance Sheet Date (a) Illinova and its Subsidiaries have
conducted their business in all material respects in the ordinary course
consistent with past practices, (b) there has not been any change or
development, or combination of changes or developments that, individually or in
the aggregate, would have an Illinova Material Adverse Effect, (c) other than as
would be permitted by Section 7.2(b), there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect to
any shares of capital stock of Illinova or any repurchase, redemption or other
acquisition by Illinova or any of its Subsidiaries of any outstanding shares of
capital stock or other securities of, or other ownership interests in, Illinova
or any of its Subsidiaries, (d) there has not been any amendment of any term of
any outstanding security of Illinova or any of its Subsidiaries, and (e) there
has not been any change in any method of accounting or accounting practice by
Illinova or any of its Subsidiaries, except for any such change required because
of a concurrent change in GAAP or to conform a Subsidiary's accounting policies
and practices to those of Illinova.
Section 6.9 Taxes.
(a) Except as listed in Section 6.9(a) of the Illinova
Disclosure Schedule and for matters that would not have an Illinova Material
Adverse Effect:
(i) Illinova and each of its Subsidiaries have timely
filed or will file or cause to be timely filed, all material
Tax Returns required by applicable law prior to or as of the
Closing Date. All such Tax Returns and amendments thereto are
or will be true, complete and correct in all material
respects;
(ii) Illinova and each of its Subsidiaries have paid
whether or not shown on any Tax Return, or where payment is
not yet due, have established, an adequate accrual for the
payment of all material Taxes and no claim has been made by
any Tax Authority in a jurisdiction where Illinova or any of
Subsidiaries do not file Tax Return that it is or may be
subject to taxation in that jurisdiction;
(iii) No Audit is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, Illinova or
any of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of Illinova or any of its Subsidiaries
that if raised with respect to any other period not so audited
could be expected to result in a material proposed deficiency
for any period not so audited. No material deficiency or
adjustment for any Taxes has been threatened, proposed,
asserted or assessed against Illinova or any of its
Subsidiaries. There are no liens for Taxes
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upon the assets of Illinova or any of its Subsidiaries, except
liens for current Taxes not yet delinquent;
(iv) Neither Illinova nor any of its Subsidiaries has
given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes or have executed
powers of attorney with respect to Tax matters which will be
outstanding as of the Closing Date; and
(v) Section 6.9(a) of the Illinova Disclosure
Schedule lists, all material Tax sharing, Tax indemnity, or
similar agreements to which Illinova or any of its
Subsidiaries is party, is bound by, or have any obligation or
liability for Taxes.
(b) Section 6.9(b) of the Illinova Disclosure Schedule lists
(1) the name of each employee, former employee or other person who is or was
providing services to Illinova or any Illinova Subsidiaries and who, in
connection with the Transactions, will receive, or will or may become entitled
to receive in the future or upon termination of such person's employment, any
payments (including accelerated vesting of Illinova Options or other
equity-based awards) which could reasonably be expected to constitute Excess
Parachute Payments, (2) with respect to each such person, the maximum amount of
Excess Parachute Payments which could reasonably be expected to be so received
(determined in accordance with proposed regulations of the IRS promulgated under
Section 280G of the Code), and (3) with respect to each person who is entitled
to receive a "gross-up payment" in respect of excise taxes imposed on such
Excess Parachute Payments under Section 4999 of the Code, a reasonable estimate
of the amount of such gross-up payment.
Section 6.10 Litigation.
Except as disclosed in the Illinova SEC Reports or Section 6.10 of the
Illinova Disclosure Schedule, (i) as of the date hereof there is no Action (or
group of related Actions) pending or, to Illinova's knowledge, threatened
against or directly affecting Illinova, any Subsidiaries of Illinova or any of
the directors or officers of Illinova or any of its Subsidiaries in their
capacity as such, that could reasonably be expected to result in an adverse
judgment in excess of $1,000,000; and (ii) there is no Action (or group of
related Actions) pending or, to Illinova's knowledge, threatened against or
directly affecting Illinova, any Subsidiaries of Illinova or any of the
directors or officers of Illinova or any of its Subsidiaries in their capacity
as such, that could reasonably be expected to have an Illinova Material Adverse
Effect, if adversely determined. Neither Illinova nor any of its Subsidiaries,
nor any officer, director or employee of Illinova or any of its Subsidiaries,
has been permanently or temporarily enjoined by any Order from engaging in or
continuing any conduct or practice in connection with the business, assets or
properties of Illinova or such Subsidiary, nor, to the knowledge of Illinova, is
Illinova, any Subsidiary or any officer, director or employee of Illinova or its
Subsidiaries under investigation by any Governmental Authority. Except as
disclosed in the Illinova SEC Reports or in Section 6.10 of the Illinova
Disclosure Schedule, there is no Order or order of any arbitrator or mediator
enjoining or requiring Illinova or any of its Subsidiaries to take any action of
any kind with respect to its business, assets or properties. Notwithstanding the
foregoing, no representation or warranty in this Section 6.10 is made with
respect to Environmental Laws, which are covered in Section 6.12.
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Section 6.11 Employee Benefit Plans; ERISA.
(a) Section 6.11(a) of the Illinova Disclosure Schedule lists
all employee benefit plans or arrangements of any type (including plans
described in Section 3(3) of ERISA and all bonus plans, stock option, stock
purchase, restricted stock, incentive, deferred compensation, and all
employment, termination, severance, or other arrangements), sponsored,
maintained or contributed to by Illinova or any trade or business, whether or
not incorporated, which together with Illinova would be deemed a "single
employer" under Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of
ERISA (an "ILLINOVA ERISA AFFILIATE") within six years prior to the Effective
Time ("ILLINOVA BENEFIT PLANS").
(b) With respect to each Illinova Benefit Plan: (i) if
intended to qualify under Section 401(a) or 401(k) of the Code, such plan
satisfies the requirements of such sections, has received a favorable
determination letter from the Internal Revenue Service with respect to its
qualification, and its related trust has been determined to be exempt from tax
under Section 501(a) of the Code and, to Illinova's knowledge, nothing has
occurred since the date of such letter to adversely affect such qualification or
exemption; (ii) each such plan has been administered in substantial compliance
with its terms and applicable law, except for any noncompliance with respect to
any such plan that could not reasonably be expected to result in an Illinova
Material Adverse Effect; (iii) (x) as of the date hereof, neither Illinova nor
any Illinova ERISA Affiliate has engaged in, and Illinova and each Illinova
ERISA Affiliate do not have any knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would subject Illinova
or any Illinova ERISA Affiliate to any liability for a breach of fiduciary duty
under ERISA in excess of $1,000,000; and (y) neither Illinova nor any Illinova
ERISA Affiliate has engaged in, and Illinova and each Illinova ERISA Affiliate
do not have any knowledge of any Person that has engaged in, any transaction or
acted or failed to act in any manner that would subject Illinova or any Illinova
ERISA Affiliate to any liability for a breach of fiduciary duty under ERISA that
could reasonably be expected to result in an Illinova Material Adverse Effect;
(iv) no disputes or Actions are pending, or, to the knowledge of Illinova or any
Illinova ERISA Affiliate, threatened that could reasonably be expected to result
in a material liability that would have an Illinova Material Adverse Effect; (v)
neither Illinova nor any Illinova ERISA Affiliate has engaged in, and Illinova
and each Illinova ERISA Affiliate does not have any knowledge of any Person that
has engaged in, any transaction in violation of Section 406(a) or (b) of ERISA
or Section 4975 of the Code for which no exemption exists under Section 408 of
ERISA or Section 4975(c) of the Code or Section 4975(d) of the Code that could
reasonably be expected to result in an Illinova Material Adverse Effect; (vi)
there have been no "reportable events" under Section 4043 of ERISA for which the
30 day notice requirement of ERISA has not been waived by the PBGC; (vii) all
contributions due have been made on a timely basis (within, where applicable,
the time limit established under Section 302 of ERISA or Code Section 412);
(viii) no notice of intent to terminate such plan has been given under Section
4041 of ERISA and no Action has been instituted under Section 4042 of ERISA to
terminate such plan; (ix) except for defined benefit plans (if applicable), such
plan may be terminated on a prospective basis without any continuing liability
for benefits other than benefits accrued to the date of such termination; and
(x) neither Illinova nor any Illinova ERISA Affiliate has incurred any liability
under Title IV of ERISA other than liabilities that would not cause an Illinova
Material Adverse Effect. All contributions made or required to be made under any
Illinova Benefit Plan have been made on or before their required due date and
all such contributions meet the requirements for
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deductibility under the Code, and all contributions which are required and which
have not been made have been properly recorded on the books of Illinova or an
Illinova ERISA Affiliate.
(c) No Illinova Benefit Plan is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of the Code). No event has occurred with respect
to Illinova or an Illinova ERISA Affiliate which could subject Illinova to any
liability or Lien with respect to any Illinova Benefit Plan or any employee
benefit plan described in Section 3(3) of ERISA maintained, sponsored or
contributed to by an Illinova ERISA Affiliate under ERISA or the Code.
(d) Except as listed in Section 6.11(d) of the Illinova
Disclosure Schedule, no employee of Illinova or any of its Subsidiaries is
covered by any severance plan or similar arrangement.
(e) Except as listed in Section 6.11(e) of the Illinova
Disclosure Schedule, none of the Illinova Benefit Plans that are "welfare
plans," within the meaning of Section 3(1) of ERISA, provides for any benefits
payable to or on behalf of any employee or director after termination of
employment or service, as the case may be, other than elective continuation
required pursuant to Code Section 4980B or coverage which expires at the end of
the calendar month following such event. Each such plan that is a "group health
plan" (as defined in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance that would not,
or insofar as reasonably can be determined could not give rise to an Illinova
Material Adverse Effect.
Section 6.12 Environmental Liability.
Except as listed in Section 6.12 of the Illinova Disclosure Schedule:
(a) The businesses of Illinova and its Subsidiaries have been
and are operated in material compliance with all Environmental Laws, except for
any violations which could not reasonably be expected to result in an Illinova
Material Adverse Effect.
(b) Neither Illinova nor any of its Subsidiaries has caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances at any of its properties or facilities except for any such action
which could not reasonably be expected to have an Illinova Material Adverse
Effect and, to Illinova's knowledge, no such action has occurred at any property
or facility owned, leased or operated by Illinova or any of its Subsidiaries,
except for any such action that could not reasonably be expected to have an
Illinova Material Adverse Effect.
(c) Neither Illinova nor any of its Subsidiaries has received
any written notice from any Governmental Authority or third party or, to the
knowledge of Illinova, any other written communication alleging or concerning
any material violation by Illinova or any of its Subsidiaries of, or
responsibility or liability of Illinova or any of its Subsidiaries under, any
Environmental Law which could reasonably be expected to have an Illinova
Material Adverse Effect. There are no pending, or to Illinova's knowledge,
threatened Actions with respect to the businesses or operations of Illinova or
any of its Subsidiaries alleging or concerning any violation of or
responsibility or liability under any Environmental Law that, if adversely
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determined, could reasonably be expected to have an Illinova Material Adverse
Effect, nor does Illinova have any knowledge of any fact or condition that could
give rise to such an Action.
(d) Illinova and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities under all Environmental Laws
with respect to the operation of the businesses of Illinova and its
Subsidiaries; there are no pending or, to Illinova's knowledge, threatened
Actions seeking to modify, revoke or deny renewal of any of such approvals,
permits, licenses registrations and authorizations; and Illinova does not have
knowledge of any fact or condition that is reasonably likely to give rise to any
Action to modify, revoke or deny renewal of any of such approvals, permits,
licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the
foregoing, except as would not cause an Illinova Material Adverse Effect, (i) to
Illinova's knowledge, all off-site locations where Illinova or any of its
Subsidiaries has transported, released, discharged, stored, disposed or arranged
for the disposal of Hazardous Substances are licensed disposal sites as required
by law, (ii) to Illinova's knowledge, all underground and above-ground storage
tanks, and the operating status, capacity and contents of such tanks, located on
any property owned, leased or operated by Illinova or any of its Subsidiaries
are listed in Section 6.12 of the Illinova Disclosure Schedule and (iii) to
Illinova's knowledge, no PCB-Contaminated Electrical Equipment, as defined in 40
C.F.R. Section 761.3, is used or stored at any property owned, leased or
operated by Illinova or any of its Subsidiaries.
(f) To Illinova's knowledge, no claims have been asserted or
threatened against Illinova or its Subsidiaries as a result of any release or
disposal at any of the properties currently or previously owned or operated by
Illinova, its Subsidiaries, or a predecessor in interest, or at any disposal or
treatment facility which received Hazardous Substances generated by Illinova,
its Subsidiaries, or any predecessor in interest which could reasonably be
expected to result in an Illinova Material Adverse Effect.
(g) To Illinova's knowledge, no claims have been asserted or
threatened against Illinova or its Subsidiaries for any personal injury
(including wrongful death) or property damage (real or personal) arising out of
exposure to Hazardous Substances used, handled, generated, transported or
disposed by Illinova or its Subsidiaries at property currently or previously
owned or operated by Illinova or its Subsidiaries, except as could not
reasonably be expected to result in an Illinova Material Adverse Effect.
(h) To Illinova's knowledge, Illinova has made available to
Dynegy all material non-privileged internal and external environmental audits,
evaluations, assessments and studies in the possession of Illinova (i)
pertaining to Hazardous Substances used, handled, generated, transported or
disposed by Illinova or its Subsidiaries at property owned or operated by
Illinova or its Subsidiaries, or (ii) concerning compliance by Illinova or its
Subsidiaries with Environmental Laws.
(i) Except as listed in Section 6.12(i) of the Illinova
Disclosure Schedule, Illinova owns sufficient NO(x) and SO(2) allowances and
credits, to the extent required under
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applicable Environmental Law, to continue to operate its business as currently
operated and as planned to be operated.
Section 6.13 Compliance with Applicable Laws.
Except as would not individually or in the aggregate result in an
Illinova Material Adverse Effect, Illinova and each of its Subsidiaries hold all
approvals, licenses, permits, registrations and similar type authorizations
necessary for the lawful conduct of its respective businesses, as now conducted,
and such businesses are not being, and neither Illinova nor any of its
Subsidiaries has received any notice from any Person that any such business has
been or is being, conducted in violation of any law, ordinance or regulation,
including any law, ordinance or regulation relating to occupational health and
safety, except for possible violations that either individually or in the
aggregate have not resulted and would not result in an Illinova Material Adverse
Effect; provided, however, no representation or warranty in this Section 6.13 is
made with respect to Environmental Laws, which are covered exclusively in
Section 6.12.
Section 6.14 Labor Matters; Employees.
(a) Except as listed in Section 6.14(a) of the Illinova
Disclosure Schedule, (i) (A) none of Illinova or any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Illinova or any
of its Subsidiaries and (B) none of the employees of Illinova or any of its
Subsidiaries are represented by any labor organization and none of Illinova or
any of its Subsidiaries have any knowledge of any current union organizing
activities among the employees of Illinova or any of its Subsidiaries nor does
any question concerning representation exist concerning such employees, and (ii)
except as would not cause an Illinova Material Adverse Effect (A) there is no
labor strike, dispute, slowdown, work stoppage or lockout actually pending or,
to Illinova's knowledge, threatened against or affecting Illinova or any of its
Subsidiaries and, during the past five years, there has not been any such
action, (B) Illinova and its Subsidiaries have each at all times been in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (C) there is no unfair labor practice charge or
complaint against any of Illinova or any of its Subsidiaries pending or, to the
knowledge of Illinova, threatened before the National Labor Relations Board or
any similar state or foreign agency, (D) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or other grievance
procedure relating to Illinova or any of its Subsidiaries, (E) neither the
Occupational Safety and Health Administration nor any corresponding state agency
has threatened to file any citation, and there are no pending citations,
relating to Illinova or any of its Subsidiaries, and (F) there is no employee or
governmental claim or investigation, including any charges to the Equal
Employment Opportunity Commission or state employment practice agency,
investigations regarding Fair Labor Standards Act compliance, audits by the
Office of Federal Contractor Compliance Programs, sexual harassment complaints
or demand letters or threatened claims.
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(b) Except for the disposition of the Nuclear Facility, since
the enactment of the WARN Act, none of Illinova or any of its Subsidiaries has
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of any of Illinova or any of its Subsidiaries, or (ii)
a "mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of Illinova or any of its Subsidiaries, nor has Illinova or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law, in each case that could reasonably be expected to
have an Illinova Material Adverse Effect.
Section 6.15 Material Contracts.
(a) Except as set forth in the Illinova SEC Reports or as
permitted pursuant to Section 7.2, neither Illinova nor any of its Subsidiaries
is a party to or bound by (i) any agreement relating to the incurrence of debt
(including sale and leaseback and capitalized lease transactions and other
similar financing transactions) or its guaranty providing for payment or
repayment in excess of $10,000,000, but excluding open option, future and
forward positions with respect to the purchase, sale or delivery of commodities
or securities, (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or (iii) any non-competition agreement
or any other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any portion of
the business of Illinova and/or its Subsidiaries is or would be conducted or
through which Illinova and/or its Subsidiaries can restrict the conduct of
business by any other Person.
(b) Except as disclosed in the Illinova SEC Reports, to
Illinova's knowledge, no event of default (or an event which, with notice or
lapse of time or both notice and lapse of time, would constitute an event of
default) exists under any material note, lease, mortgage, deed of trust,
license, agreement or other instrument or obligation to which any Person which
owns or leases any of the Illinova Power Generation Facilities is a party or by
which any of the Illinova Power Generation Facilities is subject or bound.
Section 6.16 Required Stockholder Vote or Consent.
The only vote of the holders of any class or series of Illinova's
capital stock necessary to consummate the Transactions is the approval of this
Agreement by the holders of two-thirds of the outstanding shares of Illinova
Common Stock (the "ILLINOVA STOCKHOLDERS' APPROVAL").
Section 6.17 Proxy Statement/Prospectus; Registration Statement.
None of the information to be supplied by any Illinova Company for
inclusion in (a) the Proxy Statement/Prospectus Dynegy, Illinova and Newco are
to file with the SEC, and any amendments or supplements thereto, or (b) the
Registration Statement that Newco is to file with the SEC in connection with the
Mergers, and any amendments or supplements thereto, will, at the respective
times such documents are filed, and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any
amendment or supplement thereto is first mailed to stockholders of Dynegy and
Illinova, at the time such stockholders vote on approval and adoption of this
Agreement and at the Effective Time, and, in
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the case of the Registration Statement, when it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be made therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 6.18 Intellectual Property.
Illinova or its Subsidiaries own, or are licensed or otherwise have the
right to use, all Intellectual Property currently used in the conduct of the
business of Illinova and its Subsidiaries, except where the failure to do so
would not, individually or in the aggregate, have an Illinova Material Adverse
Effect. No Person has notified either Illinova or any of its Subsidiaries that
their use of the Intellectual Property infringes on the rights of any Person,
subject to such claims and infringements as do not, individually or in the
aggregate, give rise to any liability on the part of Illinova and its
Subsidiaries that could have an Illinova Material Adverse Effect, and, to
Illinova's knowledge, no Person is infringing on any right of Illinova or any of
its Subsidiaries with respect to any such Intellectual Property. No Actions are
pending or, to Illinova's knowledge, threatened that Illinova or any of its
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to such other Person's Intellectual Property.
Section 6.19 Brokers.
No broker, finder or investment banker (other than Chase Securities
Inc. and Berenson Minella & Company, the fees and expenses of which Illinova
will pay) is entitled to any brokerage, finder's fee or other fee or commission
payable by Illinova or any of its Subsidiaries in connection with the
Transactions. True and correct copies of all agreements and engagement letters
currently in effect with Chase Securities Inc. and Berenson Minella & Company
(the "ILLINOVA ENGAGEMENT LETTERS") have been provided to Dynegy.
Section 6.20 Tax Free Reorganization.
Neither Illinova nor, to its knowledge, any of its affiliates has taken
or agreed to take any action that would prevent the IAC Merger and the other
Transactions from constituting a contribution of assets under Section 351 of the
Code.
Section 6.21 Fairness Opinion.
Illinova's Board of Directors has received written opinions from Chase
Securities Inc. and Berenson Minella & Company that, as of the date of such
opinions, the Illinova Consideration (taking into account the Aggregate Merger
Stock Consideration) is fair, from a financial point of view, to the holders of
Illinova Common Stock. True and complete copies of such opinions have been made
available to Dynegy.
Section 6.22 Year 2000 Issues.
The disclosures set forth in the Illinova SEC Reports concerning
potential computer hardware and software problems associated with the Year 2000
are true and correct in all material respects as of the respective dates of
filing and the date hereof.
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Section 6.23 Takeover Laws.
Illinova and its Board of Directors have each taken all action required
to be taken by it to exempt this Agreement and the Transactions from, and this
Agreement and the Transactions are exempt from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination" or other anti-takeover laws and regulations of any state, including
the State of Illinois, and including Sections 7.85 and 11.75 of the IBCA.
Section 6.24 Illinova Unregulated Facilities.
Set forth in Section 6.24 of the Illinova Disclosure Schedule is a
true, accurate and complete list of (i) all of the Illinova Unregulated
Facilities, (ii) the direct or indirect equity interests therein of Illinova or
any of its Subsidiaries, and (iii) to Illinova's knowledge the direct or
indirect equity interests in any Illinova Unregulated Facility that is a
Qualifying Facility of any other "electric utility holding company," "electric
utility," or any combination thereof. For purposes hereof, the terms "electric
utility" and "electric utility holding company" shall mean a Person primarily
engaged in the generation or sale of electric power within the meaning of 18
C.F.R. Section 292.206, other than electric power solely from facilities exempt
under PUHCA as "exempt wholesale generators" or "foreign utility companies."
Section 6.25 Status of Nuclear Facility.
(a) Except as listed in Section 6.25(a) of the Illinova
Disclosure Schedule, the operation of the Nuclear Facility has at all times been
conducted in compliance with applicable health, safety, environmental,
regulatory and other legal requirements, except where the failure to be so in
compliance in the aggregate does not have, and cannot reasonably be expected to
have, an Illinova Material Adverse Effect. Except as listed in Section 6.25(a)
of the Illinova Disclosure Schedule, the operations of the Nuclear Facility are
not the subject of any outstanding notices of violation or demands for
information from the NRC or any other agency with jurisdiction over such
facility. Illinova maintains, and is in compliance with, an emergency plan
designed to protect the health and safety of the public in the event of an
unplanned release of radioactive materials from the Nuclear Facility, and such
plan has been duly filed with the NRC, and the NRC has not identified any
non-compliance with its requirements. Liability insurance to the full extent
required by law for operating nuclear facilities and consistent with Illinova's
view of the risks inherent in the operations of the Nuclear Facility remains in
full force and effect regarding such facility, and the amount of such liability
insurance meets all applicable legal and regulatory requirements and is
summarized in Section 6.25(a) of the Illinova Disclosure Schedule. The "minimum
decommissioning fund estimate" reflected in Illinova's filing with the NRC on
March 29, 1999, fully conforms with the requirements of applicable law. The
total estimate for decommissioning of the Nuclear Facility contained in such
study adequately reflects all costs and expenses which Illinova reasonably
believes would be incurred in the decommissioning of the Nuclear Facility in
compliance with all applicable law and regulations. Illinova has funded all
qualified and non-qualified decommissioning trust funds to the extent required
by law. Except as disclosed in Section 6.25(a) of the Illinova Disclosure
Schedule, Illinova has no material commitments (written or oral) to Governmental
Authorities with respect to the Nuclear Facility, other than those routine
commitments made in the ordinary course of business.
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(b) The Nuclear Facility Agreements have been duly authorized
and validly executed and delivered by IPC (and to Illinova's knowledge, PECO and
AmerGen, as applicable) and are Enforceable against IPC (and to Illinova's
knowledge, PECO and AmerGen, as applicable).
(c) IPC, and to Illinova's knowledge PECO and AmerGen, as
applicable, is not in breach or default of any Nuclear Facility Agreement, and
no event has occurred which, with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
any Nuclear Facility Agreement. Neither Illinova nor, to Illinova's knowledge,
PECO or AmerGen, has repudiated any provision of any such agreement. IPC (and
Illinova believes that PECO and AmerGen, as applicable) has satisfied or will be
able to satisfy each covenant and condition in the Nuclear Facility Agreements.
Section 6.26 Regulation as a Utility.
Illinova is an electric utility holding company and is the parent of
IPC. Except as listed in Section 6.26 of the Illinova Disclosure Schedule,
neither Illinova nor any "subsidiary company" or "affiliate" of Illinova (each
term as defined in PUHCA) is subject to regulation as a public utility, public
utility holding company or public service company (or similar designation) by
any other state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. Illinova is a
holding company exempt from all provisions of PUHCA, except Section 9(a)(2) of
PUHCA, pursuant to Section 3(a)(1) of PUHCA.
Section 6.27 Hedging.
Except as listed in Section 6.27 of the Illinova Disclosure Schedule,
as of the date hereof, neither Illinova nor any of its Subsidiaries is bound by
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from, relate to or reduce or eliminate the risk of
fluctuations in the price of commodities, currencies, securities or interest
rates, except (i) interest rate swaps, interest rate exchange agreements,
interest rate cap or collar protection agreements or interest rate options
entered into (and only in such amounts and pursuant to such terms and conditions
as are necessary and appropriate) to hedge against interest rate risk to which
Illinova and its Subsidiaries, taken as a whole, are actually exposed under
their debt obligations, or (ii) commodity swaps or other commodity price-hedging
instruments entered into (and only in such amounts and pursuant to such terms
and conditions as are necessary and appropriate) to hedge against commodity
price risk to which Illinova and its Subsidiaries, taken as a whole, are
actually exposed in the ordinary course of business, consistent with past
practices.
Section 6.28 Activities of Newco, DAC and IAC.
Other than entering into this Agreement and performing obligations
hereunder, none of Newco, DAC and IAC have entered into any agreements or
conducted any other business.
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ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 7.1 Conduct of Business by Dynegy Pending the DAC Merger.
From the date hereof until the Effective Time, unless Illinova
otherwise agrees in writing, or except as listed in the Dynegy Disclosure
Schedule or as otherwise contemplated by this Agreement, Dynegy will conduct,
and will cause its Subsidiaries to conduct, its business in the ordinary course
consistent with past practice and will use, and will cause each of its
Subsidiaries to use, all reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of its key employees, directors and officers, subject to the terms of
this Agreement. Except as listed in the Dynegy Disclosure Schedule or as
otherwise provided in this Agreement, and without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the written
consent of Illinova, which consent will not be unreasonably withheld:
(a) Neither Dynegy nor any of its Subsidiaries will adopt or
propose any change to its certificate of incorporation or bylaws (or similar
organizational documents);
(b) Neither Dynegy nor any of its Subsidiaries will (i)
declare, set aside or pay any dividend or other distribution with respect to any
shares of capital stock of Dynegy or any of its respective Subsidiaries (except
for (A) dividends on the Dynegy Stock in amounts consistent with past practices,
and (B) intercompany dividends from direct or indirect wholly-owned Subsidiaries
or from or in connection with facilities listed in Section 5.24 of the Dynegy
Disclosure Schedule) or (ii) repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Dynegy or any of its Subsidiaries, other than intercompany
acquisitions of stock;
(c) Neither Dynegy nor any of its Subsidiaries will merge or
consolidate with any Person other than a member of the consolidated group of
corporations of which Dynegy is the parent for purposes of Treasury Regulation
Section 1.1502 or acquire assets of any other Person (other than a member of
such group) for consideration exceeding $20,000,000 singularly or $75,000,000 in
the aggregate, or enter a new line of business or commence material business
operations in any country in which Dynegy is not operating as of the date of
this Agreement other than acquisitions pursuant to contractual commitments in
effect on the date hereof;
(d) Except (i) as listed in Section 7.1(d) of the Dynegy
Disclosure Schedule or (ii) for the sale, exchange or other disposition of
Qualifying Facilities listed in Section 5.24 of the Dynegy Disclosure Schedule,
Dynegy will not, and will not permit any of its Subsidiaries to, sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties (other than among Dynegy and its direct and indirect wholly owned
Subsidiaries) with an aggregate fair market value exceeding $20,000,000
singularly or $75,000,000 in the aggregate (other than sales of petroleum
liquids, electricity, gas and coal in the ordinary course of business);
(e) Dynegy will not settle any material Audit, make or change
any material Tax election or file any material amended Tax Return;
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(f) Except as otherwise permitted by this Agreement, as
disclosed on Section 7.1(f) of the Dynegy Disclosure Schedule, or in connection
with the sale, exchange or other disposition of Qualifying Facilities listed in
Section 5.24 of the Dynegy Disclosure Schedule, Dynegy and its Subsidiaries will
not issue any securities (whether through the issuance or granting of options,
warrants, rights or otherwise and except pursuant to existing obligations
disclosed in the Dynegy SEC Reports or the Dynegy Disclosure Schedule), enter
into any amendment of any term of any outstanding security of Dynegy or of any
of its Subsidiaries, incur any debt except trade debt in the ordinary course of
business and debt pursuant to existing credit facilities or arrangements and
(except as listed in Section 7.1(f) of the Dynegy Disclosure Schedule), fail to
make any required contribution to any Dynegy Benefit Plan, increase
compensation, bonus (except as listed in Section 7.1(f) of the Dynegy Disclosure
Schedule) or other benefits payable to, or modify or amend (or waive any
material provisions of) any employment agreements or severance agreements with,
any executive officer or former employee or enter into any settlement or consent
with respect to any pending litigation other than settlements in the ordinary
course of business;
(g) Dynegy will not change any method of accounting or
accounting practice by Dynegy or any of its Subsidiaries, except for any such
change required by GAAP;
(h) Dynegy will not take any action that would give rise to a
claim under the WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) Dynegy will not amend or otherwise change the terms of the
Dynegy Engagement Letters, except to the extent that any such amendment or
change would result in terms more favorable to Dynegy;
(j) Neither Dynegy nor any of its Subsidiaries will enter into
any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, currencies, securities or
interest rates, except in the ordinary course of business, consistent with past
practices;
(k) Neither Dynegy nor any of its Subsidiaries will (i) take,
or agree or commit to take, any action that would make any representation and
warranty of Dynegy hereunder inaccurate in any respect at, or as of any time
prior to, the Effective Time or (ii) omit, or agree or commit to omit, to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time;
(l) Neither Dynegy nor any of its Subsidiaries will:
(i) adopt, amend (other than amendments that reduce
the amounts payable by Dynegy or any Subsidiary, or amendments
required by law to preserve the qualified status of a Dynegy
Benefit Plan) or assume an obligation to contribute to any
employee benefit plan or arrangement of any type or collective
bargaining agreement or enter into any employment, severance
or similar contract with any person (including contracts with
management of Dynegy or any
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Subsidiaries that might require that payments be made upon the
consummation of the Transactions) or amend (or waive any
material provision of) any such existing contracts to increase
any amounts payable thereunder or benefits provided
thereunder,
(ii) engage in any transaction (either acting alone
or in conjunction with any Dynegy Benefit Plan or trust
created thereunder) in connection with which Dynegy or any
Subsidiary could be subjected (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code,
(iii) terminate any Dynegy Benefit Plan in a manner,
or take any other action with respect to any Dynegy Benefit
Plan, that could result in the liability of Dynegy or any
Subsidiary to any Person,
(iv) take any action that could adversely affect the
qualification of any Dynegy Benefit Plan or its compliance
with the applicable requirements of ERISA,
(v) fail to make full payment when due of all amounts
which, under the provisions of any Dynegy Benefit Plan, any
agreement relating thereto or applicable law, Dynegy or any
Subsidiary are required to pay as contributions thereto, or
(vi) fail to file, on a timely basis, all reports and
forms required by federal regulations with respect to any
Dynegy Benefit Plan;
(m) Dynegy will not make any election under any of its stock
option plans to pay cash in exchange for terminating awards under such plans;
(n) Neither Dynegy nor any of its Subsidiaries will, except as
required or contemplated by this Agreement, engage in any activities which would
cause a change in its status, or that of the Dynegy Subsidiaries, under PUHCA,
or that would impair the ability of Illinova, Newco or any Subsidiary to claim
an exemption as of right under Rule 2 of PUHCA or that would subject the DAC
Surviving Corporation or any Subsidiary thereof to regulation under PUHCA (other
than under Section 9(a)(2) or as an exempt holding company under Section 3 of
PUHCA), following the DAC Merger; and
(o) Neither Dynegy nor any of its Subsidiaries will agree or
commit to do any of the foregoing.
Section 7.2 Conduct of Business by Illinova Companies Pending the IAC
Merger.
From the date hereof until the Effective Time, unless Dynegy otherwise
agrees in writing, or except as listed in the Illinova Disclosure Schedule or as
otherwise contemplated by this Agreement, Illinova will conduct, and will cause
its Subsidiaries to conduct, its business in the ordinary course consistent with
past practice and will use, and will cause each of its Subsidiaries to use, all
reasonable efforts to preserve intact their business organizations and
relationships with
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third parties and to keep available the services of its key employees, directors
and officers, subject to the terms of this Agreement. Except as listed in the
Illinova Disclosure Schedule or as otherwise provided in this Agreement, and
without limiting the generality of the foregoing, from the date hereof until the
Effective Time, without the written consent of Dynegy, which consent will not be
unreasonably withheld:
(a) Neither Illinova nor any of its Subsidiaries will adopt or
propose any change to its articles of incorporation or bylaws (or similar
organizational documents);
(b) Neither Illinova nor any of its Subsidiaries will (i)
declare, set aside or pay any dividend or other distribution with respect to any
shares of capital stock of Illinova or any of its respective Subsidiaries
(except for (A) dividends on the Illinova Common Stock in amounts consistent
with past practices, (B) dividends on IPC's preferred stock outstanding as of
the date hereof pursuant to the terms of the certificates of designations with
respect thereto, and (C) intercompany dividends from direct or indirect
wholly-owned Subsidiaries) or (ii) repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Illinova or any of its Subsidiaries, other than intercompany
acquisitions of stock;
(c) Neither Illinova nor any of its Subsidiaries will merge or
consolidate with any Person other than a member of the consolidated group of
corporations of which Illinova is the parent for purposes of Treasury Regulation
Section 1.1502 or acquire assets of any Person (other than a member of such
group) for consideration exceeding $20,000,000 singularly or $75,000,000 in the
aggregate or enter a new line of business or commence business operations in any
country in which Illinova is not operating as of the date of this Agreement
other than acquisitions pursuant to contractual commitments in effect on the
date hereof;
(d) Except as listed in Section 7.2(d) of the Illinova
Disclosure Schedule, Illinova will not and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or properties (other than among Illinova and its direct
and indirect wholly owned Subsidiaries) with an aggregate fair market value
exceeding $20,000,000 singularly or $75,000,000 in the aggregate (other than
sales of electricity and gas in the ordinary course of business);
(e) Illinova will not settle any material Audit, make or
change any material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement or as
disclosed on Section 7.2(f) of the Illinova Disclosure Schedule, Illinova and
its Subsidiaries will not issue any securities (whether through the issuance or
granting of options, warrants, rights or otherwise and except pursuant to
existing obligations disclosed in the Illinova SEC Reports or the Illinova
Disclosure Schedule), enter into any amendment of any term of any outstanding
security of Illinova or of any of its Subsidiaries, incur any debt except trade
debt in the ordinary course of business and debt pursuant to existing credit
facilities or arrangements, fail to make any required contribution to any
Illinova Benefit Plan, increase compensation, bonus (except as listed in Section
7.2(f) of the Illinova Disclosure Schedule) or other benefits payable to, or
modify or amend (or waive any material provisions of) any employment agreements
or severance
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agreements with, any executive officer or former employee or enter into any
settlement or consent with respect to any pending litigation other than
settlements in the ordinary course of business;
(g) Illinova will not change any method of accounting or
accounting practice by Illinova or any of its Subsidiaries, except for any such
change required by GAAP;
(h) Illinova will not take any action that would give rise to
a claim under the WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) Illinova will not amend or otherwise change the terms of
the Illinova Engagement Letters, except to the extent that any such amendment or
change would result in terms more favorable to Illinova;
(j) Neither Illinova nor any of its Subsidiaries will enter
into any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, currencies, securities or
interest rates, except (i) interest rate swaps, interest rate exchange
agreements, interest rate cap or collar protection agreements or interest rate
options entered into (and only in such amounts and pursuant to such terms and
conditions as are necessary and appropriate) to hedge against interest rate risk
to which Illinova and its Subsidiaries, taken as a whole, are actually exposed
under their debt obligations, or (ii) commodity swaps or other commodity
price-hedging instruments entered into (and only in such amounts and pursuant to
such terms and conditions as are necessary and appropriate) to hedge against
commodity price risk to which Illinova and its Subsidiaries, taken as a whole,
are actually exposed in the ordinary course of business, consistent with past
practices;
(k) Neither Illinova nor any of its Subsidiaries will (i)
take, or agree or commit to take, any action that would make any representation
and warranty of Illinova hereunder inaccurate in any respect at, or as of any
time prior to, the Effective Time or (ii) omit, or agree or commit to omit, to
take any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time;
(l) Neither Illinova nor any of its Subsidiaries will:
(i) adopt, amend (other than amendments that reduce
the amounts payable by Illinova or any Subsidiary, or
amendments required by law to preserve the qualified status of
an Illinova Benefit Plan) or assume an obligation to
contribute to any employee benefit plan or arrangement of any
type or collective bargaining agreement or enter into any
employment, severance or similar contract with any person
(including contracts with management of Illinova or any
Subsidiaries that might require that payments be made upon
consummation of the Transactions) or amend (or waive any
material provision of) any such existing contracts to increase
any amounts payable thereunder or benefits provided
thereunder,
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(ii) engage in any transaction (either acting alone
or in conjunction with any Illinova Benefit Plan or trust
created thereunder) in connection with which Illinova or any
Subsidiary could be subjected (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code,
(iii) terminate any Illinova Benefit Plan in a
manner, or take any other action with respect to any Illinova
Benefit Plan, that could result in the liability of Illinova
or any Subsidiary to any Person,
(iv) take any action that could adversely affect the
qualification of any Illinova Benefit Plan or its compliance
with the applicable requirements or ERISA,
(v) fail to make full payment when due of all amounts
which, under the provisions of any Illinova Benefit Plan, any
agreement relating thereto or applicable law, Illinova or any
Subsidiary are required to pay as contributions thereto, or
(vi) fail to file, on a timely basis, all reports and
forms required by federal regulations with respect to any
Illinova Benefit Plan;
(m) Illinova will not make any election under any of its stock
option plans to pay cash in exchange for terminating awards under such plans;
(n) Neither Illinova nor any of its Subsidiaries will, except
as required or contemplated by this Agreement, engage in any activities which
would cause a change in its status, or that of the Illinova Subsidiaries, under
PUHCA, or that would impair the ability of Illinova, Newco or any Subsidiary to
claim an exemption as of right under Rule 2 of PUHCA or that would subject the
DAC Surviving Corporation or any Subsidiary thereof to regulation under PUHCA
(other than under Section 9(a)(2) or as an exempt holding company under Section
3 of PUHCA), following the IAC Merger;
(o) None of Newco, DAC or IAC will enter into any agreements
or engage in any business other than entering into this Agreement and the
Ancillary Agreements and performing the transactions contemplated hereby and
thereby;
(p) Neither Illinova nor any of its Subsidiaries will agree or
commit to do any of the foregoing; and
(q) Illinova agrees to use its commercially reasonable efforts
to provide title opinions, title policies, or other evidence of title,
reasonably satisfactory to Dynegy, to the Principal Power Facilities, such
evidence demonstrating that Illinova has marketable title to the site of each
Principal Power Facility, free and clear of all liens, easements, restrictive
covenants, or other restrictions, except liens, easements, restrictive
covenants, or other restrictions, (i) arising in the ordinary course of
business, (ii) securing long-term debt of IPC or Illinova and reflected on the
most recent balance sheet in Illinova's SEC Reports, (iii) arising from real
estate Taxes or other special assessments not yet due and payable as of the
Closing Date, (iv) which
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could not reasonably be expected to cause Illinova to lose title to any
Principal Power Facility, or (v) which could not reasonably be expected to
interfere with current or proposed uses of any Principal Power Facility.
Section 7.3 Certain Operating Issues.
(a) Nuclear Operations.
(i) Except as described in Section 7.3 of the
Illinova Disclosure Schedule or to the extent Dynegy otherwise
consents in writing, during the term of this Agreement and the
effectiveness of the Nuclear Facility Agreements, Illinova
shall (A) cause IPC to operate the Nuclear Facility in the
ordinary course consistent with Good Utility Practice (as
defined in the Nuclear Facility Agreements) and applicable
environmental, health, safety, regulatory, and other legal
requirements, (B) use reasonable efforts to preserve intact
the Nuclear Facility, (C) maintain customary insurance
coverage covering the Nuclear Facility, (D) not make any
material change in the nuclear fuel inventory customarily
maintained by IPC, and (E) not, except as required by law or
Order and as arising under the Nuclear Facility Agreements,
propose or adopt a budget for decommissioning expenses, which
exceeds the "minimum decommissioning fund estimate" referenced
in Section 6.25 of the Illinova Disclosure Schedule. Illinova
will not permit IPC to engage in, or enter into the business
of, the transportation, treatment or disposal of radioactive
waste generated by third parties, and will inform Dynegy
promptly of any changes in the decommissioning funding plan
for the Nuclear Facility as submitted to the NRC on March 31,
1999. To the extent not prohibited by applicable laws,
regulations, facility licenses, permits and agreements with
third parties existing as of the date hereof, at all times
prior to the Closing, Illinova will make available to Dynegy,
upon its request, any existing information relevant to the
operation or decommissioning of the Nuclear Facility, and will
inform Dynegy promptly of any proposed changes to the
decommissioning plan funding budget. If Illinova is prohibited
by agreement with a third party from providing information to
Dynegy, Illinova will use its best efforts (including taking
into account Dynegy's willingness to execute appropriate
confidentiality agreements) to obtain the consent of such
third party to the release of such information. In addition,
upon reasonable notice, Illinova will allow access by
individuals designated by Dynegy to all portions of the
Nuclear Facility, affording those persons the same degree of
access to facilities and information to the same extent
afforded the Chief Nuclear Officer. Access by the individuals
selected by Dynegy will be pursuant to existing procedures for
access to the Nuclear Facility, including any security
clearance and training normally required of Illinova nuclear
personnel.
(ii) As soon as practicable following the date
hereof, Dynegy and Illinova will create a Nuclear Advisory
Committee (the "NUCLEAR ADVISORY COMMITTEE") consisting of
three members appointed by Dynegy and three members appointed
by Illinova. The Nuclear Advisory Committee will have no
authority to control, manage, operate or participate in the
management of the
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Nuclear Facility or the decommissioning of such facility, but
will be advisory only. Each member of the Nuclear Advisory
Committee will have responsibility only to the entity that
appointed such member. To the extent not prohibited by
applicable laws, regulations and facility licenses and
permits, the Nuclear Advisory Committee and each member
thereof will have access to the Nuclear Facility to the same
extent granted to senior nuclear personnel employed by
Illinova, and Illinova employees will cooperate with members
of the Nuclear Advisory Committee in obtaining such access and
in promptly responding to all inquiries concerning the Nuclear
Facility. Access by the individuals selected by Dynegy will be
pursuant to existing procedures for access to the Nuclear
Facility, including any security clearance and training
normally required of Illinova nuclear personnel. The Nuclear
Advisory Committee will consult with the management of
Illinova and Dynegy at regular intervals (but not less
frequently than monthly) concerning the progress of operating,
decommissioning or selling the Nuclear Facility.
(iii) Illinova will use all commercially reasonable
efforts to execute a definitive agreement, and close the
transactions in a fashion that would satisfy Section 9.3(e).
(b) Integration Committee.
As soon as practicable following the date hereof, Dynegy and
Illinova will create an Integration Committee (the "INTEGRATION COMMITTEE")
initially consisting of five members appointed by Dynegy and five members
appointed by Illinova, the chairman of which shall initially be a senior
Illinova manager, which will meet from time to time with respect to the planned
integration of Illinova's and Dynegy's businesses after the Closing, including
with respect to each company's power generation facilities, trading operations,
petroleum liquids facilities or otherwise. The Integration Committee will have
no authority to control, manage, operate or participate in the management of
either Dynegy or Illinova, but will be advisory only. Each member of the
Integration Committee will have responsibility only to the entity that appointed
such member. To the extent not prohibited by applicable laws, regulations and
licenses and permits, the Integration Committee and each member thereof will
have access to the business, facilities and records of Dynegy or Illinova, as
applicable, to the same extent granted to senior personnel employed by Dynegy or
Illinova, as applicable. Illinova and Dynegy's employees will cooperate with
members of the Integration Committee in obtaining such access and in promptly
responding to all inquiries concerning such business, facilities and records.
Access to a party's business, facilities and records by the individuals selected
by the other party will be pursuant to existing procedures for access to such
business, facilities and records. The Integration Committee will consult with
the management of Illinova and Dynegy at regular intervals (but not less
frequently than bi-monthly) concerning the progress of the proposed integration
of the two companies' business and operations.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information.
The parties will each afford to the other and to the other's financial
advisors, legal counsel, accountants, consultants, financing sources, and other
authorized representatives access during normal business hours throughout the
period prior to the Effective Time to all of its books, records, properties,
contracts, leases, plants and personnel and, during such period, each will
furnish promptly to the other (a) a copy of each report, schedule and other
document filed or received by it under federal or state securities laws, and (b)
all other information as such other party reasonably may request, provided that
no investigation pursuant to this Section 8.1 will affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Mergers. Each party will hold in confidence, and will
cause its representatives to hold in confidence, all nonpublic information until
such time as such information is otherwise publicly available and, if this
Agreement is terminated, each party will deliver to the other all documents,
work papers and other materials (including copies) obtained by such party or on
its behalf from the other party in connection with this Agreement, whether so
obtained before or after the execution hereof. Notwithstanding the foregoing,
the Confidentiality Agreements will survive the execution and delivery of this
Agreement.
Section 8.2 Acquisition Proposals.
(a) From the date hereof until the Termination Date, Illinova
and its Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Illinova Acquisition Proposal
or (ii) engage in negotiations or discussions with, or disclose any nonpublic
information relating to Illinova or its Subsidiaries, or afford access to their
respective properties, books or records to any Person that may be considering
making, or has made, an Illinova Acquisition Proposal.
(b) Notwithstanding Section 8.2(a), nothing herein will
prohibit Illinova and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) under the Exchange Act, or (ii) furnishing information, including
nonpublic information to, or entering into negotiations or discussions with, any
Person that has indicated its willingness to make an unsolicited bona fide
proposal to acquire Illinova pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets, business combination
or other similar transaction, if, and only to the extent that:
(i) such unsolicited bona fide proposal relating to
an Illinova Acquisition Proposal is made by a third party that
Illinova's Board of Directors determines in good faith has the
intent to proceed with negotiations, and the financial
capability to consummate, such Illinova Acquisition Proposal,
(ii) Illinova's Board of Directors, after duly
considering the written advice of outside legal counsel to
Illinova, determines in good faith that such
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action is required for Illinova's Board of Directors to comply
with its fiduciary duties to shareholders imposed by
applicable law,
(iii) contemporaneously with furnishing such
information to, or entering into discussions or negotiations
with, such third party, Illinova provides written notice to
Dynegy to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such third
party,
(iv) Illinova receives from the third party making
such a proposal an executed confidentiality agreement with
terms no less favorable to Illinova than those contained in
the Confidentiality Agreements, and
(v) Illinova uses all reasonable efforts to keep
Dynegy informed in all material respects of the status and
terms of any such negotiations or discussions (including the
identity of the third party with whom such negotiations or
discussions are being held) and provides Dynegy copies of such
written proposals and any amendments or revisions thereto or
correspondence related thereto; provided, that Dynegy agrees
to execute a confidentiality agreement, in form reasonably
acceptable to it, with respect to any such information
delivered to Dynegy pursuant to this clause (v), which
confidentiality agreement shall be subject to Dynegy's
disclosure obligations arising under applicable law or
securities exchange regulations.
(c) From the date hereof until the Termination Date, Dynegy
and its Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Dynegy Acquisition Proposal or
(ii) engage in negotiations or discussions with, or disclose any nonpublic
information relating to Dynegy or its Subsidiaries, or afford access to their
respective properties, books or records to any Person that may be considering
making, or has made, a Dynegy Acquisition Proposal.
(d) Notwithstanding Section 8.2(c), nothing herein will
prohibit Dynegy and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) under the Exchange Act, or (ii) furnishing information, including
nonpublic information to, or entering into negotiations or discussions with, any
Person that has indicated its willingness to make an unsolicited bona fide
proposal to acquire Dynegy pursuant to a merger, consolidation, share exchange,
purchase of a substantial portion of the assets, business combination or other
similar transaction, if, and only to the extent that:
(i) such unsolicited bona fide proposal relating to a
Dynegy Acquisition Proposal is made by a third party that
Dynegy's Board of Directors determines in good faith has the
intent to proceed with negotiations, and the financial
capability to consummate, such Dynegy Acquisition Proposal,
(ii) Dynegy's Board of Directors, after duly
considering the written advice of outside legal counsel to
Dynegy, determines in good faith that such
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action is required for Dynegy's Board of Directors to comply
with its fiduciary duties to stockholders imposed by
applicable law,
(iii) contemporaneously with furnishing such
information to, or entering into discussions or negotiations
with, such Person, Dynegy provides written notice to Illinova
to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such Person,
(iv) Dynegy receives from the Person making such a
proposal an executed confidentiality agreement with terms no
less favorable to Dynegy than those contained in the
Confidentiality Agreements, and
(v) Dynegy uses all reasonable efforts to keep
Illinova informed in all material respects of the status and
terms of any such negotiations or discussions (including the
identity of the Person with whom such negotiations or
discussions are being held) and provides Illinova copies of
such written proposals and any amendments or revisions thereto
or correspondence related thereto; provided, that Illinova
agrees to execute a confidentiality agreement, in form
reasonably acceptable to it, with respect to any such
information delivered to Illinova pursuant to this clause (v),
which confidentiality agreement shall be subject to Illinova's
disclosure obligations arising under applicable law or
securities exchange regulations.
Section 8.3 Directors' and Officers' Indemnification and Insurance.
(a) Newco will indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, (i) an officer or director of Dynegy and its
Subsidiaries or an employee of Dynegy or any of its Subsidiaries who acts as a
fiduciary under any of the Dynegy Benefit Plans, (ii) an officer or director of
Illinova and its Subsidiaries or an employee of Illinova or any Subsidiary of
Illinova who acts in a fiduciary under any of the Illinova Benefit Plans (each
an "INDEMNIFIED PARTY") against all losses, claims, damages, liabilities, fees
and expenses (including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the prior written consent of
Newco, which will not be unreasonably withheld)) arising in whole or in part out
of actual or alleged actions or omissions in their capacity as such occurring at
or prior to the Effective Time to the fullest extent permitted under Illinois
law or Newco's articles of incorporation and bylaws and Dynegy's and Illinova's
indemnification obligations in effect at the date hereof, and shall advance
expenses incurred in the defense of any Action to the fullest extent permitted
by law; provided, that any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under Illinois law, Newco's articles of incorporation or bylaws or such
obligations, as the case may be, will be made by independent counsel mutually
acceptable to Newco and the Indemnified Party; and provided, further, that
nothing herein will impair any rights or obligations of any Indemnified Party.
If any claim or claims are brought against any Indemnified Party (whether
arising before or after the Effective Time), such Indemnified Party may select
counsel for the defense of such claim, which counsel
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should be reasonably acceptable to Dynegy and Illinova (if selected prior to the
Effective Time) and Newco (if selected after the Effective Time).
(b) Newco will maintain Dynegy's and Illinova's existing
officers' and directors' liability insurance policies for not less than six
years after the Effective Time, but only to the extent related to actions or
omissions prior to the Effective Time; provided, that Newco may substitute
therefor policies of substantially similar coverage and amounts containing terms
no less advantageous to such former directors or officers; provided further,
that the aggregate annual premiums to be paid with respect to the maintenance of
such insurance for such six year period will not exceed 150% of the higher of
Dynegy or Illinova's current annual premium for its existing insurance.
Section 8.4 Further Assurances.
Each party hereto agrees to use all reasonable efforts to obtain all
consents and approvals and to do all other things necessary for the consummation
of the Transactions. The parties agree to take such further action to deliver or
cause to be delivered to each other at the Closing, and at such other times
thereafter as is reasonably agreed, such additional agreements or instruments as
any of them may reasonably request for the purpose of carrying out this
Agreement and agreements and transactions contemplated hereby and thereby. The
parties will afford each other access to all information, documents, records and
personnel who may be necessary for any party to comply with laws or regulations
(including the filing and payment of taxes and handling tax audits), to fulfill
its obligations with respect to indemnification hereunder or to defend itself
against suits or claims of others. Illinova and Dynegy will duly preserve all
files, records or any similar items of Illinova or Dynegy received or obtained
as a result of the Mergers with the same care and for the same period of time as
they would preserve their own similar assets.
Section 8.5 Expenses.
(a) Except as provided in Section 8.5(b) or (c) and Section
12.8, all Expenses incurred by the parties will be borne solely and entirely by
the party that has incurred such Expenses; provided, however, that if this
Agreement is terminated for any reason, then the allocable share of Illinova and
Dynegy for all Expenses (including fees and expenses of accountants, experts,
and consultants, but excluding the fees and expenses of legal counsel and
investment bankers) related to preparing, printing, filing and mailing the
Registration Statement, the Proxy Statement/Prospectus and all SEC and HSR
filing fees incurred in connection with the Registration Statement, Proxy
Statement/Prospectus and HSR, will be one-half by Illinova and one-half by
Dynegy; provided further, if this Agreement is terminated because one of the
Dynegy Stockholders' Approval or the Illinova Stockholders' Approval is not
obtained, then the party whose stockholders' approval has not been obtained will
pay the other party's reasonably documented Expenses up to $7.5 million.
(b) Dynegy agrees that, if:
(i) (A) Illinova terminates this Agreement pursuant
to Section 11.1(g)(i) or (ii), or (B) Dynegy or Illinova
terminates this Agreement pursuant to Section 11.1(h), or
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(ii) (A) Illinova terminates this Agreement pursuant
to Section 11.1(b) at a time that a Dynegy Breach exists, (B)
Illinova terminates this Agreement pursuant to Section
11.1(d), (C) Illinova terminates this Agreement pursuant to
Section 11.1(g)(iii) or (iv), or (D) Illinova or Dynegy
terminates this Agreement because the Dynegy Stockholders'
Approval has not been obtained, and in any case described in
clauses (A), (B), (C) or (D) within 18 months after the
termination of this Agreement:
(1) a transaction is consummated, which
transaction, when offered or proposed, constitutes a
Dynegy Acquisition Proposal,
(2) a definitive agreement (the execution
and delivery of which has been authorized by the
boards of directors, or comparable bodies, that would
if consummated constitute a Dynegy Acquisition
Proposal) for such a transaction is entered into, or
(3) any Person has acquired beneficial
ownership or the right to acquire beneficial
ownership of, or any "group" (as defined under
Section 13(d) of the Exchange Act), has been formed
that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of
capital stock of Dynegy representing 50% or more of
the combined power to vote generally for the election
of directors, and Dynegy's Board of Directors has
taken any action has facilitated the acquisition by
such Person or group of such beneficial ownership,
then upon the first termination to occur under subparagraphs
(i) or (ii) of this Section 8.5(b), Dynegy will pay to
Illinova a Termination Fee of $85 million, plus in the case of
termination pursuant to subparagraph (i) or clauses (B), (C)
or (D) of subparagraph (ii), the reasonably documented
Expenses of Illinova up to $7.5 million. No Termination Fee
will be payable to Illinova (I) under clauses (i) or (ii) if
Illinova's Board of Directors withdraws, modifies or changes
its recommendation of this Agreement or the IAC Merger or
Illinova's stockholders fail to give the Illinova
Stockholders' Approval when the proposals contemplated thereby
are properly submitted to a vote at the Illinova Special
Meeting or any postponement or adjournment thereof or (II) if,
prior to the occurrence of any event requiring payment of a
Termination Fee under this Section 8.5(b), an event has
occurred requiring the payment of a Termination Fee to Dynegy
pursuant to Section 8.5(c). In the event of termination of
this Agreement as provided in this Section 8.5, payment of the
fees and expenses contemplated by this Section 8.5(b) shall be
Illinova's sole remedy.
(c) Illinova agrees that, if:
(i) (A) Dynegy terminates this Agreement pursuant to
Section 11.1(i)(i) or (ii), or (B) Illinova or Dynegy
terminates this Agreement pursuant to Section 11.1(j), or
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(ii) (A) Dynegy terminates this Agreement pursuant to
Section 11.1(b) at a time that an Illinova Breach exists, (B)
Dynegy terminates this Agreement pursuant to Section 11.1(c),
(C) Dynegy terminates this Agreement pursuant to Section
11.1(i)(iii) or (iv), or (D) Dynegy or Illinova terminates
this Agreement because the Illinova Stockholders' Approval has
not been obtained, and in any case described in clauses (A),
(B), (C) or (D) within 18 months after the termination of this
Agreement:
(1) a transaction is consummated, which
transaction, when offered or proposed, constitutes an
Illinova Acquisition Proposal,
(2) a definitive agreement (the execution
and delivery of which has been authorized by the
boards of directors, or comparable bodies, that would
if consummated constitute an Illinova Acquisition
Proposal) for such a transaction is entered into, or
(3) any Person has acquired beneficial
ownership or the right to acquire beneficial
ownership of, or any "group" (as defined under
Section 13(d) of the Exchange Act), has been formed
that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of
capital stock of Illinova representing 50% or more of
the combined power to vote generally for the election
of directors, and Illinova's Board of Directors has
taken any action has facilitated the acquisition by
such Person or group of such beneficial ownership,
then upon the first termination to occur under subparagraphs
(i) or (ii) of this Section 8.5(c), Illinova will pay to
Dynegy a Termination Fee of $85 million, plus in the case of
termination pursuant to subparagraph (i) or clauses (B), (C)
or (D) of subparagraph (ii), the reasonably documented
Expenses of Dynegy up to $7.5 million. No Termination Fee will
be payable to Dynegy (I) under clauses (i) or (ii) if Dynegy's
Board of Directors withdraws, modifies or changes its
recommendation of this Agreement or the DAC Merger or Dynegy's
stockholders fail to give the Dynegy Stockholders' Approval
when the proposals contemplated thereby are properly submitted
to a vote at the Dynegy Special Meeting or any postponement or
adjournment thereof or (II) if, prior to the occurrence of any
event requiring payment of a Termination Fee under this
Section 8.5(c), an event has occurred requiring the payment of
a Termination Fee to Illinova pursuant to Section 8.5(b). In
the event of termination of this Agreement as provided in this
Section 8.5, payment of the fees and expenses contemplated by
this Section 8.5(c) shall be Dynegy's sole remedy.
Section 8.6 Cooperation.
Subject to compliance with applicable law, from the date hereof until
the Effective Time, each party shall confer on a regular and frequent basis with
one or more representatives of the other parties to report on material
operational matters and the general status of ongoing operations and shall
promptly provide the other party or its counsel with copies of all filings
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made by such party with any Governmental Authority in connection with this
Agreement and the Transactions.
Section 8.7 Publicity.
Neither Dynegy, Illinova nor any of their respective affiliates will
issue or cause the publication of any press release or other announcement with
respect to this Agreement or the Transactions without the prior consultation of
the other party and, with respect to press releases, notice to BGAH, Chevron and
Nova, except as may be required by law or by any listing agreement with a
national securities exchange and will use reasonable efforts to provide copies
of such release or other announcement to the other party hereto, and give due
consideration to such comments as such other party may have, prior to such
release.
Section 8.8 Additional Actions.
Subject to the terms and conditions of this Agreement, each party
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunctions or other
impediments or delays, to fulfill the conditions to Closing contained in Article
IX and to consummate and make effective the Transactions, subject, however, to
the appropriate vote of stockholders of Dynegy and Illinova required so to vote.
Section 8.9 Filings.
Each party will make all filings required to be made by such party in
connection herewith or desirable to achieve the purposes contemplated hereby,
and will cooperate as needed with respect to any such filing by any other party
hereto. Without by implication limiting the foregoing, prior to the Closing,
Newco shall file (i) the Amended and Restated Newco Articles with the Illinois
Secretary of State and (ii) a statement with the Illinois Secretary of State
pursuant to Section 6.10(b) of the IBCA with respect to the Series A Convertible
Preferred Stock.
Section 8.10 Consents, Waivers and Approvals.
Each Illinova Company and Dynegy will use all reasonable efforts to
obtain all consents, waivers or approvals necessary or advisable in connection
with its obligations hereunder.
Section 8.11 Employee Matters; Benefit Plans.
(a) Illinova and Dynegy will evaluate their personnel needs
and consider continuing the employment of certain employees of Illinova, Dynegy
and their respective Subsidiaries on a case-by-case basis. At the Effective
Time, the Dynegy Stock Options and Illinova Stock Options shall be modified to
the extent provided in Section 4.6(c). In addition, Illinova and Dynegy shall
take the other employment related actions specified in Section 8.11(a) of the
Dynegy Disclosure Schedule and Section 8.11(a) of the Illinova Disclosure
Schedule, respectively. Otherwise, neither Illinova nor Dynegy shall, with
respect to the officers having an executive function of either party or their
respective material subsidiaries and with an expected aggregate annual salary
and bonus of $200,000 or more, amend any existing employment
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agreements, make any grants of options, restricted stock or similar benefits,
pay any bonuses or otherwise materially modify the financial aspects of
employment arrangements except to the extent contractually obligated to as of
the date hereof under agreements listed in Section 5.11(a) of the Dynegy
Disclosure Schedule or Section 6.11(a) of the Illinova Disclosure Schedule,
respectively;
(b) After the Effective Time, Newco will initially provide to
any employees of Illinova, Dynegy and their respective Subsidiaries who are
employed by Newco as of the Effective Time (the "RETAINED EMPLOYEES") the same
base salary or wages provided to such employees prior to the Effective Time,
subject to such changes in base salary or wages as shall be determined by Newco
after the Effective Time. Newco will take all actions necessary or appropriate
to permit the Retained Employees to continue to participate from and after the
Effective Time in the employee benefit plans or arrangements in which such
Retained Employees were participating immediately prior to the Effective Time.
Notwithstanding the foregoing, Newco may permit any such employee
benefit plan or arrangement to be terminated or discontinued on or after the
Effective Time, provided that Newco will (a) take all actions necessary or
appropriate to permit the Retained Employees participating in such employee
benefit plan or arrangement to immediately thereafter participate in employee
benefit plans or arrangements comparable to those maintained with respect to the
remainder of the Retained Employees (the "REPLACEMENT PLANS"), (b) with respect
to a Replacement Plan that is a group health plan (i) credit such Retained
Employees, for the year during which participation in the Replacement Plan
begins, with any deductibles and copayments already incurred during such year
under the terminated or discontinued group health plan and (ii) waive any
preexisting condition limitations applicable to the Retained Employees (and
their eligible dependents) under the Replacement Plan to the extent that a
Retained Employee's (or dependent's) condition would not have operated as a
preexisting condition under the terminated or discontinued group health plan,
and (c)(1) cause each Replacement Plan that is an employee pension benefit plan
(as such term is defined in Section 3(2) of ERISA) intended to be qualified
under Section 401 of the Code to be amended to provide that the Retained
Employees shall receive credit for participation and vesting purposes under such
plan for their period of employment with Illinova, Dynegy, their Subsidiaries
and predecessors to the extent such predecessor employment was recognized by
Illinova, Dynegy and their respective Subsidiaries and (2) credit the Retained
Employees under each other Replacement Plan that is not described in the
preceding clause for their period of employment with Illinova, Dynegy, their
respective Subsidiaries and predecessors to the extent such predecessor
employment was recognized by Illinova, Dynegy or their respective Subsidiaries.
At the Effective Time, Newco shall assume the obligations of (i) Dynegy under
the Dynegy Benefit Plans and (ii) Illinova under the Illinova Benefit Plans. The
terms of each such Dynegy Benefit Plan and Illinova Benefit Plan shall continue
to apply in accordance with their terms.
Section 8.12 Stockholders Meetings.
(a) Dynegy will, as promptly as reasonably practicable after
the date hereof (i) take all steps reasonably necessary to call, give notice of,
convene and hold a special meeting of its stockholders (the "DYNEGY SPECIAL
MEETING") for the purpose of securing the Dynegy Stockholders' Approval, (ii)
distribute to its stockholders the Proxy Statement/Prospectus in
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accordance with applicable federal and state law and with its certificate of
incorporation and bylaws, which Proxy Statement/Prospectus will contain the
recommendation of the Board of Directors of Dynegy that its stockholders approve
and adopt this Agreement and the Transactions, (iii) use all reasonable efforts
to solicit from its stockholders proxies in favor of the approval and adoption
of this Agreement and the Transactions and to secure the Dynegy Stockholders'
Approval, and (iv) cooperate and consult with Illinova with respect to each of
the foregoing matters; provided, that this Section 8.12(a) will not prohibit the
Dynegy Board of Directors from failing to make or from withdrawing or modifying
its recommendation to the Dynegy stockholders hereunder if the Board of
Directors of Dynegy, after consultation with and based upon the written advice
of independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to its
stockholders under applicable law.
(b) Illinova will, as promptly as reasonably practicable after
the date hereof (i) take all steps reasonably necessary to call, give notice of,
convene and hold a special meeting of its stockholders (the "ILLINOVA SPECIAL
MEETING") for the purpose of securing the Illinova Stockholders' Approval, (ii)
distribute to its shareholders the Proxy Statement/Prospectus in accordance with
applicable federal and state law and its articles of incorporation and bylaws,
which Proxy Statement/Prospectus will contain the recommendation of the Illinova
Board of Directors that its stockholders approve and adopt this Agreement and
the Transactions, and (iii) use all reasonable efforts to solicit from its
stockholders proxies in favor of approval and adoption of this Agreement, and
the Transactions and to secure the Illinova Stockholders' Approval, and (iv)
cooperate and consult with Dynegy with respect to each of the foregoing matters;
provided, that this Section 8.12(b) will not prohibit the Illinova Board of
Directors from failing to make or from withdrawing or modifying its
recommendation to the Illinova stockholders hereunder if the Board of Directors
of Illinova, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to its
stockholders under applicable law.
(c) The Illinova Special Meeting and the Dynegy Special
Meeting shall be held on the same day unless otherwise agreed by Illinova and
Dynegy.
Section 8.13 Preparation of the Proxy Statement/Prospectus and
Registration Statement.
(a) Illinova, Newco and Dynegy will promptly prepare and file
with the SEC a preliminary version of the Proxy Statement/Prospectus and will
cooperate with each other in responding to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement/Prospectus. The date that the Registration Statement is filed
with the SEC will be determined jointly by Illinova and Dynegy. Each of
Illinova, Newco and Dynegy will use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Newco will also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process in any jurisdiction)
required to be taken under any applicable state securities laws in connection
with the issuance of Newco Common Stock, the Class B Common Stock and the Series
A Convertible Preferred Stock in the
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Mergers and (i) Dynegy will furnish all information concerning Dynegy and the
holders of shares of Dynegy capital stock, and (ii) Illinova will furnish all
information concerning Illinova and holders in Illinova capital stock as may be
reasonably requested in connection with any such action. Promptly after the
effectiveness of the Registration Statement, each of Illinova and Dynegy will
cause the Proxy Statement/Prospectus to be mailed to its respective
stockholders, and if necessary, after the definitive Proxy Statement/Prospectus
will have been mailed, promptly circulate amended, supplemented or supplemental
proxy materials and, if required in connection therewith, resolicit proxies.
Illinova and Newco will advise Dynegy and Dynegy will advise Illinova, as
applicable, promptly after it receives notice thereof, of the time when the
Registration Statement will become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Newco Common Stock for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(b) Following receipt by PricewaterhouseCoopers LLP,
Illinova's independent auditors, of an appropriate request from Dynegy pursuant
to SAS No. 72, Illinova will use all reasonable efforts to cause to be delivered
to Newco a letter of PricewaterhouseCoopers LLP, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to Newco, in form and substance reasonably satisfactory to Newco and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements and
proxy statements similar to the Proxy Statement/Prospectus.
(c) Following receipt by Arthur Andersen LLP, Dynegy's
independent auditors, of an appropriate request from Illinova pursuant to SAS
No. 72, Dynegy will use all reasonable efforts to cause to be delivered to Newco
a letter of Arthur Andersen LLP, dated a date within two business days before
the effective date of the Registration Statement, and addressed to Newco, in
form and substance satisfactory to Newco and customary in scope and substance
for "cold comfort" letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Proxy Statement/Prospectus.
Section 8.14 Stock Exchange Listing.
Newco will use all reasonable efforts to cause the Newco Common Stock
to be issued in the Mergers to be approved for listing on the New York Stock
Exchange (the "NYSE") prior to the Effective Time, in each case, subject to
official notice of issuance.
Section 8.15 Notice of Certain Events.
Each party to this Agreement will promptly as reasonably practicable
notify the other party hereto of:
(a) any notice or other communication from any Person alleging
that the consent of such Person (or other Person) is or may be required in
connection with the Transactions;
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(b) any notice or other communication from any Governmental
Authority in connection with the Transactions;
(c) any Actions commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting it or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 5.10, Section 5.12, Section
6.10 or Section 6.12 or which relate to the consummation of the Transactions;
(d) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement, under any material agreement; and
(e) any Dynegy Material Adverse Effect or Illinova Material
Adverse Effect or the occurrence of any event which is reasonably likely to
result in a Dynegy Material Adverse Effect or an Illinova Material Adverse
Effect, as the case may be.
Section 8.16 Site Inspections.
Subject to compliance with applicable law (including applicable
Environmental Laws), from the date hereof until the Effective Time, each party
may undertake (at that party's sole cost and expense) an environmental
assessment or assessments (an "ASSESSMENT") of the other party's operations,
business and/or properties that are the subject of this Agreement to investigate
any potential, material environmental condition or compliance issues; provided,
however, that the performance and scope of such Assessment shall be subject to
the prior approval of the other party, such approval not to be unreasonably
withheld. An Assessment may include, but not be limited to, a review of permits,
files and records, as well as visual and physical inspections and testing.
Before conducting an Assessment, the party intending to conduct such Assessment
(the "INSPECTING PARTY") will confer with the party whose operations, business
or property is the subject of such Assessment (the "INSPECTED PARTY") regarding
the nature, scope and scheduling of such Assessment, and will comply with such
conditions as the Inspected Party may reasonably impose to avoid interference
with the Inspected Party's operations or business. The Inspected Party will
cooperate in good faith with the Inspecting Party's effort to conduct an
Assessment. If requested by the Inspected Party, the Inspecting Party shall
provide to the Inspected Party a copy of all work plans, reports, data and other
results of the Assessment. If the Mergers are not consummated, the Inspecting
Party shall destroy all originals and copies of all work plans, reports, data
and other results, documentation and work product of any Assessment.
Section 8.17 Affiliate Agreements; Tax Treatment.
(a) Dynegy and Illinova will identify in a letter to Newco all
Persons who are, on the date hereof, "affiliates" of Dynegy or Illinova, as the
case may be, as such term is used in Rule 145 under the Securities Act. Dynegy
and Illinova will use their reasonable efforts to cause their respective
affiliates to deliver to Newco not later than 10 days prior to the date of the
Dynegy and Illinova Special Meetings, a written agreement substantially in the
form attached as Exhibit 8.17, and will use their reasonable efforts to cause
Persons who become "affiliates" after
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such date but prior to the Closing Date to execute and deliver these agreements
at least 5 days prior to the Closing Date.
(b) Each party will use all reasonable best efforts to cause
the Mergers to qualify, and will not take, and will use all reasonable best
efforts to prevent any subsidiary of such party from taking, any actions which
could prevent the Mergers from qualifying, as a contribution of assets to Newco
under Section 351 of the Code.
Section 8.18 Stockholder Litigation.
Each of Illinova and Dynegy will give the other the reasonable
opportunity to participate in the defense of any Action against Illinova or
Dynegy, as applicable, and its directors relating to the Transactions.
Section 8.19 Indenture Matters.
Illinova and Dynegy will, and will cause their respective Subsidiaries
to, take all actions that are necessary or appropriate (as mutually agreed by
Illinova and Dynegy) for Illinova, Dynegy and certain of their Subsidiaries, as
applicable, to assume, guarantee or modify as appropriate the agreements
governing the outstanding publicly held debt securities of Dynegy and Illinova
referred to in the Dynegy SEC Reports and the Illinova SEC Reports and to avoid
defaults thereunder.
Section 8.20 Credit Facility.
Illinova and Dynegy will use all reasonable efforts, and will
cooperate, to obtain as promptly as practicable commitments from financing
sources to refinance or amend the existing bank credit facilities of Dynegy,
Illinova and their respective Subsidiaries, if necessary.
Section 8.21 Employment Agreements and Severance Agreements.
Newco will assume the obligations under the employment agreements and
severance agreements to which Dynegy or Illinova is a party or is otherwise
subject, to the extent such agreements are listed on Section 5.11(a) of the
Dynegy Disclosure Schedule or Section 6.11(a) of the Illinova Disclosure
Schedule.
Section 8.22 Nuclear Facility Sale
Illinova will use its commercially reasonable efforts to enter into a
definitive agreement to sell (and to close the transactions contemplated by such
agreement) the Nuclear Facility as contemplated by the Nuclear Facility
Agreements on terms and conditions consistent with those set forth in the
Interim Agreement or as otherwise reasonably satisfactory to Dynegy.
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ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to the Obligation of Each Party.
The respective obligations of each party to effect the Mergers will be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Dynegy Stockholders' Approval and the Illinova
Stockholders' Approval will have been obtained;
(b) No Action instituted by any Governmental Authority will be
pending and no statute, rule or regulation and no Order of any court or
Governmental Authority of competent jurisdiction will be in effect, in each case
which would prohibit, restrain, enjoin or restrict the consummation of the
Transactions;
(c) The Registration Statement will have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceeding for such purpose
will be pending before or threatened by the SEC;
(d) Each of Dynegy and the Illinova Companies will have
obtained all necessary or appropriate permits, authorizations, consents, waivers
or approvals (including SEC Final Orders granting exemptions or any exemption
under PUHCA resulting from a filing which obviates any otherwise applicable
requirement to register under PUHCA) (collectively, "APPROVALS"). Any Approval
required for Dynegy and the Illinova Companies with respect to the Transactions
from the ICC, the NRC, the FERC or other Governmental Authority will (in cases
other than the SEC) have been obtained on terms reasonably satisfactory to
Illinova and Dynegy, and will have become final and nonappealable;
(e) The shares of Newco Common Stock to be issued in the
Mergers will have been approved for listing on the NYSE, subject to official
notice of issuance;
(f) Any applicable waiting period under the HSR Act will have
expired or been terminated;
(g) The purchase of the capital stock of BG Holdings by Newco
contemplated by the BG Stock Purchase Agreement shall have closed.
(h) There will be no Order of any court or Governmental
Authority of competent jurisdiction applicable to Chevron in effect that would
prohibit, restrain, enjoin or restrict, or award any significant monetary
recovery with respect to, Chevron's ownership or voting of its shares of Class B
Common Stock.
(i) The Ancillary Agreements shall have been executed and
delivered by the other parties thereto and shall be in full force and effect.
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Section 9.2 Conditions to Illinova's Obligations.
Illinova's obligation to effect the IAC Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Dynegy will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Dynegy contained in
this Agreement, will be true and correct in all respects, in each case as of the
date of this Agreement and at and as of the Effective Time as if made at and as
of such time, except (i) as expressly contemplated by the Dynegy Disclosure
Schedule or this Agreement, (ii) that the accuracy of representations and
warranties that by their terms speak as of the date of this Agreement or some
other date will be determined as of such date, and (iii) for inaccuracies in
Dynegy's representations and warranties as of the Effective Time resulting
solely from conditions generally existing in the natural gas or electricity
marketing industry, the petroleum liquids industry or the electric power
generation industry after the date of this Agreement; and Illinova will have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Dynegy as to the satisfaction of this condition;
(b) All proceedings to be taken by Dynegy in connection with
the Transactions and all documents, instruments and certificates to be delivered
by Dynegy in connection with the Transactions will be reasonably satisfactory in
form and substance to Illinova;
(c) From the date hereof through the Effective Time, there
will not have occurred any change in the financial condition, business or
operations of Dynegy and its Subsidiaries, taken as a whole, that would
constitute a Dynegy Material Adverse Effect, other than any such (i) change that
affects both Illinova and Dynegy in a substantially similar manner or (ii)
change applicable to Dynegy primarily resulting from conditions generally
existing in the natural gas or electricity marketing industry, the petroleum
liquids industry or the electric power generation industry;
(d) Illinova shall have received an opinion from Troutman
Sanders LLP prior to the effectiveness of the Registration Statement to the
effect that (i) the Transactions will constitute a contribution of assets under
Section 351 of the Code or as a tax-free reorganization under the Code, (ii) no
gain or loss will be recognized by Illinova because of the IAC Merger, and (iii)
no gain or loss will be recognized by stockholders of Illinova upon receipt of
shares of Newco Common Stock in exchange for shares of Illinova Common Stock
pursuant to the IAC Merger;
(e) Dynegy shall have taken appropriate action with respect to
its ownership interests in the Dynegy Qualifying Facilities (whether through a
sale, exchange or other disposition of all or a portion of its interest therein,
conversion of such Qualifying Facilities into "exempt wholesale generators"
under PUHCA or otherwise), such that the ultimate ownership by Newco of direct
or indirect ownership interests in the Dynegy Qualifying Facilities, after the
Effective Date, shall not result in a Dynegy Material Adverse Effect.
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Section 9.3 Conditions to Dynegy's Obligations.
Dynegy's obligation to effect the DAC Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Illinova will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Illinova contained
in this Agreement will be true and correct in all respects, in each case as of
the date of this Agreement and at and as of the Effective Time as if made at and
as of such time, except (i) as expressly contemplated by the Illinova Disclosure
Schedule or this Agreement, (ii) that the accuracy of representations and
warranties that by their terms speak as of the date of this Agreement or some
other date will be determined as of such date, and (iii) for inaccuracies in
Illinova's representations and warranties as of the Effective Time resulting
solely from conditions generally existing in the electric utility or gas
distribution industries after the date of this Agreement, and Dynegy will have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Illinova as to the satisfaction of this condition;
(b) All proceedings to be taken by Illinova in connection with
the Transactions and all documents, instruments and certificates to be delivered
by Illinova in connection with the Transactions will be reasonably satisfactory
in form and substance to Dynegy;
(c) From the date hereof through the Effective Time, there
will not have occurred any change in the financial condition, business or
operations of Illinova and its Subsidiaries, taken as a whole, that would
constitute an Illinova Material Adverse Effect, other than any such (i) change
that affects both Illinova and Dynegy in a substantially similar manner or (ii)
change applicable to Illinova primarily resulting from conditions generally
existing in the electric utility or gas distribution industries;
(d) Dynegy will have received an opinion from Akin, Gump,
Strauss, Hauer & Feld, L.L.P. prior to the effectiveness of the Registration
Statement to the effect that (i) the Transactions will constitute a contribution
of assets under Section 351 of the Code or is a tax-free reorganization under
the Code, (ii) no gain or loss will be recognized by Dynegy because of the DAC
Merger, and (iii) no gain or loss will be recognized by the stockholders of
Dynegy upon the receipt of shares of Newco Common Stock in exchange for shares
of Dynegy Stock pursuant to the DAC Merger except with respect to any Cash
Consideration received;
(e) With respect to the Nuclear Facility, (i) the NRC license
and future operating and ownership responsibility for the Nuclear Facility shall
have been transferred to an unrelated third party, whose financial and economic
status meets or exceeds all applicable standards of the NRC for the transfer of
NRC licenses, in a sales transaction on terms substantially consistent with
those set forth on Schedule 9.3(e)-1 or which (A) are satisfactory to Dynegy in
its reasonable judgment as not resulting in (or reasonably expected to result
in) an Illinova Material Adverse Effect, and (B) are no less favorable than the
recorded net impairment loss relating to disposal of the Nuclear Facility as
referenced in the Illinova Balance Sheet and
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(ii) subsequent to the transfer of the Nuclear Facility the potential liability
of Newco will be covered by insurance in amounts and type consistent with the
provisions of Schedule 9.3(e)-2.
(f) (i) As of the date all other conditions to Closing are
met, Chevron, having filed and maintained in effect a good
faith application for exemption from the registration
requirements of PUHCA as required by Section 2.1(a) of the
Shareholder Agreement, shall either (A) have received a final
order of the SEC (which order shall be in full force and
effect) exempting it from the requirement to register under
PUHCA on terms acceptable to Chevron, or (B) not have received
an adverse ruling from the SEC or a "Staff Objection," as
defined in Section 9.3(f)(iii).
(ii) If a Staff Objection is received and if, after
the parties to the Shareholder Agreement follow the procedure
set forth in Section 2.1(c) of the Shareholder Agreement to
explore appropriate modifications to their agreements, Chevron
files a revised application for exemption from the
registration requirements of PUHCA, the conditions to Closing
specified in Section 9.3(f)(i) shall apply to the revised
application. If, however, the parties to the Shareholder
Agreement do not agree upon and implement any appropriate
modifications to their agreements within ninety (90) days
after the receipt of a Staff Objection and any party to the
Shareholder Agreement gives notice terminating the Shareholder
Agreement, this Agreement shall terminate simultaneously with
the termination of the Shareholder Agreement.
(iii) As used in this Section 9.3(f), the term "STAFF
OBJECTION" shall mean informal advice received by a filing
party or parties from the staff of the SEC's Division of
Investment Management at a level of Assistant Director or
higher (the "STAFF"), that (x) the Staff disagrees with the
basis on which the exemption is being sought, or (y) the Staff
is not prepared to support and recommend approval by the SEC
of the exemptions sought unless Chevron agrees and undertakes
to make material changes involving its ownership interest
(including without limitation Chevron's continuing ability to
acquire "foreign utility companies" under Section 33 of PUHCA)
or its minority shareholder protection rights (including
governance and voting rights) pertaining to Newco, or (z) the
Staff has concluded, after conferences with Commissioners'
offices informally, that it is unlikely that the SEC would
grant the exemption.
(g) The ICC shall have issued a certification (which
certification shall be in full force and effect) under Section 33 of PUHCA which
has the effect, in the reasonable judgment of Chevron, of allowing Chevron, any
parent, or any "subsidiary company" (as defined in PUHCA) of such parent to
acquire and maintain an interest in the business of one or more "foreign utility
companies" as defined in Section 33 of PUHCA, or Illinova shall have provided
evidence reasonably satisfactory to Dynegy and Chevron that such certification
is unnecessary for acquiring or maintaining such an interest. For purposes of
this subsection (g), a "PARENT" shall mean any person of which Chevron is a
"subsidiary company."
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ARTICLE X
SURVIVAL
Section 10.1 Survival of Representations and Warranties.
The representations and warranties of the parties contained in this
Agreement will not survive the Effective Time.
Section 10.2 Survival of Covenants and Agreements.
The covenants and agreements of the parties to be performed after the
Effective Time contained in this Agreement will survive the Effective Time.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Dynegy or
Illinova:
(a) by the mutual written consent of Illinova and Dynegy;
(b) by either Illinova or Dynegy if the Effective Time has not
occurred on or before the Termination Date;
(c) by Dynegy if there has been a breach by Illinova of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (if susceptible to cure) has not been cured in all material
respects within 20 business days following receipt by Illinova of notice of such
breach, which breach could reasonably be expected to cause an Illinova Material
Adverse Effect (other than an Illinova Material Adverse Effect caused by
conditions generally existing in the electric utility or gas distribution
industries) (an "ILLINOVA BREACH");
(d) by Illinova, if there has been a breach by Dynegy of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (if susceptible to cure) has not been cured in all material
respects within 20 business days following receipt by Dynegy of notice of such
breach which breach could reasonably be expected to cause a Dynegy Material
Adverse Effect (other than a Dynegy Material Adverse Effect caused by conditions
generally existing in the natural gas or electricity marketing industry, the
petroleum liquids industry or the electric power generation industry) (a "DYNEGY
BREACH");
(e) by either Dynegy or Illinova, if there is any applicable
law, rule or regulation that makes consummation of either Merger illegal or if
any Order will restrain or prohibit the consummation of either Merger, and such
Order has become final and nonappealable;
(f) by either Dynegy or Illinova, if the stockholder approvals
referred to in Section 8.12 have not been obtained because of the failure to
obtain the requisite vote upon a
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vote at a Dynegy Special Meeting or the Illinova Special Meeting or at any
adjournment or postponement thereof;
(g) by Illinova, if (i) following or at the time a Dynegy
Acquisition Proposal is made (which in the judgment of an independent,
nationally recognized investment bank retained by any party is reasonably
capable of being consummated) Dynegy's Board of Directors withdraws, modifies or
changes its recommendation of this Agreement or the DAC Merger in a manner
adverse to Illinova or has resolved to do any of the foregoing; (ii) a tender
offer or exchange offer for outstanding shares of capital stock of Dynegy then
representing 50% or more of the combined power to vote generally for the
election of directors is commenced, and Dynegy's Board of Directors does not,
within the applicable period required by law, recommend that Dynegy's
stockholders not tender their shares into such tender or exchange offer and the
Mergers fail to occur; (iii) Dynegy's Board of Directors withdraws, modifies or
changes its recommendation of this Agreement or the DAC Merger in a manner
adverse to Illinova or has resolved to do any of the foregoing or Dynegy's Board
of Directors shall have recommended to the stockholders of Dynegy any Dynegy
Acquisition Proposal or resolved to do so; or (iv) a tender offer or exchange
offer for outstanding shares of capital stock of Dynegy then representing 50% or
more of the combined power to vote generally for the election of directors is
commenced, and Dynegy's Board of Directors does not, within the applicable
period required by law, recommend that Dynegy's stockholders not tender their
shares into such tender or exchange offer;
(h) by Dynegy or Illinova, if Dynegy accepts a Dynegy Superior
Proposal and makes payment as required pursuant to Section 8.5 and of the
Expenses for which Dynegy is responsible under Section 8.5. For this Agreement,
"DYNEGY SUPERIOR PROPOSAL" means an unsolicited bona fide proposal made by a
third party relating to a Dynegy Acquisition Proposal on terms that Dynegy's
Board of Directors determines it cannot reject in favor of the DAC Merger, based
on applicable fiduciary duties and the advice of Dynegy's outside counsel;
provided, however, that Dynegy shall not be permitted to terminate this
Agreement pursuant to this Section 11.1(h) unless it has used all reasonable
efforts to provide Illinova with four business days prior written notice of its
intent to so terminate this Agreement together with a detailed summary of the
terms and conditions of such Dynegy Acquisition Proposal; provided, further,
that prior to any such termination, Dynegy shall, and shall cause its respective
financial and legal advisors to, negotiate in good faith with Illinova to make
such adjustments in this Agreement's terms and conditions as would enable Dynegy
to proceed with the Transactions, and it is acknowledged by Illinova that such
negotiations with Illinova shall be conducted in a manner consistent with the
fiduciary duties of the Dynegy Board of Directors;
(i) by Dynegy, if (i) following or at the time an Illinova
Acquisition Proposal is made (which in the judgment of an independent,
nationally recognized investment bank retained by any party is reasonably
capable of being consummated) Illinova's Board of Directors withdraws, modifies
or changes its recommendation of this Agreement or the IAC Merger in a manner
adverse to Dynegy or has resolved to do any of the foregoing; (ii) a tender
offer or exchange offer for outstanding shares of capital stock of Illinova then
representing 50% or more of the combined power to vote generally for the
election of directors is commenced, and Illinova's Board of Directors does not,
within the applicable period required by law, recommend that Illinova's
shareholders not tender their shares into such tender or exchange offer and the
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Mergers fail to occur; (iii) Illinova's Board of Directors withdraws, modifies
or changes its recommendation of this Agreement or the IAC Merger in a manner
adverse to Dynegy or has resolved to do any of the foregoing or Illinova's Board
of Directors shall have recommended to the stockholders of Illinova any Illinova
Acquisition Proposal or resolved to do so; or (iv) a tender offer or exchange
offer for outstanding shares of capital stock of Illinova then representing 50%
or more of the combined power to vote generally for the election of directors is
commenced, and Illinova's Board of Directors does not, within the applicable
period required by law, recommend that Illinova's stockholders not tender their
shares into such tender or exchange offer;
(j) by Illinova or Dynegy, if Illinova accepts an Illinova
Superior Proposal and makes payment as required pursuant to Section 8.5 and of
the Expenses for which Illinova is responsible under Section 8.5. For purposes
of this Agreement, "ILLINOVA SUPERIOR PROPOSAL" means an unsolicited bona fide
proposal made by a third party relating to an Illinova Acquisition Proposal on
terms that Illinova's Board of Directors determines it cannot reject in favor of
the IAC Merger, based on applicable fiduciary duties and the advice of
Illinova's outside counsel; provided, however, that Illinova shall not be
permitted to terminate this Agreement pursuant to this Section 11.1(j) unless it
has used all reasonable efforts to provide Dynegy with four business days prior
written notice of its intent to so terminate this Agreement together with a
detailed summary of the terms and conditions of such Illinova Acquisition
Proposal; provided, further, that prior to any such termination, Illinova shall,
and shall cause its respective financial and legal advisors to, negotiate in
good faith with Dynegy to make such adjustments in this Agreement's terms and
conditions as would enable Illinova to proceed with the Transactions, and it is
acknowledged by Dynegy that such negotiations with Dynegy shall be conducted in
a manner consistent with the fiduciary duties of the Illinova Board of
Directors.
Section 11.2 Effect of Termination.
Upon termination of the Agreement and the abandonment of either Merger
pursuant to this Article XI, all obligations of the parties shall terminate,
except the obligations of the parties pursuant to this Section 11.2 and except
for the provisions of Section 8.5, Section 8.7, Section 12.8 and the last two
sentences of Section 8.1, provided that nothing herein shall relieve any party
from liability for any breaches hereof.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices.
All notices or communications hereunder shall be in writing (including
facsimile or similar writing) addressed as follows:
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To any Illinova Company:
Illinova Corporation
5008 South 27th St.
Decatur, Illinois 62525
Attention: Chief Legal Officer
Facsimile No.: (217) 362-7417
With a copy (which shall not constitute notice) to:
Troutman Sanders LLP
600 Peachtree Street NE, Suite 5200
Atlanta, Georgia 30308
Attention: W. Brinkley Dickerson, Jr.
Facsimile No.: (404) 962-6743
To Dynegy, Newco, IAC or DAC:
Dynegy Inc.
1000 Louisiana, Ste. 5800
Houston, Texas 77002
Attention: Senior Vice President and General Counsel
Facsimile No.: (713) 507-6808
With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana; Suite 1900 South
Houston, Texas 77002
Attention: Robert B. Allen
Facsimile No.: (713) 236-0822
Any such notice or communication 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
addressed as above (or to such other address as such party may designate in
writing from time to time).
Section 12.2 Separability.
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect.
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Section 12.3 Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors,
and assigns; provided, however, that neither this Agreement nor any rights
hereunder shall be assignable or otherwise subject to hypothecation and any
assignment in violation hereof shall be null and void.
Section 12.4 Construction.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The parties have participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement is to be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of this Agreement's provisions. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" means "including without
limitation." The parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any party has breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
Section 12.5 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same Agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each party.
Section 12.6 Entire Agreement.
This Agreement and the Confidentiality Agreements represent the entire
Agreement of the parties with respect to the subject matter hereof and shall
supersede any and all previous contracts, arrangements or understandings between
the parties hereto with respect to the subject matter hereof, including the
letter agreement dated May 3, 1999 between Illinova and Dynegy, as amended.
Section 12.7 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 other than to the extent this Agreement pertains to the
internal affairs of an Illinois corporation, in which event, and only with
respect to such event, the IBCA shall apply.
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Section 12.8 Attorneys' Fees.
If any Action, including an Action for declaratory relief, is brought
to enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and expenses (including
related expert and consultant fees and expenses) from the other party, which
fees and expenses shall be in addition to any other relief which may be awarded.
Section 12.9 No Third Party Beneficiaries.
Except as provided in Section 8.3, no Person other than the parties is
an intended beneficiary of this Agreement or any portion hereof.
Section 12.10 Disclosure Schedules.
(a) The disclosures made on the Dynegy and Illinova Disclosure
Schedules (collectively, the "DISCLOSURE SCHEDULES") with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the disclosure schedule. The inclusion of
any matter on either Disclosure Schedule will not be deemed an admission by any
party that such listed matter is material or that such listed matter has or
would have a Dynegy Material Adverse Effect or an Illinova Material Adverse
Effect, as applicable. Any inadvertent disclosure of privileged information by
Dynegy or Illinova in the Disclosure Schedules or in connection with their
respective diligence examination will not be deemed to be a waiver by such
inadvertently disclosing party of the applicable privilege.
(b) The Disclosure Schedules shall be deemed to constitute an
integral part of this Agreement and to modify the respective representations,
warranties, covenants or agreements of the parties contained herein to the
extent that such representations, warranties, covenants or agreements expressly
refer to the applicable Disclosure Schedule. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
delivered on or before the date hereof shall be deemed to have been made on and
as of the date hereof. From time to time prior to the Closing, the parties shall
promptly supplement or amend the Disclosure Schedules with respect to any
matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be listed
or described in the Disclosure Schedules. No supplement or amendment shall be
deemed to cure any breach or any representation or warranty made in this
Agreement or have any effect for the purpose of determining satisfaction of the
conditions set forth in Article IX.
Section 12.11 Amendments and Supplements.
At any time before or after approval of the matters presented in
connection with the Merger by the respective stockholders of Illinova and Dynegy
and prior to the Effective Time, this Agreement may be amended or supplemented
in writing by Illinova and Dynegy with respect to any of the terms contained in
this Agreement, except as otherwise provided by law; provided, however, that
following approval of this Agreement by the stockholders of Illinova
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there shall be no amendment or change to the provisions hereof with respect to
(a) the number of shares of Newco Common Stock into which each share of Illinova
Common Stock is convertible, (b) the Termination Date, or (c) any other change
that is materially adverse to the stockholders of Illinova without further
approval by the stockholders of Illinova, and provided further that following
approval and adoption of this Agreement by the stockholders of Dynegy there
shall be no amendment or change to the provisions hereof with respect to (i) the
Exchange Ratio (ii) the amount and nature of the Aggregate Merger Consideration
payable per share of Dynegy Stock, (iii) the Termination Date or (iv) any other
change that is materially adverse to the stockholders of Dynegy without further
approval by the affected stockholders of Dynegy.
Section 12.12 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 arises out of this Agreement or the Transactions, (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, and (c) agrees that it will not
bring any Action relating to this Agreement or any of the Transactions in any
court other than a federal court sitting in the State of Delaware or a Delaware
state court. Illinova, IAC and Newco hereby irrevocably appoint The Corporation
Trust Company located at 1209 Orange Street in Wilmington, Delaware, as its
lawful agent in Delaware to receive and forward on their behalf service of all
necessary processes in any Action arising under this Agreement that may be
brought against Illinova, IAC or Newco in any court (including federal court) in
Delaware. Such service of process or notice received thereof by the agent will
have the same force and effect as if served upon Illinova, IAC or Newco.
Section 12.13 Extensions, Waivers, Etc.
At any time prior to the Effective Time, either party may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto; or
(c) subject to the proviso of Section 12.11 waive compliance
with any of the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing, no failure or delay by Illinova or
Dynegy in exercising any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Merger
Agreement as of the day and year first above written.
ILLINOVA CORPORATION
By: /s/ Charles E. Bayless
-----------------------------------------
President
DYNEGY INC.
By: /s/ C.L. Watson
-----------------------------------------
Chairman and Chief Executive Officer
ENERGY CONVERGENCE
HOLDING COMPANY
By: /s/ Charles E. Bayless
-----------------------------------------
President
ENERGY CONVERGENCE ACQUISITION CORPORATION
By: /s/ Charles E. Bayless
-----------------------------------------
President
DYNEGY ACQUISITION CORPORATION
By: /s/ C.L. Watson
-----------------------------------------
President
<PAGE> 83
EXHIBIT A
Energy Convergence Holding Corporation
Article 4, Paragraph 2, continued:
A. General
All holders of Class A Common Stock (as defined) shall be entitled to
cumulative voting rights, as that term is used in Section 7.40 of the Illinois
Business Corporation Act of 1983, as amended from time to time (the "IBCA"), in
any election of directors. Holders of Class B Common Stock (as defined) shall
not be entitled to cumulative voting rights.
B. Provisions Relating to Preferred Stock
(1) Authority is hereby expressly vested in the Board of Directors (the
"Board") to divide, and to provide for the issue from time to time of, the
Preferred Stock in series and to fix and determine as to each such series:
(a) the designation of, and the number of shares to be
issuable in, such series;
(b) the dividend rate for the shares for such series;
(c) the price or prices at which, and the terms and conditions
on which, such shares may be redeemed;
(d) the amount payable upon each of such shares in the event
of involuntary dissolution of the corporation;
(e) the amount payable upon each of such shares in the event
of voluntary dissolution of the corporation;
(f) sinking fund provisions, if any, for the redemption or
purchase of such shares (the term "sinking fund," as used herein,
including any analogous fund, however designated);
(g) if such shares are to be issued with the privilege of
conversion into shares of the Common Stock or other securities, the
terms and conditions on which such shares may be so converted; and
(h) the voting rights or the grant of special voting rights,
provided that the voting rights of such Preferred Stock are no greater
in proportion than to the economic interest of such Shares.
In all other respects the shares of Preferred Stock of all series shall be
identical. Holders of Preferred Stock shall have no preemptive rights.
Additional series of preferred stock may be issued pursuant to
designation by resolution of the Board of Directors and such series may have
preferences which are junior to, parri passu with or superior to an outstanding
series of preferred stock set forth in these articles of
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incorporation or created by designation without any vote of such outstanding
series of preferred stock unless the designation or terms of the outstanding
series of preferred stock expressly provides otherwise.
So long as any shares of any series of the Preferred Stock established
by resolution of the Board of Directors shall be outstanding, such resolution
shall not be amended so as to affect any of the preferences or other rights of
the holders of the shares of such series without the affirmative vote or the
written consent of the holders of at least a majority of the shares of such
series outstanding at the time or as of a record date fixed by the Board of
Directors, but such resolution may be so amended with such vote or consent.
C. Provisions Relating to Common Stock
(1) The total number of shares of common stock that the corporation
shall have authority to issue is 420,000,000 of which (i) 300,000,000 shares
shall be shares of Class A Common Stock, no par value per share (the "Class A
Common Stock"), and (ii) 120,000,000 shares shall be shares of Class B Common
Stock, no par value per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock").
(2) Holders of the Common Stock shall have no preemptive rights. Except
as contemplated by Article 4, Paragraph 2C., each outstanding share of Common
Stock shall entitle the holder thereof to one vote (and not more than one vote)
on each matter submitted to a vote at a meeting of holders of Common Stock.
(3) The following is a statement of the relative powers, preferences
and participating, optional or other special rights, and the qualifications,
limitations and restrictions of the Class A Common Stock and Class B Common
Stock:
(a) Class A Common Stock and Class B Common Stock
Except as otherwise set forth in this Article 4, Paragraph 2C,
the relative powers, preferences and participating, optional or other
special rights, and the qualifications, limitations or restrictions of
the Class A Common Stock and Class B Common Stock shall be identical in
all respects.
(b) Dividends
Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of these Articles, holders of Common
Stock shall be entitled to receive such dividends and other
distributions in cash, stock of any corporation (other than Common
Stock) or property of the corporation as may be declared thereon by the
Board of Directors from time to time out of assets or funds of the
corporation legally available therefor and shall share equally on a per
share basis in all such dividends and other distributions. In the case
of dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock,
only shares of Class A Common Stock shall be paid or distributed with
respect to Class A Common Stock and only shares of Class B Common Stock
shall be paid or distributed with respect to Class B
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Common Stock. The number of shares of Class A Common Stock and Class B
Common Stock so distributed on each share shall be equal in number.
Neither the shares of Class A Common Stock nor the shares of Class B
Common Stock may be reclassified, subdivided or combined unless such
reclassification, subdivision or combination occurs simultaneously and
in the same proportion for each class.
(c) Voting.
(i) Except as may be otherwise required by law or by the
provisions of this Article 4, Paragraph 2C.(3)(c), the holders of the
Class B Common Stock shall vote together with the holders of the Class
A Common Stock as a single class on every matter coming before any
meeting of the shareholders or otherwise to be acted upon by the
shareholders, subject to any voting rights which may be granted to
holders of any other class or series of Preferred Stock. So long as any
Class B Common Stock is outstanding, the corporation shall not amend
(x) Section 7 of Article III or Article X of the corporation's By-laws
(unless such amendment shall be approved by a majority of the Class B
directors present at the meeting where such amendment is considered and
a majority of the Directors then in office) or effect any mergers,
consolidations, reorganizations, or sales of assets requiring
shareholder approval under the IBCA or disposition of all or
substantially all of the corporation's assets without the affirmative
vote of 66 2/3% of the shares of Common Stock outstanding, voting as a
single class or (y) any provision of this Article 4, Paragraph
2C.(3)(c)(i) relating to the Common Stock without the affirmative vote
of 66 2/3% of the shares of Class B Common Stock outstanding, voting as
a separate class, and the affirmative vote of a majority of the shares
of Class A and Class B Common Stock, voting as a single class.
(ii) The Board of Directors of the corporation shall consist
of at least twelve members and no more than fifteen members as
established from time to time by resolution of the Board of Directors,
except that such numbers are subject to automatic adjustment as
necessary, under those circumstances and during those time periods that
holders of any other class or series of the corporation's outstanding
Preferred Stock have rights to elect members of the Board of Directors
(the "Preferred Stock Directors"), as set forth in these Articles of
Incorporation or in the resolution of the Board of Directors
establishing and designating such series and fixing and determining the
relative rights and preferences thereof. So long as any shares of Class
B Common Stock are outstanding, the holders of the Class B Common
Stock, as such holders, shall be entitled to vote as a separate class
for the election of three directors of the corporation (the "Class B
Directors") and the holders of the Class A Common Stock shall be
entitled to vote as a separate class for the remaining directors of the
corporation (the "Class A Directors"), excluding Preferred Stock
Directors, if any. At such time as no Class B Common Stock is
outstanding, the term of all Class B Directors shall immediately end.
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(iii) For purposes of electing Class B Directors, the Board of
Directors will nominate such individuals as may be specified by a
majority vote of the then existing Class B Directors or, if there are
no Class B Directors, by holders of a majority of the Class B Common
Stock. The remaining directors will be nominated in accordance with the
corporation's Bylaws.
(iv) At any meeting having as a purpose the election of
directors by holders of the Common Stock, the presence, in person or by
proxy, of the holders of a majority of the shares of relevant class of
Common Stock then outstanding shall be required and be sufficient to
constitute a quorum of such class for the election of any director by
such holders. Each director shall be elected by the vote or written
consent required under the IBCA of the holders of such class. At any
such meeting or adjournment thereof, (i) the absence of a quorum of
such holders of an applicable class of Common Stock shall not prevent
the election of the directors to be elected by the holders of shares
other than such class of Common Stock, and (ii) in the absence of such
quorum (either of holders of such class of Common Stock or of shares
other than such class of Common Stock, or both), a majority of the
holders, present in person or by proxy, of the class or classes of
stock which lack a quorum shall have power to adjourn the meeting for
the election of directors which they are entitled to elect, from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present.
(v) Any vacancy in the office of a class of director may be
filled by the remaining directors of such class, unless such vacancy
occurred because of the removal (with or without cause) of a director,
in which event such vacancy shall be filled by the affirmative vote of
the holders of a majority of the outstanding shares of the applicable
class of Common Stock. Any or all of the directors may be removed, with
or without cause, by vote or by written consent in each case in
accordance with Section 8.35 of the IBCA by the holders of the
applicable class of Common Stock and not otherwise. Any director
elected to fill a vacancy shall serve the same remaining term as that
of his or her predecessor, subject, however, to prior death,
resignation, retirement, disqualification, or removal from office.
(vi) Without the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of the Class B Common Stock or the
written consent of such holders of the Class B Common Stock, the
corporation may not effect any change in the rights, privileges or
preferences of the Class B Common Stock. This provision shall not be
applicable to any amendment to the Articles of Incorporation or
adoption of resolutions of the Board of Directors which establishes or
designates one or more classes or series of Preferred Stock in
accordance with Article 4, Paragraph 2B.(1).
(vii) With respect to actions by the holders of Class B Common
Stock upon those matters on which such holders are entitled to vote as
a separate class, such actions may be taken without a shareholders
meeting by the written consent of holders of the Class B Common Stock
who would be entitled to vote at a
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meeting those shares having voting power to cast not less than the
minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares of Class B Common Stock
entitled to vote were present and voted. Notice shall be given in
accordance with the applicable provisions of the IBCA of the taking of
corporate action without a meeting by less than unanimous written
consent to those holders of Class B Common Stock on the record date
whose shares were not represented on the written consent.
(d) Transfer.
(i) If any person holding shares of Class B Common Stock of
record (a "Class B Holder") purports to transfer such shares of Class B
Common Stock, whether by sale, assignment, gift, bequest or otherwise,
except to a Permitted Transferee, such transfer shall be deemed to
constitute a request by the Class B Holder for conversion of such
shares and shall result in such shares being converted into Class A
Common Stock as provided by Article 4, Paragraph 2C.(3)(e).
(ii) In the case of a Class B Holder acquiring record and
beneficial ownership of the shares of Class B Common Stock in question
upon initial issuance by the corporation (an "Original Holder"), a
"Permitted Transferee" shall mean any Affiliate (as defined) of such
Original Holder.
In the case of a Class B Holder which is a Permitted
Transferee of an Original Holder, a "Permitted Transferee" shall mean:
(y) any Original Holder, or
(z) any Permitted Transferee of any Original Holder.
For this paragraph and Article 4, Paragraph 2C.(3)(e),
"Affiliate" means any corporation, partnership, limited liability
company or other entity (each, 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.
(iii) With respect to a Class B Holder which holds shares by
virtue of its status as an Affiliate, the subsequent loss of Affiliate
status shall, unless within 15 days thereafter all shares of Class B
Common Stock held by such Class B Holder are transferred to an Original
Holder or a Permitted Transferee of an Original Holder, result in the
automatic conversion of all of its shares of Class B Common Stock into
shares of Class A Common Stock, and stock certificates formerly
representing such shares of Class B Common Stock shall thereupon and
thereafter be deemed to represent shares of Class A Common Stock as
provided by Article 4, Paragraph 2C.(3)(e).
(iv) Any transfer of shares of Class B Common Stock not
permitted hereunder shall result in the conversion of the transferee's
shares of Class B
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Common Stock into shares of Class A Common Stock as provided by Article
4, Paragraph 2C.(3)(e), effective as of the date on which certificates
representing such shares are presented for transfer on the books of the
corporation or on such earlier date that the corporation receives
notice of such attempted transfer. The corporation may, in connection
with preparing a list of stockholders entitled to vote at any meeting
of stockholders, or as a condition to the transfer or the registration
of shares of Class B Common Stock on the corporation's books, require
the furnishing of such affidavits or other proof as it deems necessary
to establish that the person is the beneficial owner of shares of Class
B Common Stock or is a Permitted Transferee.
(v) Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or "nominee"
name. For this purpose, a "beneficial owner" of any shares of Class B
Common Stock shall mean a person who, or any entity which, possesses
the powers, either singly or jointly, to direct the voting or
disposition of such shares. Certificates for shares of Class B Common
Stock shall bear a legend referencing the restrictions on transfer
imposed by this Article 4, Paragraph 2C.(3)(d).
(e) Conversion.
(i) Each share of Class B Common Stock shall be converted at
such time, in such manner and upon such terms and conditions as
provided herein into one fully paid and non-assessable share of Class A
Common Stock.
(ii) Each share of Class B Common Stock shall automatically
convert into a share of Class A Common Stock upon the earlier to occur
of (i) the holders of all Class B Common Stock ceasing to own in the
aggregate 15% of the issued and outstanding Common Stock, and (ii) as
provided in Article 4, Paragraph 2C.(3)(d). Upon automatic conversion
of shares of Class B Common Stock, the corporation shall reflect such
conversion, and the issuance of Class A Common Stock in connection
therewith on its books and records for all purposes even if
certificates reflecting such converted shares of Class B Common Stock
are not surrendered to the corporation or its transfer agent. All
shares of Class B Common Stock, upon conversion thereof into Class A
Common Stock, shall retain their designation as Class B Common Stock
and shall have the status of authorized and unissued shares of Class B
Common Stock; provided that if all shares of Class B Common Stock
outstanding are converted into shares of Class A Common Stock, then all
authorized but unissued shares or treasury shares of Class B Common
Stock shall automatically convert into authorized but unissued or
treasury shares of Class A Common Stock, as the case may be, and no
further shares of Class B Common Stock shall exist. Except as
specifically contemplated under this Article 4, Paragraph 2C.(3)(e),
shares of Class B Common Stock may not be converted into Class A Common
Stock.
(iii) Each share of Class A Common Stock owned (within the
meaning of Article 4, Paragraph 2C.(3)(d)) by Chevron U.S.A. Inc., a
Pennsylvania
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corporation ("Chevron") or its Affiliates shall simultaneous with
acquiring such ownership automatically be converted into one fully paid
and non-assessable share of Class B Common Stock; provided, however,
that for purposes of any shares of Class B Common Stock so issued, only
Chevron will be deemed to be the Original Holder thereof for purposes
of the provisions of Article 4, Paragraph 2C.(3)(d), and provided,
further, that this provision shall not apply with respect to shares of
Class A Common Stock issued upon conversion of all Class B Common Stock
in accordance with the first sentence of Article 4, Paragraph
2C.(3)(e)(ii)(i), or any shares of Class A Common Stock owned by
Chevron or its Affiliates, after such conversion shall have occurred.
Upon automatic conversion of shares of Class A Common Stock, the
corporation shall reflect such conversion and the issuance of Class B
Common Stock in connection therewith on its books and records for all
purposes even if certificates reflecting such converted shares of Class
A Common Stock are not surrendered to the corporation for transfer. All
shares of Class B Common Stock shall be subject to the restrictions and
provisions contained in the corporation's Articles of Incorporation.
All shares of Class A Common Stock, upon conversion thereof into Class
B Common Stock, shall retain their designation as Class A Common Stock
and shall have the status of authorized and unissued shares of Class A
Common Stock.
(iv) Nothing herein shall prevent the Original Holder (or any
Permitted Transferee) of the Class B Common Stock and the corporation
from executing an agreement allowing the Original Holder (or any
Permitted Transferee), at its option, to convert the Class B Common
Stock into Class A Common Stock, nor the conversion of any Class B
Common Stock pursuant to such agreement.
(v) The corporation will, as soon as practicable after such
deposit of a certificate or certificates for Common Stock to be
converted in accordance with this Article 4, Paragraph 2C.(3)(e), issue
and deliver at the office of the corporation or of its transfer agent
to the person for whose account such Common Stock was so surrendered, a
certificate or certificates for the number of full shares of Common
Stock into which the shares represented by the surrendered certificate
are converted. If surrendered certificates for Common Stock are
converted only in part, the corporation will issue and deliver to the
holder, without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted shares of such class of
Common Stock. The failure of the holder to deliver to the corporation
certificates representing shares of a class of Common Stock converted
in accordance with this Article 4, Paragraph 2C.(3)(e), shall in no way
affect the automatic conversion of such shares.
(vi) The issuance of certificates for shares of a class of
Common Stock upon conversion of shares of the other class of Common
Stock shall be made without charge for any issue, stamp or other
similar tax in respect of such issuance; provided, however, if any such
certificate is to be issued in a name other than that of the holder of
the share or shares of the class of Common Stock converted, the person
or persons requesting the issuance thereof shall pay to the corporation
the amount of any tax which may be payable in respect of any transfer
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involved in such issuance or shall establish to the satisfaction of the
corporation that such tax has been paid.
(vii) The corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all
such outstanding shares, provided that nothing contained herein shall
be construed to preclude the corporation from satisfying the
obligations in respect of the conversion of the outstanding shares of
Class B Common Stock by delivery of shares of Class A Common Stock
which are held in the treasury of the corporation. The corporation
shall take all such corporate and other actions as from time to time
may be necessary to insure that all shares of Class A Common Stock
issuable upon conversion of shares of Class B Common Stock upon issue
will be duly and validly authorized and issued, fully paid and
nonassessable and free of any preemptive or similar rights. In order
that the corporation may issue shares of Class A Common Stock upon
conversion of the Class B Common Stock, the corporation will endeavor
to comply with all applicable Federal and state securities laws and
will endeavor to list such shares to be issued upon conversion on such
securities exchange on which the Class A Common Stock is then listed.
(viii) The corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class A Common Stock a number of shares of Class
B Common Stock equal to 40% of the number of outstanding shares of
Class A Common Stock, provided that nothing contained herein shall be
construed to preclude the corporation from satisfying the obligations
in respect of the conversion of the outstanding shares of Class A
Common Stock by delivery of shares of Class B Common Stock which are
held in the treasury of the corporation. The corporation shall take all
such corporate and other actions as from time to time may be necessary
to insure that all shares of Class B Common Stock issuable upon
conversion of shares of Class A Common Stock upon issue will be duly
and validly authorized and issued, fully paid and nonassessable and
free of any preemptive or similar rights. In order that the corporation
may issue shares of Class B Common Stock upon conversion of the Class A
Common Stock, the corporation will endeavor to comply with all
applicable Federal and state securities laws.
(f) Except as may otherwise be required by law and for the equitable
rights and remedies which may otherwise be available to holders of Common Stock,
the shares of Common Stock shall not have any designations, preferences,
limitations or relative rights, other than those specifically set forth in these
Articles of Incorporation.
(g) The headings of the various subdivisions of this Section are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section.
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Article 7, Paragraph 1:
A. Right to Indemnification.
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the IBCA, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
IBCA is amended to authorize corporate action further eliminating or limiting
the personal liability of Directors, then the liability of a director or the
corporation shall be eliminated or limited to the full extent permitted under
the IBCA, as so amended. Any repeal or modification of this Article 7, Paragraph
1 by the shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to be the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to be the best interests of the
corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
B. Suit by Corporation or Shareholder
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to the best interests of the
corporation, and except that no indemnification shall be made with respect to
any claim, issue or matter as to which such person has been finally adjudged to
have been liable to the corporation, unless, and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
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circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
C. Director Discretion
Any indemnification under Article 7, Paragraphs 1A. and B. (unless
ordered by a court) shall be made only as authorized in the specific case, upon
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Article 7, Paragraphs 1A. and B. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable (or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel in a written opinion, or (3) by the
shareholders. In any event, to the extent that a director or officer of the
corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in Article 7, Paragraphs 1A. and B.
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including reasonable attorneys' fees) actually and reasonable
incurred by him in connection therewith.
D. Advancement of Expenses
(1) Reasonable expenses incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the corporation in advance of the
final deposition of such action, suit or proceeding, upon receipt of (i) a
statement signed by such director or officer to the effect that such director or
officer acted in good faith and in a manner which he believed to be in, or not
opposed to the best interests of the corporation and (ii) an undertaking by or
on behalf of the director or officer to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
(2) The board of directors may, by separate resolution adopted under
and referring to this Article of the by-laws, provide for securing the payment
of authorized advances by the creation of escrow accounts, the establishment of
letters of credit or such other means as the board deems appropriate and with
such restrictions, limitations and qualifications with respect thereto as the
board deems appropriate in the circumstances.
E. Non-Exclusivity of Rights and Contractual Nature
(1) The indemnification and advancement of expenses provided by or
granted under other subsections of this Article shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(2) The provisions of this Article 7, Paragraph 1 shall be deemed to be
a contract between the corporation and each director and officer who serves in
such capacity at anytime while this Article 7, Paragraph 1 is in effect and any
indemnification provided under Article 7, Paragraph 1 to a person shall continue
after such person ceases to be an officer, director, agent or
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employee of the corporation as to all facts, circumstances and events occurring
while such person was such officer, director, agent or employee, and shall not
be decreased or diminished in scope without such person's consent, regardless of
their repeal or modification of this Article or any repeal or modification of
the Illinois Business Corporation Act or any other applicable law. If the scope
of indemnity provided by this Article 7, Paragraph 1 or any replacement article,
or pursuant to the Illinois Business Corporation Act or any modification or
replacement thereof is increased, then such person shall be entitled to such
increased indemnification as is in existence at the time indemnity is provided
to such person, it being the intent, subject to Article 7, Paragraph 1K., to
indemnify persons under this Article 7, Paragraph 1 to the fullest extent
permitted by law.
F. Insurance
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article.
G. Report to Shareholders
The corporation shall report in writing to shareholders any indemnity
or advanced expenses paid to a director, officer, employee or agent with or
before the notice of the next shareholders' meeting.
H. Right of Claimant to Bring Suit
Subject to Article 7, Paragraph 1K., if a claim under this Article is
not promptly paid by the corporation after a written claim has been received by
the corporation or if expenses pursuant to Section 4 of this Article have not
been promptly advanced after a written request for such advancement accompanied
by the statement and undertaking required by Article 7, Paragraph 1D. of this
Article has been received by the corporation, the director or officer may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim or the advancement of expenses. If successful, in whole or in part,
in such suit, such director or officer shall also be entitled to be paid the
reasonable expense thereof, including attorneys' fees. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the corporation) that the director
or officer has not met the standards of conduct which make it permissible under
the Illinois Business Corporation Act for the corporation to indemnify the
director or officer for the amount claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
shareholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the director or officer is
proper in the circumstances because he or she has met the applicable standard of
conduct required under the Illinois Business Corporation Act, nor an actual
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determination by the corporation (including its board of directors, independent
legal counsel, or its shareholders) that the director or officer had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the director or officer had not met the applicable standard
of conduct.
I. Definition of "corporation"
For purposes of this Article, references to "the corporation" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who was a director or officer of such merging
corporation, or was serving at the request of such merging corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving corporation as such person would have with
respect to such merging corporation if its separate existence had continued.
J. Employee Benefit Plans
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and references
to "officers" shall include elected and appointed officers. A person who acted
in good faith and in a manner he reasonably believed to be in the best interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of the
corporation" as referred to in this Article.
K. Reimbursement
Anything herein to the contrary notwithstanding, if the corporation
purchases insurance in accordance with Article 7, Paragraph 1F., the corporation
shall not be required to, but may (if the board of directors so determines in
accordance with this Article 7, Paragraph 1) reimburse any party instituting any
action, suit or proceeding if a result of the institution thereof is the denial
of or limitation of payment of losses under such insurance when such losses
would have been paid thereunder if a non-insured third party had instituted such
action, suit or proceedings.
L. Severability
If any portion of this Article shall be invalidated or held to be
unenforceable on any ground by any court of competent jurisdiction, the decision
of which shall not have been reversed on appeal, such invalidity or
unenforceability shall not affect the other provisions hereof, and this Article
shall be construed in all respects as if such invalid or unenforceable
provisions had been omitted therefrom.
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Article 7, Paragraph 2:
Without the consent of the holders of eighty-five percent (85%) of the
outstanding Common Stock, voting as a single class, the corporation may (and may
permit any subsidiary of the corporation over which it has control to) sell the
following products:
(1) crude oil;
(2) other products usually and normally refined as petroleum products
from crude oils; and
(3) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(a) the United States or any of its territories or
possessions;
(b) any country wholly located in the Western Hemisphere
and/or Europe or surrounded by the Mediterranean Sea;
(c) any country all of the territory of which was formerly
contained within the Union of Soviet Socialist Republics;
(d) any country whose territory is contained within the
territories constituting as of the date hereof the countries known as
Algeria, Angola, Benin, Burkina Faso, Cameroon, Central African
Republic, Chad, Congo, Cote D'Ivoire, Equatorial Guinea, Gabon, Gambia,
Ghana, Greenland, Guinea, Guinea Bissau, Iceland, Liberia, Libya, Mali,
Mauritania, Mongolia, Morocco, Niger, Nigeria, Rio Muni, Senegal,
Sierra Leone, Togo, Tunisia, Turkey, Western Sahara and/or Zaire;
(e) Antarctica; and
(f) international waters;
unless (x) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between Dynegy Inc. and Chevron, as the same may
from time to time be amended in accordance with the terms thereof, or (y) such
Scope of Business Agreement is terminated pursuant to its terms, upon which
termination the provisions of this Article 7, Paragraph 2 shall be of no further
force and effect. A copy of such Scope of Business Agreement, as the same may be
amended, shall be available for inspection by any stockholder of the corporation
at the principal offices of the corporation. Except as indicated above or as may
otherwise be provided in these Articles of Incorporation or by Illinois law,
stockholders shall have no right to approve specific business activities of the
corporation, and the above provisions shall not otherwise affect corporate
powers and purposes as stated in Article 3.
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EXHIBIT B
STATEMENT OF RESOLUTION ESTABLISHING SERIES
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
ENERGY CONVERGENCE HOLDING COMPANY
Pursuant to and in accordance with Section 6.10 of the Illinois
Business Corporation Act of 1983, as amended (the "IBCA"), the undersigned
corporation hereby makes the following statement:
The name of the corporation is Energy Convergence Holding Company
(the "Corporation").
ARTICLE I.
The Board of Directors of the Corporation (the "Board") on ________,
[_____] duly adopted the following resolution establishing and designating a
series of preferred stock of the Corporation and fixing and determining the
relative rights and preferences thereof:
RESOLVED, that pursuant to the authority vested in the Board by
Article 4, Paragraph 2B. of the Corporation's Articles of Incorporation, a
series of preferred stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the Corporation,
such series to be designated "Series A Convertible Preferred Stock" (the
"Series A Preferred Stock"), to consist of [__________] shares, no par value
per share, of which the preferences and relative and other rights, and the
qualifications, limitations, and restrictions thereof will be, in addition to
those set forth in the Corporation's Articles of Incorporation, as follows:
1. CERTAIN DEFINITIONS. Unless otherwise stated herein or the context
otherwise requires, the terms defined in this Section 1 have the following
meanings:
"Board" is defined in the preamble to this Article II.
"Class A Common Stock" means all shares now or hereafter authorized
of Class A Common Stock, no par value per share, of the Corporation.
"Common Stock" means all shares now or hereafter authorized of any
class of common stock of the Corporation and any other stock of the
Corporation, howsoever designated, authorized after the Issue Date, which has
the right (subject to prior rights of any class or series of preferred stock)
to participate in the distribution of the assets and earnings of the
Corporation without limit as to per share amount.
"Conversion Date" is defined in Section 5(c).
"Conversion Price" will mean the price per share of Class A Common
Stock used to determine the number of shares of Class A Common Stock
deliverable upon conversion of a
<PAGE> 97
share of the Series A Preferred Stock, subject to adjustment in accordance with
the provisions of Section 5.
"Corporation" is defined in Article I.
"Dividend Payment Date" means March 31, June 30, September 30, and
December 31 of each year.
"Dividend Period" means the quarterly period between consecutive
Dividend Payment Dates; provided, that the initial Dividend Period shall be
from the Issue Date until the first Dividend Payment Date after the Issue
Date.
"Final Redemption Date" is defined in Section 4(e).
"IBCA" is defined in the introductory paragraph of this resolution.
["ILLINOVA AVERAGE PRICE" MEANS THE MEAN AVERAGE OF THE CLOSING
PRICES ON THE NEW YORK STOCK EXCHANGE, INC. OF THE COMMON STOCK, NO PAR VALUE,
OF ILLINOVA CORPORATION OVER THE FIVE CONSECUTIVE TRADING DAYS ENDING ON THE
ELECTION DATE PURSUANT TO THE MERGER AGREEMENT, BY AND AMONG ILLINOVA
CORPORATION, THE CORPORATION, DYNEGY ACQUISITION COMPANY, ENERGY CONVERGENCE
ACQUISITION COMPANY AND DYNEGY INC., DATED JUNE 14, 1999.]
"Issue Date" means the date on which shares of Series A Preferred
Stock are first issued by the Corporation.
"Junior Stock" means, for purposes of Section 2, the Common Stock and
any other class or series of capital stock of the Corporation issued after the
Issue Date not entitled to receive any dividends in any Dividend Period,
unless all dividends required to have been paid or declared and set apart for
payment on the Series A Preferred Stock have been paid or declared and set
apart for payment and, for purposes of Section 3, the Common Stock and any
class or series of capital stock of the Corporation issued after the Issue
Date not entitled to receive any assets upon the liquidation, dissolution, or
winding up of the affairs of the Corporation until the Series A Preferred
Stock have received the entire amount to which such stock is entitled upon
such liquidation, dissolution, or winding up.
"Liquidation Date" is defined in Section 3.
"Liquidation Value" means $50.00 per share of Series A Preferred
Stock, plus any accrued but unpaid dividends thereon through the Liquidation
Date.
"Parity Stock" means, for purposes of Section 2, any other class or
series of capital stock of the Corporation issued after the Issue Date
entitled to receive payment of dividends on a parity with the Series A
Preferred Stock and, for purposes of Section 3, any other class or series of
capital stock of the Corporation issued after the Issue Date entitled to
receive assets upon the liquidation, dissolution, or winding up of the affairs
of the Corporation on a parity with the Series A Preferred Stock.
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"Record Date" means March 15, June 15, September 15, and December 15
of each year, or such other date as may be designated by the Board.
"Redemption Agent" is defined in Section 4(d).
"Redemption Date" is defined in Section 4(c).
"Redemption Price" means $50.00 per share of Series A Preferred
Stock, plus any accrued but unpaid dividends thereon through the Redemption
Date.
"Senior Stock" means for purposes of Section 2, any class or series
of capital stock of the Corporation issued after the Issue Date ranking senior
to the Series A Preferred Stock in respect of the right to receive dividends,
and, for purposes of Section 3, any class or series of capital stock of the
Corporation issued after the Issue Date ranking senior to the Series A
Preferred Stock in respect of the right to receive assets upon the
liquidation, dissolution, or winding up of the affairs of the Corporation.
"Series A Preferred Stock" is defined in the preamble to this
Article II.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
Senior Stock, the holders of Series A Preferred Stock are entitled to receive,
out of funds legally available for such purpose, cash dividends at the rate of
$3.00 per annum per share of Series A Preferred Stock, and no more. Such
dividends are cumulative from the Issue Date and are payable quarterly, in
arrears, when and as declared by the Board on each Dividend Payment Date
commencing on the first Dividend Payment Date after the Issue Date. Each such
dividend will be paid to the holders of record of the Series A Preferred Stock
as their names appear on the share register of the Corporation on the Record
Date immediately preceding each Dividend Payment Date. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on such
date as may be fixed by the Board.
(b) If full cash dividends are not paid or made available to
the holders of all outstanding shares of Series A Preferred Stock and any
Parity Stock, and funds available are insufficient to permit such payment to
all such holders of the preferential amounts to which they are then entitled,
the entire amount available for payment of cash dividends remaining after the
distributions to holders of any Senior Stock of the full amounts to which they
may be entitled will be distributed among the holders of the Series A
Preferred Stock and any Parity Stock ratably in proportion to the full amount
to which they would otherwise be respectively entitled, and any remainder not
paid to the holders of the Series A Preferred Stock will cumulate as provided
in Section 2(c).
(c) If, on any Dividend Payment Date, the holders of the
Series A Preferred Stock do not receive the full dividends provided for in
Section 2(a), then such dividends will cumulate, whether or not the
Corporation has earnings or profits, whether or not there are funds legally
available for payment of such dividends, and whether or not such dividends are
declared;
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provided, however, no additional dividends will be paid on or with respect to
any dividends that cumulate pursuant to this Section 2(c).
(d) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation will not, unless all dividends to which the
holders of Series A Preferred Stock are entitled for all previous Dividend
Periods have been paid or declared and a sum of money sufficient for the
payment thereof set apart, (i) declare or pay on any Junior Stock any dividend
or distribution whatsoever, whether in cash, property, or otherwise (other
than dividends payable in shares of the class or series upon which such
dividends are declared or paid, or payable in shares of Common Stock with
respect to Junior Stock other than Common Stock, together with cash in lieu of
fractional shares), (ii) purchase or redeem any Junior Stock, or (iii) pay or
make available any monies for a sinking fund for the purchase or redemption of
any Junior Stock.
(e) Whenever, at any time, accrued but unpaid dividends
should exceed $2.25 per share of outstanding Series A Preferred Stock, the
holders of the Series A Preferred Stock will have the option, voting
separately as a class with holders of shares of any one or more other series
of Parity Stock that would then be entitled to voting rights with the Series A
Preferred Stock to elect directors as a separate class, to elect two directors
to the Board at the Corporation's next annual meeting of its shareholders and
at each subsequent annual meeting of shareholders. At elections for such
directors, each holder of Series A Preferred Stock will be entitled to one
vote for each share held (the holders of shares of Parity Stock will be
entitled to such number of votes, if any, for each share held as may be
granted to the holders of such Parity Stock by the Corporation). Upon vesting
of such right of holders of Series A Preferred Stock, the authorized number of
directors constituting the Board will be increased (even if such increase
results in exceeding the maximum authorized number of directors), in
accordance with the Corporation's Articles of Incorporation and Bylaws, by
two, and the two vacancies so created will be filled by vote of the holders of
Series A Preferred Stock together with holders of Parity Stock, voting
together as a separate class. The right of holders of Series A Preferred
Stock, voting separately as a class with holders of Parity Stock, if
applicable, to elect two directors to the Board will continue until such time
as there are no longer any accrued but unpaid dividends on outstanding Series
A Preferred Stock, subject to revesting if accrued but unpaid dividends
exceed, at any time or times, $2.25 per share of outstanding Series A
Preferred Stock. Upon any termination of the right of the holders of Series A
Preferred Stock, voting separately as a class with holders of Parity Stock, if
applicable, to elect directors as provided herein, the term of office of the
directors elected by the holders of the Series A Preferred Stock, voting
separately as a class with holders of Parity Stock, if applicable, will
automatically terminate. If the office of any director elected by the holders
of Series A Preferred Stock, voting separately as a class with holders of
Parity Stock, if applicable, becomes vacant because of death, resignation,
retirement, disqualification, removal from office, or otherwise, the remaining
director elected by the holders of Series A Preferred Stock, voting separately
as a class with holders of Parity Stock, if applicable, will choose a
successor to hold office for the unexpired term in respect of which such
vacancy occurred. Whenever the term of office of the directors elected by the
holders of Series A Preferred Stock, voting separately as a class with holders
of Parity Stock, if applicable, ends and the special voting rights provided in
this Section 2(e) terminate, the number of directors constituting the Board
will be reduced by two.
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3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION, OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution, or other
winding up of the affairs of the Corporation, subject to the prior preferences
and other rights of any Senior Stock, but before any distributions or payments
are made to the holders of Junior Stock, the holders of the Series A Preferred
Stock will be entitled to be paid the Liquidation Value of all outstanding
shares of Series A Preferred Stock, as of the date of such liquidation or
dissolution or such other winding up (the "Liquidation Date"), and no more, in
cash or in property at its fair value as determined by the Board, or both, at
the election of the Board. If such payment is made in full to the holders of
the Series A Preferred Stock, and if payment is made in full to the holders of
any Senior Stock and Parity Stock of all amounts to which such holders will be
entitled, the remaining assets and funds of the Corporation will be
distributed among the holders of Junior Stock, according to their respective
shares and priorities. If, upon any such liquidation, dissolution, or other
winding up of the affairs of the Corporation, the assets of the Corporation
distributable among the holders of all outstanding shares of the Series A
Preferred Stock and any Parity Stock are insufficient to permit the payment in
full to such holders of the preferential amounts to which they are entitled,
then the entire assets of the Corporation remaining after the distributions to
holders of any Senior Stock of the full amounts to which they may be entitled
will be distributed among the holders of the Series A Preferred Stock and any
Parity Stock ratably in proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the consolidation or merger of the
Corporation into or with another entity or entities nor the sale of all or
substantially all of the assets of the Corporation to any person or persons
will be deemed a liquidation, dissolution, or winding up of the affairs of the
Corporation within the meaning of this Section 3, unless such consolidation,
merger, or sale of assets is in connection with the complete liquidation,
dissolution, or winding up of the affairs of the Corporation.
4. REDEMPTION BY THE CORPORATION.
(a) The Series A Preferred Stock may not be redeemed, in
whole or in part, prior to the third anniversary of the Issue Date. On and
after the third anniversary of the Issue Date, the Series A Preferred Stock
may be redeemed by the Corporation at any time and from time to time in, whole
or in part, at the option of the Corporation, at the Redemption Price.
(b) If less than all of the outstanding shares of the Series
A Preferred Stock are to be redeemed by the Corporation, such shares will be
redeemed pro rata as determined by the Board in its sole discretion.
(c) Notice of each proposed redemption of the Series A
Preferred Stock will be sent by or on behalf of the Corporation, by first
class mail, postage prepaid, to holders of record of the shares of Series A
Preferred Stock to be redeemed at such holders' addresses as they appear on
the records of the Corporation, not less than 30 days or more than 60 days
prior to the date fixed for redemption by the Corporation (the "Redemption
Date") (i) notifying such holders of the election of the Corporation to redeem
such shares of Series A Preferred Stock and the Redemption Date, (ii) stating
the date on which such shares of Series A Preferred Stock cease to be
convertible and the Conversion Price, (iii) stating the place or places at
which such shares of Series A Preferred Stock called for redemption will, upon
presentation and surrender of the certificate or certificates evidencing such
shares, be redeemed and the Redemption Price, and
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(iv) stating the name and address of the Redemption Agent selected in accordance
with Section 4(d).
(d) The Corporation may (i) act as the redemption agent or
(ii) appoint as its agent, for the purpose of acting as the Corporation's
redemption agent, a bank or trust company in good standing, organized under
the laws of the United States of America or any jurisdiction thereof and any
replacement thereof or successors thereto. The Corporation or such appointed
bank or trust company is hereinafter referred to as the "Redemption Agent."
Following such appointment, if any, and prior to any redemption, the
Corporation will deliver to the Redemption Agent irrevocable written
instructions authorizing the Redemption Agent, on behalf and at the expense of
the Corporation, to cause a notice of redemption to be duly mailed in
accordance with Section 4(c), as soon as practicable after receipt of such
irrevocable instructions. All funds necessary for the redemption will be
deposited with the Redemption Agent, in trust, at least two business days
prior to the Redemption Date, for the pro rata benefit of the holders of the
shares of Series A Preferred Stock called for redemption. Neither failure to
mail any such notice to one or more holders of Series A Preferred Stock nor
any defect in any notice will affect the sufficiency of the proceedings for
redemption as to other holders of Series A Preferred Stock.
(e) If notice of redemption is given in accordance with
Section 4(e) and the Corporation is not in default in the payment of the
Redemption Price, then each holder of shares of Series A Preferred Stock
called for redemption is entitled to all preferences and relative and other
rights accorded by this resolution until and including the date prior to the
Redemption Date. If the Corporation defaults in making payment on the
Redemption Date, then each holder of the shares of Series A Preferred Stock
called for redemption is entitled to all preferences and relative and other
rights accorded by this resolution until and including the date prior to the
date when the Corporation makes payment to the holders of the Series A
Preferred Stock (the "Final Redemption Date"). From and after the Redemption
Date, the shares of Series A Preferred Stock called for redemption will no
longer be deemed to be outstanding and all rights of the holders of such
shares of Series A Preferred Stock will cease and terminate, except the right
of the holders of such shares of Series A Preferred Stock, upon surrender of
the certificate or certificates therefor, to receive the Redemption Price. The
deposit of monies in trust with the Redemption Agent by the Corporation will
be irrevocable, except that the Corporation will be entitled to receive from
the Redemption Agent the interest or other earnings, if any, earned on any
monies so deposited in trust, and the holders of any shares of Series A
Preferred Stock redeemed will have no claim to such interest or other
earnings. Any balance of monies so deposited by the Corporation and unclaimed
by the holders of the Series A Preferred Stock entitled thereto at the
expiration of one year from the Redemption Date (or the Final Redemption Date,
as applicable) will be repaid, together with any interest or other earnings
thereon, to the Corporation, and after any such repayment, the holders of the
shares of Series A Preferred Stock entitled to the funds so repaid to the
Corporation will look only to the Corporation for payment of the Redemption
Price, without interest.
5. CONVERSION RIGHTS. The Series A Preferred Stock will be
convertible into Class A Common Stock as follows:
(a) Conversion. Subject to and upon compliance with the
provisions of this Section 5, the holder of any shares of Series A Preferred
Stock will have the right at such
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holder's option, at any time or from time to time, to convert any of such shares
of Series A Preferred Stock into fully paid and nonassessable shares of Class A
Common Stock at the Conversion Price in effect on the Conversion Date. With
respect to any share of Series A Preferred Stock called for redemption, the
right of conversion described in this Section 5 will terminate at the close of
business on the day prior to the Redemption Date or, if the Corporation defaults
in the payment of the Redemption Price, at the close of business on the day
prior to the Final Redemption Date.
(b) Conversion Price. Each share of Series A Preferred Stock
will be converted into a number of shares of Class A Common Stock determined
by dividing (i) the Liquidation Value by (ii) the Conversion Price in effect
on the Conversion Date. The Conversion Price at which shares of Class A Common
Stock will initially be issuable upon conversion of the shares of Series A
Preferred Stock will be [(I) THE ILLINOVA AVERAGE PRICE TIMES 1.22 IF THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED INVESTMENT GRADE OR (II) IF THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED LESS THAN INVESTMENT GRADE THAT
MULTIPLE (NOT TO EXCEED 1.18) RESULTING IN THE FAIR MARKET VALUE OF THE SERIES
A PREFERRED STOCK BEING EQUAL TO THE LIQUIDATION VALUE UPON ISSUANCE, UPON
WHICH LEHMAN BROTHERS, INC., CHASE SECURITIES, INC., MERRILL LYNCH & COMPANY,
INC., MORGAN STANLEY & CO., INC., AND GOLDMAN SACHS INTERNATIONAL AGREE BASED ON
GOOD FAITH NEGOTIATIONS; PROVIDED THAT IF SUCH INVESTMENT BANKS CANNOT AGREE
ON THE APPROPRIATE MULTIPLE, THEN THEY SHALL CHOOSE A SIXTH INVESTMENT BANK
WHOSE DETERMINATION SHALL BE BINDING. THE DETERMINATION OF WHETHER THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED INVESTMENT GRADE OR LOWER WILL BE
BASED ON THE STATED INTENTION OF AT LEAST TWO OF THE FOLLOWING THREE RATING
AGENCIES IN CONNECTION WITH THE CORPORATION'S PROPOSED CREDIT RATING AFTER THE
CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER,
DATED JUNE 14, 1999, BY AND AMONG THE CORPORATION, DYNEGY INC., ILLINOVA
CORPORATION, DYNEGY ACQUISITION CORPORATION AND ENERGY CONVERGENCE ACQUISITION
CORPORATION: STANDARD & POORS, MOODY'S INVESTOR SERVICES AND DUFF & PHELPS.]
The Conversion Price will be subject to adjustment as set forth in Section 5(e).
No dividends will accrue or be paid on Series A Preferred Stock subsequent to
conversion.
(c) Mechanics of Conversion. The holder of any shares of
Series A Preferred Stock may exercise the conversion right specified in
Section 5(a) by surrendering to the Corporation or the transfer agent of the
Corporation the certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to be converted;
provided, however, that the Corporation will not be obligated to issue to any
such holder the certificate or certificates evidencing the shares of Class A
Common Stock issuable upon such conversion, unless the certificate or
certificates evidencing the shares of Series A Preferred Stock are either
delivered to the Corporation or the transfer agent of the Corporation.
Conversion will be deemed to have been effected on the date when delivery is
made of notice of an election to convert and the certificate or certificates
evidencing the Series A Preferred Stock shares to be converted (the
"Conversion Date"). Subject to the provisions of Section 5(e)(iv), as promptly
as practicable thereafter, the Corporation will issue and deliver to or upon
the written order of such holder a certificate or certificates for the number
of full shares of Class A Common Stock to which such holder is entitled and a
check or cash with respect to any fractional interest in a share of Class A
Common Stock as provided in Section 5(d). Subject to the provisions of Section
5(e)(iv), the person in whose name the certificate or certificates for shares
of Class A Common
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Stock are to be issued will be deemed to have become a holder of record of
such Class A Common Stock on the applicable Conversion Date. Upon conversion
of only a portion of the number of shares covered by a certificate
representing shares of Series A Preferred Stock surrendered for conversion,
the Corporation will issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Series A
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(d) Fractional Shares. No fractional shares of Class A
Common Stock or scrip will be issued upon conversion of shares of Series A
Preferred Stock. If more than one share of Series A Preferred Stock is
surrendered for conversion at any one time by the same holder, the number of
full shares of Class A Common Stock issuable upon conversion thereof will be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional shares of Class A Common Stock
which would otherwise be issuable upon conversion of any shares of Series A
Preferred Stock, the Corporation will pay a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest based on
the fair market value of the Class A Common Stock determined by the
Corporation in its sole discretion.
(e) Conversion Price Adjustments. The Conversion Price will
be subject to adjustment from time to time as follows:
(i) Stock Dividends, Subdivisions,
Reclassifications, or Combinations. If the Corporation (i) declares a
dividend or makes a distribution on its Class A Common Stock in shares of its
Class A Common Stock, (ii) subdivides or reclassifies the outstanding shares of
Class A Common Stock into a greater number of shares, or (iii) combines or
reclassifies the outstanding Class A Common Stock into a smaller number of
shares, the Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision, combination,
or reclassification will be proportionately adjusted so that the holder of any
shares of Series A Preferred Stock surrendered for conversion after such date
will be entitled to receive the number of shares of Class A Common Stock which
such holder would have owned or been entitled to receive had such Series A
Preferred Stock been converted immediately prior to such date. Successive
adjustments in the Conversion Price will be made whenever any of the foregoing
events occur.
(ii) Consolidation, Merger, Sale, Lease or
Conveyance. In case of any consolidation with or merger of the Corporation with
or into another entity, or in case of any sale, lease, or conveyance to another
person of the assets of the Corporation as an entirety or substantially as an
entirety, each share of Series A Preferred Stock will be convertible, after the
date of such consolidation, merger, sale, lease, or conveyance, into the number
of shares of stock or other securities or property (including cash) to which the
Class A Common Stock issuable (at the time of such consolidation, merger, sale,
lease, or conveyance) upon conversion of a share of Series A Preferred Stock
would have been entitled upon such consolidation, merger, sale, lease, or
conveyance; and in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of the holders of
the shares of Series A Preferred Stock will be appropriately adjusted so as to
be applicable, as nearly as may reasonably be, to any shares of
8
<PAGE> 104
stock or other securities or property thereafter deliverable on the conversion
of the shares of Series A Preferred Stock.
(iii) Rounding of Calculations; Minimum
Adjustment. All calculations under this Section 5(e) will be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the case
may be. Any provision of this Section 5 to the contrary notwithstanding, no
adjustment in the Conversion Price will be made if the amount of such adjustment
would be less than $0.05, but any such amount will be carried forward and an
adjustment with respect thereto will be made at the time of and together with
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, will aggregate $0.05 or more.
(iv) Timing of Issuance of Additional Class A
Common Stock Upon Certain Adjustments. In any case in which the provisions of
this Section 5(e) requires that an adjustment be made, such adjustment will
become effective immediately after a record date for an event. The Corporation
may defer, until the occurrence of such event, (A) issuing to the holder of any
share of Series A Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class A Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the shares of Class A Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any amount
of cash in lieu of a fractional share of Class A Common Stock pursuant to
Section 5(d); provided, however, that the Corporation upon request will deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares and such cash, upon the
occurrence of the event requiring such adjustment.
(f) Statement Regarding Adjustments. Whenever the Conversion
Price is adjusted as provided in Section 5(e), the Corporation will file, at
the office of any transfer agent for the Series A Preferred Stock and at the
principal office of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Price in effect after such
adjustment, and the Corporation will also cause a copy of such statement to be
sent by mail, first class postage prepaid, to each holder of shares of Series
A Preferred Stock at such holders address appearing on the Corporation's
records. Each such statement will be signed by the Corporation's independent
public accountants, if applicable. Where appropriate, such copy may be given
in advance and may be included as part of a notice required to be mailed under
the provisions of Section 5(g).
(g) Conditional Conversion. If it is proposed that a
registration of Common Stock is intended to be filed, except on Form S-4 or
S-8 (or any successor forms), which includes the secondary registration on
behalf of holders of Common Stock, the Corporation will notify the holders of
Series A Preferred Stock of such proposed registration and such holders may
conditionally exercise their right to convert any or all of such shares of
Series A Preferred Stock so held in accordance with this Section 5 and
participate in such proposed registration in accordance with the registration
rights granted to such holder by the Corporation, if any. If such registration
is not declared effective or is withdrawn, any conditional exercise pursuant
to this Section 5(g) will be null and void ab initio. Only the number of
shares of Class A Common Stock conditionally converted pursuant to this
Section 5(g) that are actually sold under an
9
<PAGE> 105
effective registration statement will be deemed converted pursuant to Section
5(a) and the conditional conversion of such shares will be null and void ab
initio upon the termination of the offering under such registration statement.
(h) Notice to Holders. If the Corporation proposes to take
any action of the type described in Section 5(e)(i) or (ii), the Corporation
will give notice to each holder of shares of Series A Preferred Stock, in the
manner set forth in Section 5(f), which notice will specify the record date,
if any, with respect to any such action and the approximate date on which such
action is to take place. Such notice will also set forth such facts with
respect thereto as will be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind, or class of shares or other
securities or property which will be deliverable upon conversion of shares of
Series A Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice will be given at least ten days prior to
the date so fixed, and in case of all other action, such notice will be given
at least 15 days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, will not affect the legality or validity
of any such action.
(i) Costs. The Corporation will pay all documentary, stamp,
transfer, or other transactional taxes attributable to the issuance or
delivery of shares of Class A Common Stock upon conversion of any shares of
Series A Preferred Stock; provided, however, that the Corporation will not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the shares of Series A Preferred Stock
in respect of which such shares are being issued.
(j) Reservation of Shares. The Corporation will reserve at
all times so long as any shares of Series A Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock (if
applicable) or its authorized but unissued shares of Class A Common Stock, or
both, solely for the purpose of effecting the conversion of the shares of
Series A Preferred Stock, sufficient shares of Class A Common Stock to provide
for the conversion of all outstanding shares of Series A Preferred Stock.
(k) Valid Issuance. All shares of Class A Common Stock which
may be issued upon conversion of the shares of Series A Preferred Stock will,
upon issuance by the Corporation, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens, and charges with respect to the
issuance thereof, and the Corporation will take no action which will cause a
contrary result (including, without limitation, any action which would cause
the Conversion Price to be less than the par value, if any, of the Class A
Common Stock).
6. VOTING RIGHTS. If the holders of shares of Series A Preferred
Stock have the right to vote separately as a class pursuant to Section 2(e) or
the IBCA, such holders will be entitled to one vote for each such share so
held. In all other cases, the holders of shares of Series A Preferred Stock
will be entitled to vote upon all matters upon which holders of the Class A
Common Stock have the right to vote, and will be entitled to the number of
votes equal to [1.22] [OR IF THE FACTOR DETERMINED IN ACCORDANCE WITH SECTION
5(B) IS DIFFERENT, THEN SUCH FACTOR] times the number of whole shares of Class
A Common Stock into which such shares of Series A
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<PAGE> 106
Preferred Stock could be converted pursuant to the provisions of Section 5 at
the record date for the determination of the stockholders entitled to vote on
such matters, or, if no such record date is established, at the date such vote
is taken or any written consent of stockholders is solicited, such votes to be
counted together with all other shares of capital stock having general voting
powers and not separately as a class.
7. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series A Preferred Stock will not have any preferences or
relative, participating, optional, or other special rights, other than those
specifically set forth in this Statement of Resolution. The shares of Series A
Preferred Stock will have no preemptive or subscription rights.
8. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and will not affect the
interpretation of any of the provisions hereof.
9. SEVERABILITY OF PROVISIONS. If any right, preference, or
limitation of the Series A Preferred Stock set forth in this resolution (as
such resolution may be amended from time to time) is invalid, unlawful, or
incapable of being enforced by reason of any rule of law or public policy, all
other rights, preferences, and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference, or limitation will, nevertheless, remain in
full force and effect, and no right, preference, or limitation herein set
forth will be deemed dependent upon any other such right, preference, or
limitation unless so expressed herein.
10. STATUS OF REACQUIRED SHARES. Shares of Series A Preferred Stock
which have been issued and reacquired in any manner will (upon compliance with
any applicable provisions of the laws of the State of Illinois) have the
status of authorized and unissued shares of Series A Preferred Stock issuable
in series undesignated as to series and may be redesignated and reissued.
11. ISSUANCE OF ADDITIONAL SECURITIES. Nothing contained herein will
be deemed to any way prohibit, restrict, or inhibit the ability of the
Corporation to designate and/or issue additional securities of any kind,
including, without limitation, shares of Parity Stock or Junior Stock;
provided that, the Corporation may not designate and/or issue any shares of
Senior Stock without the consent of a majority of the shares of Series A
Preferred Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
11
<PAGE> 107
The Corporation has caused this statement to be signed by its duly
authorized officers, each of whom affirms, under penalties of perjury, that
the facts stated herein are true.
Date:
----------------------- ENERGY CONVERGENCE HOLDING COMPANY
By:
-------------------------------
---------------------,President
Attested By:
----------------------
-----------, Secretary
<PAGE> 108
EXHIBIT 8.17
FORM OF AFFILIATE AGREEMENT
Newco
[_______________]
[_______________]
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger (the "MERGER
AGREEMENT") dated as of June 14, 1999 among Illinova Corporation, an Illinois
corporation ("ILLINOVA"), Energy Convergence Holding Company, an Illinois
corporation ("NEWCO"), Dynegy Acquisition Corporation, a Delaware corporation,
and a wholly owned subsidiary of Newco ("DAC"), Energy Convergence Acquisition
Corporation, an Illinois corporation, and a wholly owned subsidiary of Newco
("IAC"), and Dynegy Inc., a Delaware corporation ("DYNEGY"), pursuant to which
DAC will be merged with and into Dynegy, and IAC will be merged with and into
Illinova.
Pursuant to the terms and conditions of the Merger Agreement,
[THE UNDERSIGNED HEREBY AGREES THAT IT WILL MAKE OR CAUSE TO BE MADE AN
ELECTION PURSUANT TO SECTION 4.1(d) OF THE MERGER AGREEMENT TO RECEIVE STOCK
ELECTION SHARES (AS DEFINED IN THE MERGER AGREEMENT) AND THAT UPON CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED THEREBY, EACH SHARE OF COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF DYNEGY OWNED BY THE UNDERSIGNED AS OF THE EFFECTIVE TIME (AS
DEFINED IN THE MERGER AGREEMENT) WILL BE CONVERTED INTO AND EXCHANGEABLE FOR
CERTAIN SECURITIES OF NEWCO.]
[THE UNDERSIGNED HEREBY AGREES THAT IT WILL MAKE OR CAUSE TO BE MADE AN
ELECTION PURSUANT TO SECTION 4.1(d) OF THE MERGER AGREEMENT TO RECEIVE CASH
ELECTION SHARES (AS DEFINED IN THE MERGER AGREEMENT) AND THAT UPON CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED THEREBY, EACH SHARE OF COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF DYNEGY OWNED BY THE UNDERSIGNED AS OF THE EFFECTIVE TIME (AS
DEFINED IN THE MERGER AGREEMENT) WILL BE CONVERTED INTO AND EXCHANGEABLE FOR
CASH AND CERTAIN SECURITIES OF NEWCO.]
[EACH SHARE OF COMMON STOCK, NO PAR VALUE, OF ILLINOVA OWNED BY THE
UNDERSIGNED AS OF THE EFFECTIVE TIME WILL BE CONVERTED INTO AND EXCHANGEABLE
INTO ONE SHARE OF NEWCO COMMON STOCK, NO PAR VALUE.]
The undersigned understands that it may be deemed to be an "affiliate"
of Dynegy or Illinova for purposes of Rule 145 promulgated under the Securities
Act of 1933, as amended (the "ACT"). The undersigned is delivering this letter
of undertaking and commitment pursuant to Section 8.17 of the Merger Agreement.
With respect to such securities of Newco as may be received by the
undersigned pursuant to the Merger Agreement (the "SHARES"), the undersigned
represents to and agrees with Newco that:
<PAGE> 109
A. The undersigned will not make any offer to sell or any sale
or other disposition of all or any part of the Shares in violation of
the Act or the rules and regulations thereunder, including Rule 145,
and will hold all the Shares subject to all applicable provisions of
the Act and the rules and regulations thereunder.
B. The undersigned has been advised that the offering, sale
and delivery of the Shares to the undersigned pursuant to the Merger
Agreement will be registered under the Act on a Registration Statement
on Form S-4. The undersigned has also been advised, however, that,
since the undersigned may be deemed an "affiliate" of Dynegy or
Illinova, any public reoffering or resale by the undersigned of any of
the Shares will, under current law, require either (i) the further
registration under the Act of the Shares to be sold, (ii) compliance
with Rule 145 promulgated under the Act (permitting limited sales under
certain circumstances) or (iii) the availability of another exemption
from registration under the Act.
C. The undersigned also understands that, if Newco should deem
it necessary to comply with the requirements of the Act, stop transfer
instructions will be given to its transfer agents with respect to the
Shares and that there will be placed on the certificates for the
Shares, or any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate were issued in
a transaction under Rule 145 promulgated under the Securities
Act of 1933, as amended (the "ACT"), and may be sold,
transferred or otherwise disposed of only upon receipt by the
Corporation of an opinion of counsel acceptable to it that the
securities are being sold in compliance with the limitations
of Rule 145 or that some other exemption from registration
under the Act is available, or pursuant to a registration
statement under the Act."
Execution of this letter shall not be considered an admission on the
part of the undersigned that the undersigned is an "affiliate" of Dynegy or
Illinova for purposes of Rule 145 under the Act or as a waiver of any rights the
undersigned may have to any claim that the undersigned is not such an affiliate
on or after the date of this letter.
Very truly yours,
-----------------------------------------
Signature
-----------------------------------------
Name
-----------------------------------------
Date
ii
<PAGE> 1
SUBSCRIPTION AGREEMENT
BY AND BETWEEN
CHEVRON U.S.A. INC.
AND
ENERGY CONVERGENCE HOLDING COMPANY
DATED: JUNE 14, 1999
<PAGE> 2
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (this "AGREEMENT") is entered into on June
14, 1999, by and between Energy Convergence Holding Company, an Illinois
corporation (the "COMPANY") and Chevron U.S.A. Inc., a Pennsylvania corporation
(the "BUYER").
WHEREAS, the Buyer desires to purchase from the Company, and the
Company desires to sell to the Buyer, the Shares (as defined herein), in
accordance with the terms and conditions of this Agreement; and
WHEREAS, this Agreement is being entered into in connection with the
Merger Agreement (as defined herein) and is an integral part of the transactions
contemplated thereby;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"ACTION" means any action, lawsuit, proceeding, hearing, notice,
investigation, mediation, arbitration, complaint, claim or demand.
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with another Person.
"BGAH" means British Gas Atlantic Holdings, BV, a Netherlands
corporation.
"BG AND NOVA SHORTFALL AMOUNT" means the amount of cash, in addition to
the $200,000,000 required to be paid pursuant to this Agreement, that would be
required to be added to the Cash Consideration under the Merger Agreement such
that NOVA (through the Merger Agreement) and BGAH (through the BG Stock Purchase
Agreement) will receive Cash Consideration for at least 75% of their shares of
Common Stock held (in the case of BGAH, held by BG Holdings) as of the date
hereof. Notwithstanding the foregoing, the BG and NOVA Shortfall Amount will not
exceed $40,000,000.
"BG HOLDINGS" means BG Holdings, Inc., a Delaware corporation.
"BG STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement
between BGAH and the Company dated the date hereof.
"BUYER" is defined in the preamble.
"BUYER SHARES NOTIONAL AMOUNT" shall mean that number which is the same
as the Purchase Price.
"CLASS A COMMON STOCK" means the Class A Common Stock, no par value, of
the Company.
1
<PAGE> 3
"CLASS B COMMON STOCK" means the Class B Common Stock, no par value, of
the Company.
"CLOSING" is defined in Section 2.3.
"CLOSING DATE" is defined in Section 2.3.
"COMMON STOCK" means the Class A Common Stock and the Class B Common
Stock.
"COMPANY" is defined in the preamble.
"DYNEGY" means Dynegy Inc., a Delaware corporation.
"GOVERNMENTAL AUTHORITY" means any governmental or regulatory authority
or agency, court or similar entity.
"MERGER AGREEMENT" is defined in Section 6.1.
"MERGERS" means the mergers contemplated under the Merger Agreement.
"NOVA" means NOVA Gas Services (U.S.) Inc., a Delaware corporation.
"PERSON" means 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.
"PREFERRED STOCK" is defined in Section 3.8.
"PURCHASE PRICE" means $200,000,000, provided that such amount shall be
increased by an amount equal to the BG and Nova Shortfall Amount, but the
aggregate amount of the Purchase Price shall not exceed $240,000,000.
"SHAREHOLDER AGREEMENT" means that certain Shareholder Agreement dated
June 14, 1999 among the Buyer, the Company, Dynegy and Illinova Corporation.
"SHARES" means the number of shares of Class B Common Stock which is
equal to the quotient of the Buyer Shares Notional Amount divided by the lesser
of (i) $16.50 or (ii) the mean average of the closing prices on the New York
Stock Exchange, Inc. of the common stock of Dynegy Inc. over the 20 consecutive
trading days ending immediately prior to two business days prior to the
Effective Time (as such term is defined in the Merger Agreement), in either case
divided by 0.69.
ARTICLE II
SUBSCRIPTION
2.1 PURCHASE AND SALE OF SHARES. On and subject to the terms and
conditions of this Agreement and subject to the terms and conditions of the
Shareholder Agreement, Buyer agrees
2
<PAGE> 4
to buy and the Company agrees to issue and deliver to the Buyer, the Shares at
the Closing for the consideration specified in this Article 2.
2.2 PURCHASE PRICE. The Buyer agrees to pay to the Company the Purchase
Price in cash at the Closing.
2.3 THE CLOSING. The closing of the purchase and sale of the Shares
(the "CLOSING") shall take place immediately after the closing of the Mergers at
the same place as the closing of the Mergers, subject to the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transactions to take place at the Closing (other than conditions with respect to
actions the respective parties will take at the Closing itself). The date of the
Closing is referred to as the "CLOSING DATE."
2.4 DELIVERIES AT THE CLOSING. At the Closing:
(a) The Company will deliver to the Buyer the stock
certificates representing the Shares duly registered in the name of
Buyer; and
(b) The Buyer will deliver to the Company the Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article 3 are correct and complete as of the date of this
Agreement (unless stated to relate to a specific date, in which case such
representations and warranties shall be correct and complete as of such specific
date) and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 3).
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation, duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
3.2 DUE AUTHORIZATION. The execution, delivery, and performance by the
Company of this Agreement:
(a) has been duly authorized by all necessary internal action
and does not require any consent, waiver, approval, order,
authorization or permit of, or registration, filing with or
notification to any Person; and
(b) does not conflict with or result in any violation of or
the breach of or constitute a default (with notice or lapse of time or
both) under, or give rise to any right of termination, purchase, first
refusal, cancellation or acceleration or guaranteed payments or a loss
of a material benefit under, any of the Company's organizational
documents, any order or judgment of any Governmental Authority or any
law or regulation, or any note, lease, mortgage, license, agreement or
other instrument or obligation to which the Company is a party or by
which it or its properties or assets may be bound.
3
<PAGE> 5
3.3 DUE EXECUTION. This Agreement has been duly executed and delivered
by a duly authorized officer of the Company.
3.4 LEGAL, VALID AND BINDING OBLIGATIONS. This Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, moratorium and other laws affecting the
rights of creditors generally and by general principles of equity.
3.5 NO LITIGATION. There is no pending or, to the knowledge of the
Company, threatened action or proceeding before any court or other governmental
entity, or arbitrator by or against, or involving the Company or its Affiliates,
which questions or challenges the validity or enforceability of this Agreement
or any action taken or to be taken by the Company pursuant to this Agreement or
in connection with the transactions contemplated hereby.
3.6 BROKERS' FEE. The Company does not have any liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated hereby for which the Buyer could become liable.
3.7 ORGANIZATIONAL DOCUMENTS. True and correct copies of the
Certificate of Incorporation and Bylaws of the Company have heretofore been
delivered by the Company to the Buyer.
3.8 CAPITALIZATION. At the time of the Closing, the authorized capital
stock of the Company will consist of 420,000,000 shares of Common Stock, of
which 300,000,000 are shares of Class A Common Stock and 120,000,000 are shares
of Class B Common Stock, and 70,000,000 shares of preferred stock, no par value
(the "PREFERRED STOCK"). As of the date hereof, (i) 1,000 shares of Class A
Common Stock were issued and outstanding, (ii) no shares of Class B Common Stock
were issued and outstanding and (iii) no shares of Preferred Stock were issued
and outstanding. All such shares are duly authorized, and if issued are validly
issued, fully paid and nonassessable, and free of preemptive rights. Except as
set forth in the Merger Agreement or the Disclosure Schedules related thereto,
there are no outstanding subscriptions, options, rights, warrants, convertible
securities, stock appreciation rights, phantom equity, or other agreements or
commitments obligating the Company to issue, transfer, sell, redeem, repurchase
or otherwise acquire any shares of its capital stock of any class. Buyer
acknowledges that the Company contemplates instituting an employee stock option
plan prior to the Closing (such plan to be approved by the Company's Board of
Directors constituted in accordance with Section 3.3(C) of the Merger Agreement)
and designating the Series A Convertible Preferred Stock as contemplated by the
Merger Agreement.
3.9 COMMON STOCK. The Shares to be issued and sold by the Company to
the Buyer hereunder have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and validly
issued and fully paid and nonassessable.
4
<PAGE> 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company that the statements
contained in this Article 4 are correct and complete as of the date of this
Agreement (unless stated to relate to a specific date, in which case such
representations and warranties shall be correct and complete as of such specific
date) and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 4).
4.1 ORGANIZATION OF BUYER. The Buyer is a corporation, duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization.
4.2 DUE AUTHORIZATION. The execution, delivery, and performance by the
Buyer of this Agreement:
(a) has been duly authorized by all necessary internal action
and does not require any consent, waiver, approval, order,
authorization or permit of or registration, filing with or notification
to any Person; and
(b) does not conflict with or result in any violation of or
the breach of or constitute a default (with notice or lapse of time or
both) under, the Buyer's organizational documents, any order or
judgment of any Governmental Authority or any law or regulation
applicable to Buyer.
4.3 DUE EXECUTION. This Agreement has been duly executed and delivered
by a duly authorized officer of the Buyer.
4.4 LEGAL, VALID AND BINDING OBLIGATIONS. This Agreement constitutes
the legal, valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium and other laws affecting the
rights of creditors generally and by general principles of equity.
4.5 NO LITIGATION. There is no pending or, to the knowledge of the
Buyer, threatened action or proceeding before any court or other governmental
entity, or arbitrator by or against, or involving Buyer or its Affiliates, which
questions or challenges the validity or enforceability of this Agreement or any
action taken or to be taken by Buyer pursuant to this Agreement or in connection
with the transactions contemplated hereby.
4.6 BROKERS' FEES. The Buyer does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated hereby for which the Company could become liable.
4.7 SECURITIES LAWS. The Buyer:
5
<PAGE> 7
(a) has been furnished with such information about the Company
and the Shares as it has requested and with such information as
necessary to comply with any and all applicable securities laws;
(b) has made its own independent inquiry and investigation
into, and based thereon, has formed an independent judgment concerning
the Company and the Shares;
(c) has adequate means of providing for its current needs and
possible contingencies and is able to bear the economic risks of this
investment and has a sufficient net worth to sustain a loss of its
entire investment in the Company in the event such loss should occur;
(d) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
an investment in the Company;
(e) is an "accredited" investor within the meaning of
"accredited investor" under Regulation D of the Securities Act of 1933,
as currently in effect;
(f) is not an issuer or an Affiliate of the Company, an
underwriter or dealer; and
(g) is not acquiring the Shares with a view to distribution.
ARTICLE V
CONDITIONS TO OBLIGATION TO CLOSE
5.1 CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer
to consummate the transactions contemplated by this Agreement and to perform its
obligations under this Agreement in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 3
shall be true and correct in all material respects at and as of the
Closing Date; the Company shall have performed and complied with all of
its covenants hereunder in all material respects prior to the Closing;
and the Buyer shall have received a certificate from a duly authorized
officer of the Company as to the satisfaction of this condition;
(b) the Company will be prepared to make the deliveries
contemplated by Section 2.4;
(c) the Buyer shall have received a certificate from the
secretary of Energy Convergence, certifying that the articles of
incorporation and bylaws of Energy Convergence have not been amended
(other than an amendment to change the name of Energy Convergence),
since the date hereof;
(d) the Buyer shall have received a certificate from an
executive officer of the Company, certifying that all of the conditions
precedent to the closing of the transactions
6
<PAGE> 8
contemplated by the Merger Agreement have been satisfied or waived as
contemplated by the Merger Agreement; and
(e) the Registration Rights Agreement, by and between the
Company and Buyer, dated the date hereof, and the Shareholder Agreement
shall be in full force and effect.
The Buyer may waive any condition specified in this Section 5.1 if it
executes a writing expressly so stating at or prior to the Closing.
5.2 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the transactions contemplated hereby and to perform its
obligations under this Agreement in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 4
shall be true and correct in all material respects at and as of the
Closing Date; the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects prior to the Closing;
and the Company shall have received a certificate from a duly
authorized officer of the Buyer as to the satisfaction of this
condition;
(b) the Buyer will be prepared to tender the Purchase Price
against receipt of the Shares; and
The Company may waive any condition specified in this Section 5.2 if it
executes a writing expressly so stating at or prior to the Closing.
ARTICLE VI
MISCELLANEOUS
6.1 TERMINATION OF AGREEMENT. If the Merger Agreement (the "MERGER
AGREEMENT") among the Company, Dynegy, Energy Convergence Acquisition
Corporation, Dynegy Acquisition Corporation and Illinova Corporation, dated as
of the date hereof, is terminated, this Agreement shall terminate and all rights
and obligations of the parties hereunder shall terminate without any liability
of any party to any other party.
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation,
warranty and covenant of the parties contained in this Agreement shall survive
the Closing.
6.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, or supplemented only by written agreement of BG Holdings, NOVA,
Illinova Corporation, Dynegy and the parties hereto.
6.4 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply
with any obligation, covenant, agreement, or condition herein may be waived by
the other party; provided, however, that any such waiver may be made only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits
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<PAGE> 9
consent by or on behalf of any party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 6.4, with appropriate notice in accordance with
Section 6.8.
6.5 ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement and all of
the provisions hereof shall be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
Person other than the parties hereto, and their respective successors and
assigns any right, remedy, or claim under or by reason of this Agreement or any
provision herein contained, except that the parties hereto acknowledge that BG
Holdings, NOVA, Dynegy and Illinova Corporation are third party beneficiaries of
this Agreement. The Buyer has the right to assign (and each successive assignee
may further assign) its rights under this Agreement to any Person, which such
Person by acceptance of such assignment shall be deemed to assume all
liabilities, indebtedness and obligations included in the rights assigned. The
Company may not assign its rights or obligations under this Agreement.
6.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Delaware (without regard to its conflicts of law
doctrines).
6.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and shall become a binding
agreement when one or more of the counterparts have been signed by each of the
parties and delivered to the other party.
6.8 NOTICES. All notices or communications hereunder shall be in
writing (including facsimile or similar writing) addressed as follows:
If to the Company:
Dynegy Inc.
1000 Louisiana
Suite 6700
Houston, TX 77002
Attention: Kenneth Randolph
Tel: (713) 507-6400
Fax: (713) 507-6806
with copies to (such copy not to constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place, South Tower
711 Louisiana Street
Houston, TX 77002
Attention: Robert B. Allen
Tel: (713) 220-5800
Fax: (713) 236-0822
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<PAGE> 10
and
Troutman Sanders LLP
600 Peachtree Street N.E., Suite 5200
Atlanta, GA 30308
Attention: W. Brinkley Dickerson, Jr.
Tel: (404) 885-3822
Fax: (404) 962-6743
If to the Buyer:
Chevron U.S.A. Inc.
1301 McKinney Street
Houston, TX 77010
Attention: President of Chevron U.S.A.
Production Company
Tel: (713) 754-5554
Fax: (713) 754-5777
with copies to (such copies not to constitute notice):
Harvey D. Hinman, Esq.
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Tel: (415) 894-3232
Fax: (415) 894-6017
and:
Terry Michael Kee, Esq. and
Rodney R. Peck, Esq.
Pillsbury, Madison & Sutro L.L.P.
235 Montgomery Street, Suit 1675
Post Office Box 7880
San Francisco, CA 94120-7880
Tel: (415) 983-1000
Fax: (415) 983-1200
Any such notice or communication 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 addressed as above (or to such
other address as such party may designate in writing from time to time).
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<PAGE> 11
6.9 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
6.11 SEVERABILITY. If any one or more provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or, unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
6.12 FURTHER ASSURANCES. Each party to this Agreement agrees to execute
such documents or instruments, and to take such action, as the other party may
reasonably request after the date hereof in order to effectuate and perfect the
agreements contemplated hereby.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement on the date first written above.
ENERGY CONVERGENCE HOLDING COMPANY
By: /s/ Charles E. Bayless
------------------------------
Name: Charles E. Bayless
------------------------------
Title: President
------------------------------
CHEVRON U.S.A. INC.
By: /s/ P.J. Robertson
------------------------------
Name: P.J. Robertson
------------------------------
Title: Executive Vice President
------------------------------
<PAGE> 1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ENERGY CONVERGENCE HOLDING COMPANY
("BUYER")
AND
BRITISH GAS ATLANTIC HOLDINGS BV
("SELLER")
DATED: JUNE 14, 1999
<PAGE> 2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into on
June 14, 1999, by and between Energy Convergence Holding Company, an Illinois
corporation ("Buyer"), and British Gas Atlantic Holdings BV, a Netherlands
corporation ("Seller").
RECITALS:
1. Seller owns 1,802 shares of common stock of BG Holdings, Inc., a
Delaware corporation and a wholly owned subsidiary of Seller (the "Company"),
which represent all of the outstanding shares of common stock of the Company.
2. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of the outstanding shares of common stock of the Company (the
"Shares"), in accordance with terms and conditions of this Agreement.
3. To induce Buyer to purchase the Shares, simultaneously herewith,
British Gas Overseas Holdings, a United Kingdom company ("Guarantor" and,
together with Seller, the "Seller Parties"), has executed and delivered a
guaranty (the "Guaranty") in favor of Buyer.
4. This Agreement is being entered into in connection with the Merger
Agreement (as defined) and is an integral part of the transactions contemplated
thereby.
5. Undefined capitalized terms herein are defined in the Merger
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, Buyer and Seller agree as follows:
ARTICLE I.
DEFINITIONS
"Action" means any action, lawsuit, proceeding, hearing, notice,
investigation, mediation, arbitration, complaint, claim or demand.
"Additional Cash Consideration" is defined in Section 2.2.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with another Person.
<PAGE> 3
"After-Tax Basis" means, with respect to an indemnity payment, the
amount necessary to hold the indemnified party harmless on an after-tax basis,
after taking into account in the taxable year of payment any Taxes deemed
payable (as provided below) by the indemnified party as a result of such
indemnification payment, and any Tax benefits deemed realized (as provided
below) by the indemnified party (or any of its Affiliates) in respect of, or as
a result of a deduction or credit for, any indemnified Taxes or Damages required
to be paid by the indemnified party. The amount of any payment in the preceding
sentence (to the extent taxable) as well as the amount of any indemnified Tax,
and Tax benefits shall be determined as if the relevant indemnified party (and
any combined or consolidated group of which it is a member) were taxed at the
highest marginal rate applicable to corporations in such jurisdiction.
"Agreement" is defined in the preface to this Agreement.
"Balance Sheet" is defined in Section 3.10.
"Buyer" is defined in the preface to this Agreement.
"Buyer Common Stock" means the Class A common stock of Buyer, no par
value per share, to be issued pursuant to the Amended and Restated Newco
Articles.
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Company" is defined in the recitals to this Agreement.
"Contest" is defined in Section 6.3(b).
"Damages" is defined in Section 7.1.
"Dynegy" means Dynegy Inc., a Delaware corporation.
"Dynegy Stock" is defined in Section 3.8.
"Governmental Authority" means any governmental or regulatory authority
or agency, court or similar entity.
"Material Adverse Effect" means, with respect to a particular Person,
any event, circumstance, condition, development or occurrence causing, resulting
in or having (or with the passage of time likely to cause, result in or have) a
material adverse effect on the financial condition, business, assets,
properties, or results of operations of such Person and its subsidiaries, taken
as a whole
"Merger Agreement" is defined in Section 8.2.
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<PAGE> 4
"Mergers" means the mergers contemplated under the Merger Agreement.
"Person" means 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.
"Post-Closing Period" is defined in Section 6.2(b).
"Pre-Closing Period" is defined in Section 6.1(a).
"Preferred Stock" means the Series A Convertible Preferred Stock to be
issued pursuant to the Statement of Resolutions Establishing Series of Series A
Convertible Stock of Buyer, in the form of Exhibit B to the Merger Agreement.
"Purchase Price" is defined in Section 2.2.
"Seller" is defined in the preface to this Agreement.
"Seller Parties" is defined in the recitals to this Agreement.
"Shares" is defined in the recitals to this Agreement.
"Stock Consideration" is defined in Section 2.2.
"Stockholders Agreement" is defined in Section 3.6.
"Straddle Period" is defined in Section 6.1(c).
"Tax Indemnification Event" is defined in Section 6.3(a).
"Tax Returns" means all originally filed or amended federal, state and
local tax returns, declarations, statements, certifications, notices, reports,
schedules, forms and information returns relating to Taxes.
"Third Party Claim" is defined in Section 7.4(a).
"Voting Agreement" is defined in Section 3.6.
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<PAGE> 5
ARTICLE II.
BASIC TRANSACTION
2.1 PURCHASE AND SALE OF THE SHARES. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to sell, grant, transfer, convey, assign, and deliver, and agrees to
cause to be sold, granted, transferred, conveyed, assigned and delivered to
Buyer, the Shares at the Closing for the consideration specified in this Article
II.
2.2 PURCHASE PRICE. Buyer agrees to pay to Seller at the Closing (the
"Purchase Price"), consideration consisting of (a) that number of shares of
Preferred Stock (the "Stock Consideration") equal to the product of (i) the
quotient of the Illinova Average Price and $50.00, and (ii) the number of shares
of Buyer Common Stock that the Company would have received pursuant to the
Merger Agreement had it elected to receive only the Cash Consideration with
respect to all of the Dynegy Stock, plus (b) the amount of cash (the "Additional
Cash Consideration") that the Company would have received pursuant to the Merger
Agreement had it elected to receive only the Cash Consideration with respect to
all of the Dynegy Stock.
2.3 THE CLOSING. The closing of the purchase and sale of the Shares
(the "Closing") shall take place (i) at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. at 1900 Pennzoil Place, South Tower, 711 Louisiana,
Houston, Texas, or such other location at which the closing of the Mergers
occurs, immediately prior to the closing of the Mergers, or (ii) or at such
other time or place or on such other date as the parties hereto shall agree,
subject to the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions to take place at the Closing (other
than conditions with respect to actions the respective parties will take at the
Closing itself). The date of the Closing is referred to as the "Closing Date."
2.4 DELIVERIES AT THE CLOSING. At the Closing:
(a) Seller will deliver to Buyer all of the certificates,
instruments, and documents listed below:
(i) the stock certificates representing the Shares
duly endorsed in blank, or accompanied by stock powers duly
executed in blank, and otherwise in form reasonably acceptable
to Buyer for transfer on the books of the Company;
(ii) the corporate records of the Company as of the
Closing Date;
(iii) the written resignation of (A) each member of
the board of directors of the Company and (B) each officer of
the Company, such resignations to be effective on the Closing
Date;
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<PAGE> 6
(iv) the bank accounts of the Company and any funds
therein;
(v) a statement, issued by the Company pursuant to
the requirements of Treas. Reg. Sec. 1.897-2(h), and dated no
more than 30 days prior to the Closing, certifying that the
Shares do not constitute a U.S. real property interest
(USRPI), as that term is defined in Section 897(c) of the Code
(a copy of which will have been filed with the Internal
Revenue Service prior to Closing pursuant to the requirements
of Treas. Reg. Sec. 1.897-2(h)(2)) (the "Statement"). If such
Statement is not received, Buyer shall be entitled to withhold
10% of the Purchase Price as required by Section 1445 of the
Code; and
(vi) such other documents and instruments as are
required to be delivered pursuant to the terms hereof, or that
Buyer may reasonably request to effect the transactions
contemplated hereby.
(b) Buyer will deliver to Seller:
(i) the Purchase Price in the form of:
(A) certificates for the Stock Consideration; and
(B) the Additional Cash Consideration, in immediately
available funds, by wire transfer to an account, which account
shall be specified by Seller no later than two business days
prior to the Closing Date; and
(ii) such other documents and instruments as are required to
be delivered pursuant to the terms hereof, or that Seller may
reasonably request to effect the transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that the statements contained
in this Article III are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Article III).
3.1 ORGANIZATION OF SELLER. Each Seller Party is a corporation, duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
3.2 DUE AUTHORIZATION. The execution, delivery, and performance by
Seller of this Agreement and by Guarantor of the Guaranty:
(a) has been duly authorized by all necessary internal action
of Seller and Guarantor, as applicable, and does not require any
consent, waiver, approval,
5
<PAGE> 7
order, authorization or permit of, or registration, filing with or
notification to any Person; and
(b) does not conflict with or result in any violation of or
the breach of or constitute a default (with notice or lapse of time or
both) under, or give rise to any right of termination, purchase, first
refusal, cancellation or acceleration or guaranteed payments or a loss
of a material benefit under, either Seller Party's organizational
documents, any order or judgment of any Governmental Authority or any
law or regulation, or any note, lease, mortgage, license, agreement or
other instrument or obligation to which either Seller Party is a party
or by which it or its properties or assets may be bound.
3.3 DUE EXECUTION. This Agreement and the Guaranty have been duly
executed and delivered by a duly authorized officer of Seller and Guarantor, as
applicable.
3.4 LEGAL, VALID AND BINDING OBLIGATIONS. This Agreement and the
Guaranty constitutes a legal, valid and binding obligation of the applicable
Seller Party, enforceable against the applicable Seller Party in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium and other laws affecting the rights of creditors
generally and by general principles of equity.
3.5 NO LITIGATION. There is no pending or, to the knowledge of Seller
or Guarantor, threatened action or proceeding before any court or other
Governmental Authority, or arbitrator by or against, or involving any Seller
Party or its Affiliates, which questions or challenges the validity or
enforceability of this Agreement, the Guaranty or any action taken or to be
taken by any Seller Party pursuant to this Agreement or the Guaranty or in
connection with the transactions contemplated hereby or thereby.
3.6 CAPITALIZATION OF THE COMPANY; AGREEMENTS PERTAINING TO STOCK. The
Company's authorized capital stock consists of 20,000 shares of common stock,
par value $1.00 per share. None of such capital stock is outstanding or has been
authorized for issuance other than the Shares. The Shares have been validly
issued and are fully paid and nonassessable, and other than pursuant to (i) the
Stockholders Agreement dated May 22, 1996, by and among the Company, NOVA Gas
Services (U.S.) Inc., and Chevron U.S.A., Inc., as amended (the "Stockholders
Agreement"), (ii) the Voting Agreement dated the date hereof, by and between the
Company and Illinova Corporation (the "Voting Agreement"), (iii) this Agreement
or (iv) with respect to the Dynegy Stock, the Merger Agreement, neither the
Shares nor the Dynegy Stock are subject to any agreements or understandings
among any Persons with respect to the voting or transfer of the Shares or the
Dynegy Stock.
3.7 BROKERS' FEES. No Seller Party has any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated hereby for which Buyer or the Company could become
liable.
6
<PAGE> 8
3.8 THE COMPANY'S ASSETS AND LIABILITIES. Except as disclosed on
Schedule 3.8, the Company's sole assets other than cash and cash equivalents are
38,789,876 shares of common stock of Dynegy, par value $.01 per share (the
"Dynegy Stock"). Seller is, and at the Closing will be, the record and
beneficial owner of, and upon the Closing Buyer will acquire, good, valid, and
marketable title to, the Shares, free and clear of all liens, encumbrances and
restrictions on transferability, other than (i) those that may arise because of
any actions taken by or on behalf of Buyer or its Affiliates or (ii)
restrictions on transfer that may be imposed by federal, state or other
securities laws. There are no preemptive or similar rights with respect to the
Company's capital stock and the Shares were issued without violation of any such
rights. Other than this Agreement, the Stockholders Agreement and the Voting
Agreement, there are no subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character obligating a Person to
purchase, sell or issue any shares of the capital stock of the Company
(including the Shares) or the Dynegy Stock or any other securities convertible
into, exchangeable or exercisable for, or evidencing the right to subscribe for,
any such Shares or the Dynegy Stock. Except as contemplated by (i) the Merger
Agreement, (ii) the Stockholders Agreement, or (iii) the Voting Agreement,
neither the Company nor Seller is a party to any voting agreements, voting
trusts, proxies or any other agreements, instruments or understandings with
respect to the voting of any shares of the Company's capital stock, the Shares
or the Dynegy Stock, or any agreement with respect to the transferability,
purchase or redemption of any shares of capital stock of the Company, the Shares
or the Dynegy Stock. Except as contemplated by this Agreement, the Company has
no liabilities, obligations, costs or expenses of any nature whatsoever, whether
now known or unknown, asserted or unasserted, accrued or unaccrued, liquidated,
unliquidated or due or to become due, (including, without limitation, other than
as a result of the transactions contemplated hereby, any liability in respect of
Taxes of any kind whatsoever) in excess of amounts reserved therefor that affect
the Company or its ownership of the Dynegy Stock.
3.9 COMPANY ACTIVITIES. Since March 26, 1999, the Company has not
engaged in any business or other activity (other than the ownership of the
Dynegy Stock) that will have an adverse effect on the Company's properties,
assets, operations, business or prospects. Other than the Dynegy Stock, the
Company has no subsidiaries or equity investments in any Person or enterprise.
Prior to March 26, 1999, the Company did not engage in any activities other than
as a holding company for, and owning stock and other interests and investments
in, the following entities, among others: Dynegy (formerly NGC Corp.); Itron,
Inc.; British Gas Americas, Inc. (formerly British Gas Delaware, Inc. and
British Gas Technology, Inc.); British Gas Capital, Inc.; BG Exploration
America, Inc.; British Gas Services, Inc. (formerly BG US Services, Inc.; and
British Gas Exploration and Production, Inc.); British Gas Finance, Inc.;
British Gas Financial Products, Inc.; British Gas General Partner, Inc.; British
Gas Global Services, Inc.; British Gas Inspection Services, Inc. (formerly BG
Inspection Services, Inc.); British Gas Limited Partner, Inc.; British Gas
Methane Arctic, Inc.; British Gas Methane Polar, Inc.; British Gas NGC LP; BG
Tunisia, Inc. (formerly Freeway Housing, Inc. and Houston Oil & Minerals of
Tunisia, Inc.).
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<PAGE> 9
3.10 BALANCE SHEET. At or prior to the Closing, the Company shall
deliver to Buyer accurate and complete copies of the Company's audited balance
sheet as of the date of the most recently completed audit of the Company prior
to the Closing Date (the "Balance Sheet"), and the related statements of income
and stockholders' equity, for the period since March 26, 1999. The Balance Sheet
(i) shall be prepared from the books and records of the Company and (ii) shall
accurately and fairly present the Company's financial position as of its date.
The Balance Sheet (including the notes thereto) will have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the period covered thereby, and present fairly
the Company's financial condition as of the applicable audit period. At the
Closing, Seller shall deliver to Buyer accurate and complete copies of the
Company's unaudited balance sheet (including notes) as of the Closing Date, and
the related statements of income and stockholders' equity, since the date of the
Balance Sheet. Such unaudited balance sheet (including the notes thereto) shall
reflect that the Company has net assets (determined without regard to the Dynegy
Stock) having a fair market value of at least $800,000.
3.11 TAXES.
(a) The Company has timely filed (or will timely file) all Tax
Returns required to be filed by it in, or with respect to Taxes for,
any period ending before the Closing Date. All Tax Returns filed by the
Company prior to the Closing Date or for any period ending before the
Closing Date correctly reflect the applicable facts regarding the
income, business, assets, operations, activities, status or other
matters of the Company or any other information required to be shown
thereon. The foregoing Tax Returns are not subject to penalties under
Section 6662 of the Code relating to accuracy-related penalties, or any
other provision of the Code (or any corresponding provisions of state,
local or foreign Tax law) or any predecessor provision of law. No
extension of time within which to file any Tax Return that has not been
filed has been requested or granted, by, or on behalf of, the Company.
(b) The Company is not a party to or bound by any current Tax
indemnity, Tax sharing or Tax allocation agreement (and any such
agreements to which the Company was previously a party have been
cancelled or otherwise terminated.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the statements contained
in this Article IV are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article IV).
4.1 ORGANIZATION OF BUYER. Buyer is a corporation, duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization.
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<PAGE> 10
4.2 DUE AUTHORIZATION. The execution, delivery, and performance by
Buyer of this Agreement:
(a) has been duly authorized by all necessary internal action
of Buyer and does not require any consent, waiver, approval, order,
authorization or permit of or registration, filing with or notification
to any Person; and
(b) does not conflict with or result in any violation of or
the breach of or constitute a default (with notice or lapse of time or
both) under, or give rise to any right of termination, purchase, first
refusal, cancellation or acceleration or guaranteed payments or a loss
of a material benefit under, Buyer's organizational documents, any
order or judgment of any Governmental Authority or any law or
regulation, or any note, lease, mortgage, license, agreement or other
instrument or obligation to which Buyer is a party or by which it or
its properties or assets may be bound.
4.3 DUE EXECUTION. This Agreement has been duly executed and delivered
by a duly authorized officer of Buyer.
4.4 LEGAL, VALID AND BINDING OBLIGATIONS. This Agreement constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium and other laws affecting the
rights of creditors generally and by general principles of equity.
4.5 NO LITIGATION. There is no pending or, to the knowledge of Buyer,
threatened action or proceeding before any court or other Governmental
Authority, or arbitrator by or against, or involving Buyer or its Affiliates,
which questions or challenges the validity or enforceability of this Agreement
or any action taken or to be taken by Buyer pursuant to this Agreement or in
connection with the transactions contemplated hereby.
4.6 BROKERS' FEES. Buyer does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated hereby for which either Seller or Guarantor could
become liable.
ARTICLE V.
CONDITIONS TO OBLIGATION TO CLOSE
5.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement and to perform its
obligations under this Agreement in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article
III shall be true and correct in all material respects at and as of the
Closing Date (provided that any breach or misrepresentation resulting
in a liability for which Seller
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<PAGE> 11
acknowledges in writing that it will indemnify Buyer shall not be
deemed to be a breach of this section); Seller shall have performed and
complied with all of its covenants hereunder in all material respects
prior to the Closing Date; and Buyer shall have received a certificate
from a duly authorized officer of Seller as to the satisfaction of this
condition;
(b) Seller will have made the deliveries contemplated by
Section 2.4;
(c) since the date of this Agreement there must not have been
any change in law which, or announced contemplated change in law the
passage of which, could reasonably be expected to have, as a result of
the consummation of the transactions contemplated by this Agreement, a
Material Adverse Effect on the Company; and
(d) all of the conditions precedent to the closing of the
transactions contemplated by the Merger Agreement have been satisfied
or waived as contemplated by the Merger Agreement.
Buyer may waive any condition specified in this Section 5.1 if it
executes a writing expressly so stating at or prior to the Closing.
5.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated hereby and to perform its respective
obligations under this Agreement in connection with the Closing is subject to
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
shall be true and correct in all material respects at and as of the
Closing Date (provided that any breach or misrepresentation resulting
in a liability for which Buyer acknowledges in writing that it will
indemnify Seller shall not be deemed to be a breach of this section);
Buyer shall have performed and complied with all of its covenants
hereunder in all material respects prior to the Closing; and Seller
shall have received a certificate from a duly authorized officer of
Buyer as to the satisfaction of this condition;
(b) Buyer will have made the deliveries contemplated by
Section 2.4;
(c) since the date of this Agreement there must not have been
any change in law which, or announced contemplated change in law the
passage of which, could reasonably be expected to have, as a result of
the consummation of the transactions contemplated by this Agreement, a
Material Adverse Effect on Seller;
(d) Buyer will have provided to Seller a certificate from a
duly authorized officer of Buyer certifying that all of the conditions
precedent to the closing of the transactions contemplated by the Merger
Agreement have been satisfied or waived as contemplated by the Merger
Agreement; and
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(e) Dynegy will have delivered to the Company a statement,
dated no more than 30 days prior to the Closing, certifying that the
Dynegy Stock is not a USRPI.
Seller may waive any condition specified in this Section 5.2 if it
executes a writing expressly so stating at or prior to the Closing.
ARTICLE VI.
TAX MATTERS
6.1 TAX INDEMNITIES.
(a) Seller shall indemnify Buyer and hold it harmless from and
against any liability for Taxes (i) imposed on the Company in respect
of its income, business or operations for any period prior to the
Closing Date (a "Pre-Closing Period"), (ii) imposed on the Company
pursuant to Section 1.1502-6 of the Treasury Regulations promulgated
under the Code (or pursuant to any analogous provision of state or
local law) as a result of the affiliation of any company with the
Company during a Pre-Closing Period or (iii) attributable to any change
in accounting method employed by the Company prior to the Closing Date
(but only to the extent that the amount of such Taxes is in excess of
the amount accrued for Taxes in the books and records of the Company as
of the Closing Date); provided, however, that no indemnity shall be
provided under this Article VI for (x) any Taxes resulting from a
breach by Buyer of its representations, warranties and obligations
under this Agreement, (y) Taxes attributable to, or arising as a result
of, any transactions contemplated by this Agreement or (z) any
liability for Taxes resulting from elections under Section 338 of the
Code with respect to the Company (or any comparable elections under the
state or local Tax laws). Indemnity payments under this Article VI
shall be made on an After-Tax Basis.
(b) From and after the Closing Date (a "Post Closing Period"),
Buyer shall indemnify Seller and hold it harmless from and against all
Taxes imposed on the Company that are not subject to indemnification
pursuant to Section 6.1(a) or Article VII.
(c) Any Taxes (other than U.S. federal income taxes) of the
Company not otherwise indemnified under this Article VI for a period
beginning before the Closing Date and ending after the Closing Date (a
"Straddle Period") shall be apportioned between Seller and Buyer, in
the case of real and personal property taxes and franchise taxes not
based on gross or net income or capital (including net worth or
long-term debt) or gross or net assets, on a per diem basis and, in the
case of other Taxes (including sale and transfer Taxes), shall be
determined based on the actual activities and operations of the Company
during the portion of such period that is a Pre-Closing Period and the
portion of such period that is a Post-Closing Period. Notwithstanding
the foregoing, in the case of any Tax based upon or measured by capital
(including net worth or long-term debt) or gross or net
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assets or intangibles, the amount of such Tax allocated to the
Pre-Closing Period shall be computed by reference to the average level
of such items during the Pre-Closing Period.
(d) Payment by an indemnitor of any amount due under this
Section 6.1 shall be made within 30 days following written notice by
the indemnitee that payment of such amount to the appropriate Tax
authority is due, provided that the indemnitor shall not be required to
make any payment earlier than two days before it is due to the
appropriate Tax authority. If Seller receives an assessment or other
notice of Taxes due with respect to the Company for any Pre-Closing
Period for which Seller is not responsible, in whole or in part,
pursuant to Section 6.1(a) and Seller pays such Tax, then Buyer shall
pay Seller, in accordance with the first sentence of this Section
6.1(d), the amount of such Tax for which Seller is not responsible
under Section 6.1(a). In the case of a Tax that is contested in
accordance with the provisions of Section 6.3, payment of such Tax to
the appropriate Tax authority will not be considered to be due earlier
than the date of a final determination with respect to such Tax.
Failure to pay amounts when due pursuant to this Section 6.1(d) shall
result in the imposition of an interest charge at the applicable rate
prescribed under Section 6621(a)(1) of the Code (but only to the extent
that (i) such interest does not constitute a Tax (as defined herein) or
(ii) the indemnitee is not otherwise indemnified therefor).
Notwithstanding anything herein to the contrary, the indemnified party
may make more than one request for payment under this Agreement with
respect to any indemnifiable Tax imposed by a Tax jurisdiction to the
extent the amount of such indemnifiable Tax is adjusted or redetermined
from time to time.
6.2 REFUNDS AND TAX BENEFITS.
(a) Buyer shall promptly pay to Seller any refund or credit
(including any interest paid or credited with respect thereto) received
by Buyer or the Company of Taxes relating to Pre-Closing Periods or
attributable to an amount paid by or on behalf of Seller under Section
6.1; provided, however, that payments with respect to credits shall be
made no earlier than the time as such credit reduces or could reduce
the Tax liability of Buyer and its Affiliates, including the Company.
If any refund or credit of Taxes for which a payment has been made
pursuant to Section 6.2 is subsequently reduced or disallowed, Seller
shall indemnify and hold harmless payor for any Tax liability assessed
against such payor because of the reduction or disallowance. Buyer
shall, if Seller so requests and at Seller's expense, cause the
relevant entity to file for and obtain any refund to which Seller is
entitled under this Section 6.2. Subject to Section 6.3, Buyer shall
permit Seller to control (at Seller's expense) the prosecution of any
such refund claim, and shall cause the relevant entity to authorize by
appropriate power of attorney such persons as Seller shall designate to
represent such entity with respect to such refund claim.
(b) If and to the extent that Seller receives a refund or
credit of federal, state or local Taxes for any Pre-Closing Period
attributable solely to the carryback
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of losses, credits or similar items arising in any Post-Closing Period
and attributable to the Company, Seller shall promptly pay to Buyer the
amount of such refund or credit, together with any interest paid or
credited with respect thereto. If any refund or credit of Taxes for
which a payment has been made pursuant to this Section 6.2(b) is
subsequently reduced or disallowed, Buyer shall indemnify and hold
harmless payor for any Tax liability, including interest, assessed by
reason of the reduction or disallowance.
6.3 CONTESTS.
(a) After the Closing Date, Buyer shall notify Seller promptly
(and in any event within 15 business days) of the commencement of any
Tax audit or administrative or judicial proceeding, or of any demand or
claim on Buyer or the Company, with respect to the Company or its
subsidiaries for any period beginning before Closing or the receipt of
any notice of proposed adjustment by Buyer or the Company (a "Tax
Indemnification Event"), which could give rise to a claim for
indemnification under Section 6.1 or, in the case of the breach of a
representation in Section 3.11, Article VII. Such notice shall contain
factual information (to the extent known to Buyer or the Company) with
respect to the Tax Indemnification Event in reasonable detail and shall
include copies of any notice or other document received from any Taxing
authority in respect thereof. If Buyer fails to give Seller notice
within a reasonable period of time or in sufficient detail to apprise
Seller of the nature of the claim (in each instance taking into account
the facts and circumstances of such claim), Seller shall not be liable
under this Agreement for such claim to the extent, if any, that the
rights of Seller with respect to such claim are actually prejudiced.
(b) Subject to Section 6.3(d), Seller may elect to direct,
through counsel of its own choosing and at its own expense, any audit,
claim for refund or administrative or judicial proceeding involving any
Pre-Closing Tax Periods with respect to which (and to the extent that)
indemnity may be sought from Seller, under Section 6.1 or, in the case
of the breach of a representation in Section 3.11, Article VII (any
such audit, claim for refund or proceeding is referred to herein as a
"Contest"). If Seller elects to direct a Contest it shall within 15
business days of receipt of the notice of the Tax Indemnification Event
relating to such Contest notify Buyer of its intent to do so and, if
requested by Buyer, Seller shall furnish to Buyer in due course, as a
condition to further pursuing such Contest, an opinion of Seller's
independent Tax counsel to the effect that Seller has a reasonable
basis to pursue such Contest. If Buyer is requested (or, if an election
by Seller is not timely made, shall determine) to pay the Tax claimed
and sue for a refund, Seller shall make a tentative indemnity payment
to the party making such payment. In the case of any Contest, Buyer or
the Company, as the case may be, shall not make payment of the Tax in
question for at least 30 days (or such shorter time period as may be
required by applicable law) after the giving of notice to Seller of its
intention to do so (and if Seller has elected to direct the Contest
shall not make payment unless requested by Seller), shall give to
Seller any information reasonably requested by Seller relating to such
Contest and otherwise shall
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cooperate with Seller in good faith in order to contest effectively any
such Contest and, to the extent not inconsistent with Buyer's or the
Company's control over the portion of proceedings that relate to issues
other than those subject to this indemnity (as described below), shall
permit Seller to control such proceedings relating to any Contest.
Buyer or its duly appointed representatives shall be allowed to attend
all meetings between Seller and the Taxing authority in question and
shall be provided with copies of all correspondence and documents
relating to such Contest (other than internal correspondence and
documents that are privileged or confidential). If Seller fails to
notify Buyer of its election as herein provided, then until receiving
notification as to Seller's intentions, each of Buyer and the Company
shall take such reasonable steps as may be prudent and within its
capacity to preserve the right of the relevant entity to contest such
asserted Tax liability and may pay, compromise or contest such asserted
Tax liability. However, in each such case, neither Buyer nor the
Company may settle or compromise any asserted Tax liability over the
objection of Seller; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. If Buyer or the Company
assumes control of a Contest with respect to Taxes pursuant to the
foregoing, provided that Seller has acted in good faith, Seller shall
retain the right at any time thereafter and immediately upon notice to
the entity that shall have assumed control of such Contest, to assume
itself, at Seller's expense, sole direction and control of such
Contest, as set forth above. If Seller chooses to direct the Contest,
Buyer shall promptly empower and shall cause the Company promptly to
empower (by power of attorney and such other documentation as may be
necessary and appropriate) such representatives of Seller as it may
designate to represent Buyer and/or the Company in the Contest insofar
as the Contest involves an asserted Tax liability for which Seller
could be liable under Section 6.1 or, in the case of a breach of a
representation in Section 3.11, Article VII.
(c) If, after actual receipt by Buyer or the Company of an
amount paid by Seller as a tentative adjustment pursuant to paragraph
(b), the extent of the liability of Buyer or the Company with respect
to the indemnified matter for which Seller is liable under this
Agreement shall be established by final determination to be a lesser
amount, Buyer or the Company, as the case may be, shall promptly pay to
Seller the amount of such difference, including all or the portion of
any refund received by or credited to Buyer or the Company with respect
to the indemnified matter (together with any interest paid or credited
thereon by the Taxing authority) plus (i) the amount of the Tax
savings, if any, realized by Buyer or the Company as a result of such
payment, and (ii) interest at the rate which shall be applicable under
section 6621(a)(1) of the Code in respect of federal income taxes and
at the rate provided by applicable law in respect of other Taxes from
time to time from the date of actual collection by Buyer or the Company
of such refund (and any such interest thereon) to the date of payment
to Seller thereunder.
(d) Nothing contained herein shall require Buyer or the
Company (i) to contest a Contest which it would otherwise be required
to contest pursuant to
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this Agreement or (ii) to permit Seller control any such Contest, if
Buyer shall waive the payment by Seller of any amount that might
otherwise be payable by Seller hereunder (or under Article VII) by way
of indemnity with respect to such Contest. Upon any such waiver, Buyer
or its Affiliates, as the case may be, shall repay to Seller any
payments made with respect to such Contest pursuant to Section 6.3(b)
together with interest at the rate which shall be applicable under
Section 6621(a)(1) of the Code from time to time from the date the
payment was paid by Seller to the date of repayment by Buyer or its
Affiliate.
6.4 PREPARATION OF TAX RETURNS. Seller shall prepare and timely file,
or cause to be prepared and timely filed, all Tax Returns relating to the
Company and its subsidiaries that are due (taking into account any applicable
extension periods) not more than 30 days after the Closing Date. Buyer shall
prepare and timely file or cause the Company to prepare and timely file all Tax
Returns relating to the Company and its subsidiaries that are due (taking into
account any applicable extension periods) more than 30 days after the Closing
Date. Returns required to be filed by Buyer in respect of a period beginning
prior to the Closing Date shall be prepared on a basis consistent with those
prepared for prior Tax years unless a different treatment of an item is required
by an intervening change in law. Buyer shall furnish Seller with a copy of any
Tax Return so prepared by it for a period beginning prior to the Closing Date at
least 30 days before the anticipated filing date thereof and, in preparing such
Tax Returns, shall accept any comments made by Seller with respect to any issue
or item which could give rise to a claim for indemnification; provided, however,
that this sentence shall not apply in respect of any comments for which Seller
does not provide Buyer, if so requested in writing to do so, with an opinion of
nationally recognized counsel, obtained at Seller's expense, to the effect that
there is a more likely than not basis for Seller's comment.
6.5 COOPERATION AND EXCHANGE OF INFORMATION. Following the Closing,
Seller and Buyer shall provide each other, and Buyer shall cause its Affiliates
to provide Seller, with such cooperation and information as reasonably may be
requested in filing any Tax Return, amended return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by Tax authorities. Each of Seller, Buyer and their Affiliates
shall make its employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each of Seller,
Buyer and the Company shall retain all Tax Returns, schedules and work papers
and all material records or other documents that are in its possession
immediately following the Closing, or created by or on behalf of it thereafter,
relating to Tax matters of the Company for the taxable period of each relevant
jurisdiction first ending after the Closing Date and for all prior taxable
periods until the later of (i) the expiration of the statute of limitations of
the taxable periods to which such returns and other documents relate, without
regard to extensions except to the extent notified by the other party in writing
of such extensions for the respective Tax periods, or (ii) six years following
the due date (without extension) for such returns. Any information obtained
under this Article VI shall be confidential, except as may be otherwise
necessary in
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connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.
6.6 MISCELLANEOUS.
(a) The parties agree that all payments made under this
Article VI, under any other indemnity provision contained in this
Agreement, and for any misrepresentations or breach of warranties or
covenants shall constitute adjustments to the Purchase Price and that
they shall report all such payments on that basis in all Tax Returns
filed with any taxation authority for purposes hereof. If, contrary to
the intent of the parties as expressed in the foregoing sentence, any
indemnity payment made pursuant to this Agreement is treated as taxable
income of the recipient, then the payor shall indemnify and hold
harmless the recipient for any liability for Taxes attributable to the
receipt of such payment.
(b) Except in the case of a breach of a representation in
Section 3.11, this Article VI shall be the sole provisions governing
indemnities and claims for Taxes under this Agreement.
(c) For purposes of this Article VI, all references to Buyer,
Seller or the Company include successors in interest, whether by
operation of law or otherwise.
(d) The covenants and agreements of the parties hereto
contained in this Article VI shall survive the Closing and shall remain
in full force and effect until the expiration of all statutes of
limitations with respect to any Taxes that would be indemnifiable by
Seller under Section 6.1(a) or Article VII, or by Buyer under Section
6.1(b).
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ARTICLE VII.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation,
warranty and covenant of the parties contained in this Agreement shall survive
the Closing until the expiration of the applicable statute of limitations.
Seller shall be liable and shall indemnify and hold Buyer harmless from, any
losses, damages (including incidental and consequential damages), liabilities,
payments, obligations, penalties, costs, expenses (including reasonable fees and
expenses of attorneys, accountants and other professional advisors and of expert
witnesses and costs of investigation and preparation in connection with any
Action or threatened Action) of any kind or nature whatsoever ("Damages")
related to any breaches of representations, warranties and covenants of Seller
contained in this Agreement; provided, however, that no indemnification shall be
provided under this Article VII for any Damages for which Buyer is indemnified
pursuant to Article VI. Buyer shall be liable and shall indemnify and hold
Seller harmless from any Damages related to any breaches of representations,
warranties and covenants of Buyer contained in this Agreement. Payments under
this Article VII shall be made on an After-Tax Basis.
7.2 INDEMNIFICATION OBLIGATION ABSOLUTE. The right to indemnification,
payment of Damages or other remedy under this Agreement will not be affected by
any investigation conducted with respect to, or any knowledge acquired or
capable of being acquired, at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or the compliance with, any such representation, warranty,
covenant or obligation; provided however, that any party claiming the right to
indemnification, payment of Damages or other remedy hereunder shall provide
notice to the indemnifying party of any Damage that becomes known to such
indemnified party after the Closing, and the indemnifying party shall not be
obligated to make any payments related to additional Damage incurred directly as
a result of a failure by the indemnified party to deliver such a notice if such
failure materially prejudices the indemnifying party's ability to mitigate the
Damage. The negligence of the party demanding indemnification, regardless of
whether such negligence is alleged or proven, will not serve as a bar to, or be
a defense to, any claim arising from any breach of this Agreement. Unless
expressly specified, the waiver of any condition based on the accuracy of any
representation or warranty, or of the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants and
obligations.
7.3 LIMITATIONS ON SELLERS' INDEMNIFICATION LIABILITY. Seller will have
no liability under this Article VII for Damages related to breaches of the
representations, warranties and covenants contained in this Agreement unless and
until the aggregate Damages claimed under this Article VII exceeds $50,000 (the
"THRESHOLD AMOUNT"); provided, that once such amount exceeds the Threshold
Amount, the Damages payable hereunder shall relate back to the first dollar and
Buyer will be entitled to recover all amounts to which they are entitled as a
result thereof; provided further that Seller's
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liability under this Article VII for Damages shall not exceed the Purchase Price
(with the value of the Stock Consideration being valued immediately following
the Closing).
7.4 THIRD PARTY CLAIM PROCEDURES.
(a) If any third party shall notify any of the parties hereto
with respect to the commencement of any Action (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
party under Section 7.2, then the indemnified party shall promptly give
notice to the indemnifying party. Failure to notify the indemnifying
party will not relieve the indemnifying party of any liability or
obligation that it may have to the indemnified party, except to the
extent the defense of such Action is materially prejudiced by the
indemnified party's failure to give such notice.
(b) An indemnifying party will have the right to defend
against a Third Party Claim with counsel of its choice reasonably
satisfactory to the indemnified party if (i) within 15 days following
the receipt of notice of the Third Party Claim the indemnifying party
notifies the indemnified party in writing that the indemnifying party
will indemnify the indemnified party from and against the entirety of
any Damages the indemnified party may suffer resulting from, relating
to, arising out of, or attributable to the Third Party Claim, (ii) the
Third Party Claim involves only money Damages and does not seek an
injunction or other equitable relief, and (iii) the indemnifying party
continuously conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the indemnifying party is conducting the
defense of the Third Party Claim in accordance with Section 7.4(b), (i)
the indemnified party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim,
(ii) the indemnified party will not consent to the entry of any order,
decree or judgment with respect to the Third Party Claim without the
prior written consent of the indemnifying party (not to be withheld
unreasonably), and (iii) the indemnifying party will not consent to the
entry of any order, decree or judgment with respect to the Third Party
Claim without the prior written consent of the indemnified party (not
to be withheld unreasonably, provided that it will not be deemed to be
unreasonable for an indemnified party to withhold its consent (A) with
respect to any finding of or admission of any violation of any law,
order, decree, judgment or permit, or (B) if any portion of such order,
decree or judgment would not remain sealed).
(d) If any condition in Section 7.4(b) is or becomes
unsatisfied, (i) the indemnified party may defend with attorneys of its
choice against, and consent (with the consent of the indemnifying
party, such consent not to be unreasonably withheld or delayed) to the
entry of any order, decree or judgment with respect to a Third Party
Claim in any manner it may deem appropriate, (ii) the indemnifying
party will be obligated to reimburse the indemnified party promptly and
periodically for Damages related to defending against the Third Party
Claim, and (iii) each indemnifying party will remain liable for any
Damages the indemnified
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party may suffer relating to the Third Party Claim to the fullest
extent provided in this Article VII.
7.5 MISCELLANEOUS. Seller shall (and shall cause its affiliates to)
hold the Company and Buyer harmless from any rights of contribution or
indemnification it or its affiliates may have against the Company as a result of
Damages Seller or its affiliates may incur under this Agreement or as a result
of owning the Company or otherwise.
7.6 ARBITRATION. Any dispute, controversy or claim arising out of or in
connection with this Agreement, or the breach thereof, shall be finally settled
under the Rules of Arbitration of the American Arbitration Association. The
arbitration proceeding shall be held in Wilmington, Delaware. The arbitral award
shall be in writing, shall be rendered within three months after submission of
the matter, and shall be final and binding on the parties. The arbitration shall
be before a single arbitrator with prior professional experience as a lawyer,
accountant or investment banker with corporate acquisitions with values in
excess of $500 million. Except to the extent determined by the arbitrator, his
decision shall be based solely upon written submissions. In the absence of any
award, each party shall bear its own costs and the parties shall share equally
the fees and expenses of the arbitrator. In the event of an award, the
arbitrator may elect to award a prevailing party its reasonable costs attendant
to the arbitration if he determines that the losing party's position was
unreasonable or without significant merit. Judgment upon the award (for purposes
of enforcement) may be entered by any court having jurisdiction thereof or
having jurisdiction over the parties or their assets.
ARTICLE VIII.
MISCELLANEOUS
8.1 ADDITIONAL COVENANTS.
(a) Except as expressly permitted by this Agreement, from the
date hereof to and including the Closing Date, Seller will not, and
will cause the Company not to, take any action, or fail to take any
reasonable action (in each case consistent with the terms of this
Agreement), as a result of which Seller would not be reasonably likely
to be able to deliver the certificate contemplated by Section 5.1(a).
Prior to Closing, Seller will provide Buyer with such information as
Buyer reasonably requests concerning the status of the business,
operations and finances of the Company.
(b) Seller has provided Buyer with accurate and complete
copies of Guarantor's most recently completed audited balance sheet
prior to the date hereof, and prior to Closing will provide Buyer with
accurate and complete copies of Guarantor's most recently completed
balance sheet prior to the Closing Date, such balance sheets to be
prepared consistent with Guarantor's past accounting practices.
Guarantor has no plan or intent to, and after the date hereof Guarantor
will not, take any action which could have a Material Adverse Effect on
Guarantor. Guarantor has no plan or intent to, and after the date
hereof Guarantor
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will not, materially alter its assets and/or liabilities so as to
impair Guarantor's ability to satisfy its obligations under the
Guaranty.
(c) From the day before the Closing Date until the Closing,
Seller will not, and will cause the Company not to, take any
affirmative action, or fail to take any reasonable action (in each case
consistent with the terms of this Agreement), as a result of which a
Material Adverse Effect could occur with respect to Taxes of any kind
whatsoever that affect the Company or its assets.
8.2 TERMINATION OF AGREEMENT. If the Merger Agreement (the "Merger
Agreement") among Illinova Corporation, Buyer, Energy Convergence Acquisition
Company, Dynegy Acquisition Company and Dynegy, dated the date hereof, is
terminated, this Agreement shall terminate and all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party.
8.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, or supplemented only by written agreement of Dynegy and the parties
hereto.
8.4 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply
with any obligation, covenant, agreement, or condition herein may be waived by
the parties hereto; provided, however, that any such waiver may be made only by
a written instrument signed by the parties hereto and Dynegy granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 8.4, with appropriate
notice in accordance with Section 8.8.
8.5 ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement and all of
the provisions hereof shall be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
Person other than the parties hereto, and their respective successors and
assigns any right, remedy, or claim under or by reason of this Agreement or any
provision herein contained, except that the parties hereto acknowledge that
Dynegy is a third party beneficiary of this Agreement. No party may assign its
rights or obligations under this Agreement to any Person without the written
consent of the other parties hereto, such consent not to be unreasonably
withheld.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Delaware (without regard to its conflicts of law
doctrines).
8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and shall become a binding
agreement when one or more of the counterparts have been signed by each of the
parties and delivered to the other party.
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8.8 NOTICES. All notices or communications hereunder shall be in
writing (including facsimile or similar writing) addressed as follows:
If to Buyer:
Energy Convergence Holding Company
1000 Louisiana
Suite 6700
Houston, TX 77002
Attention: Kenneth Randolph
Telecopy: (713) 507-6808
with copies to (such copy not to constitute notice):
Illinova Corporation
500 South 27th Street,
Decatur, Illinois 62521
Attention: President
Telecopy: (217) 362-7458
and:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place, South Tower
711 Louisiana Street
Houston, Texas 77002
Attn: Robert B. Allen
Telecopy: (713) 236-0822
If to Seller:
British Gas Atlantic Holdings BV
3032 AC Rotterdam
Wilhelminaplein 14
3072 DE Rotterdam
The Netherlands
Attn: Loek de Preter
Telecopy: 3110 290 6581
with a copy to (such copy not to constitute notice):
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Alfred J. Ross, Jr. and Douglas McFadyen
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Telecopy: (212) 848-7179
Any such notice or communication shall be deemed given (i) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, (ii)
three business days 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 addressed as above
(or to such other address as such party may designate in writing from time to
time).
8.9 SERVICE OF PROCESS. Seller hereby irrevocably appoints The
Corporation Trust Company located at 1209 Orange Street in Wilmington, Delaware,
as its lawful agent in Delaware to receive and forward on their behalf service
of all necessary processes in any action, suit, or proceeding arising under this
Agreement that may be brought against Seller in any court (including federal
courts) in Delaware. Such service of process or notice received thereof by the
agent will have the same force and effect as if served upon Seller. Seller will
pay all costs and expense and circulate forms as may be required by The
Corporation Trust Company in this capacity.
8.10 HEADINGS The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.11 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
8.12 SEVERABILITY. If any one or more provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or, unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
8.13 FURTHER ASSURANCES. Each party to this Agreement agrees to execute
such documents or instruments, and to take such action, as the other party may
reasonably request after the date hereof in order to effectuate and perfect the
indemnification contemplated hereby.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
ENERGY CONVERGENCE HOLDING
COMPANY
By: /s/ Charles E. Bayless
--------------------------
Name: Charles E. Bayless
--------------------------
Title: President
--------------------------
BRITISH GAS ATLANTIC
HOLDINGS BV
By: /s/ L.M.O.C. de Preter
--------------------------
Name: L.M.O.C. de Preter
--------------------------
Title: Director
--------------------------
<PAGE> 25
GUARANTY
WHEREAS, British Gas Atlantic Holdings BV, a Dutch corporation
("Seller"), is a wholly owned subsidiary of BG Overseas Holdings Limited, a
company incorporated under the laws of England and Wales ("Parent"); and
WHEREAS, Parent is directly and indirectly benefiting from the
consummation of the transactions contemplated in the Stock Purchase Agreement,
dated the date hereof, by and between Energy Convergence Holding Company and
Seller, and any amendments or supplements thereto (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Parent hereby unconditionally, absolutely and continuously
guarantees Seller's payment and performance of its liabilities and obligations
under the Purchase Agreement. Parent hereby waives any right to require Buyer to
(a) proceed against Seller, (b) have Parent joined with Seller in any suit or
proceeding arising out of this Guaranty, or (c) pursue any other remedy in
Buyer's power whatsoever.
Any dispute, controversy or claim arising out of or in connection with
this Guaranty, or the breach thereof, shall be finally settled under the Rules
of Arbitration of the American Arbitration Association. The arbitration
proceeding shall be held in Wilmington, Delaware. The arbitral award shall be in
writing, shall be rendered within three months after submission of the matter,
and shall be final and binding on the parties. The arbitration shall be before a
single arbitrator with prior professional experience as a lawyer, accountant or
investment banker with corporate acquisitions with values in excess of $500
million. Except to the extent determined by the arbitrator, his decision shall
be based solely upon written submissions. In the absence of any award, each
party shall bear its own costs and the parties shall share equally the fees and
expenses of the arbitrator. In the event of an award, the arbitrator may elect
to award a prevailing party its reasonable costs attendant to the arbitration if
he determines that the losing party's position was unreasonable or without
significant merit. Judgment upon the award (for purposes of enforcement) may be
entered by any court having jurisdiction thereof or having jurisdiction over the
parties or their assets.
Guarantor hereby irrevocably appoints CT Corporation System in
Wilmington, Delaware, as its lawful agent in Delaware to receive and forward on
their behalf service of all necessary processes in any action, suit, or
proceeding arising under this Agreement that may be brought against Guarantor in
any court (including federal courts) in Delaware. Such service of process or
notice received thereof by the agent will have the same force and effect as if
served upon Guarantor. Guarantor will pay all costs and expense and circulate
forms as may be required by CT Corporation System in this capacity.
This Guaranty shall be governed by and construed in accordance with the
laws of Delaware (without regard to its conflicts of law doctrines).
<PAGE> 26
IN WITNESS WHEREOF, Parent has caused this Guaranty to be duly executed
as of the 14th day of June, 1999.
BG OVERSEAS HOLDINGS LIMITED
By: /s/ Tom Melvin
----------------------------------------
Name: Tom Melvin
----------------------------------------
Title: Director
----------------------------------------
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June 14, 1999, by and between Illinova
Corporation, an Illinois corporation ("Illinova"), and BG Holdings, Inc., a
Delaware corporation ("Stockholder").
WHEREAS, concurrently herewith, Illinova and Dynegy Inc., a Delaware
corporation ("Dynegy"), are entering into an Agreement and Plan of Merger (as
amended or supplemented from time to time, the "Merger Agreement;" capitalized
terms used without definition herein having the meanings ascribed thereto in the
Merger Agreement);
WHEREAS, as of June 14, 1999, Stockholder owns and/or has the power to
vote, as applicable, the number and type of Shares (as defined in Section 5
below) set forth in Schedule I hereto;
WHEREAS, the Board of Directors of Dynegy has, prior to the execution
of this Agreement, approved and adopted the Merger Agreement, and such approvals
and adoption have not been withdrawn;
WHEREAS, approval of the Merger Agreement by Dynegy's stockholders is a
condition to the consummation of the Mergers; and
WHEREAS, as a condition to its entering into the Merger Agreement,
Illinova has required that Stockholder agree, and Stockholder has so agreed, to
enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
Section 1. Agreement to Vote. (a) Unless the Dynegy Board of Directors
shall have withdrawn its recommendation in favor of the Mergers, Stockholder
hereby agrees to attend the Dynegy Special Meeting (or any other meeting of
stockholders of Dynegy at which the matters contemplated by the Merger Agreement
or this Agreement are to be presented to a vote of stockholders of Dynegy), in
person or by proxy, and to vote (or cause to be voted) all Shares and any other
voting securities of Dynegy that Stockholder directly or indirectly owns or has
the right to vote or direct the voting of (including any such securities
acquired hereafter but excluding any Shares or other securities Stockholder has
the right to acquire but has not acquired) (collectively, the "Covered Shares")
for approval and adoption of: (i) the Merger Agreement, (ii) the DAC Merger,
(iii) any related action reasonably required in furtherance thereof. Unless the
Dynegy Board of Directors shall have withdrawn its recommendation in favor of
the Mergers, Stockholder hereby further agrees that until the Termination Date
(as defined below), it shall, from time to time, in connection with any consent
solicitation relating to the Merger Agreement, timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares in favor of the approval and adoption of the Merger Agreement,
the DAC Merger and any action required in furtherance thereof.
(b) Stockholder hereby agrees to make or cause to be made a timely
Election to receive Cash Consideration with respect to all Covered Shares under
the Merger Agreement.
<PAGE> 2
(c) From and after the date hereof until the Termination Date, unless
the Dynegy Board of Directors shall have withdrawn its recommendation of the
Mergers, Stockholder hereby agrees to vote (or cause to be voted) any Covered
Shares against any Dynegy Acquisition Proposal and any related action reasonably
required in furtherance thereof, at any meeting of stockholders of Dynegy
(including any adjournments or postponements thereof) called to consider and
vote on any Dynegy Acquisition Proposal. Stockholder further agrees that, until
the Termination Date, in connection with any consent solicitation relating to a
Dynegy Acquisition Proposal, Stockholder will timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares against any Dynegy Acquisition Proposal as contemplated by the
immediately preceding sentence. For purposes hereof, the term "Termination Date"
shall mean the first to occur of (a) the termination of the Merger Agreement and
(b) the date of consummation of the Mergers.
(d) To the extent inconsistent with the foregoing provisions of this
Section 1 or the other provisions of this Agreement, Stockholder hereby (i)
revokes any and all previous proxies with respect to Stockholder's Covered
Shares, (ii) waives any provisions of the Stockholders Agreement dated May 22,
1996 among BG Holdings, Inc., NOVA Gas Services (U.S.) Inc., and Chevron U.S.A.,
Inc. (the "Stockholders Agreement") with respect to actions contemplated by the
Merger Agreement, (iii) agrees that the Stockholders Agreement shall terminate
as of the Effective Time of the Mergers, and (iv) agrees that it will not
convert any Dynegy preferred shares into common stock before the Termination
Date.
(e) In furtherance of the purposes, and subject to the terms, of this
Agreement, Stockholder hereby appoints Illinova its proxy to vote all of
Stockholder's Covered Shares at any meeting of stockholders of Dynegy (including
any adjournments and postponements thereof) and to execute and deliver any
written consents in order to fulfill the obligations of Stockholder under this
Agreement. This proxy is coupled with an interest and is irrevocable until the
Termination Date.
(f) Nothing herein contained shall (i) restrict, limit or prohibit any
individuals who may represent a Stockholder on Dynegy's Board of Directors from
exercising (in his or her capacity as a director or officer) his or her
fiduciary duties to the stockholders of Dynegy under applicable law, or (ii)
require any individual, in his or her capacity as an officer of Dynegy, to take
any action in contravention of, or omit to take any action pursuant to, or
otherwise take or refrain from taking any actions which are inconsistent with,
instructions or directions of the Board of Directors of Dynegy undertaken in the
exercise of its fiduciary duties, provided that nothing in this Section 1(f)
shall relieve or be deemed to relieve Stockholder from its obligations under
Sections 1 or 2 of this Agreement.
Section 2. Disposition of Shares. From and after the date hereof until
the Termination Date, and except as provided for in the Stock Purchase Agreement
by and among Newco, British Gas Atlantic Holdings BV and Stockholder, dated June
14, 1999 (the "BG Stock Purchase Agreement"), Stockholder hereby agrees that it
will not directly or indirectly sell, pledge, encumber, grant any proxy or enter
into any voting or similar agreement with respect to, transfer or otherwise
dispose of (collectively, "Transfer"), or agree or contract to Transfer, any
Covered Shares (or any interest therein) with respect to which Stockholder
directly or indirectly controls
2
<PAGE> 3
the right to Transfer; provided, however, that Stockholder may Transfer its
respective Covered Shares to an Affiliate of Stockholder provided that such
Affiliate agrees to be subject to the terms and conditions set forth in this
Agreement.
Section 3. Other Covenants and Agreements.
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be reasonably
necessary or appropriate to effectuate, carry out and comply with all of their
obligations under this Agreement. Without limiting the generality of the
foregoing, neither party shall enter into any agreement or arrangement (or
alter, amend or terminate any existing agreement or arrangement) or take any
other action (or fail to take any other action) if such action (or failure)
would materially impair the ability of any party to effectuate, carry out or
comply with all the terms of this Agreement. Illinova hereby agrees to (a)
cooperate with Stockholder in connection with any filings required to be made by
Stockholder in connection with the Mergers and the transactions contemplated
thereby, and (b) cause Newco to file with the SEC a Proxy Statement/Prospectus
registering shares of Newco Common Stock, Class B Common Stock and Series A
Convertible Preferred Stock in accordance with Section 8.13 of the Merger
Agreement.
Section 4. Representations and Warranties of Illinova. Illinova
represents and warrants to Stockholder as follows: (a) each of this Agreement
and the Merger Agreement has been approved by the Board of Directors of
Illinova, representing all necessary corporate action on the part of Illinova,
except for the approval of Illinova's stockholders contemplated by the Merger
Agreement, (b) each of this Agreement and the Merger Agreement has been duly
executed and delivered by a duly authorized officer of Illinova, and (c) each of
this Agreement and the Merger Agreement constitutes a valid and binding
agreement of Illinova, enforceable against Illinova.
Section 5. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Illinova as follows: (a) Stockholder has the
corporate power and authority to execute and deliver this Agreement, (b) this
Agreement has been duly executed and delivered by Stockholder, (c) this
Agreement constitutes the valid and binding agreement of such Stockholder, (d)
except as provided in the Stockholders Agreement, Stockholder has the full power
and authority to vote, or execute a consent, with respect to, all Covered Shares
as contemplated hereby, (e) the securities of Dynegy listed next to the name of
Stockholder on Schedule I hereto are the only securities of Dynegy owned by
Stockholder and over which Stockholder has the power to vote (or direct the
voting) (collectively, the "Shares"), (f) except as provided in the Stockholders
Agreement, Stockholder is the lawful owner of the Shares listed on Schedule I as
owned by it, free and clear of all liens, charges, encumbrances and commitments
of every kind, other than this Agreement, and has the power to vote (including
by an irrevocable power to vote or execution of a consent) such Shares without
any actions on the part of any other party, and (g) except as provided in the
Stockholders Agreement, the execution and delivery by Stockholder of this
Agreement does not violate or breach any law, contract, instrument, agreement or
arrangement to which Stockholder is a party or by which Stockholder is bound,
except to the extent such violation or breach does not prevent or delay
performance of such Stockholder's obligations hereunder.
3
<PAGE> 4
Section 6. Effectiveness. It is a condition precedent to the
effectiveness of this Agreement that the Merger Agreement shall have been duly
executed and delivered by the parties thereto. Any amendment or change to the
Merger Agreement that (i) changes the Exchange Ratio, (ii) changes the amount
and nature of the Aggregate Merger Consideration payable per share of Dynegy
Stock, (iii) changes the termination date of the Merger Agreement, or (iv)
materially adversely affects the Stockholder, will nullify the effectiveness of
this Agreement and this Agreement shall terminate immediately.
Section 7. Miscellaneous.
(a) 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 to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or three days after being mailed by
courier service that guarantees overnight delivery, in each case to the
applicable addresses set forth below:
If to Illinova:
Illinova Corporation
500 South 27th Street,
Decatur, IL 62521
Attention: President
Telecopy: (217) 362-7458
with copies to:
Illinova Corporation
500 South 27th Street
Decatur, IL 62521
Attention: Chief Legal Officer
Telecopy: (217) 424-6978
and:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, GA 30308
Attention: W. Brinkley Dickerson, Jr.
Telecopy: (404) 962-6743
If to the Stockholder:
BG Holdings, Inc.
-------------------------------
-------------------------------
Attention:
-------------------------------
4
<PAGE> 5
Telecopy:
-------------------------------
with copies to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Alfred J. Ross, Jr.
Telecopy: (212) 848-7179
and:
Dynegy Inc.
1000 Louisiana, Ste. 5800
Houston, TX 77002
Attention: Senior Vice President and General Counsel
Telecopy: (713) 507-6808
and:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana Street, 19th Floor
Houston, TX 77002
Attention: Robert Allen
Telecopy: (713) 236-0822
or to such other address as such party shall have designated by notice so given
to each other party.
(b) 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 Illinova and Stockholder. In addition, Illinova
agrees not to waive or modify Section 9.1(h) of the Merger Agreement without the
prior consent of Stockholder.
(c) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns, including without limitation any corporate
successor by merger or otherwise, or any party succeeding to the ownership of
(or power to vote) Stockholder's Covered Shares.
(d) Entire Agreement. This Agreement, the BG Stock Purchase Agreement
and the Ancillary Agreements (together with the Merger Agreement) embodies the
entire agreement and understanding between 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 Ancillary Agreements and the Merger Agreement.
5
<PAGE> 6
(e) 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 party 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.
(f) Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
(g) 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.
(h) 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 party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) 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, except the parties hereto acknowledge that Dynegy is a
third party beneficiary with respect to Section 1(b) of this Agreement.
(j) 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. Each party hereto hereby waives any right to a trial by jury in
connection with any such action.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware to the fullest extent possible.
(l) 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
6
<PAGE> 7
construction hereof. Whenever the context may require, any pronoun used herein
shall include the corresponding masculine, feminine or neuter forms.
(m) 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, the
parties hereto.
(n) Expenses. Illinova and Stockholder shall bear its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Voting
Agreement as of the date first above written.
ILLINOVA CORPORATION
By: /s/ Charles E. Bayless
-----------------------------
Name: Charles E. Bayless
-----------------------------
Title: Chairman, President and CEO
-----------------------------
BG HOLDINGS, INC.
By: /s/ Cynthia Masters
-----------------------------
Name: Cynthia Masters
-----------------------------
Title: Vice President
-----------------------------
<PAGE> 9
SCHEDULE I
SHARES
Dynegy Common Stock 38,789,876
9
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June 14, 1999, by and between Illinova
Corporation, an Illinois corporation ("Illinova"), and NOVA Gas Services (U.S.)
Inc., a Delaware corporation ("Stockholder").
WHEREAS, concurrently herewith, Illinova and Dynegy Inc., a Delaware
corporation ("Dynegy"), are entering into an Agreement and Plan of Merger (as
amended or supplemented from time to time, the "Merger Agreement;" capitalized
terms used without definition herein having the meanings ascribed thereto in the
Merger Agreement);
WHEREAS, as of June 14, 1999, Stockholder owns and/or has the power to
vote, as applicable, the number and type of Shares (as defined in Section 5
below) set forth in Schedule I hereto;
WHEREAS, the Board of Directors of Dynegy has, prior to the execution
of this Agreement, approved and adopted the Merger Agreement, and such approvals
and adoption have not been withdrawn;
WHEREAS, approval of the Merger Agreement by Dynegy's stockholders is a
condition to the consummation of the Mergers; and
WHEREAS, as a condition to its entering into the Merger Agreement,
Illinova has required that Stockholder agree, and Stockholder has so agreed, to
enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
Section 1. Agreement to Vote. (a) Unless the Dynegy Board of Directors
shall have withdrawn its recommendation in favor of the Mergers, Stockholder
hereby agrees to attend the Dynegy Special Meeting (or any other meeting of
stockholders of Dynegy at which the matters contemplated by the Merger Agreement
or this Agreement are to be presented to a vote of stockholders of Dynegy), in
person or by proxy, and to vote (or cause to be voted) all Shares and any other
voting securities of Dynegy that Stockholder directly or indirectly owns or has
the right to vote or direct the voting of (including any such securities
acquired hereafter but excluding any Shares or other securities Stockholder has
the right to acquire but has not acquired) (collectively, the "Covered Shares")
for approval and adoption of: (i) the Merger Agreement, (ii) the DAC Merger,
(iii) any related action reasonably required in furtherance thereof. Unless the
Dynegy Board of Directors shall have withdrawn its recommendation in favor of
the Mergers, Stockholder hereby further agrees that until the Termination Date
(as defined below), it shall, from time to time, in connection with any consent
solicitation relating to the Merger Agreement, timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares in favor of the approval and adoption of the Merger Agreement,
the DAC Merger and any action required in furtherance thereof.
<PAGE> 2
(b) Stockholder hereby agrees to make or cause to be made a timely
Election to receive Cash Consideration with respect to all Covered Shares under
the Merger Agreement.
(c) From and after the date hereof until the Termination Date, unless
the Dynegy Board of Directors shall have withdrawn its recommendation of the
Mergers, Stockholder hereby agrees to vote (or cause to be voted) any Covered
Shares against any Dynegy Acquisition Proposal and any related action reasonably
required in furtherance thereof, at any meeting of stockholders of Dynegy
(including any adjournments or postponements thereof) called to consider and
vote on any Dynegy Acquisition Proposal. Stockholder further agrees that, until
the Termination Date, in connection with any consent solicitation relating to a
Dynegy Acquisition Proposal, Stockholder will timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares against any Dynegy Acquisition Proposal as contemplated by the
immediately preceding sentence. For purposes hereof, the term "Termination Date"
shall mean the first to occur of (a) the termination of the Merger Agreement and
(b) the date of consummation of the Mergers.
(d) To the extent inconsistent with the foregoing provisions of this
Section 1 or the other provisions of this Agreement, Stockholder hereby (i)
revokes any and all previous proxies with respect to Stockholder's Covered
Shares, (ii) waives any provisions of the Stockholders Agreement dated May 22,
1996 among BG Holdings, Inc., NOVA Gas Services (U.S.) Inc., and Chevron U.S.A.,
Inc. (the "Stockholders Agreement") with respect to actions contemplated by the
Merger Agreement, (iii) agrees that the Stockholders Agreement shall terminate
as of the Effective Time of the Mergers, and (iv) agrees that it will not
convert any Dynegy preferred shares into common stock before the Termination
Date.
(e) In furtherance of the purposes, and subject to the terms, of this
Agreement, Stockholder hereby appoints Illinova its proxy to vote all of
Stockholder's Covered Shares at any meeting of stockholders of Dynegy (including
any adjournments and postponements thereof) and to execute and deliver any
written consents in order to fulfill the obligations of Stockholder under this
Agreement. This proxy is coupled with an interest and is irrevocable until the
Termination Date.
(f) Nothing herein contained shall (i) restrict, limit or prohibit any
individuals who may represent a Stockholder on Dynegy's Board of Directors from
exercising (in his or her capacity as a director or officer) his or her
fiduciary duties to the stockholders of Dynegy under applicable law, or (ii)
require any individual, in his or her capacity as an officer of Dynegy, to take
any action in contravention of, or omit to take any action pursuant to, or
otherwise take or refrain from taking any actions which are inconsistent with,
instructions or directions of the Board of Directors of Dynegy undertaken in the
exercise of its fiduciary duties, provided that nothing in this Section 1(f)
shall relieve or be deemed to relieve Stockholder from its obligations under
Sections 1 or 2 of this Agreement.
Section 2. Disposition of Shares. From and after the date hereof until
the Termination Date, Stockholder hereby agrees that it will not directly or
indirectly sell, pledge, encumber, grant any proxy or enter into any voting or
similar agreement with respect to, transfer or otherwise dispose of
(collectively, "Transfer"), or agree or contract to Transfer, any Covered
2
<PAGE> 3
Shares (or any interest therein) with respect to which Stockholder directly or
indirectly controls the right to Transfer; provided, however, that Stockholder
may Transfer its respective Covered Shares to an Affiliate of Stockholder
provided that such Affiliate agrees to be subject to the terms and conditions
set forth in this Agreement.
Section 3. Other Covenants and Agreements.
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be reasonably
necessary or appropriate to effectuate, carry out and comply with all of their
obligations under this Agreement. Without limiting the generality of the
foregoing, neither party shall enter into any agreement or arrangement (or
alter, amend or terminate any existing agreement or arrangement) or take any
other action (or fail to take any other action) if such action (or failure)
would materially impair the ability of any party to effectuate, carry out or
comply with all the terms of this Agreement. Illinova hereby agrees to (a)
cooperate with Stockholder in connection with any filings required to be made by
Stockholder in connection with the Mergers and the transactions contemplated
thereby, and (b) cause Newco to file with the SEC a Proxy Statement/Prospectus
registering shares of Newco Common Stock, Class B Common Stock and Series A
Convertible Preferred Stock in accordance with Section 8.13 of the Merger
Agreement.
Section 4. Representations and Warranties of Illinova. Illinova
represents and warrants to Stockholder as follows: (a) each of this Agreement
and the Merger Agreement has been approved by the Board of Directors of
Illinova, representing all necessary corporate action on the part of Illinova,
except for the approval of Illinova's stockholders contemplated by the Merger
Agreement, (b) each of this Agreement and the Merger Agreement has been duly
executed and delivered by a duly authorized officer of Illinova, and (c) each of
this Agreement and the Merger Agreement constitutes a valid and binding
agreement of Illinova, enforceable against Illinova.
Section 5. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Illinova as follows: (a) Stockholder has the
corporate power and authority to execute and deliver this Agreement, (b) this
Agreement has been duly executed and delivered by Stockholder, (c) this
Agreement constitutes the valid and binding agreement of such Stockholder, (d)
except as provided in the Stockholders Agreement, Stockholder has the full power
and authority to vote, or execute a consent, with respect to, all Covered Shares
as contemplated hereby, (e) the securities of Dynegy listed next to the name of
Stockholder on Schedule I hereto are the only securities of Dynegy owned by
Stockholder and over which Stockholder has the power to vote (or direct the
voting) (collectively, the "Shares"), (f) except as provided in the Stockholders
Agreement, Stockholder is the lawful owner of the Shares listed on Schedule I as
owned by it, free and clear of all liens, charges, encumbrances and commitments
of every kind, other than this Agreement, and has the power to vote (including
by an irrevocable power to vote or execution of a consent) such Shares without
any actions on the part of any other party, and (g) except as provided in the
Stockholders Agreement, the execution and delivery by Stockholder of this
Agreement does not violate or breach any law, contract, instrument, agreement or
arrangement to which Stockholder is a party or by which Stockholder is bound,
except to the extent such violation or breach does not prevent or delay
performance of such Stockholder's obligations hereunder.
3
<PAGE> 4
Section 6. Effectiveness. It is a condition precedent to the
effectiveness of this Agreement that the Merger Agreement shall have been duly
executed and delivered by the parties thereto. Any amendment or change to the
Merger Agreement that (i) changes the Exchange Ratio, (ii) changes the amount
and nature of the Aggregate Merger Consideration payable per share of Dynegy
Stock, (iii) changes the termination date of the Merger Agreement, or (iv)
materially adversely affects the Stockholder, will nullify the effectiveness of
this Agreement and this Agreement shall terminate immediately.
Section 7. Miscellaneous.
(a) 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 to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or three days after being mailed by
courier service that guarantees overnight delivery, in each case to the
applicable addresses set forth below:
If to Illinova:
Illinova Corporation
500 South 27th Street,
Decatur, IL 62521
Attention: President
Telecopy: (217) 362-7458
with copies to:
Illinova Corporation
500 South 27th Street
Decatur, IL 62521
Attention: Chief Legal Officer
Telecopy: (217) 424-6978
and:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, GA 30308
Attention: W. Brinkley Dickerson, Jr.
Telecopy: (404) 962-6743
If to the Stockholder:
NOVA Gas Services (U.S.) Inc.
645 - 7th Avenue S.W.
Calgary, Alberta
4
<PAGE> 5
T2P 4G8
Canada
Attention: Senior Vice President, Law
Telecopy: (403) 750-4885
with copies to:
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attention: Alan Talkington
Telecopy: (415) 773-5759
and:
Dynegy Inc.
1000 Louisiana, Ste. 5800
Houston, TX 77002
Attention: Senior Vice President and General Counsel
Telecopy: (713) 507-6808
and:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana Street, 19th Floor
Houston, TX 77002
Attention: Robert Allen
Telecopy: (713) 236-0822
or to such other address as such party shall have designated by notice so given
to each other party.
(b) 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 Illinova and Stockholder.
(c) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns, including without limitation any corporate
successor by merger or otherwise, or any party succeeding to the ownership of
(or power to vote) Stockholder's Covered Shares.
(d) Entire Agreement. This Agreement and the Ancillary Agreements
(together with the Merger Agreement) embodies the entire agreement and
understanding between 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
5
<PAGE> 6
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement, the Ancillary Agreements and the Merger Agreement.
(e) 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 party 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.
(f) Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
(g) 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.
(h) 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 party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) 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, except the parties hereto acknowledge that Dynegy is a
third party beneficiary with respect to Section 1(b) of this Agreement.
(j) 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. Each party hereto hereby waives any right to a trial by jury in
connection with any such action.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware to the fullest extent possible.
6
<PAGE> 7
(l) 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.
(m) 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, the
parties hereto.
(n) Expenses. Illinova and Stockholder shall bear its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
ILLINOVA CORPORATION
By: /s/ Charles E. Bayless
-------------------------------
Name: Charles E. Bayless
-------------------------------
Title: Chairman, President and CEO
------------------------------
NOVA GAS SERVICES (U.S.) INC.
By: /s/ Jeffrey Lipton
-------------------------------
Name: Jeffrey Lipton
-------------------------------
Title: Director
-------------------------------
8
<PAGE> 9
SCHEDULE I
SHARES
Dynegy Common Stock 38,789,876
9
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June 14, 1999, by and between Illinova
Corporation, an Illinois corporation ("Illinova"), and Chevron U.S.A. Inc., a
Pennsylvania corporation ("Stockholder").
WHEREAS, concurrently herewith, Illinova and Dynegy Inc., a Delaware
corporation ("Dynegy"), are entering into an Agreement and Plan of Merger (as
amended or supplemented from time to time, the "Merger Agreement;" capitalized
terms used without definition herein having the meanings ascribed thereto in the
Merger Agreement);
WHEREAS, as of June 14, 1999, Stockholder owns and/or has the power to
vote, as applicable, the number and type of Shares (as defined in Section 5
below) set forth in Schedule I hereto;
WHEREAS, the Board of Directors of Dynegy has, prior to the execution
of this Agreement, approved and adopted the Merger Agreement, and such approvals
and adoption have not been withdrawn;
WHEREAS, approval of the Merger Agreement by Dynegy's stockholders is a
condition to the consummation of the Mergers; and
WHEREAS, as a condition to its entering into the Merger Agreement,
Illinova has required that Stockholder agree, and Stockholder has so agreed, to
enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
Section 1. Agreement to Vote. (a) Unless the Dynegy Board of Directors
shall have withdrawn its recommendation in favor of the Mergers, Stockholder
hereby agrees to attend the Dynegy Special Meeting (or any other meeting of
stockholders of Dynegy at which the matters contemplated by the Merger Agreement
or this Agreement are to be presented to a vote of stockholders of Dynegy), in
person or by proxy, and to vote (or cause to be voted) all Shares and any other
voting securities of Dynegy that Stockholder directly or indirectly owns or has
the right to vote or direct the voting of (including any such securities
acquired hereafter but excluding any Shares or other securities Stockholder has
the right to acquire but has not acquired) (collectively, the "Covered Shares")
for approval and adoption of: (i) the Merger Agreement, (ii) the DAC Merger,
(iii) any related action reasonably required in furtherance thereof. Unless the
Dynegy Board of Directors shall have withdrawn its recommendation in favor of
the Mergers, Stockholder hereby further agrees that until the Termination Date
(as defined below), it shall, from time to time, in connection with any consent
solicitation relating to the Merger Agreement, timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares in favor of the approval and adoption of the Merger Agreement,
the DAC Merger and any action required in furtherance thereof.
(b) Stockholder hereby agrees to make or cause to be made a timely
Election to receive Common Stock Consideration with respect to all Covered
Shares under the Merger Agreement.
<PAGE> 2
(c) From and after the date hereof until the Termination Date, unless
the Dynegy Board of Directors shall have withdrawn its recommendation of the
Mergers, Stockholder hereby agrees to vote (or cause to be voted) any Covered
Shares against any Dynegy Acquisition Proposal and any related action reasonably
required in furtherance thereof, at any meeting of stockholders of Dynegy
(including any adjournments or postponements thereof) called to consider and
vote on any Dynegy Acquisition Proposal. Stockholder further agrees that, until
the Termination Date, in connection with any consent solicitation relating to a
Dynegy Acquisition Proposal, Stockholder will timely execute and deliver (or
cause to be timely executed and delivered) a written consent with respect to any
Covered Shares against any Dynegy Acquisition Proposal as contemplated by the
immediately preceding sentence. For purposes hereof, the term "Termination Date"
shall mean the first to occur of (a) the termination of the Merger Agreement and
(b) the date of consummation of the Mergers.
(d) To the extent inconsistent with the foregoing provisions of this
Section 1 or the other provisions of this Agreement, Stockholder hereby (i)
revokes any and all previous proxies with respect to Stockholder's Covered
Shares, (ii) waives any provisions of the Stockholders Agreement dated May 22,
1996 among BG Holdings, Inc., NOVA Gas Services (U.S.) Inc., and Chevron U.S.A.,
Inc. (the "Stockholders Agreement") with respect to actions contemplated by the
Merger Agreement, (iii) agrees that the Stockholders Agreement shall terminate
as of the Effective Time of the Mergers, and (iv) agrees that it will not
convert any Dynegy preferred shares into common stock before the Termination
Date.
(e) Nothing herein contained shall (i) restrict, limit or prohibit any
individuals who may represent a Stockholder on Dynegy's Board of Directors from
exercising (in his or her capacity as a director or officer) his or her
fiduciary duties to the stockholders of Dynegy under applicable law, or (ii)
require any individual, in his or her capacity as an officer of Dynegy, to take
any action in contravention of, or omit to take any action pursuant to, or
otherwise take or refrain from taking any actions which are inconsistent with,
instructions or directions of the Board of Directors of Dynegy undertaken in the
exercise of its fiduciary duties, provided that nothing in this Section 1(e)
shall relieve or be deemed to relieve Stockholder from its obligations under
Sections 1 or 2 of this Agreement.
Section 2. Disposition of Shares. From and after the date hereof until
the Termination Date, Stockholder hereby agrees that it will not directly or
indirectly sell, pledge, encumber, grant any proxy or enter into any voting or
similar agreement with respect to, transfer or otherwise dispose of
(collectively, "Transfer"), or agree or contract to Transfer, any Covered Shares
(or any interest therein) with respect to which Stockholder directly or
indirectly controls the right to Transfer; provided, however, that Stockholder
may Transfer its respective Covered Shares to an Affiliate of Stockholder
provided that such Affiliate agrees to be subject to the terms and conditions
set forth in this Agreement.
Section 3. Other Covenants and Agreements.
Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be reasonably
necessary or appropriate to effectuate, carry out and comply with all of their
obligations under this Agreement. Without limiting the
2
<PAGE> 3
generality of the foregoing, neither party shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
or take any other action (or fail to take any other action) if such action (or
failure) would materially impair the ability of any party to effectuate, carry
out or comply with all the terms of this Agreement. Illinova hereby agrees (a)
to cooperate with Stockholder in connection with any filings required to be made
by Stockholder in connection with the Mergers and the transactions contemplated
thereby, and (b) cause Newco to file with the SEC a Proxy Statement/Prospectus
registering shares of Newco Common Stock, Class B Common Stock and Series A
Convertible Preferred Stock in accordance with Section 8.13 of the Merger
Agreement.
Section 4. Representations and Warranties of Illinova. Illinova
represents and warrants to Stockholder as follows: (a) each of this Agreement
and the Merger Agreement has been approved by the Board of Directors of
Illinova, representing all necessary corporate action on the part of Illinova,
except for the approval of Illinova's stockholders contemplated by the Merger
Agreement, (b) each of this Agreement and the Merger Agreement has been duly
executed and delivered by a duly authorized officer of Illinova, and (c) each of
this Agreement and the Merger Agreement constitutes a valid and binding
agreement of Illinova, enforceable against Illinova.
Section 5. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Illinova as follows: (a) Stockholder has the
corporate power and authority to execute and deliver this Agreement, (b) this
Agreement has been duly executed and delivered by Stockholder, (c) this
Agreement constitutes the valid and binding agreement of such Stockholder, (d)
except as provided in the Stockholders Agreement, Stockholder has the full power
and authority to vote, or execute a consent, with respect to, all Covered Shares
as contemplated hereby, (e) the securities of Dynegy listed next to the name of
Stockholder on Schedule I hereto are the only securities of Dynegy owned by
Stockholder and over which Stockholder has the power to vote (or direct the
voting) (collectively, the "Shares"), (f) except as provided in the Stockholders
Agreement, Stockholder is the lawful owner of the Shares listed on Schedule I as
owned by it, free and clear of all liens, charges, encumbrances and commitments
of every kind, other than this Agreement, and has the power to vote (including
by an irrevocable power to vote or execution of a consent) such Shares without
any actions on the part of any other party, and (g) except as provided in the
Stockholders Agreement, the execution and delivery by Stockholder of this
Agreement does not violate or breach any law, contract, instrument, agreement or
arrangement to which Stockholder is a party or by which Stockholder is bound,
except to the extent such violation or breach does not prevent or delay
performance of such Stockholder's obligations hereunder.
Section 6. Effectiveness. It is a condition precedent to the
effectiveness of this Agreement that the Merger Agreement shall have been duly
executed and delivered by the parties thereto. Any amendment or change to the
Merger Agreement that (i) changes the Exchange Ratio, (ii) changes the amount
and nature of the Aggregate Merger Consideration payable per share of Dynegy
Stock, (iii) changes the termination date of the Merger Agreement, or (iv)
materially adversely affects the Stockholder, will nullify the effectiveness of
this Agreement and this Agreement shall terminate immediately.
Section 7. Miscellaneous.
3
<PAGE> 4
(a) 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 to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or three days after being mailed by
courier service that guarantees overnight delivery, in each case to the
applicable addresses set forth below:
If to Illinova:
Illinova Corporation
500 South 27th Street,
Decatur, IL 62521
Attention: President
Telecopy: (217) 362-7458
with copies to:
Illinova Corporation
500 South 27th Street
Decatur, IL 62521
Attention: Chief Legal Officer
Telecopy: (217) 424-6978
and:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, GA 30308
Attention: W. Brinkley Dickerson, Jr.
Telecopy: (404) 962-6743
If to the Stockholder:
Chevron U.S.A. Inc.
1301 McKinney Street
Houston, TX 77010
Attention: President of Chevron U.S.A.
Production Company
Telecopy: (713) 754-5777
with copies to:
4
<PAGE> 5
Harvey D. Hinman, Esq.
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Telecopy: (415) 894-6017
and:
Terry Michael Kee, Esq. and
Rodney R. Peck, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telecopy: (415) 982-1200
and:
Dynegy Inc.
1000 Louisiana, Ste. 5800
Houston, TX 77002
Attention: Senior Vice President and General Counsel
Telecopy: (713) 507-6808
and:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana Street, 19th Floor
Houston, TX 77002
Attention: Robert Allen
Telecopy: (713) 236-0822
or to such other address as such party shall have designated by notice so given
to each other party.
(b) 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 Illinova and Stockholder.
(c) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns, including without limitation any corporate
successor by merger or otherwise, or any party succeeding to the ownership of
(or power to vote) Stockholder's Covered Shares.
(d) Entire Agreement. This Agreement and the Ancillary Agreements
(together with the Merger Agreement) embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings
5
<PAGE> 6
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 Ancillary Agreements and the Merger
Agreement.
(e) 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 party 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.
(f) Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
(g) 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.
(h) 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 party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) 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, except the parties hereto acknowledge that Dynegy is a
third party beneficiary with respect to Section 1(b) of this Agreement.
(j) 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. Each party hereto hereby waives any right to a trial by jury in
connection with any such action.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware to the fullest extent possible.
6
<PAGE> 7
(l) 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.
(m) 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, the
parties hereto.
(n) Expenses. Illinova and Stockholder shall bear its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Voting
Agreement as of the date first above written.
ILLINOVA CORPORATION
By: /s/ CHARLES E. BAYLESS
----------------------------------
Name: Charles E. Bayless
----------------------------------
Title: Chairman, President and CEO
----------------------------------
CHEVRON U.S.A. INC.
By: /s/ P.J. ROBERTSON
----------------------------------
Name: P.J. Robertson
----------------------------------
Title: Executive Vice President
----------------------------------
<PAGE> 9
SCHEDULE I
SHARES
Dynegy Common Stock 38,789,876
Dynegy Preferred Stock 7,815,363
9
<PAGE> 1
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT, dated as of June 14, 1999 (the
"Agreement"), is made by and among Energy Convergence Holding Company, an
Illinois corporation ("Newco"), Illinova Corporation, an Illinois corporation
("Illinova"), Dynegy Inc., a Delaware corporation ("Dynegy"), and Chevron U.S.A.
Inc., a Pennsylvania corporation (the "Shareholder").
WHEREAS, Shareholder owns a significant percentage of the outstanding
capital stock of Dynegy; and
WHEREAS, Newco, Illinova, Energy Convergence Acquisition Company, an
Illinois corporation ("ECAC"), Dynegy Acquisition Company, a Delaware
corporation ("DAC"), and Dynegy 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 DAC with and into Dynegy (the "Merger"),
pursuant to which shares of Newco's Class B Common Stock, no par value ("Class B
Shares"), shall be issued to Shareholder in exchange for its shares of Dynegy
stock, subject to the terms and conditions of the Merger Agreement; and
WHEREAS, on the closing date of the Merger, Shareholder will purchase
additional shares of Newco Class B Shares pursuant to the terms of a
Subscription Agreement dated as of the date hereof (the "Subscription
Agreement") by and between Newco and the Shareholder; and
WHEREAS, as an inducement to Newco, Illinova and Dynegy to enter into
the Merger Agreement, Shareholder 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 Newco conducted by an
investment banking firm of national reputation selected by Newco and reasonably
acceptable to Shareholder. 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 Newco's Board of Directors or a committee thereof or (ii) any
recapitalization, combination, reverse merger or other similar transaction.
<PAGE> 2
"Blocking Event" shall occur if either (a) all of the directors elected
to Newco'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 Newco'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 Newco's Board of
Directors and the executive officers of Newco or any Subsidiary of Newco).
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 Newco'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 Newco's Class A Common Stock, no
par value.
"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 (1) and (2) thereof) of the Bylaws of Newco.
"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 Shareholder is a "subsidiary
company" as defined in PUHCA.
"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.
2
<PAGE> 3
"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 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 Shareholder or any
Affiliate thereof to acquire all, but not less than all, of the outstanding
voting securities of Newco 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 Shareholder and Newco.
"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 Newco's Articles 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 Chevron Corporation).
"Voting Agreement" shall mean the Voting Agreement dated as of the date
hereof between Shareholder and Illinova.
"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
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all voting securities of Newco 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 Newco then outstanding.
ARTICLE II
AGREEMENTS RELATING TO PUHCA AND ICC CERTIFICATION
2.1 Covenants of Shareholder and Newco. Shareholder and Newco covenant
and agree that:
(a) Within 30 days after the date hereof, Shareholder will
file with the SEC a good faith application seeking exemption or
exclusion (under such provisions of PUHCA as Shareholder shall elect)
from the registration requirements of PUHCA that would otherwise apply
to Shareholder by virtue of Shareholder's acquisition of Newco Common
Shares pursuant to the Merger Agreement and the Subscription Agreement.
Shareholder will coordinate its efforts to secure an exemption from the
registration requirements of PUHCA with Illinova and Dynegy and provide
Illinova the opportunity to join said application.
(b) In the event that the SEC grants the PUHCA exemption
application under Section 2.1(a) hereof conditioned upon modifications
to Shareholder's ownership interests or minority shareholder protection
rights (including governance and voting rights) pertaining to Newco or
that the staff of the SEC's Division of Investment Management at a
level of Assistant Director or higher conditions its willingness to
support the issuance of a final order granting the PUHCA exemption
application upon the inclusion in Shareholder's exemption application
of representations or undertakings concerning Shareholder's intended
exercise of its rights, Shareholder will take such steps as may be
reasonably required to implement (not including registration under
PUHCA) such modifications or representations; provided, however, that
Shareholder shall not be required to make any such modification or
representation that would effect a material change in Shareholder's
ownership interest or minority shareholder protection rights (including
governance and voting rights) pertaining to Newco except as required
under Section 2.1(e) hereof, or affect Shareholder's ability to acquire
"foreign utility companies" under Section 33 of PUHCA.
(c) In the event that prior to Closing (as defined in the
Merger Agreement) (i) the SEC denies the PUHCA exemption application to
be made under Section 2.1(a) hereof or a "Staff Objection," as defined
in the Merger Agreement, is received, the parties will mutually explore
appropriate modifications to their agreements and the basis for a
renewed or amended exemption application that is likely to address any
Staff Objection and receive favorable action and will cooperate in
making such amended application; provided, however, that Shareholder
shall not be required to make any modification or to make any
representation or undertaking to the SEC that would effect a material
change in Shareholder's ownership interests in or minority shareholder
protection rights (including governance and voting rights) pertaining
to Newco, except as may be required under Section 2.1(e) hereof or
affect Shareholder's ability to acquire "foreign utility companies"
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under Section 33 of PUHCA. If the parties do not agree upon and
implement such modification to their agreements within 90 days, any
party hereto may terminate this Agreement by notice to the other
parties, which termination shall automatically terminate the Merger
Agreement, as provided in Section 9.3(f) thereof.
(d) In the event that after Closing (as defined in the Merger
Agreement), the SEC denies the PUHCA exemption application to be made
under Section 2.1(a) hereof or revokes or revises in a manner adverse
to Shareholder an exemption previously granted, and no action
Shareholder is required to take, or will agree to take, under this
Section 2.1 will enable Shareholder to obtain an exemption or to
restore the exemption previously granted, Newco shall have the sole
responsibility to take and will take the necessary actions to avoid
Shareholder 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 Shareholder to avoid the requirement that Shareholder
register as a holding company pursuant to PUHCA. In such instances,
Shareholder shall cooperate with Newco in its efforts to obtain
perfection of an exemption from the registration requirements of PUHCA
for Shareholder, but will not be required to take any action materially
affecting Shareholder's ownership interest or minority shareholder
protection rights (including governance and voting rights) pertaining
to Newco, or Shareholder's ability to acquire "foreign utility
companies" under Section 33 of PUHCA.
(e) Notwithstanding any other provision of this Section 2.1,
in the event that Shareholder acquires (other than through Newco) a
direct or indirect interest in any public utility company other than
Illinois Power Company or acquires voting stock in Newco in addition to
the stock to be acquired under the Merger Agreement and the
Subscription Agreement: (i) Newco shall not be required to undertake
any action to remedy the legal consequences under PUHCA of any such
acquisition, and (ii) Shareholder shall have the sole responsibility to
take (if it elects to do so) the necessary actions to avoid Shareholder
becoming a holding company required to register under PUHCA including,
without limitation, divestiture of the additional interests acquired by
Shareholder and modification of Shareholder's minority shareholder
protection rights (including governance and voting rights) in any of
Shareholder's direct or indirect interests in a public utility company.
(f) Newco 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 Newco or
Shareholder at risk or restrict Shareholder's ability to invest in or
acquire interests in "foreign utility companies" as defined by section
33(a)(3) of PUHCA.
(g) Newco agrees to obtain or cause to be obtained from the
ICC a certification under Section 33 of PUHCA which has the effect of
allowing Shareholder,
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any Parent, or any "subsidiary company" (as defined in PUHCA) of such
Parent to acquire and maintain an interest in the business of one or
more "foreign utility companies" as defined in Section 33 of PUHCA,
unless Illinova shall have provided evidence reasonably satisfactory to
Dynegy and Shareholder that such certification is unnecessary for
acquiring or maintaining such an interest.
(h) Newco, Illinova and Dynegy shall furnish such information
and provide such assistance, as Shareholder 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 Shareholder. Newco and
Shareholder covenant and agree that:
(a) Shareholder may freely acquire, or permit any Affiliate of
Shareholder to acquire, by purchase or otherwise, any securities of
Newco or become affiliated with any Person who owns securities of
Newco, so long as Shareholder and its Affiliates do not collectively
beneficially own (including any securities of other Persons with whom
Shareholder or its Affiliates are affiliated) securities representing
more than 40% of the total combined voting power of the outstanding
voting securities of Newco.
(b) From the date hereof until the first anniversary of the
Closing, Shareholder 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 Newco 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 Shareholder to
undertake any of such actions) any securities of Newco in excess of 40%
of the total combined voting power of the outstanding voting securities
of Newco; provided, however, that Shareholder 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 Shareholder) 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 Newco
representing 15% or more the total combined voting power of the
outstanding voting securities of Newco or (ii) exercise its preemptive
rights pursuant to Article VI hereof.
(c) From and after the first anniversary of the Closing,
Shareholder 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 Newco 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 Shareholder to
undertake any of such actions) any securities of Newco in excess of 40%
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of the total combined voting power of the outstanding voting securities
of Newco; provided, however, that Shareholder shall be entitled to make
a Qualified Offer in accordance with Section 3.1(d).
(d) (i) In connection with any Qualified Offer, Shareholder
shall deliver the Qualified Offer in writing to Newco. In the
event that Newco does not accept such offer in writing within
30 days after receipt, such offer shall be deemed withdrawn
and Shareholder shall elect for Newco to either: (A) conduct
an Auction in which Shareholder may participate but shall have
no special priority or other rights vis-a-vis other bidders,
or (B) conduct an Auction in which Shareholder shall not
participate but at the conclusion thereof Shareholder shall
have the right to acquire all of the outstanding voting
securities of Newco at a purchase price per share equal to
105% of the purchase price per share set forth in the bid
selected by Newco's Board of Directors and in such event,
Newco's Board of Directors shall approve promptly and in any
case within 10 days of Shareholder'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 Newco to
Shareholder) entering into a definitive agreement with
Shareholder for such a transaction containing customary terms
and conditions, and Newco shall, within 2 days of the approval
of its Board of Directors of such an agreement, execute and
deliver the same to Shareholder; such terms and conditions
shall include a termination fee of 5 percent of the aggregate
value of Newco as evidenced by the per share value payable by
Shareholder under the agreement and a right of Newco to
terminate the transaction and pay such termination fee to
Shareholder if Newco's Board of Directors determines that it
is necessary for Newco to so terminate the agreement in order
for the Board to properly discharge its fiduciary duties. In
the event of any such termination by Newco, Shareholder may,
in its discretion, proceed with a tender or exchange offer for
all of the common stock of Newco which Shareholder 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 Newco
arising from such termination; Shareholder shall not be
obligated to 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 Newco receives the Qualified Offer and
the corresponding sale shall close within 60 days
after completion of the Auction.
(B) If Newco 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 Newco receives a Qualified Offer,
Shareholder 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
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thereafter, or (II) reinitiate the process by
submitting a new Qualified Offer.
(C) In the event that Shareholder 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, Shareholder 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) Newco and Shareholder agree that the
purchase price set forth in a Qualified Offer is
highly confidential and, as such, Newco and
Shareholder (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 Shareholder may
receive solely cash for its Class B Shares.
(F) In any Auction, Newco may be a bidder.
3.2 Transfer Restrictions. Newco and Shareholder covenant and agree
that commencing upon the Closing and for a period of one year thereafter (the
"Restricted Period"), Shareholder 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, Shareholder 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.
(a) Widely Disbursed Public Sale. Following the Restricted
Period, Shareholder may Transfer any Class B Shares in one or more
Widely Disbursed Public Sales.
(b) Other Transfers. Following the Restricted Period,
Shareholder may Transfer part or all of its Class B Shares in
accordance with this Section 3.2(b) and Newco shall first be given the
opportunity, in the following manner, to purchase (or cause a Person or
group designated by Newco (a "Newco 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 Shareholder is
not in receipt of a Third Party Offer, Shareholder desires to
Transfer some or all of the Class B Shares other than pursuant
to a Widely Disbursed Public Sale, Shareholder shall deliver a
written
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notice (the "Offer Notice") to Newco of such intention and
stating the number of Class B Shares that Shareholder proposes
to Transfer and the cash purchase price per share for such
Transfer. Newco (or a Newco 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 Newco
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 Newco (or a Newco Designee) does not
provide Shareholder written notice of its election to
purchase within thirty (30) days from receipt of the
Offer Notice, Shareholder 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 Shareholder delivers
the Offer Notice.
(B) If Newco 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 Shareholder delivers
the Offer Notice at a time and place reasonably
specified by Newco (or a Newco Designee). At the
closing, Newco (or a Newco Designee) shall deliver to
Shareholder 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
Shareholder (and its Affiliates) shall deliver to
Newco (or a Newco 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 Newco, free and clear of
liens, claims or other encumbrances of any nature.
If, for any reason other than a delay caused by
Shareholder, Newco (or a Newco Designee) fails to
complete the purchase of the Class B Shares in
accordance with this clause within 180 days after
Shareholder delivers the Offer Notice, then
Shareholder (and its Affiliates) may, but is not
obligated to, Transfer the Class B Shares at such
price as it shall deem appropriate, provided that
Shareholder shall complete such Transfer within 180
days thereafter. Shareholder and Newco expressly
agree that, with respect to the first failure of
Newco to complete the purchase of the Class B Shares
as required by this clause (B), Shareholder shall
have no remedies other than (1) the rights set forth
in the immediately preceding sentence and (2) a right
to recover from Newco on demand Shareholder's
reasonable out of pocket expenses related to the
proposed sale; provided, however that such limitation
on Shareholder's remedies shall only be applicable if
Newco 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.
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(ii) Transfer Pursuant to a Third Party Offer. At any time
Shareholder receives and desires to accept an unsolicited Third Party
Offer, Shareholder shall deliver a written notice (the "Third Party
Offer Notice") to Newco of such intention and stating the identity of
the Third Party Offeror, the number of Class B Shares that Shareholder
proposes to Transfer and the purchase price per share for such
Transfer. Following, receipt of the Third Party Offer Notice, Newco'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 Shareholder 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 Newco advises Shareholder that the sale to the
Third Party Offeror is acceptable, then Shareholder may
proceed with the Transfer of Class B Shares in accordance with
the Third Party Offer Notice (or at a higher price).
(B) If Newco advises Shareholder that the sale to the
Third Party Offeror is not acceptable, then Shareholder shall
have the right to require Newco to purchase (or to designate a
Newco 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 Shareholder, Newco
(or a Newco Designee) fails to complete the purchase within
180 days from its receipt of the Third Party Offer Notice,
Shareholder 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 Shareholder shall
complete such Transfer within 180 days thereafter. Shareholder
and Newco expressly agree that, with respect to the first such
failure of Newco to complete the purchase of the Class B
Shares as required by this clause (B), Shareholder shall have
no remedies other than (1) the rights set forth in the
immediately preceding sentence and (2) a right to recover from
Newco on demand Shareholder's reasonable out of pocket
expenses related to the proposed sale; provided, however that
such limitation on Shareholder's remedies shall only be
applicable if Newco 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.
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3.4 Additional Shareholder Covenants. Shareholder shall not seek,
directly or indirectly, to place representatives on the Board of Directors of
Newco or seek the removal of any member of the Board of Directors of Newco
except pursuant to the terms of the Class B Shares set forth in the Articles of
Incorporation of Newco.
3.5 Shares Subject to the Agreement. Except as otherwise provided for
herein, all Class B Shares now or hereafter owned by Shareholder 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 Newco's Articles 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, Shareholder 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 Shareholder Agreement between and among Newco
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 Newco;
and
(b) to the entry of a stop transfer order with the transfer
agent or agents of Newco securities against the transfer of Class B
Shares except in compliance with the requirements of this Agreement,
or, if Newco is its own transfer agent with respect to any Class B
Shares, to the refusal by Newco to transfer any such securities except
in compliance with the requirements of this Agreement.
ARTICLE IV
NEWCO'S BUYOUT RIGHTS
4.1 Buyout Rights. Subject to the limitations hereinafter set forth,
upon the occurrence of a Buyout Event, Shareholder's blocking rights under this
Agreement with respect to a Covered Transaction and pursuant to Article III,
Section 7 of Newco's Bylaws shall, subject to reinstatement under clause
(a)(iii) hereunder, terminate and Shareholder may, 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), Shareholder,
at its option shall either:
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(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, Shareholder shall deliver
written notice to Newco 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 Shareholder's notice,
Newco's board of directors delivers written notice to Shareholder that
a proposed buyer or terms are not acceptable, in its sole discretion,
then Shareholder shall have the right to require Newco 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
Shareholder 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
Shareholder, Newco (or any acceptable buyer appointed by Newco) fails
to purchase the Class B Shares within 180 days after the date of the
Buyout Event, then Shareholder (and its Affiliates) shall be free to
Transfer the Class B Shares at such price as it shall deem appropriate,
provided that Shareholder shall complete such Transfer within 180 days
thereafter, provided, that if Shareholder 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 Shareholder's blocking
rights under Article III, Section 7 of Newco's Bylaws shall thereupon
be reinstated. Shareholder and Newco expressly agree that, with respect
to the first failure of Newco to complete the purchase of the Class B
Shares as required by this clause (iii), Shareholder shall have no
remedies other than (1) the rights set forth in the immediately
preceding sentence and (2) a right to recover from Newco on demand
Shareholder's reasonable out of pocket expenses related to the proposed
sale; provided, however that such limitation on Shareholder's remedies
shall only be applicable if Newco 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 Newco, 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 Newco's Bylaws.
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ARTICLE V
CERTAIN AGREEMENTS RELATING TO
THE MERGER AGREEMENT AND NEWCO
5.1 Determination of Satisfaction of Certain Conditions. The parties
hereto covenant and agree that any determination by Dynegy that the conditions
to the closing of the Merger Agreement specified in Sections 9.1(h) or 9.3(e),
(f) or (g) of the Merger Agreement are satisfied shall not be deemed to be
effective unless such determination shall also be approved in writing by
Shareholder.
5.2 Sales of Class B Common Stock. Newco covenants and agrees that it
shall not issue or agree to issue to any Person other than Shareholder 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 Shareholder.
5.3 Restraints on Shareholders Ownership. Newco covenants and agrees
that its shall not adopt a shareholder rights plan, "poison pill" or similar
device that prevents Shareholder from exercising its rights under Section 3.1(c)
or Article IV.
5.4 Nuclear Facility. Newco covenants and agrees that, from and after
the Closing, it shall not acquire, own or operate (and shall prevent any
subsidiary or joint venture to which it is a party from acquiring, owning or
operating) a facility licensed by the Nuclear Regulatory Commission (a "Nuclear
Facility"). This restriction shall not prohibit Newco and its subsidiaries from
owning up to 10% of the equity securities of any publicly-traded company that
owns or operates a Nuclear Facility.
5.5 Representatives on Newco's Board of Directors. Dynegy covenants and
agrees that it shall cause the three directors nominated by Shareholder to be
appointed to Newco's Board of Directors pursuant to Section 3.3(c)(i) of the
Merger Agreement.
ARTICLE VI
PREEMPTIVE RIGHTS
6.1 Employee Benefit Plans. In the event that Newco 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 Newco shall
notify Shareholder in writing of all such issuances. Within 30 days after the
receipt of such notification, Shareholder may notify Newco of its intent to
purchase its "proportionate share" of such securities, in which event Newco
shall issue such equity securities to Shareholder in exchange for the purchase
price. Notwithstanding the foregoing, in the event that Newco is subject to a
stock split, reverse split, merger, share exchange or other transaction in which
the rights of Shareholder 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 Shareholder to elect to
purchase equity securities and participate in such transaction.
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6.2 Other Issuances. In the event that Newco issues any equity
securities other than as described in Section 6.1 hereof, promptly, but in all
events within 30 days following each such issuance, Newco shall notify
Shareholder in writing of such issuance. Within 30 days after the receipt of
such notification, Shareholder may notify Newco in writing of its intent to
purchase its proportionate share of such securities, in which event Newco shall
issue such equity securities to Shareholder in exchange for the purchase price.
6.3 Intended Issuances. Notwithstanding the provisions of Section 6.2,
in order to enable Newco to efficiently structure financings and other
securities issuances, to the extent that Newco notifies Shareholder in writing
of the material terms of an intended issuance of any equity securities, as
promptly as practicable thereafter Shareholder shall notify Newco in writing of
its election to purchase its proportionate share of such securities, in which
case Newco shall issue such equity securities to Shareholder 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, Newco shall
promptly give Shareholder written notice thereof, and as promptly as practicable
thereafter Shareholder 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 Newco'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
Hart-Scott-Rodino 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 Board of Directors
of Newco.
6.5 Proportionate Share. For purposes of the issuance of securities to
Shareholder pursuant to this Article VI, Shareholder's "proportionate share"
shall be that number of shares or interests which preserves Shareholder's
proportionate interest in the equity value of Newco at the same level as prior
to the issuance that triggered Shareholder's rights.
6.6 Nature of Securities. To the extent that Shareholder is entitled to
purchase Class A Common Shares pursuant to this Article VI, it instead shall be
issued Class B Common Shares on a one-for-one basis. To the extent that
Shareholder is entitled to purchase any other voting securities, Newco and
Shareholder 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. Shareholder
shall have no preemptive rights with respect to securities that do not
participate in the earnings of Newco or, absent a payment or other default, in
the election of directors of Newco.
6.7 Presumption. In order to facilitate future reviews of the books and
records of Newco, there shall be an irrefutable presumption that this Article VI
has been fully complied with by Newco: (a) absent a filing by Shareholder 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
14
<PAGE> 15
issuances during such year, and (b) absent the institution of litigation against
Newco by Shareholder 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 Shareholder and its Affiliates
own less than 10% of the total combined voting power of all voting
securities of Newco; 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 Shareholder and its Affiliates cease to own
at least 15% of the total combined voting power of all voting
securities of Newco.
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 Newco representing such Class B Shares may be
surrendered to Newco 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 Shareholder as soon as practicable and the stop transfer
order provided for in Section 3.7 shall be rescinded immediately.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Intent and Interpretation. Each of parties hereto stipulates and
acknowledges that Newco has made, prior to the date hereof, a careful evaluation
of Shareholder, its investment objectives with regard to the Class B Shares and
its lack of intent to obtain control of Newco by its acquisition thereof, and
the compatibility of such objectives with the objectives of Newco; that such
factors were critical to Newco in the decision to consummate the Merger and
thereby issue a large block of voting securities to Shareholder; that, absent
the restrictions in this Agreement, ownership of the Class B Shares would
present an unusual opportunity for Shareholder to gain effective control of
Newco; that Newco might have reached a different decision with regard to the
Merger and the resulting issuance of the Class B Shares to a group of
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<PAGE> 16
related persons had such persons been other than Shareholder; therefore, that
the restrictions set forth in this Agreement are a material part of the
consideration received by Newco 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 Shareholder 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 Newco. Shareholder
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, Shareholder and Newco 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 Newco. 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.
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):
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<PAGE> 17
If to Newco, Dynegy or Illinova:
Energy Convergence Holding Company
1000 Louisiana, Suite 5800
Houston, Texas 77002
Attention: President
Telecopy: (713) 507-6808
with copies (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana; Suite 1900 South
Houston, Texas 77002
Attention: Robert B. Allen
Telecopy (713) 236-0822
If to Shareholder:
Chevron U.S.A. Inc.
1301 McKinney
Houston, TX 77010
Attention: President
Telecopy: (713) 754-5777
with a copy to:
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Attention: General Counsel
Telecopy: (415) 894-6017
and to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street, Suite 1675
San Francisco, CA 94104
Attention: Terry M. Kee, Esq.
and Rodney R. Peck, Esq.
Telecopy: (415) 983-1200
or to such other address as such party shall have designated by notice so given
to each other party.
17
<PAGE> 18
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 Articles of Incorporation and Bylaws of Newco)
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 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 other than to the extent this Agreement pertains to
the internal affairs of an Illinois corporation, in which event, and only with
respect to such event, the Illinois Business Corporation Act shall apply.
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.
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<PAGE> 19
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. Shareholder shall not assign this
Agreement without the written consent of Newco, except to an Affiliate of
Shareholder as contemplated herein; Newco may assign this Agreement only to any
successor to substantially all of its business as a result of a merger,
consolidation or sale by Newco. 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.
8.16 Certain Agreements Relating to Newco's Articles of Incorporation.
In the event that the Illinois Secretary of State will not allow the provisions
of Article 7, Paragraph 2 of the Newco Articles of Incorporation as heretofore
agreed to by the parties to be included in the Articles, such provisions shall
be deemed to be incorporated by reference into this Agreement and shall be fully
binding upon Newco unless waived in writing by Shareholder.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly and validly executed
this Shareholder Agreement as of the day and year first above written.
ENERGY CONVERGENCE HOLDING COMPANY
By: /s/ Charles E. Bayless
---------------------------
Name: Charles E. Bayless
---------------------------
Title: President
---------------------------
CHEVRON U.S.A. INC.
By: /s/ P.J. Robertson
---------------------------
Name: P.J. Robertson
---------------------------
Title: Executive Vice President
---------------------------
ILLINOVA CORPORATION
By: /s/ Charles E. Bayless
---------------------------
Name: Charles E. Bayless
---------------------------
Title: Chairman, President and CEO
---------------------------
DYNEGY INC.
By: /s/ C. L. Watson
---------------------------
Name: C.L. Watson
---------------------------
Title: Chairman and
Chief Executive Officer
---------------------------
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of June
14, 1999, is by and among Energy Convergence Holding Company, an Illinois
corporation (the "Company"), British Gas Atlantic Holdings BV, a Netherlands
corporation ("BG"), and NOVA Gas Services (U.S.) Inc., a Delaware corporation
("NOVA"). BG and NOVA may hereinafter be referred to collectively as
"Stockholders."
WHEREAS, pursuant to the Merger Agreement (the "Merger Agreement")
dated as of the date hereof among Illinova Corporation, an Illinois corporation,
the Company, Dynegy Acquisition Company, a Delaware corporation, Energy
Convergence Acquisition Company, an Illinois corporation, and Dynegy Inc., a
Delaware corporation ("Dynegy"), NOVA will receive, at the Effective Time (as
such term is defined in the Merger Agreement), shares of Series A Convertible
Preferred Stock, no par value per share, of the Company (the "Preferred Stock");
WHEREAS, pursuant to the Stock Purchase Agreement (the "Stock Purchase
Agreement") as of the date hereof, between the Company and BG, BG will receive
shares of Preferred Stock; and
WHEREAS, in connection with the Merger Agreement and the Stock Purchase
Agreement, the Company has agreed to grant to each Stockholder certain
registration rights set forth below.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Stockholder and the Company, the parties hereto agree as
follows:
SECTION 1.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS.
The following capitalized terms shall have the meanings ascribed to
them in this Section 1.1:
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"Agreement" shall have the meaning set forth in the preamble hereto.
"BG" shall have the meaning set forth in the preamble hereto.
"Chevron Agreement" is defined in Section 11.2.
"BG Holder" means BG and each transferee of Registrable Stock directly
or indirectly (in a chain of title) from BG to whom the right to cause one or
more demand registrations under
<PAGE> 2
Section 2.1 has been expressly assigned in writing directly or indirectly (in a
chain of title) from BG.
"Class B Common Stock" shall mean the Class B common stock of the
Company, no par value per share.
"Common Stock" shall mean the Class A common stock of the Company, no
par value per share.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Registration" is defined in Section 3.1.
"Dynegy" shall have the meaning set forth in the recitals hereto.
"Effective Time" shall have the meaning set forth in the Merger
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holders" shall mean the BG Holders and the NOVA Holders.
"Indemnified Party" shall have the meaning set forth in Section 7.3.
"Indemnifying Party" shall have the meaning set forth in Section 7.3.
"Initial Date" shall mean the date which is 270 days after the
Effective Time.
"Inspectors" shall have the meaning set forth in Section 4.1(l).
"Loss" or "Losses" shall have the meaning set forth in Section 7.1.
"Merger Agreement" shall have the meaning set forth in the recitals
hereto.
"NOVA" shall have the meaning set forth in the preamble hereto.
"NOVA Holder" means NOVA and each transferee of Registrable Stock
directly or indirectly (in a chain of title) from NOVA to whom the right to
cause one or more demand registrations under Section 2.1 has been expressly
assigned in writing directly or indirectly (in a chain of title) from NOVA.
"person" shall mean any business entity (including, without limitation,
a corporation, partnership (limited or general), limited liability company or
business trust) or a natural person.
"Preferred Stock" shall have the meaning set forth in the recitals
hereto.
"Prospectus" shall have the meaning set forth in Section 7.1.
"register" "registered" and "registration" and words of similar import
refer to a registration effected by preparing and filing with the SEC a
registration statement in compliance
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<PAGE> 3
with the Securities Act, and the declaration and ordering by the SEC of
effectiveness of such registration statement or document.
"Registrable Common Stock" shall mean any Common Stock held by any
Stockholder or its permitted assigns as of the Effective Time, and any
securities issued or issuable in respect of any Registrable Common Stock by way
of any stock split or stock dividend or in connection with any combination of
shares, recapitalization, merger, consolidation, reorganization or otherwise.
"Registrable Preferred Stock" shall mean any Preferred Stock held by
any Stockholder or its permitted assigns as of the Effective Time, and any
securities issued or issuable in respect of any Registrable Preferred Stock by
way of any stock split or stock dividend or in connection with any combination
of shares, recapitalization, merger, consolidation, reorganization or otherwise.
"Registrable Stock" shall mean, collectively, the Registrable Common
Stock and the Registrable Preferred Stock.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholders" shall have the meaning set forth in the preamble hereto.
1.2 OTHER DEFINITIONS.
Other capitalized terms used herein but not defined in Section 1.1
shall have the respective meanings ascribed to them throughout this Agreement.
SECTION 2.
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION RIGHTS.
(a) After the Initial Date, upon receipt of a written request
from a BG Holder or a NOVA Holder to register under the Securities Act (whether
for purposes of a public offering, an exchange offer or otherwise) all or part
of the Registrable Stock held by such BG Holder or NOVA Holder, as the case may
be, the Company shall as expeditiously as reasonably possible (but in any event
not later than forty-five (45) days after receipt of such request) prepare and
file, and use its best efforts to cause to become effective as soon thereafter
as practicable, a registration statement under the Securities Act to effect the
offering of such Registrable Stock in the manner specified in such request.
(b) The BG Holder or the NOVA Holder, as the case may be,
shall be entitled to select and retain one or more investment bankers or
managers reasonably acceptable to the Company in connection with any
underwritten offerings made pursuant to this Section 2.1.
(c) Subject to the terms and conditions set forth in Section
2.2, any BG Holder or NOVA Holder may request the Company to register
Registrable Stock under the Securities Act pursuant to this Section 2.1 at any
time and from time to time; provided, however,
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<PAGE> 4
that the Holders may not request the Company to register Registrable Stock
pursuant to this Section 2.1 more than once in any 180-day period.
2.2 TERMS AND CONDITIONS OF DEMAND REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein,
the registration rights granted to the BG Holders and the NOVA Holders in
Section 2.1 are expressly subject to the following terms and conditions:
(a) The BG Holders and the NOVA Holders, collectively, shall
only be entitled (i) to four requests to register Registrable Stock under the
terms of Section 2.1, and (ii) to commence requests after the Initial Date. A
"request" as it is used in this Section 2.2(a) shall be deemed to have occurred
only upon completion of a requested registration and the subsequent sale of
Registrable Stock.
(b) In no event shall the Registrable Stock to be offered
under a registration statement prepared and filed pursuant to Section 2.1
constitute less than (i) two percent (2%) of the then outstanding shares of
Common Stock (treating the Class B Common Stock and the Registrable Preferred
Stock as if they had been converted for purposes of this calculation), or (ii)
if the number of shares of Registrable Stock constitutes less than two percent
(2%) of the then outstanding shares of Common Stock (treating the Class B Common
Stock and the Registrable Preferred Stock as if they had been converted for
purposes of this calculation), then all of such Stockholder's remaining shares
of Registrable Stock. For purposes of meeting the two percent (2%) threshold in
(i) above, the BG Holders and the NOVA Holders may aggregate their shares of
Registrable Stock to be included therein.
(c) If at any time or from time to time a Holder shall request
registration of any of its Registrable Stock in accordance with Section 2.1, the
Company shall give the other Holders prompt written notice of the proposed
registration and shall include in such registration on the same terms and
conditions as the other Registrable Stock included in such registration such
number of shares of Registrable Stock as the other Holders shall request within
five (5) business days after the giving of such notice. If the managing
underwriter or underwriters of a proposed offering for which securities of more
than one Holder are included pursuant to this Section 2.2(c) advise the Company
in writing that in its or their good faith judgment the total amount of
securities to be included in such offering is sufficiently large to jeopardize
the success of such offering, then in such event the securities to be included
in such offering shall be allocated pro rata among each Holder participating in
the offering based upon the number of shares of Registrable Common Stock
requested to be included in such registration by each such Holder.
(d) The Company shall be entitled to defer for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise required to be prepared and filed by it under
Section 2.1 if the Company notifies the BG Holder or the NOVA Holder, as the
case may be, within five (5) business days after such BG Holder or NOVA Holder
requested the registration under Section 2.1, that the Company (i) is at such
time conducting or about to conduct an underwritten public offering of its
securities for its own account and the Board of Directors of the Company
determines in good faith that such offering would be
4
<PAGE> 5
materially adversely affected by such registration requested by the BG Holders
or the NOVA Holders or (ii) would, in the opinion of its counsel, be required to
disclose in such registration statement information not otherwise then required
by law to be publicly disclosed and, in the good faith judgment of the Board of
Directors of the Company, such disclosure might adversely affect any material
business transaction or negotiation in which the Company is then engaged. If the
Company elects to defer the filing of a registration statement pursuant to this
Section 2.2(c), the BG Holder or the NOVA Holder, as the case may be, may
withdraw its request, in writing, during the time of such deferral and such
request shall not be counted toward the limit set forth in Section 2.2(a).
(e) Neither the BG Holders nor the NOVA Holders shall exercise
their rights pursuant to Section 2.1 during the 60-day period immediately
following the effective date of any registration statement filed by the Company
under the Securities Act (other than on Form S-8 or another similar form) in
respect of an offering or sale of Common Stock by or on behalf of the Company or
any other stockholder of the Company.
SECTION 3.
PIGGYBACK REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATION RIGHTS. If at any time or from time to time
the Company shall propose to register any Common Stock for public sale under the
Securities Act (for its own account or for the account of any stockholder) (a
"Company Registration"), the Company shall give each Stockholder prompt written
notice of the proposed registration and shall include in such registration on
the same terms and conditions as the other securities included in such
registration such number of shares of Registrable Common Stock as any
Stockholder shall request within five (5) business days after the giving of such
notice; provided, however, that the Company may at any time prior to the
effectiveness of any such registration statement, in its sole discretion and
without the consent of Stockholders, abandon the proposed offering in which a
Stockholder had requested to participate (provided that the Company gives each
Stockholder prompt notice of such decision); and provided further that any
Stockholder shall be entitled to withdraw any or all of its shares of
Registrable Common Stock to be included in a registration statement under this
Section 3.1 at any time prior to the date on which the registration statement
with respect to such shares of Registrable Common Stock is declared effective by
the SEC. The Company shall be entitled to select the investment bankers and/or
managers, if any, to be retained in connection with any registration referred to
in this Section 3.1, provided such investment bankers and/or managers are
reasonably acceptable to the Stockholder who holds a majority of the stock to be
included in the registration.
3.2 RESTRICTIONS ON PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein,
the registration rights granted to Stockholders in Section 3.1 are expressly
subject to the following terms and conditions:
(a) The Company shall not be obligated to include shares of
Registrable Common Stock in an offering as contemplated by Section 3.1 if the
Company is advised in writing by the managing underwriter or underwriters of
such offering (with a copy to each
5
<PAGE> 6
Stockholder), that the success of such offering would in its or their good faith
judgment be jeopardized by such inclusion (after consideration of all relevant
factors, including without limitation, the impact of any delay caused by
including such shares); provided, however, that the Company shall in any case be
obligated to include such number of shares of Registrable Common Stock in such
offering, if any, as such underwriter or underwriters shall determine will not
jeopardize the success of such offering.
(b) The Company shall not be obligated to include any shares
of Registrable Common Stock in any registration by the Company of any Common
Stock in connection with any merger, acquisition, exchange offer, or any other
business combination, including any transaction within the scope of Rule 145
promulgated pursuant to the Securities Act, subscription offer, dividend
reinvestment plan or stock option or other director or employee incentive or
benefit plan.
(c) The Company shall use all commercially reasonable efforts
to cause the managing underwriter or underwriters of a proposed underwritten
offering to permit the Registrable Common Stock requested to be included in a
registration of Common Stock, pursuant to this Section 3 to be included on the
same terms and conditions as any similar securities included therein.
Notwithstanding the foregoing, the Company shall not be required to include any
Stockholder's Registrable Common Stock in such offering unless such Stockholder
accepts the terms of the underwriting agreement between the Company and the
managing underwriter or underwriters and otherwise complies with the provisions
of Section 7 below. If the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their good
faith judgment the total amount of securities, including securities requested to
be included in a registration of Common Stock, pursuant to this Section 3 and
other similar securities, to be included in such offering is sufficiently large
to jeopardize the success of such offering, then in such event the securities to
be included in such offering shall be allocated first to the Company and then,
to the extent that any additional securities can, in the good faith judgment of
such managing underwriter or underwriters, be sold without creating any such
jeopardy to the success of such offering, pro rata among each Stockholder
participating in the offering based upon the number of shares of Registrable
Common Stock requested to be included in such registration by each such holder.
(d) In the event that some but less than all of a
Stockholder's shares of Registrable Common Stock are included in an offering
contemplated by a registration statement pursuant to this Section 3, such
Stockholder shall execute one or more "lockup" letters, in customary form,
setting forth an agreement by such Stockholder not to offer for sale, sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of Common Stock, or any securities convertible into or
exchangeable into or exercisable for any shares of Common Stock, for a period of
90 days from the date such offering commences; provided, however, that if the
period of any such "lockup" applicable to the Company with respect to any such
registration statement shall be less than ninety (90) days, then the period of
time applicable to each Stockholder shall be such lesser period of time.
6
<PAGE> 7
SECTION 4.
COVENANTS
4.1 COVENANTS OF THE COMPANY.
In connection with any offering of shares of Registrable Stock pursuant
to this Agreement, the Company shall:
(a) Prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 120
days, or such shorter period which will terminate when all Registrable Stock
covered by such registration statement has been sold or withdrawn at the request
of participating holders of Common Stock or Preferred Stock, as the case may be;
and cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(b) Furnish to each Stockholder and to each managing
underwriter, if any, (i) at least two (2) business days prior to filing with the
SEC, any registration statement covering shares of Registrable Stock, any
amendment or supplement thereto, and any prospectus used in connection
therewith, which documents will be subject to the reasonable review of such
Stockholders and such underwriter, and, with respect to a registration statement
prepared pursuant to Section 2.1, the Company shall not file any such documents
with the SEC to which any such Stockholder shall reasonably object; and (ii) a
copy of any and all transmittal letters or other correspondence with the SEC or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering of shares of Registrable Stock;
(c) Furnish to each Stockholder and each managing underwriter,
if any, such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein) and the prospectus included in such
registration statement (including each preliminary prospectus and prospectus
supplement) as such Stockholder or such underwriter may reasonably request in
order to facilitate the sale of the shares of Registrable Stock;
(d) After the filing of such registration statement, promptly
notify each Stockholder of any stop order issued or enforcement action initiated
or, to the knowledge of the Company, threatened to be issued by the SEC and
promptly take all reasonable actions to prevent the entry of such stop order or
to obtain its withdrawal if entered;
(e) Use its commercially reasonable efforts to qualify such
shares of Registrable Stock for offer and sale under the securities, "blue sky"
or similar laws of such jurisdictions (including any foreign country or any
political subdivision thereof in which shares of Common Stock are then listed)
as any Stockholder or any underwriter shall reasonably request and use its
commercially reasonable efforts to obtain all appropriate registrations, permits
and consents required in connection therewith, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation or to file a general consent to service of process in
any such jurisdiction;
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(f) Furnish to each managing underwriter, if any, an opinion
of counsel for the Company addressed to each of them, dated as of the date of
the closing of the offering of shares of Registrable Stock, and a "comfort"
letter or letters signed by the Company's independent public accountants, each
in reasonable and customary form and covering such matters of the type
customarily covered by opinions or comfort letters delivered by such parties in
underwritten public offerings, and use its commercially reasonable efforts to
have such opinions and comfort letters addressed to and delivered to each
Stockholder;
(g) Furnish certificates (unlegended in the case of
Registrable Common Stock) representing ownership of the shares of the
Registrable Stock being sold in such denominations as shall be requested by a
Stockholder or the managing underwriter, if any, provided such request is made
at least two (2) business days prior to the closing of the sale of such shares;
(h) Promptly inform each Stockholder (i) in the case of any
offering of shares of Registrable Stock in respect of which a registration
statement is filed under the Securities Act, of the date on which such
registration statement or any post-effective amendment thereto becomes effective
and, if applicable, of the date of filing a Rule 430A prospectus (and, in the
case of an offering abroad of shares of Registrable Stock, of the date when any
required filing under the securities and other laws of such foreign
jurisdictions shall have been made and when the offering may be commenced in
accordance with such laws) and (ii) of any request by the SEC, any securities
exchange, government agency, self-regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement or
preliminary prospectus or prospectus included therein or any offering memorandum
or other offering document relating to such offering;
(i) Subject to subparagraph (k) below, until the earlier of
(i) such time as all of the shares of Registrable Stock being offered have been
disposed of in accordance with the intended method of disposition by such
Stockholder set forth in the registration statement or other offering document
(and the expiration of any prospectus delivery requirements in connection
therewith) or (ii) the expiration of nine (9) months after such registration
statement or other offering document becomes effective (unless the offering is a
continuous offering of securities under Rule 415, in which case until the
earliest of the date the offering is completed and the second anniversary of
such effective date), keep effective and maintain any registration,
qualification or approval obtained in connection with the offering of the shares
of Registrable Stock, and amend or supplement the registration statement or
prospectus or other offering document used in connection therewith to the extent
necessary in order to comply with applicable securities laws;
(j) Use its commercially reasonable efforts to have the shares
of Registrable Common Stock listed on any domestic and foreign securities
exchanges on which the Common Stock is then listed;
(k) As promptly as practicable, notify each Stockholder at any
time when a prospectus relating to the sale of the shares of Registrable Stock
is required by law to be delivered in connection with sales by an underwriter or
dealer, of the occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter
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delivered to the purchasers of such shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, and as promptly as
practicable make available to each Stockholder and to each managing underwriter,
if any, any such supplement or amendment; in the event the Company shall give
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective as provided in Section 4.1(i) by the
number of days during the period from and including the date of the giving of
such notice to the date when the Company shall make available to each
Stockholder such supplemented or amended prospectus;
(l) Make available for inspection during the normal business
hours of the Company by any Stockholder, any underwriter participating in such
offering, and any attorney, accountant or other agent retained by any such
Stockholder or any such underwriter in connection with the sale of shares of
Registrable Stock (collectively, the "Inspectors"), all relevant financial and
other records, pertinent corporate documents and properties of the Company as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration statement and make available for consultation
and for analyst and other marketing calls such officers, accountants and
employees in connection therewith as shall reasonably be requested by the
Stockholders; provided, however, that (i) in connection with any such
inspection, any such Inspectors shall cooperate to the extent reasonably
practicable to minimize any disruption to the operation by the Company of its
business and (ii) any records, information or documents shall be kept
confidential by such Inspectors, unless (1) such records, information or
documents are in the public domain or otherwise publicly available or (2)
disclosure of such records, information or documents is required by a court or
administrative order or by applicable law (including, without limitation, the
Securities Act);
(m) Enter into and perform its obligations under usual and
customary agreements (including an underwriting agreement in usual and customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the sale of the Registrable Stock.
(n) Make "generally available to its security holders" (within
the meaning of Rule 158 of the Securities Act) an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of the 12-month period beginning with the first
day of the Company's first fiscal quarter commencing after the effective date of
the registration statement, which earnings statement shall cover said 12-month
period;
(o) If requested by the managing underwriter or underwriters
or Stockholder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters or any participating Holder, as the case may be, reasonably
requests to be included therein, including, without limitation, information with
respect to the number of shares of Registrable Stock being sold by Stockholder
to any underwriter or underwriters, the purchase price being paid therefor by
such underwriter or underwriters and with respect to any other terms of an
underwritten offering of the Registrable
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Common Stock to be sold in such offering, and promptly make all required filings
of such prospectus by supplement or post-effective amendment;
(p) As promptly as practicable after filing with the SEC of
any document which is incorporated by reference in a prospectus contained in a
registration statement, deliver a copy of such document to each Stockholder;
(q) If (i) as of the Effective Time a BG Holder holds an
interest in the Company which would be treated as a U.S. real property interest
(USRPI) under Section 897(c) of the Code if the Company were a U. S. real
property holding corporation as defined in Section 897(c)(2) of the Code, and
(ii) at the time of a registration under this Agreement, such BG Holder
reasonably requests a statement pursuant to Treas. Reg. Section 1.897-2(h) and
Treas. Reg. Section 1.897-2(g), certifying that ownership of Common Stock is not
a USRPI, then the Company shall use its commercially reasonable efforts to
provide such BG Holder with such statement, and such BG Holder shall be liable
for all expenses incurred by the Company in providing such statement (including,
without limitation, internal costs such as overhead and wages of employees
devoted to providing such statement);
(r) Not later than the effective date of the applicable
registration statement (or if later, the earliest business day thereafter on
which a CUSIP number is available), provide a CUSIP number for all Registrable
Common Stock and provide the applicable transfer agent with printed certificates
for the Registrable Common Stock which are in a form eligible for deposit with
The Depository Trust Company (if such Registrable Common Stock is then eligible
for such deposit);
(s) Cooperate with each seller of Registrable Common Stock and
each underwriter or agent, if any, participating in the disposition thereof and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers;
(t) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Common Stock covered by such registration
statement from and after a date not later than the effective date thereof; and
(u) Take all other steps necessary to effect the registration
of the Registrable Stock contemplated hereby.
4.2 COVENANT OF STOCKHOLDERS.
Each Stockholder agrees and covenants that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
4.1(k) hereof, such Stockholder will forthwith discontinue disposition of
Registrable Stock pursuant to the registration statement covering such
Registrable Stock until such Stockholder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4.1(k) hereof, and,
if so directed by the Company, such Stockholder will deliver to the Company all
copies, other than permanent file copies, then in such Stockholder's possession
of the most recent prospectus covering such Registrable Stock at the time of
receipt of such notice.
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SECTION 5.
RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS
The Company agrees:
(a) Not to effect any public sale or distribution of any
securities during the 90-day period commencing on the effective date of a
registration statement filed pursuant to Section 2.1, except in connection with
any merger, acquisition, exchange offer, or any other business combination,
including any transaction within the scope of Rule 145 promulgated pursuant to
the Securities Act, subscription offer, dividend reimbursement plan or stock
option or other director or employee incentive or benefit plan;
(b) That any agreement entered into after the date hereof
pursuant to which the Company grants registration rights with respect to the
Company's securities shall contain a provision under which holders of such
securities agree, to the extent not inconsistent with applicable laws, not to
effect any public sale or distribution of any such securities (excluding any
sale in accordance with Rule 144 under the Securities Act) during the period
commencing with the effective date of a registration statement pursuant to
Section 2.1 through the 90-day period beginning on the date that the
registration statement filed pursuant to Section 2.1 becomes effective.
SECTION 6.
EXPENSES
All expenses incurred in connection with the registration of
Registrable Stock, including, without limitation, all filing fees, escrow fees,
fees and expenses of compliance with securities or blue sky laws (including fees
and disbursements of the Company's counsel in connection with blue sky
qualifications of the Registrable Stock), rating agency fees, printing expenses,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, and fees and disbursements of counsel for the Company and the reasonable
fees and disbursements of a single counsel for selling Stockholders and the
Company's independent certified public accountants (including the expenses of
any special audit or "cold comfort" letters required by or incident to such
performance) directly attributable to the registration of securities, Securities
Act liability insurance (if the Company elects to obtain such insurance), and
the fees and expenses of any special experts or other persons retained by the
Company will be borne by the Company. The Company shall have no obligation to
pay and shall not pay any underwriting fees, discounts or commissions in
connection with any Registrable Stock registered pursuant to this Agreement or
any out-of-pocket expenses of the holders in connection therewith (except as
expressly contemplated by the preceding sentence).
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SECTION 7.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and hold harmless each Stockholder, its
officers, directors and agents, and will agree to indemnify and hold harmless
any underwriter of Registrable Stock, and each person, if any, who controls any
of the foregoing persons within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (individually, a "Loss" collectively,
"Losses") arising from or caused by (x) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Stock (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (y) any violation or alleged violation by
the Company of the Securities Act, any blue sky laws, securities laws or other
applicable laws of any state in which shares of Registrable Stock are offered
and relating to action or inaction required of the Company in connection with
such offering; and will reimburse each such person for any legal or other
out-of-pocket expenses reasonably incurred in connection with investigating, or
defending against, any such Loss (or any proceeding in respect thereof), subject
to the provisions of Section 7.3, except that the indemnification provided for
in this Section 7.1 shall not apply to Losses that are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Stockholder expressly for use therein. Notwithstanding the foregoing, the
Company shall not be liable in any such case to the extent that any such Loss
arises out of, or is based upon, an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i) a
Stockholder failed to send or deliver a copy of the prospectus included in the
relevant registration statement at the time it became effective (the
"Prospectus") with or prior to the delivery of written confirmation of the sale
of Registrable Stock to the person asserting such Loss or who purchased such
Registrable Stock which are the subject thereof if, in either case, such
delivery is required by the Securities Act and (ii) the Prospectus would have
corrected such untrue statement or omission or alleged untrue statement or
alleged omission; and the Company shall not be liable in any such case to the
extent that any such Loss arises out of, or is based upon, an untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in the Prospectus, if such untrue statement or alleged
untrue statement or omission or alleged omission is corrected in any amendment
or supplement to the Prospectus and if, having previously been furnished by or
on behalf of the Company with copies of the Prospectus as so amended or
supplemented, a Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to and concurrently with the sale of Registrable
Stock if such delivery is required by the Securities Act. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of each Stockholder or any other person indemnified hereunder and shall
survive the transfer of such securities by such Stockholder.
7.2 INDEMNIFICATION BY STOCKHOLDERS.
Each Stockholder, severally but not jointly, agrees to indemnify and
hold harmless the Company, its officers and directors, and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the
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same extent as the indemnity made pursuant to clause (x) of Section 7.1 above
from the Company to such Stockholder, but only with reference to information
furnished in writing by or on behalf of such Stockholder expressly for use in
any registration statement or prospectus relating to shares of Registrable
Stock, or any amendment or supplement thereto, or any preliminary prospectus.
7.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to Section 7.1 or 7.2, such person (the "Indemnified Party") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing, provided that the omission to so notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability it
may have under this Agreement or otherwise except to the extent of any loss,
damage, liability or expense arising from such omission. The Indemnifying Party,
upon the request of the Indemnified Party, shall retain counsel reasonably
satisfactory to such Indemnified Party to represent such Indemnified Party and
any others the Indemnifying Party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding. In any
such proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention, (ii) the Indemnifying Party
shall have failed to comply with its obligations under the preceding sentence or
(iii) the Indemnified Party shall have been advised by its counsel in writing
that actual or potential differing interests exist between the Indemnifying
Party and the Indemnified Party. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, which
consent shall not be unreasonably withheld. The Indemnifying Party shall not
agree to any settlement as the result of which any remedy or relief, other than
monetary damages for which the Indemnifying Party shall be fully responsible,
shall be applied to or against an Indemnified Party without the prior written
consent of such Indemnified Party.
7.4 CONTRIBUTION.
If the indemnification provided for in this Section 7.4 from the
Indemnifying Party is unavailable to an Indemnified Party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, liability or expenses in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set
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forth in Section 7.3, any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding. No party shall be
liable for contribution with respect to any action or claim settled without its
written consent, which consent shall not be unreasonably withheld.
Notwithstanding the provisions of this Section 7.4, no Stockholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Stock of such Stockholder was offered to
the public exceeds the amount of any damages which such Stockholder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission of alleged omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 7.4
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 8.
TERMINATION
This Agreement shall terminate with respect to any Stockholder upon the
first such instance as such Stockholder ceases to own at least one percent (1%)
of the outstanding Common Stock (treating the Class B Common Stock and the
Preferred Stock as if they had been converted into Common Stock in accordance
with its terms for the purposes of this calculation). For the purposes of this
Section 8, a Stockholder shall be deemed to own any and all Common Stock and
Preferred Stock owned by (i) such Stockholder and (ii) its Affiliates.
Notwithstanding the foregoing, the Company's and Stockholders' rights, duties
and obligations under Section 6 and Section 7 shall survive the termination of
this Agreement.
SECTION 9.
AVAILABLE INFORMATION
The Company shall take such reasonable action and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 and Rule 144A, or any successor
provisions.
SECTION 10.
ASSIGNMENT OF RIGHTS
10.1 ASSIGNMENT OF RIGHTS.
Subject to Section 10.2, the Registrable Stock and rights of any
Stockholder under this Agreement with respect to any Registrable Stock owned by
such Stockholder may be assigned to any person who acquires Registrable Stock
from a Stockholder, except that any person who acquires such Registrable Stock
(x) pursuant to a public offering registered under the Securities Act, or (y)
pursuant to a transfer made in accordance with Rule 144 under the Securities Act
(or any similar successor provision) may not assign rights hereunder with
respect to such Registrable Stock. Notwithstanding the foregoing, rights to
cause one or more demand registrations under Section 2.1 may only be assigned if
such rights are expressly assigned in writing from a BG
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Holder or a NOVA Holder. Any assignment of registration rights pursuant to this
Section 10.1 shall be effective upon receipt by the Company of written notice
from such assigning Stockholder (i) stating the name and address of any
assignee, (ii) describing the manner in which the assignee acquired Registrable
Stock from such Stockholder and (iii) identifying the Registrable Stock with
respect to which the rights under this Agreement are being assigned.
10.2 SCOPE OF ASSIGNMENT.
The rights of an assignee under Section 10.1 shall be the same rights
granted to the assigning Stockholder under this Agreement, except that in no
event shall the Company's obligations hereunder be increased due to any such
assignment. In connection with any such assignment, the term "Stockholder" as
used herein shall, where appropriate to assign the rights and obligations of the
assigning Stockholder hereunder to such assignee, be deemed to refer to the
assignee. After any such assignment, the assigning Stockholder shall retain its
rights under this Agreement with respect to all other Registrable Stock owned by
such Stockholder.
SECTION 11.
MISCELLANEOUS
11.1 TERMINATION OF OLD REGISTRATION RIGHTS AGREEMENT. BG and NOVA
acknowledge that, at the Effective Time, the Registration Rights Agreement dated
August 31, 1996 among NGC Corporation (former name of Dynegy), BG Holdings, Inc.
(a wholly owned subsidiary of BG) ("BGH"), NOVA and Chevron U.S.A., Inc.
("Chevron") is terminated with respect to BGH and NOVA, respectively, effective
upon consummation of the Merger provided for in the Merger Agreement.
11.2 BG/NOVA PRIORITY.
(a) Favored Nations. Except as herein provided, for a period
of three years from the Effective Time, the Company shall not provide
registration rights to any other party which, taken as a whole, are more
favorable than those provided to Stockholders hereunder, without also offering
to Stockholders such more favorable rights; provided, however, that the benefits
of this Section 11.2 shall not run to the Stockholders holding less than two
percent (2%) of the then outstanding shares of Common Stock (treating the Class
B Common Stock and the Preferred Stock as if they had been converted for
purposes of this calculation). The Company shall give Stockholders notice within
15 days after the execution of any agreement (including the terms thereof)
between the Company and a third party which triggers a right of Stockholders to
invoke the favored nations provision of this Section 11.2.
(b) For a period of twenty-four months after the Effective
Time:
(i) if NOVA or BG exercises a demand registration right
hereunder, then Chevron may participate in such registration
only through exercise of its piggyback registration rights,
subject to any underwriter cutback;
(ii) if Chevron exercises a demand registration right under
the Registration Rights Agreement dated as of the date hereof
among the Company and Chevron (the "Chevron Agreement") to
effect a disposition
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other than one intended to satisfy any regulatory
requirements, then NOVA and BG shall have the right to
participate on a "Pro-Rata Basis" in such demand
registration. For purposes of this subsection 11.2, "Pro-Rata
Basis" shall mean that each participant in such registration
shall be entitled to register an equal number of shares; and
(iii) in the event of a Company Registration, any Chevron
shares participating in such Company Registration shall be
subject to any underwriter's cutback prior to any cutback of
any BG or NOVA shares participating in such Company
Registration.
(c) Following twenty-four months after the Effective Time:
(i) if BG or NOVA exercises a demand registration right
hereunder or Chevron exercises such a right under the Chevron
Agreement (other than an exercise by Chevron to effect a
disposition intended to satisfy any regulatory requirement),
then each of BG, Chevron and NOVA shall be entitled to
participate in such registration on a Pro-Rata Basis; and
(ii) in the event of a Company Registration, each of the BG,
NOVA or Chevron shares participating in such Company
Registration shall be subject to any underwriter's cutback on
a Pro-Rata Basis.
11.3 PROVISION OF INFORMATION.
Each Stockholder shall, and shall cause its officers, directors,
employees and agents to complete and execute all such questionnaires as the
Company shall reasonably request in connection with any registration pursuant to
this Agreement.
11.4 INJUNCTIONS.
Irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with its specified terms or
were otherwise breached. Therefore, the parties hereto shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms of provisions hereof in any
court having jurisdiction, such remedy being in addition to any other remedy to
which they may be entitled at law or in equity.
11.5 SEVERABILITY.
If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms and provisions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term or
provision.
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11.6 FURTHER ASSURANCES.
Subject to the specific terms of this Agreement, each Stockholder and
the Company shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.
11.7 ENTIRE AGREEMENT; MODIFICATION.
This Agreement contains the entire understanding of the parties with
respect to the transactions contemplated hereby and supersedes all agreements
and understandings entered into prior to the execution hereof. This Agreement
may be modified only by a written instrument duly executed by or on behalf of
(i) the Company, (ii) BG, (iii) NOVA, and (iv) for 24 months after the Effective
Time, Chevron. No breach of any covenant, agreement, warranty or representation
shall be deemed waived unless expressly waived in writing by or on behalf of the
party who might assert such breach.
11.8 COUNTERPARTS.
For the convenience of the parties hereto, any number of counterparts
of this Agreement may be executed by the parties hereto, but all such
counterparts shall be deemed one and the same instrument.
11.9 NOTICES.
All notices, consents, requests, demands, and other communications
hereunder shall be in writing and shall be given by hand or by mail (return
receipt requested) or sent by overnight delivery service, cable, telegram, or
facsimile transmission to the parties at the address specified beside each
party's name on the signature pages hereto or at such other address as shall be
specified by the parties by like notice.
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth business day after posting, in the
case of notice so given by overnight delivery service, on the day after notice
is deposited with such service, and in the case of notice so given by cable,
telegram, facsimile transmission or, as the case may be, personal delivery, on
the date of actual delivery.
11.10 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ANY CHOICE
OF LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
11.11 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by and against the successors and permitted assigns of the
parties hereto.
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11.12 PARTIES IN INTEREST.
Except as otherwise specifically provided herein and for Chevron,
nothing in this Agreement expressed or implied is intended or shall be construed
to confer any right or benefit upon any person, firm or corporation other than
Stockholder and the Company and their respective successors and permitted
assigns.
11.13 SHARES SUBJECT TO THIS AGREEMENT; EFFECTIVE TIME.
This Agreement shall be effective at the Effective Time and will be
null and void and of no effect upon the termination of the Merger Agreement in
accordance with its terms.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 19
IN WITNESS WHEREOF, each Stockholder and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
ENERGY CONVERGENCE HOLDING COMPANY
By: /s/ Charles E. Bayless
-----------------------------------
Name: Charles E. Bayless
-----------------------------------
Title: President
-----------------------------------
Address: 1000 Louisiana, Suite 5800
Houston, TX 77002
BRITISH GAS ATLANTIC
HOLDINGS BV
By: /s/ L.M.O.C. de Preter
-----------------------------------
Name: L.M.O.C. de Preter
-----------------------------------
Title: Director
-----------------------------------
Address: 1100 Louisiana, Suite 2500
Houston, TX 77002
Telecopier: (713) 507-6808
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Alfred J. Ross, Jr.
Telecopy: (212) 848-7179
NOVA GAS SERVICES (U.S.) INC.
By: /s/ Jeffrey Lipton
-----------------------------------
Name: Jeffrey Lipton
-----------------------------------
Title: Director
-----------------------------------
Address: 400 Frankfort Road
Monoca, Pennsylvania 15061
Telecopier: (724) 770-5557
Attn: Ernest V. Dean
with copies to:
Jack S. Mustoe
Senior Vice President and General Counsel
<PAGE> 20
NOVA Chemicals Corporation
645 Seventh Avenue, S.W.
Calgary, Alberta CANADA T2P 4G8
Telecopier: (403) 750-4885
and:
Alan Talkington
Orrick Herrington & Sutcliffe
400 Sansome Street
San Francisco, CA 94111
Telecopier: (415) 773-5759
20
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of June
14, 1999, is by and among Energy Convergence Holding Company, an Illinois
corporation (the "Company"), and Chevron U.S.A. Inc., a Pennsylvania corporation
("Stockholder").
WHEREAS, pursuant to (i) the Merger Agreement (the "Merger Agreement")
dated the date hereof among Illinova Corporation, an Illinois corporation, the
Company, Dynegy Acquisition Corporation, a Delaware corporation, Energy
Convergence Acquisition Corporation, an Illinois corporation, and Dynegy Inc., a
Delaware corporation ("Dynegy"), and (ii) the Subscription Agreement dated the
date hereof between Company and Stockholder, Stockholder will receive at or
immediately after the Effective Time (as such term is defined in the Merger
Agreement), shares of Class B common stock, no par value per share (the "Class B
Common Stock"), of the Company; and
WHEREAS, in connection with the Merger Agreement, the Company has
agreed to grant to Stockholder certain registration rights set forth below.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Stockholder and the Company, the parties hereto agree as
follows:
SECTION 1.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS.
The following capitalized terms shall have the meanings ascribed to
them in this Section 1.1:
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"Agreement" shall have the meaning set forth in the preamble hereto.
"BGAH" means British Gas Atlantic Holdings BV, a Netherlands
corporation.
"BG/NOVA Agreement" is defined in Section 11.2.
"Class B Common Stock" shall have the meaning set forth in the recitals
hereto.
"Common Stock" shall mean the Class A common stock of the Company, no
par value per share.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Registration" is defined in Section 3.1.
"Dynegy" shall have the meaning set forth in the recitals hereto.
"Effective Time" shall have the meaning set forth in the Merger
Agreement.
<PAGE> 2
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holder" shall mean Stockholder and each transferee of Registrable
Common Stock directly or indirectly (in a chain of title) from Stockholder to
whom the right to cause one or more demand registrations under Section 2.1 has
been expressly assigned in writing directly or indirectly (in a chain of title)
from Stockholder.
"Indemnified Party" shall have the meaning set forth in Section 7.3.
"Indemnifying Party" shall have the meaning set forth in Section 7.3.
"Initial Date" shall mean the date which is 270 days after the
Effective Time.
"Inspectors" shall have the meaning set forth in Section 4.1(l).
"Loss" or "Losses" shall have the meaning set forth in Section 7.1.
"Merger Agreement" shall have the meaning set forth in the recitals
hereto.
"NOVA" shall mean NOVA Gas Services (U.S.) Inc., a Delaware
corporation.
"person" shall mean any business entity (including, without limitation,
a corporation, partnership (limited or general), limited liability company or
business trust) or a natural person.
"Preferred Stock" shall mean the Series A Convertible Preferred Stock,
no par value per share, of the Company.
"Prospectus" shall have the meaning set forth in Section 7.1.
"register" "registered" and "registration" and words of similar import
refer to a registration effected by preparing and filing with the SEC a
registration statement in compliance with the Securities Act, and the
declaration and ordering by the SEC of effectiveness of such registration
statement or document.
"Registrable Common Stock" shall mean any Common Stock issuable upon
conversion of Class B Common Stock held or acquired by Stockholder (or its
permitted assigns) as of the Effective Time, and any securities issued or
issuable in respect of any such Registrable Common Stock by way of any stock
split or stock dividend or in connection with any combination of shares,
recapitalization, merger, consolidation, reorganization or otherwise.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholder" shall have the meaning set forth in the preamble hereto.
1.2 OTHER DEFINITIONS.
Other capitalized terms used herein but not defined in Section 1.1
shall have the respective meanings ascribed to them throughout this Agreement.
2
<PAGE> 3
SECTION 2.
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION RIGHTS.
(a) After the Initial Date, upon receipt of a written request
from a Holder to register under the Securities Act (whether for purposes of a
public offering, an exchange offer or otherwise) all or part of the Registrable
Common Stock held by such Holder, the Company shall as expeditiously as
reasonably possible (but in any event not later than forty-five (45) days after
receipt of such request) prepare and file, and use its best efforts to cause to
become effective as soon thereafter as practicable, a registration statement
under the Securities Act to effect the offering of such Registrable Common Stock
in the manner specified in such request.
(b) Holder shall be entitled to select and retain one or more
investment bankers or managers reasonably acceptable to the Company in
connection with any underwritten offerings made pursuant to this Section 2.1.
(c) Subject to the terms and conditions set forth in Section
2.2, Holder may request the Company to register Registrable Common Stock under
the Securities Act pursuant to this Section 2.1 at any time and from time to
time; provided, however, that a Holder may not request the Company to register
Registrable Common Stock pursuant to this Section 2.1 more than once in any
180-day period.
2.2 TERMS AND CONDITIONS OF DEMAND REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein,
the registration rights granted to the Holders in Section 2.1 are expressly
subject to the following terms and conditions:
(a) The Holders, collectively, shall only be entitled (i) to
eight (8) requests to register Registrable Common Stock under the terms of
Section 2.1, and (ii) to commence requests after the Initial Date. A "request"
as it is used in this Section 2.2(a) shall be deemed to have occurred only upon
completion of a requested registration and the subsequent sale of Registrable
Common Stock.
(b) In no event shall the Registrable Common Stock to be
offered under a registration statement prepared and filed pursuant to Section
2.1 constitute less than (i) five percent (5%) of the then outstanding shares of
Common Stock (treating the Class B Common Stock and the Preferred Stock as if it
had been converted into Common Stock in accordance with its terms for the
purposes of this calculation), or (ii) if the number of shares of Registrable
Common Stock constitutes less than five percent (5%) of the then outstanding
shares of Common Stock (treating the Class B Common Stock and the Preferred
Stock as if it had been converted into Common Stock in accordance with its terms
for the purposes of this calculation), then all of Stockholder's remaining
shares of Registrable Common Stock.
(c) The Company shall be entitled to defer for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise required to be prepared and filed by it under
Section 2.1 if the Company notifies the Holder, within five (5)
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<PAGE> 4
business days after such Holder requested the registration under Section 2.1
that the Company (i) is at such time conducting or about to conduct an
underwritten public offering of its securities for its own account and the Board
of Directors of the Company determines in good faith that such offering would be
materially adversely affected by such registration requested by the Holders or
(ii) would, in the opinion of its counsel, be required to disclose in such
registration statement information not otherwise then required by law to be
publicly disclosed and, in the good faith judgment of the Board of Directors of
the Company, such disclosure might adversely affect any material business
transaction or negotiation in which the Company is then engaged. If the Company
elects to defer the filing of a registration statement pursuant to this Section
2.2(c), the Holder may withdraw its request, in writing, during the time of such
deferral and such request shall not be counted toward the limit set forth in
Section 2.2(a).
(d) The Holders shall not exercise their rights pursuant to
Section 2.1 during the 60-day period immediately following the effective date of
any registration statement filed by the Company under the Securities Act (other
than on Form S-8 or another similar form) in respect of an offering or sale of
Common Stock of the Company by or on behalf of the Company or any other
stockholder of the Company.
SECTION 3.
PIGGYBACK REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATION RIGHTS. If at any time or from time to time
the Company shall propose to register any Common Stock for public sale under the
Securities Act (a "Company Registration"), the Company shall give Stockholder
prompt written notice of the proposed registration and shall include in such
registration on the same terms and conditions as the other securities included
in such registration such number of shares of Registrable Common Stock as
Stockholder shall request within five (5) business days after the giving of such
notice; provided, however, that the Company may at any time prior to the
effectiveness of any such registration statement, in its sole discretion and
without the consent of Stockholder, abandon the proposed offering in which
Stockholder had requested to participate (provided that the Company gives
Stockholder prompt notice of such decision); and provided further that
Stockholder shall be entitled to withdraw any or all of its shares of
Registrable Common Stock to be included in a registration statement under this
Section 3.1 at any time prior to the date on which the registration statement
with respect to such shares of Registrable Common Stock is declared effective by
the SEC. The Company shall be entitled to select the investment bankers and/or
managers, if any, to be retained in connection with any registration referred to
in this Section 3.1, provided such investment bankers and/or managers are
reasonably acceptable to Stockholder.
3.2 RESTRICTIONS ON PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein,
the registration rights granted to Stockholder in Section 3.1 are expressly
subject to the following terms and conditions:
(a) The Company shall not be obligated to include shares of
Registrable Common Stock in an offering as contemplated by Section 3.1 if the
Company is advised in writing by the managing underwriter or underwriters of
such offering (with a copy to Stockholder), that the success of such offering
would in its or their good faith judgment be jeopardized by such
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<PAGE> 5
inclusion (after consideration of all relevant factors, including without
limitation, the impact of any delay caused by including such shares); provided,
however, that the Company shall in any case be obligated to include such number
of shares of Registrable Common Stock in such offering, if any, as such
underwriter or underwriters shall determine will not jeopardize the success of
such offering.
(b) The Company shall not be obligated to include any shares
of Registrable Common Stock in any registration by the Company of any Common
Stock in connection with any merger, acquisition, exchange offer, or any other
business combination, including any transaction within the scope of Rule 145
promulgated pursuant to the Securities Act, subscription offer, dividend
reinvestment plan or stock option or other director or employee incentive or
benefit plan.
(c) The Company shall use all commercially reasonable efforts
to cause the managing underwriter or underwriters of a proposed underwritten
offering to permit the Registrable Common Stock requested to be included in a
registration of Common Stock pursuant to this Section 3 to be included on the
same terms and conditions as any similar securities included therein.
Notwithstanding the foregoing, the Company shall not be required to include
Stockholder's Registrable Common Stock in such offering unless Stockholder
accepts the terms of the underwriting agreement between the Company and the
managing underwriter or underwriters and otherwise complies with the provisions
of Section 8 below. If the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their good
faith judgment the total amount of securities, including securities requested to
be included in a registration of Common Stock pursuant to this Section 3 and
other similar securities, to be included in such offering is sufficiently large
to jeopardize the success of such offering, then in such event the securities to
be included in such offering shall be allocated first to the Company and then,
to the extent that any additional securities can, in the good faith judgment of
such managing underwriter or underwriters, be sold without creating any such
jeopardy to the success of such offering, to Stockholder based upon the number
of shares of Registrable Common Stock requested to be included in such
registration.
(d) In the event that some but less than all of Stockholder's
shares of Registrable Common Stock are included in an offering contemplated by a
registration statement pursuant to this Section 3, Stockholder shall execute one
or more "lockup" letters, in customary form, setting forth an agreement by
Stockholder not to offer for sale, sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
securities convertible into or exchangeable into or exercisable for any shares
of Common Stock, for a period of 90 days from the date such offering commences;
provided, however, that if the period of any such "lockup" applicable to the
Company with respect to any such registration statement shall be less than
ninety (90) days, then the period of time applicable to Stockholder shall be
such lesser period of time.
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<PAGE> 6
SECTION 4.
COVENANTS
4.1 COVENANTS OF THE COMPANY.
In connection with any offering of shares of Registrable Common Stock
pursuant to this Agreement, the Company shall:
(a) Prepare and file with the SEC such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 120
days, or such shorter period which will terminate when all Registrable Common
Stock covered by such registration statement has been sold or withdrawn at the
request of participating holders of Common Stock; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
(b) Furnish to Stockholder and to each managing underwriter,
if any, (i) at least two (2) business days prior to filing with the SEC, any
registration statement covering shares of Registrable Common Stock, any
amendment or supplement thereto, and any prospectus used in connection
therewith, which documents will be subject to the reasonable review of
Stockholder and such underwriter, and, with respect to a registration statement
prepared pursuant to Section 2.1, the Company shall not file any such documents
with the SEC to which Stockholder shall reasonably object; and (ii) a copy of
any and all transmittal letters or other correspondence with the SEC or any
other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering of shares of Registrable Common Stock;
(c) Furnish to Stockholder and each managing underwriter, if
any, such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein) and the prospectus included in such
registration statement (including each preliminary prospectus and prospectus
supplement) as Stockholder or such underwriter may reasonably request in order
to facilitate the sale of the shares of Registrable Common Stock;
(d) After the filing of such registration statement, promptly
notify Stockholder of any stop order issued or enforcement action initiated or,
to the knowledge of the Company, threatened to be issued by the SEC and promptly
take all reasonable actions to prevent the entry of such stop order or to obtain
its withdrawal if entered;
(e) Use its commercially reasonable efforts to qualify such
shares of Registrable Common Stock for offer and sale under the securities,
"blue sky" or similar laws of such jurisdictions (including any foreign country
or any political subdivision thereof in which shares of Common Stock are then
listed) as Stockholder or underwriter shall reasonably request and use its
commercially reasonable efforts to obtain all appropriate registrations, permits
and consents required in connection therewith, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation or to file a general consent to service of process in
any such jurisdiction;
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<PAGE> 7
(f) Furnish to each managing underwriter, if any, an opinion
of counsel for the Company addressed to each of them, dated as of the date of
the closing of the offering of shares of Registrable Common Stock, and a
"comfort" letter or letters signed by the Company's independent public
accountants, each in reasonable and customary form and covering such matters of
the type customarily covered by opinions or comfort letters delivered by such
parties in underwritten public offerings, and use its commercially reasonable
efforts to have such opinions and comfort letters addressed to and delivered to
Stockholder;
(g) Furnish unlegended certificates representing ownership of
the shares of Registrable Common Stock being sold in such denominations as shall
be requested by Stockholder or the managing underwriter, if any, provided such
request is made at least two (2) business days prior to the closing of the sale
of such shares;
(h) Promptly inform Stockholder (i) in the case of any
offering of shares of Registrable Common Stock in respect of which a
registration statement is filed under the Securities Act, of the date on which
such registration statement or any post-effective amendment thereto becomes
effective and, if applicable, of the date of filing a Rule 430A prospectus (and,
in the case of an offering abroad of shares of Registrable Common Stock, of the
date when any required filing under the securities and other laws of such
foreign jurisdictions shall have been made and when the offering may be
commenced in accordance with such laws) and (ii) of any request by the SEC, any
securities exchange, government agency, self-regulatory body or other body
having jurisdiction for any amendment of or supplement to any registration
statement or preliminary prospectus or prospectus included therein or any
offering memorandum or other offering document relating to such offering;
(i) Subject to subparagraph (k) below, until the earlier of
(i) such time as all of the shares of Registrable Common Stock being offered
have been disposed of in accordance with the intended method of disposition by
Stockholder set forth in the registration statement or other offering document
(and the expiration of any prospectus delivery requirements in connection
therewith) or (ii) the expiration of nine (9) months after such registration
statement or other offering document becomes effective (unless the offering is a
continuous offering of securities under Rule 415, in which case until the
earliest of the date the offering is completed and the second anniversary of
such effective date), keep effective and maintain any registration,
qualification or approval obtained in connection with the offering of the shares
of Registrable Common Stock, and amend or supplement the registration statement
or prospectus or other offering document used in connection therewith to the
extent necessary in order to comply with applicable securities laws;
(j) Use its commercially reasonable efforts to have the shares
of Registrable Common Stock listed on any domestic and foreign securities
exchanges on which the Common Stock is then listed;
(k) As promptly as practicable, notify Stockholder at any time
when a prospectus relating to the sale of the shares of Registrable Common Stock
is required by law to be delivered in connection with sales by an underwriter or
dealer, of the occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such shares, such prospectus will not contain an untrue statement
of a material
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<PAGE> 8
fact or omit to state any material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading, and as promptly as practicable make
available to Stockholder and to each managing underwriter, if any, any such
supplement or amendment; in the event the Company shall give such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective as provided in Section 4.1(i) by the number of days
during the period from and including the date of the giving of such notice to
the date when the Company shall make available to Stockholder such supplemented
or amended prospectus;
(l) Make available for inspection during the normal business
hours of the Company by Stockholder, any underwriter participating in such
offering, and any attorney, accountant or other agent retained by Stockholder or
any such underwriter in connection with the sale of shares of Registrable Common
Stock (collectively, the "Inspectors"), all relevant financial and other
records, pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration statement and make available for consultation
and for analyst and other marketing calls such officers, accountants and
employees in connection therewith as shall reasonably be requested by
Stockholder; provided, however, that (i) in connection with any such inspection,
any such Inspectors shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation by the Company of its business and (ii)
any records, information or documents shall be kept confidential by such
Inspectors, unless (1) such records, information or documents are in the public
domain or otherwise publicly available or (2) disclosure of such records,
information or documents is required by a court or administrative order or by
applicable law (including, without limitation, the Securities Act);
(m) Enter into and perform its obligations under usual and
customary agreements (including an underwriting agreement in usual and customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the sale of the Registrable Common Stock.
(n) Make "generally available to its security holders" (within
the meaning of Rule 158 of the Securities Act) an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of the 12-month period beginning with the first
day of the Company's first fiscal quarter commencing after the effective date of
the registration statement, which earnings statement shall cover said 12-month
period;
(o) If requested by the managing underwriter or underwriters
or Stockholder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters or any participating Holder reasonably requests to be included
therein, including, without limitation, information with respect to the number
of shares of Registrable Common Stock being sold by Stockholder to any
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of an
underwritten offering of the Registrable Common Stock to
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<PAGE> 9
be sold in such offering, and promptly make all required filings of such
prospectus by supplement or post-effective amendment;
(p) As promptly as practicable after filing with the SEC of
any document which is incorporated by reference in a prospectus contained in a
registration statement, deliver a copy of such document to Stockholder;
(q) Not later than the effective date of the applicable
registration statement (or if later, the earliest business day thereafter on
which a CUSIP number is available), provide a CUSIP number for all Registrable
Common Stock and provide the applicable transfer agent with printed certificates
for the Registrable Common Stock which are in a form eligible for deposit with
The Depository Trust Company (if such Registrable Common Stock is then eligible
for such deposit);
(r) Cooperate with each seller of Registrable Common Stock and
each underwriter or agent, if any, participating in the disposition thereof and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers;
(s) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Common Stock covered by such registration
statement from and after a date not later than the effective date thereof; and
(t) Take all other steps necessary to effect the registration
of the Registrable Common Stock contemplated hereby.
4.2 COVENANT OF STOCKHOLDER.
Stockholder agrees and covenants that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
4.1(k) hereof, Stockholder will forthwith discontinue disposition of Registrable
Common Stock pursuant to the registration statement covering such Registrable
Common Stock until Stockholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4.1(k) hereof, and, if so directed by
the Company, Stockholder will deliver to the Company all copies, other than
permanent file copies, then in Stockholder's possession of the most recent
prospectus covering such Registrable Common Stock at the time of receipt of such
notice.
SECTION 5.
RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS
The Company agrees:
(a) Not to effect any public sale or distribution of any
securities during the 90-day period commencing on the effective date of a
registration statement filed pursuant to Section 2.1, except in connection with
any merger, acquisition, exchange offer, or any other business combination,
including any transaction within the scope of Rule 145 promulgated pursuant to
the Securities Act, subscription offer, dividend reimbursement plan or stock
option or other director or employee incentive or benefit plan;
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<PAGE> 10
(b) That any agreement entered into after the date hereof
pursuant to which the Company grants registration rights with respect to the
Company's securities shall contain a provision under which holders of such
securities agree, to the extent not inconsistent with applicable laws, not to
effect any public sale or distribution of any such securities (excluding any
sale in accordance with Rule 144 under the Securities Act) during the period
commencing with the effective date of a registration statement pursuant to
Section 2.1 through the 90-day period beginning on the date that the
registration statement filed pursuant to Section 2.1 becomes effective.
SECTION 6.
EXPENSES
All expenses incurred in connection with the registration of
Registrable Common Stock, including, without limitation, all filing fees, escrow
fees, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of the Company's counsel in connection with
blue sky qualifications of the Registrable Common Stock), rating agency fees,
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed, and fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of a single counsel for Stockholder
and the Company's independent certified public accountants (including the
expenses of any special audit or "cold comfort" letters required by or incident
to such performance) directly attributable to the registration of securities,
Securities Act liability insurance (if the Company elects to obtain such
insurance), and the fees and expenses of any special experts or other persons
retained by the Company will be borne by the Company. The Company shall have no
obligation to pay and shall not pay any underwriting fees, discounts or
commissions in connection with any Registrable Common Stock registered pursuant
to this Agreement or any out-of-pocket expenses of the holders in connection
therewith (except as expressly contemplated by the preceding sentence).
SECTION 7.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and hold harmless Stockholder, its
officers, directors and agents, and will agree to indemnify and hold harmless
any underwriter of Registrable Common Stock, and each person, if any, who
controls any of the foregoing persons within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages and liabilities (individually, a "Loss"
collectively, "Losses") arising from or caused by (x) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Common Stock (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (y) any violation
or alleged violation by the
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Company of the Securities Act, any blue sky laws, securities laws or other
applicable laws of any state in which shares of Registrable Common Stock are
offered and relating to action or inaction required of the Company in connection
with such offering; and will reimburse each such person for any legal or other
out-of-pocket expenses reasonably incurred in connection with investigating, or
defending against, any such Loss (or any proceeding in respect thereof), subject
to the provisions of Section 7.3, except that the indemnification provided for
in this Section 7.1 shall not apply to Losses that are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon and in
conformity with information furnished in writing to the Company by or on behalf
of Stockholder expressly for use therein. Notwithstanding the foregoing, the
Company shall not be liable in any such case to the extent that any such Loss
arises out of, or is based upon, an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i)
Stockholder failed to send or deliver a copy of the prospectus included in the
relevant registration statement at the time it became effective (the
"Prospectus") with or prior to the delivery of written confirmation of the sale
of Registrable Common Stock to the person asserting such Loss or who purchased
such Registrable Common Stock which are the subject thereof if, in either case,
such delivery is required by the Securities Act and (ii) the Prospectus would
have corrected such untrue statement or omission or alleged untrue statement or
alleged omission; and the Company shall not be liable in any such case to the
extent that any such Loss arises out of, or is based upon, an untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in the Prospectus, if such untrue statement or alleged
untrue statement or omission or alleged omission is corrected in any amendment
or supplement to the Prospectus and if, having previously been furnished by or
on behalf of the Company with copies of the Prospectus as so amended or
supplemented, Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to and concurrently with the sale of Registrable
Common Stock if such delivery is required by the Securities Act. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of Stockholder or any other person indemnified hereunder and shall
survive the transfer of such securities by Stockholder.
7.2 INDEMNIFICATION BY STOCKHOLDER.
Stockholder agrees to indemnify and hold harmless the Company, its
officers and directors, and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the indemnity made pursuant to clause (x) of
Section 7.1 above from the Company to Stockholder, but only with reference to
information furnished in writing by or on behalf of Stockholder expressly for
use in any registration statement or prospectus relating to shares of
Registrable Common Stock, or any amendment or supplement thereto, or any
preliminary prospectus.
7.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to Section 7.1 or 7.2, such person (the "Indemnified Party") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing, provided that the omission to so notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability it
may have under this Agreement or otherwise except to the extent of any loss,
damage, liability or expense arising from such omission. The Indemnifying Party,
upon the request of the Indemnified Party,
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<PAGE> 12
shall retain counsel reasonably satisfactory to such Indemnified Party to
represent such Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention, (ii) the Indemnifying Party shall have failed to comply with its
obligations under the preceding sentence or (iii) the Indemnified Party shall
have been advised by its counsel in writing that actual or potential differing
interests exist between the Indemnifying Party and the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not agree to any settlement as the result
of which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be fully responsible, shall be applied to or against an
Indemnified Party without the prior written consent of such Indemnified Party.
7.4 CONTRIBUTION.
If the indemnification provided for in this Section 7.4 from the
Indemnifying Party is unavailable to an Indemnified Party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, liability or expenses in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. No party shall be liable for contribution with respect to any action
or claim settled without its written consent, which consent shall not be
unreasonably withheld.
Notwithstanding the provisions of this Section 7.4, Stockholder shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Common Stock of Stockholder was offered to
the public exceeds the amount of any damages which Stockholder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission of alleged omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 7.4 were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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SECTION 8.
TERMINATION
This Agreement shall terminate upon the first such instance as
Stockholder ceases to own at least one percent (1%) of the outstanding Common
Stock (treating the Class B Common Stock and the Preferred Stock as if it had
been converted into Common Stock in accordance with its terms for the purposes
of this calculation). For the purposes of this Section 8, Stockholder shall be
deemed to own any and all Common Stock owned by Stockholder and its Affiliates.
Notwithstanding the foregoing, the Company's and Stockholder's rights, duties
and obligations under Section 6 and Section 7 shall survive the termination of
this Agreement.
SECTION 9.
AVAILABLE INFORMATION
The Company shall take such reasonable action and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 and Rule 144A, or any successor
provisions.
SECTION 10.
ASSIGNMENT OF RIGHTS
10.1 ASSIGNMENT OF RIGHTS.
Subject to Section 10.2, the Registrable Common Stock and rights of
Stockholder under this Agreement with respect to any Registrable Common Stock
owned by Stockholder may be assigned to any person who acquires Registrable
Common Stock from Stockholder, except that any person who acquires such
Registrable Common Stock (x) pursuant to a public offering registered under the
Securities Act, or (y) pursuant to a transfer made in accordance with Rule 144
under the Securities Act (or any similar successor provision) may not assign
rights hereunder with respect to such Registrable Common Stock. Notwithstanding
the foregoing, rights to cause one or more demand registrations under Section
2.1 may only be assigned if such rights are expressly assigned in writing from a
Holder. Any assignment of registration rights pursuant to this Section 10.1
shall be effective upon receipt by the Company of written notice from
Stockholder (i) stating the name and address of any assignee, (ii) describing
the manner in which the assignee acquired Registrable Common Stock from
Stockholder and (iii) identifying the Registrable Common Stock with respect to
which the rights under this Agreement are being assigned.
10.2 SCOPE OF ASSIGNMENT.
The rights of an assignee under Section 10.1 shall be the same rights
granted to the Stockholder under this Agreement, except that in no event shall
the Company's obligations hereunder be increased due to any such assignment. In
connection with any such assignment, the term "Stockholder" as used herein
shall, where appropriate to assign the rights and obligations of the assigning
Stockholder hereunder to such assignee, be deemed to refer to the assignee.
After any such assignment, Stockholder shall retain its rights under this
Agreement with respect to all other Registrable Common Stock owned by
Stockholder.
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<PAGE> 14
SECTION 11.
MISCELLANEOUS
11.1 TERMINATION OF OLD REGISTRATION RIGHTS AGREEMENT. Stockholder
acknowledges that the Registration Rights Agreement dated August 31, 1996 among
NGC Corporation (former name of Dynegy), BG Holdings, Inc., NOVA, and
Stockholder is terminated with respect to it effective upon consummation of the
Merger provided for in the Merger Agreement.
11.2 BG/NOVA PRIORITY.
(a) Favored Nations. Except as herein provided, for a period
of three years from the Effective Time, the Company shall not provide
registration rights to any other party which, taken as a whole, are more
favorable than those provided to Stockholder hereunder, without also offering to
Stockholder such more favorable rights; provided, however, that the benefits of
this Section 11.2 shall not run to Stockholder if Stockholder holds less than
two percent (2%) of the then outstanding shares of Common Stock (treating the
Class B Common Stock and the Preferred Stock as if they had been converted for
purposes of this calculation). The Company shall give Stockholder notice within
15 days after the execution of any agreement (including the terms thereof)
between the Company and a third party which triggers a right of Stockholder to
invoke the favored nations provision of this Section 11.2.
(b) For a period of twenty-four months after the Effective
Time:
(i) if NOVA or BG exercises a demand
registration right under the Registration
Rights Agreement dated as of the date hereof
among the Company, BG Atlantic and NOVA (the
"BG/NOVA Agreement"), then Stockholder may
participate in such registration only
through exercise of its piggyback
registration rights hereunder, subject to
any underwriter cutback;
(ii) if Stockholder exercises a demand
registration right hereunder to effect a
disposition other than one intended to
satisfy any regulatory requirements, then
NOVA and BG shall have the right to
participate on a "Pro-Rata Basis" in such
demand registration. For purposes of this
subsection 11.2, "Pro-Rata Basis" shall mean
that each participant in such registration
shall be entitled to register an equal
number of shares; and
(iii) in the event of a Company Registration, any
Stockholder shares participating in such
Company Registration shall be subject to any
underwriter's cutback prior to any cutback
of any BG or NOVA shares participating in
such Company Registration.
(c) Following twenty-four months after the Effective Time:
(i) if Stockholder exercises a demand
registration right hereunder (other than any
exercise by Stockholder to effect a
disposition
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<PAGE> 15
intended to satisfy any regulatory
requirements) or BG or NOVA exercise such a
right under the BG/NOVA Agreement, then each
of BG, Stockholder and NOVA shall be
entitled to participate in such demand
registration on a Pro-Rata Basis; and
(ii) in the event of a Company Registration, each
of BG, NOVA or Stockholder shares
participating in such Company Registration
shall be subject to any underwriter's
cutback on a Pro-Rata Basis.
11.3 PROVISION OF INFORMATION.
Stockholder shall, and shall cause its officers, directors, employees
and agents to complete and execute all such questionnaires as the Company shall
reasonably request in connection with any registration pursuant to this
Agreement.
11.4 INJUNCTIONS.
Irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with its specified terms or
were otherwise breached. Therefore, the parties hereto shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms of provisions hereof in any
court having jurisdiction, such remedy being in addition to any other remedy to
which they may be entitled at law or in equity.
11.5 SEVERABILITY.
If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms and provisions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term or
provision.
11.6 FURTHER ASSURANCES.
Subject to the specific terms of this Agreement, Stockholder and the
Company shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.
11.7 ENTIRE AGREEMENT; MODIFICATION.
This Agreement contains the entire understanding of the parties with
respect to the transactions contemplated hereby and supersedes all agreements
and understandings entered into prior to the execution hereof. This Agreement
may be modified only by a written instrument duly executed by or on behalf of
(i) the Company, (ii) each Holder, and (iii) for 24 months after the Effective
Time, BGAH and NOVA. No breach of any covenant, agreement, warranty or
representation shall be deemed waived unless expressly waived in writing by or
on behalf of the party who might assert such breach.
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<PAGE> 16
11.8 COUNTERPARTS.
For the convenience of the parties hereto, any number of counterparts
of this Agreement may be executed by the parties hereto, but all such
counterparts shall be deemed one and the same instrument.
11.9 NOTICES.
All notices, consents, requests, demands, and other communications
hereunder shall be in writing and shall be given by hand or by mail (return
receipt requested) or sent by overnight delivery service, cable, telegram, or
facsimile transmission to the parties at the address specified beside each
party's name on the signature pages hereto or at such other address as shall be
specified by the parties by like notice.
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth business day after posting, in the
case of notice so given by overnight delivery service, on the day after notice
is deposited with such service, and in the case of notice so given by cable,
telegram, facsimile transmission or, as the case may be, personal delivery, on
the date of actual delivery.
11.10 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ANY CHOICE
OF LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
11.11 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by and against the successors and permitted assigns of the
parties hereto.
11.12 PARTIES IN INTEREST.
Except as otherwise specifically provided herein and for BG and NOVA,
nothing in this Agreement expressed or implied is intended or shall be construed
to confer any right or benefit upon any person, firm or corporation other than
Stockholder and the Company and their respective successors and permitted
assigns.
11.13 EFFECTIVE TIME.
This Agreement shall be effective at the Effective Time and will be
null and void and of no effect upon the termination of the Merger Agreement in
accordance with its terms.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 17
IN WITNESS WHEREOF, Stockholder and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
ENERGY CONVERGENCE
HOLDING COMPANY
By: /s/ Charles E. Bayless
-----------------------------------
Name: Charles E. Bayless
-----------------------------------
Title: President
-----------------------------------
Address: 1000 Louisiana, Suite 5800
Houston, TX 77002
Attn: President
Telecopier: (713) 507-6808
CHEVRON U.S.A. INC.
By: /s/ P.J. Robertson
-----------------------------------
Name: P.J. Robertson
-----------------------------------
Title: Executive Vice President
-----------------------------------
Address: 1301 McKinney Street
Houston, TX 77010
Attn: President of Chevron U.S.A.
Production Company
Telecopier: (713) 754-5777
with copies to:
Harvey D. Hinman
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Telecopier: (415) 894-6017
and:
Terry Michael Kee, Esq. and
Rodney R. Peck, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 982-1200
<PAGE> 1
ENERGY CONVERGENCE HOLDING COMPANY
BY-LAWS
ARTICLE I
CORPORATE OFFICES
Section 1. Illinois Registered Office. The registered office of the
corporation in the State of Illinois may, but need not, be identical with the
principal office in the State of Illinois, and the address of the registered
office may be changed from time to time by the board of directors.
Section 2. Other Offices. The principal office of the corporation in
the State of Illinois shall initially be located in the City of Decatur and
County of Macon. The corporation may also have offices at such other places both
within and without the State of Illinois as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Times and Places of Meetings. Meetings of shareholders for
any purpose may be held at such time and place, within or without the State of
Illinois, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of shareholders, commencing
with the year 2000, shall be held on the 1st of May if not a legal holiday, and
if a legal holiday, then on the next business day following, or at such other
time as may be provided in a resolution by the board of directors, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting. If the election of directors shall
not be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as conveniently may be.
Section 3. Special Meetings. Special meetings of shareholders may be
called by the chairman of the board, the chief executive officer, the president,
the board directors, or the holders of not less than one-fifth of all the
outstanding shares entitled to vote on the matter for which the meeting is
called.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or
<PAGE> 2
exchange of assets, not less than twenty nor more than sixty days before the
date of the meeting, either personally or by mail, by or at the direction of the
chairman of the board, chief executive officer, president or the secretary or
other persons calling the meeting, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at the
shareholder's address as it appears on the records of the corporation, with
postage thereon prepaid.
Section 5. Waiver of Notice. Whenever any notice whatsoever is required
to be given under the provisions of the Business Corporation Act or the articles
of incorporation or these by-laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Attendance at any meeting shall constitute waiver of notice thereof unless the
person at the meeting objects to the holding of the meeting because proper
notice was not given.
Section 6. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or shareholders
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the board of directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than sixty days and, for a meeting of
shareholders, not less than ten days, or in the case of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of assets, not less than
twenty days, immediately preceding such meeting or other action. If no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided herein, such determination
shall apply to any adjournment thereof.
Section 7. Voting Lists. The officer or agent having charge of the
transfer books for shares of the corporation shall make, within twenty days
after the record date for a meeting of shareholders or ten days before such
meeting, whichever is earlier, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten days prior to
such meeting, shall be kept on file at the registered office of the corporation
and shall be subject to inspection by any shareholder, and to copying at the
shareholder's expense, 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
subject to the inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof kept
in this State, shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of shareholders.
Section 8. Quorum. A majority of the outstanding shares entitled to
vote on a matter, represented in person or by proxy, shall constitute a quorum
for consideration of such matter at any meeting of shareholders; provided, that
if less than a majority of such outstanding shares are represented at the
meeting, a majority of the shares so represented may adjourn the meeting from
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<PAGE> 3
time to time without further notice until a quorum shall attend. If a quorum is
present, the affirmative vote of the majority of such shares represented at the
meeting and entitled to vote on a matter shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required by the
Business Corporation Act, the articles of incorporation or these by-laws.
Section 9. Proxies. A shareholder may appoint a proxy to vote or
otherwise act for that shareholder by signing a proxy appointment form and
delivering it to the person so appointed. Such proxy shall be filed with the
secretary of the corporation before the time of the meeting. No proxy shall be
valid after eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy continues in full force and effect until revoked by the
person executing it prior to the vote thereon, except to the extent such proxy
is irrevocable under applicable law. Such revocation may be effected by a
writing delivered to the secretary of the corporation stating that the proxy is
revoked, or by a subsequent proxy executed by, or by attendance at the meeting
and voting in person by, the person executing the proxy. The dates contained on
the forms of proxy presumptively determine the order of execution, regardless of
the postmark dates on the envelopes in which they are mailed.
Section 10. Voting of Shares. Except as otherwise provided by the
articles of incorporation or by resolutions of the board of directors providing
for the issue of any shares of preferred or special classes in series, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of shareholders.
Section 11. Voting of Shares by Certain Holders. Shares registered in
the name of another corporation, domestic or foreign, may be voted by any
officer, agent, proxy or other legal representative authorized to vote such
shares under the law of incorporation of such corporation. The corporation may
treat the president or other person holding the position of chief executive
officer of such other corporation as authorized to vote such shares, together
with any other person indicated and any other holder of an office indicated by
the corporate shareholder to the corporation as a person or an office authorized
to vote such shares. Such persons and offices indicated shall be registered by
the corporation on the transfer books for shares and included in any voting list
prepared in accordance with the Business Corporation Act and these by-laws.
Shares registered in the name of a deceased person, a minor ward or a person
under legal disability may be voted by his administrator, executor or
court-appointed guardian, either in person or by proxy, without a transfer of
such shares into the name of such administrator, executor or court-appointed
guardian. Shares registered in the name of a trustee may be voted by such
trustee, either in person or by proxy. Shares registered in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
the receiver's name if authority so to do is contained in an appropriate order
of the court by which such receiver was appointed. A shareholder whose shares
are pledged shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred. Shares of the corporation owned by
the corporation shall not be voted, directly or indirectly, at any meeting and
shall not be counted in determining the total number of outstanding shares
entitled to vote at any given time, but shares of the corporation
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<PAGE> 4
held by the corporation in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote
at any given time.
Section 12. Inspectors. The board of directors, in advance of any
meeting of shareholders, may appoint one or more persons as inspectors to act at
such meeting or any adjournment thereof. If inspectors of election are not so
appointed, the chairman of the meeting may, or upon the request of any
shareholder shall, appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting, based upon their determination of the validity and effect of
proxies; count all votes and report the results; and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders. Each report of an inspector shall be in writing and signed by
the inspector or by a majority of them if there is more than one inspector
acting at such meeting. If there is more than one inspector, the report of a
majority shall be the report of the inspectors. The report of the inspector or
inspectors on the number of shares represented at the meeting and the results of
the voting shall be prima facie evidence thereof.
Section 13. Voting by Ballot. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order that voting be by
ballot.
Section 14. Organization of Meetings. At each meeting of shareholders,
one of the following officers shall act as chairman and shall preside thereat,
in the following order of precedence: the chairman of the board; the president;
any vice president acting in place of the president as provided by these
by-laws; any person designated by the affirmative vote of the holders of a
majority of the shares represented at the meeting in person or by proxy and
entitled to vote.
Section 15. Notice of Shareholder Business and Nominations.
(A) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the board of
directors of the corporation and the proposal of business to be considered by
the shareholders may be made at an annual meeting of shareholders (a) pursuant
to the corporation's notice of meeting, (b) by or at the direction of the board
of directors, (c) as expressly provided in the corporation's articles of
incorporation, or (d) by any shareholder of record of the corporation at the
relevant time, provided that shareholders of common stock of the corporation
(the "COMMON STOCK SHAREHOLDERS") comply with the notice procedures set forth in
Section 15(A)(2)-(3) below.
(2) For nominations or other business to be properly brought
before an annual meeting by a Common Stock Shareholder, such shareholder must
have given timely notice thereof in writing to the secretary of the corporation
and such other business must be a proper matter for shareholder action. To be
timely, the Common Stock Shareholder's notice shall be delivered to the
secretary of the corporation at the principal executive offices of the
corporation not later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareholder to be timely must be so
delivered not
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<PAGE> 5
earlier than the close of business on the 120th day prior to such annual meeting
and not later than the close of business on the later of the 90th day prior to
such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a Common Stock Shareholder's notice as described above.
Such shareholder's notice shall set forth: (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE Act"), and Rule 14a-11
thereunder (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to any
other business that the shareholder proposes to bring before the meeting, a
brief description of the business described to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such shareholder, as they appear on
the corporations' book and of such beneficial owner and (ii) the class and
number of shares of the corporation which are owned beneficially and of record
by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 15 to the contrary and except with respect to
the first annual meeting of the corporation, in the event that the number of
directors to be elected to the board of directors of the corporation is
increased and there is no public announcement naming the nominees for director
or specifying the size of the increased board of directors made by the
corporation at least 100 days prior to the first anniversary of the preceding
year's annual meeting, a Common Stock Shareholder's notice required by this
Section 15 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to the
secretary of the corporation at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.
(B) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have
been brought before the meeting pursuant to a notice of
meeting given pursuant to Section 4 of this Article II.
Nominations of persons for election to the board of directors
may be made at a special meeting of shareholders at which
directors are to be elected pursuant to the corporation's
notice of meeting (1) by or at the direction of the board of
directors or (2) by any shareholder of the corporation who is
a shareholder of record at the time of giving of notice
provided for in this Section 15, who shall be entitled to vote
at the meeting and who complies with the notice procedures set
forth in this Section 15. In the event the corporation calls a
special meeting of shareholders for the purpose of electing
one or more directors to the board of directors, any such
shareholder may nominate a person or persons (as the case may
be), for election to such position(s) as specified in the
corporation's notice of meeting, if
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the shareholder's notice required by paragraph (A)(2) of this
Section 15 shall be delivered to the secretary of the
corporation at the principal executive office of the
corporation not earlier than the close of business on the
120th day prior to such special meeting and not later than the
close of business on the later of the 90th day prior to such
special meeting or the 10th day following the day on which
public announcement is first made of the date of the special
meeting and of the nominees proposed by the board of directors
to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a
new time period for the giving of a shareholder's notice as
described above.
(C) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 15 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of shareholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 15. Except as otherwise provided by law, the articles of
incorporation of the corporation or these by-laws, the chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made, or proposed, as the case may
be, in accordance with the procedures set forth in this Section 15 and, if any
proposed nomination or business is not in compliance with this Section 15, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 15, "PUBLIC ANNOUNCEMENT"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
15, a shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder, if any, with respect to
the matters set forth in this Section 15. Nothing in this Section 15 shall be
deemed to affect any rights of (i) shareholders to request inclusion of
proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) the holders of any series of preferred shares of the
corporation to elect directors under specified circumstances.
(4) No provision of this Section 15 shall apply to the
election of any Class B Director (as defined in the Articles of Incorporation).
ARTICLE III
DIRECTORS
Section 1. Powers. The business and affairs of the corporation shall be
managed by or under the direction of its board of directors.
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Section 2. Tenure and Qualifications. Each director shall hold office
until the next annual meeting of shareholders following his or her election and
until his or her successor shall have been duly elected and qualified or until
his or her earlier death, resignation or removal. A director need not be a
resident of the State of Illinois or a shareholder of the corporation. A
director may resign at any time by giving written notice to the board of
directors, or to the chairman of the board, chief executive officer, president
or secretary of the corporation. A resignation shall be effective when the
notice is given, unless the notice specifies a future date.
Section 3. Place of Meetings. The board of directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Illinois.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this by-law, immediately
after, and at the same place as, the annual meeting of shareholders. Other
regular meetings of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by the board.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by the chairman of the board and shall be called by the chairman
of the board or secretary on the written request of three directors or the sole
director, as the case may be.
Section 6. Notice. Notice of any special meeting shall be given: (i) at
least five days prior thereto if the notice is given personally or by an
electronic transmission, (ii) at least five business days prior thereto if the
notice is given by having it delivered by a third party entity that provides
delivery services in the ordinary course of business and guarantees delivery of
the notice to the director no later than the following business day, and (iii)
at least seven business days prior thereto if the notice is given by mail.
Notice of any meeting where any actions described in Section 7.(B) will be
considered shall be given to Class B directors at least 30 days before the vote
on any such action and shall set forth the material terms thereof. For this
purpose, the term "ELECTRONIC TRANSMISSION" may include, but shall not be
limited to, a facsimile, email or other electronic means. Notice shall be
delivered to the director's business address and/or telephone number and shall
be deemed given upon electronic transmission, upon delivery to the third party
delivery service, or upon being deposited in the United States mail with postage
thereon prepaid. Any director may waive notice of any meeting by signing a
written waiver of notice either before or after the meeting. Attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
except when a director attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum; Vote Required, Actions Requiring Approval.
(A) Except as provided in Section 7.(B), a majority of the directors
then in office, but not less than a majority of the minimum number of directors
specified by the articles of incorporation for the variable range of the number
of directors, shall constitute a quorum for the transaction of business at any
meeting of the board of directors, and the act of a majority of the
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directors present at a meeting at which a quorum is present shall be the act of
the board of directors. If less than a majority of such number of directors are
present at the meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
(B) Notwithstanding anything to the contrary herein, so long as any
shares of Class B Common Stock of the corporation are issued and outstanding and
the holders of Class B Common Stock have not terminated their rights to block
such actions granted to them under Section 4.1 of the Shareholder Agreement
between the corporation and Chevron U.S.A., Inc., dated June 13, 1999, the
corporation shall not take (or permit to be taken in its capacity as a
shareholder or partner or otherwise permit any subsidiary of the corporation to
take) any of the following actions if all of the Class B directors present at
the meeting where such action is considered vote against such action:
(1) amendment of Article II, Section 15(C)(4), Article III,
Sections 6, 7.(B), 7.(C), or 12, Article IV, Section 1, Article V, Section 1, or
Article IX of these Bylaws, or amendment of Article IV, Section 2A. of the
articles of incorporation of the corporation;
(2) adoption of any provision of these Bylaws or amendment to
the articles of incorporation which would substantially and adversely affect the
rights of the holders of the Class B Common Stock.
(3) authorization of new shares of any stock of the
corporation where the aggregate consideration to be received by the corporation
therefor exceeds the greater of (a) $1 billion or (b) one-quarter of the
Corporation's Market Capitalization;
(4) any disposition of all or substantially all of the
corporation's Liquids Business (defined below) or Gas Marketing Business (as
defined below), so long as there shall be in effect any substantial agreements
between Chevron U.S.A. Inc. and Dynegy relating to such businesses, except for a
contribution of such Liquids Business to a joint venture, limited liability
company or other form of partnership in which the corporation has a majority
direct or indirect interest;
(5) any merger or consolidation of the corporation or any
subsidiary (other than a merger or consolidation by a subsidiary with the
corporation or another subsidiary), any joint venture, any liquidation or
dissolution of the corporation, any voluntary initiation of a proceeding in
bankruptcy or acquiescence to an involuntary initiation of a proceeding in
bankruptcy, any acquisition of stock or assets by the corporation or its
subsidiaries, or any issuance of common or preferred stock by the corporation,
any of which would result in the payment or receipt of consideration (including
the incurrence or assumption of indebtedness and liabilities) having a fair
market value exceeding the greater of (a) $1 billion or (b) one-quarter of the
Corporation's Market Capitalization (as defined below); or
(6) any other material transaction (or series of related
transactions) which would result in the payment or receipt of consideration
(including the incurrence or assumption of indebtedness and liabilities) having
a fair market value exceeding the greater of (a) $1 billion
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or (b) one-quarter of the Corporation's Market Capitalization, and is out of the
ordinary course of business for the corporation.
For purposes of this Section, the "CORPORATION'S MARKET CAPITALIZATION"
means the sum of (a) the product of (x) the total number of shares outstanding
of Class A and Class B Common Stock of the corporation on the relevant date and
(y) the closing price of the Class A Common Stock on the New York Stock Exchange
("NYSE") at the end of the regular session represented by the consolidated tape,
Network A, (b) the product of (x) the total number of shares outstanding of all
of the corporation's NYSE traded preferred stock on the relevant date and (y)
the closing price of such preferred stock on the NYSE at the end of the regular
session represented by the consolidated tape, Network A and (c) the aggregate
value of the liquidation preference of any non-NYSE listed non-convertible stock
of the corporation and (d) the aggregate value of the greater of the liquidation
preference and the value of the underlying common stock (calculated in
accordance with (a) of this paragraph) issuable upon conversion of any non-NYSE
listed convertible preferred stock on the relevant date. The "LIQUIDS BUSINESS"
means the processing of natural gas to produce natural gas liquids, the
fractionation of natural gas liquids, and the purchase, sale and transportation
of such natural gas liquids. The "Gas Marketing Business" shall mean the
purchase, receipt, sale and delivery of natural gas, excluding the retail gas
distribution business conducted by Illinova Corporation ("ILLINOVA") and its
affiliates prior to the closing of the transactions contemplated by the
Agreement and Plan of Merger, dated as of June 13, 1999, by and among the
Corporation, Illinova, Dynegy, Inc., Energy Convergence Acquisition Corporation,
and Dynegy Acquisition Corporation.
(C) The executive officers of the Corporation shall advise the members
of the Board of Directors of the consideration of a proposal relating to any
matter of the type described in Section 7.(B) at such time as they determine to
give substantive attention to such proposal.
Section 8. Informal Action by Directors. Any action required to be
taken at a meeting of the board of directors, or any other action which may be
taken at a meeting of the board of directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. The consent shall be evidenced by one or more written approvals, each of
which sets forth the action taken and bears the signature of one or more
directors. All the approvals evidencing the consent shall be delivered to the
secretary to be filed in the corporate records. The action taken shall be
effective when all the directors have approved the consent unless the consent
specifies a different effective date. Any such consent signed by all the
directors or all the members of a committee shall have the same effect as a
unanimous vote, and may be stated as such in any document filed with the
Secretary of State of Illinois under the Business Corporation Act.
Section 9. Participation with Communications Equipment. Members of the
board of directors or of any committee of the board of directors may participate
in and act at any meeting of such board or committee through the use of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in such
meeting shall constitute attendance and presence in person at the meeting of the
person or persons so participating.
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Section 10. Compensation of Directors. The board of directors shall
have the authority to fix the compensation of directors by the affirmative vote
of a majority of the directors then in office and irrespective of any personal
interest of any of its members. In addition, the directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be compensated additionally for so serving.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless the dissent of that director shall be entered in the minutes of the
meeting or unless that director shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered or certified mail to the secretary
of the corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
Section 12. Agenda Items. No action may be taken at a meeting of the
board of directors with respect to any matter that was not previously set forth
on an agenda for such meeting delivered to the directors at least two business
days prior to such meeting if either a majority of the Class B Directors present
at such meeting or a majority of the other directors present at such meeting
oppose taking action at such meeting with respect to such matter.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. Establishment of Committees. A majority of the directors may
create one or more committees and appoint members of the board of directors to
serve on the committee or committees. Each committee shall have two or more
members, who serve at the pleasure of the board of directors. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. Any vacancy in a committee may be filled by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors as required. Unless precluded by applicable
law or any applicable rule of the New York Stock Exchange, Inc., each committee
shall have at least one Class B Director thereon.
Section 2. Manner of Acting. Unless the appointment by the board of
directors requires a greater number, a majority of any committee shall
constitute a quorum and a majority of a quorum shall be necessary for action by
any committee. A committee may act by unanimous consent in writing without a
meeting. Each committee, by majority vote of its members, shall determine the
time and place of meetings and the notice required therefor.
Section 3. Authority of Committees. To the extent specified by
resolution of the board of directors and these by-laws, each committee may
exercise the authority of the board of directors, provided, however, a committee
may not:
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a) authorize distributions, except for dividends to be paid with
respect to shares of any preferred or special classes or any
series thereof;
b) approve or recommend to shareholders any act requiring the
approval of shareholders under applicable law;
c) fill vacancies on the board or any committee;
d) elect or remove officers or fix the compensation of any member
of the committee;
e) adopt, amend or repeal these by-laws;
f) approve a plan of merger not requiring shareholder approval;
g) authorize or approve reacquisition of shares, except according
to a general formula or method prescribed by the board of
directors;
h) authorize or approve the issuance or sale, or contract for
sale, of shares, or determine the designation and relative
rights, preferences, and limitations of a series of shares,
except the board may direct that a committee may fix the
specific terms of the issuance or sale or contract for sale,
or the number of shares to be allocated to particular
employees under an employee benefit plan; or
i) amend, alter, repeal, or take action inconsistent with any
resolution or action of the board of directors when the
resolution or action of the board of directors provides by its
terms that it shall not be amended, altered or repealed by
action of a committee.
Section 4. Executive Committee. The board of directors shall establish
an Executive Committee. The Executive Committee, during intervals between
meetings of the board of directors, shall have, and may exercise, subject to the
limitations contained in Section 3 of this Article, the powers of the board of
directors in the management of the business and affairs of the corporation.
Section 5. Compensation/Nomination Committee. The board of directors
shall establish a Compensation/Nomination Committee consisting of directors who
are not otherwise employed by the corporation. The Compensation/Nomination
Committee shall (i) review, from time to time, the salaries, compensation and
employee benefits of the officers and employees of the corporation and make
recommendations to the board of directors concerning such matters and (ii)
consider matters related to corporate governance, develop general criteria
regarding the selection and qualifications for members of the board of directors
and recommend candidates for election to the board of directors.
Section 6. Audit and Finance Committee. The board of directors shall
establish an Audit and Finance Committee consisting of directors who are not
otherwise employed by the corporation. The Audit and Finance Committee shall (i)
review the selection and qualifications of the independent public accountants
employed by the corporation to audit the financial
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statements of the corporation to audit the financial statements of the
corporation and the scope and adequacy of their audits and (ii) review major
financial decisions of the corporation and make recommendations to the board of
directors concerning such matters. The Audit and Finance Committee shall also
consider recommendations made by such independent public accountants, review the
internal financial audits of the corporation, and report any additions or
changes it deems advisable to the board of directors.
Section 7. Risk and Environmental Committee. The board of directors
shall establish a Risk and Environmental Committee consisting of directors who
are not otherwise employed by the corporation. The Risk and Environmental
Committee shall consider matters related to insurance and environmental issues
and shall make recommendations to the board of directors concerning such
matters.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall consist of a
chief executive officer, chairman of the board, president, one or more vice
presidents (the number, seniority and any other designations thereof to be
determined by the board of directors), a secretary, a treasurer, a controller,
and such other officers as may be elected by the board of directors. Any two or
more offices may be held by the same person.
Section 2. Additional Officers and Agents. The board of directors may
appoint such other officers and agents as it shall deem necessary, who shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 3. Compensation of Officers. The compensation of all officers
and agents of the corporation shall be fixed by or under the direction of the
board of directors. No officer shall be prevented from receiving such
compensation by reason of the fact that such officer is also a director of the
corporation.
Section 4. Term of Office and Vacancy. Each elected officer shall hold
office until a successor is elected and qualified or until such officer's
earlier resignation or removal. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors for the unexpired portion
of the term. Each appointed officer shall serve at the pleasure of the board of
directors. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 5. Removal. Any officer or agent may be removed by the board of
directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 6. Chief Executive Officer. The chairman of the board may, but
need not, be the chief executive officer of the corporation. The chief executive
officer shall (a) determine and administer the policies of the corporation,
subject to the instructions of the board of directors; (b) be authorized to
execute all documents in the name and on behalf of the corporation; and
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(c) perform all duties incident to the office of chief executive officer and
such other duties as the board of directors or bylaws may from time to time
prescribe.
Section 7. Chairman of the Board. The chairman of the board, or in his
or her absence, the president, shall preside at all meetings of the shareholders
and the board of directors.
Section 8. President. The president shall (a) be the chief operating
officer of the corporation, and shall in general be in charge of the operations
of the corporation, subject to the control of the board of directors; (b) be
authorized to execute all documents in the name and on behalf of the
corporation; and (c) perform all duties incident to the office of president and
such other duties as the board of directors may from time to time prescribe.
Section 9. Vice Presidents. In the absence of the president or in the
event of the inability or refusal of the president to act, the vice president
(or in the event there is more than one vice president, the vice presidents in
the order of seniority of title, or in the event of equal seniority, then in the
order designated, or in the absence of any designation, then in the order named
in the most recent resolution providing for the annual election of officers)
shall perform the duties of the president, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the president. Any
vice president shall perform such other duties and have such other powers as the
board of directors or the chief executive officer or president may from time to
time prescribe.
Section 10. Secretary. The secretary shall (a) attend meetings of the
board of directors and meetings of the shareholders and record minutes of the
proceedings of the meetings of the shareholders and of the board of directors,
and when required, shall perform like duties for the committees of the board;
(b) assure that all notices are duly given in accordance with the provisions of
these by-laws or as required by law; (c) maintain custody of the corporate
records of the corporation; (d) keep or cause to be kept a register of the post
office address of each shareholder as furnished to the secretary by such
shareholder; (e) sign with the chief executive officer, president or a vice
president certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (f) have
charge of the stock transfer books of the corporation and authority over a stock
transfer agent, if any; (g) certify copies of the bylaws, resolutions of the
shareholders and board of directors and committees thereof and other documents
of the corporation as true and correct copies thereof; and (h) perform all
duties incident to the office of secretary and such other duties as the board of
directors or the chief executive officer or president may from time to time
prescribe.
Section 11. Assistant Secretaries. The assistant secretary, or if there
is more than one, the assistant secretaries, respectively, as authorized by the
board of directors, may sign with the president or a vice president certificates
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the board of directors, and shall, in the absence of the
secretary or in the event of the inability or refusal of the secretary to act,
perform the duties and exercise the powers of the secretary, and shall perform
such other duties as the board of directors, chief executive officer, president
or secretary may from time to time prescribe.
Section 12. Treasurer. The treasurer shall (a) have custody of the
funds and securities of the corporation; (b) deposit all moneys and other
valuable effects in the name and to the credit
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of the corporation in such depositories as may be designated by the board of
directors; (c) maintain adequate accounts of the corporation; (d) disburse the
funds of the corporation as may be ordered by the board of directors; (e) submit
financial statements to the president and the board of directors; and (f)
perform all duties incident to the office of treasurer and such other duties as
the board of directors or the chief executive officer or president may from time
to time prescribe.
Section 13. Assistant Treasurers. The assistant treasurer, or if there
is more than one, the assistant treasurers, respectively, as authorized by the
board of directors, shall, in the absence of the treasurer or in the event of
the inability or refusal of the treasurer to act, perform the duties and
exercise the power of the treasurer and shall perform such other duties and have
such other power as the board of directors, the chief executive officer,
president or treasurer may from time to time prescribe.
Section 14. Controller. The controller shall conduct the accounting
activities of the corporation, including the maintenance of the corporation's
general and supporting ledgers and books of account, operating budgets, and the
preparation and consolidation of financial statements.
Section 15. General Powers of Officers. The chairman of the board,
chief executive officer, president, any executive vice president, senior vice
president and any vice president, may sign without countersignature or
attestation any deeds, mortgages, bonds, contracts, reports to public agencies,
or other instruments whether or not the board of directors has expressly
authorized execution of such instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these by-laws solely to some other officer or agent of the corporation, or shall
be required by law to be otherwise signed or executed. Any other officer of this
corporation may sign contracts, reports to public agencies, or other instruments
which are in the regular course of business and within the scope of his or her
authority, except where the signing and execution thereof shall be expressly
delegated by the board of directors or by these by-laws to some other officer or
agent of the corporation, or shall be required by law to be otherwise signed or
executed.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any officer
or officers, or agent or agents, to enter into any contract and execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Checks, Drafts, Notes. All checks, drafts or other orders
for the payment of money, notes and other evidences of indebtedness, issued in
the name of the corporation, shall be signed by such officer or officers, or
agent or agents, of the corporation and in such manner as shall from time to
time be determined by resolution of the board of directors.
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Section 3. Deposits. All funds of the corporation other than petty cash
shall be deposited to the credit of the corporation in such banks, trust
companies or other depositories as the board of directors may select.
ARTICLE VII
SHARES
Section 1. Issued Shares. The issued shares of the corporation may be
represented by certificates, or may be uncertificated shares, in either case in
whole or in part, as determined and authorized by the board of directors.
Section 2. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the chairman of the board, chief
executive officer or president and by the secretary or an assistant secretary.
If a certificate is countersigned by a transfer agent or registrar, other than
the corporation itself or its employee, any other signatures or countersignature
on the certificate may be facsimiles. If any officer of the corporation, or any
officer or employee of the transfer agent or registrar, who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer of the corporation, or an officer or employee of the transfer agent or
registrar, before such certificate is issued, the certificate may be issued by
the corporation with the same effect as if the officer of the corporation, or
the officer or employee of the transfer agent or registrar, had not ceased to be
such at the date of its issue. Certificates for shares shall be individually
numbered or otherwise individually identified. Each certificate for shares shall
state the name of the registered owner of the shares in the stock ledger, the
number and the class and series, if any, of such shares, and the date of
issuance of the certificate. If the corporation is authorized to issue more than
one class of stock, a full summary or statement of all of the designations,
preferences, qualifications, limitations, restrictions, and special or relative
rights of each class authorized to be issued, and, if the corporation is
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences among such series, shall be set forth upon
the face or back of the certificate. Such statement may be omitted if it shall
be set forth upon the face or back of the certificate that such statement, in
full, will be furnished by the corporation to any shareholder upon request and
without charge.
Section 3. Uncertificated Shares. The board of directors may provide by
resolution that some or all of any or all classes and series of its shares shall
be uncertificated shares, and may provide an election by individual shareholders
to receive certificates or uncertificated shares and the conditions of such
election, provided that such resolution shall not apply to shares represented by
a certificate until such certificate is surrendered to the corporation. Within a
reasonable time after the registration of issuance or transfer of uncertificated
shares, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to the Business Corporation Act or these by-laws. Except
as otherwise expressly provided by law, the rights and obligations of the
holders of uncertificated shares and rights and obligations of the holders of
certificates representing shares of the same class and series shall be
identical.
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Section 4. Registration of Transfers of Shares. Transfers of shares
shall be registered in the records of the corporation upon request by the
registered owner thereof in person or by a duly authorized attorney, upon
presentation to the corporation or to its transfer agent (if any) of a duly
executed assignment and other evidence of authority to transfer, or proper
evidence of succession, and, if the shares are represented by a certificate, a
duly endorsed certificate or certificates for shares surrendered for
cancellation, and with such proof of the authenticity of the signatures as the
corporation or its transfer agent may reasonably require. The person in whose
name shares are registered in the stock ledger of the corporation shall be
deemed the owner thereof for all purposes as regards to the corporation.
Section 5. Lost Certificates. The corporation may issue a new share,
certificate in the place of any certificate theretofore issued by it, alleged to
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact, by the person claiming the share certificate to be lost, stolen or
destroyed. When authorizing such issuance of a new certificate or certificates
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the owner's legal representative, to advertise
the same in such manner as it shall require or to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate or certificates alleged
to have been lost, stolen or destroyed.
ARTICLE VIII
OTHER PROVISIONS
Section 1. Distributions. The board of directors may authorize, and the
corporation may make, distributions to its shareholders, subject to any
restriction in the articles of incorporation and subject to any limitations
provided by law.
Section 2. Fiscal Year. The fiscal year of the corporation shall be
fixed, and shall be subject to change, by the board of directors.
Section 3. Seal. The board of directors may, but shall not be required
to, provide by resolution for a corporate seal, which may be used by causing it,
or a facsimile thereof, to be impressed or affixed or in any other manner
reproduced.
ARTICLE IX
EMERGENCY BY-LAWS
Section 1. Emergency Board of Directors. In the event a quorum of the
board of directors cannot readily be convened for action due to (a) an attack or
imminent attack on the United States or any of its possessions, (b) any nuclear
or atomic disaster, or (c) any other catastrophe or emergency condition, the
vacant director positions shall be filled by the following persons (provided in
each case such person is not already a director and is willing and able to
serve) in the following order: the president, the vice presidents in order of
seniority, the treasurer, the secretary, any other officers in order of
seniority and any other persons in such
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order as named by the board of directors on any list as it may compile from time
to time for purposes of appointing such successor directors; provided, however,
that to the extent possible, the holders of Class B Common Stock shall be
entitled to nominate a number of directors to such board of directors
proportionate to the representation on the board of directors immediately prior
to such emergency condition to which the holders of Class B Common Stock were
entitled. Such new board of directors shall be referred to as the emergency
board of directors of the corporation. The initial Chairman of the Board of the
emergency board of directors ("CHAIRMAN") shall be the regularly-elected
director, if any, who has served on the board of directors for the longest
period of time and, if all directors on the emergency board of directors are
successor directors appointed pursuant to this Section, the Chairman shall be
determined according to the same order of priority as such successor directors
are appointed pursuant to this Section. The directors appointed pursuant to this
Section shall serve until the next annual or special meeting of shareholders at
which directors are to be elected or until the emergency condition shall have
terminated.
Section 2. Powers. The emergency board of directors shall have all of
the rights, powers and duties of the board of directors except such emergency
board of directors may not amend the Articles of Incorporation of the
corporation nor approve a merger, sale of all or substantially all of the assets
of the corporation, liquidation or dissolution.
Section 3. Notice of Meetings. Notice of any meeting of the emergency
board of directors held during any emergency described in Section l of this
Article IX may be given only to such directors or successor directors as it may
be feasible to reach at the time and by such means as may be feasible at the
time, including, without limitation, publication or radio.
Section 4. Liability. No officer, director or employee of the
corporation acting in accordance with this Article IX shall be liable to the
corporation, except for willful misconduct.
Section 5. By-laws. To the extent not inconsistent with this Article
IX, the by-laws of the corporation shall remain in effect during any emergency
described in Section l of this Article IX.
Section 6. Interpretation. If, by operation of law or otherwise, any of
the provisions of this Article IX are deemed to be invalid or not controlling,
such provisions shall be construed by any court or agency having competent
jurisdiction as a determinative factor evidencing the intent of the corporation.
ARTICLE X
AMENDMENTS
Subject to the provisions of the Articles of Incorporation, these
by-laws may be altered, amended or repealed, and new by-laws may be adopted, by
the board of directors; provided that no amendment or repeal of Article II,
Section 15(c)(4), Article III, Sections 6, 7.(B), 7.(C) or 12, Article IV,
Section 1, Article V, Section 1, or Article IX, Section 1, nor the adoption of
any provision of these Bylaws which would substantially and adversely affect the
rights of the holders of Class B Common Stock shall be effective except upon the
approval of the affirmative
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vote of the majority of the Class B directors and a majority of the entire
number of directors then in office. Subject to the provisions of the articles of
incorporation, these by-laws may also be altered, amended or repealed by the
shareholders of the corporation.
ARTICLE XI
INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may indemnify any agent or employee of the corporation
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (including, but not limited to
any such proceeding by or in the right of the corporation) whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was serving the corporation at its request and in the course and scope of his
duties and acting in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, against expenses
(including reasonable attorney's fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action, suit or proceeding.
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FOR IMMEDIATE RELEASE
ILLINOVA AND DYNEGY AGREE TO $7.5 BILLION MERGER
COMBINATION CREATES PREMIER NATIONAL ENERGY MERCHANT
- - STRONGLY ACCRETIVE TO EARNINGS IN THE FIRST YEAR
- - NEW COMPANY TO BE NAMED DYNEGY
- - ILLINOIS POWER TO REMAIN HEADQUARTERED IN DECATUR, ILLINOIS
- - CHEVRON TO INVEST BETWEEN $200 MILLION-$240 MILLION IN NEW EQUITY
- - CHUCK WATSON TO BE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DECATUR, IL AND HOUSTON, TX (JUNE 14, 1999) -- Illinova Corporation [NYSE: ILN]
and Dynegy Inc. [NYSE: DYN] today announced the execution of definitive
agreements for the merger of Illinova and Dynegy, creating a $7.5 billion full
service provider of energy products and services. The combined company will be a
national leader in the rapidly changing energy industry and will be well
positioned to capitalize on opportunities created by energy convergence and
deregulation.
Under the terms of the merger agreement, which were approved unanimously by each
company's board of directors, and agreed to by Dynegy's industrial shareholders
(who collectively own approximately 76% of Dynegy's outstanding common stock), a
newly established parent company will acquire all of the shares of Dynegy and
Illinova for a combination of stock and cash, subject to the satisfaction of
certain pre-closing conditions. Approximately 60% of the consideration received
by Dynegy's shareholders will be stock and 40% will be cash. Dynegy shareholders
may elect to exchange each Dynegy share for 0.69 share of the new company, based
on a fixed exchange ratio, or elect to receive $16.50 per share in cash
consideration, subject to pro-ration. In aggregate, the cash portion of the
consideration will be approximately $1.06 billion. Illinova shareholders will
exchange their shares on a share-for-share basis. Following the transaction,
Dynegy's shareholders will own slightly more than 50% of the new company. The
new company will be named Dynegy Inc. The combination will be accounted for as a
purchase of Illinova by Dynegy and is expected to be accretive to both
companies' earnings by more than 10% in the first year and continuing
thereafter.
Chevron U.S.A., which currently owns an approximate 29% interest in Dynegy, has
voted its shares in favor of the merger, and has elected to take all stock.
Chevron also will invest $200 million of new equity capital in the combined
company, plus up to an additional $40 million, subject to certain terms and
conditions, if required to facilitate a more complete monetization of NOVA
Chemicals' and BG plc's investments in Dynegy. Such investment will be made at
the lower of $16.50 per share or the then current market price of a Dynegy
equivalent share as of the closing date.
NOVA and BG, which each currently own an approximate 24% interest in Dynegy,
have also agreed to vote their shares in favor of the merger and have elected to
receive all cash in the transaction, subject to pro-ration based on the cash
election of Dynegy's public shareholders. BG and NOVA have also agreed to hold
their remaining ownership interest in the combined
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company in the form of new convertible preferred stock which is expected to
represent no more than approximately 25% of their current holdings.
Dynegy's chairman and chief executive officer and the president of its marketing
and trading organization, who collectively own 6.6 % of Dynegy, have agreed to
vote in favor of the merger, elected to take all stock and will continue their
current management roles with the new company.
In conjunction with its approval of the merger agreement, Illinova's board
authorized the company to enter into a forward contract with a financial
institution whereby certain open market purchases of up to 10% of outstanding
Illinova common may be made. The purpose of this arrangement is to provide, in
certain limited circumstances, additional market liquidity for an orderly
distribution of Illinova shares subsequent to the merger being announced.
Although several settlement alternatives exist, Illinova anticipates that any
shares acquired pursuant to these arrangements will be redistributed via sales
in the market.
The combination brings together Illinova, with strategically positioned
generating facilities in the Midwest and a developing national energy services
business, and Dynegy, one of the country's leading marketers of energy products
and services. Both companies are leading independent power developers and
producers. Upon closing, the combined company is expected to own and/or control
more than 15,000 gross megawatts of domestic generating capacity representing
the nation's most geographically diverse generating asset portfolio. In
addition, Illinova's stable regulated natural gas and electric utility
subsidiary with 650,000 customers and retail distribution expertise coupled with
Dynegy's position as the largest marketer of natural gas liquids in the United
States provide a broader spectrum of value opportunities.
The new company will be well positioned to help shape the dynamic changes taking
place in the energy marketplace, driven by the restructuring of the power
industry and the convergence of the natural gas and electricity industries.
Energy convergence provides opportunities to maximize the value of wholesale
natural gas and power marketing and trading by leveraging the control and
optimization of Btu conversion capacity and other assets.
Chuck Watson, chairman and chief executive officer of Dynegy Inc., and the
designated chairman and chief executive officer of the combined company, said,
"This merger advances our strategic plan through the addition of strategically
located generation assets, which will enable Dynegy to enhance its position as
one of the nation's leading energy merchants. Shareholders in the combined
company will have an opportunity to participate in the restructuring of the $300
billion power industry from a strong corporate platform with capable management
from both companies. The combined company will have control over the assets
needed to compete across nearly the entire energy value chain - from generation,
to delivery, to marketing and trading to retail. Illinova's customers will
benefit from increased access to reliable, competitively priced energy supplies
and solutions tailored to their energy needs, delivered by a company with
greater financial strength and flexibility."
Charles Bayless, chairman, president and chief executive officer of Illinova
Corporation said, "This union with Dynegy reflects the culmination of efforts
undertaken by Illinova over the past few years, including key achievements
during the past several months. Since forming our
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holding company in 1994, we have worked to develop national and international
capabilities in the unregulated energy industry through Illinova Generating and
Illinova Energy Partners. To further our competitive positioning, we championed
the successful campaign for customer choice in Illinois. More recently, we
restructured our balance sheet through the issuance of securitized debt and the
implementation of an accounting quasi-reorganization. We have reached an interim
agreement to sell the Clinton Power Station and have filed with regulators to
transfer our generating assets to an unregulated subsidiary. Combined, these
actions have significantly strengthened Illinova's financial and competitive
profile. This combination with Dynegy is one we actively pursued and one which
we believe uniquely achieves our objective for a strategic transformation for
our company."
"This strategic combination creates tremendous opportunities for each company
much faster than either could have achieved on a stand-alone basis," Watson
said. "Energy convergence is rapidly sweeping across the nation and is a major
driver for energy industry competition and consolidation. While our combined
company will be larger in scale, the primary benefit of this merger results from
the scope and skills we will have to effectively compete in the national energy
marketplace. Joining Illinova's strategically located generating assets and
operating expertise with Dynegy's diversified energy franchise and strengths in
energy marketing and trading will create a company with multiple avenues for
growth from a stable earnings foundation provided by the regulated utility. This
is a truly unique and exciting platform from which we can achieve significant
near-term and long-term shareholder value."
"Dynegy, with its experienced leadership and proven track record of risk
management, profitability and growth, is the ideal strategic partner for
Illinova," Mr. Bayless said, "I am confident that, together, we will be a leader
in the rapidly evolving energy marketplace of the future."
"I look forward to a smooth integration of our two companies. Illinova and
Dynegy operate in complementary segments of the energy industry. Likewise, our
corporate cultures share many of the same values. In addition, both Illinova and
Dynegy have solid histories of community involvement and economic development,
and the combined company will be committed to building on those traditions in
the communities where we will operate. Employees of both companies will have an
opportunity to play on a much larger competitive field," Watson noted.
Beginning this summer, both companies will benefit from expanded opportunities
from energy convergence through a previously agreed to consulting arrangement
under which Dynegy will advise Illinova regarding the expanded utilization and
marketing of 4,500 megawatts of Illinova's generation. Shareholders and
customers will benefit through enhanced efficiencies and reliability in the 1999
summer cooling season.
EARNINGS ACCRETION
The new company will be positioned to compete effectively in an open national
energy market and to achieve certain cost efficiencies. The combination of the
two companies is expected to create annual pre-tax revenue enhancements and cost
savings between approximately $125
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million and $165 million. Approximately two-thirds of the total annual synergies
efficiencies are attributable to revenue enhancement opportunities related to
optimizing Illinova's existing portfolio of generation assets while
approximately one-third is attributable to cost savings related staff reductions
and the elimination of duplicate corporate programs. As a result, the merger is
expected to be strongly accretive to the earnings of both shareholder groups in
the first year of combined operations and thereafter.
The companies expect to enhance profitability by:
- - Utilizing Dynegy's marketing, trading and risk management capabilities to
integrate Illinova's significant physical generation assets in the
strategic Midwest region with a multi-regional supply perspective;
- - Improving reliability of services to Illinova's customers by delivering
cost-effective supply from indigenous generation capacity and expanded
access to excess generation capacity from other markets across the country;
- - Optimizing Illinova's plant operations to satisfy its customers' power
requirements efficiently and reliably;
- - Leveraging the retail experience and presence brought by Illinova to
expedite the implementation of a national retail energy and energy services
strategy;
- - Combining Dynegy's operational capabilities with those of Illinova to
create a generation portfolio diversified in terms of strategic location,
production, contracts and fuel;
- - Expanding Dynegy's marketing and trading operations through access to
Illinova's customer base in the Midwest;
- - Supporting marketing of Illinova's generation capacity in excess of local
market requirements when market conditions permit; and
- - Managing Illinova's and Dynegy's fuel requirements and other assets on a
cost-effective basis.
Earnings from the regulated transmission and distribution business will provide
a stable earnings platform from which to pursue strategic growth opportunities.
In addition, cost savings will come from the elimination of duplicate
activities, improved operating efficiencies and lower capital costs. The
companies anticipate the elimination of approximately five percent of the
combined workforce of 6,500 over time and will seek to minimize workforce
effects of the merger, primarily through reduced hiring, attrition, voluntary
separation programs and other appropriate measures. All union contracts will be
honored.
The combined company is expected to generate approximately 70% of its earnings
and cash flow from non-regulated activities based on estimated results for 2000.
The contribution from non-
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regulated activities is expected to grow as the new company invests in new
generation assets as part of a total corporate capital expenditure program of
approximately $1 billion per year over the next five years.
MANAGEMENT
Upon closing, Chuck Watson, chairman and chief executive officer of Dynegy Inc.,
will retain that title in the combined company. Charles Bayless, chairman,
president and chief executive officer of Illinova, will continue as a
non-executive director of the combined company. The board of directors of the
combined company, which will be incorporated in Illinois and headquartered in
Houston, Texas, will consist of 7 members of the current Illinova board and 7
members of the current Dynegy board, including three designees of Chevron.
Illinova's regulated utility, Illinois Power, will be a subsidiary and remain
headquartered in Decatur, Illinois.
DIVIDEND POLICY/CAPITALIZATION
It is anticipated that the combined company will adopt an initial annual
dividend of $0.60 per share, subject to financial conditions, results of
operations and capital requirements. It is expected that the board will review
the dividend on an annual basis. The companies noted that the new dividend level
would be more appropriately aligned with the anticipated mix of earnings and
cash flow from the new company's unregulated/ regulated businesses and a prudent
capital structure. The new dividend is also consistent with the company's
strategic goals and would preserve capital to fund the combined company's
significant growth opportunities.
Given the significant growth opportunities available to the combined company,
maintenance of a strong balance sheet and a solid investment grade rating is a
top priority. As such, it is anticipated that the combined company will issue
$400 million to $500 million in new equity prior to the end of 2000. The
companies expect to maintain investment grade ratings on outstanding debt and to
achieve investment grade ratings on any new debt incurred as a result of the
transaction.
REGULATORY APPROVALS/CONDITIONS OF CLOSING
The merger is conditioned, among other things, upon the completion of the
previously announced, pending sale of the Clinton Power Station by Illinova, the
approvals of the Federal Energy Regulatory Commission, the Securities and
Exchange Commission, Illinova's common stockholders and the expiration or
termination of the Hart-Scott-Rodino waiting period. In addition, limited
approval is also required by the Illinois Commerce Commission. The merger is
expected to close by the end of the first quarter of 2000.
The merger agreement provides for a bilateral termination fee of $85 million,
plus expenses of up to $7.5 million, payable under certain conditions.
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Chase Securities Inc. and Berenson Manella & Co. acted as financial advisors and
provided fairness opinions to Illinova.
Lehman Brothers, Inc. acted as financial advisor and provided a fairness opinion
to Dynegy.
Dynegy Inc. is one of the leading marketers of energy products and services in
North America. The name Dynegy reflects the company's evolution from a natural
gas marketing company to a dynamic energy company with a full energy network to
meet the growing challenges of the energy market of the future. Through its
leadership positions in energy marketing, independent power generation, and
gathering, processing, and transportation, the company provides energy solutions
to its customers primarily in North America and the United Kingdom.
Illinova Corp., headquartered in Decatur, Ill., is an energy services holding
company with $6.8 billion in assets and annual revenues of $2.4 billion. Its
subsidiaries include Illinois Power, an electric and natural gas utility that
serves approximately 650,000 customers over a 15,000-square-mile area of
Illinois; Illinova Generating, which invests in, develops and operates
independent power projects worldwide; and Illinova Energy Partners, which
markets energy and energy-related services in the United States and Canada.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this press release are
forward-looking Although Illinova and Dynegy believe these statements are
accurate, their businesses are dependent on various regulatory issues, general
economic conditions and future trends, the completion of the transaction is
conditioned upon the fulfillment of a number of conditions, and the success of
the combination of the two companies will be dependent on a wide range of
issues. These factors can cause actual results to differ materially from the
forward-looking statements that have been made. In particular:
The benefits that are expected to result from the combination
are predicated upon the belief that combining the complementary
expertise and resources of Dynegy and Illinova will result in increased
revenue and decreased expenses. Because of the complexity of the
environments in which the two companies operate, there can be no
certainty that these benefits will be achieved to the extent expected.
The expected synergies assume that there will be a reduction
in employment by the combined entity of approximately 5%, primarily
through voluntary means. With the exception of a few executive officers
of Illinova who will not remain with the combined entity, no
individuals have been identified for this reduction. As a result, as
individuals are identified in connection with this reduction, the
expected benefits may not be as great as assumed and the adverse
consequences may be greater than assumed. Similarly, the synergies also
reflect a more profitable marketing of Illinova's excess generating
capacity. Changes in the energy marketplace, e.g., a reduction in the
wholesale price of electricity, would negatively impact this
assumption. Overall, the estimate of the accretiveness of the
transaction reflects the companies' current best estimates based upon
available information and numerous assumptions and, accordingly, may or
may not be achieved if business conditions change or the assumptions
that have been made do not prove to be accurate.
The integration of two large businesses is a complex process
which frequently is not as successful as the parties initially expect.
Problems can arise with respect to differing managerial styles,
differing compensation theories and a wide range of other issues.
The customers of the two businesses may not be as receptive to
the combination as expected. Similarly, the competitors of the two
businesses may respond adversely.
Significant regulatory approvals are necessary to complete the
transaction. For instance, Chevron, since it will own a significant
percentage of the combined entity, will be filing with the Securities
and Exchange Commission
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for an exemption under the Public Utility Holding Company Act of 1935,
and the approval of the Federal Energy Regulatory Commission and the
Illinois Commerce Commission will be necessary. There can be no
assurances that the exemption and approvals will be obtained on a
timely basis and on acceptable terms. In addition, Illinova, and to a
lesser extent Dynegy, operate in heavily regulated environments. Any
significant changes in these regulatory environments could negatively
impact the transaction and the combined entity.
The transaction is conditioned upon the sale of Illinova's
Clinton nuclear facility. As previously announced, Illinova is
currently in the process of negotiating the definitive agreements for
the sale of that facility. Should those negotiations not be successful,
other parties have expressed interest in purchasing the facility.
However, there can be no assurance that the facility will be sold in a
timely fashion.
The companies do not expect any adverse impact on the credit
ratings of their outstanding and future debt and other securities and
expect that the newly formed company will be able to issue the debt
necessary to complete the transaction on commercially reasonable terms.
The companies cannot predict with certainty the ultimate response of
the various rating agencies to the transactions, and the volatility of
the capital markets could make obtaining the necessary financing more
difficult than expected.
The energy industry is currently going through significant
deregulation. The impact of this deregulation on the combined
businesses, as well as on either business individually, cannot be
predicted with certainty. In the recent past, prices for energy have
been volatile. An increase in this volatility could impact the
companies and the expected benefits from the transactions.
Note to Editors: Today's news release, along with other news about Illinova and
Dynegy, is available on the Internet at http://www.Illinova.com and
http://www.Dynegy.com.
CONTACTS FOR ILLINOVA: CONTACTS FOR DYNEGY:
MEDIA: MEDIA:
Name: Shirley Swarthout Name: John Sousa
Phone: 217 424-6400 Phone: 713 506-3936
www.illinova.com www.dynegy.com
INVESTORS: INVESTORS:
Name: Greg Gudeman Name: Margaret Nollen
Phone: 217 424-8715 Phone: 713 767-8707
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