Exhibit 99.1
SETTLEMENT AGREEMENT AMONG DYNEGY INC., DYNEGY HOLDINGS INC., CGNN
HOLDING COMPANY, INC. AND MCTJ HOLDING CO. LLC.
This settlement agreement (the "MCTJ/CGNN Settlement Agreement") is
entered into as of the 3rd day of January 2002 by and among Dynegy Inc.
("Dynegy"), Dynegy Holdings Inc. ("Dynegy Holdings"), CGNN Holding Company, Inc.
("CGNN"), and MCTJ Holding Co. LLC ("MCTJ").
RECITALS
WHEREAS, by an Option Agreement dated as of November 9, 2001, as
amended by an Amendment to Option Agreement, dated as of November 19, 2001 (as
amended, the "Option Agreement," attached as Exhibits A and B hereto), Dynegy
Holdings contracted with CGNN and others for an option (the "Option") to
purchase from CGNN all of the outstanding membership interests in MCTJ;
WHEREAS, Dynegy acquired 100% of the preferred stock of Northern
Natural Gas Company ("NNGC");
WHEREAS, concurrently with the Option Agreement, by a Purchase
Option Agreement, dated as of November 9, 2001, as amended by the Amendment to
Purchase Option Agreement, dated as of November 19, 2001 (as amended, the
"Purchase Option Agreement," attached as Exhibits C and D hereto), CGNN and
others contracted with Dynegy and Dynegy Holdings for an option to repurchase
all of the outstanding membership interests in MCTJ and 100% of the preferred
stock of NNGC (the "Purchase Option");
WHEREAS, Dynegy gave Enron notice on November 28, 2001 that it was
terminating the Merger Agreement pursuant to section 9.4(a) and, immediately
thereafter, Dynegy Holdings gave notice to CGNN that it was exercising the
Option under
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section 2.5.1.4 of the Option Agreement to purchase all of the outstanding
membership interests of MCTJ;
WHEREAS, on December 10, 2001, Dynegy Holdings gave notice to CGNN
that it was exercising the Option under section 2.5.1.5 of the Option Agreement
to purchase all of the outstanding membership interests of MCTJ;
WHEREAS, a dispute has arisen among Dynegy, Dynegy Holdings, CGNN,
MCTJ, Enron Corp. ("Enron"), and Enron Transportation Services Co. ("Enron
Transportation") regarding Dynegy Holdings' right to exercise the Option under
the Option Agreement (the "Dispute");
WHEREAS, claims were brought in an adversary proceeding styled
Adversary Proceeding No. 01-03626, Case No. 01-16034 (AJG) (Chapter 11), ENRON
CORP., ENRON TRANSPORTATION SERVICES CO., CGNN HOLDING COMPANY, INC., AND MCTJ
HOLDING CO. LLC V. DYNEGY INC. AND DYNEGY HOLDINGS INC., in the United States
Bankruptcy Court for the Southern District of New York (the "Adversary
Proceeding") seeking, among other things, a declaration that Dynegy Holdings had
no right to exercise the Option provided by the Option Agreement; and
WHEREAS, Dynegy and Dynegy Holdings brought a suit styled Cause No.
2001-61378; DYNEGY INC. AND DYNEGY HOLDINGS, INC. VS. CGNN HOLDING COMPANY, INC.
AND MCTJ HOLDING CO. LLC, in the 333rd Judicial District Court of Xxxxxx County,
Texas (the "Texas Suit") alleging that CGNN and MCTJ wrongfully breached the
Option Agreement and seeking, among other things, specific performance and
temporary injunctive relief;
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NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby is acknowledged, the undersigned hereby agree as
follows:
1. The undersigned agree to take all steps necessary for a closing, as
defined and provided for in the Option Agreement, and the delivery at said
closing of all outstanding membership interests in MCTJ pursuant to the terms of
the Option Agreement. The undersigned agree that the Closing will occur as soon
as reasonably possible, but in no event later than the earlier of (i) January
30, 2002 or (ii) the day before the expiration of the Standstill Period as
defined in the Agreement and Consent. As of the date of this MCTJ/CGNN
Settlement Agreement, neither Dynegy nor Dynegy Holdings has received any
written notice from the Co-Administrative Agents that the Secured Parties have
decided to take any Remedial Action, which would cause the Standstill Period to
begin to run as defined in the Agreement and Consent. Dynegy and Dynegy Holdings
will send any such written notice by facsimile to CGNN's counsel, Xxxx X.
Xxxxxxx, within two (2) business days after receipt thereof. The Closing shall
occur at the offices of Xxxxx Xxxxx L.L.P. in Houston, Texas. The undersigned
agree to perform their respective covenants and obligations under the Option
Agreement, including but not limited to satisfying all conditions to Closing
referred to in section 3.3 of the Option Agreement, complying with all covenants
referred to in section 4 of the Option Agreement, and complying with all other
covenants and obligations under the Option Agreement, as amended by this
MCTJ/CGNN Settlement Agreement.
2. Without waiving strict compliance with any other obligation under the
Option Agreement, the undersigned specifically agree as follows:
a. To facilitate the Section 338(h)(10) Elections referred to in
section 4.1 of the Option Agreement, the undersigned agree to
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comply with all their obligations referred to in section 4.1 of
the Option Agreement.
b. In accordance with the definition of Estimated Working Capital
in the Option Agreement, CGNN will deliver to Dynegy and Dynegy
Holdings a good faith estimate of Estimated Working Capital by
the date five (5) business days prior to the scheduled Closing.
c. In accordance with section 2.6 of the Option Agreement, the
undersigned agree that they will comply with all obligations
referred to in that section for calculation of Final Working
Capital and settlement of the working capital adjustment.
d. Upon payment by Dynegy of the Exercise Price to CGNN pursuant to
section 2.3 of the Option Agreement, CGNN agrees to segregate
such funds from all other funds and place such funds in an
escrow account with an independent commercial bank pursuant to a
customary escrow agreement and to not subject such funds to any
encumbrance or any zero balance cash management program or other
cash sweep or other cash management program of Enron Corp. or
any affiliate of Enron Corp. or any bankrupt entity, or
otherwise commingle such funds with any other funds, until such
time as the parties have certified to the escrow agent that all
obligations under section 2.6 of the Option Agreement are
completed.
3. The undersigned further agree to perform their respective covenants and
obligations in the Purchase Option Agreement; provided, however, that
notwithstanding the provisions of section 2.2 of the Purchase Option Agreement,
(1) the Purchase Option shall be exercisable until June 30, 2002 (the "Option
Term"), and (2) any exercise of the Purchase Option must be all outstanding
membership interests in MCTJ and all outstanding shares of Series A Preferred
Stock simultaneously. Further, the Exercise Price of the Purchase Option for all
outstanding membership interests in MCTJ shall be the total sum of (i) $24
million, PLUS (ii) $950 million, MINUS (iii) the aggregate amount of outstanding
principal indebtedness under the Bank Credit Facility and the Senior Notes and
any Permitted Refinancing Debt related thereto on the Closing Date of the
Purchase Option Agreement, PLUS (iv) the positive or negative change in Working
Capital
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calculated from the Closing Date of the Option Agreement to the Estimated
Working Capital based on the definition of Working Capital provided in the
Purchase Option Agreement, MINUS (v) any increase in long-term debt (other than
Debt referred to in (iii) above) between the closing under the Option Agreement
and the closing under the Purchase Option Agreement, PLUS (vi) any decrease in
long-term Debt (other than Debt referred to in (iii) above) between the closing
under the Option Agreement and the closing under the Purchase Option Agreement,
PLUS (vii) any accrued but unpaid dividends on the Series A Preferred Stock as
of the closing under the Option Agreement. The exercise price of the Purchase
Option for all shares of the Series A Preferred Stock shall be $1.5 billion. All
capitalized terms used in this paragraph shall have the meanings set forth for
each such term in the Purchase Option Agreement.
4. Immediately upon execution of the Agreement of same date herewith by
and among Dynegy, Dynegy Holdings, Enron, and Enron Transportation (the
"Agreement") and of this MCTJ/CGNN Settlement Agreement, the undersigned shall
execute the Stipulation and Order attached as Exhibit E hereto and shall jointly
cause the Stipulation and Order to be filed in the Adversary Proceeding.
5. Immediately upon execution of the Agreement and of this MCTJ/CGNN
Settlement Agreement, the undersigned shall execute the Agreed Judgment attached
as Exhibit F hereto and shall jointly cause the dismissal of the Texas Suit with
prejudice in accordance with the Agreed Judgment.
6. The undersigned agree that by entering into this MCTJ/CGNN Settlement
Agreement, no party is admitting any liability. Neither this MCTJ/CGNN
Settlement Agreement nor the performance of the undersigned under the Option
Agreement can be
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used by any party as an admission or evidence, or by way of collateral estoppel
or res judicata, as to whether Dynegy was validly entitled to terminate the
merger agreement ("Merger Agreement") by and among Dynegy, Enron, and related
parties, dated as of November 9, 2001, under section 9.4(a) of that agreement,
or whether Dynegy Holdings was validly entitled to exercise the Option under the
Option Agreement. Nothing in this MCTJ/CGNN Settlement Agreement or in the
Agreed Judgment will have any adverse impact or effect on any claim against
Dynegy or Dynegy Holdings by Enron (and its affiliates) in the Adversary
Proceeding, including any claim seeking to recover damages based on allegations
that Dynegy Holdings' exercise of the Option was improper, or claims, if any,
arising in or related to Enron's Title 11 case, with any claims by CGNN against
Dynegy Inc. or Dynegy Holdings to be brought only in state district court in
Xxxxxx County, Texas. The undersigned specifically reserve any claims, defenses,
and counterclaims in the Adversary Proceeding as to breaches of the Merger
Agreement and the Option Agreement. Dynegy and Dynegy Holdings agree that they
will not institute any suit against CGNN in Texas with respect to their exercise
of the option under the Option Agreement, including but not limited to their
right to exercise such option and/or their right to terminate the Merger
Agreement, PROVIDED, HOWEVER, that if CGNN sues Dynegy Inc. or Dynegy Holdings,
Dynegy Inc. and Dynegy Holdings shall have the right to assert all available
counterclaims for damages.
7. Should any dispute arise concerning the construction and/or enforcement
of this MCTJ/CGNN Settlement Agreement, each of the undersigned hereby consents
to the exclusive jurisdiction of the 333rd Judicial District Court, Xxxxxx
County, Texas, which shall be the sole forum for resolving such dispute. The
undersigned further agree
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that any dispute concerning this MCTJ/CGNN Settlement Agreement will be governed
by Texas law. Notwithstanding the foregoing, nothing in this MCTJ/CGNN
Settlement Agreement or the Agreed Judgment, including but not limited to the
forum selection provisions of this paragraph, may be relied on by Dynegy or
Dynegy Holdings in connection with any motion or other proceeding concerning the
appropriate venue or jurisdiction for the claims asserted in the Adversary
Proceeding (including any amended pleadings therein), the bankruptcy case filed
by Enron and certain affiliates, or any other action or proceeding.
8. The undersigned acknowledge that an Agreement is simultaneously being
executed by and among Dynegy, Dynegy Holdings, Enron, and Enron Transportation,
which may be subject to bankruptcy court approval. The undersigned agree that if
either Enron or Enron Transportation fails to perform under the Agreement,
including the failure to cooperate in obtaining bankruptcy court approval, if
necessary, CGNN and MCTJ remain bound to this MCTJ/CGNN Settlement Agreement.
Dynegy Inc. CGNN Holding Company, Inc.
/s/ Xxxxx Xxxxxxxxxxxx /s/ Xxxxxxx X. Xxxxxx
-------------------------------, ------------------------------------,
by: Xxxxx Xxxxxxxxxxxx by: Xxxxxxx X. Xxxxxx
---------------------------- ---------------------------------
its Senior Vice President its Chairman of the Board,
---------------------------- President and Chief Executive
Officer
---------------------------------
Dynegy Holdings Inc. MCTJ Holding Co. LLC
/s/ Xxxxx Xxxxxxxxxxxx /s/ Xxxxxxx X. Xxxxxx
------------------------------- ------------------------------------
by: Xxxxx Xxxxxxxxxxxx by: Xxxxxxx X. Xxxxxx
---------------------------- ---------------------------------
its Senior Vice President its Chairman of the Board,
---------------------------- President and Chief Executive
Officer
---------------------------------
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