Exhibit 10.5
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT, dated as of
August 11, 2003 (the "Agreement"), among
DYNEGY INC., an Illinois corporation,
DYNEGY HOLDINGS INC., a Delaware
corporation ("DHI," and together with
Dynegy Inc., "Dynegy"), and CHEVRON
U.S.A. INC., a Pennsylvania corporation
("Chevron").
WHEREAS, Dynegy Inc. and Chevron have entered into the Series B Preferred
Stock Exchange Agreement dated as of July 28, 2003 (the "Exchange Agreement");
WHEREAS, in connection with the transactions contemplated by a proposed
refinancing plan, (i) Dynegy Inc. is offering to sell convertible debentures to
certain qualified institutional buyers, (ii) DHI, a wholly owned subsidiary of
Dynegy, is offering to sell senior second-priority secured notes to certain
qualified institutional buyers, and (iii) DHI is making a tender offer for
certain senior notes previously issued by DHI; and
WHEREAS, Dynegy and/or DHI have distributed (i) a preliminary confidential
offering circular dated July 25, 2003 and a confidential offering circular dated
August 1, 2003 relating to DHI's second-priority senior secured notes ($1.45
billion aggregate principal amount) (the "Notes Offering Memorandum"), (ii) a
preliminary confidential offering circular dated July 25, 2003 and a
confidential offering circular dated August 1, 2003 relating to Dynegy's
convertible subordinated debentures ($175 million to $225 million aggregate
principal amount) (the "Debenture Offering Memorandum"), and (iii) Offer to
Purchase and Consent Solicitation Statement, dated July 14, 2003, and related
ancillary documents to holders of its outstanding senior notes in connection
with the tender offer (as such documents may be amended, modified or
supplemented, the "Tender Documents");
WHEREAS, as described in the Debenture Offering Memorandum, Dynegy will be
entering into a registration rights agreement with respect to the securities to
be offered pursuant to the Debenture Offering Memorandum (the "Registration
Rights Agreement"); and
WHEREAS, in furtherance of its obligations under the Registration Rights
Agreement, Dynegy will file a registration statement covering resales of the
debentures (and the common stock issuable upon conversion thereof) (as described
in the Debenture Offering Memorandum) and, in connection with such registration
statement filing ("Post-Offering 1934 Act Action"), Dynegy shall prepare certain
prospectuses (preliminary, subject to completion and/or final), and supplements
to prospectuses (collectively, the "Prospectuses," and together with the Notes
Offering Memorandum, the Debenture Offering Memorandum, all information
disclosed in connection with the Post-Offering 1934 Act Action, and all
information deemed part of any Prospectus, the Notes Offering Memorandum, and
the Debenture Offering Memorandum by incorporation by reference, collectively,
the "Disclosure Material").
NOW, THEREFORE, in consideration of the premises and of the mutual consents
and obligations hereinafter and elsewhere set forth, the parties hereto hereby
agree as follows:
Section 1. Definitions.
(a) Capitalized terms used but not defined herein have the meanings
ascribed to them in the Exchange Agreement, which is incorporated herein by
reference.
(b) As used herein, the following terms shall have the following respective
meanings:
"Agreement" shall have the meaning ascribed to it in the preamble to this
Agreement.
"Chevron" shall have the meaning ascribed to it in the preamble to this
Agreement.
"CUSA Registration Rights Agreements" shall mean the Amended and Restated
Registration Rights Agreement, the Exchange and Registration Rights Agreement
(Notes) and the Exchange and Registration Rights Agreement (Preferred Stock).
"Damages" means any and all losses, claims, damages or liabilities (or any
action in respect thereof).
"Debenture Offering Memorandum" shall have the meaning ascribed to it in
the recitals to this Agreement.
"DHI" shall have the meaning ascribed to it in the preamble to this
Agreement.
"Disclosure Material" shall have the meaning ascribed to it in the recitals
to this Agreement.
"Dynegy" shall have the meaning ascribed to it in the preamble to this
Agreement.
"Exchange Agreement" shall have the meaning ascribed to it in the recitals
to this Agreement.
"Indemnified Parties" means (i) Chevron, (ii) its Affiliates and (iii)
their respective officers and directors and each person, if any, who controls
CUSA or any of its Affiliates within the meaning of the Securities Act.
"Notes Offering Memorandum" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Post-Offering 1934 Act Action" shall have the meaning ascribed to it in
the recitals to this Agreement.
"Prospectuses" shall have the meaning ascribed to it in the recitals to
this Agreement.
"Registration Rights Agreement" shall have the meaning ascribed to it in
the recitals to this Agreement.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Signatories" means Dynegy Inc., DHI and CUSA.
"Tender Documents" shall have the meaning ascribed to it in the recitals to
this Agreement.
Section 2. Indemnification.
(a) Subject to Section 2(b) below, from and after the date hereof, Dynegy
shall indemnify, defend and hold harmless each of the Indemnified Parties from
and against all Damages asserted against, relating to, or imposed upon or
incurred by reason of, or resulting from, any untrue or alleged untrue statement
of a material fact contained in the Disclosure Material or any omission or
alleged omission to state therein 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, except insofar as the same may be caused
by or contained in any information furnished in writing to Dynegy specifically
for inclusion in the Disclosure Material by such Indemnified Party for use
therein; provided, however, that (I) Dynegy shall not be liable in any such case
to the extent that any such Damages arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the preliminary or final Disclosure Material if the preliminary or final
Disclosure Material or a supplement or amendment thereto completely corrected in
a timely manner such untrue statement or omission; and (II) Dynegy shall not be
liable in any such case to the extent that any such Damages arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the preliminary or final Disclosure Material, if such untrue
statement or alleged untrue statement, omission or alleged omission is
completely corrected in a timely manner in an amendment or supplement to the
preliminary or final Disclosure Material.
(b) Limitation on Indemnification. Notwithstanding anything to the
contrary, in no event shall any Indemnified Party be entitled to indemnification
by Dynegy if Damages for which such Indemnified Party seeks indemnification
arise out of or are otherwise based upon acts or omissions by such Indemnified
Party not in good faith or which involve gross negligence, intentional
misconduct or illegal conduct, including, but not limited to, fraud; provided,
however, the limitation expressed in this Section 2(b) shall not limit an
Indemnified Party where the lack of good faith, gross negligence, intentional
misconduct, illegal conduct or fraud is imputed to the Indemnified Party by
virtue of its relationship to Dynegy or to any of Dynegy's Affiliates.
(c) Conduct of Indemnification Proceedings. Any Indemnified Party entitled
to indemnification hereunder will (i) give prompt (but in any event within
thirty (30) days after such Indemnified Party has actual knowledge of the facts
constituting the basis for indemnification) written notice to Dynegy of any
claim with respect to which it seeks indemnification and (ii) permit Dynegy to
assume the defense of such claim with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that any delay or failure to so notify
Dynegy shall not relieve Dynegy of any and all of its obligations hereunder
except to the extent Dynegy is materially prejudiced as a result thereof and in
any event shall not relieve it from any liability which it may have otherwise
than on account of this Agreement; provided further, however, that any
Indemnified Party entitled to indemnification hereunder shall have the
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right to select and employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (a) Dynegy has agreed in writing to pay such fees
or expenses, (b) Dynegy shall have failed to assume the defense of such claim
within a reasonable time after receipt of notice of such claim from the
Indemnified Party entitled to indemnification hereunder and employ counsel
reasonably satisfactory to such Indemnified Party or (c) in the reasonable
judgment of any such Indemnified Party, based upon advice of counsel, one or
more legal defenses may be available to such Indemnified Party which are
different from or additional to those available to Dynegy (and, furthermore, in
the reasonable judgment of such counsel it is advisable for such Indemnified
Party to employ separate counsel) (in which case, if the Indemnified Party
notifies Dynegy in writing that such Indemnified Party elects to employ separate
counsel at the expense of Dynegy, Dynegy shall not have the right to assume the
defense of such claim on behalf of such Indemnified Party). The Indemnified
Party shall provide Dynegy with the access to its records and personnel relating
to any claim with respect to which it seeks indemnification and shall otherwise
reasonably cooperate with Dynegy in the defense or settlement thereof. If such
defense is not assumed by Dynegy, Dynegy will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). An Indemnified Party shall not be required to consent to
any settlement involving the imposition of equitable remedies or involving the
imposition of any material obligations on such Indemnified Party other than
financial obligations for which such Indemnified Party will be indemnified
hereunder. Neither Dynegy nor an Indemnified Party will be required to consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Whenever the Indemnified Party or Dynegy receives a firm offer to
settle a claim for which indemnification is sought hereunder, it shall promptly
notify the other of such offer. If Dynegy refuses to accept such offer within
twenty (20) business days after receipt of such offer (or of notice thereof),
such claim shall continue to be contested and, if such claim is within the scope
of Dynegy's indemnity contained herein, the Indemnified Party shall be
indemnified pursuant to the terms hereof. If Dynegy notifies the Indemnified
Party in writing that Dynegy desires to accept such offer, but the Indemnified
Party refuses to accept such offer within twenty (20) business days after
receipt of such notice, the Indemnified Party may continue to contest such claim
and, in such event, the total maximum liability of Dynegy to indemnify or
otherwise reimburse the Indemnified Party hereunder with respect to such claim
shall be limited to and shall not exceed the amount of such offer, plus
reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and disbursements) to the date of notice that Dynegy desires to accept such
offer, provided that this sentence shall not apply to any settlement of any
claim involving the imposition of equitable remedies, to any settlement imposing
any material obligations on such indemnified party other than financial
obligations for which such Indemnified Party will be indemnified hereunder, or
to any settlement which does not include as an unconditional term thereof the
giving by the claimant or Plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
(d) Contribution. If for any reason the indemnification provided for in
this Section 2 is determined to be unavailable to any Indemnified Party or
insufficient to hold any Indemnified Party harmless as contemplated by this
Section 2, then Dynegy shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damage in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party and
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Dynegy, but also the relative fault of such Indemnified Party and Dynegy, as
well as any other relevant equitable considerations. No Indemnified Party guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution.
(e) Exclusive Remedy. Each of Dynegy and the Indemnified Parties agree that
the sole and exclusive remedy of each of Dynegy and the Indemnified Parties,
with respect to any and all Damages asserted against, resulting to, or imposed
upon or incurred by reason of, or resulting from, any untrue or alleged untrue
statement of a material fact contained in the preliminary or final Disclosure
Material or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, shall be limited to the indemnification provisions set forth in this
Agreement; provided, however, that nothing in the foregoing limitation shall
limit in any manner (i) the rights of any officer or director of CUSA or any of
its Affiliates under the Dynegy Articles of Incorporation and Dynegy Bylaws by
virtue of such officer or director also being a past or present director of
Dynegy, and (ii) the rights that any Indemnified Party may have under the CUSA
Registration Rights Agreements (it being agreed that rights arising under, or by
virtue of, the CUSA Registration Rights Agreements shall, as to any untrue or
alleged untrue statement or omission and to the extent of such rights, take
precedence over this Agreement).
(f) Reimbursement. Dynegy shall reimburse each Indemnified Party promptly
after receipt of invoices from such Indemnified Party for any legal and other
expenses as reasonably incurred by such Indemnified Party in connection with
investigating, preparing to defend or defending against or appearing as a third
party witness in connection with any Damage for which indemnification may be
sought under this Section 2; reimbursement shall be made notwithstanding the
possibility that payments for such expenses might later be held to be improper,
in which case such payments shall be promptly refunded to Dynegy.
Section 3. Miscellaneous Provisions.
(a) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(b) Waivers. The Signatories may (i) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a Signatory to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such Signatory.
(c) Amendment. This Agreement may be modified, supplemented or amended only
by a written instrument executed by each Signatory.
(d) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to its subject matter, and supersedes all prior
agreements and understandings of the parties hereto, oral and written, with
respect to its subject matter.
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(e) Headings. The headings contained in this Agreement are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
(f) Successors/Assigns. Except as set forth in this Agreement, no party
hereto may transfer or assign, directly or indirectly, by operation of law or
otherwise, any of its rights or obligations hereunder without the prior written
consent of the other party hereto, and any purported transfer or assignment that
does not comply with this subsection shall be null and void ab initio.
(g) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns and other Persons expressly named
herein (it being understood that each of the Indemnified Parties is an intended
third party beneficiary hereunder and shall be entitled to enforce this
Agreement as if a party hereto).
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws provisions thereof.
(i) Nature of Obligations. The obligations and liabilities of Dynegy Inc.
and DHI hereunder are joint and several.
(j) Interpretation. In construing this Agreement, no consideration shall be
given to the fact or presumption that either party hereto had a greater or
lesser hand in drafting this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnity
Agreement on the date first above written.
DYNEGY INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President and CEO
DYNEGY HOLDINGS INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President and CEO
CHEVRON U.S.A. INC.
By: /s/ Xxxxx Xxxxx
-----------------------------------
Name: Xxxxx Xxxxx
Title: Vice President and Secretary
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