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AGREEMENT AND PLAN OF MERGER
BY
AND
AMONG
ILLINOVA CORPORATION,
ENERGY CONVERGENCE HOLDING COMPANY,
ENERGY CONVERGENCE ACQUISITION CORPORATION,
DYNEGY ACQUISITION CORPORATION
AND
DYNEGY INC.
Dated as of June 14, 1999
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") dated as of June
14, 1999, is by and among Illinova Corporation, an Illinois corporation
("ILLINOVA"), Energy Convergence Holding Company, an Illinois corporation
("NEWCO"), Dynegy Acquisition Corporation, a Delaware corporation ("DAC"),
Energy Convergence Acquisition Corporation, an Illinois corporation, ("IAC" and,
together with DAC, Illinova and Newco, the "ILLINOVA COMPANIES"), and Dynegy
Inc., a Delaware corporation ("DYNEGY").
WHEREAS, the respective Boards of Directors of Illinova, Dynegy and DAC
deem it advisable and in the best interests of their respective stockholders
that DAC merge with and into Dynegy (the "DAC MERGER") upon the terms and
subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of Illinova, Dynegy and IAC
deem it advisable and in the best interests of their respective stockholders
that IAC merge with and into Illinova (the "IAC MERGER" and, together with the
DAC Merger, the "MERGERS") upon the terms and subject to the conditions set
forth herein;
WHEREAS, the Board of Directors of Illinova deems it advisable and in
the best interests of its stockholders that Illinova enter into the Voting
Agreements (herein defined) and such Board has approved the delivery and
performance of the Voting Agreements;
WHEREAS, the Board of Directors of Dynegy deems it advisable and in the
best interests of its stockholders that certain of Dynegy's stockholders enter
into the Voting Agreements;
WHEREAS, simultaneously with the execution of this Agreement, Chevron
U.S.A. Inc., a Pennsylvania corporation ("CHEVRON"), has entered into a
Subscription Agreement (the "SUBSCRIPTION AGREEMENT") with Newco, by which
Chevron will purchase shares of Newco Common Stock (as defined) for an aggregate
consideration of at least $200 million and up to $240 million at the price per
share set forth therein immediately after the closing of the Mergers;
WHEREAS, simultaneously with the execution of this Agreement, Newco and
British Gas Atlantic Holdings BV, a Netherlands corporation ("BGAH"), have
entered into a Stock Purchase Agreement (the "BG STOCK PURCHASE AGREEMENT"), by
which Newco has agreed to purchase all of the issued and outstanding capital
stock of BG Holdings, Inc., a Delaware corporation ("BG HOLDINGS"), from BGAH
immediately prior to the closing of the Mergers, in return for a combination of
cash and Series A Convertible Preferred Stock (as defined herein) such that BGAH
will receive the same combination of cash and Series A Convertible Preferred
Stock as consideration for the Dynegy Common Stock it owns through BG Holdings
as it would have had it been a holder of Dynegy Common Stock in the DAC Merger;
WHEREAS, such Boards of Directors have approved the Mergers;
WHEREAS, for federal income tax purposes, the parties intend that the
Mergers will qualify as contributions of stock of Illinova, Dynegy and other
assets to Newco under the
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provisions of Section 351 of the United States Internal Revenue Code of 1986, as
amended, and any regulations thereunder or any successor statutes thereto (the
"CODE"); and
WHEREAS, for financial accounting purposes, it is intended that the
Mergers will be accounted for as a purchase of Illinova by Dynegy.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, including the exhibits, each of the
following capitalized terms is defined as follows:
"ACTION" means a suit, claim, action, proceeding or investigation.
"AGGREGATE COMMON STOCK CONSIDERATION" is defined in Section 4.1(c).
"AGGREGATE MERGER CONSIDERATION" is defined in Section 4.5(a).
"AGGREGATE MERGER STOCK CONSIDERATION" is defined in Section 4.1(i).
"AGREEMENT" is defined in the preamble to this Agreement.
"AMENDED AND RESTATED NEWCO ARTICLES" means the amended and restated
articles of incorporation of Newco, in the form of Exhibit A.
"AMERGEN" means AmerGen Energy Company, L.L.C., a Delaware limited
liability company.
"ANCILLARY AGREEMENTS" means any other agreement executed and delivered
in connection herewith, including the Voting Agreements, Registration Rights
Agreements, BG Stock Purchase Agreement, Guaranty of British Gas Overseas
Holdings dated the date hereof, Subscription Agreement and the Shareholder
Agreement.
"APPROVALS" is defined in Section 9.1(d).
"ASSESSMENT" is defined in Section 8.16.
"ATOMIC ENERGY ACT" means the Atomic Energy Act of 1954, as amended,
including any regulations promulgated thereunder and any successor statutes
thereto.
"AUDIT" means any audit, assessment of Taxes, other examination by any
Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"AWARDS" is defined in Section 4.6(c).
"BG AND NOVA SHORTFALL AMOUNT" is defined in the Subscription
Agreement.
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"BG HOLDINGS" is defined in the recitals to this Agreement.
"BG STOCK PURCHASE AGREEMENT" is defined in the recitals to this
Agreement.
"BGAH" is defined in the recitals to this Agreement.
"CASH CONSIDERATION" is defined in Section 4.1(c).
"CASH ELECTION SHARES" is defined in Section 4.1(d).
"CERTIFICATE OF MERGER" is defined in Section 2.2.
"CHEVRON" is defined in the recitals to this Agreement.
"CLOSING" is defined in Section 4.7.
"CLOSING DATE" is defined in Section 4.7.
"CODE" is defined in the recitals to this Agreement.
"COMMON STOCK CONSIDERATION" is defined in Section 4.1(c).
"CONFIDENTIALITY AGREEMENTS" means the Confidentiality Agreements,
dated May 13, 1998, and December 29, 1998, between Illinova and Dynegy.
"CUSTOMARY POST-CLOSING CONSENTS" is defined in Section 5.4(b)(i).
"DAC" is defined in the preamble to this Agreement.
"DAC MERGER" is defined in the recitals to this Agreement.
"DAC SURVIVING CORPORATION" is defined in Section 2.1(a).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"DISCLOSURE SCHEDULES" is defined in Section 12.10(a).
"DYNEGY" is defined in the preamble to this Agreement.
"DYNEGY ACQUISITION PROPOSAL" means any offer or proposal for, or any
indication of interest in, a merger or other business combination directly or
indirectly involving Dynegy or any Dynegy Subsidiary or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than (i) the Transactions and (ii) any such offer, proposal or
indication of interest with respect to Dynegy's business related to the
fractionation and processing of natural gas to produce natural gas liquids, and
the transporting and marketing of such natural gas liquids.
"DYNEGY BALANCE SHEET" is defined in Section 5.7.
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"DYNEGY BALANCE SHEET DATE" is defined in Section 5.7.
"DYNEGY BENEFIT PLANS" is defined in Section 5.11(a).
"DYNEGY BREACH" is defined in Section 11.1(d).
"DYNEGY CASH NUMBER" means the sum of (i) the product of the number of
shares of Dynegy Stock outstanding as of the Election Date and 0.4 and (ii) the
quotient of the BG and Nova Shortfall Amount pursuant to the Subscription
Agreement and $16.50.
"DYNEGY COMMON STOCK" means the common stock, par value $.01, of
Dynegy.
"DYNEGY COMMON STOCK CERTIFICATE" is defined in Section 4.1(j).
"DYNEGY DE MINIMIS SHARES" is defined in Section 4.1(d).
"DYNEGY DIRECTOR NOMINEES" is defined in Section 3.3(c)(i).
"DYNEGY DISCLOSURE SCHEDULE" is defined in the introductory paragraph
to Article V.
"DYNEGY ENGAGEMENT LETTERS" is defined in Section 5.19.
"DYNEGY ERISA AFFILIATE" is defined in Section 5.11(a).
"DYNEGY MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, development or occurrence causing, resulting in or having (or with
the passage of time likely to cause, result in or have) a material adverse
effect on the financial condition, business, assets, properties, or results of
operations of Dynegy and its Subsidiaries, taken as a whole.
"DYNEGY POWER GENERATION FACILITIES" means Dynegy's power generation
facilities listed in Item 2 in the Annual Report on Form 10-K of the Dynegy SEC
Reports for the year ended December 31, 1998.
"DYNEGY PREFERRED STOCK" is defined in Section 5.2(a).
"DYNEGY PREFERRED STOCK CERTIFICATE" is defined in Section 4.1(j).
"DYNEGY PUBLIC STOCKHOLDERS" is defined in Section 5.21.
"DYNEGY QUALIFYING FACILITIES" means power generation facilities in
which Dynegy owns an interest that are Qualifying Facilities.
"DYNEGY SEC REPORTS" is defined in Section 5.5.
"DYNEGY SPECIAL MEETING" is defined in Section 8.12(a).
"DYNEGY STOCK" means the Dynegy Common Stock and Dynegy Preferred
Stock.
"DYNEGY STOCK CERTIFICATES" is defined in Section 4.1(j).
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"DYNEGY STOCK OPTIONS" is defined in Section 4.6(a).
"DYNEGY STOCKHOLDERS' APPROVAL" is defined in Section 5.16.
"DYNEGY SUPERIOR PROPOSAL" is defined in Section 11.1(h).
"DYNEGY UNREGULATED FACILITIES" means the power generation facilities
in which Dynegy owns an interest that are either (i) Qualifying Facilities or
(ii) owned by "exempt wholesale generators" or "foreign utility companies" as
defined in PUHCA.
"EFFECTIVE TIME" is defined in Section 2.2.
"ELECTION" is defined in Section 4.1(c).
"ELECTION DATE" is defined in Section 4.4(d).
"ENFORCEABLE" an agreement is "enforceable" if it is the legal, valid
and binding obligation of the applicable Person enforceable against such Person
in accordance with its terms, except as such enforceability may be subject to
the effects of bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights of creditors and general principals of
equity.
"ENVIRONMENTAL LAWS" means federal, state, local and foreign
environmental protection, health and safety or similar laws, statutes,
ordinances, restrictions, licenses, rules, regulations, permit conditions and
legal requirements imposing liability or establishing standards of conduct for
protection of the environment, including the Federal Clean Water Act, Safe
Drinking Water Act, Resource Conservation and Recovery Act, Clean Air Act, Toxic
Substances Control Act, Outer Continental Shelf Lands Act, Comprehensive
Environmental Response, Compensation and Liability Act, and Emergency Planning
and Community Right to Know Act, each as amended and currently in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCESS PARACHUTE PAYMENTS" is defined in Section 5.9(b).
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended, including any regulations promulgated thereunder and any successor
statutes thereto.
"EXCHANGE AGENT" is defined in Section 4.4(a).
"EXCHANGE FUND" is defined in Section 4.5(a).
"EXCHANGE RATIO" is defined in Section 4.1(c).
"EXPENSES" means all reasonable out-of-pocket expenses (including all
reasonable fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
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preparation, printing, filing and mailing of the Registration Statement, the
Proxy Statement/Prospectus, the solicitation of stockholder approvals, requisite
filings under the HSR Act and all other matters related to the consummation of
the Transactions.
"FERC" means the Federal Energy Regulation Commission.
"FORM OF ELECTION" is defined in Section 4.4(b).
"GAAP" means United States generally accepted accounting principles in
effect on the date hereof.
"GOVERNMENTAL AUTHORITY" means any governmental or regulatory authority
or agency.
"HAZARDOUS SUBSTANCES" means any chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, mixed hazardous waste
substances, petroleum, petroleum products or any substance regulated under any
Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, including any regulations promulgated thereunder and any
successor statutes thereto.
"IBCA" means the Illinois Business Corporation Act of 1983, as amended.
"ICC" means the Illinois Commerce Commission.
"IAC" is defined in the preamble to this Agreement.
"IAC COMMON STOCK" means the common stock, no par value, of IAC.
"IAC MERGER" is defined in the recitals to this Agreement.
"IAC SURVIVING CORPORATION" is defined in Section 2.1(b).
"ILLINOVA" is defined in the preamble to this Agreement.
"ILLINOVA ACQUISITION PROPOSAL" means any offer or proposal for, or any
indication of interest in, a merger or other business combination directly or
indirectly involving Illinova or any Illinova Subsidiary or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than the Transactions.
"ILLINOVA AVERAGE PRICE" means the mean average of the closing prices
on the New York Stock Exchange, Inc. of the Illinova Common Stock over 20
consecutive trading days ending on the Election Date.
"ILLINOVA BALANCE SHEET" is defined in Section 6.7.
"ILLINOVA BALANCE SHEET DATE" is defined in Section 6.7.
"ILLINOVA BENEFIT PLANS" is defined in Section 6.11(a).
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"ILLINOVA BREACH" is defined in Section 11.1(c).
"ILLINOVA COMMON STOCK" means the common stock, no par value, of
Illinova.
"ILLINOVA COMPANIES" is defined in the preamble to this Agreement.
"ILLINOVA CONSIDERATION" is defined in Section 4.2(c).
"ILLINOVA DIRECTOR NOMINEES" is defined in Section 3.3(c)(i).
"ILLINOVA DISCLOSURE SCHEDULE" is defined in the introductory paragraph
to Article VI.
"ILLINOVA DISSENTING SHARES" is defined in Section 4.2(e).
"ILLINOVA ENGAGEMENT LETTERS" is defined in Section 6.19.
"ILLINOVA ERISA AFFILIATE" is defined in Section 6.11(a).
"ILLINOVA MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, development or occurrence causing, resulting in or having (or with
the passage of time likely to cause, result in or have) a material adverse
effect on the financial condition, business, assets, properties, or results of
operations of Illinova and its Subsidiaries, taken as a whole.
"ILLINOVA POWER GENERATION FACILITIES" means Illinova's power
generation facilities listed in Item 2 in the Annual Report on Form 10-K of the
Illinova SEC Reports for the year ended December 31, 1998.
"ILLINOVA SEC REPORTS" is defined in Section 6.5.
"ILLINOVA SPECIAL MEETING" is defined in Section 8.12(b).
"ILLINOVA STOCK OPTIONS" is defined in Section 4.6(b).
"ILLINOVA STOCK CERTIFICATE" is defined in Section 4.2(d).
"ILLINOVA STOCKHOLDERS' APPROVAL" is defined in Section 6.16.
"ILLINOVA SUPERIOR PROPOSAL" is defined in Section 11.1(j).
"ILLINOVA UNREGULATED FACILITIES" means the power generation facilities
in which Illinova owns an interest that are either (i) Qualifying Facilities or
(ii) owned by "exempt wholesale generators" or "foreign utility companies" as
defined in PUHCA.
"INDEMNIFIED PARTY" is defined in Section 8.3(a).
"INSPECTED PARTY" is defined in Section 8.16.
"INSPECTING PARTY" is defined in Section 8.16.
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"INTEGRATION COMMITTEE" is defined in Section 7.3(b).
"INTELLECTUAL PROPERTY" is defined in Section 5.18.
"INTERIM AGREEMENT" means the Interim Agreement relative to the Clinton
Nuclear Power Station, dated March 31, 1999, by and among IPC, PECO and AmerGen.
"IPC" means Illinois Power Company, an Illinois corporation.
"LIENS" is defined in Section 5.2(b).
"MERGERS" is defined in the recitals to this Agreement.
"NEWCO" is defined in the preamble to this Agreement.
"NEWCO CLASS B COMMON STOCK" means the Class B Common Stock, no par
value, of Newco, to be issued pursuant to the Amended and Restated Newco
Articles.
"NEWCO COMMON STOCK" means the Class A Common Stock, no par value, of
Newco, to be issued pursuant to the Amended and Restated Newco Articles.
"NOVA" means Nova Gas Services (U.S.) Inc., a Delaware corporation.
"NRC" means the Nuclear Regulatory Commission.
"NUCLEAR ADVISORY COMMITTEE" is defined in Section 7.3(a)(ii).
"NUCLEAR FACILITY" means IPC's nuclear facility in DeWitt County,
Illinois.
"NUCLEAR FACILITY AGREEMENTS" means (i) the Management Services
Agreement, dated January 15, 1998, by and between IPC and PECO, as amended to
the date hereof, (ii) the Incentive Compensation Agreement to Amend the
Management Services Agreement, dated May 19, 1998, by and between IPC and PECO,
and (iii) the Interim Agreement.
"NYSE" is defined in Section 8.14.
"ORDER" means any order, judgment or decree of any court or any other
Governmental Authority.
"PBGC" is defined in Section 5.11(b).
"PECO" means PECO Energy Company, a Pennsylvania corporation.
"PERSON" means a natural person, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a Governmental Authority.
"POWER ACT" means the Federal Power Act, as amended, including any
regulations promulgated thereunder and any successor statutes thereto.
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"PREDECESSOR COMPANY STOCK OPTIONS" is defined in Section 4.6(b).
"PREFERRED STOCK CONSIDERATION" is defined in Section 4.1(h).
"PRINCIPAL POWER FACILITIES" means the following facilities owned by
Illinova: Baldwin Power Station, Havana Power Station, Hennepin Power Station,
Vermilion Power Station, Wood River Power Station, Oglesby Gas Turbine,
Stallings Gas Turbine, and Tilton Energy Center.
"PROXY STATEMENT/PROSPECTUS" is defined in Section 5.17.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"QUALIFYING FACILITIES" means a "qualifying cogeneration facility" or
"qualifying small power production facility," as defined in PURPA.
"REGISTRATION STATEMENT" is defined in Section 5.17.
"REGISTRATION RIGHTS AGREEMENTS" means (i) the Registration Rights
Agreement by and among Newco, BGAH and Nova, dated the date hereof, as amended
from time to time, and (ii) the Registration Rights Agreement, by and between
Newco and Chevron, dated the date hereof, as amended from time to time.
"REPLACEMENT PLANS" is defined in Section 8.11.
"RETAINED EMPLOYEES" is defined in Section 8.11.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
including any regulations promulgated thereunder and any successor statutes
thereto.
"SERIES A CONVERTIBLE PREFERRED STOCK" means the Series A Convertible
Preferred Stock of Newco to be authorized pursuant to the Statement of
Resolution Establishing Series A Convertible Preferred Stock of Newco, in the
form of Exhibit B.
"SHAREHOLDER AGREEMENT" means the Shareholder Agreement, dated as of
the date hereof, among Newco, Illinova, Dynegy and Chevron.
"STAFF" is defined in Section 9.3(f)(iii).
"STAFF OBJECTION" is defined in Section 9.3(f)(iii).
"STOCK ELECTION SHARES" is defined in Section 4.1(f)(i).
"SUBSCRIPTION AGREEMENT" is defined in the recitals to this Agreement.
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"SUBSIDIARY" means, with respect to any party, any Person of which (x)
at least a majority of the securities or other interests having by their terms
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such Person is directly or indirectly
beneficially owned or controlled by such Person or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries, or (y) such
party or any Subsidiary of such party is a general partner of a partnership or a
manager of a limited liability company.
"SURVIVING CORPORATIONS" is defined in Section 2.1(b).
"TAX AUTHORITY" means the Internal Revenue Service and any other
domestic or foreign Governmental Authority responsible for the administration of
any Taxes.
"TAX RETURNS" means all originally filed or amended federal, state and
local tax returns, declarations, statements, certifications, notices, reports,
schedules, forms, claim for refund and information returns relating to Taxes,
including any schedule or attachment thereto.
"TAXES" means all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"TERMINATION DATE" means May 31, 2000.
"TRANSACTIONS" means the transactions contemplated by this Agreement.
"VOTING AGREEMENTS" means the Voting Agreements, dated as of the date
hereof, between Illinova and each of Nova, BG Holdings and Chevron under which
such parties have among other things agreed to support the DAC Merger upon the
terms and conditions set forth therein.
"VOTING AGREEMENT PARTIES" is defined in Section 5.21.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act
of 1988 including any regulations promulgated thereunder and any successor
statutes thereto.
ARTICLE II
THE MERGERS
Section 2.1 The Mergers.
(a) Upon the terms and subject to the conditions hereof, at
the Effective Time, DAC shall merge with and into Dynegy and the separate
corporate existence of DAC will thereupon cease and Dynegy will be the surviving
corporation in the DAC Merger (sometimes referred to as the "DAC SURVIVING
CORPORATION"). The DAC Merger will have the effects set forth in Section 259 of
the DGCL, including the DAC Surviving Corporation's succession to and assumption
of all rights and obligations of Dynegy and DAC.
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(b) Upon the terms and subject to the conditions hereof, at
the Effective Time, IAC shall merge with and into Illinova and the separate
corporate existence of IAC will thereupon cease and Illinova will be the
surviving corporation in the IAC Merger (sometimes referred to as the "IAC
SURVIVING CORPORATION" and, together with the DAC Surviving Corporation, the
"SURVIVING CORPORATIONS"). The IAC Merger will have the effects set forth in
Section 11.50 of the IBCA, including the IAC Surviving Corporation's succession
to and assumption of all rights and obligations of Illinova and IAC.
Section 2.2 Effective Time of the Mergers.
Subject to the provisions of this Agreement, as soon as practicable on
or after the Closing Date, the parties shall file articles or a certificate of
merger (individually, a "CERTIFICATE OF MERGER" and collectively, the
"CERTIFICATES OF MERGER") executed in accordance with the relevant provisions of
the DGCL and the IBCA and shall make all other filings or recordings required
under the DGCL and the IBCA, as applicable, to effect both Mergers. Each Merger
shall become effective at such time as is specified in the applicable
Certificate of Merger (the time at which both Mergers have become fully
effective is referred to as the "EFFECTIVE TIME").
Section 2.3 Tax and Accounting Treatment.
The parties intend that (i) the Mergers will constitute a contribution
of assets to Newco under Section 351 of the Code, (ii) the Mergers will be
accounted for as a purchase of Illinova by Dynegy for financial accounting
purposes, and (iii) the Mergers will be treated as a reverse acquisition of
Illinova by Dynegy whereby the consolidated group of corporations of which
Dynegy is the parent for purposes of Treasury Regulation Section 1.1502 is
considered remaining in existence pursuant to Treasury Regulation Section
1.1502-75(d)(3)(i).
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 Certificate/Articles of Incorporation.
(a) The certificate of incorporation of Dynegy in effect
immediately prior to the Effective Time will be amended and restated to be
substantially identical to the certificate of incorporation of DAC and such
amended and restated certificate of incorporation will be the certificate of
incorporation of the DAC Surviving Corporation at and after the Effective Time
until thereafter amended in accordance with its terms and the DGCL.
(b) The articles of incorporation of Illinova in effect
immediately prior to the Effective Time will be amended and restated to be
substantially identical to the articles of incorporation of IAC and such amended
and restated articles of incorporation will be the articles of incorporation of
the IAC Surviving Corporation at and after the Effective Time until thereafter
amended in accordance with their terms and the IBCA.
(c) The articles of incorporation of Newco as amended and in
effect as of the date hereof (which shall continue in effect (other than
amendments to the name of Newco) until the Effective Time), will continue to be
the articles of incorporation of Newco at and after the Effective Time until
thereafter amended in accordance with their terms and the IBCA; provided,
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however, each party acknowledges and agrees that the Board of Directors of Newco
will prior to the Effective Time adopt a resolution pursuant to Section 6.10 of
the IBCA to authorize and establish the Series A Convertible Preferred Stock.
Section 3.2 Bylaws.
(a) The bylaws of DAC Surviving Corporation shall be amended
at the Effective Time to be identical to the bylaws of DAC as in effect
immediately prior to the Effective Time will be the bylaws of the DAC Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by the certificate of incorporation of the DAC Surviving Corporation
and the DGCL.
(b) The bylaws of IAC as in effect immediately prior to the
Effective Time will be the bylaws of the IAC Surviving Corporation until
thereafter amended in accordance with their terms and as provided by the
articles of incorporation of the IAC Surviving Corporation and the IBCA.
(c) The bylaws of Newco as amended and in effect as of the
date hereof (which shall continue in effect until the Effective Time) will be
the bylaws of Newco until thereafter amended in accordance with their terms and
as provided by the articles of incorporation of the Newco and the IBCA.
Section 3.3 Directors and Officers.
(a) At and after the Effective Time, the directors and
officers of the DAC Surviving Corporation will be the same as the directors and
officers of Dynegy immediately prior thereto, until their respective successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the DAC Surviving Corporation's
certificate of incorporation and bylaws.
(b) At and after the Effective Time, the directors and
officers of the IAC Surviving Corporation will be the same as the directors and
officers of Illinova immediately prior thereto, until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the IAC Surviving
Corporation's articles of incorporation and bylaws.
(c) Newco's Board, Committees, Executive Officers.
(i) Prior to the Effective Time, (A) Illinova's Board
of Directors will select from among the current members of
Illinova's Board of Directors seven individuals (the "ILLINOVA
DIRECTOR NOMINEES") for nomination as directors of Newco,
which nominees will include Mr. Charles Bayless, and (B)
Dynegy's Board of Directors will select from among the current
members of Dynegy's Board of Directors seven individuals
(including three nominated by Chevron) (the "DYNEGY DIRECTOR
NOMINEES") for nomination as directors of Newco, which
nominees will include Mr. C.L. Watson and who shall serve as
Chairman of the Board of Directors if he is willing and able
to do so. Prior to the Effective Time, Illinova will cause
Newco and its directors to nominate and elect the Dynegy
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Director Nominees and the Illinova Director Nominees to be
directors of Newco for a term expiring at Newco's next annual
meeting of shareholders following the Effective Time, subject
to being renominated as a director at the discretion of
Newco's Board of Directors. If at any time prior to the
Effective Time, any Dynegy Director Nominee or Illinova
Director Nominee is unable to serve as a director at the
Effective Time, the Board of Directors that designated such
individual as provided herein will designate another
individual to serve in such individual's place.
(ii) The composition of the committees of Newco's
Board of Directors immediately subsequent to the Effective
Time (including the chairman thereof) will be as designated
prior to the Effective Time in a manner consistent with the
bylaws of Newco and reasonably acceptable to Illinova and
Dynegy with the objective being that the committees initially
have approximately equal representation from among the Dynegy
Director Nominees (each of which committee's members shall
include at least one nominee of Chevron) and the Illinova
Director Nominees; provided that the Nominating Committee of
Newco initially shall be constituted of three members of which
two will be independent members of, and will be designated by,
the Dynegy Board of Directors and one will be an independent
member of, and will be designated by, the Illinova Board of
Directors.
(iii) Effective as of the Effective Time, Newco's
Board of Directors shall elect the officers of Newco, provided
(A) C.L. Watson shall be elected President and Chief Executive
Officer if he is willing and able to serve, and (B) absent
cause, the remaining officers shall be elected by the Board of
Directors if so required by Newco's bylaws, upon the
recommendation of, or, if not required to be so elected, as
appointed by, the President and Chief Executive Officer in
each instance to serve until the earlier of such officer's
resignation or removal or until such officer's successor is
duly elected.
ARTICLE IV
CONVERSION OF SHARES
Section 4.1 Conversion of Dynegy Capital Stock.
As of the Effective Time, by virtue of the DAC Merger and without any
action on the part of DAC, Dynegy, Newco or the holders of any of the capital
stock described below:
(a) Each outstanding share of DAC Common Stock will be
converted into and become one share of common stock of the DAC Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and, except as provided in Section 4.1(b), shall constitute the only
shares of the DAC Surviving Corporation's capital stock.
(b) All shares of Dynegy Common Stock that are held in
Dynegy's treasury will be canceled and no cash, Newco capital stock or other
consideration shall be delivered in exchange therefor. All shares of Dynegy
Common Stock owned by Illinova, Newco or any of
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their Subsidiaries shall be canceled except for shares owned by BG Holdings, all
of which shall be converted into an aggregate of 613 shares of DAC Surviving
Corporation common stock, and continue to remain outstanding and shall not be
converted into the Common Stock Consideration as contemplated by Section 4.1(c).
(c) Subject to the provisions of Section 4.1(e), each
outstanding share of Dynegy Common Stock (other than shares of Dynegy Common
Stock to be treated in accordance with Section 4.1(b)) will be converted into
either (x) $16.50 in cash (the "CASH CONSIDERATION") or (y) 0.69 (the "EXCHANGE
RATIO") fully paid and non-assessable shares of Newco Common Stock (the "COMMON
STOCK CONSIDERATION" and, together with the Cash Consideration, the "AGGREGATE
COMMON STOCK CONSIDERATION"), in each case as the holder thereof shall have
elected or be deemed to have elected (an "ELECTION") in accordance with Section
4.1(d).
(d) (i) Subject to the procedures set forth in Section 4.4,
each holder of record of shares of Dynegy Common Stock
outstanding immediately prior to the Election Date who makes a
valid election to receive Cash Consideration pursuant to
Section 4.4 will be entitled to receive the Cash Consideration
in respect of such shares. In addition, each holder who would,
absent such an election, be entitled to receive a fractional
share of Newco Common Stock (the "DYNEGY DE MINIMIS SHARES")
shall be deemed to elect Cash Consideration to the extent of
such fractional shares. (Collectively the shares described in
the two preceding sentences shall be the "CASH ELECTION
SHARES.") All other holders of record of shares of Dynegy
Common Stock outstanding immediately prior to the Election
Date will be deemed to elect to receive the Common Stock
Consideration in respect of such shares.
(ii) Notwithstanding the foregoing, solely for
purposes of calculating the number of shares of Dynegy Common
Stock to receive Cash Consideration and Common Stock
Consideration under Section 4.1(e), the shares of Dynegy
Common Stock held by BG Holdings will be deemed to be Cash
Election Shares, even though as a result of Section 4.1(b),
its shares of Dynegy Common Stock will be converted into
shares of common stock of the DAC Surviving Corporation.
(e) Notwithstanding anything in this Agreement to the
contrary:
(i) the number of shares of Dynegy Common Stock to be
converted into the right to receive the Cash Consideration
will be equal to the Dynegy Cash Number, and
(ii) the number of shares of Dynegy Common Stock to
be converted into the right to receive the Common Stock
Consideration will be equal to (x) the number of shares of
Dynegy Common Stock outstanding immediately prior to the
Effective Time (ignoring for this purpose any Dynegy Common
Stock held as treasury shares) less (y) the Dynegy Cash
Number.
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(f) To the extent the aggregate number of Cash Election Shares
exceeds the Dynegy Cash Number, the Cash Consideration shall be prorated as
follows:
(i) all shares of Dynegy Common Stock in respect of
which Elections to receive Common Stock Consideration have
been made or deemed to have been made (the "STOCK ELECTION
SHARES") will be converted into the right to receive the
Common Stock Consideration; and
(ii) the Cash Election Shares will be converted into
the right to receive the Cash Consideration or the Common
Stock Consideration in the following manner:
(A) the Dynegy De minimis Shares shall be
converted into Cash Consideration;
(B) the number of Cash Election Shares,
other than Dynegy De minimis Shares, covered by each
Form of Election to be converted into Cash
Consideration will be determined by multiplying the
number of Cash Election Shares covered by such Form
of Election by a fraction, (I) the numerator of which
is the Dynegy Cash Number less the number of shares
of Dynegy Common Stock converted into cash pursuant
to clause (A) and (II) the denominator of which is
the aggregate number of Cash Election Shares less the
number of shares of Dynegy Common Stock converted
into cash pursuant to clause (A); and
(C) all Cash Election Shares not converted
into Cash Consideration in accordance with clause (A)
or (B) will be converted into the right to receive
the Common Stock Consideration.
(g) The Exchange Agent, in consultation with Illinova and
Dynegy, will make all computations to give effect to this Section 4.1.
(h) At the Effective Time, each outstanding share of Dynegy
Preferred Stock will be converted into the right to receive 0.69 shares of Newco
Class B Common Stock (the "PREFERRED STOCK CONSIDERATION").
(i) Notwithstanding the foregoing, (i) for each share of
Common Stock Consideration Nova otherwise would be entitled to receive, in lieu
thereof it shall receive that number of shares of Newco Series A Convertible
Preferred Stock equal to the quotient of the Illinova Average Price divided by
$50.00 and (ii) to the extent Chevron is entitled to receive Common Stock
Consideration, in lieu thereof it shall receive one share of Newco Class B
Common Stock for each share of Newco Common Stock it was to receive
(collectively, together with the Common Stock Consideration and the Preferred
Stock Consideration, the "AGGREGATE MERGER STOCK CONSIDERATION").
(j) Except as contemplated by Section 4.1(b), the Dynegy Stock
which is converted will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and the holder of a certificate
that, immediately prior to the Effective Time,
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represented outstanding shares of Dynegy Common Stock ("DYNEGY COMMON STOCK
CERTIFICATE") and Dynegy Preferred Stock ("DYNEGY PREFERRED STOCK CERTIFICATE"
and, together with the Dynegy Common Stock Certificates, the "DYNEGY STOCK
CERTIFICATES") will cease to have any rights with respect thereto, except the
right to receive, upon the surrender of (i) a Dynegy Common Stock Certificate,
the applicable Aggregate Common Stock Consideration to which such holder is
entitled pursuant to this Article IV, and (ii) a Dynegy Preferred Stock
Certificate, the Preferred Stock Consideration to which such holder is entitled
pursuant to this Article IV. Until surrendered as contemplated by this Section
4.1, each Dynegy Stock Certificate will be deemed, at any time after the
Effective Time, to represent only the right to receive upon such surrender the
applicable Aggregate Merger Consideration as contemplated by this Article IV.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time, the outstanding shares of Illinova Common Stock, Dynegy Common
Stock or Dynegy Preferred Stock have been changed into a different number of
shares or a different class because of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio and the Cash Consideration will be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(k) No dividends or other distributions with a record date
after the Effective Time will be paid to the holder of any unsurrendered Dynegy
Stock Certificate with respect to the Aggregate Merger Stock Consideration
represented thereby until the holder of record of such Dynegy Stock Certificate
has surrendered such Dynegy Stock Certificate in accordance with Section 4.5.
Subject to applicable laws, following surrender of any such Dynegy Stock
Certificates, there will be paid to the record holder of the certificate or
certificates representing the Aggregate Merger Stock Consideration issued in
exchange therefor, without interest, (i) the amount of dividends or other
distributions with a record date on or after the Effective Time theretofore paid
with respect to such Aggregate Merger Stock Consideration, and (ii) if the
payment date for any dividend or distribution payable with respect to such
Aggregate Merger Stock Consideration has not occurred prior to the surrender of
such Dynegy Stock Certificate, at the appropriate payment date therefor, the
amount of dividends or other distributions with a record date on or after the
Effective Time but prior to the surrender of such Dynegy Stock Certificate.
(l) All Aggregate Merger Consideration issued upon the
surrender of Dynegy Stock Certificates in accordance with the terms hereof will
be deemed to have been issued in full satisfaction of all rights pertaining to
such Dynegy Stock Certificates and the Dynegy Stock formerly represented
thereby, and from and after the Effective Time, there will be no further
registration of transfers effected on the stock transfer books of the DAC
Surviving Corporation of shares of Dynegy Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Dynegy
Stock Certificates are presented to the DAC Surviving Corporation for any
reason, they will be canceled and converted as provided in this Article IV.
Section 4.2 Conversion of Illinova Common Stock.
As of the Effective Time, by virtue of the IAC Merger and without any
action on the part of IAC, Illinova, or Newco, or the holders of any of the
capital stock described below:
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(a) Each outstanding share of IAC Common Stock will be
converted into and become one share of common stock of the IAC Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only shares of the IAC Surviving
Corporation's capital stock.
(b) All shares of Illinova Common Stock that are held in
Illinova's treasury and shares of Illinova Common Stock owned by Dynegy or any
of its Subsidiaries will be canceled and no cash, Newco capital stock or other
consideration shall be delivered in exchange therefor.
(c) At the Effective Time, each outstanding share of Illinova
Common Stock will be converted into one share of Newco Common Stock (the
"ILLINOVA CONSIDERATION").
(d) All Illinova Common Stock, when converted, will no longer
be outstanding and will automatically be canceled and retired and will cease to
exist, and the holder of a certificate that, immediately prior to the Effective
Time, represented outstanding shares of Illinova Common Stock ("ILLINOVA STOCK
CERTIFICATE") will cease to have any rights with respect thereto, except the
right to receive, upon the surrender of an Illinova Stock Certificate, the
Illinova Consideration to which such holder is entitled pursuant to this Article
IV. Until surrendered as contemplated by this Section 4.2, each Illinova Stock
Certificate will be deemed, at any time after the Effective Time, to represent
only the right to receive upon such surrender the Illinova Consideration as
contemplated by this Article IV.
(e) Holders of shares of Illinova Common Stock who have
complied with requirements for perfecting dissenters' rights under Section 11.70
of the IBCA will be entitled to exercise such rights with respect to the shares
as to which such rights have been perfected ("ILLINOVA DISSENTING SHARES"), to
the extent available under Section 11.70 of the IBCA. Illinova Dissenting Shares
shall be entitled to receive such consideration as will be determined under
Section 11.70 of the IBCA, and upon receipt of such consideration, such Illinova
Dissenting Shares will cease to be issued and outstanding. Shares of Illinova
Common Stock that are outstanding immediately prior to the Effective Time and
with respect to which dissenters' rights under the IBCA may be, but have not yet
been, perfected, will, if and when such dissenters' rights can no longer be
legally perfected or exercised under the IBCA, be converted into Newco Common
Stock.
(f) No dividends or other distributions with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Illinova Stock Certificate with respect to the Illinova Consideration
represented thereby until the holder of record of such Illinova Stock
Certificate has surrendered such Stock Certificate in accordance with Section
4.5. Subject to applicable laws, following surrender of any such Illinova Stock
Certificates, there will be paid to the record holder of the certificate or
certificates representing the Illinova Consideration issued in exchange
therefor, without interest, (i) the amount of dividends or other distributions
with a record date on or after the Effective Time theretofore paid with respect
to such Illinova Consideration, and (ii) if the payment date for any dividend or
distribution payable with respect to such Illinova Consideration has not
occurred prior to the surrender of such Illinova Stock Certificate, at the
appropriate payment date therefor, the amount of dividends or other
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distributions with a record date on or after the Effective Time but prior to the
surrender of such Illinova Stock Certificate.
(g) All Newco Common Stock issued upon the surrender of
Illinova Stock Certificates in accordance with the terms hereof will be deemed
to have been issued in full satisfaction of all rights pertaining to such
Illinova Stock Certificates and the Illinova Common Stock formerly represented
thereby, and from and after the Effective Time, there will be no further
registration of transfers effected on the stock transfer books of the IAC
Surviving Corporation of shares of Illinova Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Illinova
Stock Certificates are presented to the IAC Surviving Corporation for any
reason, they will be canceled and exchanged as provided in this Article IV.
Section 4.3 Conversion of Newco Capital Stock.
At the Effective Time, by virtue of the Mergers and without any action
on the part of IAC, DAC, or Newco, or the holders of any of the capital stock
described below:
(a) Each outstanding share of Newco Common Stock issued and
outstanding immediately prior to the Effective Time will be canceled and no cash
or other consideration will be delivered in exchange therefor.
(b) Each outstanding share of Series A Convertible Preferred
Stock of Newco will remain issued and outstanding.
Section 4.4 Dynegy Common Stock Procedures.
(a) Newco shall authorize one or more transfer agent(s)
reasonably acceptable to Dynegy to receive Elections and to act as Exchange
Agent hereunder (the "EXCHANGE AGENT") with respect to each Merger.
(b) Newco shall prepare, for use by Dynegy's Common
Stockholders in surrendering Certificates, a form (the "FORM OF ELECTION")
pursuant to which each Dynegy Common Stockholder may make an Election. The Form
of Election shall be mailed to the Dynegy Common Stockholders as of the record
date for the Dynegy Special Meeting and shall accompany the Proxy
Statement/Prospectus.
(c) Dynegy shall use all reasonable efforts to make the Form
of Election available to all Persons who become Dynegy Common Stockholders of
record between such record date and the Election Date.
(d) An Election shall have been properly made only if the
Exchange Agent shall have received, by 5:00 p.m., Eastern time, two business
days (the "ELECTION DATE") prior to the Effective Time, or at such other time as
Dynegy and Illinova agree, a Form of Election properly completed and signed and
accompanied by the Dynegy Common Stock Certificate or Certificates to which such
Form of Election relates (or by an appropriate guarantee of delivery of such
Certificate or Certificates as set forth in such Form of Election from a member
of any registered national securities exchange or of the National Association of
Securities Dealers, Inc.,
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or a commercial bank or trust company having an office or correspondent in the
United States, provided such Certificate or Certificates are in fact delivered
by the time set forth in such guarantee of delivery).
(e) Any Dynegy Common Stockholder may at any time prior to the
Election Date change such holder's Election by written notice received by the
Exchange Agent at or prior to the Election Date accompanied by a properly
completed Form of Election. Newco shall have the right in its sole discretion to
permit changes in Elections after the Election Date.
(f) Any Dynegy Common Stockholder may at any time prior to the
Election Date revoke such holder's Election by written notice received by the
Exchange Agent at or prior to the Election Date or by withdrawal prior to the
Election Date of such holder's Certificates previously deposited with the
Exchange Agent. Any revocation of an Election may be withdrawn by notice of such
withdrawal delivered at or prior to the Election Date. Any Dynegy Common
Stockholder who has deposited a Dynegy Common Stock Certificate or Certificates
with the Exchange Agent shall have the right to withdraw such Certificates by
written notice received by the Exchange Agent at or prior to the Election Date.
Newco shall obtain from the Exchange Agent an agreement to return all Forms of
Election and accompanying Dynegy Common Stock Certificate or Certificates to the
Dynegy Common Stockholders submitting the same if this Agreement is terminated
in accordance with its terms.
(g) Newco, with Dynegy's consent, shall have the right to make
rules, not inconsistent with this Agreement's terms, governing the validity of
Forms of Election, the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Section 4.1, the issuance and
delivery of certificates for Newco Common Stock into which shares of Dynegy
Common Stock are converted in the DAC Merger, and the payment for shares of
Dynegy Common Stock converted into the right to receive the Cash Consideration
in the DAC Merger.
Section 4.5 Surrender and Payment.
(a) At or prior to the Effective Time, Newco will deposit with
the Exchange Agent for the benefit of the holders of Dynegy Stock, for exchange
in accordance with this Section 4.5, the following consideration (the "AGGREGATE
MERGER CONSIDERATION"): (i) certificates representing shares of Newco Common
Stock representing the applicable portion of the Aggregate Common Stock
Consideration, (ii) certificates representing shares of Newco Class B Common
Stock representing the Preferred Stock Consideration and a portion of the
Aggregate Common Stock Consideration to be paid in accordance with Section
4.1(i), (iii) certificates representing Series A Convertible Preferred Stock of
Newco representing the applicable portion of the Aggregate Common Stock
Consideration to be paid in accordance with Section 4.1(i) and (iv) the Cash
Consideration. At or prior to the Effective Time, Newco will deposit with the
Exchange Agent for the benefit of the holders of Illinova Common Stock, for
exchange in accordance with this Section 4.5, certificates representing shares
of Newco Common Stock representing the Illinova Consideration. The stock
certificates and cash described above are referred to as the "EXCHANGE FUND."
The Exchange Agent, pursuant to irrevocable instructions, will deliver the
Aggregate Merger Consideration and the Illinova Consideration out of the
Exchange Fund. No interest will be paid or will accrue on any cash amount
payable upon the
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surrender of any Dynegy Stock Certificates or Illinova Stock Certificates.
Except as contemplated by Section 4.5(d), the Exchange Fund shall not be used
for any other purpose.
(b) Promptly after the Effective Time, but not later than five
business days thereafter, Newco will send, or will cause the Exchange Agent to
send, to each holder of a Dynegy Stock Certificate or Illinova Stock Certificate
a letter of transmittal and instructions for use in effecting the exchange of
such Dynegy Stock Certificates or Illinova Stock Certificates for certificates
representing the Aggregate Merger Consideration or the Illinova Consideration
owing to such holder.
(c) If any shares of Newco Common Stock are to be issued
and/or cash to be paid to a Person other than the registered holder of the
Dynegy Stock Certificate or Certificates or Illinova Stock Certificate or
Certificates surrendered in exchange therefor, it will be a condition to such
issuance that the Dynegy or Illinova Stock Certificate or Certificates so
surrendered will be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such issuance will pay to the Exchange
Agent any transfer or other taxes required as a result of such issuance to a
Person other than the registered holder or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(d) Any Aggregate Merger Consideration or Illinova
Consideration that remains unclaimed by the holders of Dynegy Stock or Illinova
Common Stock one year after the Effective Time will be returned to Newco, upon
demand, and any such holder who has not exchanged such holder's Dynegy or
Illinova Stock Certificates in accordance with this Section 4.5 prior to that
time will thereafter look only to Newco, as a general creditor thereof, to
exchange such Dynegy or Illinova Stock Certificates or to pay amounts to which
they are entitled pursuant to Section 4.1 and Section 4.2. If any Dynegy or
Illinova Stock Certificates are not surrendered within six years after the
Effective Time, the Aggregate Merger Consideration or Illinova Consideration, as
the case may be, issuable in respect of such Dynegy or Illinova Stock
Certificates, and the amount of dividends and other distributions, if any, which
have become payable and which thereafter become payable on the Aggregate Merger
Consideration or Illinova Consideration evidenced by such Dynegy or Illinova
Stock Certificates as provided herein will, to the extent permitted by
applicable law, become the property of Newco, free and clear of all claims or
interest of any Person previously entitled thereto. Notwithstanding the
foregoing, none of Newco or either Surviving Corporation will be liable to any
holder of Dynegy or Illinova Stock Certificates for any amount paid, or
Aggregate Merger Stock Consideration or Illinova Consideration, cash or
dividends delivered, to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(e) If any Dynegy or Illinova Stock Certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Dynegy or Illinova Stock Certificate to be lost, stolen or
destroyed and, if required by Newco, the posting by such Person of a bond in
such reasonable amount as Newco may direct as indemnity against any claim that
may be made against it with respect to such Dynegy or Illinova Stock
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Dynegy or Illinova Stock Certificate the Aggregate Merger
Consideration or Illinova Consideration, as the case may be, and, if applicable,
cash and unpaid dividends and other distributions on any Aggregate
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Merger Consideration or Illinova Consideration, as the case may be, deliverable
in respect thereof pursuant to this Agreement.
Section 4.6 Stock Options.
(a) At the Effective Time, automatically and without any
action on the part of either Surviving Corporation, Newco or any holder of
outstanding employee or director stock options of Dynegy outstanding at the
Effective Time (the "DYNEGY STOCK OPTIONS"), Newco will assume each Dynegy Stock
Option and it will become an option to purchase that number of shares of Newco
Common Stock obtained by multiplying the number of shares of Dynegy Common Stock
issuable upon the exercise of such option by the Exchange Ratio at an exercise
price per share equal to the per share exercise price of such Dynegy Stock
Option divided by the Exchange Ratio and otherwise upon the same terms and
conditions as such outstanding options to purchase Dynegy Common Stock;
provided, however, in the case of any Dynegy Stock Option to which Section 421
of the Code applies because of the qualifications under Section 422 or 423 of
the Code, the exercise price, the number of shares of Newco Common Stock
purchasable pursuant to such Dynegy Stock Option and the terms and conditions of
exercise of such Dynegy Stock Option will comply with Section 424(a) of the
Code.
(b) At the Effective Time, automatically and without any
action on the part of either Surviving Corporation, Newco or any holder of
employee or director stock options of Illinova outstanding at the Effective Time
(the "ILLINOVA STOCK OPTIONS" and, together with the Dynegy Stock Options, the
"PREDECESSOR COMPANY STOCK OPTIONS"), Newco will assume each Illinova Stock
Option and it will become an option to purchase one share of Newco Common Stock
for each share of Illinova Common Stock issuable upon the exercise of such
Illinova Stock Option and otherwise upon the same terms and conditions as such
outstanding options to purchase Illinova Common Stock; provided, however, in the
case of any option to which Section 421 of the Code applies because of the
qualifications under Section 422 or 423 of the Code, the exercise price, the
number of shares purchasable pursuant to such Illinova Stock Option and the
terms and conditions of exercise of such Illinova Stock Option will comply with
Section 424(a) of the Code.
(c) At the Effective Time, the Dynegy Stock Options and
Illinova Stock Options will vest and become immediately exercisable to the
extent set forth in Schedule 4.6(c). At the Effective Time, each outstanding
award (including restricted stock, phantom stock, stock equivalents and stock
units) ("AWARDS") under any employee incentive or benefit plans, programs or
arrangements and non-employee director plans currently maintained by Dynegy or
Illinova which provide for grants of equity-based awards shall be amended or
converted into a similar instrument of Newco, in each case with such adjustments
to the terms of such Awards, such that the Awards become non-forfeitable to the
extent as determined by Illinova's Board of Directors or Dynegy's Board of
Directors, as the case may be, as of the Effective Time, and otherwise as are
appropriate to preserve the value inherent in such Awards with no material
detrimental effects on the holders thereof. The other terms of each Award, and
the plans or agreements under which they were issued, will continue to apply in
accordance with their terms.
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(d) Newco will take all corporate actions necessary to reserve
for issuance a sufficient number of shares of Newco Common Stock for delivery
upon exercise of Predecessor Company Stock Options assumed by Newco pursuant to
Section 4.6(a) and Section 4.6(b).
(e) As promptly as practicable after the Effective Time, Newco
will file a Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Newco Common Stock subject to
Predecessor Company Stock Options and will use all reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(f) As of the Effective Time, Newco will assume each Dynegy
and Illinova stock option plan providing for the issuance or grant of options
with such amendments thereto as may be required to reflect the Mergers,
including the substitution of Newco Common Stock for Dynegy Common Stock and
Illinova Common Stock, as applicable, thereunder; provided that after the
Effective Time, no more options or other awards will be issued under any such
plans.
Section 4.7 Closing.
The closing (the "CLOSING") of the Transactions will take place at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 711 Louisiana Street,
Suite 1900, Houston, Texas, on the second business day (the "CLOSING DATE")
after which all of the conditions listed in Article IX are satisfied or waived,
or at such other date, place and time as Illinova and Dynegy otherwise agree.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DYNEGY
Except as listed in the disclosure schedule delivered to Newco
contemporaneously with the execution hereof (the "DYNEGY DISCLOSURE SCHEDULE"),
Dynegy represents and warrants to Illinova and Newco as follows:
Section 5.1 Organization and Qualification.
(a) Dynegy is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of Dynegy's properties or the nature of its
business makes such qualification necessary, except in jurisdictions, if any,
where the failure to be so qualified would not result in a Dynegy Material
Adverse Effect. Dynegy has all requisite corporate or other power and authority
to own, use or lease its properties and to carry on its business as it is now
being conducted. Dynegy has made available to Illinova a complete and correct
copy of its certificate of incorporation and bylaws, each as amended to date,
and Dynegy's certificate of incorporation and bylaws as so made available are in
full force and effect. Dynegy is not in default in the performance, observation
or fulfillment of any provision of its certificate of incorporation or bylaws.
(b) Each of Dynegy's Subsidiaries is a Person duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, is duly qualified to do
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business as a foreign Person and is in good standing in each jurisdiction in
which the character of such Subsidiary's properties or the nature of its
business makes such qualification necessary, except in jurisdictions, if any,
where the failure to be so qualified would not result in a Dynegy Material
Adverse Effect. Except as disclosed in Section 5.1(b) of the Dynegy Disclosure
Schedule, none of Dynegy or such Persons is a "public utility company," a
"holding company," a "subsidiary company" or an "affiliate" of any public
utility company or holding company within the meaning of Sections 2(a)(5),
2(a)(7), 2(a)(8), or 2(a)(11) of PUHCA. Each of Dynegy's Subsidiaries has the
requisite corporate or other similar power and authority to own, use or lease
its properties and to carry on its business as it is now being conducted and as
it is now proposed to be conducted. Dynegy has made available to Illinova a
complete and correct copy of the certificate of incorporation and bylaws (or
similar organizational documents) of each of Dynegy's Subsidiaries, each as
amended to date, and each certificate of incorporation and bylaws (or similar
organizational documents) as so delivered is in full force and effect. No
Subsidiary of Dynegy is in default in the performance, observation or
fulfillment of any provision of its articles of incorporation or bylaws (or
similar organizational documents). Except as listed on Section 5.1(b) of the
Dynegy Disclosure Schedule, other than Dynegy's Subsidiaries, Dynegy does not
beneficially own or control, directly or indirectly, 5% or more of any class of
equity or similar securities of any Person.
Section 5.2 Capitalization.
(a) The authorized capital stock of Dynegy consists of
400,000,000 shares of Dynegy Common Stock and 50,000,000 shares of preferred
stock, par value $.01 per share, of which 8,000,000 shares have been designated
and issued as the Series A Participating Preferred Stock (the "DYNEGY PREFERRED
STOCK"). At May 12, 1999, 152,864,662 shares of Dynegy Common Stock were issued
and outstanding. As of March 31, 1999, (i) 154,086,298 shares of Dynegy Common
Stock were issued and outstanding, (ii) 7,815,363 shares of Dynegy Preferred
Stock were issued and outstanding, (iii) options to acquire 18,175,186.25 shares
of Dynegy Common Stock were outstanding under all stock option plans and
agreements of Dynegy or its Subsidiaries, and (iv) warrants to purchase 6,228
shares of Dynegy Common Stock were outstanding. All such shares are duly
authorized, validly issued, fully paid and nonassessable, and free of preemptive
rights. Except as set forth above, and except for this Agreement, as set forth
on Section 5.2(a) of the Dynegy Disclosure Schedule, and pursuant to the terms
of the Dynegy Preferred Stock, there are no outstanding subscriptions, options,
rights, warrants, convertible securities, stock appreciation rights, phantom
equity, or other agreements or commitments obligating Dynegy to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of its capital stock of
any class.
(b) Except as listed in Section 5.2(b) of the Dynegy
Disclosure Schedule, Dynegy is the record or beneficial owner of all of the
outstanding equity interests of each Dynegy Subsidiary, there are no irrevocable
proxies with respect to any such equity interests, and no equity interests of
any Dynegy Subsidiary are or may become required to be issued because of any
options, warrants, rights to subscribe to, calls or commitments relating to, or
securities or rights convertible into or exchangeable or exercisable for, equity
interests of any Dynegy Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which Dynegy or any Dynegy Subsidiary is or
may be bound to issue additional equity interests of any Dynegy Subsidiary or
securities convertible into or exchangeable or exercisable for any
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such equity interests. Except as listed in Section 5.2(b) of the Dynegy
Disclosure Schedule or with respect to equity interests in Subsidiaries of
Dynegy the sole assets of which are Dynegy Unregulated Facilities and whose
equity has been pledged or otherwise encumbered as a condition of non-recourse
financing of Dynegy Unregulated Facilities, all of such equity interests are
duly authorized, validly issued, fully paid and nonassessable and Dynegy owns
them free and clear of all liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind (collectively, the "LIENS").
Section 5.3 Authority.
Dynegy has full corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it is or will be a party
and, subject to obtaining the Dynegy Stockholders' Approval under Section 8.12,
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
Dynegy is or will be a party, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
Dynegy's Board of Directors, and no other corporate proceedings on Dynegy's part
are necessary to authorize this Agreement and the Ancillary Agreements to which
Dynegy is or will be a party or to consummate the transactions contemplated
hereby or thereby, other than the Dynegy Stockholders' Approval as contemplated
by Section 8.12. This Agreement has been, and the Ancillary Agreements to which
Dynegy is or will be a party are, or upon execution will be, duly and validly
executed and delivered by Dynegy and, assuming the due authorization, execution
and delivery hereof and thereof by the other parties hereto and thereto, is, or
upon execution will be Enforceable against Dynegy.
Section 5.4 Consents and Approvals; No Violation.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by Dynegy of its obligations hereunder will
not:
(a) subject to obtaining the Dynegy Stockholders' Approval as
contemplated by Section 8.12, conflict with any provision of Dynegy's
certificate of incorporation or bylaws or the certificates of incorporation or
bylaws (or other similar organizational documents) of any of its Subsidiaries;
(b) subject to obtaining the Dynegy Stockholders' Approval as
contemplated by Section 8.12, require any consent, waiver, approval, order,
authorization or permit of, or registration, filing with or notification to:
(i) any Governmental Authority, except for (x)
required regulatory approvals listed in Section 5.4(b) of the
Dynegy Disclosure Schedule and (y) approvals that are
ministerial in nature and are customarily obtained from
Governmental Authorities after the Effective Time in
connection with transactions of the same nature as are
contemplated hereby ("CUSTOMARY POST-CLOSING CONSENTS"), or
(ii) except as listed in Section 5.4(b) of the Dynegy
Disclosure Schedule, any third party other than a Governmental
Authority, other than such
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non-Governmental Authority third party consents, waivers,
approvals, orders, authorizations and permits that would not
(x) result in a Dynegy Material Adverse Effect, (y) impair the
ability of Dynegy or any of its Subsidiaries, as the case may
be, to perform its obligations under this Agreement or any
Ancillary Agreement or (z) prevent the consummation of any of
the transactions contemplated hereby and thereby;
(c) result in any violation of or the breach of or constitute
a default (with notice or lapse of time or both) under, or give rise to any
right of termination, purchase, first refusal, cancellation or acceleration or
guaranteed payments or a loss of a material benefit under, any provisions of any
note, lease, mortgage, license, agreement or other instrument or obligation to
which Dynegy or any of its Subsidiaries is a party or by which Dynegy or any of
its Subsidiaries or any of their respective properties or assets may be bound,
except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) result in a Dynegy Material Adverse Effect, (ii) materially impair the
ability of Dynegy or any of its Subsidiaries to perform its obligations under
this Agreement or any Ancillary Agreement or (iii) prevent the consummation of
any of the transactions contemplated hereby and thereby. Solely for this Section
5.4(c), an obligation by Dynegy to dispose of (and resulting disposal of) any of
its ownership interests in any or all of the Dynegy Qualifying Facilities will
not be deemed to be a Dynegy Material Adverse Effect;
(d) violate the provisions of any material order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Dynegy
or any Subsidiary of Dynegy;
(e) result in the creation of any Lien upon material
properties or assets or on any shares of capital stock of Dynegy or its
Subsidiaries under any agreement or instrument to which Dynegy or any of its
Subsidiaries is a party or by which Dynegy or any of its Subsidiaries or any of
their properties or assets is bound; or
(f) result in any holder of any securities of Dynegy being
entitled to appraisal, dissenters' or similar rights.
Section 5.5 Dynegy SEC Reports.
Dynegy has filed with the SEC, and has made available to Illinova, true
and complete copies of each form, registration statement, report, schedule,
proxy or information statement and other document (including exhibits and
amendments thereto), including its Annual Reports to Stockholders incorporated
by reference in certain of such reports, required to be filed with the SEC since
December 31, 1995 under the Securities Act or the Exchange Act (collectively,
the "DYNEGY SEC REPORTS"). As of the respective dates that such Dynegy SEC
Reports were filed, each Dynegy SEC Report, including any financial statements
or schedules included therein, (a) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No event has
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occurred between the date of the most recent Dynegy SEC Report filed and the
date hereof that would require the filing of a Current Report on Form 8-K.
Section 5.6 Dynegy Financial Statements.
Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Dynegy (including any related notes
and schedules) included (or incorporated by reference) in its Annual Reports on
Form 10-K for each of the three fiscal years ended December 31, 1996, 1997 and
1998, and any subsequent Dynegy SEC Report, have been prepared from, and are in
accordance with, the books and records of Dynegy and its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the SEC's published rules and regulations, have been
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto and subject, in the case of quarterly financial
statements, to normal and recurring year-end adjustments) and fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Dynegy and its
Subsidiaries as of the date thereof and the consolidated results of operations
and cash flows (and changes in financial position, if any) of Dynegy and its
Subsidiaries for the periods presented therein (subject to normal year-end
adjustments and the absence of financial footnotes in the case of any unaudited
interim financial statements).
Section 5.7 Absence of Undisclosed Liabilities.
Except for such liabilities or obligations as (i) were accrued or fully
reserved against in the consolidated balance sheet of Dynegy at March 31, 1999
(the "DYNEGY BALANCE SHEET"), (ii) are of a normally recurring nature and were
incurred after March 31, 1999 (the "DYNEGY BALANCE SHEET DATE") in the ordinary
course of business consistent with past practice or (iii) as described in the
Dynegy Disclosure Schedule or in the Dynegy SEC Reports, neither Dynegy nor any
of its Subsidiaries has any liabilities or obligations of any nature (matured or
unmatured, fixed or contingent) which are, individually or in the aggregate, of
a nature required to be disclosed on the face of a balance sheet prepared in
accordance with GAAP and are material to the business of Dynegy and its
Subsidiaries, taken as a whole. As of the Dynegy Balance Sheet Date, there were
no material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) which are not adequately provided for in the Dynegy Balance Sheet as
required by said Statement No. 5.
Section 5.8 Absence of Certain Changes.
Except as contemplated by this Agreement, as listed in Section 5.8 of
the Dynegy Disclosure Schedule or as disclosed in the Dynegy SEC Reports, since
the Dynegy Balance Sheet Date, (a) Dynegy and its Subsidiaries have conducted
their business in all material respects in the ordinary course consistent with
past practices, (b) there has not been any change or development, or combination
of changes or developments that, individually or in the aggregate, would have a
Dynegy Material Adverse Effect, (c) other than as would be permitted by Section
7.1(b), there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
Dynegy, or any repurchase, redemption
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or other acquisition by Dynegy or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
Dynegy or any of its Subsidiaries, (d) there has not been any amendment of any
term of any outstanding security of Dynegy or any of its Subsidiaries, and (e)
there has not been any change in any method of accounting or accounting practice
by Dynegy or any of its Subsidiaries, except for any such change required
because of a concurrent change in GAAP or to conform a Subsidiary's accounting
policies and practices to those of Dynegy.
Section 5.9 Taxes.
(a) Except as listed in Section 5.9(a) of the Dynegy
Disclosure Schedule and for matters that would not have a Dynegy Material
Adverse Effect:
(i) Dynegy and each of its Subsidiaries have timely
filed or will file or cause to be timely filed, all material
Tax Returns required by applicable law prior to or as of the
Closing Date. All such Tax Returns and amendments thereto are
or will be true, complete and correct in all material
respects;
(ii) Dynegy and each of its Subsidiaries have paid
whether or not shown on any Tax Return, or where payment is
not yet due, have established, an adequate accrual for the
payment of all material Taxes and no claim has been made by
any Tax Authority in a jurisdiction where Dynegy or any of its
Subsidiaries do not file tax returns that it is or may be
subject to taxation in that jurisdiction;
(iii) No Audit is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, Dynegy or any
of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of Dynegy or any of its Subsidiaries
that if raised with respect to any other period not so audited
could be expected to result in a material proposed deficiency
for any period not so audited. No material deficiency or
adjustment for any Taxes has been threatened, proposed,
asserted or assessed against Dynegy or any of its
Subsidiaries. There are no liens for Taxes upon the assets of
Dynegy or any of its Subsidiaries, except liens for current
Taxes not yet delinquent;
(iv) Neither Dynegy nor any of its Subsidiaries has
given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes or have executed
powers of attorney with respect to Tax matters, which will be
outstanding as of the Closing Date; and
(v) Section 5.9(a) of the Dynegy Disclosure Schedule
lists all material Tax sharing, Tax indemnity, or similar
agreements to which Dynegy or any of its Subsidiaries is
party, is bound by, or have any obligation or liability for
Taxes.
(b) Section 5.9(b) of the Dynegy Disclosure Schedule lists (1)
the name of each employee, former employee or other person who is or was
providing services to Dynegy or any Dynegy Subsidiaries and who, in connection
with the Transactions, will receive, or will or may become entitled to receive
in the future or upon termination of such person's employment,
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any payments (including accelerated vesting of Dynegy Options or other
equity-based awards) which could reasonably be expected to constitute "excess
parachute payments" with respect to such person within the meaning of Section
280G of the Code ("EXCESS PARACHUTE PAYMENTS"), (2) with respect to each such
person, the maximum amount of Excess Parachute Payments which could reasonably
be expected to be so received (determined in accordance with proposed
regulations of the IRS promulgated under Section 280G of the Code), and (3) with
respect to each person who is entitled to receive a "gross-up payment" in
respect of excise taxes imposed on such Excess Parachute Payments under Section
4999 of the Code, a reasonable estimate of the amount of such gross-up payment.
(c) The Code Section 338(h)(10) election made in connection
with the purchase of Destec Energy, Inc. is effective for both Federal and State
income tax purposes to cause the tax basis of the assets acquired to reflect
allocated purchase price. Dynegy and each of its Subsidiaries including Destec
Energy, Inc. have timely filed or caused to be filed all elections and forms
required to be filed to make such election valid, such acquisition qualified for
elective treatment under Code Section 338(h)(10), and to its knowledge the
allocation of purchase price among the assets was proper.
Section 5.10 Litigation.
Except as disclosed in the Dynegy SEC Reports or Section 5.10 of the
Dynegy Disclosure Schedule, (i) as of the date hereof, there is no Action (or
group of related Actions) pending or, to Dynegy's knowledge, threatened against
or directly affecting Dynegy, any Subsidiaries of Dynegy or any of the directors
or officers of Dynegy or any of its Subsidiaries in their capacity as such, that
could reasonably be expected to result in an adverse judgment in excess of
$1,000,000; and (ii) there is no Action (or group of related Actions) pending
or, to Dynegy's knowledge, threatened against or directly affecting Dynegy, any
Subsidiaries of Dynegy or any of the directors or officers of Dynegy or any of
its Subsidiaries in their capacity as such, that could reasonably be expected to
have a Dynegy Material Adverse Effect, if adversely determined. Neither Dynegy
nor any of its Subsidiaries, nor any officer, director or employee of Dynegy or
any of its Subsidiaries, has been permanently or temporarily enjoined by any
Order from engaging in or continuing any conduct or practice in connection with
the business, assets or properties of Dynegy or such Subsidiary, nor, to the
knowledge of Dynegy, is Dynegy, any Subsidiary or any officer, director or
employee of Dynegy or its Subsidiaries under investigation by any Governmental
Authority. Except as disclosed in the Dynegy SEC Reports or in Section 5.10 of
the Dynegy Disclosure Schedule, there is no Order or order of any arbitrator or
mediator enjoining or requiring Dynegy or any of its Subsidiaries to take any
action of any kind with respect to its business, assets or properties.
Notwithstanding the foregoing, no representation or warranty in this Section
5.10 is made with respect to Environmental Laws, which are covered in Section
5.12.
Section 5.11 Employee Benefit Plans; ERISA.
(a) Section 5.11(a) of the Dynegy Disclosure Schedule lists
all employee benefit plans or arrangements of any type (including plans
described in Section 3(3) of ERISA and all bonus plans, stock option, stock
purchase, restricted stock, incentive, deferred compensation, and all
employment, termination, severance or other arrangements), sponsored,
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maintained or contributed to by Dynegy or any trade or business, whether or not
incorporated, which together with Dynegy would be deemed a "single employer"
under Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA (a
"DYNEGY ERISA AFFILIATE") within six years prior to the Effective Time ("DYNEGY
BENEFIT PLANS").
(b) With respect to each Dynegy Benefit Plan: (i) if intended
to qualify under Section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination letter
from the Internal Revenue Service with respect to its qualification, and its
related trust has been determined to be exempt from tax under Section 501(a) of
the Code and, to Dynegy's knowledge, nothing has occurred since the date of such
letter to adversely affect such qualification or exemption; (ii) each such plan
has been administered in substantial compliance with its terms and applicable
law, except for any noncompliance with respect to any such plan that could not
reasonably be expected to result in a Dynegy Material Adverse Effect; (iii) (x)
as of the date hereof, neither Dynegy nor any Dynegy ERISA Affiliate has engaged
in, and Dynegy and each Dynegy ERISA Affiliate do not have any knowledge of any
Person that has engaged in, any transaction or acted or failed to act in any
manner that would subject Dynegy or any Dynegy ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA in excess of $1,000,000; and (y)
neither Dynegy nor any Dynegy ERISA Affiliate has engaged in, and Dynegy and
each Dynegy ERISA Affiliate do not have any knowledge of any Person that has
engaged in, any transaction or acted or failed to act in any manner that would
subject Dynegy or any Dynegy ERISA Affiliate to any liability for a breach of
fiduciary duty under ERISA that could reasonably be expected to result in a
Dynegy Material Adverse Effect; (iv) no disputes or Actions are pending, or, to
the knowledge of Dynegy or any Dynegy ERISA Affiliate, threatened that could
reasonably be expected to result in a material liability that would have a
Dynegy Material Adverse Effect; (v) neither Dynegy nor any Dynegy ERISA
Affiliate has engaged in, and Dynegy and each Dynegy ERISA Affiliate does not
have any knowledge of any Person that has engaged in, any transaction in
violation of Section 406(a) or (b) of ERISA or Section 4975 of the Code for
which no exemption exists under Section 408 of ERISA or Section 4975(c) of the
Code or Section 4975(d) of the Code that could reasonably be expected to result
in a Dynegy Material Adverse Effect; (vi) there have been no "reportable events"
under Section 4043 of ERISA for which the 30 day notice requirement of ERISA has
not been waived by the Pension Benefit Guaranty Corporation (the "PBGC"); (vii)
all contributions due have been made on a timely basis (within, where
applicable, the time limit established under Section 302 of ERISA or Code
Section 412); (viii) no notice of intent to terminate such plan has been given
under Section 4041 of ERISA and no Action has been instituted under Section 4042
of ERISA to terminate such plan; (ix) except for defined benefit plans (if
applicable), such plan may be terminated on a prospective basis without any
continuing liability for benefits other than benefits accrued to the date of
such termination; and (x) neither Dynegy nor any Dynegy ERISA Affiliate has
incurred any liability under Title IV of ERISA other than liabilities that would
not cause a Dynegy Material Adverse Effect. All contributions made or required
to be made under any Dynegy Benefit Plan have been made on or before their
required due date and all such contributions meet the requirements for
deductibility under the Code, and all contributions which are required and which
have not been made have been properly recorded on the books of Dynegy or a
Dynegy ERISA Affiliate.
(c) No Dynegy Benefit Plan is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of
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the Code). No event has occurred with respect to Dynegy or a Dynegy ERISA
Affiliate which could subject Dynegy to any liability or Lien with respect to
any Dynegy Benefit Plan or any employee benefit plan described in Section 3(3)
of ERISA maintained, sponsored or contributed to by a Dynegy ERISA Affiliate
under ERISA or the Code.
(d) Except as listed in Section 5.11(d) of the Dynegy
Disclosure Schedule, no employee of Dynegy or any of its Subsidiaries is covered
by any severance plan or similar arrangement.
(e) Except as listed in Section 5.11(e) of the Dynegy
Disclosure Schedule, none of the Dynegy Benefit Plans that are "welfare plans,"
within the meaning of Section 3(1) of ERISA, provides for any benefits payable
to or on behalf of any employee or director after termination of employment or
service, as the case may be, other than elective continuation required pursuant
to Code Section 4980B or coverage which expires at the end of the calendar month
following such event. Each such plan that is a "group health plan" (as defined
in Code Section 4980B(g)) has been operated in compliance with Code Section
4980B at all times, except for any non-compliance that would not, or insofar as
reasonably can be determined could not, give rise to a Dynegy Material Adverse
Effect.
Section 5.12 Environmental Liability.
Except as listed in Section 5.12 of the Dynegy Disclosure Schedule:
(a) The businesses of Dynegy and its Subsidiaries have been
and are operated in material compliance with all Environmental Laws, except for
any violations which could not reasonably be expected to result in a Dynegy
Material Adverse Effect.
(b) Neither Dynegy nor any of its Subsidiaries has caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances at any of its properties or facilities, except for any such action
which could not reasonably be expected to have a Dynegy Material Adverse Effect
and, to Dynegy's knowledge, no such action has occurred at any property or
facility owned, leased or operated by Dynegy or any of its Subsidiaries, except
for any such action that could not reasonably be expected to have a Dynegy
Material Adverse Effect.
(c) Neither Dynegy nor any of its Subsidiaries has received
any written notice from any Governmental Authority or third party or, to the
knowledge of Dynegy, any other written communication alleging or concerning any
material violation by Dynegy or any of its Subsidiaries of, or responsibility or
liability of Dynegy or any of its Subsidiaries under, any Environmental Law
which could reasonably be expected to have a Dynegy Material Adverse Effect.
There are no pending, or to Dynegy's knowledge, threatened Actions with respect
to the businesses or operations of Dynegy or any of its Subsidiaries alleging or
concerning any violation of or responsibility or liability under any
Environmental Law that, if adversely determined, could reasonably be expected to
have a Dynegy Material Adverse Effect, nor does Dynegy have any knowledge of any
fact or condition that could give rise to such an Action.
(d) Dynegy and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities
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under all Environmental Laws with respect to the operation of the businesses of
Dynegy and its Subsidiaries; there are no pending or, to Dynegy's knowledge,
threatened Actions seeking to modify, revoke or deny renewal of any of such
approvals, permits, licenses, registrations and authorizations; and Dynegy does
not have knowledge of any fact or condition that is reasonably likely to give
rise to any Action to modify, revoke or deny renewal of any of such approvals,
permits, licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the
foregoing, except as would not cause a Dynegy Material Adverse Effect, (i) to
Dynegy's knowledge, all off-site locations where Dynegy or any of its
Subsidiaries has transported, released, discharged, stored, disposed or arranged
for the disposal of Hazardous Substances are licensed disposal sites as required
by law, (ii) to Dynegy's knowledge, all underground and above ground storage
tanks, and the operating status, capacity and contents of such tanks, located on
any property owned, leased or operated by Dynegy or any of its Subsidiaries are
listed in Section 5.12(e) of the Dynegy Disclosure Schedule and (iii) to
Dynegy's knowledge, no PCB-Contaminated Electrical Equipment, as defined in 40
C.F.R. Section 761.3, is used or stored at any property owned, leased or
operated by Dynegy or any of its Subsidiaries.
(f) To Dynegy's knowledge, no claims have been asserted or
threatened against Dynegy or its Subsidiaries as a result of any release or
disposal at any of the properties currently or previously owned or operated by
Dynegy, its Subsidiaries, or a predecessor in interest, or at any disposal or
treatment facility which received Hazardous Substances generated by Dynegy, its
Subsidiaries, or any predecessor in interest which could reasonably be expected
to result in a Dynegy Material Adverse Effect.
(g) To Dynegy's knowledge, no claims have been asserted or
threatened against Dynegy or its Subsidiaries for any personal injury (including
wrongful death) or property damage (real or personal) arising out of exposure to
Hazardous Substances used, handled, generated, transported or disposed by Dynegy
or its Subsidiaries at property currently or previously owned or operated by
Dynegy or its Subsidiaries, except as could not reasonably be expected to result
in a Dynegy Material Adverse Effect.
(h) To Dynegy's knowledge, Dynegy has made available to
Illinova all material non-privileged internal and external environmental audits,
evaluations, assessments and studies in the possession of Dynegy (i) pertaining
to Hazardous Substances used, handled, generated, transported or disposed by
Dynegy or its Subsidiaries at property owned or operated by Dynegy or its
Subsidiaries, or (ii) concerning compliance by Dynegy or its Subsidiaries with
Environmental Laws.
Section 5.13 Compliance with Applicable Laws.
Except as would not individually or in the aggregate result in a Dynegy
Material Adverse Effect, Dynegy and each of its Subsidiaries hold all approvals,
licenses, permits, registrations and similar type authorizations necessary for
the lawful conduct of its respective businesses, as now conducted, and such
businesses are not being, and neither Dynegy nor any of its Subsidiaries has
received any notice from any Person that any such business has been or is being,
conducted in violation of any law, ordinance or regulation, including any law,
ordinance or
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regulation relating to occupational health and safety, except for possible
violations that either individually or in the aggregate have not resulted and
would not result in a Dynegy Material Adverse Effect; provided, however, no
representation or warranty in this Section 5.13 is made with respect to
Environmental Laws, which are covered exclusively in Section 5.12.
Section 5.14 Labor Matters; Employees.
(a) Except as listed in Section 5.14(a) of the Dynegy
Disclosure Schedule, (i) (A) none of Dynegy or any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Dynegy or any of
its Subsidiaries and (B) none of the employees of Dynegy or any of its
Subsidiaries are represented by any labor organization and none of Dynegy or any
of its Subsidiaries have any knowledge of any current union organizing
activities among the employees of Dynegy or any of its Subsidiaries nor does any
question concerning representation exist concerning such employees, and (ii)
except as would not cause a Dynegy Material Adverse Effect (A) there is no labor
strike, dispute, slowdown, work stoppage or lockout actually pending or, to
Dynegy's knowledge threatened against or affecting Dynegy or any of its
Subsidiaries and, during the past five years, there has not been any such
action, (B) Dynegy and its Subsidiaries have each at all times been in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (C) there is no unfair labor practice charge or
complaint against any of Dynegy or any of its Subsidiaries pending or, to the
knowledge of Dynegy, threatened before the National Labor Relations Board or any
similar state or foreign agency, (D) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or other grievance
procedure relating to Dynegy or any of its Subsidiaries, (E) neither the
Occupational Safety and Health Administration nor any corresponding state agency
has threatened to file any citation, and there are no pending citations,
relating to Dynegy or any of its Subsidiaries, and (F) there is no employee or
governmental claim or investigation, including any charges to the Equal
Employment Opportunity Commission or state employment practice agency,
investigations regarding Fair Labor Standards Act compliance, audits by the
Office of Federal Contractor Compliance Programs, sexual harassment complaints
or demand letters or threatened claims.
(b) Except as listed in Section 5.14(b) of the Dynegy
Disclosure Schedule, since the enactment of the WARN Act, none of Dynegy or any
of its Subsidiaries has effectuated (i) a "plant closing" (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of Dynegy or
any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of Dynegy or any of its
Subsidiaries, nor has Dynegy or any of its Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law, in each case
that could reasonably be expected to have a Dynegy Material Adverse Effect.
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Section 5.15 Material Contracts.
(a) Except as set forth in the Dynegy SEC Reports or as
permitted pursuant to Section 7.1, neither Dynegy nor any of its Subsidiaries is
a party to or bound by (i) any agreement relating to the incurrence of debt
(including sale and leaseback and capitalized lease transactions and other
similar financing transactions) or its guaranty providing for payment or
repayment in excess of $10,000,000, but excluding open option, future and
forward positions with respect to the purchase, sale or delivery of commodities
and securities; (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or (iii) any non-competition agreement
or any other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any portion of
the business of Dynegy and/or its Subsidiaries is or would be conducted or
through which Dynegy and/or its Subsidiaries can restrict the conduct of
business by any other Person.
(b) Except as listed in Section 5.15(b) of the Dynegy
Disclosure Schedule or disclosed in the Dynegy SEC Reports, to Dynegy's
knowledge, no event of default (or an event which, with notice or lapse of time
or both notice and lapse of time, would constitute an event of default) exists
under any material note, lease, mortgage, deed of trust, license, agreement or
other instrument or obligation to which any Person which owns or leases any of
the Dynegy Power Generation Facilities is a party or by which any of the Dynegy
Power Generation Facilities is subject or bound.
Section 5.16 Required Stockholder Vote or Consent.
The only vote of the holders of any class or series of Dynegy's capital
stock necessary to consummate the Transactions is the approval and adoption of
this Agreement by the holders of a majority of the votes entitled to be cast by
holders of the Dynegy Common Stock and the Dynegy Preferred Stock, voting
together as a single class, with each share of Dynegy Common Stock being
entitled to one vote per share and each share of Dynegy Preferred Stock being
entitled to a number of votes per share equal to the number of shares of Dynegy
Common Stock into which such share of Dynegy Preferred Stock is then convertible
(the "DYNEGY STOCKHOLDERS' APPROVAL").
Section 5.17 Proxy Statement/Prospectus; Registration Statement.
None of the information to be supplied by Dynegy for inclusion in (a)
the joint proxy statement relating to the Dynegy Special Meeting and the
Illinova Special Meeting (also constituting the prospectus in respect of Newco
Common Stock into which shares of Dynegy Stock will be converted) (the "PROXY
STATEMENT/PROSPECTUS") Newco, Dynegy and Illinova are to file with the SEC, and
any amendments or supplements thereto, or (b) the Registration Statement on Form
S-4 (the "REGISTRATION STATEMENT") that Newco is to file with the SEC in
connection with the Mergers, and any amendments or supplements thereto, will, at
the respective times such documents are filed and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any
amendment or supplement thereto is first mailed to stockholders of Dynegy and
Illinova, at the time such stockholders vote on approval and adoption of this
Agreement and at the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act, contain any
untrue statement of a
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material fact or omit to state any material fact required to be made therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
Section 5.18 Intellectual Property.
Dynegy or its Subsidiaries own, or are licensed or otherwise have the
right to use, all patents, patent rights, trademarks, rights, trade names, trade
name rights, service marks, service mark rights, copyrights, technology,
know-how, processes and other proprietary intellectual property rights and
computer programs ("INTELLECTUAL PROPERTY") currently used in the conduct of the
business of Dynegy and its Subsidiaries, except where the failure to do so would
not, individually or in the aggregate, have a Dynegy Material Adverse Effect. No
Person has notified either Dynegy or any of its Subsidiaries that their use of
the Intellectual Property infringes on the rights of any Person, subject to such
claims and infringements as do not, individually or in the aggregate, give rise
to any liability on the part of Dynegy and its Subsidiaries that could have a
Dynegy Material Adverse Effect, and, to Dynegy's knowledge, no Person is
infringing on any right of Dynegy or any of its Subsidiaries with respect to any
such Intellectual Property. No Actions are pending or, to Dynegy's knowledge,
threatened that Dynegy or any of its Subsidiaries is infringing or otherwise
adversely affecting the rights of any Person with regard to such other Person's
Intellectual Property.
Section 5.19 Brokers.
No broker, finder or investment banker (other than Lehman Brothers
Inc., the fees and expenses of which Dynegy will pay) is entitled to any
brokerage, finder's fee or other fee or commission payable by Dynegy or any of
its Subsidiaries in connection with the Transactions. True and correct copies of
all agreements and engagement letters currently in effect with Lehman Brothers
Inc. (the "DYNEGY ENGAGEMENT LETTERS") have been provided to Illinova.
Section 5.20 Tax-Free Reorganization.
Neither Dynegy nor, to its knowledge, any of its affiliates has taken
or agreed to take any action that would prevent the DAC Merger and the other
Transactions from constituting a contribution of assets under Section 351 of the
Code.
Section 5.21 Fairness Opinion.
Dynegy's Board of Directors has received a written opinion of Lehman
Brothers Inc. that, based upon and subject to the matters discussed therein, as
of the date of such opinion, the Aggregate Common Stock Consideration to be
offered to the holders (the "DYNEGY PUBLIC STOCKHOLDERS") of the Dynegy Common
Stock (other than the holders of Dynegy Stock who are parties (the "VOTING
AGREEMENT PARTIES") to the Voting Agreements) in the DAC Merger is fair, from a
financial point of view, to the Dynegy Public Stockholders. The opinion of
Lehman Brothers Inc. also provides that, based upon and subject to the matters
discussed therein, including specifically their analysis of the respective fair
market values of the Series A Convertible Preferred Stock and the Newco Class B
Common Stock based on assumptions they believe are reasonable and the effect on
such value of the terms pursuant to which the Series A Convertible Preferred
Stock and the Newco Class B Common Stock will be issued, which
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include, among other things, certain restrictions on the transfer of such
shares, Lehman Brothers Inc. also is of the opinion, as of the date of such
opinion, that, from a financial point of view, (a) fair market value of the
Series A Convertible Preferred Stock to be issued to BGAH and Nova for each
share of Dynegy Common Stock is not greater than the fair market value of the
Common Stock Consideration to be offered to the Dynegy Public Stockholders in
the DAC Merger for each share of Dynegy Common Stock and (b) the fair market
value of the Newco Class B Common Stock to be issued to Chevron for each share
of Newco Common Stock is not greater than the fair market value of the Common
Stock Consideration to be offered to the Dynegy Public Stockholders in the DAC
Merger. True and correct copies of such opinions have been made available to
Illinova.
Section 5.22 Year 2000 Issues.
The disclosures set forth in the Dynegy SEC Reports concerning
potential computer hardware and software problems associated with the Year 2000
are true and correct in all material respects as of the respective dates of
filing and the date hereof.
Section 5.23 Takeover Laws.
Dynegy and its Board of Directors have each taken all action required
to be taken by it to exempt this Agreement and the Transactions from, and this
Agreement and the Transactions are exempt from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination" or other anti-takeover laws and regulations of any state, including
the State of Delaware, and including Section 203 of the DGCL.
Section 5.24 Dynegy Unregulated Facilities.
Set forth in Section 5.24 of the Dynegy Disclosure Schedule is a true,
accurate and complete list of (i) all of the Dynegy Unregulated Facilities, (ii)
the direct or indirect equity interests therein of Dynegy or any of its
Subsidiaries, and (iii) to Dynegy's knowledge, the direct or indirect equity
interests in any Dynegy Unregulated Facility that is a Qualifying Facility of
any "electric utility holding company," "electric utility," or any combination
thereof. For purposes hereof, the terms "electric utility" and "electric utility
holding company" shall mean a Person primarily engaged in the generation or sale
of electric power within the meaning of 18 C.F.R. Section 292.206, other than
electric power solely from facilities exempt under PUHCA as "exempt wholesale
generators" or "foreign utility companies."
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ILLINOVA
Except as listed in the disclosure schedule delivered to Dynegy
contemporaneously with the execution hereof (the "ILLINOVA DISCLOSURE
SCHEDULE"), each of Illinova, Newco, DAC and IAC, jointly and severally,
represent and warrant to Dynegy as follows:
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Section 6.1 Organization and Qualification.
(a) Illinova is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of Illinova's properties or the nature of
its business makes such qualification necessary, except in jurisdictions, if
any, where the failure to be so qualified would not result in an Illinova
Material Adverse Effect. Illinova has all requisite corporate or other power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted. Illinova has made available to Dynegy a complete and
correct copy of its and Newco's articles of incorporation and bylaws, each as
amended to date, and Illinova's and Newco's articles of incorporation and bylaws
as so made available are in full force and effect. Illinova is not in default in
the performance, observation or fulfillment of any provision of its articles of
incorporation or bylaws.
(b) Each of Illinova's Subsidiaries is a Person duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business as a foreign
Person and is in good standing in each jurisdiction in which the character of
such Subsidiary's properties or the nature of its business makes such
qualification necessary, except in jurisdictions, if any, where the failure to
be so qualified would not result in an Illinova Material Adverse Effect. Except
as disclosed in Section 6.1(b) of the Illinova Disclosure Schedule, none of
Illinova or such Persons is a "public utility company," a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company or holding
company within the meaning of Sections 2(a)(5), 2(a)(7), 2(a)(8), or 2(a)(11) of
PUHCA. Each of Illinova's Subsidiaries has the requisite corporate or other
similar power and authority to own, use or lease its properties and to carry on
its business as it is now being conducted and as it is now proposed to be
conducted. Illinova has made available to Dynegy a complete and correct copy of
the certificate of incorporation and bylaws (or similar organizational
documents) of each of Illinova's Subsidiaries, each as amended to date, and each
certificate of incorporation and bylaws (or similar organizational documents) as
so delivered is in full force and effect. No Subsidiary of Illinova is in
default in the performance, observation or fulfillment of any provision of its
certificate of incorporation or bylaws (or similar organizational documents).
Except as listed on Section 6.1(b) of the Illinova Disclosure Schedule, other
than Illinova's Subsidiaries, Illinova does not beneficially own or control,
directly or indirectly, 5% or more of any class of equity or similar securities
of any Person.
Section 6.2 Capitalization.
(a) The authorized capital stock of Illinova consists of
200,000,000 shares of Illinova Common Stock, no par value and the authorized
capital stock of Newco consists of 1,000 shares of common stock, no par value,
of which 1,000 are issued and outstanding. As of March 31, 1999, (i) 69,919,287
shares of Illinova Common Stock were issued and outstanding and (ii) stock
options to acquire 611,200 shares of Illinova Common Stock were outstanding
under all stock option plans and agreements of Illinova. As of the date hereof,
1,000 shares of Newco Common Stock were issued and outstanding. All outstanding
shares of Newco and Illinova are duly authorized, validly issued, fully paid and
nonassessable, and free of preemptive rights. Except as set forth above, and
other than this Agreement and the Ancillary Agreements,
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there are no outstanding subscriptions, options, rights, warrants, convertible
securities, stock appreciation rights, phantom equity, or other agreements or
commitments obligating Illinova or Newco to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock of any class.
(b) Except as listed in Section 6.2(b) of the Illinova
Disclosure Schedule, Illinova is the record or beneficial owner of all of the
outstanding equity interests of each Illinova Subsidiary, there are no
irrevocable proxies with respect to any such equity interests, and no equity
interests of any Illinova Subsidiary are or may become required to be issued
because of any options, warrants, rights to subscribe to, calls or commitments
relating to, or securities or rights convertible into or exchangeable or
exercisable for, equity interests of any Illinova Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which Illinova or any
Illinova Subsidiary is or may be bound to issue additional equity interests of
any Illinova Subsidiary or securities convertible into or exchangeable or
exercisable for any such equity interests. Except as listed in Section 6.2(b) of
the Illinova Disclosure Schedule or with respect to equity interests in
Subsidiaries of Illinova Generating Company, the sole assets of which are
Illinova Unregulated Facilities and whose equity has been pledged or otherwise
encumbered as a condition of non-recourse financing of Illinova Unregulated
Facilities, all of such equity interests are duly authorized, validly issued,
fully paid and nonassessable and Illinova owns them free and clear of all Liens.
Section 6.3 Authority.
Each Illinova Company has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is or will
be a party and, subject to obtaining the Illinova Stockholders' Approval under
Section 8.12, to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to which such Illinova Company is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by such Illinova Company's Board of Directors, and no
other corporate proceedings on such Illinova Company's part are necessary to
authorize this Agreement and the Ancillary Agreements to which such Illinova
Company is or will be a party or to consummate the transactions contemplated
hereby or thereby, other than obtaining the Illinova Stockholders' Approval as
contemplated by Section 8.12. This Agreement has been, and the Ancillary
Agreements to which such Illinova Company is or will be a party are, or upon
execution will be, duly and validly executed and delivered by the applicable
Illinova Company and, assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto and thereto, is, or upon
execution will be Enforceable against the applicable Illinova Company.
Section 6.4 Consents and Approvals; No Violation.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by each Illinova Company of its obligations
hereunder will not:
(a) subject to obtaining the Illinova Stockholders' Approval
as contemplated by Section 8.12, conflict with any provision of the articles of
incorporation or bylaws of Illinova
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or the certificates of incorporation or bylaws (or other similar organizational
documents) of any of its Subsidiaries;
(b) subject to obtaining the requisite Illinova Stockholders'
Approval as contemplated by Section 8.12, require any consent, waiver, approval,
order, authorization or permit of, or registration, filing with or notification
to:
(i) any Governmental Authority except for (x)
required regulatory approvals listed in Section 6.4(b) of the
Illinova Disclosure Schedule and (y) Customary Post-Closing
Consents, or
(ii) except as listed in Section 6.4(b) of the
Illinova Disclosure Schedule, any third party other than a
Governmental Authority, other than such non-Governmental
Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (x) result in an
Illinova Material Adverse Effect, (y) impair the ability of
Illinova or any of its Subsidiaries, as the case may be, to
perform its obligations under this Agreement or any Ancillary
Agreement or (z) prevent the consummation of any of the
transactions contemplated hereby and thereby;
(c) except as listed in Section 6.4(c) of the Illinova
Disclosure Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any right
of termination, purchase, first refusal, cancellation or acceleration or
guaranteed payments or a loss of a material benefit under, any provisions of any
note, lease, mortgage, license, agreement or other instrument or obligation to
which Illinova or any of its Subsidiaries is a party or by which Illinova or any
of its Subsidiaries or any of their respective properties or assets may be
bound, except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) result in an Illinova Material Adverse Effect, (ii) materially impair
the ability of Illinova or any of its Subsidiaries to perform its obligations
under this Agreement or any Ancillary Agreement or (iii) prevent the
consummation of any of the transactions contemplated hereby and thereby;
(d) violate the provisions of any material order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Illinova
or any Subsidiary of Illinova;
(e) result in the creation of any Lien upon any material
properties or assets or on any shares of capital stock of Illinova or its
Subsidiaries under any agreement or instrument to which Illinova or any of its
Subsidiaries is a party or by which Illinova or any of its Subsidiaries or any
of their properties or assets is bound; or
(f) result in any holder of any securities of Illinova being
entitled to appraisal, dissenters' or similar rights other than as contemplated
by Section 4.2(e).
Section 6.5 Illinova Reports.
The filings required to be made by Illinova and its Subsidiaries
(including with respect to filings under PUHCA, Illinova's "subsidiary
companies") since January 1, 1996, under PUHCA,
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the Atomic Energy Act, applicable Illinois laws and regulations, the Power Act
and the Natural Gas Act have been filed with the appropriate Governmental
Authority, and, as of the date of such filings, complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. Copies of such filings have been made available to
Dynegy. Illinova has filed with the SEC, and has made available to Dynegy, true
and complete copies of each form, registration statement, report, schedule,
proxy or information statement and other document (including exhibits and
amendments thereto), including its Annual Reports to Shareholders incorporated
by reference in certain of such reports, required to be filed with the SEC since
December 31, 1995 under the Securities Act or the Exchange Act (collectively,
the "ILLINOVA SEC REPORTS"). As of the respective dates that such Illinova SEC
Reports were filed, each Illinova SEC Report, including any financial statements
or schedules included therein, (a) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No event has occurred between the date of the most recent
Illinova SEC Report and the date hereof that would require the filing of a
Current Report on Form 8-K.
Section 6.6 Illinova Financial Statements.
Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Illinova (including any related
notes and schedules) included (or incorporated by reference) in its Annual
Reports on Form 10-K for each of the three fiscal years ended December 31, 1996,
1997 and 1998 and any subsequent Illinova SEC Report, have been prepared from,
and are in accordance with, the books and records of Illinova and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the SEC's published rules and regulations, have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated in the notes thereto and subject, in the case of quarterly
financial statements, to normal and recurring year-end adjustments) and fairly
present, in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of Illinova
and its Subsidiaries as of the date thereof and the consolidated results of
operations and cash flows (and changes in financial position, if any) of
Illinova and its Subsidiaries for the periods presented therein (subject to
normal year-end adjustments and the absence of financial footnotes in the case
of any unaudited interim financial statements).
Section 6.7 Absence of Undisclosed Liabilities.
Except for such liabilities or obligations as (i) were accrued or fully
reserved against in the consolidated balance sheet of Illinova at March 31, 1999
(the "ILLINOVA BALANCE SHEET"), (ii) are of a normally recurring nature and were
incurred after March 31, 1999 (the "ILLINOVA BALANCE SHEET DATE") in the
ordinary course of business consistent with past practice or (iii) as described
in the Illinova Disclosure Schedule or in the Illinova SEC Reports, neither
Illinova nor any of its Subsidiaries has any liabilities or obligations of any
nature (matured or unmatured, fixed or contingent) which are, individually or in
the aggregate, of a nature required to be disclosed on the face of a balance
sheet prepared in accordance with GAAP and are material to the business of
Illinova and its Subsidiaries, taken as a whole. As of the Illinova Balance
Sheet
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Date, there were no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which are not adequately provided for
in the Illinova Balance Sheet as required by said Statement No. 5.
Section 6.8 Absence of Certain Changes.
Except as contemplated by this Agreement, as listed in Section 6.8 of
the Illinova Disclosure Schedule or as disclosed in the Illinova SEC Reports,
since the Illinova Balance Sheet Date (a) Illinova and its Subsidiaries have
conducted their business in all material respects in the ordinary course
consistent with past practices, (b) there has not been any change or
development, or combination of changes or developments that, individually or in
the aggregate, would have an Illinova Material Adverse Effect, (c) other than as
would be permitted by Section 7.2(b), there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect to
any shares of capital stock of Illinova or any repurchase, redemption or other
acquisition by Illinova or any of its Subsidiaries of any outstanding shares of
capital stock or other securities of, or other ownership interests in, Illinova
or any of its Subsidiaries, (d) there has not been any amendment of any term of
any outstanding security of Illinova or any of its Subsidiaries, and (e) there
has not been any change in any method of accounting or accounting practice by
Illinova or any of its Subsidiaries, except for any such change required because
of a concurrent change in GAAP or to conform a Subsidiary's accounting policies
and practices to those of Illinova.
Section 6.9 Taxes.
(a) Except as listed in Section 6.9(a) of the Illinova
Disclosure Schedule and for matters that would not have an Illinova Material
Adverse Effect:
(i) Illinova and each of its Subsidiaries have timely
filed or will file or cause to be timely filed, all material
Tax Returns required by applicable law prior to or as of the
Closing Date. All such Tax Returns and amendments thereto are
or will be true, complete and correct in all material
respects;
(ii) Illinova and each of its Subsidiaries have paid
whether or not shown on any Tax Return, or where payment is
not yet due, have established, an adequate accrual for the
payment of all material Taxes and no claim has been made by
any Tax Authority in a jurisdiction where Illinova or any of
Subsidiaries do not file Tax Return that it is or may be
subject to taxation in that jurisdiction;
(iii) No Audit is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, Illinova or
any of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of Illinova or any of its Subsidiaries
that if raised with respect to any other period not so audited
could be expected to result in a material proposed deficiency
for any period not so audited. No material deficiency or
adjustment for any Taxes has been threatened, proposed,
asserted or assessed against Illinova or any of its
Subsidiaries. There are no liens for Taxes
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upon the assets of Illinova or any of its Subsidiaries, except
liens for current Taxes not yet delinquent;
(iv) Neither Illinova nor any of its Subsidiaries has
given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes or have executed
powers of attorney with respect to Tax matters which will be
outstanding as of the Closing Date; and
(v) Section 6.9(a) of the Illinova Disclosure
Schedule lists, all material Tax sharing, Tax indemnity, or
similar agreements to which Illinova or any of its
Subsidiaries is party, is bound by, or have any obligation or
liability for Taxes.
(b) Section 6.9(b) of the Illinova Disclosure Schedule lists
(1) the name of each employee, former employee or other person who is or was
providing services to Illinova or any Illinova Subsidiaries and who, in
connection with the Transactions, will receive, or will or may become entitled
to receive in the future or upon termination of such person's employment, any
payments (including accelerated vesting of Illinova Options or other
equity-based awards) which could reasonably be expected to constitute Excess
Parachute Payments, (2) with respect to each such person, the maximum amount of
Excess Parachute Payments which could reasonably be expected to be so received
(determined in accordance with proposed regulations of the IRS promulgated under
Section 280G of the Code), and (3) with respect to each person who is entitled
to receive a "gross-up payment" in respect of excise taxes imposed on such
Excess Parachute Payments under Section 4999 of the Code, a reasonable estimate
of the amount of such gross-up payment.
Section 6.10 Litigation.
Except as disclosed in the Illinova SEC Reports or Section 6.10 of the
Illinova Disclosure Schedule, (i) as of the date hereof there is no Action (or
group of related Actions) pending or, to Illinova's knowledge, threatened
against or directly affecting Illinova, any Subsidiaries of Illinova or any of
the directors or officers of Illinova or any of its Subsidiaries in their
capacity as such, that could reasonably be expected to result in an adverse
judgment in excess of $1,000,000; and (ii) there is no Action (or group of
related Actions) pending or, to Illinova's knowledge, threatened against or
directly affecting Illinova, any Subsidiaries of Illinova or any of the
directors or officers of Illinova or any of its Subsidiaries in their capacity
as such, that could reasonably be expected to have an Illinova Material Adverse
Effect, if adversely determined. Neither Illinova nor any of its Subsidiaries,
nor any officer, director or employee of Illinova or any of its Subsidiaries,
has been permanently or temporarily enjoined by any Order from engaging in or
continuing any conduct or practice in connection with the business, assets or
properties of Illinova or such Subsidiary, nor, to the knowledge of Illinova, is
Illinova, any Subsidiary or any officer, director or employee of Illinova or its
Subsidiaries under investigation by any Governmental Authority. Except as
disclosed in the Illinova SEC Reports or in Section 6.10 of the Illinova
Disclosure Schedule, there is no Order or order of any arbitrator or mediator
enjoining or requiring Illinova or any of its Subsidiaries to take any action of
any kind with respect to its business, assets or properties. Notwithstanding the
foregoing, no representation or warranty in this Section 6.10 is made with
respect to Environmental Laws, which are covered in Section 6.12.
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Section 6.11 Employee Benefit Plans; ERISA.
(a) Section 6.11(a) of the Illinova Disclosure Schedule lists
all employee benefit plans or arrangements of any type (including plans
described in Section 3(3) of ERISA and all bonus plans, stock option, stock
purchase, restricted stock, incentive, deferred compensation, and all
employment, termination, severance, or other arrangements), sponsored,
maintained or contributed to by Illinova or any trade or business, whether or
not incorporated, which together with Illinova would be deemed a "single
employer" under Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of
ERISA (an "ILLINOVA ERISA AFFILIATE") within six years prior to the Effective
Time ("ILLINOVA BENEFIT PLANS").
(b) With respect to each Illinova Benefit Plan: (i) if
intended to qualify under Section 401(a) or 401(k) of the Code, such plan
satisfies the requirements of such sections, has received a favorable
determination letter from the Internal Revenue Service with respect to its
qualification, and its related trust has been determined to be exempt from tax
under Section 501(a) of the Code and, to Illinova's knowledge, nothing has
occurred since the date of such letter to adversely affect such qualification or
exemption; (ii) each such plan has been administered in substantial compliance
with its terms and applicable law, except for any noncompliance with respect to
any such plan that could not reasonably be expected to result in an Illinova
Material Adverse Effect; (iii) (x) as of the date hereof, neither Illinova nor
any Illinova ERISA Affiliate has engaged in, and Illinova and each Illinova
ERISA Affiliate do not have any knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would subject Illinova
or any Illinova ERISA Affiliate to any liability for a breach of fiduciary duty
under ERISA in excess of $1,000,000; and (y) neither Illinova nor any Illinova
ERISA Affiliate has engaged in, and Illinova and each Illinova ERISA Affiliate
do not have any knowledge of any Person that has engaged in, any transaction or
acted or failed to act in any manner that would subject Illinova or any Illinova
ERISA Affiliate to any liability for a breach of fiduciary duty under ERISA that
could reasonably be expected to result in an Illinova Material Adverse Effect;
(iv) no disputes or Actions are pending, or, to the knowledge of Illinova or any
Illinova ERISA Affiliate, threatened that could reasonably be expected to result
in a material liability that would have an Illinova Material Adverse Effect; (v)
neither Illinova nor any Illinova ERISA Affiliate has engaged in, and Illinova
and each Illinova ERISA Affiliate does not have any knowledge of any Person that
has engaged in, any transaction in violation of Section 406(a) or (b) of ERISA
or Section 4975 of the Code for which no exemption exists under Section 408 of
ERISA or Section 4975(c) of the Code or Section 4975(d) of the Code that could
reasonably be expected to result in an Illinova Material Adverse Effect; (vi)
there have been no "reportable events" under Section 4043 of ERISA for which the
30 day notice requirement of ERISA has not been waived by the PBGC; (vii) all
contributions due have been made on a timely basis (within, where applicable,
the time limit established under Section 302 of ERISA or Code Section 412);
(viii) no notice of intent to terminate such plan has been given under Section
4041 of ERISA and no Action has been instituted under Section 4042 of ERISA to
terminate such plan; (ix) except for defined benefit plans (if applicable), such
plan may be terminated on a prospective basis without any continuing liability
for benefits other than benefits accrued to the date of such termination; and
(x) neither Illinova nor any Illinova ERISA Affiliate has incurred any liability
under Title IV of ERISA other than liabilities that would not cause an Illinova
Material Adverse Effect. All contributions made or required to be made under any
Illinova Benefit Plan have been made on or before their required due date and
all such contributions meet the requirements for
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deductibility under the Code, and all contributions which are required and which
have not been made have been properly recorded on the books of Illinova or an
Illinova ERISA Affiliate.
(c) No Illinova Benefit Plan is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of the Code). No event has occurred with respect
to Illinova or an Illinova ERISA Affiliate which could subject Illinova to any
liability or Lien with respect to any Illinova Benefit Plan or any employee
benefit plan described in Section 3(3) of ERISA maintained, sponsored or
contributed to by an Illinova ERISA Affiliate under ERISA or the Code.
(d) Except as listed in Section 6.11(d) of the Illinova
Disclosure Schedule, no employee of Illinova or any of its Subsidiaries is
covered by any severance plan or similar arrangement.
(e) Except as listed in Section 6.11(e) of the Illinova
Disclosure Schedule, none of the Illinova Benefit Plans that are "welfare
plans," within the meaning of Section 3(1) of ERISA, provides for any benefits
payable to or on behalf of any employee or director after termination of
employment or service, as the case may be, other than elective continuation
required pursuant to Code Section 4980B or coverage which expires at the end of
the calendar month following such event. Each such plan that is a "group health
plan" (as defined in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance that would not,
or insofar as reasonably can be determined could not give rise to an Illinova
Material Adverse Effect.
Section 6.12 Environmental Liability.
Except as listed in Section 6.12 of the Illinova Disclosure Schedule:
(a) The businesses of Illinova and its Subsidiaries have been
and are operated in material compliance with all Environmental Laws, except for
any violations which could not reasonably be expected to result in an Illinova
Material Adverse Effect.
(b) Neither Illinova nor any of its Subsidiaries has caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances at any of its properties or facilities except for any such action
which could not reasonably be expected to have an Illinova Material Adverse
Effect and, to Illinova's knowledge, no such action has occurred at any property
or facility owned, leased or operated by Illinova or any of its Subsidiaries,
except for any such action that could not reasonably be expected to have an
Illinova Material Adverse Effect.
(c) Neither Illinova nor any of its Subsidiaries has received
any written notice from any Governmental Authority or third party or, to the
knowledge of Illinova, any other written communication alleging or concerning
any material violation by Illinova or any of its Subsidiaries of, or
responsibility or liability of Illinova or any of its Subsidiaries under, any
Environmental Law which could reasonably be expected to have an Illinova
Material Adverse Effect. There are no pending, or to Illinova's knowledge,
threatened Actions with respect to the businesses or operations of Illinova or
any of its Subsidiaries alleging or concerning any violation of or
responsibility or liability under any Environmental Law that, if adversely
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determined, could reasonably be expected to have an Illinova Material Adverse
Effect, nor does Illinova have any knowledge of any fact or condition that could
give rise to such an Action.
(d) Illinova and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities under all Environmental Laws
with respect to the operation of the businesses of Illinova and its
Subsidiaries; there are no pending or, to Illinova's knowledge, threatened
Actions seeking to modify, revoke or deny renewal of any of such approvals,
permits, licenses registrations and authorizations; and Illinova does not have
knowledge of any fact or condition that is reasonably likely to give rise to any
Action to modify, revoke or deny renewal of any of such approvals, permits,
licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the
foregoing, except as would not cause an Illinova Material Adverse Effect, (i) to
Illinova's knowledge, all off-site locations where Illinova or any of its
Subsidiaries has transported, released, discharged, stored, disposed or arranged
for the disposal of Hazardous Substances are licensed disposal sites as required
by law, (ii) to Illinova's knowledge, all underground and above-ground storage
tanks, and the operating status, capacity and contents of such tanks, located on
any property owned, leased or operated by Illinova or any of its Subsidiaries
are listed in Section 6.12 of the Illinova Disclosure Schedule and (iii) to
Illinova's knowledge, no PCB-Contaminated Electrical Equipment, as defined in 40
C.F.R. Section 761.3, is used or stored at any property owned, leased or
operated by Illinova or any of its Subsidiaries.
(f) To Illinova's knowledge, no claims have been asserted or
threatened against Illinova or its Subsidiaries as a result of any release or
disposal at any of the properties currently or previously owned or operated by
Illinova, its Subsidiaries, or a predecessor in interest, or at any disposal or
treatment facility which received Hazardous Substances generated by Illinova,
its Subsidiaries, or any predecessor in interest which could reasonably be
expected to result in an Illinova Material Adverse Effect.
(g) To Illinova's knowledge, no claims have been asserted or
threatened against Illinova or its Subsidiaries for any personal injury
(including wrongful death) or property damage (real or personal) arising out of
exposure to Hazardous Substances used, handled, generated, transported or
disposed by Illinova or its Subsidiaries at property currently or previously
owned or operated by Illinova or its Subsidiaries, except as could not
reasonably be expected to result in an Illinova Material Adverse Effect.
(h) To Illinova's knowledge, Illinova has made available to
Dynegy all material non-privileged internal and external environmental audits,
evaluations, assessments and studies in the possession of Illinova (i)
pertaining to Hazardous Substances used, handled, generated, transported or
disposed by Illinova or its Subsidiaries at property owned or operated by
Illinova or its Subsidiaries, or (ii) concerning compliance by Illinova or its
Subsidiaries with Environmental Laws.
(i) Except as listed in Section 6.12(i) of the Illinova
Disclosure Schedule, Illinova owns sufficient NO(x) and SO(2) allowances and
credits, to the extent required under
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applicable Environmental Law, to continue to operate its business as currently
operated and as planned to be operated.
Section 6.13 Compliance with Applicable Laws.
Except as would not individually or in the aggregate result in an
Illinova Material Adverse Effect, Illinova and each of its Subsidiaries hold all
approvals, licenses, permits, registrations and similar type authorizations
necessary for the lawful conduct of its respective businesses, as now conducted,
and such businesses are not being, and neither Illinova nor any of its
Subsidiaries has received any notice from any Person that any such business has
been or is being, conducted in violation of any law, ordinance or regulation,
including any law, ordinance or regulation relating to occupational health and
safety, except for possible violations that either individually or in the
aggregate have not resulted and would not result in an Illinova Material Adverse
Effect; provided, however, no representation or warranty in this Section 6.13 is
made with respect to Environmental Laws, which are covered exclusively in
Section 6.12.
Section 6.14 Labor Matters; Employees.
(a) Except as listed in Section 6.14(a) of the Illinova
Disclosure Schedule, (i) (A) none of Illinova or any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Illinova or any
of its Subsidiaries and (B) none of the employees of Illinova or any of its
Subsidiaries are represented by any labor organization and none of Illinova or
any of its Subsidiaries have any knowledge of any current union organizing
activities among the employees of Illinova or any of its Subsidiaries nor does
any question concerning representation exist concerning such employees, and (ii)
except as would not cause an Illinova Material Adverse Effect (A) there is no
labor strike, dispute, slowdown, work stoppage or lockout actually pending or,
to Illinova's knowledge, threatened against or affecting Illinova or any of its
Subsidiaries and, during the past five years, there has not been any such
action, (B) Illinova and its Subsidiaries have each at all times been in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (C) there is no unfair labor practice charge or
complaint against any of Illinova or any of its Subsidiaries pending or, to the
knowledge of Illinova, threatened before the National Labor Relations Board or
any similar state or foreign agency, (D) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or other grievance
procedure relating to Illinova or any of its Subsidiaries, (E) neither the
Occupational Safety and Health Administration nor any corresponding state agency
has threatened to file any citation, and there are no pending citations,
relating to Illinova or any of its Subsidiaries, and (F) there is no employee or
governmental claim or investigation, including any charges to the Equal
Employment Opportunity Commission or state employment practice agency,
investigations regarding Fair Labor Standards Act compliance, audits by the
Office of Federal Contractor Compliance Programs, sexual harassment complaints
or demand letters or threatened claims.
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(b) Except for the disposition of the Nuclear Facility, since
the enactment of the WARN Act, none of Illinova or any of its Subsidiaries has
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of any of Illinova or any of its Subsidiaries, or (ii)
a "mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of Illinova or any of its Subsidiaries, nor has Illinova or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law, in each case that could reasonably be expected to
have an Illinova Material Adverse Effect.
Section 6.15 Material Contracts.
(a) Except as set forth in the Illinova SEC Reports or as
permitted pursuant to Section 7.2, neither Illinova nor any of its Subsidiaries
is a party to or bound by (i) any agreement relating to the incurrence of debt
(including sale and leaseback and capitalized lease transactions and other
similar financing transactions) or its guaranty providing for payment or
repayment in excess of $10,000,000, but excluding open option, future and
forward positions with respect to the purchase, sale or delivery of commodities
or securities, (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or (iii) any non-competition agreement
or any other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any portion of
the business of Illinova and/or its Subsidiaries is or would be conducted or
through which Illinova and/or its Subsidiaries can restrict the conduct of
business by any other Person.
(b) Except as disclosed in the Illinova SEC Reports, to
Illinova's knowledge, no event of default (or an event which, with notice or
lapse of time or both notice and lapse of time, would constitute an event of
default) exists under any material note, lease, mortgage, deed of trust,
license, agreement or other instrument or obligation to which any Person which
owns or leases any of the Illinova Power Generation Facilities is a party or by
which any of the Illinova Power Generation Facilities is subject or bound.
Section 6.16 Required Stockholder Vote or Consent.
The only vote of the holders of any class or series of Illinova's
capital stock necessary to consummate the Transactions is the approval of this
Agreement by the holders of two-thirds of the outstanding shares of Illinova
Common Stock (the "ILLINOVA STOCKHOLDERS' APPROVAL").
Section 6.17 Proxy Statement/Prospectus; Registration Statement.
None of the information to be supplied by any Illinova Company for
inclusion in (a) the Proxy Statement/Prospectus Dynegy, Illinova and Newco are
to file with the SEC, and any amendments or supplements thereto, or (b) the
Registration Statement that Newco is to file with the SEC in connection with the
Mergers, and any amendments or supplements thereto, will, at the respective
times such documents are filed, and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus or any
amendment or supplement thereto is first mailed to stockholders of Dynegy and
Illinova, at the time such stockholders vote on approval and adoption of this
Agreement and at the Effective Time, and, in
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the case of the Registration Statement, when it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be made therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 6.18 Intellectual Property.
Illinova or its Subsidiaries own, or are licensed or otherwise have the
right to use, all Intellectual Property currently used in the conduct of the
business of Illinova and its Subsidiaries, except where the failure to do so
would not, individually or in the aggregate, have an Illinova Material Adverse
Effect. No Person has notified either Illinova or any of its Subsidiaries that
their use of the Intellectual Property infringes on the rights of any Person,
subject to such claims and infringements as do not, individually or in the
aggregate, give rise to any liability on the part of Illinova and its
Subsidiaries that could have an Illinova Material Adverse Effect, and, to
Illinova's knowledge, no Person is infringing on any right of Illinova or any of
its Subsidiaries with respect to any such Intellectual Property. No Actions are
pending or, to Illinova's knowledge, threatened that Illinova or any of its
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to such other Person's Intellectual Property.
Section 6.19 Brokers.
No broker, finder or investment banker (other than Chase Securities
Inc. and Berenson Minella & Company, the fees and expenses of which Illinova
will pay) is entitled to any brokerage, finder's fee or other fee or commission
payable by Illinova or any of its Subsidiaries in connection with the
Transactions. True and correct copies of all agreements and engagement letters
currently in effect with Chase Securities Inc. and Berenson Minella & Company
(the "ILLINOVA ENGAGEMENT LETTERS") have been provided to Dynegy.
Section 6.20 Tax Free Reorganization.
Neither Illinova nor, to its knowledge, any of its affiliates has taken
or agreed to take any action that would prevent the IAC Merger and the other
Transactions from constituting a contribution of assets under Section 351 of the
Code.
Section 6.21 Fairness Opinion.
Illinova's Board of Directors has received written opinions from Chase
Securities Inc. and Berenson Minella & Company that, as of the date of such
opinions, the Illinova Consideration (taking into account the Aggregate Merger
Stock Consideration) is fair, from a financial point of view, to the holders of
Illinova Common Stock. True and complete copies of such opinions have been made
available to Dynegy.
Section 6.22 Year 2000 Issues.
The disclosures set forth in the Illinova SEC Reports concerning
potential computer hardware and software problems associated with the Year 2000
are true and correct in all material respects as of the respective dates of
filing and the date hereof.
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Section 6.23 Takeover Laws.
Illinova and its Board of Directors have each taken all action required
to be taken by it to exempt this Agreement and the Transactions from, and this
Agreement and the Transactions are exempt from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination" or other anti-takeover laws and regulations of any state, including
the State of Illinois, and including Sections 7.85 and 11.75 of the IBCA.
Section 6.24 Illinova Unregulated Facilities.
Set forth in Section 6.24 of the Illinova Disclosure Schedule is a
true, accurate and complete list of (i) all of the Illinova Unregulated
Facilities, (ii) the direct or indirect equity interests therein of Illinova or
any of its Subsidiaries, and (iii) to Illinova's knowledge the direct or
indirect equity interests in any Illinova Unregulated Facility that is a
Qualifying Facility of any other "electric utility holding company," "electric
utility," or any combination thereof. For purposes hereof, the terms "electric
utility" and "electric utility holding company" shall mean a Person primarily
engaged in the generation or sale of electric power within the meaning of 18
C.F.R. Section 292.206, other than electric power solely from facilities exempt
under PUHCA as "exempt wholesale generators" or "foreign utility companies."
Section 6.25 Status of Nuclear Facility.
(a) Except as listed in Section 6.25(a) of the Illinova
Disclosure Schedule, the operation of the Nuclear Facility has at all times been
conducted in compliance with applicable health, safety, environmental,
regulatory and other legal requirements, except where the failure to be so in
compliance in the aggregate does not have, and cannot reasonably be expected to
have, an Illinova Material Adverse Effect. Except as listed in Section 6.25(a)
of the Illinova Disclosure Schedule, the operations of the Nuclear Facility are
not the subject of any outstanding notices of violation or demands for
information from the NRC or any other agency with jurisdiction over such
facility. Illinova maintains, and is in compliance with, an emergency plan
designed to protect the health and safety of the public in the event of an
unplanned release of radioactive materials from the Nuclear Facility, and such
plan has been duly filed with the NRC, and the NRC has not identified any
non-compliance with its requirements. Liability insurance to the full extent
required by law for operating nuclear facilities and consistent with Illinova's
view of the risks inherent in the operations of the Nuclear Facility remains in
full force and effect regarding such facility, and the amount of such liability
insurance meets all applicable legal and regulatory requirements and is
summarized in Section 6.25(a) of the Illinova Disclosure Schedule. The "minimum
decommissioning fund estimate" reflected in Illinova's filing with the NRC on
March 29, 1999, fully conforms with the requirements of applicable law. The
total estimate for decommissioning of the Nuclear Facility contained in such
study adequately reflects all costs and expenses which Illinova reasonably
believes would be incurred in the decommissioning of the Nuclear Facility in
compliance with all applicable law and regulations. Illinova has funded all
qualified and non-qualified decommissioning trust funds to the extent required
by law. Except as disclosed in Section 6.25(a) of the Illinova Disclosure
Schedule, Illinova has no material commitments (written or oral) to Governmental
Authorities with respect to the Nuclear Facility, other than those routine
commitments made in the ordinary course of business.
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(b) The Nuclear Facility Agreements have been duly authorized
and validly executed and delivered by IPC (and to Illinova's knowledge, PECO and
AmerGen, as applicable) and are Enforceable against IPC (and to Illinova's
knowledge, PECO and AmerGen, as applicable).
(c) IPC, and to Illinova's knowledge PECO and AmerGen, as
applicable, is not in breach or default of any Nuclear Facility Agreement, and
no event has occurred which, with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
any Nuclear Facility Agreement. Neither Illinova nor, to Illinova's knowledge,
PECO or AmerGen, has repudiated any provision of any such agreement. IPC (and
Illinova believes that PECO and AmerGen, as applicable) has satisfied or will be
able to satisfy each covenant and condition in the Nuclear Facility Agreements.
Section 6.26 Regulation as a Utility.
Illinova is an electric utility holding company and is the parent of
IPC. Except as listed in Section 6.26 of the Illinova Disclosure Schedule,
neither Illinova nor any "subsidiary company" or "affiliate" of Illinova (each
term as defined in PUHCA) is subject to regulation as a public utility, public
utility holding company or public service company (or similar designation) by
any other state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. Illinova is a
holding company exempt from all provisions of PUHCA, except Section 9(a)(2) of
PUHCA, pursuant to Section 3(a)(1) of PUHCA.
Section 6.27 Hedging.
Except as listed in Section 6.27 of the Illinova Disclosure Schedule,
as of the date hereof, neither Illinova nor any of its Subsidiaries is bound by
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from, relate to or reduce or eliminate the risk of
fluctuations in the price of commodities, currencies, securities or interest
rates, except (i) interest rate swaps, interest rate exchange agreements,
interest rate cap or collar protection agreements or interest rate options
entered into (and only in such amounts and pursuant to such terms and conditions
as are necessary and appropriate) to hedge against interest rate risk to which
Illinova and its Subsidiaries, taken as a whole, are actually exposed under
their debt obligations, or (ii) commodity swaps or other commodity price-hedging
instruments entered into (and only in such amounts and pursuant to such terms
and conditions as are necessary and appropriate) to hedge against commodity
price risk to which Illinova and its Subsidiaries, taken as a whole, are
actually exposed in the ordinary course of business, consistent with past
practices.
Section 6.28 Activities of Newco, DAC and IAC.
Other than entering into this Agreement and performing obligations
hereunder, none of Newco, DAC and IAC have entered into any agreements or
conducted any other business.
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ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 7.1 Conduct of Business by Dynegy Pending the DAC Merger.
From the date hereof until the Effective Time, unless Illinova
otherwise agrees in writing, or except as listed in the Dynegy Disclosure
Schedule or as otherwise contemplated by this Agreement, Dynegy will conduct,
and will cause its Subsidiaries to conduct, its business in the ordinary course
consistent with past practice and will use, and will cause each of its
Subsidiaries to use, all reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of its key employees, directors and officers, subject to the terms of
this Agreement. Except as listed in the Dynegy Disclosure Schedule or as
otherwise provided in this Agreement, and without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the written
consent of Illinova, which consent will not be unreasonably withheld:
(a) Neither Dynegy nor any of its Subsidiaries will adopt or
propose any change to its certificate of incorporation or bylaws (or similar
organizational documents);
(b) Neither Dynegy nor any of its Subsidiaries will (i)
declare, set aside or pay any dividend or other distribution with respect to any
shares of capital stock of Dynegy or any of its respective Subsidiaries (except
for (A) dividends on the Dynegy Stock in amounts consistent with past practices,
and (B) intercompany dividends from direct or indirect wholly-owned Subsidiaries
or from or in connection with facilities listed in Section 5.24 of the Dynegy
Disclosure Schedule) or (ii) repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Dynegy or any of its Subsidiaries, other than intercompany
acquisitions of stock;
(c) Neither Dynegy nor any of its Subsidiaries will merge or
consolidate with any Person other than a member of the consolidated group of
corporations of which Dynegy is the parent for purposes of Treasury Regulation
Section 1.1502 or acquire assets of any other Person (other than a member of
such group) for consideration exceeding $20,000,000 singularly or $75,000,000 in
the aggregate, or enter a new line of business or commence material business
operations in any country in which Dynegy is not operating as of the date of
this Agreement other than acquisitions pursuant to contractual commitments in
effect on the date hereof;
(d) Except (i) as listed in Section 7.1(d) of the Dynegy
Disclosure Schedule or (ii) for the sale, exchange or other disposition of
Qualifying Facilities listed in Section 5.24 of the Dynegy Disclosure Schedule,
Dynegy will not, and will not permit any of its Subsidiaries to, sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties (other than among Dynegy and its direct and indirect wholly owned
Subsidiaries) with an aggregate fair market value exceeding $20,000,000
singularly or $75,000,000 in the aggregate (other than sales of petroleum
liquids, electricity, gas and coal in the ordinary course of business);
(e) Dynegy will not settle any material Audit, make or change
any material Tax election or file any material amended Tax Return;
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(f) Except as otherwise permitted by this Agreement, as
disclosed on Section 7.1(f) of the Dynegy Disclosure Schedule, or in connection
with the sale, exchange or other disposition of Qualifying Facilities listed in
Section 5.24 of the Dynegy Disclosure Schedule, Dynegy and its Subsidiaries will
not issue any securities (whether through the issuance or granting of options,
warrants, rights or otherwise and except pursuant to existing obligations
disclosed in the Dynegy SEC Reports or the Dynegy Disclosure Schedule), enter
into any amendment of any term of any outstanding security of Dynegy or of any
of its Subsidiaries, incur any debt except trade debt in the ordinary course of
business and debt pursuant to existing credit facilities or arrangements and
(except as listed in Section 7.1(f) of the Dynegy Disclosure Schedule), fail to
make any required contribution to any Dynegy Benefit Plan, increase
compensation, bonus (except as listed in Section 7.1(f) of the Dynegy Disclosure
Schedule) or other benefits payable to, or modify or amend (or waive any
material provisions of) any employment agreements or severance agreements with,
any executive officer or former employee or enter into any settlement or consent
with respect to any pending litigation other than settlements in the ordinary
course of business;
(g) Dynegy will not change any method of accounting or
accounting practice by Dynegy or any of its Subsidiaries, except for any such
change required by GAAP;
(h) Dynegy will not take any action that would give rise to a
claim under the WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) Dynegy will not amend or otherwise change the terms of the
Dynegy Engagement Letters, except to the extent that any such amendment or
change would result in terms more favorable to Dynegy;
(j) Neither Dynegy nor any of its Subsidiaries will enter into
any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, currencies, securities or
interest rates, except in the ordinary course of business, consistent with past
practices;
(k) Neither Dynegy nor any of its Subsidiaries will (i) take,
or agree or commit to take, any action that would make any representation and
warranty of Dynegy hereunder inaccurate in any respect at, or as of any time
prior to, the Effective Time or (ii) omit, or agree or commit to omit, to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time;
(l) Neither Dynegy nor any of its Subsidiaries will:
(i) adopt, amend (other than amendments that reduce
the amounts payable by Dynegy or any Subsidiary, or amendments
required by law to preserve the qualified status of a Dynegy
Benefit Plan) or assume an obligation to contribute to any
employee benefit plan or arrangement of any type or collective
bargaining agreement or enter into any employment, severance
or similar contract with any person (including contracts with
management of Dynegy or any
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Subsidiaries that might require that payments be made upon the
consummation of the Transactions) or amend (or waive any
material provision of) any such existing contracts to increase
any amounts payable thereunder or benefits provided
thereunder,
(ii) engage in any transaction (either acting alone
or in conjunction with any Dynegy Benefit Plan or trust
created thereunder) in connection with which Dynegy or any
Subsidiary could be subjected (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code,
(iii) terminate any Dynegy Benefit Plan in a manner,
or take any other action with respect to any Dynegy Benefit
Plan, that could result in the liability of Dynegy or any
Subsidiary to any Person,
(iv) take any action that could adversely affect the
qualification of any Dynegy Benefit Plan or its compliance
with the applicable requirements of ERISA,
(v) fail to make full payment when due of all amounts
which, under the provisions of any Dynegy Benefit Plan, any
agreement relating thereto or applicable law, Dynegy or any
Subsidiary are required to pay as contributions thereto, or
(vi) fail to file, on a timely basis, all reports and
forms required by federal regulations with respect to any
Dynegy Benefit Plan;
(m) Dynegy will not make any election under any of its stock
option plans to pay cash in exchange for terminating awards under such plans;
(n) Neither Dynegy nor any of its Subsidiaries will, except as
required or contemplated by this Agreement, engage in any activities which would
cause a change in its status, or that of the Dynegy Subsidiaries, under PUHCA,
or that would impair the ability of Illinova, Newco or any Subsidiary to claim
an exemption as of right under Rule 2 of PUHCA or that would subject the DAC
Surviving Corporation or any Subsidiary thereof to regulation under PUHCA (other
than under Section 9(a)(2) or as an exempt holding company under Section 3 of
PUHCA), following the DAC Merger; and
(o) Neither Dynegy nor any of its Subsidiaries will agree or
commit to do any of the foregoing.
Section 7.2 Conduct of Business by Illinova Companies Pending the IAC
Merger.
From the date hereof until the Effective Time, unless Dynegy otherwise
agrees in writing, or except as listed in the Illinova Disclosure Schedule or as
otherwise contemplated by this Agreement, Illinova will conduct, and will cause
its Subsidiaries to conduct, its business in the ordinary course consistent with
past practice and will use, and will cause each of its Subsidiaries to use, all
reasonable efforts to preserve intact their business organizations and
relationships with
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third parties and to keep available the services of its key employees, directors
and officers, subject to the terms of this Agreement. Except as listed in the
Illinova Disclosure Schedule or as otherwise provided in this Agreement, and
without limiting the generality of the foregoing, from the date hereof until the
Effective Time, without the written consent of Dynegy, which consent will not be
unreasonably withheld:
(a) Neither Illinova nor any of its Subsidiaries will adopt or
propose any change to its articles of incorporation or bylaws (or similar
organizational documents);
(b) Neither Illinova nor any of its Subsidiaries will (i)
declare, set aside or pay any dividend or other distribution with respect to any
shares of capital stock of Illinova or any of its respective Subsidiaries
(except for (A) dividends on the Illinova Common Stock in amounts consistent
with past practices, (B) dividends on IPC's preferred stock outstanding as of
the date hereof pursuant to the terms of the certificates of designations with
respect thereto, and (C) intercompany dividends from direct or indirect
wholly-owned Subsidiaries) or (ii) repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Illinova or any of its Subsidiaries, other than intercompany
acquisitions of stock;
(c) Neither Illinova nor any of its Subsidiaries will merge or
consolidate with any Person other than a member of the consolidated group of
corporations of which Illinova is the parent for purposes of Treasury Regulation
Section 1.1502 or acquire assets of any Person (other than a member of such
group) for consideration exceeding $20,000,000 singularly or $75,000,000 in the
aggregate or enter a new line of business or commence business operations in any
country in which Illinova is not operating as of the date of this Agreement
other than acquisitions pursuant to contractual commitments in effect on the
date hereof;
(d) Except as listed in Section 7.2(d) of the Illinova
Disclosure Schedule, Illinova will not and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or properties (other than among Illinova and its direct
and indirect wholly owned Subsidiaries) with an aggregate fair market value
exceeding $20,000,000 singularly or $75,000,000 in the aggregate (other than
sales of electricity and gas in the ordinary course of business);
(e) Illinova will not settle any material Audit, make or
change any material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement or as
disclosed on Section 7.2(f) of the Illinova Disclosure Schedule, Illinova and
its Subsidiaries will not issue any securities (whether through the issuance or
granting of options, warrants, rights or otherwise and except pursuant to
existing obligations disclosed in the Illinova SEC Reports or the Illinova
Disclosure Schedule), enter into any amendment of any term of any outstanding
security of Illinova or of any of its Subsidiaries, incur any debt except trade
debt in the ordinary course of business and debt pursuant to existing credit
facilities or arrangements, fail to make any required contribution to any
Illinova Benefit Plan, increase compensation, bonus (except as listed in Section
7.2(f) of the Illinova Disclosure Schedule) or other benefits payable to, or
modify or amend (or waive any material provisions of) any employment agreements
or severance
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agreements with, any executive officer or former employee or enter into any
settlement or consent with respect to any pending litigation other than
settlements in the ordinary course of business;
(g) Illinova will not change any method of accounting or
accounting practice by Illinova or any of its Subsidiaries, except for any such
change required by GAAP;
(h) Illinova will not take any action that would give rise to
a claim under the WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) Illinova will not amend or otherwise change the terms of
the Illinova Engagement Letters, except to the extent that any such amendment or
change would result in terms more favorable to Illinova;
(j) Neither Illinova nor any of its Subsidiaries will enter
into any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, currencies, securities or
interest rates, except (i) interest rate swaps, interest rate exchange
agreements, interest rate cap or collar protection agreements or interest rate
options entered into (and only in such amounts and pursuant to such terms and
conditions as are necessary and appropriate) to hedge against interest rate risk
to which Illinova and its Subsidiaries, taken as a whole, are actually exposed
under their debt obligations, or (ii) commodity swaps or other commodity
price-hedging instruments entered into (and only in such amounts and pursuant to
such terms and conditions as are necessary and appropriate) to hedge against
commodity price risk to which Illinova and its Subsidiaries, taken as a whole,
are actually exposed in the ordinary course of business, consistent with past
practices;
(k) Neither Illinova nor any of its Subsidiaries will (i)
take, or agree or commit to take, any action that would make any representation
and warranty of Illinova hereunder inaccurate in any respect at, or as of any
time prior to, the Effective Time or (ii) omit, or agree or commit to omit, to
take any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time;
(l) Neither Illinova nor any of its Subsidiaries will:
(i) adopt, amend (other than amendments that reduce
the amounts payable by Illinova or any Subsidiary, or
amendments required by law to preserve the qualified status of
an Illinova Benefit Plan) or assume an obligation to
contribute to any employee benefit plan or arrangement of any
type or collective bargaining agreement or enter into any
employment, severance or similar contract with any person
(including contracts with management of Illinova or any
Subsidiaries that might require that payments be made upon
consummation of the Transactions) or amend (or waive any
material provision of) any such existing contracts to increase
any amounts payable thereunder or benefits provided
thereunder,
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(ii) engage in any transaction (either acting alone
or in conjunction with any Illinova Benefit Plan or trust
created thereunder) in connection with which Illinova or any
Subsidiary could be subjected (directly or indirectly) to
either a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code,
(iii) terminate any Illinova Benefit Plan in a
manner, or take any other action with respect to any Illinova
Benefit Plan, that could result in the liability of Illinova
or any Subsidiary to any Person,
(iv) take any action that could adversely affect the
qualification of any Illinova Benefit Plan or its compliance
with the applicable requirements or ERISA,
(v) fail to make full payment when due of all amounts
which, under the provisions of any Illinova Benefit Plan, any
agreement relating thereto or applicable law, Illinova or any
Subsidiary are required to pay as contributions thereto, or
(vi) fail to file, on a timely basis, all reports and
forms required by federal regulations with respect to any
Illinova Benefit Plan;
(m) Illinova will not make any election under any of its stock
option plans to pay cash in exchange for terminating awards under such plans;
(n) Neither Illinova nor any of its Subsidiaries will, except
as required or contemplated by this Agreement, engage in any activities which
would cause a change in its status, or that of the Illinova Subsidiaries, under
PUHCA, or that would impair the ability of Illinova, Newco or any Subsidiary to
claim an exemption as of right under Rule 2 of PUHCA or that would subject the
DAC Surviving Corporation or any Subsidiary thereof to regulation under PUHCA
(other than under Section 9(a)(2) or as an exempt holding company under Section
3 of PUHCA), following the IAC Merger;
(o) None of Newco, DAC or IAC will enter into any agreements
or engage in any business other than entering into this Agreement and the
Ancillary Agreements and performing the transactions contemplated hereby and
thereby;
(p) Neither Illinova nor any of its Subsidiaries will agree or
commit to do any of the foregoing; and
(q) Illinova agrees to use its commercially reasonable efforts
to provide title opinions, title policies, or other evidence of title,
reasonably satisfactory to Dynegy, to the Principal Power Facilities, such
evidence demonstrating that Illinova has marketable title to the site of each
Principal Power Facility, free and clear of all liens, easements, restrictive
covenants, or other restrictions, except liens, easements, restrictive
covenants, or other restrictions, (i) arising in the ordinary course of
business, (ii) securing long-term debt of IPC or Illinova and reflected on the
most recent balance sheet in Illinova's SEC Reports, (iii) arising from real
estate Taxes or other special assessments not yet due and payable as of the
Closing Date, (iv) which
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could not reasonably be expected to cause Illinova to lose title to any
Principal Power Facility, or (v) which could not reasonably be expected to
interfere with current or proposed uses of any Principal Power Facility.
Section 7.3 Certain Operating Issues.
(a) Nuclear Operations.
(i) Except as described in Section 7.3 of the
Illinova Disclosure Schedule or to the extent Dynegy otherwise
consents in writing, during the term of this Agreement and the
effectiveness of the Nuclear Facility Agreements, Illinova
shall (A) cause IPC to operate the Nuclear Facility in the
ordinary course consistent with Good Utility Practice (as
defined in the Nuclear Facility Agreements) and applicable
environmental, health, safety, regulatory, and other legal
requirements, (B) use reasonable efforts to preserve intact
the Nuclear Facility, (C) maintain customary insurance
coverage covering the Nuclear Facility, (D) not make any
material change in the nuclear fuel inventory customarily
maintained by IPC, and (E) not, except as required by law or
Order and as arising under the Nuclear Facility Agreements,
propose or adopt a budget for decommissioning expenses, which
exceeds the "minimum decommissioning fund estimate" referenced
in Section 6.25 of the Illinova Disclosure Schedule. Illinova
will not permit IPC to engage in, or enter into the business
of, the transportation, treatment or disposal of radioactive
waste generated by third parties, and will inform Dynegy
promptly of any changes in the decommissioning funding plan
for the Nuclear Facility as submitted to the NRC on March 31,
1999. To the extent not prohibited by applicable laws,
regulations, facility licenses, permits and agreements with
third parties existing as of the date hereof, at all times
prior to the Closing, Illinova will make available to Dynegy,
upon its request, any existing information relevant to the
operation or decommissioning of the Nuclear Facility, and will
inform Dynegy promptly of any proposed changes to the
decommissioning plan funding budget. If Illinova is prohibited
by agreement with a third party from providing information to
Dynegy, Illinova will use its best efforts (including taking
into account Dynegy's willingness to execute appropriate
confidentiality agreements) to obtain the consent of such
third party to the release of such information. In addition,
upon reasonable notice, Illinova will allow access by
individuals designated by Dynegy to all portions of the
Nuclear Facility, affording those persons the same degree of
access to facilities and information to the same extent
afforded the Chief Nuclear Officer. Access by the individuals
selected by Dynegy will be pursuant to existing procedures for
access to the Nuclear Facility, including any security
clearance and training normally required of Illinova nuclear
personnel.
(ii) As soon as practicable following the date
hereof, Dynegy and Illinova will create a Nuclear Advisory
Committee (the "NUCLEAR ADVISORY COMMITTEE") consisting of
three members appointed by Dynegy and three members appointed
by Illinova. The Nuclear Advisory Committee will have no
authority to control, manage, operate or participate in the
management of the
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Nuclear Facility or the decommissioning of such facility, but
will be advisory only. Each member of the Nuclear Advisory
Committee will have responsibility only to the entity that
appointed such member. To the extent not prohibited by
applicable laws, regulations and facility licenses and
permits, the Nuclear Advisory Committee and each member
thereof will have access to the Nuclear Facility to the same
extent granted to senior nuclear personnel employed by
Illinova, and Illinova employees will cooperate with members
of the Nuclear Advisory Committee in obtaining such access and
in promptly responding to all inquiries concerning the Nuclear
Facility. Access by the individuals selected by Dynegy will be
pursuant to existing procedures for access to the Nuclear
Facility, including any security clearance and training
normally required of Illinova nuclear personnel. The Nuclear
Advisory Committee will consult with the management of
Illinova and Dynegy at regular intervals (but not less
frequently than monthly) concerning the progress of operating,
decommissioning or selling the Nuclear Facility.
(iii) Illinova will use all commercially reasonable
efforts to execute a definitive agreement, and close the
transactions in a fashion that would satisfy Section 9.3(e).
(b) Integration Committee.
As soon as practicable following the date hereof, Dynegy and
Illinova will create an Integration Committee (the "INTEGRATION COMMITTEE")
initially consisting of five members appointed by Dynegy and five members
appointed by Illinova, the chairman of which shall initially be a senior
Illinova manager, which will meet from time to time with respect to the planned
integration of Illinova's and Dynegy's businesses after the Closing, including
with respect to each company's power generation facilities, trading operations,
petroleum liquids facilities or otherwise. The Integration Committee will have
no authority to control, manage, operate or participate in the management of
either Dynegy or Illinova, but will be advisory only. Each member of the
Integration Committee will have responsibility only to the entity that appointed
such member. To the extent not prohibited by applicable laws, regulations and
licenses and permits, the Integration Committee and each member thereof will
have access to the business, facilities and records of Dynegy or Illinova, as
applicable, to the same extent granted to senior personnel employed by Dynegy or
Illinova, as applicable. Illinova and Dynegy's employees will cooperate with
members of the Integration Committee in obtaining such access and in promptly
responding to all inquiries concerning such business, facilities and records.
Access to a party's business, facilities and records by the individuals selected
by the other party will be pursuant to existing procedures for access to such
business, facilities and records. The Integration Committee will consult with
the management of Illinova and Dynegy at regular intervals (but not less
frequently than bi-monthly) concerning the progress of the proposed integration
of the two companies' business and operations.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information.
The parties will each afford to the other and to the other's financial
advisors, legal counsel, accountants, consultants, financing sources, and other
authorized representatives access during normal business hours throughout the
period prior to the Effective Time to all of its books, records, properties,
contracts, leases, plants and personnel and, during such period, each will
furnish promptly to the other (a) a copy of each report, schedule and other
document filed or received by it under federal or state securities laws, and (b)
all other information as such other party reasonably may request, provided that
no investigation pursuant to this Section 8.1 will affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Mergers. Each party will hold in confidence, and will
cause its representatives to hold in confidence, all nonpublic information until
such time as such information is otherwise publicly available and, if this
Agreement is terminated, each party will deliver to the other all documents,
work papers and other materials (including copies) obtained by such party or on
its behalf from the other party in connection with this Agreement, whether so
obtained before or after the execution hereof. Notwithstanding the foregoing,
the Confidentiality Agreements will survive the execution and delivery of this
Agreement.
Section 8.2 Acquisition Proposals.
(a) From the date hereof until the Termination Date, Illinova
and its Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Illinova Acquisition Proposal
or (ii) engage in negotiations or discussions with, or disclose any nonpublic
information relating to Illinova or its Subsidiaries, or afford access to their
respective properties, books or records to any Person that may be considering
making, or has made, an Illinova Acquisition Proposal.
(b) Notwithstanding Section 8.2(a), nothing herein will
prohibit Illinova and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) under the Exchange Act, or (ii) furnishing information, including
nonpublic information to, or entering into negotiations or discussions with, any
Person that has indicated its willingness to make an unsolicited bona fide
proposal to acquire Illinova pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets, business combination
or other similar transaction, if, and only to the extent that:
(i) such unsolicited bona fide proposal relating to
an Illinova Acquisition Proposal is made by a third party that
Illinova's Board of Directors determines in good faith has the
intent to proceed with negotiations, and the financial
capability to consummate, such Illinova Acquisition Proposal,
(ii) Illinova's Board of Directors, after duly
considering the written advice of outside legal counsel to
Illinova, determines in good faith that such
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action is required for Illinova's Board of Directors to comply
with its fiduciary duties to shareholders imposed by
applicable law,
(iii) contemporaneously with furnishing such
information to, or entering into discussions or negotiations
with, such third party, Illinova provides written notice to
Dynegy to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such third
party,
(iv) Illinova receives from the third party making
such a proposal an executed confidentiality agreement with
terms no less favorable to Illinova than those contained in
the Confidentiality Agreements, and
(v) Illinova uses all reasonable efforts to keep
Dynegy informed in all material respects of the status and
terms of any such negotiations or discussions (including the
identity of the third party with whom such negotiations or
discussions are being held) and provides Dynegy copies of such
written proposals and any amendments or revisions thereto or
correspondence related thereto; provided, that Dynegy agrees
to execute a confidentiality agreement, in form reasonably
acceptable to it, with respect to any such information
delivered to Dynegy pursuant to this clause (v), which
confidentiality agreement shall be subject to Dynegy's
disclosure obligations arising under applicable law or
securities exchange regulations.
(c) From the date hereof until the Termination Date, Dynegy
and its Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Dynegy Acquisition Proposal or
(ii) engage in negotiations or discussions with, or disclose any nonpublic
information relating to Dynegy or its Subsidiaries, or afford access to their
respective properties, books or records to any Person that may be considering
making, or has made, a Dynegy Acquisition Proposal.
(d) Notwithstanding Section 8.2(c), nothing herein will
prohibit Dynegy and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) under the Exchange Act, or (ii) furnishing information, including
nonpublic information to, or entering into negotiations or discussions with, any
Person that has indicated its willingness to make an unsolicited bona fide
proposal to acquire Dynegy pursuant to a merger, consolidation, share exchange,
purchase of a substantial portion of the assets, business combination or other
similar transaction, if, and only to the extent that:
(i) such unsolicited bona fide proposal relating to a
Dynegy Acquisition Proposal is made by a third party that
Dynegy's Board of Directors determines in good faith has the
intent to proceed with negotiations, and the financial
capability to consummate, such Dynegy Acquisition Proposal,
(ii) Dynegy's Board of Directors, after duly
considering the written advice of outside legal counsel to
Dynegy, determines in good faith that such
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action is required for Dynegy's Board of Directors to comply
with its fiduciary duties to stockholders imposed by
applicable law,
(iii) contemporaneously with furnishing such
information to, or entering into discussions or negotiations
with, such Person, Dynegy provides written notice to Illinova
to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such Person,
(iv) Dynegy receives from the Person making such a
proposal an executed confidentiality agreement with terms no
less favorable to Dynegy than those contained in the
Confidentiality Agreements, and
(v) Dynegy uses all reasonable efforts to keep
Illinova informed in all material respects of the status and
terms of any such negotiations or discussions (including the
identity of the Person with whom such negotiations or
discussions are being held) and provides Illinova copies of
such written proposals and any amendments or revisions thereto
or correspondence related thereto; provided, that Illinova
agrees to execute a confidentiality agreement, in form
reasonably acceptable to it, with respect to any such
information delivered to Illinova pursuant to this clause (v),
which confidentiality agreement shall be subject to Illinova's
disclosure obligations arising under applicable law or
securities exchange regulations.
Section 8.3 Directors' and Officers' Indemnification and Insurance.
(a) Newco will indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, (i) an officer or director of Dynegy and its
Subsidiaries or an employee of Dynegy or any of its Subsidiaries who acts as a
fiduciary under any of the Dynegy Benefit Plans, (ii) an officer or director of
Illinova and its Subsidiaries or an employee of Illinova or any Subsidiary of
Illinova who acts in a fiduciary under any of the Illinova Benefit Plans (each
an "INDEMNIFIED PARTY") against all losses, claims, damages, liabilities, fees
and expenses (including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the prior written consent of
Newco, which will not be unreasonably withheld)) arising in whole or in part out
of actual or alleged actions or omissions in their capacity as such occurring at
or prior to the Effective Time to the fullest extent permitted under Illinois
law or Newco's articles of incorporation and bylaws and Dynegy's and Illinova's
indemnification obligations in effect at the date hereof, and shall advance
expenses incurred in the defense of any Action to the fullest extent permitted
by law; provided, that any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under Illinois law, Newco's articles of incorporation or bylaws or such
obligations, as the case may be, will be made by independent counsel mutually
acceptable to Newco and the Indemnified Party; and provided, further, that
nothing herein will impair any rights or obligations of any Indemnified Party.
If any claim or claims are brought against any Indemnified Party (whether
arising before or after the Effective Time), such Indemnified Party may select
counsel for the defense of such claim, which counsel
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should be reasonably acceptable to Dynegy and Illinova (if selected prior to the
Effective Time) and Newco (if selected after the Effective Time).
(b) Newco will maintain Dynegy's and Illinova's existing
officers' and directors' liability insurance policies for not less than six
years after the Effective Time, but only to the extent related to actions or
omissions prior to the Effective Time; provided, that Newco may substitute
therefor policies of substantially similar coverage and amounts containing terms
no less advantageous to such former directors or officers; provided further,
that the aggregate annual premiums to be paid with respect to the maintenance of
such insurance for such six year period will not exceed 150% of the higher of
Dynegy or Illinova's current annual premium for its existing insurance.
Section 8.4 Further Assurances.
Each party hereto agrees to use all reasonable efforts to obtain all
consents and approvals and to do all other things necessary for the consummation
of the Transactions. The parties agree to take such further action to deliver or
cause to be delivered to each other at the Closing, and at such other times
thereafter as is reasonably agreed, such additional agreements or instruments as
any of them may reasonably request for the purpose of carrying out this
Agreement and agreements and transactions contemplated hereby and thereby. The
parties will afford each other access to all information, documents, records and
personnel who may be necessary for any party to comply with laws or regulations
(including the filing and payment of taxes and handling tax audits), to fulfill
its obligations with respect to indemnification hereunder or to defend itself
against suits or claims of others. Illinova and Dynegy will duly preserve all
files, records or any similar items of Illinova or Dynegy received or obtained
as a result of the Mergers with the same care and for the same period of time as
they would preserve their own similar assets.
Section 8.5 Expenses.
(a) Except as provided in Section 8.5(b) or (c) and Section
12.8, all Expenses incurred by the parties will be borne solely and entirely by
the party that has incurred such Expenses; provided, however, that if this
Agreement is terminated for any reason, then the allocable share of Illinova and
Dynegy for all Expenses (including fees and expenses of accountants, experts,
and consultants, but excluding the fees and expenses of legal counsel and
investment bankers) related to preparing, printing, filing and mailing the
Registration Statement, the Proxy Statement/Prospectus and all SEC and HSR
filing fees incurred in connection with the Registration Statement, Proxy
Statement/Prospectus and HSR, will be one-half by Illinova and one-half by
Dynegy; provided further, if this Agreement is terminated because one of the
Dynegy Stockholders' Approval or the Illinova Stockholders' Approval is not
obtained, then the party whose stockholders' approval has not been obtained will
pay the other party's reasonably documented Expenses up to $7.5 million.
(b) Dynegy agrees that, if:
(i) (A) Illinova terminates this Agreement pursuant
to Section 11.1(g)(i) or (ii), or (B) Dynegy or Illinova
terminates this Agreement pursuant to Section 11.1(h), or
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(ii) (A) Illinova terminates this Agreement pursuant
to Section 11.1(b) at a time that a Dynegy Breach exists, (B)
Illinova terminates this Agreement pursuant to Section
11.1(d), (C) Illinova terminates this Agreement pursuant to
Section 11.1(g)(iii) or (iv), or (D) Illinova or Dynegy
terminates this Agreement because the Dynegy Stockholders'
Approval has not been obtained, and in any case described in
clauses (A), (B), (C) or (D) within 18 months after the
termination of this Agreement:
(1) a transaction is consummated, which
transaction, when offered or proposed, constitutes a
Dynegy Acquisition Proposal,
(2) a definitive agreement (the execution
and delivery of which has been authorized by the
boards of directors, or comparable bodies, that would
if consummated constitute a Dynegy Acquisition
Proposal) for such a transaction is entered into, or
(3) any Person has acquired beneficial
ownership or the right to acquire beneficial
ownership of, or any "group" (as defined under
Section 13(d) of the Exchange Act), has been formed
that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of
capital stock of Dynegy representing 50% or more of
the combined power to vote generally for the election
of directors, and Dynegy's Board of Directors has
taken any action has facilitated the acquisition by
such Person or group of such beneficial ownership,
then upon the first termination to occur under subparagraphs
(i) or (ii) of this Section 8.5(b), Dynegy will pay to
Illinova a Termination Fee of $85 million, plus in the case of
termination pursuant to subparagraph (i) or clauses (B), (C)
or (D) of subparagraph (ii), the reasonably documented
Expenses of Illinova up to $7.5 million. No Termination Fee
will be payable to Illinova (I) under clauses (i) or (ii) if
Illinova's Board of Directors withdraws, modifies or changes
its recommendation of this Agreement or the IAC Merger or
Illinova's stockholders fail to give the Illinova
Stockholders' Approval when the proposals contemplated thereby
are properly submitted to a vote at the Illinova Special
Meeting or any postponement or adjournment thereof or (II) if,
prior to the occurrence of any event requiring payment of a
Termination Fee under this Section 8.5(b), an event has
occurred requiring the payment of a Termination Fee to Dynegy
pursuant to Section 8.5(c). In the event of termination of
this Agreement as provided in this Section 8.5, payment of the
fees and expenses contemplated by this Section 8.5(b) shall be
Illinova's sole remedy.
(c) Illinova agrees that, if:
(i) (A) Dynegy terminates this Agreement pursuant to
Section 11.1(i)(i) or (ii), or (B) Illinova or Dynegy
terminates this Agreement pursuant to Section 11.1(j), or
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(ii) (A) Dynegy terminates this Agreement pursuant to
Section 11.1(b) at a time that an Illinova Breach exists, (B)
Dynegy terminates this Agreement pursuant to Section 11.1(c),
(C) Dynegy terminates this Agreement pursuant to Section
11.1(i)(iii) or (iv), or (D) Dynegy or Illinova terminates
this Agreement because the Illinova Stockholders' Approval has
not been obtained, and in any case described in clauses (A),
(B), (C) or (D) within 18 months after the termination of this
Agreement:
(1) a transaction is consummated, which
transaction, when offered or proposed, constitutes an
Illinova Acquisition Proposal,
(2) a definitive agreement (the execution
and delivery of which has been authorized by the
boards of directors, or comparable bodies, that would
if consummated constitute an Illinova Acquisition
Proposal) for such a transaction is entered into, or
(3) any Person has acquired beneficial
ownership or the right to acquire beneficial
ownership of, or any "group" (as defined under
Section 13(d) of the Exchange Act), has been formed
that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of
capital stock of Illinova representing 50% or more of
the combined power to vote generally for the election
of directors, and Illinova's Board of Directors has
taken any action has facilitated the acquisition by
such Person or group of such beneficial ownership,
then upon the first termination to occur under subparagraphs
(i) or (ii) of this Section 8.5(c), Illinova will pay to
Dynegy a Termination Fee of $85 million, plus in the case of
termination pursuant to subparagraph (i) or clauses (B), (C)
or (D) of subparagraph (ii), the reasonably documented
Expenses of Dynegy up to $7.5 million. No Termination Fee will
be payable to Dynegy (I) under clauses (i) or (ii) if Dynegy's
Board of Directors withdraws, modifies or changes its
recommendation of this Agreement or the DAC Merger or Dynegy's
stockholders fail to give the Dynegy Stockholders' Approval
when the proposals contemplated thereby are properly submitted
to a vote at the Dynegy Special Meeting or any postponement or
adjournment thereof or (II) if, prior to the occurrence of any
event requiring payment of a Termination Fee under this
Section 8.5(c), an event has occurred requiring the payment of
a Termination Fee to Illinova pursuant to Section 8.5(b). In
the event of termination of this Agreement as provided in this
Section 8.5, payment of the fees and expenses contemplated by
this Section 8.5(c) shall be Dynegy's sole remedy.
Section 8.6 Cooperation.
Subject to compliance with applicable law, from the date hereof until
the Effective Time, each party shall confer on a regular and frequent basis with
one or more representatives of the other parties to report on material
operational matters and the general status of ongoing operations and shall
promptly provide the other party or its counsel with copies of all filings
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made by such party with any Governmental Authority in connection with this
Agreement and the Transactions.
Section 8.7 Publicity.
Neither Dynegy, Illinova nor any of their respective affiliates will
issue or cause the publication of any press release or other announcement with
respect to this Agreement or the Transactions without the prior consultation of
the other party and, with respect to press releases, notice to BGAH, Chevron and
Nova, except as may be required by law or by any listing agreement with a
national securities exchange and will use reasonable efforts to provide copies
of such release or other announcement to the other party hereto, and give due
consideration to such comments as such other party may have, prior to such
release.
Section 8.8 Additional Actions.
Subject to the terms and conditions of this Agreement, each party
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunctions or other
impediments or delays, to fulfill the conditions to Closing contained in Article
IX and to consummate and make effective the Transactions, subject, however, to
the appropriate vote of stockholders of Dynegy and Illinova required so to vote.
Section 8.9 Filings.
Each party will make all filings required to be made by such party in
connection herewith or desirable to achieve the purposes contemplated hereby,
and will cooperate as needed with respect to any such filing by any other party
hereto. Without by implication limiting the foregoing, prior to the Closing,
Newco shall file (i) the Amended and Restated Newco Articles with the Illinois
Secretary of State and (ii) a statement with the Illinois Secretary of State
pursuant to Section 6.10(b) of the IBCA with respect to the Series A Convertible
Preferred Stock.
Section 8.10 Consents, Waivers and Approvals.
Each Illinova Company and Dynegy will use all reasonable efforts to
obtain all consents, waivers or approvals necessary or advisable in connection
with its obligations hereunder.
Section 8.11 Employee Matters; Benefit Plans.
(a) Illinova and Dynegy will evaluate their personnel needs
and consider continuing the employment of certain employees of Illinova, Dynegy
and their respective Subsidiaries on a case-by-case basis. At the Effective
Time, the Dynegy Stock Options and Illinova Stock Options shall be modified to
the extent provided in Section 4.6(c). In addition, Illinova and Dynegy shall
take the other employment related actions specified in Section 8.11(a) of the
Dynegy Disclosure Schedule and Section 8.11(a) of the Illinova Disclosure
Schedule, respectively. Otherwise, neither Illinova nor Dynegy shall, with
respect to the officers having an executive function of either party or their
respective material subsidiaries and with an expected aggregate annual salary
and bonus of $200,000 or more, amend any existing employment
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agreements, make any grants of options, restricted stock or similar benefits,
pay any bonuses or otherwise materially modify the financial aspects of
employment arrangements except to the extent contractually obligated to as of
the date hereof under agreements listed in Section 5.11(a) of the Dynegy
Disclosure Schedule or Section 6.11(a) of the Illinova Disclosure Schedule,
respectively;
(b) After the Effective Time, Newco will initially provide to
any employees of Illinova, Dynegy and their respective Subsidiaries who are
employed by Newco as of the Effective Time (the "RETAINED EMPLOYEES") the same
base salary or wages provided to such employees prior to the Effective Time,
subject to such changes in base salary or wages as shall be determined by Newco
after the Effective Time. Newco will take all actions necessary or appropriate
to permit the Retained Employees to continue to participate from and after the
Effective Time in the employee benefit plans or arrangements in which such
Retained Employees were participating immediately prior to the Effective Time.
Notwithstanding the foregoing, Newco may permit any such employee
benefit plan or arrangement to be terminated or discontinued on or after the
Effective Time, provided that Newco will (a) take all actions necessary or
appropriate to permit the Retained Employees participating in such employee
benefit plan or arrangement to immediately thereafter participate in employee
benefit plans or arrangements comparable to those maintained with respect to the
remainder of the Retained Employees (the "REPLACEMENT PLANS"), (b) with respect
to a Replacement Plan that is a group health plan (i) credit such Retained
Employees, for the year during which participation in the Replacement Plan
begins, with any deductibles and copayments already incurred during such year
under the terminated or discontinued group health plan and (ii) waive any
preexisting condition limitations applicable to the Retained Employees (and
their eligible dependents) under the Replacement Plan to the extent that a
Retained Employee's (or dependent's) condition would not have operated as a
preexisting condition under the terminated or discontinued group health plan,
and (c)(1) cause each Replacement Plan that is an employee pension benefit plan
(as such term is defined in Section 3(2) of ERISA) intended to be qualified
under Section 401 of the Code to be amended to provide that the Retained
Employees shall receive credit for participation and vesting purposes under such
plan for their period of employment with Illinova, Dynegy, their Subsidiaries
and predecessors to the extent such predecessor employment was recognized by
Illinova, Dynegy and their respective Subsidiaries and (2) credit the Retained
Employees under each other Replacement Plan that is not described in the
preceding clause for their period of employment with Illinova, Dynegy, their
respective Subsidiaries and predecessors to the extent such predecessor
employment was recognized by Illinova, Dynegy or their respective Subsidiaries.
At the Effective Time, Newco shall assume the obligations of (i) Dynegy under
the Dynegy Benefit Plans and (ii) Illinova under the Illinova Benefit Plans. The
terms of each such Dynegy Benefit Plan and Illinova Benefit Plan shall continue
to apply in accordance with their terms.
Section 8.12 Stockholders Meetings.
(a) Dynegy will, as promptly as reasonably practicable after
the date hereof (i) take all steps reasonably necessary to call, give notice of,
convene and hold a special meeting of its stockholders (the "DYNEGY SPECIAL
MEETING") for the purpose of securing the Dynegy Stockholders' Approval, (ii)
distribute to its stockholders the Proxy Statement/Prospectus in
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accordance with applicable federal and state law and with its certificate of
incorporation and bylaws, which Proxy Statement/Prospectus will contain the
recommendation of the Board of Directors of Dynegy that its stockholders approve
and adopt this Agreement and the Transactions, (iii) use all reasonable efforts
to solicit from its stockholders proxies in favor of the approval and adoption
of this Agreement and the Transactions and to secure the Dynegy Stockholders'
Approval, and (iv) cooperate and consult with Illinova with respect to each of
the foregoing matters; provided, that this Section 8.12(a) will not prohibit the
Dynegy Board of Directors from failing to make or from withdrawing or modifying
its recommendation to the Dynegy stockholders hereunder if the Board of
Directors of Dynegy, after consultation with and based upon the written advice
of independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to its
stockholders under applicable law.
(b) Illinova will, as promptly as reasonably practicable after
the date hereof (i) take all steps reasonably necessary to call, give notice of,
convene and hold a special meeting of its stockholders (the "ILLINOVA SPECIAL
MEETING") for the purpose of securing the Illinova Stockholders' Approval, (ii)
distribute to its shareholders the Proxy Statement/Prospectus in accordance with
applicable federal and state law and its articles of incorporation and bylaws,
which Proxy Statement/Prospectus will contain the recommendation of the Illinova
Board of Directors that its stockholders approve and adopt this Agreement and
the Transactions, and (iii) use all reasonable efforts to solicit from its
stockholders proxies in favor of approval and adoption of this Agreement, and
the Transactions and to secure the Illinova Stockholders' Approval, and (iv)
cooperate and consult with Dynegy with respect to each of the foregoing matters;
provided, that this Section 8.12(b) will not prohibit the Illinova Board of
Directors from failing to make or from withdrawing or modifying its
recommendation to the Illinova stockholders hereunder if the Board of Directors
of Illinova, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to its
stockholders under applicable law.
(c) The Illinova Special Meeting and the Dynegy Special
Meeting shall be held on the same day unless otherwise agreed by Illinova and
Dynegy.
Section 8.13 Preparation of the Proxy Statement/Prospectus and
Registration Statement.
(a) Illinova, Newco and Dynegy will promptly prepare and file
with the SEC a preliminary version of the Proxy Statement/Prospectus and will
cooperate with each other in responding to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement/Prospectus. The date that the Registration Statement is filed
with the SEC will be determined jointly by Illinova and Dynegy. Each of
Illinova, Newco and Dynegy will use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Newco will also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process in any jurisdiction)
required to be taken under any applicable state securities laws in connection
with the issuance of Newco Common Stock, the Class B Common Stock and the Series
A Convertible Preferred Stock in the
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Mergers and (i) Dynegy will furnish all information concerning Dynegy and the
holders of shares of Dynegy capital stock, and (ii) Illinova will furnish all
information concerning Illinova and holders in Illinova capital stock as may be
reasonably requested in connection with any such action. Promptly after the
effectiveness of the Registration Statement, each of Illinova and Dynegy will
cause the Proxy Statement/Prospectus to be mailed to its respective
stockholders, and if necessary, after the definitive Proxy Statement/Prospectus
will have been mailed, promptly circulate amended, supplemented or supplemental
proxy materials and, if required in connection therewith, resolicit proxies.
Illinova and Newco will advise Dynegy and Dynegy will advise Illinova, as
applicable, promptly after it receives notice thereof, of the time when the
Registration Statement will become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Newco Common Stock for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(b) Following receipt by PricewaterhouseCoopers LLP,
Illinova's independent auditors, of an appropriate request from Dynegy pursuant
to SAS No. 72, Illinova will use all reasonable efforts to cause to be delivered
to Newco a letter of PricewaterhouseCoopers LLP, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to Newco, in form and substance reasonably satisfactory to Newco and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements and
proxy statements similar to the Proxy Statement/Prospectus.
(c) Following receipt by Arthur Andersen LLP, Dynegy's
independent auditors, of an appropriate request from Illinova pursuant to SAS
No. 72, Dynegy will use all reasonable efforts to cause to be delivered to Newco
a letter of Arthur Andersen LLP, dated a date within two business days before
the effective date of the Registration Statement, and addressed to Newco, in
form and substance satisfactory to Newco and customary in scope and substance
for "cold comfort" letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Proxy Statement/Prospectus.
Section 8.14 Stock Exchange Listing.
Newco will use all reasonable efforts to cause the Newco Common Stock
to be issued in the Mergers to be approved for listing on the New York Stock
Exchange (the "NYSE") prior to the Effective Time, in each case, subject to
official notice of issuance.
Section 8.15 Notice of Certain Events.
Each party to this Agreement will promptly as reasonably practicable
notify the other party hereto of:
(a) any notice or other communication from any Person alleging
that the consent of such Person (or other Person) is or may be required in
connection with the Transactions;
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(b) any notice or other communication from any Governmental
Authority in connection with the Transactions;
(c) any Actions commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting it or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 5.10, Section 5.12, Section
6.10 or Section 6.12 or which relate to the consummation of the Transactions;
(d) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement, under any material agreement; and
(e) any Dynegy Material Adverse Effect or Illinova Material
Adverse Effect or the occurrence of any event which is reasonably likely to
result in a Dynegy Material Adverse Effect or an Illinova Material Adverse
Effect, as the case may be.
Section 8.16 Site Inspections.
Subject to compliance with applicable law (including applicable
Environmental Laws), from the date hereof until the Effective Time, each party
may undertake (at that party's sole cost and expense) an environmental
assessment or assessments (an "ASSESSMENT") of the other party's operations,
business and/or properties that are the subject of this Agreement to investigate
any potential, material environmental condition or compliance issues; provided,
however, that the performance and scope of such Assessment shall be subject to
the prior approval of the other party, such approval not to be unreasonably
withheld. An Assessment may include, but not be limited to, a review of permits,
files and records, as well as visual and physical inspections and testing.
Before conducting an Assessment, the party intending to conduct such Assessment
(the "INSPECTING PARTY") will confer with the party whose operations, business
or property is the subject of such Assessment (the "INSPECTED PARTY") regarding
the nature, scope and scheduling of such Assessment, and will comply with such
conditions as the Inspected Party may reasonably impose to avoid interference
with the Inspected Party's operations or business. The Inspected Party will
cooperate in good faith with the Inspecting Party's effort to conduct an
Assessment. If requested by the Inspected Party, the Inspecting Party shall
provide to the Inspected Party a copy of all work plans, reports, data and other
results of the Assessment. If the Mergers are not consummated, the Inspecting
Party shall destroy all originals and copies of all work plans, reports, data
and other results, documentation and work product of any Assessment.
Section 8.17 Affiliate Agreements; Tax Treatment.
(a) Dynegy and Illinova will identify in a letter to Newco all
Persons who are, on the date hereof, "affiliates" of Dynegy or Illinova, as the
case may be, as such term is used in Rule 145 under the Securities Act. Dynegy
and Illinova will use their reasonable efforts to cause their respective
affiliates to deliver to Newco not later than 10 days prior to the date of the
Dynegy and Illinova Special Meetings, a written agreement substantially in the
form attached as Exhibit 8.17, and will use their reasonable efforts to cause
Persons who become "affiliates" after
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such date but prior to the Closing Date to execute and deliver these agreements
at least 5 days prior to the Closing Date.
(b) Each party will use all reasonable best efforts to cause
the Mergers to qualify, and will not take, and will use all reasonable best
efforts to prevent any subsidiary of such party from taking, any actions which
could prevent the Mergers from qualifying, as a contribution of assets to Newco
under Section 351 of the Code.
Section 8.18 Stockholder Litigation.
Each of Illinova and Dynegy will give the other the reasonable
opportunity to participate in the defense of any Action against Illinova or
Dynegy, as applicable, and its directors relating to the Transactions.
Section 8.19 Indenture Matters.
Illinova and Dynegy will, and will cause their respective Subsidiaries
to, take all actions that are necessary or appropriate (as mutually agreed by
Illinova and Dynegy) for Illinova, Dynegy and certain of their Subsidiaries, as
applicable, to assume, guarantee or modify as appropriate the agreements
governing the outstanding publicly held debt securities of Dynegy and Illinova
referred to in the Dynegy SEC Reports and the Illinova SEC Reports and to avoid
defaults thereunder.
Section 8.20 Credit Facility.
Illinova and Dynegy will use all reasonable efforts, and will
cooperate, to obtain as promptly as practicable commitments from financing
sources to refinance or amend the existing bank credit facilities of Dynegy,
Illinova and their respective Subsidiaries, if necessary.
Section 8.21 Employment Agreements and Severance Agreements.
Newco will assume the obligations under the employment agreements and
severance agreements to which Dynegy or Illinova is a party or is otherwise
subject, to the extent such agreements are listed on Section 5.11(a) of the
Dynegy Disclosure Schedule or Section 6.11(a) of the Illinova Disclosure
Schedule.
Section 8.22 Nuclear Facility Sale
Illinova will use its commercially reasonable efforts to enter into a
definitive agreement to sell (and to close the transactions contemplated by such
agreement) the Nuclear Facility as contemplated by the Nuclear Facility
Agreements on terms and conditions consistent with those set forth in the
Interim Agreement or as otherwise reasonably satisfactory to Dynegy.
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ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to the Obligation of Each Party.
The respective obligations of each party to effect the Mergers will be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Dynegy Stockholders' Approval and the Illinova
Stockholders' Approval will have been obtained;
(b) No Action instituted by any Governmental Authority will be
pending and no statute, rule or regulation and no Order of any court or
Governmental Authority of competent jurisdiction will be in effect, in each case
which would prohibit, restrain, enjoin or restrict the consummation of the
Transactions;
(c) The Registration Statement will have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceeding for such purpose
will be pending before or threatened by the SEC;
(d) Each of Dynegy and the Illinova Companies will have
obtained all necessary or appropriate permits, authorizations, consents, waivers
or approvals (including SEC Final Orders granting exemptions or any exemption
under PUHCA resulting from a filing which obviates any otherwise applicable
requirement to register under PUHCA) (collectively, "APPROVALS"). Any Approval
required for Dynegy and the Illinova Companies with respect to the Transactions
from the ICC, the NRC, the FERC or other Governmental Authority will (in cases
other than the SEC) have been obtained on terms reasonably satisfactory to
Illinova and Dynegy, and will have become final and nonappealable;
(e) The shares of Newco Common Stock to be issued in the
Mergers will have been approved for listing on the NYSE, subject to official
notice of issuance;
(f) Any applicable waiting period under the HSR Act will have
expired or been terminated;
(g) The purchase of the capital stock of BG Holdings by Newco
contemplated by the BG Stock Purchase Agreement shall have closed.
(h) There will be no Order of any court or Governmental
Authority of competent jurisdiction applicable to Chevron in effect that would
prohibit, restrain, enjoin or restrict, or award any significant monetary
recovery with respect to, Chevron's ownership or voting of its shares of Class B
Common Stock.
(i) The Ancillary Agreements shall have been executed and
delivered by the other parties thereto and shall be in full force and effect.
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Section 9.2 Conditions to Illinova's Obligations.
Illinova's obligation to effect the IAC Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Dynegy will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Dynegy contained in
this Agreement, will be true and correct in all respects, in each case as of the
date of this Agreement and at and as of the Effective Time as if made at and as
of such time, except (i) as expressly contemplated by the Dynegy Disclosure
Schedule or this Agreement, (ii) that the accuracy of representations and
warranties that by their terms speak as of the date of this Agreement or some
other date will be determined as of such date, and (iii) for inaccuracies in
Dynegy's representations and warranties as of the Effective Time resulting
solely from conditions generally existing in the natural gas or electricity
marketing industry, the petroleum liquids industry or the electric power
generation industry after the date of this Agreement; and Illinova will have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Dynegy as to the satisfaction of this condition;
(b) All proceedings to be taken by Dynegy in connection with
the Transactions and all documents, instruments and certificates to be delivered
by Dynegy in connection with the Transactions will be reasonably satisfactory in
form and substance to Illinova;
(c) From the date hereof through the Effective Time, there
will not have occurred any change in the financial condition, business or
operations of Dynegy and its Subsidiaries, taken as a whole, that would
constitute a Dynegy Material Adverse Effect, other than any such (i) change that
affects both Illinova and Dynegy in a substantially similar manner or (ii)
change applicable to Dynegy primarily resulting from conditions generally
existing in the natural gas or electricity marketing industry, the petroleum
liquids industry or the electric power generation industry;
(d) Illinova shall have received an opinion from Troutman
Sanders LLP prior to the effectiveness of the Registration Statement to the
effect that (i) the Transactions will constitute a contribution of assets under
Section 351 of the Code or as a tax-free reorganization under the Code, (ii) no
gain or loss will be recognized by Illinova because of the IAC Merger, and (iii)
no gain or loss will be recognized by stockholders of Illinova upon receipt of
shares of Newco Common Stock in exchange for shares of Illinova Common Stock
pursuant to the IAC Merger;
(e) Dynegy shall have taken appropriate action with respect to
its ownership interests in the Dynegy Qualifying Facilities (whether through a
sale, exchange or other disposition of all or a portion of its interest therein,
conversion of such Qualifying Facilities into "exempt wholesale generators"
under PUHCA or otherwise), such that the ultimate ownership by Newco of direct
or indirect ownership interests in the Dynegy Qualifying Facilities, after the
Effective Date, shall not result in a Dynegy Material Adverse Effect.
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Section 9.3 Conditions to Dynegy's Obligations.
Dynegy's obligation to effect the DAC Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Illinova will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Illinova contained
in this Agreement will be true and correct in all respects, in each case as of
the date of this Agreement and at and as of the Effective Time as if made at and
as of such time, except (i) as expressly contemplated by the Illinova Disclosure
Schedule or this Agreement, (ii) that the accuracy of representations and
warranties that by their terms speak as of the date of this Agreement or some
other date will be determined as of such date, and (iii) for inaccuracies in
Illinova's representations and warranties as of the Effective Time resulting
solely from conditions generally existing in the electric utility or gas
distribution industries after the date of this Agreement, and Dynegy will have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Illinova as to the satisfaction of this condition;
(b) All proceedings to be taken by Illinova in connection with
the Transactions and all documents, instruments and certificates to be delivered
by Illinova in connection with the Transactions will be reasonably satisfactory
in form and substance to Dynegy;
(c) From the date hereof through the Effective Time, there
will not have occurred any change in the financial condition, business or
operations of Illinova and its Subsidiaries, taken as a whole, that would
constitute an Illinova Material Adverse Effect, other than any such (i) change
that affects both Illinova and Dynegy in a substantially similar manner or (ii)
change applicable to Illinova primarily resulting from conditions generally
existing in the electric utility or gas distribution industries;
(d) Dynegy will have received an opinion from Akin, Gump,
Strauss, Hauer & Feld, L.L.P. prior to the effectiveness of the Registration
Statement to the effect that (i) the Transactions will constitute a contribution
of assets under Section 351 of the Code or is a tax-free reorganization under
the Code, (ii) no gain or loss will be recognized by Dynegy because of the DAC
Merger, and (iii) no gain or loss will be recognized by the stockholders of
Dynegy upon the receipt of shares of Newco Common Stock in exchange for shares
of Dynegy Stock pursuant to the DAC Merger except with respect to any Cash
Consideration received;
(e) With respect to the Nuclear Facility, (i) the NRC license
and future operating and ownership responsibility for the Nuclear Facility shall
have been transferred to an unrelated third party, whose financial and economic
status meets or exceeds all applicable standards of the NRC for the transfer of
NRC licenses, in a sales transaction on terms substantially consistent with
those set forth on Schedule 9.3(e)-1 or which (A) are satisfactory to Dynegy in
its reasonable judgment as not resulting in (or reasonably expected to result
in) an Illinova Material Adverse Effect, and (B) are no less favorable than the
recorded net impairment loss relating to disposal of the Nuclear Facility as
referenced in the Illinova Balance Sheet and
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(ii) subsequent to the transfer of the Nuclear Facility the potential liability
of Newco will be covered by insurance in amounts and type consistent with the
provisions of Schedule 9.3(e)-2.
(f) (i) As of the date all other conditions to Closing are
met, Chevron, having filed and maintained in effect a good
faith application for exemption from the registration
requirements of PUHCA as required by Section 2.1(a) of the
Shareholder Agreement, shall either (A) have received a final
order of the SEC (which order shall be in full force and
effect) exempting it from the requirement to register under
PUHCA on terms acceptable to Chevron, or (B) not have received
an adverse ruling from the SEC or a "Staff Objection," as
defined in Section 9.3(f)(iii).
(ii) If a Staff Objection is received and if, after
the parties to the Shareholder Agreement follow the procedure
set forth in Section 2.1(c) of the Shareholder Agreement to
explore appropriate modifications to their agreements, Chevron
files a revised application for exemption from the
registration requirements of PUHCA, the conditions to Closing
specified in Section 9.3(f)(i) shall apply to the revised
application. If, however, the parties to the Shareholder
Agreement do not agree upon and implement any appropriate
modifications to their agreements within ninety (90) days
after the receipt of a Staff Objection and any party to the
Shareholder Agreement gives notice terminating the Shareholder
Agreement, this Agreement shall terminate simultaneously with
the termination of the Shareholder Agreement.
(iii) As used in this Section 9.3(f), the term "STAFF
OBJECTION" shall mean informal advice received by a filing
party or parties from the staff of the SEC's Division of
Investment Management at a level of Assistant Director or
higher (the "STAFF"), that (x) the Staff disagrees with the
basis on which the exemption is being sought, or (y) the Staff
is not prepared to support and recommend approval by the SEC
of the exemptions sought unless Chevron agrees and undertakes
to make material changes involving its ownership interest
(including without limitation Chevron's continuing ability to
acquire "foreign utility companies" under Section 33 of PUHCA)
or its minority shareholder protection rights (including
governance and voting rights) pertaining to Newco, or (z) the
Staff has concluded, after conferences with Commissioners'
offices informally, that it is unlikely that the SEC would
grant the exemption.
(g) The ICC shall have issued a certification (which
certification shall be in full force and effect) under Section 33 of PUHCA which
has the effect, in the reasonable judgment of Chevron, of allowing Chevron, any
parent, or any "subsidiary company" (as defined in PUHCA) of such parent to
acquire and maintain an interest in the business of one or more "foreign utility
companies" as defined in Section 33 of PUHCA, or Illinova shall have provided
evidence reasonably satisfactory to Dynegy and Chevron that such certification
is unnecessary for acquiring or maintaining such an interest. For purposes of
this subsection (g), a "PARENT" shall mean any person of which Chevron is a
"subsidiary company."
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ARTICLE X
SURVIVAL
Section 10.1 Survival of Representations and Warranties.
The representations and warranties of the parties contained in this
Agreement will not survive the Effective Time.
Section 10.2 Survival of Covenants and Agreements.
The covenants and agreements of the parties to be performed after the
Effective Time contained in this Agreement will survive the Effective Time.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Dynegy or
Illinova:
(a) by the mutual written consent of Illinova and Dynegy;
(b) by either Illinova or Dynegy if the Effective Time has not
occurred on or before the Termination Date;
(c) by Dynegy if there has been a breach by Illinova of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (if susceptible to cure) has not been cured in all material
respects within 20 business days following receipt by Illinova of notice of such
breach, which breach could reasonably be expected to cause an Illinova Material
Adverse Effect (other than an Illinova Material Adverse Effect caused by
conditions generally existing in the electric utility or gas distribution
industries) (an "ILLINOVA BREACH");
(d) by Illinova, if there has been a breach by Dynegy of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (if susceptible to cure) has not been cured in all material
respects within 20 business days following receipt by Dynegy of notice of such
breach which breach could reasonably be expected to cause a Dynegy Material
Adverse Effect (other than a Dynegy Material Adverse Effect caused by conditions
generally existing in the natural gas or electricity marketing industry, the
petroleum liquids industry or the electric power generation industry) (a "DYNEGY
BREACH");
(e) by either Dynegy or Illinova, if there is any applicable
law, rule or regulation that makes consummation of either Merger illegal or if
any Order will restrain or prohibit the consummation of either Merger, and such
Order has become final and nonappealable;
(f) by either Dynegy or Illinova, if the stockholder approvals
referred to in Section 8.12 have not been obtained because of the failure to
obtain the requisite vote upon a
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vote at a Dynegy Special Meeting or the Illinova Special Meeting or at any
adjournment or postponement thereof;
(g) by Illinova, if (i) following or at the time a Dynegy
Acquisition Proposal is made (which in the judgment of an independent,
nationally recognized investment bank retained by any party is reasonably
capable of being consummated) Dynegy's Board of Directors withdraws, modifies or
changes its recommendation of this Agreement or the DAC Merger in a manner
adverse to Illinova or has resolved to do any of the foregoing; (ii) a tender
offer or exchange offer for outstanding shares of capital stock of Dynegy then
representing 50% or more of the combined power to vote generally for the
election of directors is commenced, and Dynegy's Board of Directors does not,
within the applicable period required by law, recommend that Dynegy's
stockholders not tender their shares into such tender or exchange offer and the
Mergers fail to occur; (iii) Dynegy's Board of Directors withdraws, modifies or
changes its recommendation of this Agreement or the DAC Merger in a manner
adverse to Illinova or has resolved to do any of the foregoing or Dynegy's Board
of Directors shall have recommended to the stockholders of Dynegy any Dynegy
Acquisition Proposal or resolved to do so; or (iv) a tender offer or exchange
offer for outstanding shares of capital stock of Dynegy then representing 50% or
more of the combined power to vote generally for the election of directors is
commenced, and Dynegy's Board of Directors does not, within the applicable
period required by law, recommend that Dynegy's stockholders not tender their
shares into such tender or exchange offer;
(h) by Dynegy or Illinova, if Dynegy accepts a Dynegy Superior
Proposal and makes payment as required pursuant to Section 8.5 and of the
Expenses for which Dynegy is responsible under Section 8.5. For this Agreement,
"DYNEGY SUPERIOR PROPOSAL" means an unsolicited bona fide proposal made by a
third party relating to a Dynegy Acquisition Proposal on terms that Dynegy's
Board of Directors determines it cannot reject in favor of the DAC Merger, based
on applicable fiduciary duties and the advice of Dynegy's outside counsel;
provided, however, that Dynegy shall not be permitted to terminate this
Agreement pursuant to this Section 11.1(h) unless it has used all reasonable
efforts to provide Illinova with four business days prior written notice of its
intent to so terminate this Agreement together with a detailed summary of the
terms and conditions of such Dynegy Acquisition Proposal; provided, further,
that prior to any such termination, Dynegy shall, and shall cause its respective
financial and legal advisors to, negotiate in good faith with Illinova to make
such adjustments in this Agreement's terms and conditions as would enable Dynegy
to proceed with the Transactions, and it is acknowledged by Illinova that such
negotiations with Illinova shall be conducted in a manner consistent with the
fiduciary duties of the Dynegy Board of Directors;
(i) by Dynegy, if (i) following or at the time an Illinova
Acquisition Proposal is made (which in the judgment of an independent,
nationally recognized investment bank retained by any party is reasonably
capable of being consummated) Illinova's Board of Directors withdraws, modifies
or changes its recommendation of this Agreement or the IAC Merger in a manner
adverse to Dynegy or has resolved to do any of the foregoing; (ii) a tender
offer or exchange offer for outstanding shares of capital stock of Illinova then
representing 50% or more of the combined power to vote generally for the
election of directors is commenced, and Illinova's Board of Directors does not,
within the applicable period required by law, recommend that Illinova's
shareholders not tender their shares into such tender or exchange offer and the
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Mergers fail to occur; (iii) Illinova's Board of Directors withdraws, modifies
or changes its recommendation of this Agreement or the IAC Merger in a manner
adverse to Dynegy or has resolved to do any of the foregoing or Illinova's Board
of Directors shall have recommended to the stockholders of Illinova any Illinova
Acquisition Proposal or resolved to do so; or (iv) a tender offer or exchange
offer for outstanding shares of capital stock of Illinova then representing 50%
or more of the combined power to vote generally for the election of directors is
commenced, and Illinova's Board of Directors does not, within the applicable
period required by law, recommend that Illinova's stockholders not tender their
shares into such tender or exchange offer;
(j) by Illinova or Dynegy, if Illinova accepts an Illinova
Superior Proposal and makes payment as required pursuant to Section 8.5 and of
the Expenses for which Illinova is responsible under Section 8.5. For purposes
of this Agreement, "ILLINOVA SUPERIOR PROPOSAL" means an unsolicited bona fide
proposal made by a third party relating to an Illinova Acquisition Proposal on
terms that Illinova's Board of Directors determines it cannot reject in favor of
the IAC Merger, based on applicable fiduciary duties and the advice of
Illinova's outside counsel; provided, however, that Illinova shall not be
permitted to terminate this Agreement pursuant to this Section 11.1(j) unless it
has used all reasonable efforts to provide Dynegy with four business days prior
written notice of its intent to so terminate this Agreement together with a
detailed summary of the terms and conditions of such Illinova Acquisition
Proposal; provided, further, that prior to any such termination, Illinova shall,
and shall cause its respective financial and legal advisors to, negotiate in
good faith with Dynegy to make such adjustments in this Agreement's terms and
conditions as would enable Illinova to proceed with the Transactions, and it is
acknowledged by Dynegy that such negotiations with Dynegy shall be conducted in
a manner consistent with the fiduciary duties of the Illinova Board of
Directors.
Section 11.2 Effect of Termination.
Upon termination of the Agreement and the abandonment of either Merger
pursuant to this Article XI, all obligations of the parties shall terminate,
except the obligations of the parties pursuant to this Section 11.2 and except
for the provisions of Section 8.5, Section 8.7, Section 12.8 and the last two
sentences of Section 8.1, provided that nothing herein shall relieve any party
from liability for any breaches hereof.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices.
All notices or communications hereunder shall be in writing (including
facsimile or similar writing) addressed as follows:
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To any Illinova Company:
Illinova Corporation
5008 South 27th St.
Decatur, Illinois 62525
Attention: Chief Legal Officer
Facsimile No.: (217) 362-7417
With a copy (which shall not constitute notice) to:
Troutman Sanders LLP
600 Peachtree Street NE, Suite 5200
Atlanta, Georgia 30308
Attention: W. Brinkley Dickerson, Jr.
Facsimile No.: (404) 962-6743
To Dynegy, Newco, IAC or DAC:
Dynegy Inc.
1000 Louisiana, Ste. 5800
Houston, Texas 77002
Attention: Senior Vice President and General Counsel
Facsimile No.: (713) 507-6808
With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana; Suite 1900 South
Houston, Texas 77002
Attention: Robert B. Allen
Facsimile No.: (713) 236-0822
Any such notice or communication shall be deemed given (i) when made,
if made by hand delivery, and upon confirmation of receipt, if made by
facsimile, (ii) one business day after being deposited with a next-day courier,
postage prepaid, or (iii) three business days after being sent certified or
registered mail, return receipt requested, postage prepaid, in each case
addressed as above (or to such other address as such party may designate in
writing from time to time).
Section 12.2 Separability.
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect.
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Section 12.3 Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors,
and assigns; provided, however, that neither this Agreement nor any rights
hereunder shall be assignable or otherwise subject to hypothecation and any
assignment in violation hereof shall be null and void.
Section 12.4 Construction.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The parties have participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement is to be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of this Agreement's provisions. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" means "including without
limitation." The parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any party has breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
Section 12.5 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same Agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each party.
Section 12.6 Entire Agreement.
This Agreement and the Confidentiality Agreements represent the entire
Agreement of the parties with respect to the subject matter hereof and shall
supersede any and all previous contracts, arrangements or understandings between
the parties hereto with respect to the subject matter hereof, including the
letter agreement dated May 3, 1999 between Illinova and Dynegy, as amended.
Section 12.7 Governing Law.
This Agreement shall be construed, interpreted, and governed in
accordance with the laws of Delaware, without reference to rules relating to
conflicts of law other than to the extent this Agreement pertains to the
internal affairs of an Illinois corporation, in which event, and only with
respect to such event, the IBCA shall apply.
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Section 12.8 Attorneys' Fees.
If any Action, including an Action for declaratory relief, is brought
to enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and expenses (including
related expert and consultant fees and expenses) from the other party, which
fees and expenses shall be in addition to any other relief which may be awarded.
Section 12.9 No Third Party Beneficiaries.
Except as provided in Section 8.3, no Person other than the parties is
an intended beneficiary of this Agreement or any portion hereof.
Section 12.10 Disclosure Schedules.
(a) The disclosures made on the Dynegy and Illinova Disclosure
Schedules (collectively, the "DISCLOSURE SCHEDULES") with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the disclosure schedule. The inclusion of
any matter on either Disclosure Schedule will not be deemed an admission by any
party that such listed matter is material or that such listed matter has or
would have a Dynegy Material Adverse Effect or an Illinova Material Adverse
Effect, as applicable. Any inadvertent disclosure of privileged information by
Dynegy or Illinova in the Disclosure Schedules or in connection with their
respective diligence examination will not be deemed to be a waiver by such
inadvertently disclosing party of the applicable privilege.
(b) The Disclosure Schedules shall be deemed to constitute an
integral part of this Agreement and to modify the respective representations,
warranties, covenants or agreements of the parties contained herein to the
extent that such representations, warranties, covenants or agreements expressly
refer to the applicable Disclosure Schedule. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
delivered on or before the date hereof shall be deemed to have been made on and
as of the date hereof. From time to time prior to the Closing, the parties shall
promptly supplement or amend the Disclosure Schedules with respect to any
matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be listed
or described in the Disclosure Schedules. No supplement or amendment shall be
deemed to cure any breach or any representation or warranty made in this
Agreement or have any effect for the purpose of determining satisfaction of the
conditions set forth in Article IX.
Section 12.11 Amendments and Supplements.
At any time before or after approval of the matters presented in
connection with the Merger by the respective stockholders of Illinova and Dynegy
and prior to the Effective Time, this Agreement may be amended or supplemented
in writing by Illinova and Dynegy with respect to any of the terms contained in
this Agreement, except as otherwise provided by law; provided, however, that
following approval of this Agreement by the stockholders of Illinova
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there shall be no amendment or change to the provisions hereof with respect to
(a) the number of shares of Newco Common Stock into which each share of Illinova
Common Stock is convertible, (b) the Termination Date, or (c) any other change
that is materially adverse to the stockholders of Illinova without further
approval by the stockholders of Illinova, and provided further that following
approval and adoption of this Agreement by the stockholders of Dynegy there
shall be no amendment or change to the provisions hereof with respect to (i) the
Exchange Ratio (ii) the amount and nature of the Aggregate Merger Consideration
payable per share of Dynegy Stock, (iii) the Termination Date or (iv) any other
change that is materially adverse to the stockholders of Dynegy without further
approval by the affected stockholders of Dynegy.
Section 12.12 Consent to Jurisdiction.
Each Party (a) consents to submit itself to the personal jurisdiction
of any federal court located in the State of Delaware or any Delaware state
court if any Action arises out of this Agreement or the Transactions, (b) agrees
that it will not attempt to defeat or deny such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any Action relating to this Agreement or any of the Transactions in any
court other than a federal court sitting in the State of Delaware or a Delaware
state court. Illinova, IAC and Newco hereby irrevocably appoint The Corporation
Trust Company located at 1209 Orange Street in Wilmington, Delaware, as its
lawful agent in Delaware to receive and forward on their behalf service of all
necessary processes in any Action arising under this Agreement that may be
brought against Illinova, IAC or Newco in any court (including federal court) in
Delaware. Such service of process or notice received thereof by the agent will
have the same force and effect as if served upon Illinova, IAC or Newco.
Section 12.13 Extensions, Waivers, Etc.
At any time prior to the Effective Time, either party may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto; or
(c) subject to the proviso of Section 12.11 waive compliance
with any of the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing, no failure or delay by Illinova or
Dynegy in exercising any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
[REMAINDER OF PAGE INTENTIONALLY BLANK.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Merger
Agreement as of the day and year first above written.
ILLINOVA CORPORATION
By: /s/ Charles E. Bayless
-----------------------------------------
President
DYNEGY INC.
By: /s/ C.L. Watson
-----------------------------------------
Chairman and Chief Executive Officer
ENERGY CONVERGENCE
HOLDING COMPANY
By: /s/ Charles E. Bayless
-----------------------------------------
President
ENERGY CONVERGENCE ACQUISITION CORPORATION
By: /s/ Charles E. Bayless
-----------------------------------------
President
DYNEGY ACQUISITION CORPORATION
By: /s/ C.L. Watson
-----------------------------------------
President
83
EXHIBIT A
Energy Convergence Holding Corporation
Article 4, Paragraph 2, continued:
A. General
All holders of Class A Common Stock (as defined) shall be entitled to
cumulative voting rights, as that term is used in Section 7.40 of the Illinois
Business Corporation Act of 1983, as amended from time to time (the "IBCA"), in
any election of directors. Holders of Class B Common Stock (as defined) shall
not be entitled to cumulative voting rights.
B. Provisions Relating to Preferred Stock
(1) Authority is hereby expressly vested in the Board of Directors (the
"Board") to divide, and to provide for the issue from time to time of, the
Preferred Stock in series and to fix and determine as to each such series:
(a) the designation of, and the number of shares to be
issuable in, such series;
(b) the dividend rate for the shares for such series;
(c) the price or prices at which, and the terms and conditions
on which, such shares may be redeemed;
(d) the amount payable upon each of such shares in the event
of involuntary dissolution of the corporation;
(e) the amount payable upon each of such shares in the event
of voluntary dissolution of the corporation;
(f) sinking fund provisions, if any, for the redemption or
purchase of such shares (the term "sinking fund," as used herein,
including any analogous fund, however designated);
(g) if such shares are to be issued with the privilege of
conversion into shares of the Common Stock or other securities, the
terms and conditions on which such shares may be so converted; and
(h) the voting rights or the grant of special voting rights,
provided that the voting rights of such Preferred Stock are no greater
in proportion than to the economic interest of such Shares.
In all other respects the shares of Preferred Stock of all series shall be
identical. Holders of Preferred Stock shall have no preemptive rights.
Additional series of preferred stock may be issued pursuant to
designation by resolution of the Board of Directors and such series may have
preferences which are junior to, parri passu with or superior to an outstanding
series of preferred stock set forth in these articles of
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incorporation or created by designation without any vote of such outstanding
series of preferred stock unless the designation or terms of the outstanding
series of preferred stock expressly provides otherwise.
So long as any shares of any series of the Preferred Stock established
by resolution of the Board of Directors shall be outstanding, such resolution
shall not be amended so as to affect any of the preferences or other rights of
the holders of the shares of such series without the affirmative vote or the
written consent of the holders of at least a majority of the shares of such
series outstanding at the time or as of a record date fixed by the Board of
Directors, but such resolution may be so amended with such vote or consent.
C. Provisions Relating to Common Stock
(1) The total number of shares of common stock that the corporation
shall have authority to issue is 420,000,000 of which (i) 300,000,000 shares
shall be shares of Class A Common Stock, no par value per share (the "Class A
Common Stock"), and (ii) 120,000,000 shares shall be shares of Class B Common
Stock, no par value per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock").
(2) Holders of the Common Stock shall have no preemptive rights. Except
as contemplated by Article 4, Paragraph 2C., each outstanding share of Common
Stock shall entitle the holder thereof to one vote (and not more than one vote)
on each matter submitted to a vote at a meeting of holders of Common Stock.
(3) The following is a statement of the relative powers, preferences
and participating, optional or other special rights, and the qualifications,
limitations and restrictions of the Class A Common Stock and Class B Common
Stock:
(a) Class A Common Stock and Class B Common Stock
Except as otherwise set forth in this Article 4, Paragraph 2C,
the relative powers, preferences and participating, optional or other
special rights, and the qualifications, limitations or restrictions of
the Class A Common Stock and Class B Common Stock shall be identical in
all respects.
(b) Dividends
Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of these Articles, holders of Common
Stock shall be entitled to receive such dividends and other
distributions in cash, stock of any corporation (other than Common
Stock) or property of the corporation as may be declared thereon by the
Board of Directors from time to time out of assets or funds of the
corporation legally available therefor and shall share equally on a per
share basis in all such dividends and other distributions. In the case
of dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock,
only shares of Class A Common Stock shall be paid or distributed with
respect to Class A Common Stock and only shares of Class B Common Stock
shall be paid or distributed with respect to Class B
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Common Stock. The number of shares of Class A Common Stock and Class B
Common Stock so distributed on each share shall be equal in number.
Neither the shares of Class A Common Stock nor the shares of Class B
Common Stock may be reclassified, subdivided or combined unless such
reclassification, subdivision or combination occurs simultaneously and
in the same proportion for each class.
(c) Voting.
(i) Except as may be otherwise required by law or by the
provisions of this Article 4, Paragraph 2C.(3)(c), the holders of the
Class B Common Stock shall vote together with the holders of the Class
A Common Stock as a single class on every matter coming before any
meeting of the shareholders or otherwise to be acted upon by the
shareholders, subject to any voting rights which may be granted to
holders of any other class or series of Preferred Stock. So long as any
Class B Common Stock is outstanding, the corporation shall not amend
(x) Section 7 of Article III or Article X of the corporation's By-laws
(unless such amendment shall be approved by a majority of the Class B
directors present at the meeting where such amendment is considered and
a majority of the Directors then in office) or effect any mergers,
consolidations, reorganizations, or sales of assets requiring
shareholder approval under the IBCA or disposition of all or
substantially all of the corporation's assets without the affirmative
vote of 66 2/3% of the shares of Common Stock outstanding, voting as a
single class or (y) any provision of this Article 4, Paragraph
2C.(3)(c)(i) relating to the Common Stock without the affirmative vote
of 66 2/3% of the shares of Class B Common Stock outstanding, voting as
a separate class, and the affirmative vote of a majority of the shares
of Class A and Class B Common Stock, voting as a single class.
(ii) The Board of Directors of the corporation shall consist
of at least twelve members and no more than fifteen members as
established from time to time by resolution of the Board of Directors,
except that such numbers are subject to automatic adjustment as
necessary, under those circumstances and during those time periods that
holders of any other class or series of the corporation's outstanding
Preferred Stock have rights to elect members of the Board of Directors
(the "Preferred Stock Directors"), as set forth in these Articles of
Incorporation or in the resolution of the Board of Directors
establishing and designating such series and fixing and determining the
relative rights and preferences thereof. So long as any shares of Class
B Common Stock are outstanding, the holders of the Class B Common
Stock, as such holders, shall be entitled to vote as a separate class
for the election of three directors of the corporation (the "Class B
Directors") and the holders of the Class A Common Stock shall be
entitled to vote as a separate class for the remaining directors of the
corporation (the "Class A Directors"), excluding Preferred Stock
Directors, if any. At such time as no Class B Common Stock is
outstanding, the term of all Class B Directors shall immediately end.
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(iii) For purposes of electing Class B Directors, the Board of
Directors will nominate such individuals as may be specified by a
majority vote of the then existing Class B Directors or, if there are
no Class B Directors, by holders of a majority of the Class B Common
Stock. The remaining directors will be nominated in accordance with the
corporation's Bylaws.
(iv) At any meeting having as a purpose the election of
directors by holders of the Common Stock, the presence, in person or by
proxy, of the holders of a majority of the shares of relevant class of
Common Stock then outstanding shall be required and be sufficient to
constitute a quorum of such class for the election of any director by
such holders. Each director shall be elected by the vote or written
consent required under the IBCA of the holders of such class. At any
such meeting or adjournment thereof, (i) the absence of a quorum of
such holders of an applicable class of Common Stock shall not prevent
the election of the directors to be elected by the holders of shares
other than such class of Common Stock, and (ii) in the absence of such
quorum (either of holders of such class of Common Stock or of shares
other than such class of Common Stock, or both), a majority of the
holders, present in person or by proxy, of the class or classes of
stock which lack a quorum shall have power to adjourn the meeting for
the election of directors which they are entitled to elect, from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present.
(v) Any vacancy in the office of a class of director may be
filled by the remaining directors of such class, unless such vacancy
occurred because of the removal (with or without cause) of a director,
in which event such vacancy shall be filled by the affirmative vote of
the holders of a majority of the outstanding shares of the applicable
class of Common Stock. Any or all of the directors may be removed, with
or without cause, by vote or by written consent in each case in
accordance with Section 8.35 of the IBCA by the holders of the
applicable class of Common Stock and not otherwise. Any director
elected to fill a vacancy shall serve the same remaining term as that
of his or her predecessor, subject, however, to prior death,
resignation, retirement, disqualification, or removal from office.
(vi) Without the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of the Class B Common Stock or the
written consent of such holders of the Class B Common Stock, the
corporation may not effect any change in the rights, privileges or
preferences of the Class B Common Stock. This provision shall not be
applicable to any amendment to the Articles of Incorporation or
adoption of resolutions of the Board of Directors which establishes or
designates one or more classes or series of Preferred Stock in
accordance with Article 4, Paragraph 2B.(1).
(vii) With respect to actions by the holders of Class B Common
Stock upon those matters on which such holders are entitled to vote as
a separate class, such actions may be taken without a shareholders
meeting by the written consent of holders of the Class B Common Stock
who would be entitled to vote at a
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meeting those shares having voting power to cast not less than the
minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares of Class B Common Stock
entitled to vote were present and voted. Notice shall be given in
accordance with the applicable provisions of the IBCA of the taking of
corporate action without a meeting by less than unanimous written
consent to those holders of Class B Common Stock on the record date
whose shares were not represented on the written consent.
(d) Transfer.
(i) If any person holding shares of Class B Common Stock of
record (a "Class B Holder") purports to transfer such shares of Class B
Common Stock, whether by sale, assignment, gift, bequest or otherwise,
except to a Permitted Transferee, such transfer shall be deemed to
constitute a request by the Class B Holder for conversion of such
shares and shall result in such shares being converted into Class A
Common Stock as provided by Article 4, Paragraph 2C.(3)(e).
(ii) In the case of a Class B Holder acquiring record and
beneficial ownership of the shares of Class B Common Stock in question
upon initial issuance by the corporation (an "Original Holder"), a
"Permitted Transferee" shall mean any Affiliate (as defined) of such
Original Holder.
In the case of a Class B Holder which is a Permitted
Transferee of an Original Holder, a "Permitted Transferee" shall mean:
(y) any Original Holder, or
(z) any Permitted Transferee of any Original Holder.
For this paragraph and Article 4, Paragraph 2C.(3)(e),
"Affiliate" means any corporation, partnership, limited liability
company or other entity (each, a "Person") that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, another Person, and includes any Person
acting in concert with another Person.
(iii) With respect to a Class B Holder which holds shares by
virtue of its status as an Affiliate, the subsequent loss of Affiliate
status shall, unless within 15 days thereafter all shares of Class B
Common Stock held by such Class B Holder are transferred to an Original
Holder or a Permitted Transferee of an Original Holder, result in the
automatic conversion of all of its shares of Class B Common Stock into
shares of Class A Common Stock, and stock certificates formerly
representing such shares of Class B Common Stock shall thereupon and
thereafter be deemed to represent shares of Class A Common Stock as
provided by Article 4, Paragraph 2C.(3)(e).
(iv) Any transfer of shares of Class B Common Stock not
permitted hereunder shall result in the conversion of the transferee's
shares of Class B
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Common Stock into shares of Class A Common Stock as provided by Article
4, Paragraph 2C.(3)(e), effective as of the date on which certificates
representing such shares are presented for transfer on the books of the
corporation or on such earlier date that the corporation receives
notice of such attempted transfer. The corporation may, in connection
with preparing a list of stockholders entitled to vote at any meeting
of stockholders, or as a condition to the transfer or the registration
of shares of Class B Common Stock on the corporation's books, require
the furnishing of such affidavits or other proof as it deems necessary
to establish that the person is the beneficial owner of shares of Class
B Common Stock or is a Permitted Transferee.
(v) Shares of Class B Common Stock shall be registered in the
names of the beneficial owners thereof and not in "street" or "nominee"
name. For this purpose, a "beneficial owner" of any shares of Class B
Common Stock shall mean a person who, or any entity which, possesses
the powers, either singly or jointly, to direct the voting or
disposition of such shares. Certificates for shares of Class B Common
Stock shall bear a legend referencing the restrictions on transfer
imposed by this Article 4, Paragraph 2C.(3)(d).
(e) Conversion.
(i) Each share of Class B Common Stock shall be converted at
such time, in such manner and upon such terms and conditions as
provided herein into one fully paid and non-assessable share of Class A
Common Stock.
(ii) Each share of Class B Common Stock shall automatically
convert into a share of Class A Common Stock upon the earlier to occur
of (i) the holders of all Class B Common Stock ceasing to own in the
aggregate 15% of the issued and outstanding Common Stock, and (ii) as
provided in Article 4, Paragraph 2C.(3)(d). Upon automatic conversion
of shares of Class B Common Stock, the corporation shall reflect such
conversion, and the issuance of Class A Common Stock in connection
therewith on its books and records for all purposes even if
certificates reflecting such converted shares of Class B Common Stock
are not surrendered to the corporation or its transfer agent. All
shares of Class B Common Stock, upon conversion thereof into Class A
Common Stock, shall retain their designation as Class B Common Stock
and shall have the status of authorized and unissued shares of Class B
Common Stock; provided that if all shares of Class B Common Stock
outstanding are converted into shares of Class A Common Stock, then all
authorized but unissued shares or treasury shares of Class B Common
Stock shall automatically convert into authorized but unissued or
treasury shares of Class A Common Stock, as the case may be, and no
further shares of Class B Common Stock shall exist. Except as
specifically contemplated under this Article 4, Paragraph 2C.(3)(e),
shares of Class B Common Stock may not be converted into Class A Common
Stock.
(iii) Each share of Class A Common Stock owned (within the
meaning of Article 4, Paragraph 2C.(3)(d)) by Chevron U.S.A. Inc., a
Pennsylvania
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corporation ("Chevron") or its Affiliates shall simultaneous with
acquiring such ownership automatically be converted into one fully paid
and non-assessable share of Class B Common Stock; provided, however,
that for purposes of any shares of Class B Common Stock so issued, only
Chevron will be deemed to be the Original Holder thereof for purposes
of the provisions of Article 4, Paragraph 2C.(3)(d), and provided,
further, that this provision shall not apply with respect to shares of
Class A Common Stock issued upon conversion of all Class B Common Stock
in accordance with the first sentence of Article 4, Paragraph
2C.(3)(e)(ii)(i), or any shares of Class A Common Stock owned by
Chevron or its Affiliates, after such conversion shall have occurred.
Upon automatic conversion of shares of Class A Common Stock, the
corporation shall reflect such conversion and the issuance of Class B
Common Stock in connection therewith on its books and records for all
purposes even if certificates reflecting such converted shares of Class
A Common Stock are not surrendered to the corporation for transfer. All
shares of Class B Common Stock shall be subject to the restrictions and
provisions contained in the corporation's Articles of Incorporation.
All shares of Class A Common Stock, upon conversion thereof into Class
B Common Stock, shall retain their designation as Class A Common Stock
and shall have the status of authorized and unissued shares of Class A
Common Stock.
(iv) Nothing herein shall prevent the Original Holder (or any
Permitted Transferee) of the Class B Common Stock and the corporation
from executing an agreement allowing the Original Holder (or any
Permitted Transferee), at its option, to convert the Class B Common
Stock into Class A Common Stock, nor the conversion of any Class B
Common Stock pursuant to such agreement.
(v) The corporation will, as soon as practicable after such
deposit of a certificate or certificates for Common Stock to be
converted in accordance with this Article 4, Paragraph 2C.(3)(e), issue
and deliver at the office of the corporation or of its transfer agent
to the person for whose account such Common Stock was so surrendered, a
certificate or certificates for the number of full shares of Common
Stock into which the shares represented by the surrendered certificate
are converted. If surrendered certificates for Common Stock are
converted only in part, the corporation will issue and deliver to the
holder, without charge therefor, a new certificate or certificates
representing the aggregate of the unconverted shares of such class of
Common Stock. The failure of the holder to deliver to the corporation
certificates representing shares of a class of Common Stock converted
in accordance with this Article 4, Paragraph 2C.(3)(e), shall in no way
affect the automatic conversion of such shares.
(vi) The issuance of certificates for shares of a class of
Common Stock upon conversion of shares of the other class of Common
Stock shall be made without charge for any issue, stamp or other
similar tax in respect of such issuance; provided, however, if any such
certificate is to be issued in a name other than that of the holder of
the share or shares of the class of Common Stock converted, the person
or persons requesting the issuance thereof shall pay to the corporation
the amount of any tax which may be payable in respect of any transfer
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involved in such issuance or shall establish to the satisfaction of the
corporation that such tax has been paid.
(vii) The corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all
such outstanding shares, provided that nothing contained herein shall
be construed to preclude the corporation from satisfying the
obligations in respect of the conversion of the outstanding shares of
Class B Common Stock by delivery of shares of Class A Common Stock
which are held in the treasury of the corporation. The corporation
shall take all such corporate and other actions as from time to time
may be necessary to insure that all shares of Class A Common Stock
issuable upon conversion of shares of Class B Common Stock upon issue
will be duly and validly authorized and issued, fully paid and
nonassessable and free of any preemptive or similar rights. In order
that the corporation may issue shares of Class A Common Stock upon
conversion of the Class B Common Stock, the corporation will endeavor
to comply with all applicable Federal and state securities laws and
will endeavor to list such shares to be issued upon conversion on such
securities exchange on which the Class A Common Stock is then listed.
(viii) The corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class A Common Stock a number of shares of Class
B Common Stock equal to 40% of the number of outstanding shares of
Class A Common Stock, provided that nothing contained herein shall be
construed to preclude the corporation from satisfying the obligations
in respect of the conversion of the outstanding shares of Class A
Common Stock by delivery of shares of Class B Common Stock which are
held in the treasury of the corporation. The corporation shall take all
such corporate and other actions as from time to time may be necessary
to insure that all shares of Class B Common Stock issuable upon
conversion of shares of Class A Common Stock upon issue will be duly
and validly authorized and issued, fully paid and nonassessable and
free of any preemptive or similar rights. In order that the corporation
may issue shares of Class B Common Stock upon conversion of the Class A
Common Stock, the corporation will endeavor to comply with all
applicable Federal and state securities laws.
(f) Except as may otherwise be required by law and for the equitable
rights and remedies which may otherwise be available to holders of Common Stock,
the shares of Common Stock shall not have any designations, preferences,
limitations or relative rights, other than those specifically set forth in these
Articles of Incorporation.
(g) The headings of the various subdivisions of this Section are for
convenience of reference only and shall not affect the interpretation of any of
the provisions of this Section.
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Article 7, Paragraph 1:
A. Right to Indemnification.
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the IBCA, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
IBCA is amended to authorize corporate action further eliminating or limiting
the personal liability of Directors, then the liability of a director or the
corporation shall be eliminated or limited to the full extent permitted under
the IBCA, as so amended. Any repeal or modification of this Article 7, Paragraph
1 by the shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to be the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to be the best interests of the
corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
B. Suit by Corporation or Shareholder
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to the best interests of the
corporation, and except that no indemnification shall be made with respect to
any claim, issue or matter as to which such person has been finally adjudged to
have been liable to the corporation, unless, and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
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circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
C. Director Discretion
Any indemnification under Article 7, Paragraphs 1A. and B. (unless
ordered by a court) shall be made only as authorized in the specific case, upon
a determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Article 7, Paragraphs 1A. and B. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable (or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel in a written opinion, or (3) by the
shareholders. In any event, to the extent that a director or officer of the
corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in Article 7, Paragraphs 1A. and B.
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including reasonable attorneys' fees) actually and reasonable
incurred by him in connection therewith.
D. Advancement of Expenses
(1) Reasonable expenses incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the corporation in advance of the
final deposition of such action, suit or proceeding, upon receipt of (i) a
statement signed by such director or officer to the effect that such director or
officer acted in good faith and in a manner which he believed to be in, or not
opposed to the best interests of the corporation and (ii) an undertaking by or
on behalf of the director or officer to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
(2) The board of directors may, by separate resolution adopted under
and referring to this Article of the by-laws, provide for securing the payment
of authorized advances by the creation of escrow accounts, the establishment of
letters of credit or such other means as the board deems appropriate and with
such restrictions, limitations and qualifications with respect thereto as the
board deems appropriate in the circumstances.
E. Non-Exclusivity of Rights and Contractual Nature
(1) The indemnification and advancement of expenses provided by or
granted under other subsections of this Article shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(2) The provisions of this Article 7, Paragraph 1 shall be deemed to be
a contract between the corporation and each director and officer who serves in
such capacity at anytime while this Article 7, Paragraph 1 is in effect and any
indemnification provided under Article 7, Paragraph 1 to a person shall continue
after such person ceases to be an officer, director, agent or
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93
employee of the corporation as to all facts, circumstances and events occurring
while such person was such officer, director, agent or employee, and shall not
be decreased or diminished in scope without such person's consent, regardless of
their repeal or modification of this Article or any repeal or modification of
the Illinois Business Corporation Act or any other applicable law. If the scope
of indemnity provided by this Article 7, Paragraph 1 or any replacement article,
or pursuant to the Illinois Business Corporation Act or any modification or
replacement thereof is increased, then such person shall be entitled to such
increased indemnification as is in existence at the time indemnity is provided
to such person, it being the intent, subject to Article 7, Paragraph 1K., to
indemnify persons under this Article 7, Paragraph 1 to the fullest extent
permitted by law.
F. Insurance
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article.
G. Report to Shareholders
The corporation shall report in writing to shareholders any indemnity
or advanced expenses paid to a director, officer, employee or agent with or
before the notice of the next shareholders' meeting.
H. Right of Claimant to Bring Suit
Subject to Article 7, Paragraph 1K., if a claim under this Article is
not promptly paid by the corporation after a written claim has been received by
the corporation or if expenses pursuant to Section 4 of this Article have not
been promptly advanced after a written request for such advancement accompanied
by the statement and undertaking required by Article 7, Paragraph 1D. of this
Article has been received by the corporation, the director or officer may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim or the advancement of expenses. If successful, in whole or in part,
in such suit, such director or officer shall also be entitled to be paid the
reasonable expense thereof, including attorneys' fees. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the corporation) that the director
or officer has not met the standards of conduct which make it permissible under
the Illinois Business Corporation Act for the corporation to indemnify the
director or officer for the amount claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
shareholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the director or officer is
proper in the circumstances because he or she has met the applicable standard of
conduct required under the Illinois Business Corporation Act, nor an actual
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determination by the corporation (including its board of directors, independent
legal counsel, or its shareholders) that the director or officer had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the director or officer had not met the applicable standard
of conduct.
I. Definition of "corporation"
For purposes of this Article, references to "the corporation" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who was a director or officer of such merging
corporation, or was serving at the request of such merging corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving corporation as such person would have with
respect to such merging corporation if its separate existence had continued.
J. Employee Benefit Plans
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and references
to "officers" shall include elected and appointed officers. A person who acted
in good faith and in a manner he reasonably believed to be in the best interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of the
corporation" as referred to in this Article.
K. Reimbursement
Anything herein to the contrary notwithstanding, if the corporation
purchases insurance in accordance with Article 7, Paragraph 1F., the corporation
shall not be required to, but may (if the board of directors so determines in
accordance with this Article 7, Paragraph 1) reimburse any party instituting any
action, suit or proceeding if a result of the institution thereof is the denial
of or limitation of payment of losses under such insurance when such losses
would have been paid thereunder if a non-insured third party had instituted such
action, suit or proceedings.
L. Severability
If any portion of this Article shall be invalidated or held to be
unenforceable on any ground by any court of competent jurisdiction, the decision
of which shall not have been reversed on appeal, such invalidity or
unenforceability shall not affect the other provisions hereof, and this Article
shall be construed in all respects as if such invalid or unenforceable
provisions had been omitted therefrom.
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Article 7, Paragraph 2:
Without the consent of the holders of eighty-five percent (85%) of the
outstanding Common Stock, voting as a single class, the corporation may (and may
permit any subsidiary of the corporation over which it has control to) sell the
following products:
(1) crude oil;
(2) other products usually and normally refined as petroleum products
from crude oils; and
(3) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(a) the United States or any of its territories or
possessions;
(b) any country wholly located in the Western Hemisphere
and/or Europe or surrounded by the Mediterranean Sea;
(c) any country all of the territory of which was formerly
contained within the Union of Soviet Socialist Republics;
(d) any country whose territory is contained within the
territories constituting as of the date hereof the countries known as
Algeria, Angola, Benin, Burkina Faso, Cameroon, Central African
Republic, Chad, Congo, Cote D'Ivoire, Equatorial Guinea, Gabon, Gambia,
Ghana, Greenland, Guinea, Guinea Bissau, Iceland, Liberia, Libya, Mali,
Mauritania, Mongolia, Morocco, Niger, Nigeria, Rio Muni, Senegal,
Sierra Leone, Togo, Tunisia, Turkey, Western Sahara and/or Zaire;
(e) Antarctica; and
(f) international waters;
unless (x) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between Dynegy Inc. and Chevron, as the same may
from time to time be amended in accordance with the terms thereof, or (y) such
Scope of Business Agreement is terminated pursuant to its terms, upon which
termination the provisions of this Article 7, Paragraph 2 shall be of no further
force and effect. A copy of such Scope of Business Agreement, as the same may be
amended, shall be available for inspection by any stockholder of the corporation
at the principal offices of the corporation. Except as indicated above or as may
otherwise be provided in these Articles of Incorporation or by Illinois law,
stockholders shall have no right to approve specific business activities of the
corporation, and the above provisions shall not otherwise affect corporate
powers and purposes as stated in Article 3.
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EXHIBIT B
STATEMENT OF RESOLUTION ESTABLISHING SERIES
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
ENERGY CONVERGENCE HOLDING COMPANY
Pursuant to and in accordance with Section 6.10 of the Illinois
Business Corporation Act of 1983, as amended (the "IBCA"), the undersigned
corporation hereby makes the following statement:
The name of the corporation is Energy Convergence Holding Company
(the "Corporation").
ARTICLE I.
The Board of Directors of the Corporation (the "Board") on ________,
[_____] duly adopted the following resolution establishing and designating a
series of preferred stock of the Corporation and fixing and determining the
relative rights and preferences thereof:
RESOLVED, that pursuant to the authority vested in the Board by
Article 4, Paragraph 2B. of the Corporation's Articles of Incorporation, a
series of preferred stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the Corporation,
such series to be designated "Series A Convertible Preferred Stock" (the
"Series A Preferred Stock"), to consist of [__________] shares, no par value
per share, of which the preferences and relative and other rights, and the
qualifications, limitations, and restrictions thereof will be, in addition to
those set forth in the Corporation's Articles of Incorporation, as follows:
1. CERTAIN DEFINITIONS. Unless otherwise stated herein or the context
otherwise requires, the terms defined in this Section 1 have the following
meanings:
"Board" is defined in the preamble to this Article II.
"Class A Common Stock" means all shares now or hereafter authorized
of Class A Common Stock, no par value per share, of the Corporation.
"Common Stock" means all shares now or hereafter authorized of any
class of common stock of the Corporation and any other stock of the
Corporation, howsoever designated, authorized after the Issue Date, which has
the right (subject to prior rights of any class or series of preferred stock)
to participate in the distribution of the assets and earnings of the
Corporation without limit as to per share amount.
"Conversion Date" is defined in Section 5(c).
"Conversion Price" will mean the price per share of Class A Common
Stock used to determine the number of shares of Class A Common Stock
deliverable upon conversion of a
97
share of the Series A Preferred Stock, subject to adjustment in accordance with
the provisions of Section 5.
"Corporation" is defined in Article I.
"Dividend Payment Date" means March 31, June 30, September 30, and
December 31 of each year.
"Dividend Period" means the quarterly period between consecutive
Dividend Payment Dates; provided, that the initial Dividend Period shall be
from the Issue Date until the first Dividend Payment Date after the Issue
Date.
"Final Redemption Date" is defined in Section 4(e).
"IBCA" is defined in the introductory paragraph of this resolution.
["ILLINOVA AVERAGE PRICE" MEANS THE MEAN AVERAGE OF THE CLOSING
PRICES ON THE NEW YORK STOCK EXCHANGE, INC. OF THE COMMON STOCK, NO PAR VALUE,
OF ILLINOVA CORPORATION OVER THE FIVE CONSECUTIVE TRADING DAYS ENDING ON THE
ELECTION DATE PURSUANT TO THE MERGER AGREEMENT, BY AND AMONG ILLINOVA
CORPORATION, THE CORPORATION, DYNEGY ACQUISITION COMPANY, ENERGY CONVERGENCE
ACQUISITION COMPANY AND DYNEGY INC., DATED JUNE 14, 1999.]
"Issue Date" means the date on which shares of Series A Preferred
Stock are first issued by the Corporation.
"Junior Stock" means, for purposes of Section 2, the Common Stock and
any other class or series of capital stock of the Corporation issued after the
Issue Date not entitled to receive any dividends in any Dividend Period,
unless all dividends required to have been paid or declared and set apart for
payment on the Series A Preferred Stock have been paid or declared and set
apart for payment and, for purposes of Section 3, the Common Stock and any
class or series of capital stock of the Corporation issued after the Issue
Date not entitled to receive any assets upon the liquidation, dissolution, or
winding up of the affairs of the Corporation until the Series A Preferred
Stock have received the entire amount to which such stock is entitled upon
such liquidation, dissolution, or winding up.
"Liquidation Date" is defined in Section 3.
"Liquidation Value" means $50.00 per share of Series A Preferred
Stock, plus any accrued but unpaid dividends thereon through the Liquidation
Date.
"Parity Stock" means, for purposes of Section 2, any other class or
series of capital stock of the Corporation issued after the Issue Date
entitled to receive payment of dividends on a parity with the Series A
Preferred Stock and, for purposes of Section 3, any other class or series of
capital stock of the Corporation issued after the Issue Date entitled to
receive assets upon the liquidation, dissolution, or winding up of the affairs
of the Corporation on a parity with the Series A Preferred Stock.
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"Record Date" means March 15, June 15, September 15, and December 15
of each year, or such other date as may be designated by the Board.
"Redemption Agent" is defined in Section 4(d).
"Redemption Date" is defined in Section 4(c).
"Redemption Price" means $50.00 per share of Series A Preferred
Stock, plus any accrued but unpaid dividends thereon through the Redemption
Date.
"Senior Stock" means for purposes of Section 2, any class or series
of capital stock of the Corporation issued after the Issue Date ranking senior
to the Series A Preferred Stock in respect of the right to receive dividends,
and, for purposes of Section 3, any class or series of capital stock of the
Corporation issued after the Issue Date ranking senior to the Series A
Preferred Stock in respect of the right to receive assets upon the
liquidation, dissolution, or winding up of the affairs of the Corporation.
"Series A Preferred Stock" is defined in the preamble to this
Article II.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
Senior Stock, the holders of Series A Preferred Stock are entitled to receive,
out of funds legally available for such purpose, cash dividends at the rate of
$3.00 per annum per share of Series A Preferred Stock, and no more. Such
dividends are cumulative from the Issue Date and are payable quarterly, in
arrears, when and as declared by the Board on each Dividend Payment Date
commencing on the first Dividend Payment Date after the Issue Date. Each such
dividend will be paid to the holders of record of the Series A Preferred Stock
as their names appear on the share register of the Corporation on the Record
Date immediately preceding each Dividend Payment Date. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on such
date as may be fixed by the Board.
(b) If full cash dividends are not paid or made available to
the holders of all outstanding shares of Series A Preferred Stock and any
Parity Stock, and funds available are insufficient to permit such payment to
all such holders of the preferential amounts to which they are then entitled,
the entire amount available for payment of cash dividends remaining after the
distributions to holders of any Senior Stock of the full amounts to which they
may be entitled will be distributed among the holders of the Series A
Preferred Stock and any Parity Stock ratably in proportion to the full amount
to which they would otherwise be respectively entitled, and any remainder not
paid to the holders of the Series A Preferred Stock will cumulate as provided
in Section 2(c).
(c) If, on any Dividend Payment Date, the holders of the
Series A Preferred Stock do not receive the full dividends provided for in
Section 2(a), then such dividends will cumulate, whether or not the
Corporation has earnings or profits, whether or not there are funds legally
available for payment of such dividends, and whether or not such dividends are
declared;
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provided, however, no additional dividends will be paid on or with respect to
any dividends that cumulate pursuant to this Section 2(c).
(d) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation will not, unless all dividends to which the
holders of Series A Preferred Stock are entitled for all previous Dividend
Periods have been paid or declared and a sum of money sufficient for the
payment thereof set apart, (i) declare or pay on any Junior Stock any dividend
or distribution whatsoever, whether in cash, property, or otherwise (other
than dividends payable in shares of the class or series upon which such
dividends are declared or paid, or payable in shares of Common Stock with
respect to Junior Stock other than Common Stock, together with cash in lieu of
fractional shares), (ii) purchase or redeem any Junior Stock, or (iii) pay or
make available any monies for a sinking fund for the purchase or redemption of
any Junior Stock.
(e) Whenever, at any time, accrued but unpaid dividends
should exceed $2.25 per share of outstanding Series A Preferred Stock, the
holders of the Series A Preferred Stock will have the option, voting
separately as a class with holders of shares of any one or more other series
of Parity Stock that would then be entitled to voting rights with the Series A
Preferred Stock to elect directors as a separate class, to elect two directors
to the Board at the Corporation's next annual meeting of its shareholders and
at each subsequent annual meeting of shareholders. At elections for such
directors, each holder of Series A Preferred Stock will be entitled to one
vote for each share held (the holders of shares of Parity Stock will be
entitled to such number of votes, if any, for each share held as may be
granted to the holders of such Parity Stock by the Corporation). Upon vesting
of such right of holders of Series A Preferred Stock, the authorized number of
directors constituting the Board will be increased (even if such increase
results in exceeding the maximum authorized number of directors), in
accordance with the Corporation's Articles of Incorporation and Bylaws, by
two, and the two vacancies so created will be filled by vote of the holders of
Series A Preferred Stock together with holders of Parity Stock, voting
together as a separate class. The right of holders of Series A Preferred
Stock, voting separately as a class with holders of Parity Stock, if
applicable, to elect two directors to the Board will continue until such time
as there are no longer any accrued but unpaid dividends on outstanding Series
A Preferred Stock, subject to revesting if accrued but unpaid dividends
exceed, at any time or times, $2.25 per share of outstanding Series A
Preferred Stock. Upon any termination of the right of the holders of Series A
Preferred Stock, voting separately as a class with holders of Parity Stock, if
applicable, to elect directors as provided herein, the term of office of the
directors elected by the holders of the Series A Preferred Stock, voting
separately as a class with holders of Parity Stock, if applicable, will
automatically terminate. If the office of any director elected by the holders
of Series A Preferred Stock, voting separately as a class with holders of
Parity Stock, if applicable, becomes vacant because of death, resignation,
retirement, disqualification, removal from office, or otherwise, the remaining
director elected by the holders of Series A Preferred Stock, voting separately
as a class with holders of Parity Stock, if applicable, will choose a
successor to hold office for the unexpired term in respect of which such
vacancy occurred. Whenever the term of office of the directors elected by the
holders of Series A Preferred Stock, voting separately as a class with holders
of Parity Stock, if applicable, ends and the special voting rights provided in
this Section 2(e) terminate, the number of directors constituting the Board
will be reduced by two.
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3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION, OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution, or other
winding up of the affairs of the Corporation, subject to the prior preferences
and other rights of any Senior Stock, but before any distributions or payments
are made to the holders of Junior Stock, the holders of the Series A Preferred
Stock will be entitled to be paid the Liquidation Value of all outstanding
shares of Series A Preferred Stock, as of the date of such liquidation or
dissolution or such other winding up (the "Liquidation Date"), and no more, in
cash or in property at its fair value as determined by the Board, or both, at
the election of the Board. If such payment is made in full to the holders of
the Series A Preferred Stock, and if payment is made in full to the holders of
any Senior Stock and Parity Stock of all amounts to which such holders will be
entitled, the remaining assets and funds of the Corporation will be
distributed among the holders of Junior Stock, according to their respective
shares and priorities. If, upon any such liquidation, dissolution, or other
winding up of the affairs of the Corporation, the assets of the Corporation
distributable among the holders of all outstanding shares of the Series A
Preferred Stock and any Parity Stock are insufficient to permit the payment in
full to such holders of the preferential amounts to which they are entitled,
then the entire assets of the Corporation remaining after the distributions to
holders of any Senior Stock of the full amounts to which they may be entitled
will be distributed among the holders of the Series A Preferred Stock and any
Parity Stock ratably in proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the consolidation or merger of the
Corporation into or with another entity or entities nor the sale of all or
substantially all of the assets of the Corporation to any person or persons
will be deemed a liquidation, dissolution, or winding up of the affairs of the
Corporation within the meaning of this Section 3, unless such consolidation,
merger, or sale of assets is in connection with the complete liquidation,
dissolution, or winding up of the affairs of the Corporation.
4. REDEMPTION BY THE CORPORATION.
(a) The Series A Preferred Stock may not be redeemed, in
whole or in part, prior to the third anniversary of the Issue Date. On and
after the third anniversary of the Issue Date, the Series A Preferred Stock
may be redeemed by the Corporation at any time and from time to time in, whole
or in part, at the option of the Corporation, at the Redemption Price.
(b) If less than all of the outstanding shares of the Series
A Preferred Stock are to be redeemed by the Corporation, such shares will be
redeemed pro rata as determined by the Board in its sole discretion.
(c) Notice of each proposed redemption of the Series A
Preferred Stock will be sent by or on behalf of the Corporation, by first
class mail, postage prepaid, to holders of record of the shares of Series A
Preferred Stock to be redeemed at such holders' addresses as they appear on
the records of the Corporation, not less than 30 days or more than 60 days
prior to the date fixed for redemption by the Corporation (the "Redemption
Date") (i) notifying such holders of the election of the Corporation to redeem
such shares of Series A Preferred Stock and the Redemption Date, (ii) stating
the date on which such shares of Series A Preferred Stock cease to be
convertible and the Conversion Price, (iii) stating the place or places at
which such shares of Series A Preferred Stock called for redemption will, upon
presentation and surrender of the certificate or certificates evidencing such
shares, be redeemed and the Redemption Price, and
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(iv) stating the name and address of the Redemption Agent selected in accordance
with Section 4(d).
(d) The Corporation may (i) act as the redemption agent or
(ii) appoint as its agent, for the purpose of acting as the Corporation's
redemption agent, a bank or trust company in good standing, organized under
the laws of the United States of America or any jurisdiction thereof and any
replacement thereof or successors thereto. The Corporation or such appointed
bank or trust company is hereinafter referred to as the "Redemption Agent."
Following such appointment, if any, and prior to any redemption, the
Corporation will deliver to the Redemption Agent irrevocable written
instructions authorizing the Redemption Agent, on behalf and at the expense of
the Corporation, to cause a notice of redemption to be duly mailed in
accordance with Section 4(c), as soon as practicable after receipt of such
irrevocable instructions. All funds necessary for the redemption will be
deposited with the Redemption Agent, in trust, at least two business days
prior to the Redemption Date, for the pro rata benefit of the holders of the
shares of Series A Preferred Stock called for redemption. Neither failure to
mail any such notice to one or more holders of Series A Preferred Stock nor
any defect in any notice will affect the sufficiency of the proceedings for
redemption as to other holders of Series A Preferred Stock.
(e) If notice of redemption is given in accordance with
Section 4(e) and the Corporation is not in default in the payment of the
Redemption Price, then each holder of shares of Series A Preferred Stock
called for redemption is entitled to all preferences and relative and other
rights accorded by this resolution until and including the date prior to the
Redemption Date. If the Corporation defaults in making payment on the
Redemption Date, then each holder of the shares of Series A Preferred Stock
called for redemption is entitled to all preferences and relative and other
rights accorded by this resolution until and including the date prior to the
date when the Corporation makes payment to the holders of the Series A
Preferred Stock (the "Final Redemption Date"). From and after the Redemption
Date, the shares of Series A Preferred Stock called for redemption will no
longer be deemed to be outstanding and all rights of the holders of such
shares of Series A Preferred Stock will cease and terminate, except the right
of the holders of such shares of Series A Preferred Stock, upon surrender of
the certificate or certificates therefor, to receive the Redemption Price. The
deposit of monies in trust with the Redemption Agent by the Corporation will
be irrevocable, except that the Corporation will be entitled to receive from
the Redemption Agent the interest or other earnings, if any, earned on any
monies so deposited in trust, and the holders of any shares of Series A
Preferred Stock redeemed will have no claim to such interest or other
earnings. Any balance of monies so deposited by the Corporation and unclaimed
by the holders of the Series A Preferred Stock entitled thereto at the
expiration of one year from the Redemption Date (or the Final Redemption Date,
as applicable) will be repaid, together with any interest or other earnings
thereon, to the Corporation, and after any such repayment, the holders of the
shares of Series A Preferred Stock entitled to the funds so repaid to the
Corporation will look only to the Corporation for payment of the Redemption
Price, without interest.
5. CONVERSION RIGHTS. The Series A Preferred Stock will be
convertible into Class A Common Stock as follows:
(a) Conversion. Subject to and upon compliance with the
provisions of this Section 5, the holder of any shares of Series A Preferred
Stock will have the right at such
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holder's option, at any time or from time to time, to convert any of such shares
of Series A Preferred Stock into fully paid and nonassessable shares of Class A
Common Stock at the Conversion Price in effect on the Conversion Date. With
respect to any share of Series A Preferred Stock called for redemption, the
right of conversion described in this Section 5 will terminate at the close of
business on the day prior to the Redemption Date or, if the Corporation defaults
in the payment of the Redemption Price, at the close of business on the day
prior to the Final Redemption Date.
(b) Conversion Price. Each share of Series A Preferred Stock
will be converted into a number of shares of Class A Common Stock determined
by dividing (i) the Liquidation Value by (ii) the Conversion Price in effect
on the Conversion Date. The Conversion Price at which shares of Class A Common
Stock will initially be issuable upon conversion of the shares of Series A
Preferred Stock will be [(I) THE ILLINOVA AVERAGE PRICE TIMES 1.22 IF THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED INVESTMENT GRADE OR (II) IF THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED LESS THAN INVESTMENT GRADE THAT
MULTIPLE (NOT TO EXCEED 1.18) RESULTING IN THE FAIR MARKET VALUE OF THE SERIES
A PREFERRED STOCK BEING EQUAL TO THE LIQUIDATION VALUE UPON ISSUANCE, UPON
WHICH LEHMAN BROTHERS, INC., CHASE SECURITIES, INC., MERRILL LYNCH & COMPANY,
INC., MORGAN STANLEY & CO., INC., AND GOLDMAN SACHS INTERNATIONAL AGREE BASED ON
GOOD FAITH NEGOTIATIONS; PROVIDED THAT IF SUCH INVESTMENT BANKS CANNOT AGREE
ON THE APPROPRIATE MULTIPLE, THEN THEY SHALL CHOOSE A SIXTH INVESTMENT BANK
WHOSE DETERMINATION SHALL BE BINDING. THE DETERMINATION OF WHETHER THE
CORPORATION'S UNSECURED SENIOR DEBT IS RATED INVESTMENT GRADE OR LOWER WILL BE
BASED ON THE STATED INTENTION OF AT LEAST TWO OF THE FOLLOWING THREE RATING
AGENCIES IN CONNECTION WITH THE CORPORATION'S PROPOSED CREDIT RATING AFTER THE
CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER,
DATED JUNE 14, 1999, BY AND AMONG THE CORPORATION, DYNEGY INC., ILLINOVA
CORPORATION, DYNEGY ACQUISITION CORPORATION AND ENERGY CONVERGENCE ACQUISITION
CORPORATION: STANDARD & POORS, MOODY'S INVESTOR SERVICES AND DUFF & PHELPS.]
The Conversion Price will be subject to adjustment as set forth in Section 5(e).
No dividends will accrue or be paid on Series A Preferred Stock subsequent to
conversion.
(c) Mechanics of Conversion. The holder of any shares of
Series A Preferred Stock may exercise the conversion right specified in
Section 5(a) by surrendering to the Corporation or the transfer agent of the
Corporation the certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to be converted;
provided, however, that the Corporation will not be obligated to issue to any
such holder the certificate or certificates evidencing the shares of Class A
Common Stock issuable upon such conversion, unless the certificate or
certificates evidencing the shares of Series A Preferred Stock are either
delivered to the Corporation or the transfer agent of the Corporation.
Conversion will be deemed to have been effected on the date when delivery is
made of notice of an election to convert and the certificate or certificates
evidencing the Series A Preferred Stock shares to be converted (the
"Conversion Date"). Subject to the provisions of Section 5(e)(iv), as promptly
as practicable thereafter, the Corporation will issue and deliver to or upon
the written order of such holder a certificate or certificates for the number
of full shares of Class A Common Stock to which such holder is entitled and a
check or cash with respect to any fractional interest in a share of Class A
Common Stock as provided in Section 5(d). Subject to the provisions of Section
5(e)(iv), the person in whose name the certificate or certificates for shares
of Class A Common
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Stock are to be issued will be deemed to have become a holder of record of
such Class A Common Stock on the applicable Conversion Date. Upon conversion
of only a portion of the number of shares covered by a certificate
representing shares of Series A Preferred Stock surrendered for conversion,
the Corporation will issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Series A
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(d) Fractional Shares. No fractional shares of Class A
Common Stock or scrip will be issued upon conversion of shares of Series A
Preferred Stock. If more than one share of Series A Preferred Stock is
surrendered for conversion at any one time by the same holder, the number of
full shares of Class A Common Stock issuable upon conversion thereof will be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional shares of Class A Common Stock
which would otherwise be issuable upon conversion of any shares of Series A
Preferred Stock, the Corporation will pay a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest based on
the fair market value of the Class A Common Stock determined by the
Corporation in its sole discretion.
(e) Conversion Price Adjustments. The Conversion Price will
be subject to adjustment from time to time as follows:
(i) Stock Dividends, Subdivisions,
Reclassifications, or Combinations. If the Corporation (i) declares a
dividend or makes a distribution on its Class A Common Stock in shares of its
Class A Common Stock, (ii) subdivides or reclassifies the outstanding shares of
Class A Common Stock into a greater number of shares, or (iii) combines or
reclassifies the outstanding Class A Common Stock into a smaller number of
shares, the Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision, combination,
or reclassification will be proportionately adjusted so that the holder of any
shares of Series A Preferred Stock surrendered for conversion after such date
will be entitled to receive the number of shares of Class A Common Stock which
such holder would have owned or been entitled to receive had such Series A
Preferred Stock been converted immediately prior to such date. Successive
adjustments in the Conversion Price will be made whenever any of the foregoing
events occur.
(ii) Consolidation, Merger, Sale, Lease or
Conveyance. In case of any consolidation with or merger of the Corporation with
or into another entity, or in case of any sale, lease, or conveyance to another
person of the assets of the Corporation as an entirety or substantially as an
entirety, each share of Series A Preferred Stock will be convertible, after the
date of such consolidation, merger, sale, lease, or conveyance, into the number
of shares of stock or other securities or property (including cash) to which the
Class A Common Stock issuable (at the time of such consolidation, merger, sale,
lease, or conveyance) upon conversion of a share of Series A Preferred Stock
would have been entitled upon such consolidation, merger, sale, lease, or
conveyance; and in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of the holders of
the shares of Series A Preferred Stock will be appropriately adjusted so as to
be applicable, as nearly as may reasonably be, to any shares of
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stock or other securities or property thereafter deliverable on the conversion
of the shares of Series A Preferred Stock.
(iii) Rounding of Calculations; Minimum
Adjustment. All calculations under this Section 5(e) will be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the case
may be. Any provision of this Section 5 to the contrary notwithstanding, no
adjustment in the Conversion Price will be made if the amount of such adjustment
would be less than $0.05, but any such amount will be carried forward and an
adjustment with respect thereto will be made at the time of and together with
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, will aggregate $0.05 or more.
(iv) Timing of Issuance of Additional Class A
Common Stock Upon Certain Adjustments. In any case in which the provisions of
this Section 5(e) requires that an adjustment be made, such adjustment will
become effective immediately after a record date for an event. The Corporation
may defer, until the occurrence of such event, (A) issuing to the holder of any
share of Series A Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Class A Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the shares of Class A Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any amount
of cash in lieu of a fractional share of Class A Common Stock pursuant to
Section 5(d); provided, however, that the Corporation upon request will deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares and such cash, upon the
occurrence of the event requiring such adjustment.
(f) Statement Regarding Adjustments. Whenever the Conversion
Price is adjusted as provided in Section 5(e), the Corporation will file, at
the office of any transfer agent for the Series A Preferred Stock and at the
principal office of the Corporation, a statement showing in detail the facts
requiring such adjustment and the Conversion Price in effect after such
adjustment, and the Corporation will also cause a copy of such statement to be
sent by mail, first class postage prepaid, to each holder of shares of Series
A Preferred Stock at such holders address appearing on the Corporation's
records. Each such statement will be signed by the Corporation's independent
public accountants, if applicable. Where appropriate, such copy may be given
in advance and may be included as part of a notice required to be mailed under
the provisions of Section 5(g).
(g) Conditional Conversion. If it is proposed that a
registration of Common Stock is intended to be filed, except on Form S-4 or
S-8 (or any successor forms), which includes the secondary registration on
behalf of holders of Common Stock, the Corporation will notify the holders of
Series A Preferred Stock of such proposed registration and such holders may
conditionally exercise their right to convert any or all of such shares of
Series A Preferred Stock so held in accordance with this Section 5 and
participate in such proposed registration in accordance with the registration
rights granted to such holder by the Corporation, if any. If such registration
is not declared effective or is withdrawn, any conditional exercise pursuant
to this Section 5(g) will be null and void ab initio. Only the number of
shares of Class A Common Stock conditionally converted pursuant to this
Section 5(g) that are actually sold under an
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effective registration statement will be deemed converted pursuant to Section
5(a) and the conditional conversion of such shares will be null and void ab
initio upon the termination of the offering under such registration statement.
(h) Notice to Holders. If the Corporation proposes to take
any action of the type described in Section 5(e)(i) or (ii), the Corporation
will give notice to each holder of shares of Series A Preferred Stock, in the
manner set forth in Section 5(f), which notice will specify the record date,
if any, with respect to any such action and the approximate date on which such
action is to take place. Such notice will also set forth such facts with
respect thereto as will be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind, or class of shares or other
securities or property which will be deliverable upon conversion of shares of
Series A Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice will be given at least ten days prior to
the date so fixed, and in case of all other action, such notice will be given
at least 15 days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, will not affect the legality or validity
of any such action.
(i) Costs. The Corporation will pay all documentary, stamp,
transfer, or other transactional taxes attributable to the issuance or
delivery of shares of Class A Common Stock upon conversion of any shares of
Series A Preferred Stock; provided, however, that the Corporation will not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the shares of Series A Preferred Stock
in respect of which such shares are being issued.
(j) Reservation of Shares. The Corporation will reserve at
all times so long as any shares of Series A Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock (if
applicable) or its authorized but unissued shares of Class A Common Stock, or
both, solely for the purpose of effecting the conversion of the shares of
Series A Preferred Stock, sufficient shares of Class A Common Stock to provide
for the conversion of all outstanding shares of Series A Preferred Stock.
(k) Valid Issuance. All shares of Class A Common Stock which
may be issued upon conversion of the shares of Series A Preferred Stock will,
upon issuance by the Corporation, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens, and charges with respect to the
issuance thereof, and the Corporation will take no action which will cause a
contrary result (including, without limitation, any action which would cause
the Conversion Price to be less than the par value, if any, of the Class A
Common Stock).
6. VOTING RIGHTS. If the holders of shares of Series A Preferred
Stock have the right to vote separately as a class pursuant to Section 2(e) or
the IBCA, such holders will be entitled to one vote for each such share so
held. In all other cases, the holders of shares of Series A Preferred Stock
will be entitled to vote upon all matters upon which holders of the Class A
Common Stock have the right to vote, and will be entitled to the number of
votes equal to [1.22] [OR IF THE FACTOR DETERMINED IN ACCORDANCE WITH SECTION
5(B) IS DIFFERENT, THEN SUCH FACTOR] times the number of whole shares of Class
A Common Stock into which such shares of Series A
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Preferred Stock could be converted pursuant to the provisions of Section 5 at
the record date for the determination of the stockholders entitled to vote on
such matters, or, if no such record date is established, at the date such vote
is taken or any written consent of stockholders is solicited, such votes to be
counted together with all other shares of capital stock having general voting
powers and not separately as a class.
7. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series A Preferred Stock will not have any preferences or
relative, participating, optional, or other special rights, other than those
specifically set forth in this Statement of Resolution. The shares of Series A
Preferred Stock will have no preemptive or subscription rights.
8. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and will not affect the
interpretation of any of the provisions hereof.
9. SEVERABILITY OF PROVISIONS. If any right, preference, or
limitation of the Series A Preferred Stock set forth in this resolution (as
such resolution may be amended from time to time) is invalid, unlawful, or
incapable of being enforced by reason of any rule of law or public policy, all
other rights, preferences, and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference, or limitation will, nevertheless, remain in
full force and effect, and no right, preference, or limitation herein set
forth will be deemed dependent upon any other such right, preference, or
limitation unless so expressed herein.
10. STATUS OF REACQUIRED SHARES. Shares of Series A Preferred Stock
which have been issued and reacquired in any manner will (upon compliance with
any applicable provisions of the laws of the State of Illinois) have the
status of authorized and unissued shares of Series A Preferred Stock issuable
in series undesignated as to series and may be redesignated and reissued.
11. ISSUANCE OF ADDITIONAL SECURITIES. Nothing contained herein will
be deemed to any way prohibit, restrict, or inhibit the ability of the
Corporation to designate and/or issue additional securities of any kind,
including, without limitation, shares of Parity Stock or Junior Stock;
provided that, the Corporation may not designate and/or issue any shares of
Senior Stock without the consent of a majority of the shares of Series A
Preferred Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
11
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The Corporation has caused this statement to be signed by its duly
authorized officers, each of whom affirms, under penalties of perjury, that
the facts stated herein are true.
Date:
----------------------- ENERGY CONVERGENCE HOLDING COMPANY
By:
-------------------------------
---------------------,President
Attested By:
----------------------
-----------, Secretary
108
EXHIBIT 8.17
FORM OF AFFILIATE AGREEMENT
Newco
[_______________]
[_______________]
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger (the "MERGER
AGREEMENT") dated as of June 14, 1999 among Illinova Corporation, an Illinois
corporation ("ILLINOVA"), Energy Convergence Holding Company, an Illinois
corporation ("NEWCO"), Dynegy Acquisition Corporation, a Delaware corporation,
and a wholly owned subsidiary of Newco ("DAC"), Energy Convergence Acquisition
Corporation, an Illinois corporation, and a wholly owned subsidiary of Newco
("IAC"), and Dynegy Inc., a Delaware corporation ("DYNEGY"), pursuant to which
DAC will be merged with and into Dynegy, and IAC will be merged with and into
Illinova.
Pursuant to the terms and conditions of the Merger Agreement,
[THE UNDERSIGNED HEREBY AGREES THAT IT WILL MAKE OR CAUSE TO BE MADE AN
ELECTION PURSUANT TO SECTION 4.1(d) OF THE MERGER AGREEMENT TO RECEIVE STOCK
ELECTION SHARES (AS DEFINED IN THE MERGER AGREEMENT) AND THAT UPON CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED THEREBY, EACH SHARE OF COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF DYNEGY OWNED BY THE UNDERSIGNED AS OF THE EFFECTIVE TIME (AS
DEFINED IN THE MERGER AGREEMENT) WILL BE CONVERTED INTO AND EXCHANGEABLE FOR
CERTAIN SECURITIES OF NEWCO.]
[THE UNDERSIGNED HEREBY AGREES THAT IT WILL MAKE OR CAUSE TO BE MADE AN
ELECTION PURSUANT TO SECTION 4.1(d) OF THE MERGER AGREEMENT TO RECEIVE CASH
ELECTION SHARES (AS DEFINED IN THE MERGER AGREEMENT) AND THAT UPON CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED THEREBY, EACH SHARE OF COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF DYNEGY OWNED BY THE UNDERSIGNED AS OF THE EFFECTIVE TIME (AS
DEFINED IN THE MERGER AGREEMENT) WILL BE CONVERTED INTO AND EXCHANGEABLE FOR
CASH AND CERTAIN SECURITIES OF NEWCO.]
[EACH SHARE OF COMMON STOCK, NO PAR VALUE, OF ILLINOVA OWNED BY THE
UNDERSIGNED AS OF THE EFFECTIVE TIME WILL BE CONVERTED INTO AND EXCHANGEABLE
INTO ONE SHARE OF NEWCO COMMON STOCK, NO PAR VALUE.]
The undersigned understands that it may be deemed to be an "affiliate"
of Dynegy or Illinova for purposes of Rule 145 promulgated under the Securities
Act of 1933, as amended (the "ACT"). The undersigned is delivering this letter
of undertaking and commitment pursuant to Section 8.17 of the Merger Agreement.
With respect to such securities of Newco as may be received by the
undersigned pursuant to the Merger Agreement (the "SHARES"), the undersigned
represents to and agrees with Newco that:
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A. The undersigned will not make any offer to sell or any sale
or other disposition of all or any part of the Shares in violation of
the Act or the rules and regulations thereunder, including Rule 145,
and will hold all the Shares subject to all applicable provisions of
the Act and the rules and regulations thereunder.
B. The undersigned has been advised that the offering, sale
and delivery of the Shares to the undersigned pursuant to the Merger
Agreement will be registered under the Act on a Registration Statement
on Form S-4. The undersigned has also been advised, however, that,
since the undersigned may be deemed an "affiliate" of Dynegy or
Illinova, any public reoffering or resale by the undersigned of any of
the Shares will, under current law, require either (i) the further
registration under the Act of the Shares to be sold, (ii) compliance
with Rule 145 promulgated under the Act (permitting limited sales under
certain circumstances) or (iii) the availability of another exemption
from registration under the Act.
C. The undersigned also understands that, if Newco should deem
it necessary to comply with the requirements of the Act, stop transfer
instructions will be given to its transfer agents with respect to the
Shares and that there will be placed on the certificates for the
Shares, or any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate were issued in
a transaction under Rule 145 promulgated under the Securities
Act of 1933, as amended (the "ACT"), and may be sold,
transferred or otherwise disposed of only upon receipt by the
Corporation of an opinion of counsel acceptable to it that the
securities are being sold in compliance with the limitations
of Rule 145 or that some other exemption from registration
under the Act is available, or pursuant to a registration
statement under the Act."
Execution of this letter shall not be considered an admission on the
part of the undersigned that the undersigned is an "affiliate" of Dynegy or
Illinova for purposes of Rule 145 under the Act or as a waiver of any rights the
undersigned may have to any claim that the undersigned is not such an affiliate
on or after the date of this letter.
Very truly yours,
-----------------------------------------
Signature
-----------------------------------------
Name
-----------------------------------------
Date
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