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AGREEMENT AND PLAN OF MERGER
among
DYNEGY INC.,
STANFORD, INC.,
SORIN, INC.,
BADIN, INC.
and
ENRON CORP.
Dated as of November 9, 2001
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TABLE OF CONTENTS
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Page
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ARTICLE 1 THE MERGERS.............................................................................................2
Section 1.1 The Mergers............................................................................2
Section 1.2 The Closing............................................................................2
Section 1.3 Effective Time.........................................................................2
ARTICLE 2 CERTIFICATE OF INCORPORATION AND BYLAWS OF NEWCO; ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
ENTITIES........................................................................................3
Section 2.1 Certificate of Incorporation and Bylaws of Newco.......................................3
Section 2.2 Articles of Incorporation of the Enron Surviving Entity................................3
Section 2.3 Bylaws of the Enron Surviving Entity...................................................3
Section 2.4 Articles of Incorporation of the Dynegy Surviving Entity...............................3
Section 2.5 Bylaws of the Dynegy Surviving Entity..................................................3
ARTICLE 3 DIRECTORS AND OFFICERS OF NEWCO AND OF THE SURVIVING ENTITIES...........................................3
Section 3.1 Board of Directors of Newco............................................................3
Section 3.2 Certain Officers of Newco..............................................................4
Section 3.3 Board of Directors of Enron Surviving Entity...........................................4
Section 3.4 Officers of Enron Surviving Entity.....................................................4
Section 3.5 Board of Directors of Dynegy Surviving Entity..........................................4
Section 3.6 Officers of Dynegy Surviving Entity....................................................4
ARTICLE 4 CONVERSION OF COMMON STOCK..............................................................................4
Section 4.1 Enron Merger Ratio.....................................................................4
Section 4.2 Conversion of Capital Stock of Enron and Enron Merger Sub..............................5
Section 4.3 Conversion of Capital Stock of Newco, Dynegy and Dynegy Merger Sub.....................6
Section 4.4 Exchange of Certificates...............................................................7
Section 4.5 Options...............................................................................10
Section 4.6 Dynegy Dissenting Shares..............................................................12
Section 4.7 Adjustment of Enron Merger Ratio......................................................12
Section 4.8 Rule 16b-3 Approval...................................................................12
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ENRON................................................................12
Section 5.1 Existence; Good Standing; Corporate Authority.........................................12
Section 5.2 Authorization, Validity and Effect of Agreements......................................13
Section 5.3 Capitalization........................................................................13
Section 5.4 Subsidiaries..........................................................................13
Section 5.5 Compliance with Laws; Permits.........................................................14
Section 5.6 No Conflict...........................................................................15
Section 5.7 SEC Documents.........................................................................15
Section 5.8 Litigation............................................................................17
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Section 5.9 Absence of Certain Changes............................................................17
Section 5.10 Taxes.................................................................................17
Section 5.11 Employee Benefit Plans................................................................18
Section 5.12 Labor Matters.........................................................................19
Section 5.13 Environmental Matters.................................................................20
Section 5.14 Intellectual Property.................................................................21
Section 5.15 Decrees, Etc..........................................................................21
Section 5.16 Insurance.............................................................................21
Section 5.17 No Brokers............................................................................22
Section 5.18 Opinions of Financial Advisors........................................................22
Section 5.19 Dynegy Stock Ownership................................................................22
Section 5.20 Vote Required.........................................................................22
Section 5.21 Regulation as a Utility...............................................................22
Section 5.22 Capital Expenditure Program...........................................................23
Section 5.23 Improper Payments.....................................................................23
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF DYNEGY, NEWCO, DYNEGY MERGER SUB AND ENRON MERGER SUB................23
Section 6.1 Existence; Good Standing; Corporate Authority.........................................23
Section 6.2 Authorization, Validity and Effect of Agreements......................................23
Section 6.3 Capitalization........................................................................24
Section 6.4 Subsidiaries..........................................................................24
Section 6.5 Compliance with Laws; Permits.........................................................25
Section 6.6 No Conflict...........................................................................25
Section 6.7 SEC Documents.........................................................................26
Section 6.8 Litigation............................................................................27
Section 6.9 Absence of Certain Changes............................................................27
Section 6.10 Taxes.................................................................................28
Section 6.11 Employee Benefit Plans................................................................29
Section 6.12 Labor Matters.........................................................................30
Section 6.13 Environmental Matters.................................................................30
Section 6.14 Intellectual Property.................................................................31
Section 6.15 Decrees, Etc..........................................................................31
Section 6.16 Insurance.............................................................................31
Section 6.17 No Brokers............................................................................32
Section 6.18 Opinion of Financial Advisor..........................................................32
Section 6.19 Enron Stock Ownership.................................................................32
Section 6.20 Vote Required.........................................................................32
Section 6.21 Regulation as a Utility...............................................................32
Section 6.22 Improper Payments.....................................................................33
ARTICLE 7 COVENANTS..............................................................................................33
Section 7.1 Conduct of Business...................................................................33
Section 7.2 No Solicitation by Enron..............................................................37
Section 7.3 No Solicitation by Dynegy.............................................................39
Section 7.4 Meetings of Shareholders..............................................................40
Section 7.5 Filings; Commercially Reasonable Best Efforts, Etc....................................41
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Section 7.6 Inspection............................................................................42
Section 7.7 Publicity.............................................................................43
Section 7.8 Registration Statement on Form S-4....................................................43
Section 7.9 Listing Application...................................................................44
Section 7.10 Letters of Accountants................................................................44
Section 7.11 Agreements of Rule 145 Affiliates.....................................................44
Section 7.12 Expenses..............................................................................45
Section 7.13 Indemnification and Insurance.........................................................45
Section 7.14 Agreements Regarding Enron Supplemental Indentures....................................46
Section 7.15 No Hire...............................................................................46
Section 7.16 Employee Matters......................................................................47
Section 7.17 Alternative Structure.................................................................47
ARTICLE 8 CONDITIONS.............................................................................................48
Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers...........................48
Section 8.2 Conditions to Obligation of Enron to Effect the Mergers...............................49
Section 8.3 Conditions to Obligation of Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub to
Effect the Mergers....................................................................50
ARTICLE 9 TERMINATION............................................................................................51
Section 9.1 Termination by Mutual Consent.........................................................51
Section 9.2 Termination by Dynegy or Enron........................................................51
Section 9.3 Termination by Enron..................................................................52
Section 9.4 Termination by Dynegy.................................................................53
Section 9.5 Effect of Termination.................................................................53
Section 9.6 Extension; Waiver.....................................................................55
ARTICLE 10 GENERAL PROVISIONS....................................................................................55
Section 10.1 Nonsurvival of Representations, Warranties and Agreements.............................55
Section 10.2 Notices...............................................................................55
Section 10.3 Assignment; Binding Effect; Benefit...................................................56
Section 10.4 Entire Agreement......................................................................57
Section 10.5 Amendments............................................................................57
Section 10.6 Governing Law.........................................................................57
Section 10.7 Counterparts..........................................................................57
Section 10.8 Headings..............................................................................57
Section 10.9 Interpretation........................................................................58
Section 10.10 Waivers...............................................................................58
Section 10.11 Incorporation of Disclosure Letters and Exhibits......................................59
Section 10.12 Severability..........................................................................59
Section 10.13 Enforcement of Agreement..............................................................59
Section 10.14 No Special Damages....................................................................59
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GLOSSARY OF DEFINED TERMS
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Defined Terms Where Defined
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1935 Act .......................................................................................... Section 5.6(b)
9.142% Preferred Stock ............................................................................ Section 5.3
Action ............................................................................................ Section 7.13(a)
Agreement ......................................................................................... Preamble
Applicable Laws ................................................................................... Section 5.5(a)
Articles of Merger ................................................................................ Section 1.3
Assumed Plans ..................................................................................... Section 4.5(a)
Certificates ...................................................................................... Section 4.4(c)
Chevron ........................................................................................... Section 6.3
ChevronTexaco ..................................................................................... Recitals
Closing ........................................................................................... Section 1.2
Closing Date ...................................................................................... Section 1.2
Code .............................................................................................. Recitals
Confidentiality Agreement ......................................................................... Section 7.6
Contingent Obligation ............................................................................. Section 7.1(n)
Cutoff Date ....................................................................................... Section 7.2(d), Section
7.3(d)
Debt .............................................................................................. Section 7.1(n)
Draft Third Quarter Report ........................................................................ Section 5.7
Dynegy ............................................................................................ Preamble
Dynegy Acquisition Proposal ....................................................................... Section 7.3(a)
Dynegy Benefit Plans .............................................................................. Section 6.11(a)
Dynegy Certificates ............................................................................... Section 4.4(a)
Dynegy Class A Common Stock ....................................................................... Recitals
Dynegy Class B Common Stock ....................................................................... Recitals
Dynegy Common Stock ............................................................................... Recitals
Dynegy Consideration .............................................................................. Section 4.3(b)
Dynegy Disclosure Letter .......................................................................... Article 6 Preface
Dynegy Dissenting Share ........................................................................... Section 4.6
Dynegy Material Adverse Effect .................................................................... Section 10.9(c)
Dynegy Merger ..................................................................................... Recitals
Dynegy Merger Ratio ............................................................................... Section 4.3(b)
Dynegy Merger Sub ................................................................................. Preamble
Dynegy Option ..................................................................................... Section 4.5(a)
Dynegy Permits .................................................................................... Section 6.5(b)
Dynegy Preferred Stock ............................................................................ Section 6.3
Dynegy Real Property .............................................................................. Section 6.5(c)
Dynegy Regulatory Approvals ....................................................................... Section 6.6(b)
Dynegy Reports .................................................................................... Section 6.7
Dynegy Series B Preferred Stock ................................................................... Recitals
Dynegy Shareholder Agreement ...................................................................... Section 6.3
Dynegy Stock Plans ................................................................................ Section 4.5(a)
Dynegy Subscription Agreement ..................................................................... Recitals
Dynegy Superior Proposal .......................................................................... Section 7.3(a)
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Dynegy Surviving Entity ........................................................................... Section 1.1(b)
Effective Time .................................................................................... Section 1.3
Enron ............................................................................................. Preamble
Enron Acquisition Proposal ........................................................................ Section 7.2(a)
Enron Additional Securities ....................................................................... Section 4.1(a)
Enron Benefit Plans ............................................................................... Section 5.11(a)
Enron Capital Budget .............................................................................. Section 5.22
Enron Certificates ................................................................................ Section 4.2(b)
Enron Common Stock ................................................................................ Recitals
Enron Convertible Securities ...................................................................... Section 4.1(b)
Enron Disclosure Letter ........................................................................... Article 5 Preface
Enron Filed Reports ............................................................................... Section 5.8
Enron Material Adverse Effect ..................................................................... Section 10.9(c)
Enron Merger ...................................................................................... Recitals
Enron Merger Ratio. ............................................................................... Section 4.1(a)
Enron Merger Sub .................................................................................. Preamble
Enron Option ...................................................................................... Section 4.5(a)
Enron Parity Price ................................................................................ Section 4.1(c)
Enron Permits ..................................................................................... Section 5.5(b)
Enron Preferred Stock ............................................................................. Section 5.3
Enron Real Property ............................................................................... Section 5.5(c)
Enron Regulatory Approvals ........................................................................ Section 5.6(b)
Enron Reports ..................................................................................... Section 5.7
Enron Stock Plans ................................................................................. Section 4.5(a)
Enron Superior Proposal ........................................................................... Section 7.2(a)
Enron Surviving Entity ............................................................................ Section 1.1(a)
Enron Utility ..................................................................................... Section 5.21(a)
Environmental Laws ................................................................................ Section 5.13(a)
ERISA ............................................................................................. Section 5.11(a)
ERISA Affiliate ................................................................................... Section 5.11(b)
Exchange Act ...................................................................................... Section 4.8
Exchange Agent .................................................................................... Section 4.4(b)
Exchange Fund ..................................................................................... Section 4.4(b)
Excluded Convertible Securities ................................................................... Section 4.1(e)
Excluded Person ................................................................................... Section 7.13(a)
FERC .............................................................................................. Section 5.6(b)
Form S-4 .......................................................................................... Section 7.8(a)
Former Enron Directors ............................................................................ Section 3.1(a)
Former Dynegy Directors ........................................................................... Section 3.1(a)
Hazardous Materials ............................................................................... Section 5.13(b)
HSR Act ........................................................................................... Section 5.6(b)
IBCA .............................................................................................. Section 1.1(b)
Illinois Power .................................................................................... Section 6.21(a)
Illinova .......................................................................................... Section 6.21(a)
Indemnified Parties ............................................................................... Section 7.13(a)
Letter of Transmittal ............................................................................. Section 4.4(c)
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Liens ............................................................................................. Section 5.4
Material Adverse Effect ........................................................................... Section 10.9(c)
Mergers ........................................................................................... Recitals
Newco ............................................................................................. Preamble
Newco Class A Common Stock ........................................................................ Recitals
Newco Class B Common Stock ........................................................................ Recitals
Newco Common Stock ................................................................................ Recitals
Newco Group ....................................................................................... Section 7.16
Newco Share Price ................................................................................. Section 4.4(f)
Non-U.S. Antitrust Laws ........................................................................... Section 7.5(a)(ii)
Northern .......................................................................................... Recitals
Northern Series A Preferred Stock ................................................................. Recitals
NYSE .............................................................................................. Section 4.1(c)
OBCA .............................................................................................. Section 1.1(a)
Original Outstanding Enron Shares ................................................................. Section 4.1(a)
Other Non-U.S. Jurisdictions ...................................................................... Section 8.1(c)
Proxy Statement/Prospectus ........................................................................ Section 7.8(a)
Returns ........................................................................................... Section 5.10(a)
Rule 145 Affiliates ............................................................................... Section 7.11
Rule 16b-3 ........................................................................................ Section 4.8
Sales Consideration ............................................................................... Section 4.1(d)
SEC ............................................................................................... Section 4.5(b)
Second Preferred Stock ............................................................................ Section 5.3
Securities Act .................................................................................... Section 4.4(e)
September 30, 2001 Balance Sheet .................................................................. Section 5.7
Series B Preferred Stock .......................................................................... Section 5.3
Series C Preferred Stock .......................................................................... Section 5.3
Significant Subsidiary ............................................................................ Section 5.4
Specified Jurisdictions ........................................................................... Section 8.1(c)
Subsidiary ........................................................................................ Section 10.9(d)
Tax qualified plans ............................................................................... Section 7.16
Taxes ............................................................................................. Section 5.10(d)
Termination Date .................................................................................. Section 9.2(a)
Third-Party Provisions ............................................................................ Section 10.3
Zeros ............................................................................................. Section 5.3
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of November 9, 2001, is by and among Dynegy Inc., an Illinois corporation
("Dynegy"), Stanford, Inc., a Delaware corporation and wholly owned subsidiary
of Dynegy ("Newco"), Sorin, Inc., an Oregon corporation and wholly owned
subsidiary of Newco ("Enron Merger Sub"), Badin, Inc., an Illinois corporation
and wholly owned subsidiary of Newco ("Dynegy Merger Sub"), and Enron Corp., an
Oregon corporation ("Enron").
RECITALS
A. The Enron Merger. At the Effective Time, the parties intend
to effect a merger of Enron Merger Sub with and into Enron, with Enron being the
surviving entity (the "Enron Merger"), pursuant to which each share of common
stock, no par value, of Enron ("Enron Common Stock") will be converted into
0.2685 shares of Class A common stock, par value $.01 per share, of Newco
("Newco Class A Common Stock"), subject to adjustment.
B. The Dynegy Merger. Concurrently with the Enron Merger, the
parties intend to effect a merger of Dynegy Merger Sub with and into Dynegy,
with Dynegy being the surviving entity (the "Dynegy Merger" and, together with
the Enron Merger, the "Mergers"), pursuant to which (i) each share of Class A
common stock, no par value, of Dynegy ("Dynegy Class A Common Stock") will be
converted into one share of Newco Class A Common Stock and (ii) each share of
Class B common stock, no par value, of Dynegy ("Dynegy Class B Common Stock"
and, together with the Dynegy Class A Common Stock, the "Dynegy Common Stock")
will be converted into one share of Class B common stock, par value $.01 per
share, of Newco ("Newco Class B Common Stock" and, together with the Newco Class
A Common Stock, the "Newco Common Stock").
C. Intended U.S. Tax Consequences. The parties to this
Agreement intend that, for federal income tax purposes, the Mergers shall
qualify as transfers of Enron Common Stock and Dynegy Common Stock to Newco in a
transaction qualifying under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code").
D. Intended U.S. Accounting Treatment. The parties to this
Agreement intend that the Mergers be treated as the purchase of Enron by Dynegy
for accounting purposes.
E. Preferred Stock Subscription Agreements. Concurrently with
the execution and delivery of this Agreement, (i) Dynegy is entering into a
Subscription Agreement with Northern Natural Gas Company ("Northern") and Enron
pursuant to which Dynegy is agreeing to purchase from Northern 1,000 shares of
its Series A Preferred Stock (the "Northern Series A Preferred Stock"); and (ii)
ChevronTexaco Corporation ("ChevronTexaco") is entering into a Subscription
Agreement with Dynegy (the "Dynegy Subscription Agreement") pursuant to which
ChevronTexaco is agreeing to purchase from Dynegy 150,000 shares of its Series B
Mandatorily Convertible Redeemable Preferred Stock, no par value (the "Dynegy
Series B Preferred Stock").
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NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGERS
Section 1.1 The Mergers.
(a) Upon the terms and subject to conditions of this
Agreement, at the Effective Time, Enron Merger Sub shall be merged with and into
Enron in accordance with this Agreement, and the separate corporate existence of
Enron Merger Sub shall thereupon cease. Enron shall be the surviving entity in
the Enron Merger (sometimes hereinafter referred to as the "Enron Surviving
Entity"). The Enron Merger shall have the effects specified herein and in the
Business Corporation Act of the State of Oregon (the "OBCA").
(b) Upon the terms and subject to conditions of this
Agreement, at the Effective Time, Dynegy Merger Sub shall be merged with and
into Dynegy in accordance with this Agreement, and the separate corporate
existence of Dynegy Merger Sub shall thereupon cease. Dynegy shall be the
surviving entity in the Dynegy Merger (sometimes hereinafter referred to as the
"Dynegy Surviving Entity"). The Dynegy Merger shall have the effects specified
herein and in the Business Corporation Act of the State of Illinois (the
"IBCA").
Section 1.2 The Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Mergers (the "Closing") shall
take place (a) at the offices of Baker Botts L.L.P., One Shell Plaza, 910
Louisiana, Houston, Texas 77002, at 9:00 a.m., local time, on the first business
day immediately following the day on which the last to be fulfilled or waived of
the conditions set forth in Section 8.1, or, if on such day any condition set
forth in Section 8.2 or Section 8.3 has not been fulfilled or waived, as soon as
practicable after all the conditions set forth in Article 8 (other than the
conditions that by their terms are only capable of being satisfied on the
Closing Date) have been fulfilled or waived in accordance herewith or (b) at
such other time, date or place as Dynegy and Enron may agree, but in no event
prior to the expiration of a period of six months after the initial purchase of
shares of Dynegy Series B Preferred Stock by ChevronTexaco pursuant to the
Dynegy Subscription Agreement. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
Section 1.3 Effective Time. On the Closing Date, (i) Dynegy,
Enron and Enron Merger Sub shall cause articles of merger meeting the
requirements of Section 60.494 of the OBCA to be properly executed and filed in
accordance with the OBCA and (ii) Dynegy, Enron and Dynegy Merger Sub shall
cause articles of merger meeting the requirements of Section 11.25 of the IBCA
to be properly executed and filed in accordance with the IBCA (collectively, the
"Articles of Merger"). The Mergers shall become effective at the time that
Dynegy and Enron shall have agreed upon and designated in the respective
Articles of Merger as the effective time thereof (the "Effective Time").
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ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS OF NEWCO;
ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING ENTITIES
Section 2.1 Certificate of Incorporation and Bylaws of Newco.
At or prior to the Effective Time, Dynegy and Newco shall take all action as may
be necessary to cause Newco's certificate of incorporation and bylaws to be
amended and restated as of the Effective Time as set forth in Exhibits 2.1(a)
(subject to any adjustments necessary to permit Newco to fulfill its obligations
under Section 7.14) and 2.1(b) hereto, respectively, and to reflect that Newco
shall be named "Dynegy Inc."
Section 2.2 Articles of Incorporation of the Enron Surviving
Entity. As of the Effective Time, the articles of incorporation of Enron in
effect immediately prior to the Effective Time shall be the articles of
incorporation of the Enron Surviving Entity, until duly amended in accordance
with applicable law.
Section 2.3 Bylaws of the Enron Surviving Entity. As of the
Effective Time, the bylaws of Enron in effect immediately prior to the Effective
Time shall be the bylaws of the Enron Surviving Entity, until duly amended in
accordance with applicable law; provided that the number of directors of the
Enron Surviving Entity shall be changed to equal the number of directors of
Enron Merger Sub immediately prior to the Effective Time.
Section 2.4 Articles of Incorporation of the Dynegy Surviving
Entity. As of the Effective Time, the articles of incorporation of Dynegy in
effect immediately prior to the Effective Time shall be the articles of
incorporation of the Dynegy Surviving Entity, until duly amended in accordance
with applicable law.
Section 2.5 Bylaws of the Dynegy Surviving Entity. As of the
Effective Time, the bylaws of Dynegy Merger Sub in effect immediately prior to
the Effective Time shall be the bylaws of the Dynegy Surviving Entity, until
duly amended in accordance with applicable law; provided that the number of
directors of the Dynegy Surviving Entity shall be changed to equal the number of
directors of Dynegy Merger Sub immediately prior to the Effective Time.
ARTICLE 3
DIRECTORS AND OFFICERS OF NEWCO AND
OF THE SURVIVING ENTITIES
Section 3.1 Board of Directors of Newco.
(a) At the Effective Time, the Board of Directors of Newco
shall consist of not more than 15 members, at least three of which shall be
designated by Enron, after consultation with Dynegy, before the Effective Time
("Former Enron Directors"). Prior to the Effective Time, Dynegy shall, after
consultation with Enron, determine the total number of directors on the Board of
Directors of Newco effective as of the Effective Time and the number of Former
Enron Directors (in each case subject to the preceding sentence) and designate
the current members of the Dynegy Board of Directors that will serve on the
Newco Board of
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Directors as of the Effective Time ("Former Dynegy Directors"). Charles L.
Watson shall be the Chairman of the Board of Newco. From and after the Effective
Time, each person so designated shall serve as a director of Newco until such
person's successor shall be elected and qualified or such person's earlier
death, resignation or removal in accordance with the certificate of
incorporation and bylaws of Newco.
(b) Prior to the Effective Time, Dynegy shall cause Newco to
take such action as may be necessary to cause the Dynegy designees and the Enron
designees to be elected to the Board of Directors of Newco as of the Effective
Time.
Section 3.2 Certain Officers of Newco. From and after the
Effective Time, Charles L. Watson shall be the Chief Executive Officer of Newco
and Stephen W. Bergstrom shall be the President and Chief Operating Officer of
Newco.
Section 3.3 Board of Directors of Enron Surviving Entity. The
directors of Enron Merger Sub immediately prior to the Effective Time shall be
the directors of the Enron Surviving Entity as of the Effective Time, until
their successors shall be elected and qualified or their earlier death,
resignation or removal in accordance with the articles of incorporation and
bylaws of the Enron Surviving Entity.
Section 3.4 Officers of Enron Surviving Entity. The officers
of Enron immediately prior to the Effective Time shall be the officers of the
Enron Surviving Entity as of the Effective Time, until their successors shall be
appointed or their earlier death, resignation or removal in accordance with the
articles of incorporation and bylaws of the Enron Surviving Entity.
Section 3.5 Board of Directors of Dynegy Surviving Entity. The
directors of Dynegy Merger Sub immediately prior to the Effective Time shall be
the directors of the Dynegy Surviving Entity as of the Effective Time, until
their successors shall be elected and qualified or their earlier death,
resignation or removal in accordance with the articles of incorporation and
bylaws of the Dynegy Surviving Entity.
Section 3.6 Officers of Dynegy Surviving Entity. The officers
of Dynegy immediately prior to the Effective Time shall be the officers of the
Dynegy Surviving Entity as of the Effective Time, until their successors shall
be appointed or their earlier death, resignation or removal in accordance with
the articles of incorporation and bylaws of the Dynegy Surviving Entity.
ARTICLE 4
CONVERSION OF COMMON STOCK
Section 4.1 Enron Merger Ratio. For purposes of this
Agreement:
(a) The "Enron Merger Ratio" shall equal 0.2685, subject to
adjustment as provided in this Section 4.1. If, on or after the date of
this Agreement, Enron issues or sells any shares of Enron Common Stock
or any Enron Convertible Securities, other than Excluded Convertible
Securities and securities issued upon conversion, exercise or
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exchange of Excluded Convertible Securities (collectively, the "Enron
Additional Securities"), for Sales Consideration per share of Enron
Common Stock less than the Enron Parity Price as of the date a price is
determined pursuant to a binding agreement for such issuance or sale,
then the Enron Merger Ratio shall be adjusted by multiplying the Enron
Merger Ratio immediately prior to such adjustment by a fraction, (i)
the numerator of which is the sum of (a) the number of fully diluted
shares of Enron Common Stock outstanding (calculated using the treasury
stock method) immediately prior to the adjustment (the "Original
Outstanding Enron Shares") plus (b) the aggregate Sales Consideration
for such Enron Additional Securities divided by the Enron Parity Price,
and (ii) the denominator of which is the sum of the Original
Outstanding Enron Shares plus the number of shares of Enron Common
Stock represented by such Enron Additional Securities.
(b) "Enron Convertible Securities" means any shares of capital
stock or securities convertible into or exchangeable for Enron Common
Stock, or any options, rights or warrants exercisable to purchase Enron
Common Stock.
(c) "Enron Parity Price" means, with respect to any date, the
product of (i) the Enron Merger Ratio on such date multiplied by (ii)
the per share last reported price of the Dynegy Class A Common Stock as
reported on the consolidated transaction reporting system for
securities traded on the New York Stock Exchange, Inc. ("NYSE") (as
reported in the New York City edition of The Wall Street Journal or, if
not reported thereby, another authoritative source) on such date.
(d) "Sales Consideration" with respect to any issuance or sale
of Enron Additional Securities means the aggregate of (i) the cash
consideration, (ii) the trading value (based on the average last
reported prices therefor for the five consecutive trading days ending
on the first trading day prior to such date as quoted by an
authoritative source agreed upon by Dynegy and Enron) for any listed or
traded securities, and (iii) the fair market value (as determined by
agreement of Dynegy and Enron) for any other consideration, in each
case received therefor or to be received upon the exercise of any
option or warrant. In the event of the issuance of any Enron
Convertible Securities, the shares of Enron Common Stock issuable with
respect to such Enron Convertible Securities shall be deemed to be
issued in such transaction on an as converted basis.
(e) "Excluded Convertible Securities" means (i) the Northern
Series A Preferred Stock, (ii) any Enron Convertible Securities
outstanding on the date of this Agreement and disclosed, or not
required to be disclosed, pursuant to this Agreement, other than the
first two items of Section 5.3 of the Enron Disclosure Letter, and
(iii) employee stock options granted after the date hereof permitted by
Section 7.1(f), provided that the exercise price thereof is not less
than the fair market value on the date of grant (as provided in the
applicable plan).
Section 4.2 Conversion of Capital Stock of Enron and Enron
Merger Sub.
(a) At the Effective Time, each share of common stock, no par
value, of Enron Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Enron Merger and without any action on
the part of the holder thereof, be converted
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into and become the number of fully paid and nonassessable shares of common
stock, no par value, of the Enron Surviving Entity equal to the quotient of the
number of fully diluted shares of Enron Common Stock outstanding immediately
prior to the Effective Time divided by 1,000.
(b) At the Effective Time, each share of Enron Common Stock
issued and outstanding immediately prior to the Effective Time, including any
shares subject to employment-related restrictions (other than shares of Enron
Common Stock to be canceled without payment of any consideration therefor
pursuant to Section 4.2(c)), shall, by virtue of the Enron Merger and without
any action on the part of the holder thereof, be converted into a fraction of a
share of Newco Class A Common Stock equal to the Enron Merger Ratio and
thereupon shall cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of such shares of Enron Common Stock shall
thereafter cease to have any rights with respect to such shares of Enron Common
Stock, except the right to receive, without interest, certificates for shares of
Newco Class A Common Stock in accordance with Section 4.4(c) and cash for
fractional shares in accordance with Section 4.4(c) and Section 4.4(f) upon the
surrender of the certificate or certificates that immediately prior to the
Effective Time represented shares of Enron Common Stock ("Enron Certificates").
(c) Each share of Enron Common Stock held in Enron's treasury
and each share of Enron Common Stock owned by Enron, Newco, Dynegy, Dynegy
Merger Sub or Enron Merger Sub shall, at the Effective Time and by virtue of the
Enron Merger, cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor, and no shares of capital stock of Newco
or other consideration shall be delivered in exchange therefor.
(d) At the Effective Time, each share of Enron Preferred Stock
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and unaffected by the Enron Merger.
Section 4.3 Conversion of Capital Stock of Newco, Dynegy and
Dynegy Merger Sub.
(a) At the Effective Time, each share of common stock, no par
value, of Dynegy Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Dynegy Merger and without any action on
the part of the holder thereof, be converted into and become one fully paid and
nonassessable share of common stock, no par value, of the Dynegy Surviving
Entity.
(b) At the Effective Time, (i) each share of Dynegy Class A
Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dynegy Dissenting Shares and shares of Dynegy Class A Common Stock
to be canceled without payment of any consideration therefor pursuant to Section
4.3(c)) shall, by virtue of the Dynegy Merger and without any action on the part
of the holder thereof, be converted into one share (the "Dynegy Merger Ratio")
of Newco Class A Common Stock and (ii) each share of Dynegy Class B Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Dynegy Dissenting Shares and shares of Dynegy Class B Common Stock to be
canceled without payment of any consideration therefor pursuant to Section
4.3(c)) shall, by virtue of the Dynegy Merger and without any action on the part
of the holder thereof, be converted into one share of
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Newco Class B Common Stock (collectively, the "Dynegy Consideration"). At the
Effective Time, each share of Dynegy Common Stock shall, by virtue of the Dynegy
Merger and without any action on the part of the holder thereof, cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of shares of Dynegy Common Stock (other than Dynegy Dissenting Shares and
shares of Dynegy Common Stock to be canceled without payment of any
consideration therefor pursuant to Section 4.3(c)) shall thereafter cease to
have any rights with respect to such shares of Dynegy Common Stock.
(c) Each share of Dynegy Common Stock issued and held in
Dynegy's treasury and each share of Dynegy Common Stock owned by Enron shall, at
the Effective Time and by virtue of the Dynegy Merger, cease to be outstanding
and shall be canceled and retired without payment of any consideration therefor,
and no shares of capital stock of Newco or other consideration shall be
delivered in exchange therefor.
(d) At the Effective Time, each share of Dynegy Series B
Preferred Stock issued and outstanding immediately prior to the Effective Time,
if any, shall remain outstanding and unaffected by the Dynegy Merger.
(e) Each share of Newco Common Stock and all other shares of
capital stock of Newco issued and outstanding immediately prior to the Effective
Time shall, at the Effective Time and without any action on the part of Newco or
the holder thereof, cease to be outstanding and shall be canceled and retired
without payment of any consideration therefor, and no shares of capital stock of
Newco or other consideration shall be delivered in exchange therefor.
Section 4.4 Exchange of Certificates.
(a) From and after the Effective Time, each outstanding
certificate which prior to the Effective Time represented shares of Dynegy
Common Stock ("Dynegy Certificates") shall be deemed for all purposes to
evidence ownership of, and to represent, the shares of Newco Common Stock into
which the shares of Dynegy Common Stock represented by such Dynegy Certificate
have been converted as herein provided. The registered owner on the books and
records of Dynegy or its transfer agent of any such Dynegy Certificate as of the
Effective Time shall, until such Dynegy Certificate shall have been surrendered
for transfer or otherwise accounted for to Newco or its transfer agent, have and
be entitled to exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the shares of Newco Common
Stock evidenced by such Dynegy Certificate as above provided. Following the
Effective Time, each holder of record of one or more Dynegy Certificates may,
but shall not be required to, surrender any Dynegy Certificate for cancellation
to Newco or its transfer agent, and the holder of such Dynegy Certificate shall
be entitled to receive in exchange therefor a certificate representing that
number of shares of Newco Common Stock which such holder has the right to
receive pursuant to the provisions of this Article 4, and the Dynegy Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of shares of Dynegy Common Stock that is not registered in the
transfer records of Newco or Dynegy, a certificate representing the proper
number of shares of Newco Common Stock may be issued to such a transferee if the
Dynegy Certificate representing such shares of Dynegy Common Stock is presented
to Newco or its transfer agent, accompanied by all documents
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required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(b) As of the Effective Time, Newco shall appoint Mellon
Investor Services LLC or such other party reasonably satisfactory to Enron as
exchange agent (the "Exchange Agent"), and Newco shall, when and as needed,
deposit, or cause to be deposited with the Exchange Agent for the benefit of the
holders of shares of Enron Common Stock for exchange in accordance with this
Article 4, certificates representing the shares of Newco Common Stock to be
issued pursuant to Section 4.2 and delivered pursuant to this Section 4.4 in
exchange for outstanding shares of Enron Common Stock. When and as needed, Newco
shall provide the Exchange Agent immediately following the Effective Time cash
sufficient to pay cash in lieu of fractional shares in accordance with Section
4.4(c) and (f) (such cash and certificates for shares of Newco Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(c) Promptly after the Effective Time, Newco shall cause the
Exchange Agent to mail to each holder of record of one or more Enron
Certificates (together with the Dynegy Certificates, the "Certificates") (other
than to holders of shares of Enron Common Stock that, pursuant to Section
4.2(c), are canceled without payment of any consideration therefor): (A) a
letter of transmittal (the "Letter of Transmittal"), which shall specify that
delivery shall be effected, and risk of loss and title to the Enron Certificates
shall pass, only upon delivery of the Enron Certificates to the Exchange Agent
and shall be in such form and have such other provisions as Newco may reasonably
specify and (B) instructions for use in effecting the surrender of the Enron
Certificates in exchange for certificates representing shares of Newco Common
Stock and cash in lieu of fractional shares, if any. Upon surrender of an Enron
Certificate for cancellation to the Exchange Agent together with such Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Enron Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
Newco Common Stock and (y) a check representing the amount of cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, which
such holder has the right to receive pursuant to the provisions of this Article
4, after giving effect to any required withholding tax, and the Enron
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of Enron Certificates. In the event of
a transfer of ownership of Enron Common Stock that is not registered in the
transfer records of Enron, a certificate representing the proper number of
shares of Newco Common Stock, together with a check for the cash to be paid in
lieu of fractional shares, if any, may be issued to such a transferee if the
Enron Certificate representing such Enron Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
(d) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the Effective Time with
respect to shares of Newco Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Enron Certificate with
respect to the shares of Newco Common Stock represented by such Enron
Certificate as a result of the conversion provided in Section 4.2(b) until such
Enron Certificate is surrendered as provided herein. Subject to the effect of
applicable laws,
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following surrender of any such Enron Certificate, there shall be paid to the
holder of the Enron Certificates so surrendered, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable and not paid with
respect to the number of whole shares of Newco Common Stock issued pursuant to
Section 4.2, less the amount of any withholding taxes, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Newco
Common Stock, less the amount of any withholding taxes.
(e) At or after the Effective Time, the Enron Surviving Entity
and the Dynegy Surviving Entity shall pay from funds on hand at the Effective
Time any dividends or make other distributions with a record date prior to the
Effective Time that may have been declared or made by Enron or Dynegy,
respectively, on shares of Enron Common Stock or Dynegy Common Stock,
respectively, that remain unpaid at the Effective Time, and after the Effective
Time, there shall be no transfers on the stock transfer books of the Enron
Surviving Entity of the shares of Enron Common Stock, or on the stock transfer
books of the Dynegy Surviving Entity of the shares of Dynegy Common Stock, that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Enron Certificates are presented to the Enron Surviving Entity
or Dynegy Certificates are presented to the Dynegy Surviving Entity, the
presented Certificates shall be canceled and exchanged for certificates
representing shares of Newco Common Stock and cash in lieu of fractional shares,
if any, deliverable in respect thereof pursuant to this Agreement in accordance
with the procedures set forth in this Article 4. Certificates surrendered for
exchange by any person constituting an "affiliate" of Dynegy or Enron for
purposes of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), shall not be exchanged until Newco has received a written
agreement from such person as provided in Section 7.11.
(f) No fractional shares of Newco Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional shares of Newco
Common Stock pursuant to Section 4.2(b), cash adjustments will be paid to
holders in respect of any fractional shares of Newco Common Stock that would
otherwise be issuable, and the amount of such cash adjustment shall be equal to
such fractional proportion of the Newco Share Price. For purposes of this
Agreement, the "Newco Share Price" shall mean the average of the per share last
reported prices of the Dynegy Class A Common Stock as reported on the
consolidated transaction reporting system for securities traded on the NYSE (as
reported in the New York City edition of The Wall Street Journal or, if not
reported thereby, another authoritative source) for the 20 consecutive trading
days ending on the fifth trading day prior to the Closing Date, appropriately
adjusted for any stock splits, reverse stock splits, stock dividends,
recapitalizations or other similar transactions.
(g) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any certificates for shares of Newco Common
Stock) that remains undistributed to the former shareholders of Enron one year
after the Effective Time shall be delivered to Newco. Any former shareholders of
Enron who have not theretofore complied with this Article 4 shall thereafter
look only to Newco for delivery of certificates representing their shares of
Newco Common Stock and cash in lieu of fractional shares, if any, and for any
unpaid
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dividends and distributions on the shares of Newco Common Stock deliverable to
such former shareholder pursuant to this Agreement.
(h) None of Newco, Dynegy, Enron, the Dynegy Surviving Entity,
the Enron Surviving Entity, the Exchange Agent or any other person shall be
liable to any person for any portion of the Exchange Fund properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
(i) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such 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
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate certificates representing the shares of Newco Common
Stock, cash in lieu of fractional shares, if any, and unpaid dividends and
distributions on shares of Newco Common Stock deliverable in respect thereof
pursuant to this Agreement.
Section 4.5 Options.
(a) At the Effective Time, (i) all options to acquire shares
of Enron Common Stock outstanding at the Effective Time under Enron's stock
plans (collectively, the "Enron Stock Plans") identified in Section 4.5(a) of
the Enron Disclosure Letter (individually, a "Enron Option" and collectively,
the "Enron Options") and (ii) all options to acquire shares of Dynegy Class A
Common Stock outstanding at the Effective Time under Dynegy's stock plans
(collectively, the "Dynegy Stock Plans") identified in Section 4.5(a) of the
Dynegy Disclosure Letter (individually, a "Dynegy Option" and collectively, the
"Dynegy Options") shall remain outstanding following the Effective Time, subject
to the modifications described in this Section 4.5(a). Prior to the Effective
Time, Enron, Dynegy and Newco shall take all actions (if any) as may be required
to permit the assumption of such Enron Options and Dynegy Options by Newco
pursuant to this Section 4.5(a). At the Effective Time, the Enron Options and
the Dynegy Options shall be assumed and adjusted by Newco in the manner set
forth herein and with respect to Dynegy Options that are incentive stock options
within the meaning of Section 422 of the Code in such manner that Newco is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Code. Each Enron Option
assumed and adjusted by Newco shall be subject to the same terms and conditions
as under the applicable Enron Stock Plan and the applicable option agreement
entered into pursuant thereto, except that, immediately following the Effective
Time, (A) each Enron Option shall be an option for that whole number of shares
of Newco Class A Common Stock (rounded up to the next whole share) equal to the
number of shares of Enron Common Stock subject to such Enron Option immediately
prior to the Effective Time multiplied by the Enron Merger Ratio, and (B) the
exercise price per Newco share shall be an amount equal to the exercise price
per share of Enron Common Stock subject to such Enron Option in effect
immediately prior to the Effective Time divided by the Enron Merger Ratio (the
price per share, as so determined, being rounded down to the nearest whole
cent). Each Dynegy Option assumed and adjusted by Newco shall be subject to the
same terms and conditions as under the applicable Dynegy Stock Plan and the
applicable option agreement entered into pursuant thereto, except that,
immediately following the Effective Time, each Dynegy Option shall be an option
for the number of shares of Newco
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Class A Common Stock equal to the number of shares of Dynegy Common Stock
subject to such Dynegy Option immediately prior to the Effective Time. Without
limiting the foregoing, effective at the Effective Time, Newco shall assume the
Enron Corp. 1999 Stock Plan, Enron Corp. 1994 Stock Plan, Enron Corp. 1991 Stock
Plan, Dynegy Inc. 2000 Long Term Incentive Plan, Dynegy Inc. 2001 Non-Executive
Stock Incentive Plan and Dynegy Inc. 2001 Special Long-Term Incentive Plan
(collectively, the "Assumed Plans") for purposes of employing such plans to make
grants of stock options and other awards based on shares of Newco Class A Common
Stock following the Effective Time; to the extent that any obligation exists at
the Effective Time to issue Enron Common Stock or Dynegy Class A Common Stock
under any Assumed Plan, the obligation of Newco thereafter to issue Newco Common
Stock in fulfillment of such previous obligation shall be to issue the number of
shares of Newco Common Stock equal to (i) in the case of Enron Common Stock, the
number of shares (rounded to the nearest whole share) of Enron Common Stock
subject to such obligation multiplied by the Enron Merger Ratio and (ii) in the
case of Dynegy Class A Common Stock, the number of shares of Dynegy Class A
Common Stock subject to such obligation; provided, however, that, if the
obligation is an award of a specified dollar amount of Enron Common Stock or
Dynegy Common Stock, the substitution shall be effected simply by substituting
Newco Common Stock having the specified dollar value.
(b) At or prior to the Effective Time, Newco shall take all
corporate action necessary to reserve for issuance a number of shares of Newco
Class A Common Stock equal to the number of shares of Newco Class A Common Stock
available for issuance pursuant to the Assumed Plans (which number shall be the
sum of (i) the product (rounded to the nearest whole share) of the number of
shares of Enron Common Stock available for issuance immediately prior to the
Effective Time multiplied by the Enron Merger Ratio plus (ii) the number of
shares of Dynegy Common Stock available for issuance immediately prior to the
Effective Time). Promptly following the Closing Date, Newco shall file with the
Securities and Exchange Commission (the "SEC") a Registration Statement on Form
S-8 (or a post-effective amendment on Form S-8 with respect to the Form S-4 or
such other appropriate form) covering all such shares of Newco Class A Common
Stock and shall cause such registration statement to remain effective (and shall
cause the prospectus or prospectuses relating thereto to remain compliant with
applicable securities laws) for as long as there are outstanding any such Enron
Options or Dynegy Options or, with respect to Assumed Plans other than the Enron
Stock Plans or Dynegy Stock Plans, for as long as required under applicable
securities laws.
(c) Except as otherwise specifically provided by this Section
4.5, the terms of the Enron Options and Dynegy Options and the relevant Enron
Stock Plans and Dynegy Stock Plans, as in effect on the Effective Time, shall
remain in full force and effect with respect to the Enron Options and Dynegy
Options, as applicable, after giving effect to the Mergers and the assumptions
by Newco as set forth above; similarly, the terms of each other Assumed Plan
shall remain in full force and effect after giving effect to the Mergers and the
assumptions by Newco as set forth above. As soon as practicable following the
Effective Time, Newco shall deliver to the holders of Enron Options and Dynegy
Options and beneficiaries of awards under Assumed Plans other than Enron Stock
Plans and Dynegy Stock Plans appropriate notices setting forth the rights of
such holders and beneficiaries pursuant to the respective Enron Stock Plans and
Dynegy Stock Plans and other Assumed Plans and under the agreements evidencing
the grants of such Enron Options and Dynegy Options, and that such Enron Options
and Dynegy Options and such
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Assumed Plans shall be assumed by Newco and shall continue in effect on the same
terms and conditions (subject to any adjustments required by this Section 4.5).
Section 4.6 Dynegy Dissenting Shares. Notwithstanding anything
in this Agreement to the contrary, no share of Dynegy Common Stock the holder of
which shall have properly complied with the provisions of Section 11.70 of the
IBCA as to rights to dissent with respect to the Dynegy Merger (a "Dynegy
Dissenting Share") shall be deemed converted into and to represent the right to
receive the Dynegy Consideration hereunder; and the holders of Dynegy Dissenting
Shares, if any, shall be entitled to receive such consideration as shall be
determined pursuant to and in accordance with the provisions of such Section
11.70; provided, however, that, if any holder fails to properly perfect or
exercise his or her rights to payment as provided in such Section 11.70, such
holder shall forfeit such right to payment for such Dynegy Dissenting Shares and
each such Dynegy Dissenting Share shall thereupon be deemed to be converted into
the right to receive the Dynegy Consideration.
Section 4.7 Adjustment of Enron Merger Ratio. If, subsequent
to the date of this Agreement but prior to the Effective Time, Dynegy changes
the number of shares of Dynegy Common Stock, or Enron changes the number of
shares of Enron Common Stock, issued and outstanding as a result of a stock
split, reverse stock split, stock dividend, recapitalization or other similar
transaction, the Enron Merger Ratio and other items dependent thereon shall be
appropriately adjusted.
Section 4.8 Rule 16b-3 Approval. Newco agrees that its Board
of Directors shall, at or prior to the Effective Time, adopt resolutions
specifically approving, for purposes of Rule 16b-3 ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the receipt,
pursuant to Section 4.2 or Section 4.3, of shares of Newco Common Stock, and of
options to acquire shares of Newco Class A Common Stock, by executive officers
or directors of Enron or Dynegy who become executive officers or directors of
Newco subject to Rule 16b-3.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ENRON
Except as set forth in the disclosure letter delivered to
Dynegy by Enron at or prior to the execution hereof (the "Enron Disclosure
Letter"), Enron represents and warrants to Dynegy, Newco, Dynegy Merger Sub and
Enron Merger Sub that:
Section 5.1 Existence; Good Standing; Corporate Authority.
Enron is a corporation duly incorporated, validly existing and of active status
under the laws of the State of Oregon. Enron is duly qualified to do business
and, to the extent such concept or similar concept exists in the relevant
jurisdiction, is in good standing under the laws of any jurisdiction in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified does not and is not reasonably likely to have,
individually or in the aggregate, an Enron Material Adverse Effect. Enron has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted. The copies of Enron's
articles of
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incorporation and bylaws previously made available to Dynegy are true and
correct and contain all amendments as of the date hereof.
Section 5.2 Authorization, Validity and Effect of Agreements.
Enron has the requisite corporate power and authority to execute and deliver
this Agreement and all other agreements and documents required to be executed
and delivered by Enron pursuant to this Agreement. The consummation by Enron of
the transactions contemplated hereby has been duly authorized (i) by the Board
of Directors of Enron by unanimous vote of the directors present and (ii) by all
other requisite corporate action on behalf of Enron, other than the approval
referred to in Section 5.20. This Agreement constitutes the valid and legally
binding obligation of Enron, enforceable against Enron in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Enron has taken all action necessary to render
the restrictions set forth in Section 60.825 to 60.845 of the OBCA and in
Article V of its articles of incorporation inapplicable to this Agreement and
the transactions contemplated hereby.
Section 5.3 Capitalization. The authorized capital stock of
Enron consists of 1,200,000,000 shares of Enron Common Stock and 16,500,000
shares of preferred stock, no par value ("Enron Preferred Stock"). As of October
31, 2001, there were (i) 743,905,381 outstanding shares of Enron Common Stock,
(ii) 85,479,162 shares of Enron Common Stock reserved for issuance upon exercise
of outstanding Enron Options, (iii) 6,400,000 shares of Enron Common Stock
reserved for issuance upon exercise of an option held by Bank of America, (iv)
167,053,369 shares of Enron Common Stock reserved for issuance upon conversion
of outstanding Enron convertible or exchangeable securities and (v)
1,570,934.568509 outstanding shares of Enron Preferred Stock, consisting of
1,137,991 shares of Cumulative Second Preferred Convertible Stock (the "Second
Preferred Stock"), 35.568509 shares of 9.142% Perpetual Second Preferred Stock
(the "9.142% Preferred Stock"), 250,000 shares of Mandatorily Convertible Junior
Preferred Stock, Series B (the "Series B Preferred Stock"), and 182,908 shares
of Mandatorily Convertible Single Reset Preferred Stock, Series C (the "Series C
Preferred Stock"). All such issued and outstanding shares of Enron Common Stock
and Enron Preferred Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date of this Agreement,
except as set forth in this Section 5.3 and except for shares delivered upon
exercises of options or conversions or exchanges of convertible or exchangeable
securities set forth in this Section 5.3 from October 31, 2001 to the date
hereof, there are no outstanding shares of capital stock of Enron, and there are
no options, warrants, calls, subscriptions, convertible securities or other
rights, agreements or commitments that may obligate Enron or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock or other
voting securities of Enron or any of its Significant Subsidiaries. Enron has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote, or (except for the Second Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Zero Coupon Convertible
Senior Notes due 2021 of Enron (the "Zeros")) which are convertible into or
exercisable for securities having the right to vote, with the shareholders of
Enron on any matter.
Section 5.4 Subsidiaries. For purposes of this Agreement,
"Significant Subsidiary" shall mean significant subsidiary as defined in Rule
1-02 of Regulation S-X of the Exchange Act. Each of Enron's Significant
Subsidiaries is a corporation or other legal entity
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duly organized, validly existing and, to the extent such concept or similar
concept exists in the relevant jurisdiction, in good standing under the laws of
its jurisdiction of incorporation or organization, has the corporate or other
entity power and authority to own, operate and lease its properties and to carry
on its business as it is now being conducted, and is duly qualified to do
business and is in good standing (where applicable) in each jurisdiction in
which the ownership, operation or lease of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing does not and is not
reasonably likely to have an Enron Material Adverse Effect. As of the date of
this Agreement, all of the outstanding shares of capital stock of, or other
ownership interests in, each of Enron's Significant Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or indirectly, by Enron free and clear of all mortgages, deeds of
trust, liens, security interests, pledges, leases, conditional sale contracts,
charges, privileges, easements, rights of way, reservations, options, rights of
first refusal and other encumbrances ("Liens").
Section 5.5 Compliance with Laws; Permits. Except for such
matters as, individually or in the aggregate, do not or are not reasonably
likely to have an Enron Material Adverse Effect and except for matters arising
under Environmental Laws, which are treated exclusively in Section 5.13, and for
tax matters, which are treated exclusively in Section 5.10:
(a) Neither Enron nor any Subsidiary of Enron is in violation
of any applicable law, rule, regulation, code, governmental
determination, order, treaty, convention, governmental certification
requirement or other public limitation, U.S. or non-U.S. (collectively,
"Applicable Laws"), and no claim is pending or, to the knowledge of
Enron, threatened with respect to any such matters. To the knowledge of
Enron, no condition exists which does or is reasonably likely to
constitute a violation of or deficiency under any Applicable Law by
Enron or any Subsidiary of Enron.
(b) Enron and each Subsidiary of Enron hold all permits,
licenses, certifications, variations, exemptions, orders, franchises
and approvals of all governmental or regulatory authorities necessary
for the conduct of their respective businesses as currently conducted
(the "Enron Permits"). All Enron Permits are in full force and effect
and there exists no default thereunder or breach thereof, and Enron has
no notice or actual knowledge that such Enron Permits will not be
renewed in the ordinary course after the Effective Time. No
governmental authority has given, or, to the knowledge of Enron,
threatened to give, any action to terminate, cancel or reform any Enron
Permit.
(c) Enron and each Subsidiary of Enron possess all permits,
licenses, operating authorities, orders, exemptions, franchises,
variances, consents, approvals or other authorizations required for the
present ownership and operation of all its real property or leaseholds
("Enron Real Property"). There exists no material default or breach
with respect to, and no party or governmental authority has taken or,
to the knowledge of Enron, threatened to take, any action to terminate,
cancel or reform any such permit, license, operating authority, order,
exemption, franchise, variance, consent, approval or other
authorization pertaining to Enron Real Property.
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Section 5.6 No Conflict.
(a) Neither the execution and delivery by Enron of this
Agreement nor the consummation by Enron of the transactions contemplated hereby
in accordance with the terms hereof will (i) subject to the approvals referred
to in Section 5.20, conflict with or result in a breach of any provisions of the
articles of incorporation or bylaws of Enron; (ii) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
give rise to a right of purchase under, or accelerate the performance required
by, or result in the creation of any Lien upon any of the properties of Enron or
its Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to Enron or any of
its Subsidiaries under, any of the terms, conditions or provisions of, any note,
bond, mortgage, indenture, deed of trust, license, concession, franchise,
permit, lease, contract, agreement, joint venture or other instrument or
obligation to which Enron or any of its Subsidiaries is a party, or by which
Enron or any of its Subsidiaries or any of their properties is bound or
affected; or (iii) subject to the filings and other matters referred to in
Section 5.6(b), contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, order or decree binding upon
or applicable to Enron or any of its Subsidiaries, except, in the case of
matters described in clause (ii) or (iii), as do not and are not reasonably
likely to have, individually or in the aggregate, an Enron Material Adverse
Effect.
(b) Neither the execution and delivery by Enron of this
Agreement nor the consummation by Enron of the transactions contemplated hereby
in accordance with the terms hereof will require any consent, approval,
qualification or authorization of, or filing or registration with, any court or
governmental or regulatory authority, other than (i) the filing of the Articles
of Merger provided for in Section 1.3, (i) the filing of a listing application
with the NYSE pursuant to Section 7.9, (iii) filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Exchange Act, the Securities Act, the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act"), or applicable state securities and
"Blue Sky" laws, (iv) filings, approvals and notifications required under
applicable non-U.S. competition, antitrust or premerger notification laws, (v)
filings with, and the approval of, or notices to, non-U.S. regulatory
authorities having jurisdiction over the Mergers set forth in Section 5.6(b)(v)
of the Enron Disclosure Letter, (vi) filings with, and the approval of, or
notices to, other state regulatory authorities having jurisdiction over the
Mergers set forth in Section 5.6(b)(vi) of the Enron Disclosure Letter (the
filings, approvals and notices in this clause (vi), collectively, the "Enron
Regulatory Approvals") and (vii) filings with, approvals of or notices to the
Federal Energy Regulatory Commission (the "FERC") in connection with the
Mergers, except for any consent, approval, qualification or authorization the
failure of which to obtain and for any filing or registration the failure of
which to make does not and is not reasonably likely to have an Enron Material
Adverse Effect.
Section 5.7 SEC Documents. Enron has filed with the SEC all
documents (including exhibits and any amendments thereto) required to be so
filed by it since January 1, 1999 pursuant to Sections 13(a), 14(a) and 15(d) of
the Exchange Act, and has made available (in paper form or via the internet) to
Dynegy each registration statement, report, proxy statement or information
statement (other than preliminary materials) it has so filed, each in the form
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(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Enron Reports") and has included in the Enron Disclosure
Letter a draft of its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001 (the "Draft Third Quarter Report"). As of its respective
date, each Enron Report (i) complied in all material respects in accordance with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder and (ii) 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 made therein, in the light of the circumstances under which they
were made, not misleading, except for such statements, if any, as have been
modified by subsequent filings with the SEC prior to the date hereof. Each of
the consolidated balance sheets included in or incorporated by reference into
the Enron Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of Enron and its
consolidated Subsidiaries as of its date, and each of the consolidated
statements of operations, cash flows and changes in shareholders' equity
included in or incorporated by reference into the Enron Reports (including any
related notes and schedules) fairly presents in all material respects the
results of operations, cash flows or changes in shareholders' equity, as the
case may be, of Enron and its consolidated Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to (x) such
exceptions as may be permitted by Form 10-Q of the SEC and (y) normal year-end
audit adjustments which will not be material), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. The draft consolidated balance sheet
of Enron and its consolidated Subsidiaries as of September 30, 2001 (the
"September 30, 2001 Balance Sheet") included in the Draft Third Quarter Report
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of Enron and its consolidated
Subsidiaries as of that date, and the consolidated statements of operations,
cash flows and changes in shareholders' equity included in the Draft Third
Quarter Report (including any related notes and schedules) fairly presents in
all material respects the results of operations, cash flows or changes in
shareholders' equity, as the case may be, of Enron and its consolidated
Subsidiaries for the period then ended (subject to (A) such exceptions as may be
permitted by Form 10-Q of the SEC, (B) normal year-end audit adjustments which
will not be material and (C) changes routinely anticipated in the preparation of
the final Quarterly Report on Form 10-Q for the quarter ended September 30, 2001
which will not be material), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Except as and to the extent set forth in the September
30, 2001 Balance Sheet, neither Enron nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or reserved against in,
a consolidated balance sheet of Enron and its consolidated Subsidiaries or in
the notes thereto prepared in accordance with generally accepted accounting
principles consistently applied, other than liabilities or obligations that were
incurred in the ordinary course of business since September 30, 2001 and
liabilities or obligations that do not and are not reasonably likely to have,
individually or in the aggregate, an Enron Material Adverse Effect. All reserves
or adjustments required by generally accepted accounting principles to be
reflected in the carrying value of the assets included in the September 30, 2001
Balance Sheet have been taken other than reserves or adjustments which do not
and are not reasonably likely to have, individually or in the aggregate, an
Enron Material Adverse Effect.
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Section 5.8 Litigation. Except as described in the Enron
Reports filed prior to the date of this Agreement and the Draft Third Quarter
Report (collectively, the "Enron Filed Reports") and except for tax matters,
which are treated exclusively in Section 5.10, there are no actions, suits or
proceedings pending against Enron or any of its Subsidiaries or, to Enron's
knowledge, threatened against Enron or any of its Subsidiaries, at law or in
equity or in any arbitration or similar proceedings, before or by any U.S.
federal, state or non-U.S. court, commission, board, bureau, agency or
instrumentality or any U.S. or non-U.S. arbitral or other dispute resolution
body, that are reasonably likely to have, individually or in the aggregate, an
Enron Material Adverse Effect.
Section 5.9 Absence of Certain Changes. Except as described in
the Enron Filed Reports, since December 31, 2000, there has not been (i) any
event or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate, an Enron Material
Adverse Effect, except for such changes or effects described in clause (1) of
the definition of Enron Material Adverse Effect resulting from changes in
general industry conditions or changes in general economic conditions, (ii) any
material change by Enron or any of its Subsidiaries, when taken as a whole, in
any of its accounting methods, principles or practices or any of its tax
methods, practices or elections, (iii) any declaration, setting aside or payment
of any dividend or distribution in respect of any capital stock of Enron or any
redemption, purchase or other acquisition of any of its securities, except
dividends on shares of Enron Common Stock at a rate of not more than $0.125 per
share per quarter, on shares of its Second Preferred Stock at a rate of not more
than $3.413 per share per quarter, on shares of its 9.142% Preferred Stock at an
annual rate of not more than $91.420 per share and on shares of its Series B
Preferred Stock at an annual rate of 6.5% of the liquidation preference thereof,
or (iv) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, except in the ordinary course of
business consistent with past practice.
Section 5.10 Taxes.
(a) All tax returns, statements, reports, declarations,
estimates and forms ("Returns") required to be filed by or with respect to Enron
or any of its Subsidiaries (including any Return required to be filed by an
affiliated, consolidated, combined, unitary or similar group for a taxable year
in which Enron or any of its Subsidiaries was included in such group) on or
prior to the date hereof have been properly filed on a timely basis with the
appropriate governmental authorities, except to the extent that any failure to
file does not and is not reasonably likely to have, individually or in the
aggregate, an Enron Material Adverse Effect, and all taxes due with such Returns
have been duly paid, or deposited in full on a timely basis or adequately
reserved for in accordance with generally accepted accounting principles, except
to the extent that any failure to pay or deposit or make adequate provision for
the payment of such taxes does not and is not reasonably likely to have,
individually or in the aggregate, an Enron Material Adverse Effect.
Representations made in this Section 5.10 are made to the knowledge of Enron to
the extent that the representations relate to a corporation which was, but is
not currently, a part of Enron's or any of its Subsidiaries' affiliated,
consolidated, combined, unitary or similar group.
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(b) Except to the extent not reasonably likely to have,
individually or in the aggregate, an Enron Material Adverse Effect, (i) no
audits or other administrative proceedings or court proceedings are presently
pending with regard to any taxes or Returns of Enron or any of its Subsidiaries
as to which any taxing authority has asserted in writing any claim; (ii) no
governmental authority is now asserting in writing any deficiency or claim for
taxes or any adjustment to taxes with respect to which Enron or any of its
Subsidiaries may be liable with respect to income and other material taxes that
have not been fully paid or finally settled; (iii) neither Enron nor any of its
Subsidiaries has any liability for taxes under Treas. Reg. ss. 1.1502-6 or any
similar provision of state, local, or non-U.S. tax law, except for taxes of the
affiliated group of which Enron or any of its Subsidiaries is the common parent,
within the meaning of Section 1504(a)(1) of the Code or any similar provision of
state, local, or non-U.S. tax law; and (iv) neither Enron nor any of its
Subsidiaries is a party to, is bound by or has any obligation under any tax
sharing, allocation or indemnity agreement or any similar agreement or
arrangement. Neither Enron nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount in connection with the
Mergers that would be reasonably likely to constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
(c) Neither Enron nor any of its Subsidiaries knows of any
fact, or has taken any action or has failed to take any action, as a result of
which the Mergers would not qualify as transfers of Enron Common Stock and
Dynegy Common Stock to Newco in a transaction qualifying under Section 351 of
the Code.
(d) For purposes of this Agreement, "tax" or "taxes" means all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
accumulated earnings, personal holding company, excess profits, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, disability, capital stock, or windfall profits
taxes, customs duties or other taxes, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
Section 5.11 Employee Benefit Plans.
(a) Section 5.11 of the Enron Disclosure Letter lists or
describes all Enron Benefit Plans. The term "Enron Benefit Plans" means all
material employee benefit plans and other material benefit arrangements,
including all "employee benefit plans" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not U.S.-based plans, and all other material employee benefit, bonus,
incentive, deferred compensation, stock option (or other equity-based
compensation), severance, employment, change in control, welfare (including
post-retirement medical and life insurance) and fringe benefit plans, practices
or agreements, whether or not subject to ERISA or U.S.-based and whether written
or oral, sponsored, maintained or contributed to or required to be contributed
to by Enron or any of its Subsidiaries, to which Enron or any of its
Subsidiaries is a party or is required to provide benefits under applicable law
or in which any person who is currently, has been or, prior to the Effective
Time, is expected to become an employee of Enron is a participant. Enron will
make available to Dynegy, within 30 days after the date hereof, with true and
complete copies of the Enron Benefit Plans and, if applicable, the most recent
trust agreements, Forms 5500, summary plan descriptions, funding statements,
annual reports and actuarial reports, if applicable, for each such plan.
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(b) Except for such matters as, individually or in the
aggregate, do not and are not reasonably likely to have an Enron Material
Adverse Effect: all applicable reporting and disclosure requirements have been
met with respect to Enron Benefit Plans; there has been no "reportable event,"
as that term is defined in Section 4043 of ERISA, with respect to Enron Benefit
Plans subject to Title IV of ERISA for which the 30-day reporting requirement
has not been waived; to the extent applicable, the Enron Benefit Plans comply
with the requirements of ERISA and the Code or with other applicable law, and
have been maintained and operated in accordance with their terms, and, to
Enron's knowledge, there are no breaches of fiduciary duty in connection with
the Enron Benefit Plans; there are no pending or, to Enron's knowledge,
threatened claims against or otherwise involving any Enron Benefit Plan; with
respect to the Enron Benefit Plans or any "employee pension benefit plans," as
defined in Section 3(2) of ERISA, that are or were subject to Title IV of ERISA
and have been maintained or contributed to within six years prior to the
Effective Time by Enron, its Subsidiaries or any trade or business (whether or
not incorporated) that is under common control, or that is treated as a single
employer, with Enron or any of its Subsidiaries under Section 414(b), (c), (m)
or (o) of the Code (an "ERISA Affiliate"), (i) neither Enron nor any of its
Subsidiaries has incurred any direct or indirect liability under Title IV of
ERISA in connection with any termination thereof or withdrawal therefrom; and
(ii) there does not exist any accumulated funding deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA, whether or not waived.
(c) Neither Enron nor any of its Subsidiaries nor any of its
ERISA Affiliates contributes to, or has an obligation to contribute to, a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, and the
execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit or compensation plan,
policy, arrangement or agreement or any trust or loan (in connection therewith)
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligations to fund benefits with respect to any employee of Enron
or any Subsidiary thereof which, individually or in the aggregate, are
reasonably likely to have an Enron Material Adverse Effect.
(d) Except as provided in this Agreement, since September 1,
2001, no U.S. Enron Benefit Plan has been amended or modified in a material
substantive respect and no awards or compensation has been made or committed to
or paid under any U.S. Enron Benefit Plan that was not in the ordinary course of
business and consistent with past practices.
Section 5.12 Labor Matters.
(a) As of the date of this Agreement, neither Enron nor any of
its Subsidiaries is a party to, or bound by, any collective bargaining agreement
or similar contract, agreement or understanding with a labor union or similar
labor organization that is material to Enron and its Subsidiaries, taken as a
whole. To the knowledge of Enron, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened that is reasonably likely to have an Enron Material Adverse Effect.
(b) Except for such matters as do not and are not reasonably
likely to have an Enron Material Adverse Effect and except as described in the
Enron Filed Reports, (i) neither
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Enron nor any Subsidiary of Enron has received any written complaint of any
unfair labor practice or other unlawful employment practice or any written
notice of any material violation of any federal, state or local statutes, laws,
ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices of, Enron or any
Subsidiary of Enron or the work conditions or the terms and conditions of
employment and wages and hours of their respective businesses and (ii) there are
no unfair labor practice charges or other employee related complaints against
Enron or any Subsidiary of Enron pending or, to the knowledge of Enron,
threatened, before any governmental authority by or concerning the employees
working in their respective businesses.
Section 5.13 Environmental Matters.
(a) Enron and each Subsidiary of Enron has been and is in
compliance with all applicable orders of any court, governmental authority or
arbitration board or tribunal and any applicable law, ordinance, rule,
regulation or other legal requirement (including common law) related to human
health and the environment ("Environmental Laws") except for such matters as do
not and are not reasonably likely to have, individually or in the aggregate, an
Enron Material Adverse Effect. There are no past or present facts, conditions or
circumstances that interfere with the conduct of any of their respective
businesses in the manner now conducted or which interfere with continued
compliance with any Environmental Law, except for any noncompliance or
interference that is not reasonably likely to have, individually or in the
aggregate, an Enron Material Adverse Effect.
(b) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, an Enron Material Adverse
Effect, (i) no judicial or administrative proceedings or governmental
investigations are pending or, to the knowledge of Enron, threatened against
Enron or its Subsidiaries that allege the violation of or seek to impose
liability pursuant to any Environmental Law, and (ii) there are no past or
present facts, conditions or circumstances at, on or arising out of, or
otherwise associated with, any current (or, to the knowledge of Enron or its
Subsidiaries, former) businesses, assets or properties of Enron or any
Subsidiary of Enron, including but not limited to on-site or off-site disposal,
release or spill of any material, substance or waste classified, characterized
or otherwise regulated as hazardous, toxic or otherwise harmful to human health
or the environment under Environmental Laws, including petroleum or petroleum
products or byproducts ("Hazardous Materials") which facts, conditions or
circumstances violate Environmental Law or are reasonably likely to give rise to
(x) costs, expenses, liabilities or obligations for any cleanup, remediation,
disposal or corrective action under any Environmental Law, (y) claims arising
for personal injury, property damage or damage to natural resources, or (z)
fines, penalties or injunctive relief.
(c) Neither Enron nor any of its Subsidiaries has (i) received
any notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law or (ii) entered into any consent decree or
order or is subject to any order of any court or governmental authority or
tribunal under any Environmental Law or relating to the cleanup of any Hazardous
Materials, except for any such matters as do not and are not reasonably likely
to have an Enron Material Adverse Effect.
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Section 5.14 Intellectual Property. Enron and its Subsidiaries
own or possess adequate licenses or other valid rights to use all patents,
patent rights, know-how, trade secrets, trademarks, trademark rights and other
proprietary information and other proprietary intellectual property rights used
or held for use in connection with their respective businesses as currently
being conducted, except where the failure to own or possess such licenses and
other rights does not and is not reasonably likely to have, individually or in
the aggregate, an Enron Material Adverse Effect, and there are no assertions or
claims challenging the validity of any of the foregoing that are reasonably
likely to have, individually or in the aggregate, an Enron Material Adverse
Effect. To the knowledge of Enron, the conduct of Enron's and its Subsidiaries'
respective businesses as currently conducted does not conflict with any patents,
patent rights, licenses, trademarks, trademark rights, trade names, trade name
rights or copyrights of others that are reasonably likely to have, individually
or in the aggregate, an Enron Material Adverse Effect. To the knowledge of
Enron, there is no material infringement of any proprietary right owned by or
licensed by or to Enron or any of its Subsidiaries that is reasonably likely to
have, individually or in the aggregate, an Enron Material Adverse Effect.
Section 5.15 Decrees, Etc. Except for such matters as do not
and are not reasonably likely to have an Enron Material Adverse Effect, (a) no
order, writ, injunction or decree of any court or governmental authority or any
arbitral or other dispute resolution body has been issued or entered against
Enron or any Subsidiary of Enron that continues to be in effect that affects the
ownership or operation of any of their respective assets, and (b) since January
1, 1991, no criminal order, writ, fine, injunction, decree, judgment or
determination of any court or governmental authority has been issued against
Enron or any Subsidiary of Enron.
Section 5.16 Insurance.
(a) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, an Enron Material Adverse
Effect, Enron and its Subsidiaries maintain insurance coverage with financially
responsible insurance companies in such amounts and against such losses as are
customary in the industries in which Enron and its Subsidiaries operate on the
date hereof.
(b) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, an Enron Material Adverse
Effect, (i) no event relating specifically to Enron or its Subsidiaries has
occurred that is reasonably likely, after the date of this Agreement, to result
in an upward adjustment in premiums under any insurance policies they maintain,
(ii) excluding insurance policies that have expired and been replaced in the
ordinary course of business, no excess liability or protection and indemnity
insurance policy has been canceled by the insurer within one year prior to the
date hereof, and to Enron's knowledge, no threat in writing has been made to
cancel (excluding cancellation upon expiration or failure to renew) any such
insurance policy of Enron or any Subsidiary of Enron during the period of one
year prior to the date hereof, and (iii) no event has occurred, including the
failure by Enron or any Subsidiary of Enron to give any notice or information or
by giving any inaccurate or erroneous notice or information, that limits or
impairs the rights of Enron or any Subsidiary of Enron under any such excess
liability or protection and indemnity insurance policies.
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Section 5.17 No Brokers. Enron has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Enron, Newco or Dynegy to pay any finder's fees, brokerage
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Enron has retained J.P. Morgan Securities Inc. and Salomon Smith Barney
Inc. as its financial advisors, the arrangements with which have been disclosed
in writing to Dynegy prior to the date hereof.
Section 5.18 Opinions of Financial Advisors. The Board of
Directors of Enron has received the separate opinions of J.P. Morgan Securities
Inc. and Salomon Smith Barney Inc. to the effect that, as of the date of this
Agreement, the Enron Merger Ratio is fair, from a financial point of view, to
the holders of Enron Common Stock.
Section 5.19 Dynegy Stock Ownership. Neither Enron nor any of
its affiliates or associates owns in excess of five percent of the shares of
capital stock of Dynegy or of any other securities convertible into or otherwise
exercisable to acquire shares of capital stock of Dynegy.
Section 5.20 Vote Required. The approval of this Agreement by
(i) the holders of a majority of the votes entitled to be cast by holders of
Enron Common Stock and the Second Preferred Stock voting together as a single
class, with each share of Enron Common Stock being entitled to one vote per
share and each share of Second Preferred Stock being entitled to a number of
votes per share equal to the number of shares of Enron Common Stock into which
such share of Second Preferred Stock is then convertible, and (ii) the holders
of a majority of the outstanding shares of Enron Common Stock entitled to vote
are the only approvals of the holders of any class or series of Enron capital
stock necessary to approve any transaction contemplated by this Agreement.
Section 5.21 Regulation as a Utility.
(a) Enron is a "holding company" as defined in the 1935 Act.
Enron is exempt from registration and all sections of the 1935 Act and the rules
and regulations promulgated thereunder, other than from Section 9(a)(2) thereof,
pursuant to Rule 2 under Section 3(a)(1) of the 1935 Act. Enron also has filed
an application for exemption under Section 3(a)(3) or, in the alternative,
Section 3(a)(5) of the 1935 Act. Pending SEC action on that application, Enron
is exempt from registration and all sections of the 1935 Act and the rules and
regulations promulgated thereunder, other than from Section 9(a)(2) thereof,
pursuant to Section 3(c) of the 1935 Act. Portland General Electric Company
("Enron Utility"), a wholly owned direct Subsidiary of Enron, is a "public
utility company" within the meaning of Section 2(a)(5) of the 1935 Act. No other
Subsidiary of Enron is a "public utility company" within the meaning of Section
2(a)(5) of the 1935 Act.
(b) Enron Utility is regulated as a public utility in the
State of Oregon and in no other state. Neither Enron nor any "subsidiary
company" or "affiliate" (as each such term is defined in the 1935 Act) of Enron
(other than Enron Utility) is subject to regulation as a public utility or
public service company (or similar designation) by any other state in the United
States or any foreign country.
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Section 5.22 Capital Expenditure Program. Section 5.22 of the
Enron Disclosure Letter contains a complete copy of management's most recent
capital expenditure budget of Enron as of the date of this Agreement for each
quarterly period in 2002 (the "Enron Capital Budget").
Section 5.23 Improper Payments. No bribes, kickbacks or other
improper payments have been made by Enron or any Subsidiary of Enron or agent of
any of them in connection with the conduct of their respective businesses or the
operation of their respective assets, and neither Enron, any Subsidiary of Enron
nor any agent of any of them has received any such payments from vendors,
suppliers or other persons, where any such payment made or received is
reasonably likely to have an Enron Material Adverse Effect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DYNEGY, NEWCO,
DYNEGY MERGER SUB AND ENRON MERGER SUB
Except as set forth in the disclosure letter delivered to
Enron by Dynegy at or prior to the execution hereof (the "Dynegy Disclosure
Letter"), Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub, jointly and
severally, represent and warrant to Enron that:
Section 6.1 Existence; Good Standing; Corporate Authority.
Each of Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Dynegy is duly qualified to do business and, to
the extent such concept or similar concept exists in the relevant jurisdiction,
is in good standing under the laws of any jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified does not and is not reasonably likely to have, individually or in the
aggregate, a Dynegy Material Adverse Effect. Dynegy has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as now conducted. The copies of the articles or certificate of
incorporation and bylaws of Dynegy, Newco, Dynegy Merger Sub and Enron Merger
Sub previously made available to Enron are true and correct and contain all
amendments as of the date hereof.
Section 6.2 Authorization, Validity and Effect of Agreements.
Each of Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement and all
other agreements and documents required to be executed and delivered by it
pursuant to this Agreement. The consummation by Dynegy of the transactions
contemplated hereby has been duly authorized (i) by the Board of Directors of
Dynegy by unanimous vote of the directors present and (ii) by all other
requisite corporate action on behalf of Dynegy, other than the approvals
referred to in Section 6.20. The consummation by each of Newco, Dynegy Merger
Sub and Enron Merger Sub of the transactions contemplated hereby, including, in
the case of Newco, the issuance by Newco of shares of Newco Common Stock
pursuant to the Mergers, has been duly authorized by all requisite corporate
action on behalf of each of Newco, Dynegy Merger Sub and Enron Merger Sub. This
Agreement constitutes the valid and legally binding obligation of each of
Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub, enforceable against such
party in accordance with its terms, subject
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to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. Dynegy has taken all action necessary to render the
restrictions set forth in Sections 7.85 and 11.75 of the IBCA inapplicable to
this Agreement and the transactions contemplated hereby.
Section 6.3 Capitalization. The authorized capital stock of
Dynegy consists of 900,000,000 shares of Dynegy Class A Common Stock,
360,000,000 shares of Dynegy Class B Common Stock, and 70,000,000 shares of
preferred stock, no par value ("Dynegy Preferred Stock"). As of November 6,
2001, there were (i) 238,956,530 outstanding shares of Dynegy Class A Common
Stock and 86,599,914 outstanding shares of Dynegy Class B Common Stock, (ii)
27,211,749 shares of Dynegy Common Stock reserved for issuance upon exercise of
outstanding Dynegy Options, and (iii) no outstanding shares of Dynegy Preferred
Stock. All such issued and outstanding shares of Dynegy Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights, other than the rights of Chevron U.S.A. Inc. ("Chevron") pursuant to
Article 6 of the Shareholder Agreement, dated as of June 14, 1999 (the "Dynegy
Shareholder Agreement"), among Energy Convergence Holding Company, Illinova
Corporation, Dynegy and Chevron. As of the date of this Agreement, except (a) as
set forth in this Section 6.3, (b) for the rights of Chevron pursuant to Article
6 of the Dynegy Shareholder Agreement and pursuant to the Dynegy Subscription
Agreement and the Dynegy Series B Preferred Stock and (c) for shares delivered
upon exercises of options set forth in this Section 6.3 from October 26, 2001 to
the date hereof, there are no outstanding shares of capital stock of Dynegy, and
there are no options, warrants, calls, subscriptions, convertible securities or
other rights, agreements or commitments that may obligate Dynegy or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock or other
voting securities of Dynegy or any of its Significant Subsidiaries. Dynegy has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote, or which are convertible into or exercisable for
securities having the right to vote, with the shareholders of Dynegy on any
matter.
Section 6.4 Subsidiaries.
(a) Each of Dynegy's Significant Subsidiaries is a corporation
or other legal entity duly organized, validly existing and, to the extent such
concept or similar concept exists in the relevant jurisdiction, in good standing
under the laws of its jurisdiction of incorporation or organization, has the
corporate or other entity power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is