Exhibit 2.1
PURCHASE AGREEMENT
among
NEW IP COMPANY,
EXELON ENERGY DELIVERY COMPANY, LLC,
ILLINOIS POWER COMPANY,
IP GAS SUPPLY COMPANY
and
DYNEGY INC.
Dated as of October 31, 2003
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms 1
Section 1.2 Other Defined Terms 12
Section 1.3 Other Definitional and Interpretative Provisions 14
ARTICLE II PURCHASE AND SALE 15
Section 2.1 Purchased Assets 15
Section 2.2 Excluded Assets 16
Section 2.3 Assumed Liabilities 17
Section 2.4 Excluded Liabilities 17
Section 2.5 Purchase Price 17
Section 2.6 Purchase Price Adjustments 18
Section 2.7 Closing 20
Section 2.8 Closing Deliveries by Sellers 20
Section 2.9 Closing Deliveries by Purchaser 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS AND DYNEGY 24
Section 3.1 Organization and Qualification 24
Section 3.2 Subsidiaries and Investments 24
Section 3.3 Authority 25
Section 3.4 Consents and Approvals; No Violation 25
Section 3.5 IPC Reports 26
Section 3.6 IPC Financial Statements 27
Section 3.7 Absence of Certain Changes; Absence of Undisclosed Liabilities 27
Section 3.8 Taxes 28
Section 3.9 Litigation 30
Section 3.10 Employee Benefit Plans 30
Section 3.11 Environmental Matters. Except as listed in Schedule 3.11: 32
Section 3.12 Compliance with Applicable Laws 33
Section 3.13 Labor Matters; Employees 34
Section 3.14 Material Contracts 34
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TABLE OF CONTENTS
(continued)
Page
Section 3.15 Intellectual Property 35
Section 3.16 Real Property 36
Section 3.17 Brokers 37
Section 3.18 Personal Property 37
Section 3.19 Availability of Assets; Affiliate Transactions 37
Section 3.20 Title to Property 38
Section 3.21 Bank Accounts; Powers of Attorney; Minute Books 38
Section 3.22 Regulation as a Utility 38
Section 3.23 Regulatory Proceedings 38
Section 3.24 Hedging 39
Section 3.25 Compliance with Xxxxxxxx-Xxxxx Act 39
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND EED 39
Section 4.1 Organization and Qualification 39
Section 4.2 Authority 40
Section 4.3 Conflicts 40
Section 4.4 Securities Matters 41
Section 4.5 Litigation 41
Section 4.6 Availability of Funds 41
Section 4.7 Brokers 41
ARTICLE V ADDITIONAL AGREEMENTS 41
Section 5.1 Conduct of Business Prior to the Closing 41
Section 5.2 Access to Information 44
Section 5.3 Governmental Permits and Approvals. 45
Section 5.4 Notice of Developments 48
Section 5.5 Insurance; Risk of Loss 49
Section 5.6 Confidentiality 50
Section 5.7 Intercompany Arrangements 51
Section 5.8 Use of Dynegy and Sellers' Names 51
Section 5.9 Change of Control Offer 51
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TABLE OF CONTENTS
(continued)
Page
Section 5.10 Further Assurances 51
Section 5.11 No Public Announcement 52
Section 5.12 Access to Records 52
Section 5.13 No Solicitation 53
Section 5.14 Terminated Employees 53
Section 5.15 Bulk Sales Requirements 53
Section 5.16 Covenant Not to Xxx 53
Section 5.17 Permits, Contracts, IPC Property and Related Consents 54
Section 5.18 Remediation of Excluded Environmental Matters 56
Section 5.19 Continued Existence 57
Section 5.20 Generation Asset Transfers 57
Section 5.21 Certain Additional Agreements 57
Section 5.22 Status Meetings 58
Section 5.23 PPA Matters 58
Section 5.24 Information Technologies Employees 59
ARTICLE VI EMPLOYEES AND EMPLOYEE MATTERS 59
Section 6.1 Employment of Transferred Employees 59
Section 6.2 Transferred Employee Benefit Matters 61
Section 6.3 Miscellaneous Benefits 70
Section 6.4 Employee Rights 70
Section 6.5 WARN Act Requirements 70
ARTICLE VII TAX MATTERS AND INDEMNIFICATION 71
Section 7.1 Preparation and Filing of Tax Returns 71
Section 7.2 Cooperation 72
Section 7.3 Transfer Taxes 72
Section 7.4 FIRPTA Certificate 72
Section 7.5 Tax Refunds 72
Section 7.6 Purchase Price Allocation. 72
Section 7.7 Tax Indemnification 73
Section 7.8 Survival 75
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TABLE OF CONTENTS
(continued)
Page
Section 7.9 Employee Withholding and Reporting 75
ARTICLE VIII CONDITIONS TO CLOSING 75
Section 8.1 Conditions to Obligations of Sellers 75
Section 8.2 Conditions to Obligations of Purchaser 77
Section 8.3 Effect of Certain Waivers of Closing Conditions 79
ARTICLE IX INDEMNIFICATION 79
Section 9.1 Obligations of Dynegy 79
Section 9.2 Obligations of Purchaser 79
Section 9.3 Procedures 79
Section 9.4 Survival 81
Section 9.5 Limitations on Indemnification 82
Section 9.6 Mitigation 83
Section 9.7 Remedies Exclusive 83
ARTICLE X TERMINATION AND WAIVER 83
Section 10.1 Termination 83
Section 10.2 Effect of Termination 85
ARTICLE XI GENERAL PROVISIONS 85
Section 11.1 Expenses 85
Section 11.2 Disclaimer Regarding Projections; No Additional Representations 86
Section 11.3 Materiality 87
Section 11.4 Disclosure Schedules 88
Section 11.5 No Consequential or Punitive Damages 88
Section 11.6 Notices 88
Section 11.7 Headings 89
Section 11.8 Severability 89
Section 11.9 Entire Agreement 90
Section 11.10 Assignment 90
Section 11.11 No Third Party Beneficiaries 90
Section 11.12 Amendment 90
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TABLE OF CONTENTS
(continued)
Page
Section 11.13 Waiver 90
Section 11.14 Governing Law 90
Section 11.15 WAIVER OF JURY TRIAL 91
Section 11.16 Specific Performance; Remedies 91
Section 11.17 Counterparts 91
Section 11.18 Representation by Counsel; Interpretation 91
Section 11.19 EED Guaranty 92
Section 11.20 Dispute Resolution 92
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of October 31, 2003, is entered into by
and among Exelon Energy Delivery Company, LLC, a Delaware limited liability
company ("EED"), New IP Company, an Illinois corporation and wholly-owned
Subsidiary of EED ("Purchaser"), Illinois Power Company, an Illinois corporation
("IPC"), IP Gas Supply Company, an Illinois corporation and wholly-owned
Subsidiary of IPC ("IP Gas," and together with IPC, the "Sellers"), and Dynegy
Inc., an Illinois corporation ("Dynegy").
W I T N E S S E T H:
WHEREAS, Sellers and the Purchased Subsidiaries (as defined below) are
engaged in the Business (as defined below) and IPC owns all of the capital stock
of the Purchased Subsidiaries;
WHEREAS, a wholly owned subsidiary of Dynegy, Illinova Corporation, an
Illinois corporation ("Parent"), owns (a) 62,892,213 shares of common stock,
without par value, of IPC, constituting all of the outstanding common stock of
IPC; and (b) 662,924 shares of preferred stock, $50 par value per share, of IPC,
constituting approximately 73% of the issued and outstanding preferred stock of
IPC, and Dynegy has agreed, as an inducement to Purchaser and EED, to enter into
this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual terms,
conditions and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Accounting Firm" shall mean Deloitte & Touche LLP, or another nationally
recognized accounting firm mutually acceptable to Sellers and Purchaser.
"Action" shall mean any claim, action, suit, arbitration, mediation,
inquiry, proceeding or investigation by or before any Governmental Authority.
"Actual IP Contributions" shall mean the amount by which any contributions
made by Dynegy or any of its Affiliates prior to the Closing to any of the
Seller Pension Plans or Seller's VEBAs with respect to the 2004 plan year
results in an increase in the aggregate amounts transferred to the Purchaser
Pension Plans and the Purchaser's VEBAs over what would have been transferred to
the Purchaser Pension Plans and the Purchaser's VEBAs pursuant to this Agreement
had such contributions not been made prior to the Closing.
"Adjusted Working Capital" shall have the meaning set forth on Exhibit A.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
"Agreement" shall mean this Purchase Agreement, dated as of the date
hereof, among EED, Purchaser, Sellers and Dynegy (including the Exhibits and
Schedules hereto), as amended, modified or supplemented from time to time.
"Ancillary Agreements" shall mean the Seller Ancillary Agreements and the
Purchaser Ancillary Agreements.
"Applicable Rate" shall mean 2% plus the rate of interest per annum
publicly announced from time to time by JPMorgan Chase Bank as its prime rate in
effect at its principal office in New York City. Each change in such prime rate
shall be effective from and including the date such change is publicly announced
as being effective.
"Asset Transfer Agreements" shall mean (a) the Asset Transfer Agreement,
dated as of October 1, 1999, between IPC and Parent, (b) the Xxxx of Sale and
Assignment, effective as of August 31, 2001, between IPC and Parent and (c) the
Assignment and Xxxx of Sale effective as of December 31, 2001, between IPC and
DMG.
"Association" shall mean the American Arbitration Association.
"Audit" shall mean any action, suit, audit, assessment or reassessment of
Taxes, other examination by any Taxing Authority, or proceeding or appeal of
such proceeding relating to Taxes.
"Business" shall mean the business conducted by Sellers and the Purchased
Subsidiaries, including the transmission, distribution and sale of electric
energy, which business is regulated as a public utility under PUHCA, and the
distribution, transportation and sale of natural gas in the State of Illinois,
it being understood that the Business does not include any generation
operations.
"Business Day" shall mean any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Law to be closed in The City of
New York.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. xx.xx. 9601 et seq.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.
"ComEd" shall mean Commonwealth Edison Company, an Illinois corporation.
"Company Group" shall mean any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that, at any time on or before the Closing Date, includes
or has included either Seller or any of the Purchased Subsidiaries or any
predecessor of or successor to either Seller or any of the Purchased
Subsidiaries (or another such predecessor or successor), or any other group of
corporations that,
2
with respect to any period on or before the Closing Date, files, has filed or
will file Tax Returns on a combined, consolidated or unitary basis with either
Seller or any of the Purchased Subsidiaries or any predecessor of or successor
to either Seller or any of the Purchased Subsidiaries (or another such
predecessor or successor).
"Confidentiality Agreement" shall mean the Confidentiality and Sales
Process Agreement, dated July 23, 2003, between Dynegy and Exelon.
"Contract" shall mean any contract, lease, sublease, license, indenture,
instrument, agreement, commitment or other legally binding arrangement.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Designated Officers" shall mean the Treasurer of Dynegy or the General
Counsel of Dynegy, in the case of Dynegy, and the General Counsel or the Chief
Financial Officer of Exelon, in the case of EED.
"DHI" shall mean Dynegy Holdings Inc., a Delaware corporation.
"Disclosure Schedules" shall mean the Schedules that qualify any
representation or warranty contained in Article III and Schedule 1.1(g).
"DMG" shall mean Dynegy Midwest Generation, Inc., an Illinois corporation.
"Enforceable" shall mean, with respect to a Contract, such Contract being
"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 limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors and general principles of equity.
"Environmental Laws" shall mean United States Federal, state, and local
environmental protection, health and safety or similar Laws 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,
CERCLA and Emergency Planning and Community Right to Know Act, and similar state
and local laws, each as amended and in effect on the date hereof.
"Equity Interest" shall mean any capital stock or other equity securities
of any Person and any securities convertible into or exercisable or exchangeable
for capital stock or other equity securities of such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Environmental Matters" shall mean (a) any actual or alleged
violation of Environmental Law at any time prior to the Closing Date in
connection with the Business or any of the Purchased Assets, or (b) the actual
or alleged presence or Release of any Hazardous Substances at any time prior to
the Closing Date in soil, sediment, surface water, groundwater, air or any
structure at any Purchased Asset or any site formerly owned or operated by the
Business (including the sites in items 10, 11 and 13 on Schedule 3.11),
including any migration of those Hazardous Substances from any Purchased Asset
or foregoing site to an off-site location; or (c) any Hazardous Substances
generated by the Business prior to the Closing Date and sent to an offsite
location for treatment, storage or recycling (including item 9 on Schedule
3.11); provided that (i) Excluded Environmental Matters shall not include the
matters set forth on Schedule 1.1(c), (ii) Excluded Environmental Matters shall
not include any molecules of Hazardous Substances that were not actually and
physically present in the soil, sediment, surface water, groundwater, air or any
structure at any Purchased Asset (or the off-site location to which such
molecules of Hazardous Substances had migrated) prior to the Closing Date.
"Exelon" shall mean Exelon Corporation, a Pennsylvania corporation.
"ExGen" shall mean Exelon Generation Company, LLC, a Pennsylvania limited
liability company.
"Existing IPC Obligations" shall mean an amount equal to the sum of: (a)
the unpaid principal amount of all short-term and long-term indebtedness
(including current portion) for borrowed money of each of the IPC Companies; and
(b) all outstanding capital lease obligations of each of the IPC Companies, if
any, in each instance as of the Closing Date. For purposes of calculating the
amount of the Existing IPC Obligations, the amount of indebtedness attributable
to the Transitional Funding Trust Notes shall be reduced by an amount equal to
$240,000 multiplied by the number of days, through and including the Closing
Date, in the calendar quarter in which the Closing occurs. Existing IPC
Obligations as of September 30, 2003 are set forth on Schedule 1.1(d).
"FERC" shall mean the Federal Energy Regulatory Commission, or any
successor thereto.
"Final Determination" shall mean the final resolution of liability for any
Tax: (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date
of acceptance by or on behalf of the taxpayer, or by a form having the same
effect under the laws of other jurisdictions, except that a Form 870 or 870-AD
or comparable form that reserves (whether by its terms or by operation of law)
the right of the taxpayer to file a claim for refund and/or the right of the
Taxing Authority to assert a further deficiency shall not constitute a Final
Determination; (b) by a Governmental Order of a court of competent jurisdiction
which has become final and unappealable; (c) by a closing agreement or accepted
offer in compromise under Section 7121 or 7122 of the Code, or agreements having
the same effect under the laws of other jurisdictions; (d) by any allowance of a
refund or credit in respect of an overpayment of Tax; or (e) by any other
4
final disposition, including by reason of the expiration of the applicable
statute of limitations or by mutual agreement of the parties.
"Final Order" shall mean any Governmental Order which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to
which any waiting period prescribed by Law before the transactions contemplated
thereby Fmay be consummated has expired (but without the requirement for the
expiration of any applicable rehearing or appeal period), and as to which all
conditions to the consummation of such transactions prescribed by Law have been
satisfied.
"FPA" shall mean the Federal Power Act, as amended, including any
regulations promulgated thereunder and any successor statutes thereto.
"GAAP" shall mean United States generally accepted accounting principles
and practices as in effect from time to time.
"Generation Agreement" shall mean the agreement in the form of Exhibit D.
"Generation Assets" shall mean (a) the "Purchased Assets" described in the
Asset Transfer Agreements, including the assets set forth on Schedule 1.1(e),
(b) any fossil-fuel fired electric generating stations owned, used or operated
at any time by any of the IPC Companies, including those assets identified by
the parties pursuant to clause (ii) of Section 5.20(a) that are to be
transferred to DMG by IPC pursuant to the Generation Agreement), but excluding
those assets identified by the parties pursuant to clause (i) of Section 5.20(a)
that are to be transferred to IPC by DMG pursuant to the Generation Agreement
and (c) the assets listed on Schedule 1.1(b).
"Generation Indemnification Termination Agreements" shall mean the
agreements in the forms of Exhibit E-1 and Exhibit E-2.
"Generation Liabilities" shall mean any and all rights, costs, damages,
disbursements, expenses, losses, fines, penalties, settlements, payments,
judgments, awards, deficiencies, charges, commitments, encumbrances, liens,
rights of others, demands, actions, claims, liabilities, obligations, debts,
causes of action, or lawsuits of any kind or nature arising from or relating to
the Generation Assets, including: (a) items 1 and 2 listed on Schedule 3.11; (b)
actual or alleged failure of any Generation Assets or their owner or operator to
have complied at any time with any Law (including Environmental Laws); (c)
actual or alleged presence or Release of any Hazardous Substance in soil,
sediment, surface water, groundwater, air or any structure at any Generation
Assets at any time, including in connection with ash ponds at any Generation
Asset or any migration of Hazardous Substances from a Generation Asset to an
off-site location; (d) any Hazardous Substance from a Generating Asset that was
sent to an off-site location for treatment, storage, disposal or recycling; (e)
closure, shutdown, decommissioning, monitoring, investigation, cleanup,
containment, remediation, removal, mitigation, response or restoration work at,
on, beneath, to, from or in any Generation Assets (including any equipment) at
any time; (f) claims for workers' compensation benefits payable on account of
injuries, illness or other conditions; (g) any claims for any personal injury
(including wrongful death) or property
5
damage (real or personal) relating to the Generating Assets; or (h) any
liabilities of IPC under the Generation Agreement.
"Governmental Authority" shall mean any United States Federal, state or
local or any foreign government, supranational, governmental, regulatory or
administrative authority, instrumentality, agency or commission, political
subdivision, self-regulatory organization or any court, tribunal or judicial or
arbitral body or mediator.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Substances" shall mean any chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, mixed hazardous waste
substances, petroleum, petroleum products, radioactive material or any substance
regulated under or defined in any Environmental Law.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"ICC" shall mean the Illinois Commerce Commission.
"Income Tax Returns" shall mean Tax Returns relating to Income Taxes.
"Income Taxes" shall mean any Taxes imposed on or determined by reference
to net income, together with any interest or penalty, addition to tax or
additional amount imposed by any Governmental Authority on account of such
Taxes.
"Indemnifiable Claim" shall mean any claim of an Indemnifiable Loss for or
against which any party is entitled to indemnification under this Agreement.
"Indemnifiable Loss" shall mean any cost, damage, disbursement, expense,
liability, loss, fine, penalty or settlement, payment or judgment of any kind or
nature, including court filing fees, court costs, arbitration fees or costs and
reasonable fees and disbursements of legal counsel and other professionals fees
and amounts paid in settlement that are actually imposed on, or otherwise
actually incurred or suffered by the specified Person.
"Indemnified Party" shall mean the party entitled to indemnification
hereunder.
"Indemnifying Party" shall mean the party obligated to provide
indemnification hereunder.
"Instrument of Assignment" shall mean the instrument of assignment in the
form of Exhibit F.
"Instrument of Assumption" shall mean the instrument of assumption in the
form of Exhibit G.
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"Intellectual Property" shall mean: (a) any United States and foreign
invention, patent application, patent, patent disclosure, including all
reissues, reexaminations, divisions, continuations and extensions thereof
(whether or not patentable or reduced to patent) and improvements thereto; (b)
any United States and foreign trademark, trademark registration, trademark
application, service xxxx, internet domain name, trade name, trade dress, logo,
business names (including all assumed or fictitious names under which any IPC
Company is conducting business or has within the last three years conducted
business), whether registered or unregistered, and pending applications to
register the foregoing; (c) any United States and foreign copyright, copyright
registration, copyrightable works, whether registered or unregistered, and
pending applications to register the same; and (d) any design, design
registration, and trade secret (including confidential information, know-how,
formulae, processes, procedures, research records, records of inventions, test
information, market surveys and marketing know-how), and, in each case, any
right to any of the foregoing.
"Intercompany Note" means the Promissory Note in the original principal
amount of $2,725,721,995.00 (as adjusted) issued by Parent to IPC on October 1,
1999.
"IPC Companies" shall mean Sellers and the Persons listed on Schedule 3.2.
"IPC Other Real Property" shall mean easements, licenses, rights-of-way,
option, rights-of-first refusal, rights-of-first offer or similar rights or
interests in any parcel of real property held or used by any of the IPC
Companies.
"IPC Owned Real Property" shall mean all real property owned in fee simple
by any of the IPC Companies.
"IPC Properties" shall mean the IPC Owned Real Property, Leased Real
Property and IPC Other Real Property.
"IRS" means the United States Internal Revenue Service.
"Knowledge" shall mean (a) with respect to Purchaser, the actual knowledge
(after reasonable inquiry) of the persons listed on Schedule 1.1(f), and (b)
with respect to Dynegy and Sellers, the actual knowledge (after reasonable
inquiry) of the persons listed on Schedule 1.1(f).
"Law" shall mean any United States Federal, state or local statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law
enacted, adopted, issued or promulgated by any Governmental Authority.
"Leased Real Property" shall mean each lease or similar contract under
which an IPC Company is a lessee of, or holds, uses or operates, any real
property owned by third Persons.
"Lien" shall mean any lien (statutory or otherwise), mortgage, pledge,
security interest, or other encumbrance of any kind that has the same effect as
or similar effect to the granting of security or of any similar right of any
kind.
"Material Adverse Effect" shall mean any condition, circumstance, change,
event, occurrence or state of facts that is (a) materially adverse to the
Purchased Assets, the Business or
7
the assets, business, financial condition or results of operations of the
business of the IPC Companies, taken as a whole; or (b) materially adverse to
the ability of Dynegy, any of the IPC Companies or any of their respective
Affiliates to perform their obligations under this Agreement or any Seller
Ancillary Agreement, including the financial obligations of Dynegy hereunder or
thereunder, other than, with respect to clause (a) above, any condition,
circumstance, change, event, occurrence or state of facts (i) relating to or
resulting from economic conditions in general that are not disproportionately
adverse to the IPC Companies or the Business; (ii) resulting from the execution
or announcement of this Agreement; (iii) resulting from a material breach by
Purchaser or EED of this Agreement; (iv) relating to or resulting from changes
or developments generally in the electric or gas utility industry that are not
disproportionately adverse to the IPC Companies or the Business; or (v)
resulting from compliance by Dynegy or any IPC Company with the terms of this
Agreement or any Seller Ancillary Agreement.
"Natural Gas Act" shall mean the Natural Gas Act, as amended, including any
regulations promulgated thereunder and any successor statutes thereto.
"Non-Income Tax Returns" shall mean Tax Returns relating to Non-Income
Taxes.
"Non-Income Taxes" shall mean all Taxes other than Income Taxes.
"NPL" shall mean the National Priorities List pursuant to CERCLA.
"Omnibus Transfer Agreement" shall mean a transfer agreement that is
reasonably acceptable to Dynegy and Purchaser, which shall include provisions
for the assignment, transfer and conveyance of the IPC Properties.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall mean any permit, franchise, consent, approval, license,
certificate of occupancy, certificate of public convenience and necessity,
privilege or similar authorization.
"Permitted Liens" shall mean (a) leases, subleases, licenses and similar
use and occupancy agreements that do not materially interfere with the present
use of the relevant asset or property; (b) Liens for Taxes, assessments and
governmental charges or levies not delinquent or that may be paid without
interest or penalty that do not materially interfere with the present use of the
relevant assets or property; (c) Liens imposed by Law (other than any Lien
arising under ss.412 of the Code or ss.302 of ERISA) that do not materially
interfere with the present use of the relevant assets or property; (d) pledges
or deposits to secure obligations under workers' compensations laws or similar
legislation or to secure public or statutory obligations that do not materially
interfere with the present use of the relevant assets or property; (e)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course, and Liens arising under original purchase price
conditional sales contracts and equipment leases with third parties entered into
in the ordinary course that do not materially interfere with the present use of
the relevant assets or property; (f) Liens listed on Schedule 1.1(g); (g)
recorded and unrecorded easements, covenants, rights of way and other similar
restrictions that do not materially detract from the value or materially
interfere with the present use of the relevant assets or property; (h) as to any
IPC Property, Liens affecting the interest of the lessor thereof that do not
materially interfere with the present use of the relevant assets or property;
(i) all matters
8
created by or on behalf of Purchaser, including any documents or instruments to
be recorded as part of any financing for the acquisition of the Purchased Assets
by Purchaser; (j) Liens created by this Agreement or in connection with the
transactions contemplated hereby; and (k) Liens that does not materially
adversely affect title to, or interfere with the present use of, the relevant
assets or property.
"Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization, joint venture, limited
liability company or other entity.
"PJM" shall mean PJM Interconnection, L.L.C.
"PJM Operating Agreement" shall mean the Amended and Restated Operating
Agreement, dated June 2, 1997, among PJM and the other parties thereto, as the
same may be amended or supplemented from time to time.
"PJM West Reliability Assurance Agreement" shall mean the Reliability
Assurance Agreement-West, dated March 14, 2001, among PJM and the other parties
thereto, as the same may be amended or supplemented from time to time.
"PJM West Transmission Owner's Agreement" shall mean the West Transmission
Owners' Agreement, dated March 13, 2001, among PJM and certain owners of
transmission facilities, as the same may be amended or supplemented from time to
time.
"Post-Closing Tax Period" shall mean any taxable period beginning after the
Closing Date (and, in the case of a Straddle Period, the portion of such taxable
period beginning on the day after the Closing Date).
"PPA" shall mean, subject to the provisions of Section 5.21(d), the
agreement in the form of Exhibit H, with such changes as may be required by
Governmental Authorities as a condition to approving the transactions or any
portion thereof contemplated by this Agreement and the Ancillary Agreements that
are required to be accepted by Sellers or the Subsidiaries of Dynegy (other than
any Purchased Subsidiary) that are parties thereto, in the case of Dynegy and
Sellers, or by Purchaser or the Affiliates of Purchaser that are parties
thereto, in the case of Purchaser, pursuant to the provisions of Section 5.3 or
are otherwise accepted by Sellers or such Subsidiaries of Dynegy, or by
Purchaser or such Affiliates of Purchaser, as the case may be.
"Pre-Closing Tax Period" shall mean any taxable period ending on or before
the Closing Date (and, in the case of a Straddle Period, the portion of such
taxable period ending at the close of the Closing Date).
"Promissory Note" shall mean the note in the form of Exhibit I.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended, including any regulations promulgated thereunder or any successor
statutes thereto.
"Purchased Subsidiaries" shall mean the Persons listed on Schedule 3.2
other than IP Gas.
9
"Purchaser Ancillary Agreements" shall mean the PPA, the Transition
Services Agreement (if applicable), the Blackstart Agreement, the
Interconnection Agreement, the Supplemental Indentures, the Securitization
Transfer Agreements, the Instrument of Assumption, the Promissory Note, if
issued, and the Easement and Facilities Agreement.
"Purchaser Group Member" shall mean the Purchased Subsidiaries, Purchaser,
EED, each of their respective Affiliates and each of their respective directors,
officers, employees, agents, successors and assigns.
"Purchaser Indemnitors" shall mean EED and Purchaser.
"Reference Balance Sheet" shall mean the unaudited consolidated balance
sheet of IPC as of the Reference Balance Sheet Date attached as Schedule 1.1(a).
"Reference Balance Sheet Date" shall mean September 30, 2003.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaking or migration.
"Remediation" shall mean any or all of the following activities in
connection with and to the extent they relate to or arise from the presence or
Release of a Hazardous Substance: (a) monitoring, investigation, sampling,
analysis, cleanup, containment, remediation, removal, mitigation, response or
restoration work (collectively, "Work"); (b) obtaining any Permits from any
Governmental Authority necessary to conduct any of the Work; (c) preparing and
implementing any plans or studies necessary for implementation or completion of
the Work; (d) where required or desired, obtaining a written notice from a
Governmental Authority that no material additional work is required by such
Governmental Authority; and (e) any other activities reasonably necessary or
appropriate or required under Environmental Laws to address the presence or
Release of Hazardous Substances.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securitization Tax Ruling" means that certain IRS letter ruling issued in
connection with the issuance of the Transitional Funding Trust Notes.
"Securitization Transfer Agreements" shall mean the agreements in form and
substance reasonably satisfactory to Purchaser and Dynegy, pursuant to which
Purchaser shall assume IPC's obligations relating to the intangible transition
property and the Transitional Funding Trust Notes.
"Seller Ancillary Agreements" shall mean the PPA, the Transition Services
Agreement (if applicable), the Blackstart Agreement, the Interconnection
Agreement, the Easement and Facilities Agreement, the Supplemental Indentures,
the Securitization Transfer Agreements, the Instrument of Assignment, the
Generation Agreement and the Generation Indemnification Termination Agreements.
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"Seller Group Member" shall mean Sellers and Dynegy and each of their
Affiliates (other than the Purchased Subsidiaries after the Closing) and each of
their respective directors, officers, employees agents, successors and assigns.
"Seller Indemnitors" shall mean Dynegy and Sellers.
"Software" shall mean computer software programs and software systems,
including all databases, compilations, tool sets, compilers, higher level or
"proprietary" languages, related documentation and materials, whether in source
code, object code or human readable form.
"Straddle Period" shall mean any taxable period that begins on or before
and ends after the Closing Date.
"Subsidiaries" shall mean, with respect to any Person, any and all
corporations, partnerships, limited liability companies and other entities with
respect to which such Person, directly or indirectly, owns securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such entity.
"Supplemental Indentures" shall mean the supplemental indentures, in form
and substance reasonably satisfactory to Purchaser and Dynegy, pursuant to which
Purchaser shall assume all outstanding debt securities of IPC existing on the
date hereof under IPC's General Mortgage Indenture and Deed of Trust dated as of
November 1, 1992.
"Target Adjusted Working Capital" shall have the meaning set forth on
Exhibit A.
"Tax" shall mean: (a) any federal, state, local or foreign net income,
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or
environmental tax (including taxes under Code Section 59A), or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any Governmental Authority; and (b) any liability for the
payment of amounts with respect to payments of a type described in clause (a)
above as a result of being a member of an affiliated, consolidated, combined or
unitary group, or as a result of any obligation under any Tax Sharing
Arrangement, Tax indemnity agreement or arrangement or similar agreement or
arrangement.
"Tax Refund" shall mean a refund of Taxes either in the form of cash,
credit memos or any similar item as the result of a Final Determination.
"Tax Return" shall mean any return, filing, report, questionnaire,
information statement or other document required to be filed, including any
amendments that may be filed with respect thereto, for any taxable period with
any Taxing Authority.
"Tax Sharing Arrangement" shall mean any written or unwritten agreement or
arrangement for the allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Tax Return which
Tax Return includes or included any Seller or any Purchased Subsidiary.
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"Taxing Authority" shall mean any Governmental Authority exercising any
authority to impose, regulate or administer the imposition of Taxes.
"Xxxxxx Assets" shall mean all rights and obligations of any of the IPC
Companies pursuant to and arising from (a) the Lease, dated as of September 10,
1999, between IPC, as the lessee, and ABN Amro Bank N.V., not individually but
solely as agent lessor (as amended and restated as of October 30, 2002 (the
"Xxxxxx Lease"), (b) the Lease Agreement, dated as of October 29, 1998, between
IPC, as tenant, and Danville Industrial, L.L.C., an Illinois limited liability
company as landlord and all directly related rights and obligations held or owed
by any IPC Company, and (c) the Sublease, dated as of October 1, 1999, between
IPC, as sublessor, and DMG, as sublessee, in accordance with Section 6.2 of the
Xxxxxx Lease, and all rights, interests, assets, liabilities and obligations of
the IPC Companies that are primarily related to the foregoing project.
"Transitional Funding Trust Notes" shall mean the Transitional Funding
Trust Notes, Series 1998-1, in the original principal amount of $864,000,000,
issued by Illinois Power Special Purpose Trust, under the Indenture dated as of
December 1, 1998, between Illinois Power Special Purpose Trust, as note issuer,
and Xxxxxx Trust and Savings Bank, as trustee.
"Triggering Event" shall mean the occurrence of any of the "events" set
forth in Paragraph 5 of the form of the Promissory Note requiring prepayment in
full of the Promissory Note.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act
of 1988, as amended, including any regulations promulgated thereunder and any
successor statutes thereto.
Section 1.2 Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
Term Section
---- -------
Accrued Liability 6.2(a)(iv)(A)
Acquisition Proposal 5.13
Active Employees 6.1
Additional Disclosures 11.4
Affiliate Employees 6.1(f)
Allocation 7.6(a)
Amendment 5.3(d)(i)
Assumed Liabilities 2.3(b)
Benefit Payments 6.2(a)(iv)(C)
Blackstart Agreement 5.21
Business Recitals
Cash Adjustments 2.5
CERCLIS 3.11(g)
Closing 2.7
Closing Date 2.7
Closing Payment 2.5
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Term Section
---- -------
Compensation Arrangements 3.10(a)
DOJ 5.3(d)(iv)
Dynegy Recitals
Easement and Facilities Agreement 5.21
EED Recitals
Employee Benefit Plans 3.10(a)
Employees 3.10(a)
Excluded Assets 2.2
Excluded Liabilities 2.4
Federal Utility Filings 5.3(d)(ii)
FIRPTA 3.8(b)
FSA 6.2(d)(iv)
FTC 5.3(d)(iv)
Included Claims 9.5(a)
ICC Filings 5.3(d)(i)
Initial Transfer Amount 6.2(a)(iv)(C)
Initial Transfer Date 6.2(a)(iv)(C)
Interconnection Agreement 5.21
IPC Recitals
IPC Gas Recitals
IPC SEC Reports 3.5
IT 6.1(f)
Material Contracts 3.14
Material Permits 3.12
Memorandum of Agreement 3.10(e)
Other Plan Participant 6.2(a)(I)
Parent Recitals
PBO 6.2(a)(iv)
Plan Expenses 6.2(a)(iv)
Pre-Closing Covenants 9.4
Proposed Allocation 7.6(a)
Purchased Assets 2.1
Purchase Price 2.5
Purchaser Recitals
Purchaser Includable Claims 9.5
Purchaser Parties 5.16
Purchaser Pension Plan(s) 6.2(a)(ii)
Purchaser Savings Plan(s) 6.2(b)(ii)
Purchaser Welfare Plans 6.2(d)(i)
Purchaser's VEBA(s) 6.2(c)(I)
Retiree(s) 6.2(c)(I)
SEC Reports 3.5
Section 4044 Amount 6.2(a)(iv)
Sellers Recitals
Seller Bonus Plans 6.1(d)
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Term Section
---- -------
Seller Includable Claims 9.5
Seller Pension Plan(s) 6.2(a)(I)
Seller Savings Plans 6.2(b)(i)
Seller Welfare Plans 6.2(d)(i)
Seller's VEBA(s) 6.2(c)(I)
Solvency Opinion 8.1(f)
Tax Controversy 7.7(c)
Termination Date 10.1
Transferred Employees 6.1
Transition Services Agreement 5.21
True-Up Date 6.2(a)(iv)(C)
VEBA Transfer Date 6.2(c)(ii)
Section 1.3 Other Definitional and Interpretative Provisions.
(a) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Exhibit and
Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(c) All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise
defined therein, shall have the meaning as defined in this Agreement.
(d) The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
(e) Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The meaning of general words herein shall not be limited by
specific examples introduced by "such as" or "for example" or other similar
expressions unless otherwise specified.
(f) References to "the date of this Agreement" or "the date hereof" shall
mean October 31, 2003.
(g) References to a Person include its successors and permitted assigns.
References to a "party" or the "parties" shall refer, respectively, to a party
or the parties to this Agreement, unless the context otherwise requires or this
Agreement otherwise specifies.
(h) The phrase "in the ordinary course" shall mean in the ordinary course
of the Business.
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(i) Without limiting the rights of the Purchaser Group Members to
indemnification pursuant to Section 9.1(c), no representation or warranty in
Article III is made whatsoever with respect to any Excluded Assets or any
Excluded Liabilities.
(j) References to a specified number of days prior to the Closing shall
mean such specified number of days prior to the Closing Date as determined in
the reasonable good faith judgment of EED and Dynegy.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchased Assets. Upon the terms and subject to the conditions
of this Agreement, at the Closing, Sellers shall sell, transfer, assign, convey
and deliver to Purchaser, and Purchaser shall purchase from Sellers, on a going
concern basis, free and clear of all Liens (except for Permitted Liens), all of
the business and operations of Sellers and all of the assets and properties of
Sellers of every kind and description, wherever located, real, personal or
mixed, tangible or intangible, as the same shall exist on the Closing Date
(herein collectively called the "Purchased Assets"), including (subject to
Sections 3.4 and 5.17) all right, title and interest of Sellers in, to and
under:
(a) bank deposits and cash and cash equivalents of Sellers;
(b) all of the assets reflected on the Reference Balance Sheet and the
balance sheet of IPC and its consolidated Subsidiaries contained in the
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003 as
filed with the SEC on August 14, 2003 (other than the capital stock of IP Gas),
except those disposed of or converted into cash after the date of such balance
sheet in the ordinary course;
(c) all notes and accounts receivable;
(d) all raw materials, supplies, work-in-process, finished goods and other
materials included in the inventory of or owned by each Seller or used in the
Business;
(e) all Permits (excluding certificates of public convenience and necessity
issued by the ICC to IPC) held by each Seller or used in the Business;
(f) the IPC Properties;
(g) all Intellectual Property owned by each Seller or used in the Business,
including the name "Illinois Power Company" or any related or similar
tradenames, trademarks, service marks or logos to the extent the same
incorporate the name "Illinois Power" or any variation thereof;
(h) all Software owned by each Seller or used in the Business;
(i) all Contracts to which any Seller is a party or which are used in the
Business;
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(j) all collective bargaining, labor and similar agreements, including
local and side agreements, to which any Seller is a party or which are used in
the Business or listed on Schedule 3.13(a);
(k) all of each Seller's rights, claims or causes of action against third
parties relating to the assets, properties, business or operations of either
Seller arising out of transactions occurring prior to the Closing Date;
(l) all surveys, books and records (including all data and other
information stored on discs, tapes or other media) of Sellers except for records
which by Law Sellers are required to retain in their possession, provided that
Purchaser may to the extent permitted by Law retain copies of such records;
(m) all capital stock, membership interests or other ownership interests in
each of the Purchased Subsidiaries; and
(n) all telephone, telex and telephone facsimile numbers and other
directory listings utilized by either Seller.
Section 2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1,
the Purchased Assets shall not include the following (herein referred to as the
"Excluded Assets"):
(a) any Seller's and its Affiliate's rights set forth in, with respect to
or related to this Agreement and the Seller Ancillary Agreements, including the
right to the Purchase Price and the Promissory Note, if issued, and any other
rights to be transferred, conveyed or assigned or retained by Dynegy and its
Affiliates (other than any IPC Company) pursuant to this Agreement or any
Ancillary Agreement;
(b) any Seller's rights, claims or causes of action against third parties
relating to the assets, properties, business or operations of such Seller with
respect to the Business which might arise in connection with any Excluded
Liabilities or any Excluded Assets;
(c) the name "Dynegy" or any related or similar trade names, trademarks,
service marks or logos to the extent the same incorporate the name "Dynegy" or
any variation thereof;
(d) all corporate minute books and stock transfer books and the corporate
seals of Sellers;
(e) all records which by Law Sellers are required to retain in their
possession, subject to Section 2.1(l);
(f) the Xxxxxx Assets;
(g) all contracts of insurance;
(h) the capital stock of IP Gas;
(i) all Tax Refunds to which any Seller is entitled pursuant to Section
7.5;
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(j) the Intercompany Note; and
(k) the Generation Assets.
Section 2.3 Assumed Liabilities. On the Closing Date, Purchaser shall
deliver to Sellers the Instrument of Assumption, pursuant to which Purchaser
shall assume and agree to discharge all the obligations and liabilities of
Sellers, direct or indirect, known or unknown, absolute or contingent (excluding
the Excluded Liabilities), in accordance with their respective terms and subject
to the respective conditions thereof, including the Existing IPC Obligations.
All of the liabilities and obligations to be assumed by Purchaser hereunder
(excluding any Excluded Liabilities) are referred to herein as the "Assumed
Liabilities." For the avoidance of doubt, Purchaser shall not assume any
liabilities and obligations of Dynegy or any of its Affiliates (other than the
Assumed Liabilities and the liabilities or obligations of Purchased
Subsidiaries), direct or indirect, known or unknown, absolute or contingent.
Section 2.4 Excluded Liabilities. Purchaser shall not assume or be
obligated to pay, perform or otherwise discharge any liabilities or obligations,
direct or indirect, known or unknown, absolute or contingent, for the following
matters (the "Excluded Liabilities"):
(a) any liabilities in respect of Taxes for which any Seller Indemnitor is
liable pursuant to Article VII;
(b) any payables and other liabilities or obligations of any Seller to any
of such Seller's Affiliates except for the items listed on Schedule 5.7;
(c) any non-recurring, out-of-pocket costs and expenses payable to third
parties incurred by any Seller incident to its negotiation and preparation of
this Agreement and its performance and compliance with the agreements and
conditions contained herein, except as otherwise provided in Section 5.17 and
otherwise in this Agreement;
(d) any liabilities or obligations in respect of any Excluded Assets;
(e) any Excluded Environmental Matters;
(f) any Generation Liabilities and the Generation Assets;
(g) item 5 on Schedule 3.9 and item 9 on Schedule 3.4(b); and
(h) any employee benefit plan of Dynegy or either Seller, except to the
extent such liability or obligation is assumed by Purchaser pursuant to Article
VI.
Notwithstanding anything to the contrary in Section 2.3, none of the Excluded
Liabilities shall be Assumed Liabilities for purposes of this Agreement.
Section 2.5 Purchase Price. The aggregate purchase price for the Purchased
Assets shall be $2,225,000,000 plus the assumption of the Assumed Liabilities,
(a) less an amount equal to the Existing IPC Obligations;
17
(b) plus an amount equal to cash and cash equivalents, other than
restricted cash, of the IPC Companies included in the Purchased Assets as of
September 30, 2003 (the "Cash Adjustment");
(c) plus an amount equal to the amount by which the Actual IP Contributions
exceed $17,500,000;
(d) minus an amount equal to the amount by which the Actual IP
Contributions are less than $17,500,000;
(e) plus the amount by which the Final Adjusted Working Capital is greater
than the Target Adjusted Working Capital (if the Final Adjusted Working Capital
is greater than the Target Adjusted Working Capital); and
(f) minus the amount by which the Target Adjusted Working Capital is
greater than the Final Adjusted Working Capital (if the Target Adjusted Working
Capital is greater than the Final Adjusted Working Capital);
(such aggregate amount, the "Purchase Price"), payable as set forth in Section
2.9(a). No later than two Business Days prior to the Closing, Sellers shall
deliver to Purchaser in writing a calculation of the amount of the Existing IPC
Obligations setting forth in reasonable detail the basis for such calculation.
The amount of the Purchase Price payable at the Closing (the "Closing Payment")
shall be equal to $2,225,000,000, less the amount determined pursuant to clause
(a) above, plus the amount of the Cash Adjustment. After the Closing the
Purchase Price shall be adjusted to reflect the difference between the Target
Adjusted Working Capital and the Final Adjusted Working Capital and the
difference between $17,500,000 and the Actual IP Contributions.
Section 2.6 Purchase Price Adjustments.
(a) Promptly following the Closing Date, but in no event later than 30 days
after the Closing Date, Purchaser shall provide to Sellers a certificate
executed on behalf of Purchaser by the President or any Senior Vice President of
Purchaser, dated the date of its delivery, setting forth Purchaser's (i)
proposed Adjusted Working Capital as of the Closing Date (the "Proposed Final
Adjusted Working Capital") and (ii) Purchaser's reasonably detailed calculation
thereof (the "Closing Date Statement"). The Closing Date Statement shall be
prepared in accordance with GAAP (except as noted on Exhibit A) and in a manner
consistent with the policies and principles used in connection with the
preparation of the Reference Balance Sheet (provided, however, that in preparing
the Closing Date Statement, the inclusions, exclusions, adjustments and terms
set forth on Exhibit A shall be given effect).
(b) Purchaser shall provide reasonable cooperation to, and shall cause the
Purchased Subsidiaries and their respective employees and agents to provide
reasonable cooperation to, Sellers and their employees and representatives in
their review of the Closing Date Statement and shall provide Sellers and their
employees and representatives reasonable access to the applicable personnel,
properties, books and records of Purchaser and the Purchased Entities for such
purpose. In the event Sellers dispute the correctness of the Proposed Final
Adjusted Working Capital proposed by Purchaser, Sellers shall notify Purchaser
in writing of its
18
objections within 30 days after receipt of the Closing Date Statement and shall
set forth, in writing and in reasonable detail, the reasons for Sellers'
objections. If Sellers fail to deliver their notice of objections within 30 days
after receipt of the Closing Date Statement, Sellers shall be deemed to have
accepted Purchaser's calculation. Sellers and Purchaser shall endeavor in good
faith to resolve any disputed matters within 15 days after receipt of Sellers'
notice of objections. If Sellers and Purchaser are unable to resolve the
disputed matters, Sellers and Purchaser shall promptly refer the disputed
matters to the Accounting Firm. The Accounting Firm shall offer Sellers and
Purchaser (and their respective employees and representatives) the opportunity
to provide written submissions regarding their positions on the disputed
matters, which opportunity shall not extend more than 15 days after the
submission of the disputed matters to the Accounting Firm. The Accounting Firm
shall deliver a written report resolving all disputed matters and setting forth
the basis for such resolution within 30 days after Sellers and Purchaser have
submitted in writing (or have had the opportunity to submit in writing but have
not submitted) their positions as to the disputed items. The determination of
the Accounting Firm in respect of the correctness of each matter remaining in
dispute shall be conclusive and binding on Sellers and Purchaser. The
determination of the Accounting Firm shall be based solely on the written
submissions by Sellers and Purchaser and shall not be by independent review (it
being understood that the Accounting Firm need not accept in its entirety the
submission of either one party or the other). The Adjusted Working Capital as of
the Closing Date, as finally determined pursuant to this Section 2.6(b) (whether
by failure of Sellers to deliver a timely notice of objection, by agreement of
Sellers and Purchaser or by determination of the Accounting Firm), are referred
to herein as the "Final Adjusted Working Capital".
(c) Promptly (but in no event later than five Business Days) after the
determination of the Final Adjusted Working Capital, (i) if the Final Adjusted
Working Capital is greater than the Target Adjusted Working Capital, Purchaser
shall pay to Sellers the amount of such difference, with simple interest thereon
from the Closing Date to the date of payment at a fixed rate per annum equal to
the Applicable Rate and (ii) if the Final Adjusted Working Capital is less than
the Target Adjusted Working Capital, Dynegy or Sellers shall pay to Purchaser
the amount of such difference, with simple interest thereon from the Closing
Date to the date of payment at a fixed rate per annum equal to the Applicable
Rate.
(d) The fees and expenses, if any, of the Accounting Firm retained in
accordance with this Section 2.6 to resolve any dispute shall be paid one-half
by Purchaser and one-half by Sellers.
(e) Within 10 days after the earlier of the date the parties agree to such
amount or the True-Up Date, (i) Purchaser shall pay to IPC an amount equal to
the amount by which the Actual IP Contributions exceed $17,500,000 or (ii)
Dynegy or Sellers shall pay to Purchaser an amount equal to the amount by which
the Actual IP Contributions are less than $17,500,000. The determination of the
Actual IP Contributions shall be subject to the dispute resolution procedures
set forth in Section 6.2(a)(iv)(E).
(f) In the event the Accounting Firm is requested to resolve any dispute
pursuant to this Section 2.6, any meetings or proceedings involving the
Accounting Firm in connection with such dispute resolution shall be held in New
York, New York.
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Section 2.7 Closing. Upon the terms and subject to the conditions of this
Agreement, the sale and purchase of the Purchased Assets contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of O'Melveny & Xxxxx LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx at
10:00 a.m., New York City time, within four Business Days after the day on which
all conditions to the obligations of the parties set forth in Article VIII are
satisfied or waived, or at such other place or at such other time or on such
other date as Sellers and Purchaser may mutually agree upon in writing (the day
on which the Closing takes place being the "Closing Date"). For all purposes of
this Agreement, including all provisions relating to Taxes and accounting
matters, the Closing shall be deemed to have occurred at 11:59 p.m., Chicago,
Illinois time, on the Closing Date. Without limitation on the other obligations
of the parties pursuant to this Agreement, each party shall use its commercially
reasonable efforts to consummate the Closing as soon as reasonably practicable.
Section 2.8 Closing Deliveries by Sellers. Subject to the fulfillment or
waiver of the conditions set forth in Section 8.1, at the Closing, each Seller
and Dynegy shall deliver, or cause to be delivered, to Purchaser:
(a) the certificates of stock, membership or other ownership interests
evidencing the equity interests of the Purchased Subsidiaries, accompanied by
duly executed and witnessed stock, membership or other ownership interests
powers transferring the Equity Interests of the Purchased Subsidiaries to
Purchaser or its nominee in form reasonably satisfactory to Purchaser;
(b) a receipt for the Purchase Price;
(c) the certificate required to be delivered pursuant to Section 8.2(a);
(d) the stock or unit books, stock or unit ledgers, minute books and
corporate or similar seals of the Purchased Subsidiaries; provided, however,
that any of the foregoing items shall be deemed to have been delivered pursuant
to this Section 2.8(d) if such item has been delivered to, or is otherwise
located at, the offices of a Purchased Subsidiary;
(e) copies of the articles of incorporation of each Seller and Dynegy
certified as of a recent date by the Secretary of State of the State of
Illinois;
(f) copies of the articles of incorporation or other organizational
documents of each of the Purchased Subsidiaries certified as of a recent date by
the Secretary of State of the state of its organization;
(g) certificate of good standing of each Seller and Dynegy issued as of a
recent date by the Secretary of State of the State of Illinois;
(h) certificate of good standing of each of the Purchased Subsidiaries
certified as of a recent date by the Secretary of State of the state of its
organization;
(i) certificate of the Secretary of each Seller, dated the Closing Date, as
to (i) no amendments to the articles of incorporation of such Seller since a
specified date; (ii) the by-laws of such Seller; (iii) the resolutions of the
board of directors of such Seller and the stockholder of such Seller authorizing
the execution, delivery and performance of this Agreement, the Seller
20
Ancillary Agreements and the transactions contemplated hereby and thereby; and
(iv) the incumbency and signatures of the officers of such Seller executing this
Agreement and the Seller Ancillary Agreements;
(j) certificate of the Secretary of Dynegy, dated the Closing Date, as to
(i) no amendments to the articles of incorporation of Dynegy since a specified
date; (ii) the by-laws of Dynegy; (iii) the resolutions of the board of
directors of Dynegy authorizing the execution, delivery and performance of this
Agreement, the Seller Ancillary Agreements and the transactions contemplated
hereby and thereby; and (iv) the incumbency and signatures of the officers of
Dynegy executing this Agreement and the Seller Ancillary Agreements;
(k) all consents and Permits, including those described in Section 8.2(e),
that are received by Sellers or Dynegy in connection with this Agreement on or
prior to the Closing Date; provided, however, that any of the foregoing items
shall be deemed to have been delivered pursuant to this Section 2.8(k) if such
item has been made available to Purchaser prior to the Closing, remains in full
force in effect, and is located at the offices or other IPC Property of any IPC
Company;
(l) a signed resignation by each of the directors of each of the Purchased
Subsidiaries;
(m) the certificate required to be delivered pursuant to Section 7.4;
(n) the Transition Services Agreement (if required to be executed pursuant
to Section 5.21), duly executed by Dynegy or the Subsidiary of Dynegy (other
than any Purchased Subsidiary) that is a party thereto;
(o) the PPA, duly executed by the Subsidiary of Dynegy (other than any
Purchased Subsidiary) that is a party thereto;
(p) the Blackstart Agreement, duly executed by the Subsidiary of Dynegy
(other than any Purchased Subsidiary) that is a party thereto;
(q) the Easement and Facilities Agreement, duly executed by DMG, and any
applicable Affiliate of DMG that owns or has rights to real property subject to
such Agreement;
(r) the Instrument of Assignment, duly executed by each Seller;
(s) subject to the other provisions of this Agreement, including Sections
5.17 and 8.2(g), deeds, prepared by Purchaser with the cooperation of Sellers
and Dynegy, with respect to IPC Owned Real Property, duly executed by the
applicable Seller;
(t) subject to the other provisions of this Agreement, including Sections
5.17 and 8.2(g), assignments, prepared by Purchaser with the cooperation of
Sellers and Dynegy, with respect to Leased Real Property and IPC Other Real
Property (including easements and option rights) to which a Seller is a party,
duly executed by such Seller;
21
(u) the Omnibus Transfer Agreement, prepared by Purchaser with the
cooperation of Sellers and Dynegy (and anticipated to be modified as appropriate
for each applicable county in Illinois to comply with the recording requirements
of each such county), duly executed by Sellers, an original of which will be
delivered for each of the counties in which the IPC Properties are located;
(v) subject to the other provisions of this Agreement, including Section
5.17, assignments, in recordable form, with respect to the registered
Intellectual Property included in the Purchased Assets and pending applications
for the registration or issuance of any Intellectual Property included in the
Purchased Assets, duly executed by the applicable Seller;
(w) subject to the other provisions of this Agreement, including Section
5.17, certificates of title or origin (or like documents) with respect to any
vehicles or other equipment included in the Purchased Assets for which a
certificate of title or origin is required in order to transfer title;
(x) the Securitization Transfer Agreements, duly executed by IPC;
(y) in the event a Triggering Event has not occurred prior to the Closing
Date, the acknowledgement to the Promissory Note, duly executed by IPC;
(z) the Supplemental Indentures, duly executed by IPC and the applicable
trustee;
(aa) an acknowledgement, in form and substance reasonably satisfactory to
Purchaser, from each of the parties to the Generation Agreement and the
Generation Indemnification Termination Agreements that Purchaser is a third
party beneficiary to such agreements;
(bb) subject to the other provisions of this Agreement, including Sections
5.17, 8.2(e), 8.2(f) and 8.2(g), such other instruments of transfer or
conveyance as Purchaser may reasonably request or as may be otherwise necessary
to evidence and effect the sale, assignment, transfer, conveyance and delivery
of the Purchased Assets (including the IPC Other Real Property) to Purchaser and
to vest in Purchaser all of the applicable Sellers' right, title and interest to
the Purchased Assets;
(cc) the applicable transfer tax declarations, duly executed by the
applicable Seller; and
(dd) the Interconnection Agreement, duly executed by DMG.
Section 2.9 Closing Deliveries by Purchaser. Subject to the fulfillment or
waiver of the conditions set forth in Section 8.2, at the Closing, Purchaser and
EED shall deliver, or cause to be delivered to Sellers:
(a) by wire transfer in immediately available funds to a bank account or
bank accounts of Sellers designated by written notice to Purchaser at least two
Business Days before the Closing, an amount in U.S. dollars equal to the Closing
Payment (without reduction or setoff of any kind); provided, however, that if a
Triggering Event has not occurred prior to the Closing
22
Date, the amount payable pursuant to this Section 2.9(a) shall be reduced by
$150,000,000 (representing the principal amount of the Promissory Note);
(b) a receipt for the capital stock of the Purchased Subsidiaries;
(c) the certificate required to be delivered pursuant to Section 8.1(a);
(d) copies of the certificate of incorporation of Purchaser certified as of
a recent date by the Secretary of State of the State of Illinois;
(e) copies of the certificate of formation of EED certified as of a recent
date by the Secretary of State of the State of Delaware;
(f) certificate of good standing of EED and Purchaser issued as of a recent
date by the Secretary of State of the State of their respective organization;
(g) certificate of the Secretary of Purchaser, dated the Closing Date, as
to (i) no amendments to the certificate of incorporation of Purchaser since a
specified date; (ii) the by-laws of Purchaser; (iii) the resolutions of the
board of directors and stockholder of Purchaser authorizing the execution,
delivery and performance of this Agreement, the Purchaser Ancillary Agreements
and the transactions contemplated hereby and thereby; and (iv) the incumbency
and signatures of the officers of Purchaser executing this Agreement and the
Purchaser Ancillary Agreements;
(h) certificate of the Secretary of EED, dated the Closing Date, as to (i)
no amendments to the certificate of formation of EED since a specified date;
(ii) the operating agreement of EED; (iii) the resolutions of the member of EED
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby; and (iv) the incumbency and signatures of EED
executing this Agreement;
(i) the PPA, duly executed by ExGen;
(j) the Blackstart Agreement, duly executed by Purchaser;
(k) the Instrument of Assumption, duly executed by Purchaser;
(l) in the event a Triggering Event has not occurred prior to the Closing
Date, the Promissory Note, duly executed by Exelon, as obligor;
(m) the Supplemental Indentures, duly executed by Purchaser;
(n) the Transition Services Agreement (if required to be executed pursuant
to Section 5.21), duly executed by Purchaser;
(o) the Easement and Facilities Agreement, duly executed by Purchaser;
(p) the Interconnection Agreement, duly executed by Purchaser; and
(q) the Securitization Transfer Agreements, duly executed by Purchaser.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND DYNEGY
As an inducement to Purchaser and EED to enter into this Agreement and the
Purchaser Ancillary Agreements and to consummate the transactions contemplated
hereby and by the Purchaser Ancillary Agreements, except as set forth in the SEC
Reports filed prior to the date hereof, each Seller and Dynegy jointly and
severally hereby represent and warrant to Purchaser and EED as follows:
Section 3.1 Organization and Qualification.
(a) Dynegy is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Illinois. Dynegy has the requisite
corporate power and authority to own, use or lease and to operate its properties
and to carry on its business as it is now conducted. Dynegy is not in default in
the performance, observation or fulfillment of any provision of its articles of
incorporation or by-laws.
(b) Each of the IPC Companies is duly organized, validly existing and in
good standing under the Laws of its jurisdiction of incorporation or
organization, is duly qualified to do business as a foreign corporation or other
entity and is in good standing in each jurisdiction in which the character of
its 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
individually or in the aggregate reasonably be expected to result in a Material
Adverse Effect. Each of the IPC Companies has the requisite corporate or other
similar power and authority to own, use or lease and to operate its properties
and to carry on its business as it is now conducted. Sellers have made available
to Purchaser a complete and correct copy of the articles of incorporation and
by-laws and other constituent documents of each of the IPC Companies, each as
amended to date, and such articles of incorporation, by-laws and other
constituent documents as so made available are in full force and effect. None of
the IPC Companies is in default in the performance, observation or fulfillment
of any provision of its articles of incorporation or by-laws or other
constituent documents.
Section 3.2 Subsidiaries and Investments.
Schedule 3.2 sets forth with respect to each Subsidiary of IPC, the number
of authorized, issued and outstanding shares of capital stock of each class, the
number of issued shares of capital stock held as treasury shares and the number
of shares of capital stock unissued and not reserved for any purpose. IPC,
either directly or indirectly, owns 100% of all issued and outstanding shares of
capital stock, limited liability company interests or other Equity Interests of
such Subsidiaries, and owns no capital stock, other securities, or rights or
obligations to acquire the same, of any other Person. All of the outstanding
shares of capital stock or other Equity Interest of each Subsidiary of IPC are
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. There are no subscriptions, options, rights warrants, calls,
convertible securities, stock appreciation rights, phantom equity, or other
Contracts relating to or obligating any Seller or any of its respective
Affiliates (including such Subsidiary) to sell,
24
redeem, repurchase or otherwise acquire any shares of capital stock or Equity
Interest of any Subsidiary of any Seller.
Section 3.3 Authority.
(a) Dynegy has full corporate power and authority to execute and deliver
this Agreement and the Seller Ancillary Agreements to be executed by Dynegy and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Seller Ancillary Agreements
to be executed by Dynegy and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by Dynegy's board of
directors, and do not require any other authorization or consent of Dynegy, any
of its Affiliates (other than Sellers and Parent) or its stockholders. This
Agreement has been, and upon its execution and delivery, each Seller Ancillary
Agreement to be executed by Dynegy will have been, duly and validly authorized,
executed and delivered by Dynegy and is or will be upon its execution
Enforceable against Dynegy.
(b) Each Seller has full corporate power and authority to execute and
deliver this Agreement and the Seller Ancillary Agreements to be executed by
such Seller and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Seller
Ancillary Agreements to be executed by such Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by such Seller's board of directors and stockholders, and do not
require any other authorization or consent of either Seller or any of its
Affiliates (other than Dynegy). This Agreement has been, and upon its execution
and delivery of each Seller Ancillary Agreement to be executed by the applicable
Seller will have been, duly and validly authorized, executed and delivered by
such Seller and is or will be upon its execution Enforceable against such
Seller.
Section 3.4 Consents and Approvals; No Violation.
The execution and delivery of this Agreement, the Seller Ancillary
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance by Dynegy, Sellers and the Purchased Subsidiaries
of their obligations hereunder and under the Seller Ancillary Agreements do not
and will not:
(a) except as listed in Schedule 3.4(a) or as provided below, require any
writ, waiver, consent, judgment, decree, approval, order, act or Permit of, or
registration, filing with or notification to any Governmental Authority, except
for municipal and county franchises and Permits that are ministerial in nature
and are customarily obtained from Governmental Authorities after closings in
connection with transactions of the same nature as are contemplated hereby;
(b) except as listed in Schedule 3.4(b) or as provided below, conflict
with, result in any violation of or 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 rights under (i) any provision of the articles of
incorporation or by-laws of any Seller or the articles of incorporation or
by-laws (or other similar organizational
25
documents) of any of its Affiliates; or (ii) any provisions of any Contract to
which any IPC Company, Parent or Dynegy is a party or may be subject or bound or
by which any Purchased Assets or the Business may be subject or bound, except in
the case of clause (ii) such conflicts, violations, breaches, defaults or rights
of termination, cancellation or acceleration, guaranteed payments or losses of
rights which, individually or in the aggregate, would not reasonably be expected
(A) to result in a Material Adverse Effect; or (B) to prevent the consummation
of any transactions contemplated hereby or by any Seller Ancillary Agreement;
(c) upon receipt of the approvals and consents listed on Schedule 3.4(a) or
except as provided below, violate the provisions of any Law or Governmental
Order applicable to Dynegy, Parent, any IPC Company, the Purchased Assets or the
Business; or
(d) except as provided below, result in the creation of any Lien other than
Permitted Liens upon any Purchased Asset or properties or assets of any
Purchased Subsidiary, Purchaser or any of its Affiliates or on any Equity
Interests of any Purchased Subsidiary, Purchaser or any of its Affiliates under
any applicable Law or under any Contract to which any IPC Company, Parent or
Dynegy is a party or by which any IPC Company, Parent, Dynegy, the Purchased
Assets or the Business or any of their properties may be subject bound.
Notwithstanding anything to the contrary in this Section 3.4, the
representations and warranties in Sections 3.4(a), 3.4(b), 3.4(c) and 3.4(d) do
not and shall not be construed to address or apply to any writ, waiver, consent,
judgment, decree, approval, order, act, Permit, registration, filing or notice
requirement, conflict, violation, breach, default, right of termination,
purchase, first refusal, cancellation or acceleration or guaranteed payment or
loss of right, violation of Law or Governmental Order or Lien, other than with
respect to any item that is required to be listed (as opposed to actually
listed) on Schedules 3.14 and 3.18, that arises due to or is caused by or
results from or might arise due to or might be caused by or might result from,
the structuring of the transactions contemplated hereby as an asset sale instead
of a sale of the stock of IPC.
Section 3.5 IPC Reports.
The filings required to be made by IPC since January 1, 2003, under PUHCA,
applicable Illinois Laws, the FPA and the Natural Gas Act have been timely filed
with the appropriate Governmental Authority and, as of the date of such filings,
complied in all material respects with all applicable requirements of each such
Law. Copies of such filings have been made available to Purchaser. IPC has filed
with, or furnished to, the SEC, as the case may be, each form, registration
statement, report, schedule, proxy or information statement and other document
(including exhibits and amendments thereto) required to be filed or furnished to
with the SEC since January 1, 2003 under the Securities Act or the Exchange Act,
as applicable (collectively, the "IPC SEC Reports"). Dynegy has filed with, or
furnished to, the SEC, as the case may be, and made available to Purchaser,
copies of each form, registration statement, report, schedule, proxy or
information statement and other document (including exhibits and amendments
thereto) required to be filed with or furnished to the SEC since January 1, 2003
under the Securities Act or the Exchange Act (together with the IPC SEC Reports,
the "SEC Reports"). As of the respective dates that the IPC SEC Reports were
filed, or furnished, as the case may be, each IPC 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;
26
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 materially misleading. No event has occurred between the date of the most
recent IPC SEC Report and the date hereof that would require the filing of a
Current Report on Form 8-K by either Seller or Dynegy.
Section 3.6 IPC Financial Statements.
Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of IPC (including any related notes
and schedules) included (or incorporated by reference) in its Annual Reports on
Form 10-K for each of the two fiscal years ended December 31, 2001 and 2002, and
any subsequent IPC SEC Report, has been prepared from, and is in accordance
with, the books and records of IPC, complies in all material respects with
applicable accounting requirements and with the SEC's published rules and
regulations, has been prepared in accordance with GAAP (except in the case of
unaudited statements, as permitted under Form 10-Q under the Exchange Act)
applied on a consistent basis (except as may be indicated in the notes thereto)
and fairly presents in all material respects in conformity with GAAP applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of IPC as of the date thereof and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of IPC 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 3.7 Absence of Certain Changes; Absence of Undisclosed Liabilities.
(a) Except as listed in Schedule 3.7 or as permitted by this Agreement or
the Ancillary Agreements, since June 30, 2003: (a) the Business has been
conducted in all material respects in the ordinary course; (b) through the date
hereof there has not been any Material Adverse Effect; (c) except for
declarations, set asides and payments of dividends with respect to regular
quarterly cash dividends with respect to the preferred stock of IPC in
accordance with its terms, 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 any IPC Company or any repurchase, redemption or other
acquisition by IPC of any outstanding shares of capital stock or other
securities of, or other ownership interests in, any IPC Company; (d) there has
not been any amendment or modification of any term of any outstanding security
of any IPC Company; (e) there has not been any change in any method of
accounting or accounting principles, practices or policies by any IPC Company,
except for any such change required because of a concurrent change in GAAP or
the applicable rules and regulations of the SEC; (f) except as required by
applicable Law, no Tax Return has been prepared or filed by or with respect to
Sellers, the Business, any Purchased Asset or any Purchased Subsidiary that is
inconsistent with past practice, no position has been taken, election made, or
method adopted by or with respect to any Seller or any Purchased Subsidiary that
is inconsistent with positions taken, elections made or methods used in
preparing or filing similar Tax Returns with respect to such Seller or Purchased
Subsidiary in prior periods, no Tax Sharing Arrangement, Tax indemnity Contract
or similar Contract or arrangement affecting any Seller or any Purchased
Subsidiary has been entered into, amended or modified by any Seller or any
Purchased Subsidiary, and no payments under any such Tax Sharing Arrangement,
Tax indemnity Contract or similar Contract have been made that
27
are outside the ordinary course of business, inconsistent with past practice or
inconsistent with the terms thereof; and (g) there has not been any damage,
destruction or other casualty loss with respect to any Purchased Assets or the
Business that has a value of at least $5,000,000 or is material in the aggregate
to the Business or the Purchased Assets which is not covered by insurance.
(b) None of the IPC Companies has any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of any nature, except those which:
(i) are accrued or reserved against in the most recent audited consolidated
financial statements of IPC or reflected in the notes thereto; (ii) were
incurred in the ordinary course; (iii) have been discharged or paid in full;
(iv) are not required to be reflected in the consolidated financial statements
or the notes thereto of IPC prepared in accordance with GAAP consistently
applied; or (v) would not reasonably be expected to be in excess of $25,000,000
in the aggregate.
Section 3.8 Taxes.
(a) Except as listed in Schedule 3.8:
(i) Each Seller and each Purchased Subsidiary has timely filed or will
timely file or cause to be timely filed (taking into account all extensions
of due dates) all material Non-Income Tax Returns required by applicable
Law to be filed prior to or as of the Closing Date. All such material
Non-Income Tax Returns are or will be true, complete and correct and
disclose all Taxes required to be paid for the periods covered thereby.
(ii) Each Seller and each Purchased Subsidiary has timely paid,
whether or not shown on any Non-Income Tax Return or, where payment is not
yet due, will have established as a liability or reserve taken into account
in determining Final Adjusted Working Capital an adequate accrual,
determined in accordance with GAAP (as described in paragraph 1 of Exhibit
A), for the payment of, all Non-Income Taxes imposed on it or for which it
may otherwise be liable.
(iii) All deficiencies asserted in writing or assessments made as a
result of any Audit of the Non-Income Tax Returns referred to in clause (i)
have been paid in full.
(iv) No Audit is pending or, to the Knowledge of Sellers, threatened
with respect to any Non-Income Tax Returns filed by or with respect to, or
Non-Income Taxes due from or with respect to, any Seller or any Purchased
Subsidiary. To the Knowledge of Sellers, with respect to Taxes for all
taxable periods beginning on or after January 1, 2000, no deficiency or
adjustment for any Non-Income Taxes has been threatened, proposed, asserted
or assessed against any Seller or any Purchased Subsidiary that is
currently outstanding. There are no Liens for Taxes upon the Purchased
Assets or assets of any Purchased Subsidiary, except Liens for current
Taxes not yet delinquent.
(v) No Seller or Purchased Subsidiary has given or been requested to
give any waiver of statutes of limitations relating to the payment of
Non-Income Taxes or has executed powers of attorney with respect to
Non-Income Tax matters which will be
28
outstanding as of the Closing Date. No Seller or Purchased Subsidiary is
currently the beneficiary of any extension of time within which to file any
Non-Income Tax Return.
(vi) No Seller or Purchased Subsidiary (or any Affiliate thereof) has
received any Tax rulings, made any request that is still pending for
rulings, or entered into any closing agreements relating to any Seller or
any Purchased Subsidiary which would reasonably be expected to affect any
Non-Income Tax liability relating to the Business, any Purchased Asset or
any Purchased Subsidiary for any period after the Closing Date.
(vii) All Taxes that any Seller or any Purchased Subsidiary is
required by Law to withhold or to collect for payment have been duly
withheld and collected and have been timely paid to the appropriate
Governmental Authority or, to the extent due after the Closing Date, will
be reflected as a liability or reserve, determined in accordance with GAAP
(as described in paragraph 1 of Exhibit A), taken into account in
determining Final Adjusted Working Capital.
(viii) All Tax sharing, Tax indemnity or similar Contracts relating to
the Business, any Purchased Asset or any Purchased Subsidiary (other than
this Agreement) will terminate prior to the Closing and neither Purchaser
nor any Purchased Subsidiary will have any liability thereunder on or after
the Closing Date except to the extent of Non-Income Tax liabilities
included in the calculation of Final Adjusted Working Capital.
(ix) With respect to the Purchased Assets or any assets of a Purchased
Subsidiary, no Seller or Purchased Subsidiary is properly treated as the
owner of any such property for Income Tax purposes pursuant to Section
168(f)(8) of the Code (as in effect prior to its amendment by the Tax
Reform Act of 1986) or corresponding provisions of state or foreign Income
Tax laws that is owned by any other person for Non-Income Tax purposes.
(x) Each of the Purchased Subsidiaries (A) is disregarded for federal
income tax purposes as an entity separate from IPC, (B) was formed through
a contribution of assets from IPC or another Purchased Subsidiary, (C) is
not a successor to any entity and (D) has no liability for Taxes of IPC,
any member of any Company Group or any other Person.
(xi) The information given to the IRS in connection with the issuance
of the Securitization Tax Ruling was true, correct and complete in all
material respects at the time given and at the time the transactions
contemplated by the Securitization Tax Ruling were effected. There has been
no material breach of any representation or covenant provided to the IRS in
connection with the Securitization Tax Ruling and the transactions
described in the Securitization Tax Ruling have been carried out in
accordance with their terms in all material respects.
(b) No transaction contemplated by this Agreement is subject to withholding
under Section 1445 of the Code (relating to "FIRPTA").
29
(c) Except as listed in Schedule 3.8, no payment or other benefit, and no
acceleration of the vesting of any options, payments or other benefits, will be,
as a result of the transactions contemplated by this Agreement, an "excess
parachute payment" to a "disqualified individual" as those terms are defined in
Section 280G of the Code and the Treasury regulations thereunder.
Section 3.9 Litigation.
Except as disclosed in Schedule 3.9: (a) there are no outstanding
Governmental Orders or Actions pending or, to the Knowledge of Sellers,
threatened against or affecting any IPC Company or any of their present or
former directors or officers, any Purchased Assets or the Business that would
individually or in the aggregate reasonably be expected to exceed $30,000,000 in
costs, expenses, disbursements, losses, obligations, liabilities, settlement
payments, awards, judgments, fines penalties and damages, which determination of
exposure shall be made consistent with IPC policies for establishing reserves in
accordance with GAAP; (b) no IPC Company is permanently or temporarily enjoined
by any Governmental Order from engaging in or continuing any conduct or practice
in connection with the Business or the Purchased Assets, nor, to the Knowledge
of Sellers, is any investigation pending by any Governmental Authority with
respect to any of the IPC Companies, the Business or any of the Purchased
Assets; and (c) there is no Governmental Order enjoining any IPC Company from
taking or requiring any IPC Company to take any action of any kind with respect
to the Business or any of the Purchased Assets. Notwithstanding the foregoing,
no representation or warranty in this Section 3.9 is made with respect to ERISA
matters, environmental matters, labor and employee matters and intellectual
property matters.
Section 3.10 Employee Benefit Plans.
(a) Schedule 3.10 lists each written "employee benefit plan," as defined in
Section 3(3) of ERISA, each stock option, stock purchase, stock ownership,
deferred compensation, severance, performance, bonus, incentive, vacation or
holiday pay plan, policy, understanding or arrangement and each other employee
benefit plan or arrangement (including fringe benefit plans or arrangements)
that is maintained on the date hereof or otherwise contributed to by any IPC
Company for the benefit of Employees ("Employee Benefit Plans"). In addition,
Schedule 3.10 lists each material written employment, compensation, and
consulting agreement or arrangement, and any agreement or arrangement associated
with a change in ownership or the sale of substantially all the assets of any
IPC Company, in each case, entered into with any Employee ("Compensation
Arrangements"). There are no non-qualified deferred compensation plans or
arrangements pursuant to which any Employee is entitled to benefits. The term
"Employees" shall mean all Active Employees, Other Plan Participants and
Retirees, as those terms are used in Article VI. Sellers have made available to
Purchaser copies of (i) each Employee Benefit Plan and each Compensation
Arrangement (or, in the case of any material unwritten Employee Benefit Plans or
Compensation Arrangements, descriptions thereof); (ii) the most recent annual
report on Form 5500 filed with the applicable Governmental Authority with
respect to each Employee Benefit Plan (if any such report was required by
applicable Law); (iii) the most recent summary plan description for each
Employee Benefit Plan for which such a summary plan description is required by
applicable Law; (iv) each trust agreement or annuity contract relating to any
Seller Pension Plan or Seller VEBA; and (v) the most recent actuarial report for
any Seller Pension Plan. Each report described in clause (v) of the preceding
sentence accurately describes
30
the funded status of the plan to which it relates as of the date indicated in
such report and there has been no material change in the investment strategy of
such plan since such date. To the knowledge of Sellers and except as set forth
on Schedule 3.10, no IPC Company maintains any material oral Employee Benefit
Plan or Compensation Arrangement. For purposes of the preceding sentence, the
term "knowledge" means the actual knowledge of the President and the
Director-Human Resources of IPC.
(b) Except for matters that are listed in Schedule 3.10 or would not result
in a material liability to Purchaser: (i) each Employee Benefit Plan has been
administered in accordance with its terms; (ii) each IPC Company and all the
Employee Benefit Plans are in compliance with all Laws applicable to the
Employee Benefit Plans, including ERISA and the Code (or any similar applicable
Law of a country other than the United States); and (iii) to the Knowledge of
Sellers, there are no investigations by any Governmental Agency, termination
proceedings or other Actions against or directly involving any Employee Benefit
Plan or asserting any rights or claims to benefits under any Employee Benefit
Plan (except claims for benefits payable in the normal operation of the Employee
Benefit Plans).
(c) Except as listed in Schedule 3.10, (i) all material contributions to,
and payments from, any Seller Pension Plan and Seller VEBA that may have been
required to be made in accordance with the terms of such plans or any applicable
collective bargaining agreement have been timely made; (ii) no person has failed
to make a required installment or any other payment required under Section 412
of the Code to any Seller Pension Plan before the applicable due date; and (iii)
none of the IPC Companies or any of their respective Affiliates has contributed
to (or been required to contribute to) a multiemployer plan, within the meaning
of Section 3(37) of ERISA, since February 1, 2000 for the benefit of Employees.
(d) Except as set forth on Schedule 3.10, (i) each Employee Benefit Plan
that is intended to qualify under Section 401(a) of the Code has been the
subject of a determination letter from the IRS to the effect that such plan is
qualified and the related trust is exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and, to the Knowledge of Sellers, revocation has not
been threatened; and (ii) no event has occurred that would subject any Employee
Benefit Plan to any material Tax under Section 511 of the Code. Sellers have
made available to Purchaser a copy of the most recent determination letter
received with respect to each Employee Benefit Plan for which such a letter has
been issued, as well as a copy of any pending application for a determination
letter. Sellers have also made available to Purchaser a list of all amendments
as to which a favorable determination letter has not yet been received.
(e) Sellers and their respective Affiliates have not made or granted or
committed to make or grant any material benefit improvements under any Seller
Pension Plan (except as provided in the plan documents and/or Memorandum of
Agreement dated May 29, 2003 and the Tentative Agreement of Joint IBEW
Negotiating Committee and Illinois Power dated July 15, 2003 (the "Memoranda of
Agreement") made available to Purchaser) to which Transferred Employees are or
may become entitled which are not reflected in the most recent actuarial report
provided by Sellers to Purchaser.
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(f) Except for matters that are listed on Schedule 3.10, with respect to
each Seller Pension Plan, (i) no proceeding has been initiated to terminate such
plan; (ii) there has been no "reportable event" (as such term is defined in
Section 4043(c) of ERISA) prior to the date hereof other than reportable events
for which notice is waived under applicable regulations; (iii) no "accumulated
funding deficiency" (within the meaning of Section 412 of the Code), whether or
not waived, has occurred; and (iv) no person has provided or is required to
provide security to such plan under section 401(a)(29) of the Code due to a plan
amendment that results in an increase in current liability.
(g) Dynegy, Sellers and their respective Affiliates have complied with the
health care continuation requirements of Part 6 of Title I of ERISA in all
material respects. Except as set forth in Schedule 3.10, the consummation of the
transaction contemplated by this Agreement and by the Seller Ancillary
Agreements will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any compensation or
benefits payable to or in respect of any person rendering services to any IPC
Company. The terms of the plan documents, summary plan descriptions and other
written documents relating to each Employee Benefit Plan that provides retiree
health or life insurance benefits for managerial employees permit such plans to
be amended or terminated at any time by Sellers or their Affiliates.
(h) No Seller nor any of their respective Affiliates nor, to the best
knowledge of Sellers and their respective Affiliates, any other "disqualified
person" (within the meaning of Section 4975 of the Code) or "party in interest"
(within the meaning of Section 3(14) of ERISA) has taken any action with respect
to any Employee Benefit Plan which could subject Purchaser to the penalty or tax
under Section 502(i) or Section 502(l) of ERISA or Section 4975 of the Code.
(i) None of the IPC Companies nor any of their respective Affiliates has
taken any action or failed to take any action as of the date hereof that will
result in any potential liability, whether direct or indirect, contingent or
otherwise, to Purchaser under Section 4063, 4064, 4069, 4204 or 4212(c) of
ERISA.
Section 3.11 Environmental Matters. Except as listed in Schedule 3.11:
(a) The IPC Companies, the Purchased Assets and the Business are in
compliance with all Environmental Laws, except for any violations that would not
individually or in the aggregate reasonably be expected to result in a Material
Adverse Effect.
(b) No IPC Company has caused or allowed the generation, treatment,
manufacture, processing, distribution, use, storage, Release, transport or
handling of any Hazardous Substances at any of the Purchased Assets, except for
any such action or actions that would not individually or in the aggregate
reasonably be expected to result in a Material Adverse Effect.
(c) To the Knowledge of Sellers, no IPC Company or any of its Affiliates
has received any written notice from any Governmental Authority or third party
or any other written communication alleging or concerning any material violation
by any IPC Company of any Environmental Law, or responsibility or liability of
any IPC Company under, any Environmental Law, or in connection with the Release,
threatened Release or presence of any Hazardous
32
Substances at, on, or beneath, to, from or in the indoor or outdoor environment
at any Purchased Asset (including soil, sediment, surface water, groundwater,
air or any component of a structure), which would reasonably be expected to
result in a Material Adverse Effect. To the Knowledge of Sellers, there are no
pending or threatened Actions with respect to the Businesses or the Purchased
Assets alleging or concerning any violation of or responsibility or liability
under any Environmental Law or the Release, threatened Release or presence of
any Hazardous Substances at, on, beneath, to, from or in the indoor or outdoor
environment at any Purchased Asset (including soil sediment, surface water,
groundwater, air or any component of a structure) that, if adversely determined,
would reasonably be expected to result individually or in the aggregate in a
Material Adverse Effect.
(d) The IPC Companies hold and are in material compliance with all Permits
from all Governmental Authorities under all Environmental Laws required for the
operation of the Business and the Purchased Assets, except Permits the failure
of which to hold would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect. To the Knowledge of Sellers, there
are no pending or threatened Actions seeking to modify, revoke or deny renewal
of any of such Permits.
(e) To the Knowledge of Sellers, no claims have been asserted or threatened
against any of the IPC Companies for any personal injury (including wrongful
death) or property damage (real or personal) arising out of exposure to
Hazardous Substances used, handled, generated, transported, disposed of or
Release at any of the Purchased Assets, that, if adversely determined, would
reasonably be expected to result in a Material Adverse Effect.
(f) None of the IPC Companies is subject to any outstanding written
Governmental Order or settlement agreement with any Person relating to any of
the Purchased Assets or the Business, in each case with respect to any
Environmental Matters that, if adversely determined, would reasonably be
expected to result in a Material Adverse Effect.
(g) To the Knowledge of Sellers, no Purchased Assets are listed or proposed
for listing on the NPL, or on the Comprehensive Environmental Response
Compensation and Liability Information System List ("CERCLIS") or any similar
state list of sites.
Section 3.12 Compliance with Applicable Laws.
(a) Sellers hold all Permits necessary to entitle Sellers to own or lease,
operate and use the Purchased Assets and for the lawful conduct of the Business
other than any Permit for which the failure of a Seller to hold such Permit
would not individually or in the aggregate reasonably be expected to have a
Material Adverse Effect (collectively, the "Material Permits"). Schedule 3.12
sets forth a list and brief description of each Material Permit. Each Material
Permit is valid and in full force and effect. Except as set forth in Schedule
3.12, each Seller is in compliance in all material respects with its Material
Permits. The Business is not being, and none of the IPC Companies or their
respective Affiliates has received any notice from any Person that the Business
is being, conducted in violation of any Law, including any Law relating to
occupational health and safety, except for possible violations that would not
individually or in the aggregate reasonably be expected to result in a Material
Adverse Effect. Notwithstanding the foregoing, no representation or warranty in
this Section 3.12 is made with respect to ERISA
33
matters, environmental matters, labor and employee matters and intellectual
property matters. In no event shall Material Permits be deemed to include any
item which is a Material Contract.
(b) Each of the IPC Companies is in compliance with regulations under
Illinois Law governing its operations as an Integrated Distribution Company,
under 83 Illinois Administrative Code Part 452, to the extent applicable.
(c) Schedule 3.12(c) sets forth a list of each municipal and county
franchise agreement to which any IPC Company is a party as of the date hereof.
Section 3.13 Labor Matters; Employees.
(a) Schedule 3.13(a) lists all collective bargaining, labor or similar
agreements, including material local or side agreements (other than Employee
Benefit Plans as set forth in Section 3.10), in effect to which any Seller is a
party or by which any IPC Company is bound or otherwise used in the Business).
Copies of all such agreements have been made available to Purchaser. Since
February 1, 2000, each IPC Company has complied in all material respects with
its obligations related to, and is not in material default under, any collective
bargaining agreement to which any IPC Company is a party or by which any IPC
Company, the Business or the Purchased Assets may be subject or bound. To the
Knowledge of Sellers, there are currently no union organizing activities
relative to any IPC Company, the Purchased Assets or the Business among the
current employees of any IPC Company. Other than ordinary grievances concerning
individual employees that are being resolved solely pursuant to internal
grievance procedures and immaterial and ordinary course Actions pending or, to
the Knowledge of Sellers, threatened involving employment matters, (i) there is
no labor strike, dispute, slowdown, work stoppage or lockout actually pending
or, to the Knowledge of Sellers, threatened against or directly and adversely
affecting any IPC Company, the Purchased Assets or the Business; (ii) there is
no unfair labor practice charge or complaint against any IPC Company or
involving the Purchased Assets or the Business pending or, to the Knowledge of
Sellers, threatened before the National Labor Relations Board or any similar
state or foreign agency; and (iii) there is no pending or, to the Knowledge of
Sellers, threatened employee or governmental claim or investigation regarding
employments matters, including any charges to the Equal Employment Opportunity
Commission or state employment practice agency, or, to the Knowledge of Sellers,
investigations regarding Fair Labor Standards Act compliance, audits by the
Office of Federal Contractor Compliance Programs.
(b) Since February 1, 2000, no IPC Company 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 IPC Company; or (ii) a "mass layoff" (as defined in the WARN Act) affecting
any site of employment or facility of any IPC Company, nor has any IPC Company
been engaged in layoffs or employment terminations sufficient in number to
trigger application of any similar state or local Law.
Section 3.14 Material Contracts. Except as set forth in Schedule 3.14:
(a) No IPC Company is a party to or bound by: (i) any Contract that
provides for remaining annual payments in an amount in excess of $5,000,000;
(ii) any Contract that restricts
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any IPC Company, the Purchased Assets, the Business or any Person who after the
Closing would be an Affiliate of such IPC Company from engaging in any line of
business or competing with any Person; (iii) any Contract limiting the right of
any IPC Company to pay dividends or distributions to its shareholders; (iv) any
Contract that would impose or expressly permit the imposition of, or require any
Person to impose or expressly permit the imposition of, upon and due to the
consummation of the transactions contemplated by this Agreement or any Ancillary
Agreement, any Lien other than Permitted Liens upon any of the businesses,
assets or properties of Purchaser or any of its Affiliates (other than the
Purchased Assets); or (v) any Contract that is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the General Rules and
Regulations promulgated by the SEC) of the IPC Companies, the Purchased Assets
and the Business (such Contracts, collectively, the "Material Contracts").
Notwithstanding the foregoing, no representation or warranty in this Section
3.14 is made with respect to, and "Material Contracts" shall be deemed not to
include any Contract relating to, ERISA matters, environmental matters, labor
and employee matters, personal property, intellectual property matters and real
property matters. In no event shall Material Contracts be deemed to include any
item which is a Material Permit.
(b) Each IPC Company that is a party to a Material Contract has performed
in all material respects all obligations to be performed by it and has observed
in all material respects all terms to be observed by it under such Material
Contract. No Seller nor any of its Affiliates has received any written notice of
cancellation or threatened cancellation relating to a Material Contract or has
any Knowledge that a Material Contract is likely to be cancelled, other than
upon any expiration of such Material Contract in accordance with its terms.
(c) Except as set forth in Schedule 3.14, each Material Contract is a valid
and binding agreement, is in full force and effect, is Enforceable by the IPC
Company that is a party thereto against each other party thereto in accordance
with its terms and, except for those Material Contracts which by their terms
will expire prior to the Closing (or are otherwise terminated prior to the
Closing in the ordinary course of business or in accordance with the provisions
of this Agreement). To the Knowledge of Sellers, each other party to a Material
Contract is not in default or in breach in any material respect of any such
Material Contract.
Section 3.15 Intellectual Property.
(a) Schedule 3.15 contains a complete list of all issued patents,
registered copyrights, trademark registrations, domain name registrations, and
applications for any of the foregoing that have been issued to, assigned to or
filed by any of the IPC Companies or used in the Business, except for such
issued patents, registered copyrights, trademark registrations, domain name
registrations, and applications for any of the foregoing, the failure of which
to have would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect. Except as would not individually or in the
aggregate reasonably be expected to result in a Material Adverse Effect, the IPC
Companies have all rights to the Intellectual Property owned, licensed or used
by them as are necessary to conduct the Business.
(b) Except as disclosed in Schedule 3.15, (i) all material patents,
trademark registrations, service xxxx registrations and internet domain name
registrations issued to, assigned to or filed by any of the IPC Companies or
used in the Business are in full force and
35
effect and all applications for any such patent, trademark and service xxxx are
pending without challenge (other than office actions which may have been issued
by the U.S. Patent and Trademark Office or its foreign equivalents); (ii) the
material Intellectual Property in the form of Contracts is Enforceable by the
IPC Company that is a party to such Contracts; and (iii) the IPC Companies have
the right to bring actions for infringement or unauthorized use of the material
Intellectual Property owned by the IPC Companies.
(c) Except as disclosed in Schedule 3.15, (i) during the three years before
the Closing Date, no written claim has been made or asserted against any of the
IPC Companies that alleges any Intellectual Property owned or used by any of the
IPC Companies or used in the Business and material to their business infringes
the Intellectual Property of another Person; (ii) no litigation, arbitration or
other proceeding is currently pending or, to the Knowledge of Sellers,
threatened against any of the IPC Companies or any of their respective
Affiliates with respect to any material Intellectual Property owned or used by
or used in the Business; (iii) during the three years before the Closing Date,
no claim has been made or asserted against any of the IPC Companies or any of
their respective Affiliates that challenges the validity, enforceability or
ownership of any material Intellectual Property owned or used by the IPC
Companies or used in the Business; (iv) to the Knowledge of Sellers, the conduct
of the Business does not violate, conflict with or infringe the Intellectual
Property owned by any other Person; and (v) to the Knowledge of Sellers, there
is no continuing infringement by any other Person of the material Intellectual
Property owned or used by any of the IPC Companies or used in the Business.
(d) Schedule 3.15 contains a complete list of all material Software owned
or licensed by any of the IPC Companies or used in the Business. Except as
disclosed in Schedule 3.15 or as would not individually or in the aggregate
reasonably be expected to result in a Material Adverse Effect, the IPC Companies
either: (i) own the entire right, title and interest in and to the Software used
in the Business free and clear of Liens except for Permitted Liens; or (ii) have
the right and license to use the same in the conduct of the Business. Except as
would not individually or in the aggregate reasonably be expected to result in a
Material Adverse Effect, the IPC Companies have all rights to the Software owned
licensed or used by them or in the Business as are necessary to conduct their
Business.
Section 3.16 Real Property.
The scope of the rights in the IPC Properties are sufficient for the
operation of the Business in compliance in all material respects with all
applicable Laws. No IPC Company owns, leases or uses in connection with its
business any real property other than the IPC Properties, except for real
property comprising a portion of the Excluded Assets. Except as set forth on
Schedule 3.16 or would not individually or in the aggregate reasonably be
expected to result in a Material Adverse Effect: (i) the IPC Companies have
good, valid and insurable fee simple title to the IPC Owned Real Property, a
good, valid and insurable leasehold interest in the Leased Real Property and
easements or other similar rights in, and quiet enjoyment of, the IPC Other Real
Property, in each case free and clear of any Liens other than Permitted Liens;
(ii) all improvements, occupancy and use of such improvements, occupancy and use
of the IPC Properties, and all business operations thereon conform in all
material respects with all applicable zoning, building, fire and safety Laws,
and none of the IPC Properties has received notice of noncompliance with any
such Laws as of the date hereof; (iii) each lease, sublease,
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easement and license comprising any portion of the IPC Properties is a valid and
binding agreement in full force and effect and Enforceable by the IPC Company
thereto against the other parties thereto, no material default by any of the IPC
Companies or, to the Knowledge of Sellers, by any other party exists under any
provision thereof and no condition or event exists which after notice or lapse
of time or both would constitute a material default thereunder by any of the IPC
Companies or, to the Knowledge of Sellers, any other party; (iv) there are, to
the Knowledge of Sellers, no disputes, oral agreements, or forbearance programs
in effect with respect to any such lease, sublease, easement or license; (v) no
IPC Company nor any IPC Property is in material breach or default under, or in
violation of or noncompliance with, any such Liens and, to the Knowledge of
Sellers, no event has occurred and no condition or state of facts exists which,
with the passage of time or the giving of notice or both, would constitute such
a breach, default, violation or noncompliance; (vi) none of the IPC Companies
has received written notice and Sellers have no Knowledge of (A) any default by
a landlord or other Person under any fee mortgage or other Lien that is superior
to any lease, sublease, easement or license comprising a portion of the IPC
Properties or (B) any claim of paramount title by any third party claiming the
right to terminate any lease, sublease, easement or license comprising a portion
of the IPC Properties; (vii) the IPC Companies have legal and practical access
to all roads and utilities needed for the conduct of their business on the IPC
Properties; (viii) none of the IPC Companies has received and, to the Knowledge
of Sellers, there do not exist any adverse claims to such access that would
adversely affect the use currently being made of such access by the IPC
Companies; (ix) there are no encroachments onto IPC Properties of any
improvements on any adjoining property and the improvements are not in violation
of applicable setback requirements, zoning laws, and ordinances (including being
classified as a "permitted non-conforming use" or "permitted non-conforming
structure"); and (x) the IPC Properties are not located within any flood plain
or subject to any similar type of restrictions for which any permit, license or
additional insurance may be necessary for the use and operation thereof, there
are no condemnation or similar proceedings relating to any of the IPC
Properties. The transfer of the Generation Assets pursuant to the Asset Transfer
Agreements (including for these purposes the Generation Agreement) were
consummated in compliance in all material respects with all Laws, Permits and
any approvals of any Governmental Authority.
Section 3.17 Brokers.
No broker, finder or investment banker (other than Credit Suisse First
Boston LLC) is entitled to any brokerage, finder's fee or other fee or
commission payable by Dynegy or Sellers or any of their respective Affiliates in
connection with the transactions contemplated hereby and by the Ancillary
Agreements.
Section 3.18 Personal Property.
Schedule 3.18 contains a list of each Contract or right under which any of
the IPC Companies is lessee, or holds or operates, any machinery, equipment,
vehicle or other tangible personal property owned by a Person other than the IPC
Companies, except those that are terminable by the IPC Company party thereto
without penalty on 60 days or less notice and those that provide for annual
payments of $500,000 or less.
Section 3.19 Availability of Assets; Affiliate Transactions.
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(a) Except as set forth in Schedule 3.19 and except for the Excluded
Assets, the Purchased Assets constitute all the material assets used in the
Business.
(b) Schedule 3.19 sets forth a description of all material services
provided by any Affiliate of any of the IPC Companies (other than another IPC
Company) to any of the IPC Companies with respect to the Business utilizing
either (i) assets not included in the Purchased Assets or (ii) employees that
are not Active Employees, and the manner in which the costs of providing such
services have been allocated to the Business.
Section 3.20 Title to Property.
Sellers have good and marketable title to all of the material Purchased
Assets (other than the IPC Properties, which are covered by Section 3.16), free
and clear of all Liens, except for Permitted Liens.
Section 3.21 Bank Accounts; Powers of Attorney; Minute Books.
(a) Schedule 3.21 lists a complete and correct list of all bank accounts
and safe deposit boxes of each of the Purchased Subsidiaries and by each Seller
(in the case of a Seller, used in the Business) and persons authorized to sign
or otherwise act with respect thereto and a complete and correct list of all
persons holding a general or special power of attorney granted by any of the IPC
Companies and a complete and correct copy thereof.
(b) The minute books of each of the IPC Companies have been made available
to Purchaser. Such minute books contain true and complete records of all
meetings and other corporate action taken by the board of directors and
stockholders of the each of the IPC Companies during the past three years.
Section 3.22 Regulation as a Utility.
IPC is regulated as a public utility by the State of Illinois. Except as
set forth in the previous sentence, neither IPC nor any "subsidiary company" or
"affiliate" of IPC is subject to regulation as a public utility or public
service company (or similar designation) by any other state in the United States
or any foreign country. Dynegy and Parent are public utility holding companies
as defined by PUHCA, but currently claim exemptions from registration under
PUHCA under Section 3(a)(1) of PUHCA pursuant to orders of the SEC issued
thereunder.
Section 3.23 Regulatory Proceedings.
Except as listed on Schedule 3.23, and other than fuel adjustment or
purchase gas adjustment, manufactured gas plant remediation expense adjustment
or similar adjusting rate mechanisms, none of the IPC Companies all or part of
whose rates or services are regulated by a Governmental Authority (a) is a party
to any rate proceeding before a Governmental Authority that would reasonably be
expected to result in orders that, individually or in the aggregate, would have
a Material Adverse Effect; (b) has rates that have been or are being collected
subject to refund, pending final resolution of any rate proceeding pending
before a Governmental Authority or on appeal to a court; or (c) is a party to
any Contract with any Governmental Authority (other
38
than franchise, customer and service area agreements) imposing conditions on
rates or services in effect as of the date hereof.
Section 3.24 Hedging.
Except as set forth in the Schedule 3.24, none of the IPC Companies engages
in any natural gas, electricity or other futures or options trading or is a
party to any price swaps, xxxxxx, futures or similar instruments, except for
transactions and Contracts entered into, or hedge Contracts, for the purchase or
sale of electricity or hydrocarbons, transmission rights and ancillary services
or other financial xxxxxx and swaps to which the any of the IPC Companies is a
party that, to the Knowledge of Sellers, are in accordance with the general
practices of other similarly situated companies in the industry.
Section 3.25 Compliance with Xxxxxxxx-Xxxxx Act.
IPC represents that it has responsibility for establishing and maintaining
internal control over financial reporting, as defined in the Xxxxxxxx-Xxxxx Act,
of IPC through the Closing. IPC represents that it will perform any required
assessment through the Closing to support the requirements of Section 404 of the
Xxxxxxxx-Xxxxx Act. IPC will deliver to Purchaser the documentation supporting
such assessment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND EED
As an inducement to Sellers and Dynegy to enter into this Agreement and the
Seller Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby, each of Purchaser and EED hereby jointly and severally
represents and warrants to Sellers and Dynegy as follows:
Section 4.1 Organization and Qualification.
(a) Purchaser is a corporation duly incorporated, 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 Purchaser'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 individually or in the aggregate reasonably
be expected to result in a material adverse effect on Purchaser's ability to
perform its obligations under this Agreement. Purchaser has the requisite
corporate power and authority to own, use or lease its properties and to carry
on its business as it is now conducted. Purchaser has made available to Sellers
a complete and correct copy of its certificate of incorporation and by-laws,
each as amended to date, and Purchaser's certificate of incorporation and
by-laws as so made available are in full force and effect. Purchaser is not in
default in the performance, observation or fulfillment of any provision of its
certificate of incorporation and by-laws.
(b) EED is a limited liability company duly organized, validly existing and
in good standing under the Laws of the State of Delaware. EED has the requisite
limited liability
39
company power and authority to own, use or lease its properties and to carry on
its business as it is now conducted. EED is not in default in the performance,
observation or fulfillment of any provision of its certificate of formation and
operating agreement.
Section 4.2 Authority.
(a) Purchaser has full corporate power and authority to execute and deliver
this Agreement, the Purchaser Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Purchaser Ancillary Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by Purchaser's board of directors and
stockholder, and no other authorization or consent on Purchaser's part are
necessary to authorize this Agreement, the Purchaser Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been and upon their execution the Purchaser Ancillary Agreements will have been
duly and validly authorized, executed and delivered by Purchaser and is or will
be upon its execution Enforceable against Purchaser.
(b) EED has full limited liability company power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by EED's member and no other authorization or consent on EED's part
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by EED and is Enforceable against EED.
Section 4.3 Conflicts.
The execution and delivery of this Agreement, the Purchaser Ancillary
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance by Purchaser and EED of their obligations hereunder
do not and will not:
(a) except as listed in Schedule 4.3(a), require any writ, waiver, consent,
judgment, decree, approval, order, act or Permit of, or registration, filing
with or notification to any Governmental Authority, except for Permits that are
ministerial in nature and are customarily obtained from Governmental Authorities
after closings in connection with transactions of the same nature as are
contemplated hereby; or
(b) except as listed on Schedule 4.3(b), conflict with, 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 rights
under, (i) any provision of the certificate of incorporation or by-laws (or
similar organization documents) of Purchaser or EED; (ii) any provisions of any
material Contract or other obligation or any Governmental Order or Permit to
which Purchaser or EED is a party or by which Purchaser or EED or any of their
respective properties or assets may be bound, except in the case of clause (ii)
such conflicts, violations, breaches, defaults, or rights of termination,
cancellation or acceleration, guaranteed payments or losses of rights which,
40
individually or in the aggregate, would not reasonably be expected (A) to result
in a material adverse effect on, or otherwise materially impair the ability of,
Purchaser or EED to perform its obligations under this Agreement or any
Purchaser Ancillary Agreement or (B) to prevent the consummation of any of the
transactions contemplated hereby or by any Purchaser Ancillary Agreement; or
(c) violate the provisions of any Law or Governmental Order applicable to
Purchaser or EED or any of their respective assets or properties.
Section 4.4 Securities Matters. Purchaser is an "accredited investor" as
that term is defined in Regulation D promulgated under the Securities Act.
Purchaser (a) is acquiring the capital stock of the Purchased Subsidiaries
solely for investment with no present intention to distribute any of the capital
stock of the Purchased Subsidiaries to any Person and (b) will not sell or
otherwise dispose of any of the capital stock of the Purchased Subsidiaries
except in compliance with the registration requirements or exemption provisions
of the Securities Act and any other applicable securities Laws.
Section 4.5 Litigation. As of the date hereof, there is no Action (or group
of related Actions) pending or, to the Knowledge of Purchaser, threatened
against Purchaser or EED that seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
Section 4.6 Availability of Funds. EED is, and will at the Closing be, the
owner of ComEd and Philadelphia Electric Company, a Pennsylvania corporation.
EED currently has the financial ability to consummate the transactions
contemplated by this Agreement and EED and Purchaser will, at the Closing and
thereafter as necessary to comply herewith, have sufficient cash in immediately
available funds to pay the Purchase Price pursuant to Article II, to consummate
the transactions contemplated hereby and otherwise to satisfy its obligations
under this Agreement, including those under Section 5.9.
Section 4.7 Brokers. No broker, finder or investment banker (other than
Dresdner Kleinwort Xxxxxxxxxxx, LLC) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Purchaser or any of
its Affiliates.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Conduct of Business Prior to the Closing.
Except as contemplated by this Agreement any Seller Ancillary Agreement or
as set forth on Schedule 5.1, prior to the Closing, Dynegy and Sellers shall
cause the Business to be conducted in the ordinary course to maintain the
Purchased Assets in good operating condition and repair and to use their
commercially reasonable efforts (consistent with past practice) to keep intact
the Business, keep available the services of the IPC Companies' employees and
the employees used in connection with the Business and preserve the goodwill of
the customers, suppliers, contractors, Governmental Authorities, distributors
and others having a relationship
41
with any of the IPC Companies. Without limiting the generality of the foregoing,
except as contemplated by this Agreement, any Seller Ancillary Agreement or as
set forth on Schedule 5.1, Dynegy and Sellers shall not and shall not permit any
IPC Company to do any of the following without the prior written consent of
Purchaser, not to be unreasonably withheld (such consent to be granted or
withheld, as the case may be, promptly after a Seller's written request
therefor):
(a) modify or amend its articles of incorporation or by-laws (or comparable
constitutive documents) in a way that would adversely affect the consummation of
the transactions contemplated by this Agreement or any Ancillary Agreement;
(b) modify, terminate or amend any Material Contract, IPC Other Real
Property or Leased Real Property, other than in the ordinary course;
(c) adopt or amend any Employee Benefit Plan or any related trust or enter
into or adopt any collective bargaining agreement or other Contracts with any
labor union or similar organization that applies to, or covers, Active
Employees, except, in each case, in the ordinary course or as required by
applicable Law;
(d) grant to any Active Employee whose annual salary is $200,000 or more
(or whose annual salary would be $200,000 or more after any such increase) any
increase in guaranteed cash compensation, except (i) in the ordinary course or
(ii) as may be required (A) under existing Contracts, (B) pursuant to any
renewal of an existing Contract in the ordinary course or (C) pursuant to any
Employee Benefit Plan;
(e) sell, transfer or lease any of the Purchased Assets to, or enter into
any Contract with, any of its Affiliates or any Seller, except pursuant to
intercompany transactions in the ordinary course;
(f) make or incur any capital expenditures that, in the aggregate, are in
excess of 110% of its capital expenditures forecasted for the year 2003 and the
year 2004 in accordance with and at the approximate times as provided in the
capital expenditures forecasts for those years provided in Schedule 5.1(f),
other than extraordinary capital expenditures that are required to be made
pursuant to applicable Law or Governmental Order or prudent business practices
to maintain the Purchased Assets in reasonable working order; provided that the
IPC Companies (taken as a whole) shall not spend less than 80% of the amounts
contained in the forecasts for the year 2003 and the year 2004;
(g) except in the ordinary course, enter into any material lease, license
or easement of real property that cannot be assigned to Purchaser in connection
with the transactions contemplated by this Agreement without the consent of the
other parties thereto; provided, however, that an IPC Company may enter into any
such Contract if an IPC Company shall have used commercially reasonable efforts
to exclude such consent right from such Contract in negotiating the provisions
thereof;
(h) make any change in any method of accounting or accounting principles,
practices or policies, other than those required by GAAP or the applicable rules
and regulations of the SEC;
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(i) issue, grant, sell or encumber any Equity Interest or any right
relating thereto or make any other changes in the equity capital structure of
any of the IPC Companies;
(j) acquire by merging or consolidating with, by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof or otherwise acquire any assets that are material, individually or in
the aggregate, to the Purchased Assets, except pursuant to capital expenditures
in accordance with Section 5.1(f) or that are not material to the Business;
(k) sell, lease, transfer, convey, license or otherwise dispose of, or
mortgage, pledge, or impose or suffer to be imposed any Lien other than
Permitted Liens on, any of the Purchased Assets, except inventory and obsolete,
damaged, broken or excess equipment, items or materials sold in the ordinary
course consistent with past practices and licenses granted in the ordinary
course;
(l) cancel any debts owed to or claims held by it, other than in the
ordinary course;
(m) accelerate or delay collection of any notes or accounts receivable in
advance of or beyond their regular due dates or the dates when the same would
have been collected in the ordinary course (other than any accelerations or
delays occurring in the ordinary course);
(n) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than (A) dividends
and distributions by any Subsidiary of either Seller to such Seller; or (B)
regular quarterly cash dividends with respect to the preferred stock of IPC;
(ii) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of either Seller or any Subsidiary
of such Seller or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(o) settle any contingent liabilities with respect to the Purchased Assets
or the Business for which Purchaser could be liable other than in the ordinary
course;
(p) enter into any Contract that would be required to be listed on Schedule
3.14 or 3.15 that cannot be assigned to Purchaser in connection with the
transactions contemplated by this Agreement without the consent of the other
parties thereto; provided, however, that an IPC Company may enter into any such
Contract if an IPC Company shall have used commercially reasonable efforts to
exclude such consent right from such Contract in negotiating the provisions
thereof;
(q) make any fundamental change in the Business or the operations of the
IPC Companies;
(r) except as required by applicable Law, prepare or file any Non-Income
Tax Return relating to any Seller, any Purchased Asset or any Purchased
Subsidiary inconsistent with past practice or, on any such Non-Income Tax
Return, take any position, make any election, or adopt any method that is
inconsistent with positions taken, elections made or methods used in preparing
or filing similar Non-Income Tax Returns in prior periods, or settle any Audit
or other
43
proceeding relating to Non-Income Taxes payable by or relating to any Seller,
any Purchased Asset or any Purchased Subsidiary;
(s) incur any indebtedness for borrowed money in excess of $25,000,000 in
the aggregate, except in connection with refinancing any indebtedness of the IPC
Companies as it matures; provided that such refinancing indebtedness is no more
restrictive with respect to the assumption of such indebtedness by Purchaser and
is on market terms;
(t) take any action to (or fail to take any action necessary not to)
violate any order or regulation of the ICC (in IPC's good faith interpretation
of any such regulation), governing IPC's operation as an Integrated Distribution
Company under 83 Illinois Administrative Code Part 452; or
(u) authorize or commit to do or agree to take, whether in writing or
otherwise, any of the foregoing actions.
Section 5.2 Access to Information.
(a) From the date hereof until the Closing, to the extent permitted by
applicable Law (including antitrust Laws), Dynegy and Sellers shall, and shall
cause the Purchased Subsidiaries to, afford the employees, counsel, accountants,
consultants and representatives of Purchaser and EED reasonable access, during
normal business hours, to the offices, properties, facilities, work papers and
books and records of the IPC Companies and their Affiliates and their
accountants relating to the Business (with the exception of confidential
personnel records or legally privileged or protected information) as Purchaser
or EED reasonably deems necessary or advisable, and to those Active Employees to
whom Purchaser or EED reasonably requests access; provided, however, that in no
event shall Dynegy or Sellers be deemed to have breached the provisions of this
Section 5.2(a) with respect to the access provided to the employees, counsel,
accountants, consultants and representatives of Purchaser and EED if Dynegy and
Sellers have used commercially reasonable efforts to cause their respective
counsel, accountants and representatives to provide the level of access
otherwise required pursuant to this Section 5.2(a). All information and
knowledge obtained as a result of or in connection with in any investigation
conducted or access provided pursuant to this Section 5.2(a) shall be subject to
the Confidentiality Agreement in accordance with its terms and the terms hereof.
(b) Purchaser, EED, Dynegy and Sellers shall provide reasonable cooperation
to each other, and shall cause their respective officers, employees,
accountants, consultants and representatives to provide reasonable cooperation
to each other, for a period of 365 days after the Closing to ensure the orderly
transition of the Business from Sellers to Purchaser and to minimize any
disruption to the respective businesses of Sellers, Dynegy and Purchaser that
might result from the transactions contemplated hereby. After the Closing, upon
reasonable written notice, Purchaser, EED, Dynegy and Sellers shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
representatives reasonable access, during normal business hours, to such
information and assistance relating to the Business as is reasonably necessary
for litigation, employee benefits, environmental, financial reporting and
accounting matters, the preparation and filing of any Tax Returns or the defense
of any Tax audit, claim or assessment or any other similar reasonable matter. In
no event shall Purchaser, EED, Dynegy or
44
Sellers be deemed to have breached the provisions of this Section 5.2(b) with
respect to the access provided to their respective counsel, auditors and
representatives if the party obligated to provide access pursuant to the terms
of this Section 5.2(b) shall have used commercially reasonable efforts to cause
their respective counsel, auditors and representatives to provide the level of
access otherwise required pursuant to this Section 5.2(b). Each party shall
reimburse the other for reasonable out-of-pocket costs and expenses incurred in
assisting the other pursuant to this Section 5.2(b). No party shall be required
by this Section 5.2(b) to take any action that would unreasonably interfere with
the conduct of its business or unreasonably disrupt its normal operations or
result in any actual or potential breach of applicable Law or give rise to any
other actual or potential compliance concern.
Section 5.3 Governmental Permits and Approvals.
(a) Each Seller and Purchaser shall (and shall cause their respective
Affiliates to) prepare, make or give all filings, registrations and notices to,
and act diligently and use commercially reasonable efforts to obtain all
Governmental Orders (including those listed on Schedules 8.1(b) and 8.2(b))
from, Governmental Authorities that are, may be or may become necessary for the
consummation of the transactions contemplated by this Agreement, and shall fully
cooperate with each other to promptly obtain, prepare, make or give all such
Governmental Orders, filings, registrations and notices.
(b) Notwithstanding anything to the contrary in this Agreement, Sellers and
their respective Affiliates shall not be required to take any action or actions
that individually or together with all other actions would (i) result in a
change to the terms of the PPA that is adverse to the interests of the
Affiliates of Dynegy (other than any Purchased Subsidiary) that are a party to
the PPA, or (ii) require Parent or any of its Affiliates to make any payment or
have any continuing obligation pursuant to or otherwise in respect of the
Intercompany Note or make any additional capital contribution to any of the IPC
Companies or Purchaser or any of its Affiliates as a condition to the
transactions contemplated by this Agreement and the Ancillary Agreements.
(c) Notwithstanding anything to the contrary in this Agreement: (i)
Purchaser and its Affiliates shall not be required to take any action that would
have a material adverse effect on the business, financial condition or results
of operation of Exelon and its Subsidiaries (including Purchaser and the
Business after the Closing), taken as a whole, the Purchaser (including the
Business after the Closing), or ComEd, individually; (ii) Purchaser and its
Affiliates shall not be required to make any undertaking or satisfy any term or
condition that, individually or together with all other such undertakings, terms
and conditions imposed by any Governmental Authority and any settlement,
concession or other agreement entered into with any Governmental Authority or
third party, in each case relating to or in connection with the transactions
contemplated by this Agreement and the Governmental Approvals sought in
connection herewith, would cause any Final Order or the Final Orders taken as a
whole to fail to meet the closing conditions set forth in Section 8.2(b); (iii)
Purchaser and its Affiliates shall not be required to take any action that would
result in a loss or reduction of customer transition charges; and (iv) the
closing condition set forth in Section 8.2(b) shall not be deemed satisfied in
the event:
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(A) The approvals in the Final Orders in respect of the ICC
Filings, the Federal Utility Filings and any other filing with a
Governmental Authority are different from the approvals sought in such
filings (with materiality to be considered only in the aggregate of
such filings, and not against the business or operations of Purchaser
and its Affiliates and by reference to such filings in their original
form) and such differences are in the aggregate material and adverse
to the economic interests of Purchaser (including the Business after
the Closing); or
(B) notwithstanding Section 5.3(c)(iii)(A), the percentage rate
increase approved in the Final Order relating to Item I.A.7 of
Schedule 8.2(b) is materially and adversely different from the
percentage rate increase sought in the ICC Filings. The materiality of
the percentage rate increase shall be measured based upon the annual
net income effect of the approved rate increase net of the annual net
income effect of the actual costs reasonably incurred, or to be
reasonably incurred after the Closing but prior to 2010, by Exelon and
its Subsidiaries pursuant to conditions imposed on Purchaser or its
Affiliates (including the Purchased Assets) by any Governmental
Authority or the terms of any settlement or other agreement entered
into with any Governmental Authority or any third party, in each case
directly related to the transactions contemplated by this Agreement
and the Governmental Orders sought in connection herewith, including
those listed on Schedule 8.2(b), and with the Ancillary Agreements.
(d) Specific Filings with Governmental Authorities.
(i) Purchaser shall use commercially reasonable efforts to file (and
if and as applicable, cause ComEd and its other Affiliates to file) and
Sellers shall use commercially reasonable efforts to file with the ICC
their respective initial required applications and filings (whether singly
or jointly) for approval of the transactions contemplated hereby and by the
Ancillary Agreements as set forth on Schedules 8.1(b) and 8.2(b) (the "ICC
Filings") (A) within 30 days after the effective date, if any, of the
proposed amendment to Section 7-204 of the Illinois Public Utilities Act in
a form, subject to the other provisions of Section 5.3 of this Agreement,
reasonably acceptable to both Purchaser and Dynegy (the "Amendment"), if
such Amendment is approved by the Illinois General Assembly in the
legislative session scheduled to begin on November 4, 2003 (with such
legislative session presently scheduled to be in session on November 4, 5,
6, 18, 19 and 20) and becomes immediately effective, or (B) within 10 days
after the effective date of the Amendment if the Amendment is approved in
the legislative session scheduled to begin in January 2004 whether or not
it becomes immediately effective or if the Amendment was approved in the
November 2003 legislation session, but was not made effective until during
or after the legislation session scheduled to begin in January 2004, and
shall, as promptly as reasonably practicable, and in accordance with
applicable Law, submit in any Action in respect of such ICC Filings any
supplemental information reasonably requested from the ICC or any other
party thereto.
(ii) Purchaser shall use commercially reasonable efforts to file (and
if and as applicable, cause its Affiliates to file) and Sellers shall use
commercially reasonable efforts to file (A) with the FERC their respective
filings required under Sections 203 and,
46
if required by the FERC, 205 of the FPA or otherwise required for
approval by the FERC of the transactions contemplated hereby and by
the Ancillary Agreements as set forth on Schedules 8.1(b) and 8.2(b)
and (B) with the SEC their respective filings required under Section 9
of PUHCA or otherwise required for approval by the SEC of the
transactions contemplated hereby and by the Ancillary Agreements as
set forth on Schedules 8.1(b) and 8.2(b) within seven (7) days of the
initial ICC Filing (with respect to each such filing party, its
"Federal Utility Filings"), which seven-day period may be extended by
agreement of the parties, and shall, as promptly as reasonably
practicable, and in accordance with applicable Law, submit in any
Action in respect of each such Federal Utility Filing any supplemental
information reasonably requested from the FERC, the SEC or any other
party thereto.
(iii) Each of Sellers and Purchaser shall use commercially
reasonable efforts to file with the United States Federal Trade
Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the notification and report form required for the
transactions contemplated hereby under the HSR Act at such time as
Sellers and Purchaser shall agree, but in any event no later than 15
days after the date of the Initial ICC Filing, and shall, as promptly
as reasonably practicable, file any supplemental information
reasonably requested in connection therewith pursuant to the HSR Act.
(iv) If any of the filing dates set forth in clauses (i), (ii) or
(iii) above are delayed by more than 30 days and if a party has failed
to use commercially reasonable efforts to meet any of the filing
dates, such party shall be in default of this Agreement and the party
not in default may terminate this Agreement.
(v) IPC shall (i) be prepared to transfer and shall use its
commercially reasonable efforts to assist PJM to be ready to accept
functional control of the IPC transmission facilities to PJM for
inclusion in an expanded PJM West Region no later than October 1,
2004; (ii) be prepared to integrate and shall use its commercially
reasonable efforts to assist PJM to be ready to integrate the IPC
control area into the PJM Interchange Energy Market and certain other
PJM markets by no later than October 1, 2004; (iii) have executed and
delivered the conditional PJM West Transmission Owner's Agreement,
conditional PJM West Reliability Assurance Agreement and other such
documents as may be required by PJM for IPC to participate in PJM as a
transmission owner and load-serving entity no later than October 1,
2004; and (iv) have executed and delivered the conditional PJM
Operating Agreement no later than October 1, 2004; and (v) have
installed the applicable hardware and software systems, which systems
IPC shall have used its commercially reasonable efforts to have been
inspected and accepted by PJM no later than October 1, 2004. All
"conditional" references in this paragraph shall mean that all such
actions or the effectiveness of the applicable Contracts shall be
conditioned in all respects on the consummation of the transactions
contemplated hereby to occur at the Closing.
(vi) Purchaser shall have primary responsibility for the
preparation and filing of any applications with or notifications to
the FERC, other than Items II.B.5 and II.C on Schedule 8.2(b), and the
SEC under PUHCA. Sellers and Purchaser shall have joint responsibility
for the preparation and filing of any applications with or
notifications to the
47
ICC, the FTC and/or the DOJ; provided, however, that Purchaser and its
Affiliates shall have primary responsibility for the preparation and
filing of any applications or notifications to the ICC, the FTC and/or
the DOJ relating to Items I.A. and I.B. on Schedule 8.2(b). No
applications, notices, petitions filings testimony, exhibits,
responses to discovery requests or other documents made or prepared in
connection with the transactions contemplated by this Agreement or the
Ancillary Agreements shall (A) be filed or disseminated by or on
behalf of Dynegy or its Affiliates without the review and prior
written approval of Dynegy or (B) characterize Dynegy or its
Affiliates (other than the IPC Companies), its operations, financial
condition or management, including its management of the IPC
Companies, without the prior review and approval of Dynegy.
(vii) Each party to this Agreement or the Ancillary Agreements
shall furnish to each other party such necessary information and
reasonable assistance as each other party may request in connection
with its or its Affiliate's preparation of any filing or submission
that is reasonably necessary for any approval sought with respect to
any filing or submission made pursuant to this Section 5.3. The
parties shall keep each other fully apprised of the status of any
communications with, and any inquiries or requests for additional
information from, the applicable Governmental Authority, and shall
promptly comply with any such inquiry or request reasonably made and
promptly provide any supplemental information reasonably requested by
a Governmental Authority in connection with the filings or submissions
made pursuant to this Section 5.3.
(e) PJM Issues. In order to meet IPC's commitment to join PJM (that is
conditioned in all respects on the consummation of the transactions contemplated
hereby to occur at the Closing), IPC and Dynegy shall meet with appropriate
officials at PJM within 15 days after the date hereof and develop a detailed
plan, including schedule milestones to measure progress, to integrate IPC into
PJM as provided in Section 5.3(d)(v). The plan shall address the issue of the
appropriate date to complete the integration in light of potential concerns
about completing the integration during the peak winter heating season. IPC and
Dynegy shall consult with Purchaser and EED about its progress toward
integration on a regular basis and, subject to compliance with applicable Laws,
shall use its commercially reasonable efforts to take advantage of possible
coordination opportunities in the integration progress in light of ComEd's
participation in PJM. On the same date that IPC enters into the conditional PJM
Operating Agreement, Purchaser hereby agrees to reimburse PJM, in the event this
Agreement is terminated, for any expenses incurred or reasonably expected to be
incurred by PJM prior to such termination for the planned integration of the
Business into PJM. To the extent IPC has made payment to PJM for any such
expenses, Purchaser shall instead reimburse IPC for any amounts it would
otherwise be required to pay to PJM pursuant to the previous sentence.
Section 5.4 Notice of Developments.
Prior to the Closing, each party shall, promptly after obtaining Knowledge
of the occurrence (or non-occurrence) of any condition, event, circumstance,
change, occurrence or state of facts arising subsequent to the date of this
Agreement that would result in a material breach of any such representation or
warranty or covenant of this Agreement of such party, give written notice
thereof to the other parties and shall use its commercially reasonable efforts
to remedy promptly such breach; provided, however, that the delivery of, or
failure to deliver, any
48
notice pursuant to this Section 5.4 shall not limit or otherwise affect the
remedies available hereunder, including the rights to indemnification under
Article IX.
Section 5.5 Insurance; Risk of Loss.
(a) Dynegy and Sellers shall keep, or cause to be kept, all insurance
policies that provide coverage for the Business, or any of the Purchased Assets
or Purchased Subsidiaries, as the case may be, in full force and effect through
the Closing, or provide for the renewal of all such policies that are expiring
by their own terms prior to such date. In the event of a property loss in
respect of any asset of the Business, the Purchased Assets or Purchased
Subsidiaries prior to the Closing, Sellers and Dynegy agree to cede recovered
insurance proceeds (net of deductible/annual aggregate retention) in respect of
such asset to Purchaser post-Closing for the repair of such asset. As of the
Closing, Dynegy and Sellers shall cause the termination of all insurance
coverage for the Business, the Purchased Assets or the Purchased Subsidiaries
and their respective businesses, assets, and current or former employees, and
Purchaser shall become solely responsible for all insurance coverage and related
risk of loss based on events occurring after the Closing with respect to the
Business, the Purchased Assets (including the Purchased Subsidiaries and their
respective businesses, assets, and current and former employees); provided,
however, that (i) no such termination by Dynegy or any Seller of any
"occurrence" coverage in force as of the Closing shall be effected so as to
prevent Purchaser or any Purchased Subsidiary from recovering under such
coverage for losses from events occurring prior to the Closing; and (ii) no such
termination of any "claims-made" coverage in force as of the Closing shall be
effected so as to prevent Purchaser or any Purchased Subsidiary from recovering
under such coverage for losses from events that occurred prior to the Closing to
the extent the applicable insurance company or third party claims administrator
shall have received written notice of claims or written notice of circumstances
that are reasonably likely to give rise to a claim that occurred relating to
such events on or before or within 60 days after the Closing; provided, further,
however, that in no event at or after the Closing shall Purchaser or any
Purchased Subsidiary have the right to recover under any such coverage to the
extent Dynegy or one of its Affiliates (other than any Purchased Subsidiaries)
has assumed or retained responsibility for any such losses which are covered by
such policy, in which case such recovery rights shall be provided to the Person
which has assumed or retained such responsibility. Dynegy and Sellers shall use
commercially reasonable efforts to report to the applicable insurance company or
third party claims administrator, on a timely basis before the Closing, any
claims of which the primary person who processes such claims of the Business in
the ordinary course has knowledge (or circumstances that are reasonably likely
to give rise to a claim) relating to events occurring before the Closing. For
all insurance and/or self-insurance claims of the Business, the Purchased Assets
or the Purchased Subsidiaries filed prior to the Closing, and for those claims
of the Business, the Purchased Assets or the Purchased Subsidiaries identified
as set forth in the foregoing clauses (i) and (ii), upon the consummation of the
Closing, Purchaser shall be responsible for any and all costs related to any
such claim, including deductibles, self-insured retentions, claims adjusting
expenses, loss conversion factor expenses, retro-active premium adjustments,
collateral requirements and associated costs, uninsured losses, legal fees,
indemnity benefits and any other costs that become due and payable in connection
with any such claims. Purchaser shall reimburse Dynegy for these costs by wire
transfer of funds within twenty days of receipt of an invoice from Dynegy
therefor, accompanied by reasonable supporting detail.
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(b) To the extent that, after the Closing Date, Purchaser or Sellers or any
Affiliate thereof requires any information regarding claim data or other
information pertaining to the Business, the Purchased Assets or the Purchased
Subsidiaries in order to make filings with insurance carriers or administer or
manage a claim, upon request, Dynegy and Sellers shall promptly supply such
information to Purchaser or Purchaser shall or shall cause the applicable
Purchased Subsidiary promptly to supply such information to Sellers or the
applicable Affiliate of Sellers, as the case may be. To the extent that
Purchaser or any Purchased Subsidiary will require the utilization of the claims
data maintained by an insurance company, Purchaser agrees and will cause any
applicable Purchased Subsidiary to assume sole responsibility for obtaining a
subscription from any insurance company to obtain such claims information and
the related costs associated with any such service.
Section 5.6 Confidentiality.
(a) Purchaser and EED acknowledge that the information provided or to be
provided to them in connection with the transactions contemplated hereby is
subject to the Confidentiality Agreement, the terms of which are incorporated
herein by reference; provided, however, that the parties hereby agree that as of
the Closing Date the term of the Confidentiality Agreement shall be hereby
amended to be the later of (i) two years from the Closing Date and (ii) three
years from the date hereof; provided, further, however, that after the Closing,
Purchaser, its Affiliates and the Purchased Subsidiaries may use or disclose any
confidential information related to the Purchased Assets or the Business.
(b) Dynegy agrees that for a period of two years after the Closing, it and
its Affiliates will not use or disclose, and Dynegy will use its commercially
reasonable efforts will cause its Affiliates and each of their respective
employees, officers, directors, agents and representatives not to use or
disclose to any party other than Purchaser or any of its Affiliates any
confidential information relating to the Purchased Assets, the Business or any
Purchased Subsidiary. The obligation to keep such information confidential does
not apply to information that (i) is or becomes generally available to the
public other than as a result of an unauthorized disclosure by Dynegy, any of
its Affiliates or any of their respective directors, employees, agents or
representatives, or (ii) is required by applicable Law or applicable Tax,
accounting or SEC disclosure obligations or the applicable rules of any stock
exchange or quotation system to be disclosed, but only to the extent required to
be disclosed.
(c) Notwithstanding anything to the contrary set forth in this Agreement or
the Confidentiality Agreement, any party to this Agreement (and any employee,
representative or other agent of such party) may disclose to any and all
Persons, without limitation of any kind, the Tax treatment and Tax structure of
the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other Tax analyses) that are provided to it relating to
such Tax treatment and Tax structure; provided, however, that (i) Tax treatment
and Tax structure shall not include the identity of any existing or future party
(or any Affiliate of such party) to this Agreement; and (ii) this provision
shall not permit disclosure to the extent that nondisclosure is necessary in
order to comply with applicable securities Laws. Nothing in this Agreement shall
in any way limit any party's ability to consult any Tax advisor regarding the
Tax treatment or Tax structure of the transactions contemplated hereby.
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Section 5.7 Intercompany Arrangements. Except as listed on Schedule 5.7:
(a) without limiting the provisions of Section 2.2 in any way, all
receivables or payables of either Seller or any Purchased Subsidiary, on the one
hand, from or to, as applicable, Dynegy or any of its Affiliates (other than
either Seller or any Purchased Subsidiary), on the other hand, shall be settled
as of the Closing; and
(b) all contracts or other arrangements existing immediately prior to the
Closing between either Seller or any Purchased Subsidiary, on the one hand, and
Dynegy or any of its Affiliates (other than either Seller or any Purchased
Subsidiary), on the other hand, shall be terminated as of the Closing.
Section 5.8 Use of Dynegy and Sellers' Names.
(a) Prior to the Closing, Sellers may cause the IPC Companies to remove any
right, title or interest in any logo, trade name, trademark, service xxxx, house
xxxx, domain name, web site or company name to the extent it contains or
consists of the "Dynegy" name or the "Dynegy" emblem or any other xxxx in which
one or the other of these elements appear. Purchaser will and will cause the
Purchased Subsidiaries to remove all such items described in the preceding
sentence from the Purchased Assets within 60 days after the Closing Date. From
and after the Closing, Purchaser will not and will cause each Purchased
Subsidiaries not to use such items.
(b) As promptly as practicable after the Closing, IPC and IPC Gas shall
change their corporate names. Within 60 days after the Closing, Sellers and
Dynegy shall cause IPC and IP Gas to remove any right, title or interest in any
logo, tradename, trademark, service xxxx, house xxxx, domain name, web site or
company name to extent it contains or consists of the term "Illinois Power",
"IP", "IP Gas" or the "IPC" emblem or any other xxxx in which one or the other
of these elements appears. From and after the Closing, Sellers and Dynegy will
not and will cause their respective Affiliates not to use such items. Sellers
and Purchaser shall use commercially reasonable efforts to provide that no
Permits shall identify Dynegy or any of its Affiliates, on the one hand, and EED
or any of its Affiliates, on the other hand, as joint owners or operators of any
equipment or property.
Section 5.9 Change of Control Offer. From and after the Closing, EED shall
cause Purchaser to comply with the change of control redemption offer provisions
of the Supplemental Indenture dated as of December 20, 2002 to the General
Mortgage Indenture and Deed of Trust dated as of November 1, 1992 for the
11-1/2% bonds due 2010.
Section 5.10 Further Assurances. Except as otherwise provided in this
Agreement, from time to time following the Closing, each party shall use
commercially reasonable efforts to execute and deliver, or cause to be executed
and delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions as such other party may reasonably deem
necessary or desirable to consummate the transactions contemplated by this
Agreement or any agreement contemplated hereby.
Section 5.11 No Public Announcement. None of Purchaser, EED, Dynegy or any
Seller shall (nor shall any Seller permit any of the Purchased Subsidiaries to)
and each of them
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shall use their commercially reasonable efforts to cause their Affiliates and
each of its and their respective representatives, directors, officers and agents
not to, without the approval of the other, make any press release or other
public announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that any such party shall be so obligated by
applicable Law, applicable accounting and SEC disclosure obligations or the
applicable rules of any stock exchange or quotation system, in which case the
other parties shall be advised and the parties shall use their commercially
reasonable efforts to cause a mutually agreeable release or announcement to be
issued; provided, however, that the foregoing shall not preclude communications
or disclosures necessary in connection with regulatory filings and interactions
with Governmental Authorities (and members thereto and employees thereof) to
implement the provisions of this Agreement and the Ancillary Agreements.
Section 5.12 Access to Records.
(a) To facilitate the resolution of any claims made by or against or
incurred by Dynegy or its Affiliates relating to the Purchased Assets or the
Business prior to the Closing or for any other reasonable purpose, for a period
of seven years after the Closing Date, Dynegy and its representatives shall have
reasonable access to all of the books and records included in the Purchased
Assets and Assumed Liabilities; provided that (i) in the case of books and
records relating to Taxes, the covenant shall be for a period of time equal to
the relevant statute of limitations with respect to such Taxes, including any
extensions thereof, and (ii) with respect to Excluded Assets or Excluded
Liabilities, the covenant shall be in force during the pendency of any Action or
threatened Action related to Excluded Assets or Excluded Liabilities. Such
access shall be afforded by Purchaser or EED upon receipt of reasonable advance
written notice and during normal business hours. Dynegy shall be solely
responsible for any costs or expenses incurred by it pursuant to this Section
5.12(a). If Purchaser or EED shall desire to dispose of any of such books and
records prior to the expiration of such seven-year period, Purchaser or EED, as
the case may be, shall, prior to such disposition, give Dynegy a reasonable
opportunity, at Dynegy's expense, to segregate and remove such books and records
as Dynegy may select.
(b) To facilitate the resolution of any claims made by or against or
incurred by Purchaser or EED or any of their respective Affiliates relating to
the Purchased Assets, the Assumed Liabilities and the Business after the Closing
or for any other reasonable purpose, for a period of seven years after the
Closing Date, Purchaser, EED and their representatives shall have reasonable
access to all of the books and records relating to the Purchased Assets and
Business which Dynegy or any of its Affiliates may retain after the Closing
Date; provided that, in the case of books and records relating to Taxes, the
covenant shall be for a period of time equal to the relevant statute of
limitations with respect to such Taxes, including any extensions thereof. Such
access shall be afforded by Dynegy and its Affiliates upon receipt of reasonable
advance written notice and during normal business hours. Purchaser shall be
solely responsible for any costs and expenses incurred by it pursuant to this
Section 5.12(b). If Dynegy or any of its Affiliates shall desire to dispose of
any of such books and records prior to the expiration of such seven-year period,
Dynegy shall, prior to such disposition, give Purchaser a reasonable
opportunity, at Purchaser's expense, to segregate and remove such books and
records as Purchaser may select.
Section 5.13 No Solicitation.
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From the date hereof through the earlier of the termination of this
Agreement or the Closing Date, Dynegy and Sellers shall not, and shall cause the
Purchased Subsidiaries not to (directly or indirectly), and shall use
commercially reasonable efforts to cause their representatives, directors,
officers, agents and Affiliates not to: (a) solicit, discuss or pursue any
Acquisition Proposal (as defined hereinafter); (b) enter into any agreement with
respect to any Acquisition Proposal; or (c) participate in any discussions or
negotiations regarding, or furnish to any person any information for the purpose
of facilitating the making of, any Acquisition Proposal. For purposes of this
Agreement, "Acquisition Proposal" shall mean any proposal made or resubmitted
after the date of this Agreement for a merger or consolidation of Parent or any
of the IPC Companies or any proposal or offer made or resubmitted after the date
of this Agreement to purchase, directly or indirectly, all or any significant
portion of the assets of or any Equity Interest in Parent or any of the IPC
Companies, any recapitalization other than a scheduled repayment of debt
(including any transaction involving all or any significant portion of the debt
of Parent or the IPC Companies) or reorganization of Parent or the IPC Companies
or any similar transaction involving Parent or any of the IPC Companies.
Section 5.14 Terminated Employees.
On the Closing Date, Dynegy shall provide Purchaser with a list that sets
forth the number of full and part time employees of any IPC Companies
involuntarily terminated, other than for cause, during the period beginning 90
days prior to the Closing Date.
Section 5.15 Bulk Sales Requirements.
Sellers and Dynegy, on the one hand, and Purchaser and EED, on the other
hand, shall comply with any applicable bulk sales Laws or similar Laws,
including any applicable provisions in the Illinois Income Tax Act and the
Illinois Retailers Occupation Tax Act (and in such other statutes applicable to
either Seller or to Purchaser in which such provisions of the Illinois Retailers
Occupation Tax Act are incorporated by reference), and in all instances, all
related notice requirements. Purchaser shall bear the burden of any and all
expense and cost of preparing and filing any filings necessary for such
compliance; provided, that each of Sellers and Dynegy shall cooperate with and
provide assistance to Purchaser in its efforts to comply with such requirements.
Section 5.16 Covenant Not to Xxx.
(a) Each of Dynegy and each Seller shall not, and shall cause their
respective Affiliates and their respective successors not to, directly or
indirectly, xxx any Purchaser Group Member with regard to any Generation
Liabilities, and shall release and forever discharge all Purchaser Group Members
from such Generation Liabilities.
(b) Each of Dynegy and each Seller shall not, and shall cause each of their
respective Affiliates and each of their respective successors not to, directly
or indirectly, argue, assert, claim, agree or bring any Action or enter into any
settlement that alleges or stipulates that any Purchaser Group Member is or
should be responsible, liable or obligated to take or not to take any action,
make any payment, incur any expense, with respect to any liabilities,
commitments,
53
or obligations of any Seller or any of its Affiliates or in connection with the
Generation Liabilities.
Section 5.17 Permits, Contracts, IPC Property and Related Consents.
(a) Disclosures and General Procedures. Sellers shall, and shall cause
their Affiliates to, cooperate in good faith and use their commercially
reasonable efforts to develop complete lists of and to prepare and deliver to
Purchaser from time to time revised and updated lists of: (i) all Permits
required or held by Sellers in the operation of the Business; (ii) all Contracts
(other than Material Contracts, which are addressed in Section 3.14, and
Excluded Assets) to which any Seller is a party; (iii) descriptions of all IPC
Owned Real Property, Leased Real Property and IPC Other Real Property; and (iv)
all Intellectual Property used in the operation of the Business. Notwithstanding
anything to the contrary herein, Purchaser acknowledges that, except for
Sellers' obligations under the preceding sentence, Purchaser shall be primarily
responsible for the tasks described in this Section 5.17. Except to the extent
otherwise required by applicable Law, Purchaser shall be responsible for
preparing and filing any and all documents, records, instruments and other
filings in connection with the undertakings in this Section 5.17. In preparation
of the anticipated transfer, assignment and conveyance of the Purchased Assets
and Assumed Liabilities (including rights with respect to Permits, Contracts and
IPC Property) at the Closing, each Seller and Purchaser shall, and shall cause
their Affiliates to, cooperate in good faith and use commercially reasonable
efforts to identify the items subject to and the requirements for such transfer,
assignment and conveyance, including preparing requested filings, approvals,
waivers, consents and notices, obtaining such approvals, waivers and consents
and completing such filings. Subject to the other terms of this Agreement, each
Seller shall cooperate and use its commercially reasonable efforts to assist
Purchaser and its Affiliates in preparing such notices and obtaining such
approvals, waivers and consents and completing such filings. In no event shall
any Seller or any of their respective Affiliates, other than in consultation
with and with the written consent of Purchaser, (A) make, agree to make or agree
that Purchaser shall make any payments to any third party, or (B) make or agree
to make or agree that Purchaser shall make any amendments, changes or
modifications to any Contract or Permit in connection with obtaining the
consents, approvals, waivers and filings described in this Section 5.17.
(b) Permits. Sellers and Purchaser shall, and shall cause their Affiliates
to, cooperate in good faith and use their commercially reasonable efforts to
obtain, as soon as reasonably practical so as not to delay the Closing, any and
all transfers of Permits issued or granted by any Governmental Authority to any
of the IPC Companies and necessary or held for the operation of the Business or
amendments to such Permits necessary to transfer such Permits covering the
Purchased Assets or Assumed Liabilities to Purchaser and to remove the Purchased
Assets and Assumed Liabilities from any Permit covering equipment or property
owned or operated by Dynegy or any Affiliate and, where Permits cannot be
transferred, cancellation of Permits held by Sellers and issuance of similar
Permits to Purchaser. Each Seller and its Affiliates shall cause Dynegy and its
Affiliates to be removed as of the Closing from all Permits identified pursuant
to Section 5.17(a) relating to the Purchased Assets and Assumed Liabilities and
shall use commercially reasonable efforts to remove the name IPC from all
Permits relating to the Excluded Assets and the Excluded Liabilities as soon as
reasonably practicable after the Closing.
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(c) Contracts. Sellers and Purchaser shall, and shall cause their
Affiliates to, cooperate in good faith and use their commercially reasonable
efforts to obtain or give, as soon as reasonably practical so as not to delay
the Closing, any and all approvals, authorizations, waivers, notices and
consents required to assign to Purchaser any of the Contracts to which any
Seller is a party.
(d) Real Property. At least 60 days prior to Dynegy's good faith estimate
of the Closing Date, Dynegy and Sellers shall and shall cause their Affiliates
to use commercially reasonable efforts to prepare and deliver to Purchaser, in
form and substance reasonably satisfactory to Purchaser, the descriptions of the
IPC Properties that are legally necessary to transfer the IPC Properties to
Purchaser, and to have such transfer ready for recording in the appropriate real
estate records at the Closing, pursuant to and in accordance with the terms of
this Agreement. Sellers and Purchaser shall, and shall cause their Affiliates
to, cooperate in good faith and use their commercially reasonable efforts to
obtain, as soon as reasonably practical so as not to delay the Closing, any and
all approvals, authorizations, waivers, notices and consents required to
transfer or assign to Purchaser any of the IPC Owned Real Property, the Leased
Real Property and the IPC Other Real Property.
(e) Intellectual Property. Sellers and Purchaser shall, and shall cause
their Affiliates to, cooperate in good faith and use their commercially
reasonable efforts to obtain or give as soon as reasonably practical so as not
to delay the Closing, any and all approvals, authorizations, waivers, notices
and consents required to assign any of the Intellectual Property to Purchaser.
(f) Actions in the Event Consents Not Obtained. Sellers and Purchaser
shall, and shall cause their Affiliates to, cooperate and use commercially
reasonable efforts to secure all benefits and rights of the Purchased Assets and
Assumed Liabilities for Purchaser and for Purchaser to assume all liabilities
and obligations relating to the Purchased Assets and the Assumed Liabilities to
become effective upon the consummation of the Closing. In the event the Closing
occurs and any of the Purchased Assets cannot be sold, assigned, transferred,
conveyed or delivered effectively to Purchaser as contemplated by this Agreement
without the waiver, consent or other approval of third parties or Government
Authorities, which waiver, consent or other approval has not been obtained prior
to the Closing, Sellers and Purchaser shall, and shall cause their Affiliates
to, use their commercially reasonable efforts, at the request and sole expense
of Purchaser, jointly with Purchaser to secure for Purchaser the benefits and
obligations thereof in some other manner to the extent legally permissible
(including the exercise of the rights of the applicable Seller thereunder).
(g) Costs and Expenses. Whether or not the Closing occurs, Purchaser shall
pay all out-of-pocket expenses payable to third parties incurred by any Seller,
Dynegy or any of their respective Affiliates in connection with the preparation,
obtaining, making or giving of each writ, waiver, consent, judgment, decree,
approval, order, act, Permit, registration, filing or notice requirement,
conflict, violation, breach, default, right of termination, purchase, first
refusal, cancellation or acceleration or guaranteed payment or loss of right,
violation of Law or Governmental Order or Lien that arises due to or is caused
by or results from the structuring of the transactions contemplated hereby as an
asset sale instead of a sale of the stock of IPC. Sellers shall be responsible
for reimbursing Purchaser for all such out-of-pocket costs related to
55
such of the matters described in the preceding sentence that would have been
required in connection with a sale of the stock of IPC.
(h) Instruments of Transfer. Purchaser acknowledges that all assignments,
deeds and other instruments of transfer or conveyance used in connection with
the transactions contemplated hereby (including those delivered pursuant to
Section 2.8) shall be in customary form, shall not create any liability or
potential liability for Dynegy or Sellers independent of terms of this Agreement
and shall be subject in all respects to the terms, conditions, limitations and
qualifications contained in this Agreement.
Section 5.18 Remediation of Excluded Environmental Matters.
(a) After the Closing, if Purchaser reasonably determines that Remediation
of a Hazardous Substance, where such Remediation is an Indemnifiable Loss which
is the responsibility of the Seller Indemnitors pursuant to Article IX and
should be performed in response to (i) a requirement of an Environmental Law;
(ii) a Governmental Order from a Governmental Authority with jurisdiction over
the applicable Excluded Environmental Matters; (iii) a reasonable claim or
demand by a third party made in connection with an Environmental Law or
liability under the common law for the actual or alleged presence or Release of
Hazardous Substances; or (iv) the presence or Release of a Hazardous Substance
in excess of an applicable and relevant standard in an Environmental Law which
necessitates Remediation under such Environmental Law, and Purchaser, at its
election, decides to proceed itself to implement the required Remediation,
Purchaser shall notify Dynegy at least twenty (20) Business Days, or as soon as
reasonably possible if prompt Remediation is legally required or advisable under
this Section 5.18 in advance of commencing such Remediation and shall request
authorization from Dynegy to perform or cause one of its Affiliates to perform
the Remediation; provided, however, if Purchaser is required by a Governmental
Authority with jurisdiction to immediately take remedial action, Purchaser shall
proceed as required and notify Dynegy as soon as practicable thereafter of its
action and provide the other information required by this Section 5.18.
Purchaser's notice to Dynegy shall include a reasonably detailed description of
the Remediation to be performed and a detailed cost estimate for such
Remediation. Upon Purchaser's receipt of Dynegy's written consent (which shall
not be unreasonably withheld or delayed) to perform (or cause one of its
Affiliates to perform) the Remediation, Purchaser shall commence the Remediation
on the Purchased Asset or the Assumed Liability in accordance with the
Remediation plan. Dynegy shall reimburse Purchaser or such Affiliate of
Purchaser for all cost and expenses incurred in connection with such Remediation
within 30 days of Purchaser or such Affiliate submitting an invoice therefor to
Dynegy; provided, however, that Purchaser may, at its discretion, submit
invoices either periodically or at the completion of Remediation and Dynegy
shall reimburse Purchaser or such Affiliate for all costs and expenses incurred
in connection with such Remediation within 30 days of receiving such invoice.
Purchaser shall promptly notify Dynegy of any material changes in the
Remediation plan or costs and obtain approval for such changes. Notwithstanding
any other provision to the contrary in this Section 5.18(a), after Purchaser
receives written notice from a Governmental Authority with jurisdiction over
Remediation performed at a site by Purchaser under this Section that such
Remediation has been completed and/or that no further Remediation is needed at
that time, Purchaser shall perform no further Remediation at the site unless
subsequently required to do so in accordance with the terms of such notice or a
new event subject to Sections 5.18(a)(i), (ii), (iii) or (iv). Dynegy,
56
either Seller or any Affiliate thereof may request that a Governmental Authority
issue such notice.
(b) In the event that Purchaser chooses to develop any Purchased Assets for
a use other than the transmission, distribution and sale of electrical energy
and natural gas or substantially similar industrial purposes, Dynegy shall not
become responsible under this Section 5.18(b) for Remediation costs that, due to
the changed use, are higher than the Remediation costs would be if such
Purchased Assets continued to be used for transmission, distribution and sale of
electrical energy and natural gas or substantially similar industrial purposes.
Accordingly, if such Purchased Assets, or any portion thereof, ceases to be used
for transmission, distribution and sale of electrical energy and natural gas or
substantially similar industrial purposes (including repowering or development
for such purposes), and if due to such changed use, the costs of Remediation
relating to Excluded Environmental Matters are higher than the cost of
Remediation would be if such Purchased Assets (in their entirety) had continued
to be used for transmission, distribution and sale of electrical energy and
natural gas or substantially similar industrial purposes, Dynegy shall be
responsible only for the costs of Remediation that Purchaser would have incurred
if such Purchased Assets were being used for transmission, distribution and sale
of electrical energy and natural gas or substantially similar industrial
purposes.
Section 5.19 Continued Existence.
Each Seller shall continue its existences as a corporation in good standing
under its state of organization for a period of no less than two years after the
Closing Date; provided, however, that Sellers may merge or consolidate with any
Affiliate of such Seller.
Section 5.20 Generation Asset Transfers.
(a) The parties shall cooperate and use commercially reasonable efforts to
identify all assets (i) transferred pursuant to any Asset Transfer Agreements or
to be transferred under the Generation Agreement that are not used in the
generation operations of DMG and are used in connection with the Business and
(ii) owned by any IPC Company, not used in connection with the Business and
necessary for the operation by DMG of its generation business.
(b) Prior to the Closing, Dynegy shall cause DMG to transfer to IPC the
assets identified by the parties pursuant to clause (i) of Section 5.20(a),
pursuant to the Generation Agreement. Prior to the Closing, IPC shall transfer
or shall caused to be transferred to DMG the assets identified by the parties
pursuant to clause (ii) of Section 5.20(a) pursuant to the Generation Agreement.
In connection with such transfers pursuant to this Section 5.20(b), IPC and
Dynegy shall, and shall cause their respective Affiliates to, in consultation
with Purchaser, make all necessary filings with and obtain all necessary
appraisals and governmental orders from the applicable Governmental Authorities
Section 5.21 Certain Additional Agreements.
(a) At least 60 days prior to the Closing Date, Purchaser shall advise
Sellers whether transitional services will be required by Purchaser from and
after the Closing Date and which such services will be required. In such event,
Sellers and Purchaser shall negotiate in good faith the schedules of services to
be provided, the length of time for such services (which shall in no
57
event exceed 90 days) and the rates at which such services will be provided to
Purchaser, which rates will be at fair market value. Any transition services
agreement entered into pursuant to this Section 5.21 is referred to as the
"Transition Services Agreement". The execution of a Transition Services
Agreement shall not be a condition to the Closing for any party.
(b) Sellers and Purchaser shall negotiate in good faith an Easement and
Facilities Agreement (the "Easement and Facilities Agreement") containing the
terms set forth on Exhibit C. The parties will use good faith efforts to
finalize the Easement and Facilities Agreement at least 60 days prior to the
Closing Date and otherwise in form and substance mutually satisfactory to the
parties.
(c) Sellers and Purchaser shall negotiate in good faith a Blackstart
Agreement (the "Blackstart Agreement") containing the terms set forth on Exhibit
B. The parties will use good faith efforts to finalize the Blackstart Agreement
at least 60 days prior to the Closing Date and otherwise in form and substance
mutually satisfactory to the parties.
(d) Seller and Purchaser shall negotiate in good faith an Interconnection
Agreement (the "Interconnection Agreement") that is neutral with respect to the
interests of the parties and complies with the regulations of PJM and FERC prior
to the later of January 10, 2004 or the date that is 10 days before the date of
effectiveness of the FERC rulemaking on standardization of Generator
Interconnection Agreements and Procedures (FERC Docket No. PM-021). If the
parties fail to reach the agreement described in the preceding sentence, they
shall execute the PJM Standard Interconnection Agreement filed as Attachment O
to the PJM Tariff as the same may exist as of the Closing.
Section 5.22 Status Meetings. In furtherance of the covenants set forth in
this Agreement, representatives of each of Dynegy, IPC and EED shall meet:
(a) no less frequently than once each week: (i) to discuss all filings with
Governmental Authorities made or to be made in connection herewith and
undertakings, terms and conditions relating thereto; (ii) to discuss costs
incurred or committed to be incurred, concessions made, undertakings required
and other actions or tasks relating to the approvals and consents required
hereunder; and (iii) to discuss regulatory and legislative plans and strategies.
(b) no less frequently than once a month: (i) to discuss the parties'
efforts and progress in the undertakings of the parties relating to Section
5.17; and, subject to applicable Laws, actions taken or not to be taken or
considered in furtherance of the provisions of this Agreement and (ii) to
discuss the status of the integration of ComEd and IPC into PJM.
Section 5.23 PPA Matters.
(a) Each of Dynegy and ExGen shall use commercially reasonable efforts to
cause each of their respective Affiliates that are intended to be parties to the
PPA to convert the PPA with respect to Plants (as defined in the PPA), except to
the extent any such Plants use oil, to a tolling arrangement having
substantially the same economic terms and conditions as the PPA not later than
forty-five (45) days from the date hereof. The tolling arrangement shall have
terms and conditions substantially identical to the applicable terms and
conditions of the PPA,
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including the contract pricing. If such tolling agreement is entered into, the
term "PPA" shall mean the PPA and such tolling arrangement.
(b) Sellers and their Affiliates will use commercially reasonable efforts
to obtain the consent of NRG Inc. to permit Rocky Road Power LLC to enter into
an agreement, in substantially the same form as the PPA, with ExGen for the
output of Rocky Road from June 2009 through December 2010.
Section 5.24 Information Technologies Employees.
From the date hereof until the Closing, IPC shall not terminate the
employment of the members of its Information Technologies department who support
proprietary applications of the Business other than for "cause."
ARTICLE VI
EMPLOYEES AND EMPLOYEE MATTERS
Section 6.1 Employment of Transferred Employees. Purchaser shall offer
employment to all Active Employees of any IPC Company as of the Closing Date in
the same or comparable positions, and at the same or comparable base pay and
bonus opportunities, as were in effect immediately prior to the Closing Date.
Purchaser shall offer employment to such non-supervisory Active Employees at no
less than the wage rates, and substantially equivalent fringe benefits and terms
and conditions of employment that are in effect on the Closing Date, and shall
continue such wage rates and substantially equivalent fringe benefits and terms
and conditions of employment for at least 30 months following the Closing Date,
unless Purchaser and the collective bargaining units representing such
non-supervisory Active Employees mutually agree to different terms and
conditions of employment within such 30 month period. Any Active Employee who
accepts such offer of employment shall be referred to in this Agreement as a
"Transferred Employee." For purposes of this Article VI, the term "Active
Employees" shall include all full-time and part-time employees, employees on
workers' compensation, military leave, special military leave, maternity leave,
leave under the Family and Medical Leave Act of 1993, union leave, sick leave,
long-term disability, or layoff with recall rights, and employees on other
approved leaves of absence with a legal or contractual right to reinstatement.
(a) Assumption of Collective Bargaining Agreements. On and after the
Closing Date, except as otherwise provided in this Agreement, Purchaser shall
assume all obligations under and be bound by the provisions of each collective
bargaining agreement applicable to Transferred Employees listed on Schedule
3.13.
(b) Recognition of Transferred Employee Service. On and after the Closing
Date, and subject to the provisions of any applicable collective bargaining
agreement and Section 6.1(d), Purchaser shall recognize the service of each
Transferred Employee prior to the Closing for each IPC Company, Sellers and any
Affiliates of Sellers for all employment-related purposes determined in
accordance with the practices and procedures of any Seller, such IPC Company or
such Affiliate, as applicable, in effect on the Closing Date, provided that
Sellers provide, as soon as practicable after the Closing, a list containing
each Transferred Employee's service credited
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by Sellers to Purchaser. Commencing sixty (60) days prior to the Closing Date,
Seller shall cooperate in good faith with Purchaser to determine, and
effectuate, the most expeditious procedures subject to the limitations of
applicable Law, for transferring from Sellers to Purchaser such data relating to
Transferred Employees that is necessary for the operation of employee benefit
plans maintained by Purchaser in which Transferred Employees will participate
immediately after Closing and so that all personnel records of Transferred
Employees, the service of all Transferred Employees and all other information
reasonably determined by Purchaser to be needed by Purchaser in connection with
the employment of Transferred Employees will be provided to Purchaser on or
prior to Closing.
(c) Termination of Accruals; Assumption of Obligation to Pay Bonuses.
Except as otherwise expressly provided in this Agreement, Transferred Employees
shall not accrue benefits under any employee benefit policies, plans,
arrangements, programs, practices or agreements of Sellers or any of their
Affiliates after the Closing Date. For the year in which the Closing Date
occurs, Purchaser shall pay, or cause one of its Affiliates to pay, to the
Transferred Employees any bonuses that would have been payable to the
Transferred Employees for that year had the Transferred Employees remained
employees of any Seller or one of its Affiliates, in accordance with the
provisions of the policy, plan, arrangement, program, practice or agreement
under which the bonus would have been paid (the "Seller Bonus Plans"), provided
such Seller Bonus Plans are listed on Schedule 3.10. In determining the amount
of the bonus to be paid by Purchaser in accordance with the preceding sentence,
Purchaser shall apply criteria that are substantially comparable to the criteria
established as of the Closing Date under the Seller Bonus Plans under which the
bonus would have been paid had the Transferred Employees remained employees of
any Seller or one of its Affiliates.
(d) No Duplicate Benefits. Nothing in this Agreement shall cause duplicate
benefits to be paid or provided to or with respect to a Transferred Employee
under any employee benefit policies, plans, arrangements, programs, practices or
agreements. References herein to a benefit with respect to a Transferred
Employee shall include, where applicable, benefits with respect to any eligible
dependents and beneficiaries of such Transferred Employee under the same
employee benefit policy, plan, arrangement, program, practice or agreement.
(e) Affiliate Employees. Not less than 90 days prior to the Closing Date,
Sellers shall deliver to Purchaser a list of those Active Employees (if any)
who, as of the date of such delivery, are performing services for any IPC
Company but are employed by an Affiliate of Sellers (other than any IPC Company)
(the "Affiliate Employees"). Purchaser shall offer to employ as of the Closing
Date such Affiliate Employees as shall be mutually determined by Sellers and
Purchaser. Each such Affiliate Employee who accepts such offer of employment
shall be a Transferred Employee and shall be treated under this Agreement in a
manner that is comparable to the treatment given to the Transferred Employees
who were employed by an IPC Company, except that his or her service as of the
Closing Date shall be determined in accordance with the practices and procedures
of his or her employer, as in effect on the Closing Date.
(f) Term of Assumed Obligations. Notwithstanding anything in this Section
6.1 to the contrary, and except as otherwise expressly provided by Law or this
Agreement or in any Contract with or on behalf of a bargaining unit to which any
IPC Company is a party, Purchaser retains the right to determine after the
Closing the number of non-supervisory and supervisory
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employees it deems sufficient to operate and maintain operations and facilities
acquired hereunder, and Purchaser and its Affiliates may, at any time after the
Closing, terminate any Transferred Employee or renegotiate, alter, amend or
terminate any agreement or Contract concerning employment or any term thereof,
any employee benefit plan, or the participation of any Transferred Employee in
any such plan.
Section 6.2 Transferred Employee Benefit Matters.
(a) Defined Benefit Plans.
(i) Seller Pension Plans. As of the date of this Agreement,
Transferred Employees participate in the single-employer defined benefit
pension plans listed in Schedule 6.2(a), which plans are referred to
collectively in this Agreement as the "Seller Pension Plans" and
individually as a "Seller Pension Plan." The Seller Pension Plans also
cover the Other Plan Participants (as such term is defined below). Each
other person who was employed by any IPC Company or a predecessor to any
IPC Company who has an accrued benefit (which remains payable in whole or
in part) under a Seller Pension Plan immediately before the Closing Date
and who immediately before the Closing Date is no longer actively employed
by Dynegy, any IPC Company or any of their respective Affiliates (such as
Retirees) or who is a beneficiary or an alternate payee of an individual
who was employed by any IPC Company or a predecessor to any IPC Company or
a beneficiary or alternate payee of a Transferred Employee and who has an
accrued benefit (which remains payable in whole or in part) under a Seller
Pension Plan is referred to in this Section 6.2(a) as an "Other Plan
Participant."
(ii) Purchaser Obligations. Purchaser shall take all actions necessary
and appropriate to ensure that, as soon as practicable after the Closing
Date, Purchaser, or one of its Affiliates, maintains or adopts one or more
pension plans (hereinafter referred to in the aggregate as the "Purchaser
Pension Plans" and individually as the "Purchaser Pension Plan") effective
as of the Closing Date and to ensure that each Purchaser Pension Plan
satisfies the following requirements as of the Closing Date: (A) the
Purchaser Pension Plan is a qualified, single-employer defined benefit plan
under Section 401(a) of the Code; (B) any Purchaser Pension Plan that was
in effect before the Closing Date shall be in compliance with the funding
requirements of Section 302 of ERISA and Section 412 of the Code; (C) the
Purchaser Pension Plan is not the subject of termination proceedings or a
notice of termination under Title IV of ERISA; (D) the Purchaser Pension
Plan does not exclude Transferred Employees, as a class, from eligibility
to participate therein; and (E) the Purchaser Pension Plan does not violate
the requirements of any applicable collective bargaining agreement. No
later than ten days after the Closing, Purchaser shall provide Sellers with
a written certification that the Purchaser Pension Plan satisfies each of
the requirements set forth in this Section 6.2(a)(ii).
(iii) Transfer of Liabilities.
(A) In accordance with the provisions of this Section 6.2(a),
Purchaser shall cause the Purchaser Pension Plans to accept all
liabilities for benefits under the Seller Pension Plans, whether or
not vested, that would have been paid or
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payable (but for the transfer of assets and liabilities pursuant to
this Section 6.2(a)) to or with respect to the Transferred Employees
and Other Plan Participants under the terms of the Seller Pension
Plans, including all liabilities for "Section 411(d)(6) protected
benefits" (as defined by Section 411(d)(6) of the Code and the
regulations thereunder) that have accrued under the Seller Pension
Plans to or with respect to the Transferred Employees and Other Plan
Participants as of the Closing Date. Notwithstanding the foregoing,
neither Purchaser nor the Purchaser Pension Plans shall assume such
liabilities if Sellers and the Seller Pension Plans do not comply in
all material respects with the provisions of Section 6.2(a)(iv).
Purchaser shall not amend the Purchaser Pension Plans, or permit the
Purchaser Pension Plans to be amended, to eliminate any benefit
accrued as of the Closing, whether or not vested, with respect to
which liabilities are transferred pursuant to the foregoing provisions
of this subsection (A), including any such benefit that is a "Section
411(d)(6) protected benefit" (as defined by Section 411(d)(6) of the
Code and the regulations thereunder), except to the extent permitted
by applicable Law. Neither Dynegy nor Sellers shall on or prior to the
transfer of liabilities, take any action to fully vest Transferred
Employees in their benefits (if any) under the Seller Pension Plans.
Notwithstanding any other provision of this Agreement, the Seller
Pension Plans shall continue to make all Benefit Payments to Other
Plan Participants until both the Initial Transfer Amount and True-Up
Amount have been transferred to the Purchaser Pension Plans.
(B) Provided Sellers comply with Section 6.2(a)(iii)(C), for
purposes of eligibility, vesting and benefit calculation under the
Purchaser Pension Plans, each Transferred Employee whose accrued
benefit is transferred from a Seller Pension Plan to a Purchaser
Pension Plan shall be credited with service and compensation as of the
Closing Date as determined under the terms of the Seller Pension Plan.
(C) As soon as practicable after the Closing Date, Sellers shall
deliver to Purchaser a list reflecting each Transferred Employee's
service and compensation under each of the Seller Pension Plans, each
Transferred Employee's and Other Plan Participant's accrued benefit
thereunder as of the Closing Date, and a copy of each pending or final
domestic relations order affecting the benefit of any Transferred
Employee or Other Plan Participant.
(iv) Transfer of Assets.
(A) Not later than 90 days after the Closing, any Seller shall
cause its actuary to calculate the Accrued Liability of each
participant in each Seller Pension Plan who is a Transferred Employee
or Other Plan Participant and then to compare, on a Seller Pension
Plan by Seller Pension Plan basis, the Accrued Liability of all the
participants and beneficiaries in each Seller Pension Plan to the fair
market value of the assets of the respective Seller Pension Plan as of
the end of the calendar month which includes the Closing Date. If the
Accrued Liability of all participants and beneficiaries in a Seller
Pension Plan is less than the fair
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market value of the assets of that Seller Pension Plan, then, in
accordance with this Section 6.2(a)(iv), Sellers shall cause to be
transferred to a trust established by Purchaser as part of the
respective Purchaser Pension Plan annuity contracts held for the
benefit of Other Plan Participants and such cash and/or other assets
as Sellers and Purchaser shall mutually determine equal to the Accrued
Liability under such Seller Pension Plan for all Transferred Employees
and Other Plan Participants, where each such Accrued Liability shall
be determined as of the end of the calendar month which includes the
Closing Date. If the total Accrued Liability under a Seller Pension
Plan is equal to or more than the fair market value of the assets of
that Seller Pension Plan, then Sellers shall cause their actuary to
determine the amount of assets allocable to the Accrued Liabilities of
the Transferred Employees and Other Plan Participants in that Seller
Pension Plan based on Section 4044 of ERISA (the "Section 4044
Amount"); and, in accordance with this Section 6.2(a)(iv), Sellers
shall cause such annuity contracts held for the benefit of Other Plan
Participants and such cash and/or other assets as Purchaser and
Sellers shall mutually determine) equal to the Section 4044 Amount
applicable to the Transferred Employees and Other Plan Participants
under such Seller Pension Plan to be transferred to the trust
established by Purchaser as part of the respective Purchaser Pension
Plan. Subject to Sellers' and the Seller Pension Plans' compliance in
all material respects with the provisions of this Section 6.2(a)(iv),
Purchaser as of the Closing Date shall assume all liabilities and
obligations of any Seller, any Seller's Affiliates and each Seller
Pension Plan with respect to the Transferred Employees and the Other
Plan Participants under each Seller Pension Plan, and Purchaser shall
become with respect to each Transferred Employee and each Other Plan
Participant responsible for all benefits due under such Seller Pension
Plan, whether arising prior to, on or after the Closing Date.
(B) The Accrued Liability or the Section 4044 Amount (whichever
is applicable) for each Seller Pension Plan shall be referred to in
this Section 6.2(a)(iv)(B) as "X", and all transfers of annuity
contracts, cash and/or other assets (such other assets determined in
accordance with mutual agreement of the parties pursuant to Section
6.2(a)(iv)(A)) to each Purchaser Pension Plan with respect to "X"
shall be made in accordance with the provisions of this Section
6.2(a)(iv)(B). The initial transfer with respect to each Seller
Pension Plan shall be made no later than the later of: (1) 30 days
after the end of the calendar month that includes the Closing Date; or
(2) the date on which the requirements of Section 6.2(a)(ii) and the
requirements of Section 6.2(a)(iv)(D) have been satisfied. The date
determined under the prior sentence is referred to in this Agreement
as the "Initial Transfer Date". Sellers shall cause the trust which is
a part of each Seller Pension Plan to make an initial transfer of
annuity contracts, cash and/or assets (such other assets determined in
accordance with mutual agreement of the parties pursuant to Section
6.2(a)(iv)(A)), on the Initial Transfer Date to the trust which is a
part of the corresponding Purchaser Pension Plan equal to 85% of the
amount estimated by Sellers in good faith (using the same assumptions
and methodologies consistent with the estimates previously provided to
Purchaser and as set forth in a schedule to be presented at the
Closing by
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Sellers) to be equal to "X" with respect to each Seller Pension Plan
(the "Initial Transfer Amount"); provided, however, if Purchaser has
satisfied the requirements of Section 6.2(a)(ii) and the requirements
of Section 6.2(a)(iv)(D) have been satisfied and the Seller Pension
Plans do not transfer the Initial Transfer Amount as of the Initial
Transfer Date, Sellers shall immediately thereafter cause the Seller
Pension Plans to transfer to the Purchaser Pension Plans an amount
equal to 75 percent of the fair market value of the assets of each
Seller Pension Plan and such amount shall for all purposes of this
Agreement then be deemed to be the Initial Transfer Amount. Sellers
prior to the Initial Transfer Date for each Seller Pension Plan shall
provide Purchaser with evidence reasonably satisfactory to Purchaser
that such Seller Pension Plan continues to satisfy the requirements
for a qualified plan under Section 401(a) of the Code. As soon as
practicable after the date the final determination of the amounts to
be transferred is made (the "True-Up Date"), but in no event more than
30 days after the final determination, Sellers shall cause a second
transfer to be made from the trust which is a part of each Seller
Pension Plan to the trust which is a part of each Purchaser Pension
Plan in cash equal to the True-Up Amount, if any, with respect to such
Seller Pension Plan. The True-Up Amount, if any, for each Seller
Pension Plan shall equal:
"X" minus the Initial Transfer Amount minus benefit payments made to
any Transferred Employees and Other Plan Participants by the Seller
Pension Plan on or after the Closing Date ("Benefit Payments"), as
adjusted for earnings as calculated in accordance with this Section
6.2(a)(iv)(B).
Earnings shall be calculated in accordance with this Section
6.2(a)(iv)(B) as follows: (1) earnings shall be calculated from the
last day of the calendar month which includes the Closing Date to the
Initial Transfer Date on an amount equal to the Initial Transfer
Amount using the compound monthly rate of return (considering both
gains and losses) earned or lost on the assets of the trust from which
the True-Up Amount is being transferred; and (2) earnings shall be
calculated from the last day of the calendar month which includes the
Closing Date to the True-Up Date on an amount equal to "X" minus the
sum of the Initial Transfer Amount and such Benefit Payments using (a)
with respect to the period from the last day of the calendar month
which includes the Closing Date to the last day of the calendar month
preceding the True-Up Date, the compound monthly rate of return
(considering both gains and losses) earned or lost on the assets of
the trust from which the True-Up Amount is being transferred and (b)
with respect to the period from the first day of the calendar month
which includes the True-Up Date to the True-Up Date, the average rate
of the 90-day Treasury Xxxx on the auction date which coincides with
the first day of such calendar month or, if there is no auction on
such date, the auction date which immediately precedes the first day
of the calendar month which includes the True-Up Date. However, if the
Initial Transfer Amount for a Seller Pension Plan plus the Benefit
Payments made by such plan exceeded "X" with respect to such Seller
Pension Plan, Purchaser as soon as practicable following such
determination shall cause a transfer to be made in cash from the trust
which is a part of the corresponding
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Purchaser Pension Plan to the trust from which the Initial Transfer
Amount was transferred equal to the difference between (i) the sum of
such Initial Transfer Amount and such Benefit Payments and (ii) "X",
adjusted to reflect earnings from the Initial Transfer Date until the
date of such transfer from the trust which is a part of such Purchaser
Pension Plan using (a) with respect to the period from the Initial
Transfer Date to the last day of the calendar month preceding such
transfer, the compound rate of return (considering both gains and
losses) on the assets of such Purchaser Pension Plan and (b) with
respect to the period from the first day of the calendar month in
which the transfer occurs and the actual date of such transfer, the
average rate of the 90-day Treasury Xxxx on the auction date
coincident with the first day of the calendar month in which the
transfer occurs or, if there is no auction on such date, on the
auction date which immediately precedes the first day of the calendar
month in which the transfer occurs. Unless Sellers and Purchaser agree
otherwise, all transfers will occur on the last Business Day of a
calendar month. Finally, notwithstanding anything in this Section
6.2(a)(iv)(B) to the contrary, the transfers contemplated in this
Section 6.2(a)(iv)(B) shall comply with Section 414(l) of the Code and
the related regulations, and the amount expressly called for to be
transferred pursuant to this Section 6.2(a)(iv)(B) shall be adjusted
to the extent necessary to satisfy Section 414(l) of the Code and the
related regulations as well as Section 4044 of ERISA and the related
regulations.
(C) For purposes of this Section 6.2(a)(iv), the term "Accrued
Liability" shall mean with respect to each Seller Pension Plan the
present value of the accrued benefit of each Transferred Employee,
each Other Plan Participant and each other participant or beneficiary
in such Seller Pension Plan, determined on a termination basis using
the interest factors specified by the PBGC as in effect as of the
Closing Date for an immediate or deferred annuity as appropriate for
each such person and using the other methods and factors specified in
the PBGC's regulations for the valuation of accrued benefits upon a
plan termination. The Accrued Liability and the Section 4044 Amount
shall be determined by an enrolled actuary designated by Sellers, and
Sellers shall provide within 60 days after the Closing Date any
actuary designated by Purchaser with all the information reasonably
necessary to review the calculations of the Accrued Liability and the
Section 4044 Amount and to verify that such calculations have been
performed in a manner consistent with the terms of this Agreement. If
there is a good faith dispute between Sellers' actuary and Purchaser's
actuary as to the amount to be transferred to any plan under this
Section 6.2(a) and such dispute remains unresolved for 30 days, the
chief financial officers of Dynegy and Purchaser shall endeavor to
resolve the dispute. If such dispute remains unresolved for 60 days,
Sellers and Purchaser shall select and appoint a third actuary who is
mutually satisfactory to both Sellers and Purchaser and who shall
recalculate the disputed amount using the actuarial assumptions
described in this Section 6.2(a)(iv)(C). The decision of such third
party actuary shall be rendered within 30 days and shall be conclusive
as to any dispute for which such actuary was appointed. The cost of
such third party actuary shall be divided equally between Sellers and
Purchaser. Purchaser and Sellers each shall be responsible
65
for the cost of its own actuary. The parties understand and agree that
the actuarial assumptions and methods used by Sellers' actuary in
making the calculations described in this clause (C) shall not be
subject to dispute unless such assumptions and methods are
inconsistent with those assumptions described in such clause.
(D) In connection with the transfer of assets and liabilities
pursuant to this Section 6.2(a), Sellers and Purchaser and their
respective Affiliates shall cooperate with each other in making all
appropriate filings required by the Code or ERISA and the regulations
thereunder, and the transfer of assets and liabilities pursuant to
this Section 6.2(a) shall not take place until as soon as practicable
after the latest of (1) the expiration of the 30-day period following
the filing of any required notices with the Internal Revenue Service
pursuant to Section 6058(b) of the Code, or (2) the date Purchaser has
delivered to Sellers a copy of the Purchaser Pension Plan and, with
respect to a Purchaser Pension Plan in effect on the date of the
Closing, a copy of the most recent determination letter from the
Internal Revenue Service to the effect that the Purchaser Pension Plan
is qualified under Section 401(a) of the Code, together with
documentation reasonably satisfactory to Sellers of the due adoption
of any amendments to the Purchaser Pension Plan required by the
Internal Revenue Service as a condition to such qualification and a
certification from Purchaser that no events have occurred that
adversely affect the continued validity of such determination letter
(apart from the enactment of any Federal law for which the remedial
amendment period under Section 401(b) of the Code has not yet
expired), and (3) the receipt of information enabling the enrolled
actuary for the Purchaser Pension Plan to issue the certification
required by Section 6058(b) of the Code.
(b) Savings Plans.
(i) As of the date of this Agreement, Transferred Employees
participate in the defined contribution plans listed in Schedule 6.2(b)
(collectively referred to as the "Seller Savings Plans"). Except as
provided in Section 6.2(b)(v), Transferred Employees shall not be entitled
to make contributions to or to benefit from matching or other contributions
under the Seller Savings Plans on and after the Closing Date.
(ii) Purchaser shall take all action necessary and appropriate to
ensure that, as soon as practicable after the Closing Date, Purchaser
maintains or adopts one or more savings plans (hereinafter referred to in
the aggregate as the "Purchaser Savings Plans" and individually as the
"Purchaser Savings Plan") effective as of the Closing Date and to ensure
that each Purchaser Savings Plan satisfies the following requirements as of
the Closing Date: (A) the Purchaser Savings Plan is a qualified,
single-employer individual account plan under Section 401(a) of the Code;
(B) the Purchaser Savings Plan does not exclude Transferred Employees from
eligibility to participate therein; (C) the Purchaser Savings Plan permits
Transferred Employees to make before-tax contributions (under Section
401(k) of the Code) and provides for matching contributions by Purchaser;
and (D) the Purchaser Savings Plan does not violate the requirements of any
applicable collective bargaining agreement.
66
(iii) The terms of the Purchaser Savings Plans, or each such Purchaser
Savings Plan, shall provide that the Transferred Employees shall have the
right to make direct rollovers to such plan of their accounts in a Seller
Savings Plan, including a direct rollover of any notes evidencing loans
made to such Transferred Employees.
(iv) For purposes of eligibility and vesting under the Purchaser
Savings Plans, each Transferred Employee shall be credited with service as
of the Closing Date as determined under the terms of the Seller Savings
Plans. Within 90 days after the Closing Date, Sellers shall deliver to
Purchaser a list of the Transferred Employees covered by the Seller Savings
Plans, together with each Transferred Employee's service under each of the
Seller Savings Plans as of the Closing Date.
(v) Sellers shall contribute all Transferred Employees' contributions
that relate to compensation paid prior to the Closing Date and shall make
all required matching contributions with respect to the Transferred
Employees' contributions to the Seller Savings Plans that are (A) eligible
for matching and (B) made while employed by Sellers or its Affiliates
before the Closing Date. Such matching contributions shall be made not
later than the date on which all other matching contributions are made to
the Seller Savings Plans with respect to contributions made at the same
time as the Transferred Employees' contributions.
(c) Retiree Medical Benefits.
(i) Purchaser as of the Closing Date shall assume the liabilities,
obligations and responsibilities of Sellers and their Affiliates to provide
post-retirement medical, health and life insurance benefits (including
reimbursement for Medicare premiums) to each former employee of any IPC
Company or any predecessor of any IPC Company whose employment terminated
on or before the Closing Date and any spouse, dependents or beneficiary of
such former employee (individually a "Retiree" and collectively the
"Retirees") which Sellers or their Affiliates were obligated to provide
immediately before the Closing Date, including any liabilities, obligations
or responsibilities which Sellers or their Affiliates funded through one,
or more than one, trust described in Section 501(c)(9) of the Code
(individually a "Seller's VEBA" and collectively the "Seller's VEBAs")
provided that Purchaser or its Affiliates may, to the extent permitted by
applicable Law, change, amend or terminate such benefits at any time.
Purchaser, as part of such assumption, shall establish or maintain, as of
the Closing Date, a trust, or more than one trust, described in Section
501(c)(9) of the Code (the "Purchaser's VEBA"), the assets of which shall
fund such post-retirement benefits for such Retirees and Transferred
Employees, and Sellers as part of such assumption shall cause each Seller's
VEBA to transfer cash or assets, or cash and assets, to the Purchaser's
VEBA in accordance with this Section 6.2(c) to fund the payment of such
post-retirement benefits following the Closing Date. Notwithstanding the
foregoing, the Purchaser shall not assume such liabilities if Seller does
not comply in all material respects with the provisions of Section
6.2(c)(ii).
(ii) All transfers of cash or assets, or cash and assets, to
Purchaser's VEBA shall be made as soon as administratively feasible after
the Closing Date or within 20
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days following the date on which Sellers have been provided evidence
reasonably satisfactory to Sellers that Purchaser's VEBA satisfies the
requirements for a tax exempt trust under Section 501(c)(9) of the Code, if
such date is later than the Closing Date (the "VEBA Transfer Date").
Sellers on the VEBA Transfer Date shall cause each Seller's VEBA to make a
transfer of cash or assets to Purchaser's VEBA equal to 100% of the cash
and assets of each Seller's VEBA. In addition, all assets held in any
401(h) account under any Seller Pension Plan shall be transferred to a
401(h) account established under the Purchaser Pension Plan(s) designated
by Purchaser provided Purchaser has provided Sellers with written evidence
of the establishment of such account.
(iii) Purchaser as of the Closing Date shall assume the liabilities,
obligations and responsibilities of Sellers and their Affiliates for the
post-retirement medical and other welfare benefits described in Section
6.2(c)(i) for all Retirees and Transferred Employees. For purposes of this
Section 6.2(c), the term "Transferred Employees" shall also include
eligible spouses, dependents and beneficiaries. Purchaser shall satisfy any
requirements of any applicable collective bargaining agreement with respect
to retiree medical, health, and life insurance benefits. Sellers and their
Affiliates shall have no obligation to provide retiree medical, health and
life insurance benefits to any Transferred Employee or Retiree on or after
the Closing Date.
(d) Other Welfare Benefits.
(i) Purchaser shall take all action necessary and appropriate to
ensure that, as soon as practicable after the Closing Date, Purchaser
maintains or adopts, as of the Closing Date, one or more employee welfare
benefit plans, including medical, health, dental, flexible spending
account, accident, life, short-term disability, and long-term disability
and other employee welfare benefit plans (including retiree medical and
life) for the benefit of the Transferred Employees (the "Purchaser Welfare
Plans"). For purposes of determining eligibility to participate in each
Purchaser Welfare Plan, each Transferred Employee shall be credited with
service, determined under the terms of the corresponding welfare plans
maintained by Sellers on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage
for pre-existing conditions or requirements for evidence of insurability
under the Purchaser Welfare Plans shall be waived for Transferred
Employees, except to the extent that such restrictions or requirements have
not been satisfied under corresponding plans of Sellers and their
Affiliates as of the Closing Date. Transferred Employees shall receive
credit under the Purchaser Welfare Plans for co-payments and payments under
a deductible limit made by them and for out-of-pocket maximums applicable
to them during the plan year of the Seller Welfare Plan in accordance with
the corresponding Seller Welfare Plans. Within 90 days after the Closing
Date, Sellers shall deliver to Purchaser a list of the Transferred
Employees who had credited service under a Seller Welfare Plan, together
with each such Transferred Employee's service under such plan.
(ii) Sellers shall retain responsibility for any valid claim under a
Seller Welfare Plan for disability or life insurance benefits made by a
Transferred Employee on or after the Closing Date arising from a claim
incurred on or before the Closing Date. For purposes of this paragraph, a
claim for life insurance is deemed incurred when the
68
death occurs and a claim for long-term disability benefits is deemed
incurred on the first day the employee is absent from work as a result of
the condition that results in entitlement to disability benefits. As of the
Closing Date, Purchaser shall make available the appropriate Transferred
Employees to administer and process any claim under a Seller Welfare Plan
for medical or dental benefits made by a Transferred Employee on or after
the Closing Date arising from a claim incurred on or before the Closing
Date. Upon receipt of proof of payment reasonably satisfactory to
Purchaser, Purchaser shall reimburse Seller for any medical or dental claim
incurred prior to Closing and that is properly paid under a Seller Welfare
Plan for any Transferred Employee. For purposes of this paragraph, a
medical or dental claim is deemed incurred when the services that are the
subject of the claim are performed. Nothing in this Section 6.2(d) shall
require any party or benefit plan to make any payment or to provide any
benefit not otherwise provided by the terms of the Seller Welfare Plans.
(iii) Sellers, Purchaser, their respective Affiliates, and the Seller
Welfare Plans and the Purchaser Welfare Plans shall assist and cooperate
with each other in the disposition of claims made under the Seller Welfare
Plans, and in providing each other with any records, documents, or other
information within its control or to which it has access that is reasonably
requested by any other as necessary or appropriate to the disposition,
settlement or defense of such claims.
(iv) Nothing in this Agreement shall require Sellers or their
Affiliates to transfer assets or reserves with respect to pre-retirement
benefits under the Seller Welfare Plans to Purchaser or the Purchaser
Welfare Plans.
(v) Transferred Employees not subject to a collective bargaining
agreement shall be eligible for benefits under Purchaser severance or
separation pay policies or plans that are the same as or comparable to
those provided to similarly situated employees of Purchaser and its
Affiliates. Purchaser shall recognize the service of each such Transferred
Employee with Sellers and their Affiliates for eligibility, vesting and
benefit determinations under Purchaser's severance or separation pay policy
or plan. Transferred Employees subject to a collective bargaining agreement
shall be eligible for severance or separation pay benefits in accordance
with the terms of the applicable agreement, or as specified by Illinois
Law.
(vi) Sellers shall be responsible for satisfying "continuation
coverage" requirements for all "group health plans" under Section 4980B of
the Code, Part 6 of Title I of ERISA and comparable state law ("COBRA")
with respect to each employee of any Seller or the IPC Companies who does
not become a Transferred Employee (and any spouse, dependents or
beneficiary of such employee or other employee) and with respect to each
former employee of any Seller or any IPC Company or any predecessor of any
IPC Company whose employment terminated before the Closing Date and any
spouse, dependents or beneficiary of such former employee. Sellers will
provide any notices to Transferred Employees required under COBRA and will
comply with any other applicable provisions of COBRA in connection with
their termination of employment by Sellers. Purchaser shall be responsible
for satisfying "continuation coverage" requirements for all "group health
plans" under COBRA with respect to each Transferred
69
Employee (and any spouse, dependents or beneficiary of such Transferred
Employee) who experiences a "qualifying event" within the meaning of COBRA
after the Closing.
(vii) Sellers shall disclose to Purchaser within 30 days after the
Closing Date, the unused flexible spending account (the "FSA") balances of
each Transferred Employee and shall, to the extent permitted by applicable
Law, transfer such amounts to Purchaser. Purchaser shall cause to be
maintained for the duration of the calendar year in which the Closing Date
occurs all such unused FSA account balances of the Transferred Employees in
a plan maintained by Purchaser or one of its Affiliates.
Section 6.3 Miscellaneous Benefits. On or after the Closing Date, Purchaser
shall: (a) assume all liabilities of Sellers or any Affiliate of Sellers with
respect to any accrued but unused vacation time of Transferred Employees to the
extent that it is an accrued liability on the financial statements; and (b)
allow Transferred Employees to receive paid time off on or after the Closing
Date for any unused vacation time accrued on the financial statements prior to
the Closing Date in accordance with the applicable policies of Purchaser. For
purposes of applying such policies of Purchaser, Purchaser shall treat service
of the Transferred Employees with any Seller and its Affiliates as though it
were service with Purchaser. Sellers and their Affiliates shall have no
liability to pay Transferred Employees for the vacation time described in this
Section 6.3.
Section 6.4 Employee Rights.
(a) Nothing herein expressed or implied shall confer upon any employee of
any IPC Company, Sellers or their Affiliates, or Purchaser or its Affiliates, or
upon any legal representative of such employee, or upon any collective
bargaining agent, any rights or remedies, including any right to employment or
continued employment for any specified period, of any nature or kind whatsoever
under or by reason of this Agreement.
(b) Nothing in this Agreement shall be deemed to confer upon any person
(nor any beneficiary thereof) any rights under or with respect to any plan,
program, or arrangement described in or contemplated by this Agreement, and each
person (and any beneficiary thereof) shall be entitled to look only to the
express terms of any such plan, program or arrangement for his or her rights
thereunder.
(c) Nothing in this Agreement shall cause Purchaser or its Affiliates to
have any obligation to provide employment to any individual who is not an Active
Employee or Affiliate Employee or, except as otherwise provided in applicable
collective bargaining agreements, to continue to employ any Transferred Employee
for any period of time following the Closing Date.
Section 6.5 WARN Act Requirements. On and after the Closing Date, Purchaser
shall be responsible with respect to Transferred Employees and their
beneficiaries for compliance with the WARN Act and any other applicable Law,
including any requirement to provide for and discharge any and all
notifications, benefits and liabilities to Transferred Employees and
Governmental Authorities that might be imposed as a result of the consummation
of the transactions contemplated by this Agreement or otherwise. Purchaser shall
not take any action
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after the Closing Date that would cause any termination of employment of any
employees employed by any IPC Company or Sellers or their Affiliates prior to
the Closing Date to constitute a "plant closing" or "mass layoff" under the WARN
Act or any similar state or local Law or create any liability to Sellers or
their Affiliates for employment terminations under applicable Law it being
understood that to enable Purchaser to comply with this requirement, Sellers
shall first inform Purchaser upon the Closing Date or as soon thereafter as is
practicable of all employees, by location, terminated by any IPC Company or its
Affiliates other than for cause or through voluntary resignation or retirement
within the preceding 90 days.
ARTICLE VII
TAX MATTERS AND INDEMNIFICATION
Section 7.1 Preparation and Filing of Tax Returns.
(a) Sellers shall timely prepare and file, or cause to be timely prepared
and filed, on a basis consistent with past practice (except as required by
applicable Law), all Tax Returns required to be filed by or with respect to any
Seller (including the Business and the Purchased Assets) and each Purchased
Subsidiary (i) in the case of Income Tax Returns, that have not yet been filed
and are not yet due for any taxable period that ends on or prior to the Closing
Date, and (ii) in the case of Non-Income Tax Returns, that have not yet been
filed and are due (taking into account extensions properly obtained) on or
before the Closing Date, and in all cases Sellers shall remit or cause to be
remitted any Taxes due in respect of such Tax Returns. Dynegy shall allow
Purchaser to review any Non-Income Tax Returns relating to the Business, any
Purchased Asset or any Purchased Subsidiary required to be filed on or before
the Closing Date at IPC's offices in Decatur, Illinois, during normal business
hours prior to filing such Tax Returns.
(b) Purchaser shall timely prepare and file, or cause to be timely prepared
and filed, all Tax Returns required to be filed by or with respect to the
Business, any Purchased Asset or any Purchased Subsidiary (i) in the case of
Income Tax Returns that have not yet been filed and are not yet due for any
taxable period that begins after the Closing Date and (ii) in the case of
Non-Income Tax Returns that have not yet been filed and are due (taking into
account extensions properly obtained) after the Closing Date. Purchaser shall
prepare any Non-Income Tax Returns described in clause (ii) for any Pre-Closing
Tax Period consistent with past practice, and in each case Purchaser shall remit
or cause to be remitted any Taxes due in respect of such Tax Returns. Purchaser
shall allow Dynegy to review any Non-Income Tax Returns described in clause (ii)
for any Pre-Closing Tax Period at Purchaser's offices in Decatur, Illinois,
during normal business hours.
(c) (1) Without the written consent of Dynegy, Purchaser will not, and will
cause its Affiliates not to, file any amended Income Tax Returns, carry-back
claim, or other adjustment relating to Income Taxes or take any other action
with respect to Income Taxes relating to the Business, any Purchased Asset or
any Purchased Subsidiary for, or to, any taxable period that ends on or before
the Closing Date.
(d) (2) Without the written consent of Purchaser, Dynegy will not, and will
cause its Affiliates not to, file any amended Non-Income Tax Returns, carry-back
claim or other
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adjustment relating to Non-Income Taxes or take any other action with respect to
Non-Income Taxes relating to the Business, any Purchased Asset or any Purchased
Subsidiary for, or to, any taxable period that ends on or before the Closing
Date.
Section 7.2 Cooperation. The Seller Indemnitors and Purchaser shall
reasonably cooperate, and shall cause their respective Affiliates, officers,
employees and other representatives reasonably to cooperate, in preparing and
filing all Tax Returns required to be filed under Section 7.1 and in resolving
or managing all disputes or Audits with respect to all taxable periods relating
to Tax Returns or Taxes required to be filed or paid by or with respect to the
Business, any Purchased Asset or any Purchased Subsidiary and in any other
matters relating to Taxes required to be paid by or with respect to the
Business, any Purchased Asset or any Purchased Subsidiary, including (a) by
maintaining, subject to the other terms of this Agreement, and making available
to each other all books and records and all relevant correspondence with
Governmental Authorities in connection with Tax Returns or Taxes required to be
filed or paid by or with respect to the Business, any Purchased Asset or any
Purchased Subsidiary; (b) by promptly informing each other of notices of any Tax
Audit or other Tax proceeding in respect of which one or more of the parties or
any of its Affiliates may have a liability; and (c) by executing any reasonably
necessary powers of attorney.
Section 7.3 Transfer Taxes. Purchaser and EED shall be jointly and
severally liable for and pay, and Purchaser and EED shall jointly and severally
indemnify and hold harmless each Seller Group Member from and against any and
all Indemnifiable Losses due to all transfer, documentary, mortgage, recording,
sales, use, stamp, registration and applicable real estate transfer or gains and
stock transfer Taxes or any similar Taxes imposed on the sale of the Purchased
Assets pursuant to this Agreement.
Section 7.4 FIRPTA Certificate. Sellers shall deliver to Purchaser at the
Closing a certificate, in form and substance reasonably satisfactory to
Purchaser, certifying that the transactions contemplated hereby are exempt from
withholding under Section 1445 of the Code.
Section 7.5 Tax Refunds. Sellers shall be entitled to any Tax Refund
resulting from any Final Determination regarding Taxes for which Sellers are
liable pursuant to Section 7.7 (excluding Taxes for which Purchaser would be
liable if the proviso in Section 7.7(b) did not exist). If any such Tax Refund
is received by Purchaser, any Purchased Subsidiary or any of their respective
Subsidiaries or Affiliates, Purchaser shall forward any such Tax Refund to
Sellers (including any interest actually received) within ten days after receipt
thereof. Purchaser shall pay Sellers interest at the rate prescribed under
Section 6621(a)(1) of the Code, compounded daily, on any amount not paid when
due in accordance with the foregoing sentence. Purchaser shall be entitled to
any Tax Refund resulting from any Final Determination regarding Taxes for which
Purchaser is liable pursuant to Section 7.7; provided, that amounts that, absent
application of this proviso, would otherwise be payable under this Agreement by
reason of Section 3.8 and Article IX (to the extent it relates to Section 3.8),
shall be reduced by the amount of any Tax Refund of Non-Income Taxes received by
Purchaser and attributable to Pre-Closing Tax Periods, but only to the extent
such Tax Refund was not taken into account in the determination of Final
Adjusted Working Capital. Sellers shall make payments of any such Tax Refunds to
Purchaser under rules similar to those governing the payment of Tax Refunds by
Purchaser to Sellers set forth in the second and third preceding sentences.
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Section 7.6 Purchase Price Allocation.
(a) Purchaser shall present a draft (the "Proposed Allocation") of the
Purchase Price allocation (the "Allocation"), prepared in accordance with the
provisions of Section 1060 of the Code, to IPC and Dynegy for review within 120
days after the Closing Date. Sellers shall assist Purchaser in the preparation
of the Proposed Allocation and Purchaser shall provide Sellers, their Affiliates
and their respective employees, agents and representatives access at all
reasonable times to the personnel, properties, books and records of the
Business, any Purchased Asset and any Purchased Subsidiary for such purpose.
Except as provided in Section 7.6(b), at the close of business on the 30th day
after delivery of the Proposed Allocation, the Proposed Allocation shall become
binding upon Purchaser and Sellers, and shall be the Allocation.
(b) Sellers shall raise any objection to the Proposed Allocation in writing
within 30 days of the delivery of the Proposed Allocation. If Sellers raise any
such objection, Purchaser and IPC shall negotiate in good faith to resolve any
disputes with respect to the Proposed Allocation. If Purchaser and Sellers
cannot resolve any such disputes, they will enter into binding arbitration with
respect to the disputed items with an arbiter agreed to by the parties. The
costs of such arbiter shall be borne equally by the Seller Indemnitors, on the
one hand, and Purchaser, on the other.
(c) Sellers and Purchaser agree, for all Tax purposes, to allocate any
adjustment to the Purchase Price to the item or items to which it is principally
attributable.
Section 7.7 Tax Indemnification.
(a) After the Closing, the Seller Indemnitors shall be jointly and
severally liable for and pay, and the Seller Indemnitors shall jointly and
severally indemnify and hold harmless each Purchaser Group Member from and
against, any and all Indemnifiable Losses due to: (i) all Taxes imposed on or
with respect to a Seller, or for which a Seller may otherwise be liable,
attributable to any and all taxable years or periods (other than (A) Non-Income
Taxes imposed on or with respect to the Business, the Purchased Assets or a
Purchased Subsidiary and (B) any Income Taxes attributable to transactions or
other activities of Purchaser or its Affiliates entered into or occurring after
the Closing on the Closing Date that are not expressly contemplated by this
Agreement, to the extent such transactions or activities are not entered into or
do not occur in the ordinary course of business); (ii) Income Taxes imposed on
or with respect to the Business, the Purchased Assets or any Purchased
Subsidiary attributable to any Pre-Closing Tax Period (other than any Income
Taxes attributable to transactions or other activities of Purchaser or its
Affiliates entered into or occurring after the Closing on the Closing Date that
are not expressly contemplated by this Agreement, to the extent such
transactions or activities are not entered into or do not occur in the ordinary
course of business); and (iii) Taxes imposed on or with respect to a Seller or a
Purchased Subsidiary, or for which a Seller or a Purchased Subsidiary may
otherwise be liable, as a result of having been a member of any Company Group
(including Taxes for which a Seller or a Purchased Subsidiary is or may be
liable pursuant to Section 1.1502-6 of the Treasury regulations or similar
provisions of state or local Law as a result of having been a member of any
Company Group, and any Taxes resulting from a Seller or a Purchased Subsidiary
ceasing to be a member of any Company Group, as the case may be), it being
understood and agreed, for the avoidance of doubt, that the Seller Indemnitors
shall be
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jointly and severally liable for and pay, and shall jointly and severally
indemnify and hold harmless each Purchaser Group Member from and against, any
and all Indemnifiable Losses due to, any Income Taxes incurred by a Seller or
Purchased Subsidiary attributable to the Pre-Closing Tax Period as a result of
or relating to the transactions contemplated by this Agreement (including the
sale of the Purchased Assets pursuant to this Agreement).
(b) After the Closing, Purchaser and EED shall be jointly and severally
liable for and pay, and Purchaser and EED shall jointly and severally indemnify
and hold harmless each Seller Group Member from and against any and all
Indemnifiable Losses due to: (i) all Taxes imposed on or with respect to the
Business, any Purchased Asset or any Purchased Subsidiary attributable to any
Post-Closing Tax Period; (ii) any Non-Income Taxes imposed on or with respect to
the Business, any Purchased Asset or any Purchased Subsidiary attributable to
all taxable years and periods; and (iii) any Income Taxes attributable to
transactions or other activities of Purchaser or its Affiliates entered into or
occurring after the Closing on the Closing Date that are not expressly
contemplated by this Agreement, to the extent such transactions or activities
are not entered into or do not occur in the ordinary course of business;
provided, however, that Purchaser and EED shall not be liable for or pay, and
shall not indemnify or hold harmless any Seller Group Member from and against
any and all Indemnifiable Losses due to, Taxes for which Sellers are liable
under this Agreement (including under Article IX by reason of Section 3.8 or
Section 7.7(a)).
(c) Purchaser (on behalf of itself and EED) or Dynegy (on behalf of the
Seller Group Members), as the case may be, as the Indemnified Party, shall
promptly notify Dynegy (on behalf of the Seller Group Members) or Purchaser (on
behalf of itself and EED) as the Indemnifying Party, in writing upon receipt by
the Indemnified Party or any of its Affiliates, of notice of any pending or
threatened federal, state, local or foreign Tax Audits that may give rise to an
indemnification claim pursuant to this Section 7.7 (a "Tax Controversy") and
thereafter shall promptly forward to the Indemnifying Party copies of notices
and communications with the relevant Governmental Authority relating to such Tax
Controversy, provided, however, that a failure to comply with this provision
shall not affect the Indemnified Party's right to indemnification hereunder
except to the extent such failure materially impairs the Indemnifying Party's
ability to contest any such Tax liabilities. Except as provided in this Section
7.7(c), the Indemnifying Party may elect to control, and may elect to have sole
discretion in handling, settling or contesting any Audit inquiry, information
request, Audit proceeding, suit, contest or any other action with respect to a
Tax Controversy for which it would be required to indemnify the other party,
provided the Indemnifying Party first acknowledges in writing that it has
liability for Taxes that might arise in such proceeding. Notwithstanding the
foregoing, the Indemnifying Party shall not settle any Tax proceeding with
respect to a Tax Controversy on a basis that would materially adversely affect
the Indemnified Party or its Affiliates without obtaining the Indemnified
Party's written consent, which consent shall not be unreasonably withheld or
delayed. Any out-of-pocket expenses incurred by the Indemnified Party in
handling, settling or contesting a Tax Controversy that the Indemnifying Party
has elected to control under this Section 7.7(c) shall be borne by the
Indemnified Party, to the extent incurred during any period the Indemnifying
Party is, in fact, actively contesting such Tax Controversy. Dynegy, on the one
hand, and Purchaser, on the other hand, shall jointly control, and shall each
have the right to participate at its own expense in all activities and strategic
decisions with respect to, any Tax proceedings for which each party would be
required to indemnify the other party with respect to
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one or more Tax issues. Either Sellers or Dynegy, or both, may assume sole
control of any such Tax proceeding for any Straddle Period if it or they
acknowledge(s) in writing that it or they has or have sole liability for any
Taxes that might arise in such proceeding.
Section 7.8 Survival. Notwithstanding anything herein to the contrary, this
Article VII shall survive the Closing until 90 days after the expiration of the
applicable statute of limitations (giving effect to any waiver, mitigation or
extension thereof).
Section 7.9 Employee Withholding and Reporting. Purchaser and Sellers
intend that Purchaser shall be a "successor" within the meaning of, and solely
for the purpose of, IRS Revenue Procedure 96-60, 1996-2 C.B. 399 (the "Rev.
Proc.") with respect to all Transferred Employees. Pursuant to such intention,
Sellers and Purchaser agree that Purchaser shall be responsible for filing for
the calendar year in which Closing occurs all Forms W-2 and W-3 that relate to
Transferred Employees and for furnishing for the calendar year in which Closing
occurs Forms W-2 to all Transferred Employees, in each case which are due on or
after the Closing Date, in accordance with the Alternative Procedure described
in Section 5 of the Rev. Proc. On the Closing Date, Sellers shall provide to
Purchaser (a) all Forms W-4 and W-5 that were provided to Sellers by the
Transferred Employees, and (b) all payroll information relating to the
Transferred Employees. In addition, Sellers shall provide such information and
data to Purchaser as Purchaser shall reasonably request with respect to wages
and payroll Taxes for the year during which the Closing occurs to enable
Purchaser to comply with the provisions of this Section 7.9.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of Sellers. The obligations of
Sellers and Dynegy to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Purchaser and EED contained in this Agreement that are qualified
as to materiality shall be true and accurate at and as of the Closing Date, with
the same force and effect as if made as of the Closing Date (other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date) and the representations and warranties that
are not qualified as to materiality shall be true and accurate in all material
respects as of the Closing Date (other than such representations and warranties
as are made as of another date, which shall be true and accurate in all material
respects as of such date). The covenants and agreements contained in this
Agreement to be complied with by Purchaser and EED at or before the Closing
shall have been complied with in all material respects. Sellers shall have
received a certificate from Purchaser and EED signed by an authorized executive
officer thereof with respect to the matters described in this Section 8.1(a).
(b) Regulatory Approvals. Subject to Section 5.3, Final Orders described in
Schedule 8.1(b) (and any necessary implementing regulations) shall have been
received.
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(c) No Proceeding or Litigation. No Action shall have been threatened in
writing or filed by any state or Federal Governmental Authority against any
party seeking to restrain or prohibit or otherwise challenge the legality or
validity of the transactions contemplated by this Agreement or any Ancillary
Agreement.
(d) No Order. There shall not be in effect any applicable Law or
Governmental Order directing that the transactions contemplated by this
Agreement or any Ancillary Agreement not be consummated or which has the effect
of rendering it unlawful to consummate such transactions.
(e) Required Dynegy Consents. Dynegy and its Affiliates shall have received
consents, in form and substance reasonably satisfactory to Dynegy, to the
transactions contemplated hereby from the other parties to the transfer of all
Contracts and Permits to which any of Dynegy and its Affiliates is a party or to
which Dynegy or any Affiliate or any of its respective assets or properties is
subject and which are specified in Schedule 8.1(e) or are otherwise necessary to
prevent a Material Adverse Effect.
(f) Solvency Opinion. Dynegy shall obtain an opinion letter (the "Solvency
Opinion") (containing customary assumptions, qualifiers and disclaimers),
reasonably satisfactory to Dynegy, from a nationally recognized independent
investment banking, appraisal or solvency firm substantially to the following
effect as of the Closing:
(i) each of Dynegy and each Seller is not insolvent and will not be
rendered insolvent as a result of the consummation of the transactions
contemplated to occur at Closing;
(ii) the property of each of Dynegy and each Seller does not, and
shall not, following the consummation of the transactions contemplated to
occur at the Closing, constitute unreasonably small capital for each of
Dynegy and each Seller to carry out its business as now conducted and as
proposed to be conducted following consummation of the transactions
contemplated to occur at the Closing; and
(iii) each of Dynegy and each Seller has not incurred and does not
intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be received, and of
amounts to be payable on or in respect of the debts of each of Dynegy and
each Seller).
(g) Closing Deliveries. Purchaser shall have delivered to Sellers each of
the items required to be delivered to it pursuant to Xxxxxxx 0.0(x), (x), (x),
(x), (x), (x), (x), (x), (x), (x), (x), (x) and (q).
(h) PPA Conditions. The conditions to the effectiveness of the PPA shall
have been satisfied in all respects.
(i) PJM for ComEd. ComEd shall have (i) transferred functional control of
its transmission facilities to PJM for inclusion in an expanded PJM West Region;
(ii) integrated its control area into the PJM Interchange Energy Market and
certain other PJM markets; (iii) executed and delivered the PJM West
Transmission Owner's Agreement, PJM West Reliability
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Assurance Agreement and other such documents as may be required by PJM for ComEd
to participate in PJM as a transmission owner and load-serving entity; (iv)
executed and delivered the PJM Operating Agreement; and (v) installed the
applicable hardware and software systems, which systems shall have been
inspected and accepted by PJM.
Section 8.2 Conditions to Obligations of Purchaser. The obligations of
Purchaser and EED to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Sellers and Dynegy contained in this Agreement that are qualified
as to materiality (without consideration of any event or matter disclosed in any
Additional Disclosures) shall be true and accurate at and as of the Closing
Date, with the same force and effect as if made as of the Closing Date (other
than such representations and warranties as are made as of another date, which
shall be true and correct as of such date), and the representations and
warranties that are not qualified by materiality (without consideration of any
event or matter disclosed in any Additional Disclosures) shall be true and
accurate in all material respects as of the Closing Date (other than such
representations and warranties as are made as of another date, which shall be
true and accurate in all material respects as of such date). The covenants and
agreements contained in this Agreement to be complied with by Sellers and Dynegy
at or before the Closing shall have been complied with in all material respects
(without consideration of any event or matter disclosed in any Additional
Disclosures). With respect to any Additional Disclosure, Purchaser shall remain
obligated to consummate the transactions contemplated by this Agreement unless
an event or matter disclosed in such Additional Disclosure would reasonably be
expected to result in a Material Adverse Effect. Purchaser shall have received a
certificate from Sellers and Dynegy signed by an authorized executive officer
thereof with respect to the matters described in this Section 8.2(a).
(b) Regulatory Approvals. Subject to Section 5.3, Final Orders with respect
to the Governmental Orders described in Schedule 8.2(b) (and any necessary
implementing regulations) shall have been received.
(c) No Proceeding or Litigation. No claim, action, suit or proceeding shall
have been threatened in writing or filed by any state or Federal Governmental
Authority seeking to restrain or prohibit or otherwise challenge the legality or
validity of the transactions contemplated by this Agreement or any Ancillary
Agreement.
(d) No Order. There shall not be in effect any applicable Law or
Governmental Order directing that the transactions contemplated by this
Agreement or any agreement contemplated hereby not be consummated or which has
the effect of rendering it unlawful to consummate such transactions.
(e) Required Consents. Dynegy, its Affiliates and the IPC Companies shall
have received consents, in form and substance reasonably satisfactory to
Purchaser, to the transactions contemplated hereby and by the Ancillary
Agreements from the other parties to the transfer of all Contracts to which any
IPC Company is a party or to which any IPC Company or any of its
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respective assets or properties is subject and which are specified in Schedule
8.2(e) or are otherwise necessary to prevent a Material Adverse Effect.
(f) Required Permits. Purchaser shall have received Permits, either in the
form of new Permits or Permits transferred by Sellers, in form and substance
reasonably satisfactory to Purchaser, in all cases with respect to the operation
of the Business, the failure of which to have would result in a Material Adverse
Effect.
(g) Required Property Conveyance Documents. Dynegy, its Affiliates and the
IPC Companies shall have received and filed, to the extent applicable, transfer,
assignment and conveyance documents and filings with respect to the IPC
Properties, in form and substance reasonably satisfactory to Purchaser, required
to be obtained as a result of the transactions contemplated hereby and by the
Ancillary Agreements and necessary to become effective in order to prevent a
Material Adverse Effect.
(h) No Changes. There shall not have occurred since the date hereof any
change or event that individually or in the aggregate would reasonably be
expected to result in a Material Adverse Effect.
(i) Solvency Opinion. Dynegy shall have delivered the Solvency Opinion to
Purchaser that is reasonably satisfactory to Purchaser.
(j) Tax Opinion. Purchaser shall have received an opinion of independent
tax counsel (as selected by, and in form and substance reasonably satisfactory
to, Purchaser and which may be based on a ruling from the IRS) to the effect
that the transactions contemplated by the Securitization Transfer Agreements
will not result in a material adverse federal income tax consequence to the
Grantee, the Note Issuer, the Delaware Trustee, the Indenture Trustee or the
then existing Holders (as such terms are used in the Securitization Transfer
Agreements).
(k) Closing Deliveries. Dynegy and Sellers shall have delivered, or caused
to be delivered, to Purchaser each of the items required to be delivered to it
pursuant to Section 2.8 (except clauses (g), (h), (n), (s), (t), (w), (aa), (bb)
and (cc) thereof).
(l) Generation Agreements. Prior to the Closing, Dynegy and Sellers shall
have delivered and caused to be delivered to Purchaser (i) the Generation
Agreement, duly executed by IPC and DMG or its successor or assign, and (ii) the
Generation Indemnification Termination Agreements, duly executed by IPC and
Parent or DHI, as the case may be, and acknowledged by DMG or its successor or
assign.
(m) PJM for IPC. IPC shall have (i) transferred functional control of its
transmission facilities to PJM for inclusion in an expanded PJM West Region;
(ii) integrated its control area into the PJM Interchange Energy Market and
certain other PJM markets; (iii) executed and delivered the PJM West
Transmission Owner's Agreement, PJM West Reliability Assurance Agreement and
other such documents as may be required by PJM for IPC to participate in PJM as
a transmission owner and load-serving entity; (iv) executed and delivered the
PJM Operating Agreement; and (v) installed the applicable hardware and software
systems, which systems shall have been inspected and accepted by PJM.
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Section 8.3 Effect of Certain Waivers of Closing Conditions. If prior to
the Closing any party (the "waiving party") has Knowledge of any breach by any
other party of any representation, warranty or covenant contained in this
Agreement or any certificate delivered pursuant hereto and the waiving party
proceeds with the Closing, the waiving party shall be deemed to have waived such
breach and the waiving party and its Affiliates shall not be entitled to xxx for
damages or to assert any other right of remedy for any losses arising from any
matters relating to such condition or breach, notwithstanding anything to the
contrary contained herein or in any certificate delivered pursuant hereto.
Solely for purposes of this Section 8.3, Knowledge shall be deemed to mean (a)
with respect to Purchaser, the actual knowledge (without independent inquiry) of
the persons listed on Schedule 1.1(f) that Dynegy is able to demonstrate existed
by clear and convincing evidence, and (b) with respect to Sellers, the actual
knowledge (without independent inquiry) of the persons listed on Schedule 1.1(f)
that EED is able to demonstrate existed by clear and convincing evidence.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Obligations of Dynegy. Effective as of the Closing, the Seller
Indemnitors shall jointly and severally indemnify, reimburse and hold harmless
each Purchaser Group Member from and against any and all Indemnifiable Losses
due to:
(a) any breach of or inaccuracy in any of the representations and
warranties made by Dynegy or any Seller at the Closing in or pursuant to this
Agreement (after giving effect to events and matters disclosed in the Additional
Disclosures);
(b) any breach or nonperformance of any of the covenants or obligations of
Dynegy or any Seller contained in this Agreement; or
(c) the Excluded Liabilities.
Section 9.2 Obligations of Purchaser. Effective as of the Closing,
Purchaser Indemnitors shall jointly and severally indemnify, reimburse and hold
harmless each Seller Group Member from and against any and all Indemnifiable
Losses due to:
(a) any breach of or inaccuracy in any of the representations and
warranties made by Purchaser or EED at the Closing in or pursuant to this
Agreement;
(b) any breach or nonperformance of any of the covenants or obligations of
Purchaser or EED contained in this Agreement; or
(c) the Assumed Liabilities, the operation of the Business and the
Purchased Assets after Closing.
Section 9.3 Procedures. The following procedures shall apply with respect
to indemnification claims:
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(a) Notice of Claims. Any party seeking indemnification of any
Indemnifiable Loss or potential Indemnifiable Loss arising from an Indemnifiable
Claim, whether asserted by a party or a third party, shall give written notice
thereof to the party from whom indemnification is sought setting forth in
reasonable detail the nature and reasonably estimated amount of, and basis for,
such claim to the extent then known. Written notice to the Indemnifying Party of
the existence of a third party claim shall be given by the Indemnified Party
promptly after its receipt of an assertion of liability from the third party,
and in any event within ten days of such assertion; provided, however, that
failure to give such notice shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent it shall have been prejudiced by such
failure.
(b) Defense. In the case of a third party claim, the Indemnifying Party may
participate in the defense thereof and, if it so chooses and acknowledges its
obligation to indemnify the Indemnified Party therefore, control the defense of
an Indemnifiable Claim with counsel reasonably satisfactory to the Indemnified
Party. In all cases, the party without the right to control the defense of the
Indemnifiable Claim may participate in the defense at its own expense. In the
case of a third party claim, the Indemnifying Party shall inform the Indemnified
Party within 14 days of receiving the written notice seeking indemnification
whether the party elects to control the defense and acknowledges its obligation
to indemnify the Indemnified Party therefor. The Indemnifying Party shall be
liable for the reasonable fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying Party has not
assumed the defense thereof, provided that it either acknowledges in writing its
indemnity obligations with respect to the Indemnity Claim or it is determined by
a court of competent jurisdiction that it is obligated hereunder to provide such
indemnification. If the Indemnifying Party disputes its liability with respect
to a potential Indemnifiable Claim or the amount thereof (whether or not it
desires to defend the Indemnified Party against a third party claim), the
parties shall endeavor in good faith to settle such dispute. The Indemnifying
Party shall not settle or compromise a third party claim or legal proceeding
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed; provided that such prior written
consent shall not be required with respect to any Indemnifiable Claim that is an
Excluded Liability, except that any Indemnifiable Claim relating to Hazardous
Substances remain subject in all respect to the terms of Section 5.18. The
Indemnified Party shall not settle or compromise a third party claim for which
it is entitled to indemnification hereunder without the prior written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. If the Indemnifying Party does not assume the defense of
any third party claim or litigation resulting therefrom within 14 days after the
date it receives notice of such claim from the Indemnified Party, the
Indemnified Party may defend against such claim or litigation in such manner as
it may deem appropriate, including settling such claim or litigation, after
giving notice to the Indemnifying Party, on such terms as the Indemnified Party
may deem appropriate. Notwithstanding anything in this Section 9.3 to the
contrary, if for any reason (for example the effect of the limitations set forth
in Sections 9.4 or 9.5 or evidence that an Indemnifiable Loss may be
attributable to events before or after Closing) there is any uncertainty whether
an Indemnifiable Claim will be for the account of the Seller Indemnitors or the
Purchaser Indemnitors, the parties will (A) cooperate in good faith to determine
whether an Indemnifiable Claim will be for the account of the Seller Indemnitors
or the Purchaser Indemnitors, (B) until such uncertainty is resolved to the
mutual satisfaction of the parties, jointly determine who will control the
defense and settlement of any such Indemnifiable Claim
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and how such defense and settlement will be handled, (C) cooperate with each
other in the defense and settlement of such Indemnifiable Claim and the exchange
of information relevant thereto, (D) unless otherwise agreed, share the
out-of-pocket costs of such defense and settlement (including the costs of
investigation, response and mitigation) equally until the parties' respective
rights to indemnification for such costs are resolved, and (E) treat the defense
and settlement of such Indemnifiable Claim as a joint and common defense
pursuant to the Joint Defense and Common Interest Agreement dated as of October
8, 2003, as amended, between Dynegy and Exelon.
(c) Indemnification Payments on After-Tax Basis. Any indemnification
payment hereunder with respect to any Indemnifiable Loss shall be an amount
which is sufficient to compensate the Indemnified Party for the event giving
rise to such Indemnifiable Loss (the "Indemnified Event"), after taking into
account (i) all increases in Federal, state, local, foreign or other Taxes
payable by the Indemnified Party as a result of the receipt of such payment
(excluding any increased Tax that results from the receipt of such payment
causing a reduction in Tax basis or similar Tax attributes); (ii) to the extent
not previously taken into account in computing the amount of such Indemnifiable
Loss, all increases in federal, state, local and other Taxes (including
estimated Taxes) payable by the Indemnified Party for all affected taxable years
and periods as a result of the Indemnified Event; and (iii) to the extent not
previously taken into account in computing the amount of such Indemnifiable
Loss, all reductions in Federal, state, local and foreign Taxes (including
estimated Taxes) realized or realizable by the Indemnified Party as a result of
the Indemnified Event and any indemnification payments made with respect thereto
for all affected taxable years and periods. All calculations shall be made at
the time of the relevant indemnification payment using reasonable assumptions
(as agreed to by the Indemnifying Party and Indemnified Party) and present value
concepts (using a discount rate equal to the Applicable Rate in effect at the
time of the Indemnified Event using semi-annual compounding). Purchaser and each
Seller agrees to report each indemnification payment hereunder as an adjustment
to the Purchase Price for federal income tax purposes unless the Indemnified
Party receives an opinion from nationally recognized tax counsel, in form and
substance reasonably satisfactory to the Indemnifying Party, to the effect that
such reporting position is incorrect (it being understood that if any reporting
position is later disallowed in any administrative or court proceedings, the
Indemnifying Party shall indemnify the Indemnified Party for the effects of such
disallowance (including any increased Tax that results from such disallowance),
and it being further understood that the obligations under this parenthetical
clause shall remain in effect without limitation as to time).
(d) If there shall be (i) any conflicts between Section 9.3 and Section
7.7(c), the provisions of Section 7.7(c) shall control, or (ii) any conflicts
between this Section 9.3 and Section 5.18, the provisions of Section 5.18 shall
control.
Section 9.4 Survival. The representations and warranties contained in or
made pursuant to this Agreement shall expire upon the completion by the
independent auditors of Purchaser of the second annual audit of Purchaser's
financial statements following the Closing Date, but no later than March 31 of
the pertinent year, except that the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.17, 4.1, 4.2 and 4.7 shall survive until the
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expiration of the applicable statute of limitations. This Article IX shall
survive the Closing and shall remain in effect (a) with respect to Sections
9.1(a) and 9.2(a), so long as the relevant representations and warranties
survive, (b) with respect to Sections 9.1(b) and 9.2(b) to the extent those
Sections relate to the covenants requiring performance solely prior to the
Closing ("Pre-Closing Covenants") (other than those covenants contained in
Article VII), for one year after the Closing, (c) with respect to Sections
9.1(b) and 9.2(b) to the extent those Sections relate to covenants requiring
performance after the Closing (other than those covenants contained in Article
VII), so long as the applicable covenant survives, and (d) with respect to
Sections 9.1(c) and 9.2(c), and with respect to Sections 9.1(b) and 9.2(b), to
the extent those Sections relate to covenants contained in Article VII,
indefinitely. Any matter as to which a non-speculative claim has been asserted
in good faith by written notice in accordance with Section 9.3(a) that is
pending, unresolved and being diligently pursued at the end of any applicable
limitation period shall continue to be covered by this Article IX
notwithstanding any applicable limitation period until such matter is finally
terminated, not being diligently pursued or otherwise resolved by the parties
under this Agreement or by a court of competent jurisdiction and any amounts
payable hereunder are finally determined and paid. Any Indemnifiable Claim that
has not been asserted against the Indemnifying Party in accordance with Section
9.3(a) prior to the end of any applicable limitation period shall be barred and
forever waived by the Person entitled to assert such claim.
Section 9.5 Limitations on Indemnification.
(a) The Seller Indemnitors shall not be required to indemnify any Person
under Section 9.1(a) or, solely with respect to the Seller Indemnitors'
Pre-Closing Covenants, Section 9.1(b), unless (i) the indemnified amount that
would be payable by the Seller Indemnitors with respect to any given
Indemnifiable Claim exceeds $100,000 ("Seller Includable Claims"); and (ii) the
aggregate amount for all Seller Includable Claims exceeds $12,000,000, and in
such event, Seller Indemnitors shall be responsible for only the amount in
excess of $12,000,000; provided, however, that the foregoing limitations do not
apply to indemnification based upon or resulting from any inaccuracy in any of
the representations and warranties set forth in Sections 3.1, 3.2, 3.3 and 3.17.
In no event shall the total indemnification to be paid by the Seller Indemnitors
under Section 9.1(a) and, solely with respect to Seller Indemnitors' Pre-Closing
Covenants, Section 9.1(b) exceed $150,000,000; provided, however, that the
foregoing limitations do not apply to indemnification based upon or resulting
from any inaccuracy in any of the representations and warranties set forth in
Sections 3.1, 3.2, 3.3 and 3.17.
(b) The Purchaser Indemnitors shall not be required to indemnify any Person
under Section 9.2(a) or, solely with respect to the Purchaser Indemnitors'
Pre-Closing Covenants, Section 9.2(b), unless (i) the indemnified amount that
would be payable by the Purchaser Indemnitors with respect to any given
Indemnifiable Claim exceeds $100,000 ("Purchaser Includable Claims"); and (ii)
the aggregate amount for all Purchaser Includable Claims exceeds $12,000,000,
and in such event, Purchaser Indemnitors shall be responsible for only the
amount in excess of $12,000,000; provided, however, that the foregoing
limitations do not apply to indemnification based upon or resulting from any
inaccuracy in any of the representations and warranties set forth in Sections
4.1, 4.2 and 4.7. In no event shall the total indemnification to be paid by the
Purchaser Indemnitors under Section 9.2(a) and, solely with respect to Purchaser
Indemnitors' Pre-Closing Covenants, Section 9.2(b) exceed $150,000,000;
provided, however,
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that the foregoing limitations do not apply to indemnification based upon or
resulting from any inaccuracy in any of the representations and warranties set
forth in Sections 4.1, 4.2 and 4.7.
(c) Any Indemnifiable Claim with respect to any breach or nonperformance by
any party of a representation, warranty, covenant or agreement shall be limited
to the amount of actual Indemnifiable Losses sustained by the Indemnified Party
by reason of such breach or nonperformance, net of any insurance or other
proceeds received by the Indemnified Party in respect of such claim. Nothing in
this Agreement is intended to require or permit the payment by the Indemnifying
Party of duplicative, in whole or in part, indemnity payments hereunder to an
Indemnified Party.
(d) If an inaccuracy in any of the representations and warranties made by
Dynegy or any Seller, or a breach of any of the covenants of Dynegy or any
Seller, gives rise to an adjustment in the Purchase Price or is otherwise
addressed in some other provision of this Agreement, then such inaccuracy or
breach shall not give rise to an indemnification obligation under Section 9.1.
(e) If any Indemnifiable Claim is based upon or resulting from any
inaccuracy in any of the representations and warranties and is also subject to
indemnification under Section 9.1(b) or (c), the provisions of this Section 9.5
applicable to inaccuracies in any representation or warranty shall be
inapplicable to such Indemnifiable Claim.
Section 9.6 Mitigation. Each potential Indemnified Party shall use
commercially reasonable efforts to address any claims or liabilities in the same
manner it would respond to such claims or liabilities in the absence of the
indemnification provisions of this Agreement. In the event that any party shall
willfully fail to make such commercially reasonable efforts to mitigate or
resolve any claim or liability, then notwithstanding anything else to the
contrary contained herein, the other party shall not be required to indemnify
any Person for any Indemnifiable Loss that could reasonably be expected to have
been avoided if such party had made such efforts.
Section 9.7 Remedies Exclusive. Except as otherwise provided in Article
VII, the remedies provided for in this Article IX shall be exclusive and shall
preclude assertion by any Indemnified Party of any other rights or the seeking
of any and all other remedies against the Indemnifying Party for claims based on
this Agreement, other than fraud. In no event shall the mere breach of a
representation or warranty be used as evidence of or deemed to constitute bad
faith, misconduct or fraud. Each party hereby waives any provision of Law to the
extent that it would limit or restrict the agreement contained in this Section
9.7.
ARTICLE X
TERMINATION AND WAIVER
Section 10.1 Termination. This Agreement may be terminated as to all
parties at any time prior to the Closing:
(a) by the mutual written consent of Dynegy and Purchaser; or
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(b) by either Dynegy or Purchaser, by written notice to the other party, if
the Closing shall not have occurred on or before December 31, 2004 ( the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 10.1 shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the
principal cause of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date; or
(c) by Dynegy, by written notice to Purchaser, if there shall have been one
or more breaches of any representation or warranty, or any covenant or agreement
of Purchaser hereunder, which breach or breaches individually or in the
aggregate would reasonably be expected to prevent, materially delay or
materially impair Purchaser's or its Affiliates' ability to consummate the
transactions contemplated by this Agreement, and such breach shall not have been
remedied within 30 days after receipt by Purchaser of notice in writing from
Dynegy specifying the nature of such breach and requesting that it be remedied
or Dynegy shall not have received adequate assurance of a cure of such breach
within such 30-day period; or
(d) by Purchaser, by written notice to Dynegy, if there shall have been one
or more breaches of any representation or warranty, or any covenant or agreement
of Dynegy or any Seller hereunder, which breach or breaches individually or in
the aggregate would result in a Material Adverse Effect or reasonably be
expected to prevent, materially delay or materially impair Dynegy's or any
Seller's ability to consummate the transactions contemplated by this Agreement,
and such breach shall not have been remedied within 30 days after receipt by
Dynegy of notice in writing from Purchaser, specifying the nature of such breach
and requesting that it be remedied or Purchaser shall not have received adequate
assurance of a cure of such breach within such 30-day period; or
(e) by Dynegy, by written notice to Purchaser, if:
(i) within 15 days after issuance of the Final Order of the ICC
approving the transactions contemplated hereby, including those listed on
Schedules 8.1(b) and 8.2(b) (the "ICC Final Order"), Purchaser has not
notified Dynegy in writing that the ICC Final Order would satisfy the
condition to Closing set forth in Section 8.2(b); provided, however, that
Dynegy may not exercise its right to terminate under this clause (i) more
than 30 days after the issuance of the ICC Final Order;
(ii) immediately in the event the ICC Final Order denies the approval
of the transactions contemplated by this Agreement and the Ancillary
Agreements;
(iii) within 15 days after issuance by the FERC of its Governmental
Order approving the transactions contemplated hereby, including those
listed on Schedules 8.1(b) and 8.2(b) (the "FERC Final Order"), Purchaser
has not notified Dynegy in writing that the FERC Final Order would satisfy
the condition to Closing set forth in Section 8.2(b); provided, however,
that Dynegy may not exercise its right to terminate under this clause (iii)
more than 30 days after the issuance of the FERC Final Order; or
(iv) immediately in the event the FERC Final Order denies the approval
of the transactions contemplated by this Agreement and the Ancillary
Agreements;
84
(f) by Purchaser, by written notice to Dynegy, if:
(i) within 15 days after the issuance of the ICC Final Order, Dynegy
has not notified Purchaser in writing that the ICC Final Order would
satisfy the condition to Closing set forth in Section 8.1(b); provided,
however, that Purchaser may not exercise its right to terminate under this
clause (i) more than 30 days after the issuance of the ICC Final Order;
(ii) immediately in the event the ICC Final Order denies the approval
of the transactions contemplated by this Agreement and the Ancillary
Agreements;
(iii) within 15 days after the issuance of the FERC Final Order,
Dynegy has not notified Purchaser in writing that the FERC Final Order
would satisfy the condition to Closing set forth in Section 8.1(b);
provided, however, that Purchaser may not exercise its right to terminate
under this clause (iii) more than 30 days after the issuance of the FERC
Final Order; or
(iv) immediately in the event the FERC Final Order denies the approval
of the transactions contemplated by this Agreement and the Ancillary
Agreements;
(g) by either Dynegy or Purchaser if the Amendment does not become
effective prior to the date that is 60 days after the end of the legislative
session of the Illinois General Assembly scheduled to begin in January 2004.
Section 10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1:
(a) this Agreement shall forthwith become void thereafter and there shall
be no liability on the part of either party except that the last sentence of
Section 5.2(a), Section 5.6, Section 5.17(g), Section 10.1, this Section 10.2
and Article XI shall survive any such termination; and
(b) Purchaser and its Affiliates shall return or destroy (and provide a
certificate to Dynegy from an authorized officer of EED certifying to such
destruction) all documents and other material received from Dynegy, Sellers, any
Purchased Subsidiary or any representative of Dynegy relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to Dynegy; and all confidential information received by
Purchaser or its Affiliates shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Expenses. Except as otherwise specified in this Agreement
(including Sections 5.15 and 5.17) or the Ancillary Agreements, as applicable:
85
(a) all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants (including any brokerage, finder's or other
fee or commission), incurred in connection with this Agreement and the Ancillary
Agreements, and the transactions contemplated hereby and thereby shall be paid
by the party incurring such costs and expenses, whether or not the Closing shall
have occurred;
(b) all non-recurring, out-of-pocket costs and expenses payable to third
parties, if any, incurred by the IPC Companies in connection with this Agreement
and the transactions contemplated hereby, including the fees, expenses and
disbursements of the IPC Companies' outside counsel and accountants shall be
paid by Dynegy (it being understood that time and expenses of employees of the
IPC Companies in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements shall be borne by the IPC Companies); and
(c) the aggregate out-of-pocket costs and expenses payable to third parties
incurred by Purchaser, Sellers and Dynegy in connection with obtaining the
Solvency Opinion shall be paid one-half by Purchaser and one-half by Dynegy.
Section 11.2 Disclaimer Regarding Projections; No Additional
Representations.
(a) In connection with Purchaser's investigation of the Purchased Assets,
the Assumed Liabilities and the Business, Purchaser has received from Sellers
certain projections, estimates and other forecasts and certain business plan
information. Purchaser acknowledges that there are uncertainties inherent in
attempting to make such projections, estimates and other forecasts and plans,
that Purchaser is familiar with such uncertainties, that Purchaser is taking
full responsibility for making its own evaluation of the adequacy and accuracy
of all projections, estimates and other forecasts and plans so furnished to it
and any use of or reliance by Purchaser on such projections, estimates and other
forecasts and plans shall be at its sole risk, and without limiting any other
provisions herein, that Purchaser shall have no claim against anyone with
respect thereto. Accordingly, Purchaser acknowledges, agrees and confirms that
Sellers and their Affiliates, officers, directors, employees, agents and
representatives, do not make, have not made nor shall be deemed to have made any
representation or warranty to Purchaser, express or implied, at law or in
equity, with respect to such projections, estimates, forecasts or plans.
(b) Purchaser acknowledges that it and its representatives have been
permitted reasonable access to the books and records, facilities, equipment, Tax
Returns, Contracts, insurance policies (or summaries thereof) and other
properties and assets of the Purchased Subsidiaries that it and its
representatives have desired or requested to see or review, and that it and its
representatives have had a full opportunity to meet with the officers and
knowledgeable employees of the IPC Companies to discuss the Purchased Assets,
the Assumed Liabilities and the Business. Purchaser acknowledges that (i) none
of Sellers, any IPC Company and any other Person has made or is making any
representation or warranty, expressed or implied or other, as to any Purchased
Assets, the Assumed Liabilities, the Business, this Agreement or the
transactions contemplated hereby, or the accuracy or completeness of any
information regarding any Purchased Assets, Assumed Liabilities or the Business
furnished or made available to Purchaser and its representatives, except as set
forth in this Agreement and (ii) Purchaser has not relied on any representation
or warranty from any IPC Company or any other Person in
86
determining to enter into this Agreement, except as set forth in this Agreement
and the Ancillary Agreements.
(c) Purchaser hereby agrees not to initiate, or cause to be initiated,
against any Seller or any of its Affiliates or any other Person any Action (or
make any claim within any Action), and no Seller or any of its Affiliates or any
other Person will have or will be subject to any liability or indemnification
obligation to Purchaser or any other Person based on representations and
warranties (other than representations and warranties contained in this or any
Ancillary Agreement for such time as such representations and warranties survive
in accordance with this Agreement or such Ancillary Agreement, as the case may
be), or resulting from the distribution to Purchaser, or Purchaser's use of, any
information provided to Purchaser, including any information (including
opinions, statements and data), projections, documents or material made
available to Purchaser at any time in certain "data rooms", management
presentations, "break out" discussions, other discussions among the parties and
their representatives, responses to inquiries submitted on behalf of Purchaser,
whether orally or in writing, or in any other form in connection with this
Agreement or in furtherance of the transactions contemplated by this Agreement.
Nothing in the foregoing paragraph shall be construed to limit the provisions of
Article IX or fraud claims.
(d) Purchaser has such knowledge and experience in financial and business
matters so that it is capable of evaluating the merits and risks of this
acquisition. Purchaser is aware of and has considered the financial risks and
hazards of this acquisition and has undertaken such investigation, and has been
provided with and has evaluated such documents and information, as it has deemed
necessary in connection with the execution, delivery and performance of this
Agreement. Purchaser hereby acknowledges and agrees that, except as set forth in
Article III of this Agreement, the Purchased Assets and Assumed Liabilities are
transferred "AS IS," "WHERE IS" AND, SUBJECT TO THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE III, WITH ALL FAULTS AND WITHOUT ANY OTHER
REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE WHATSOEVER, EXPRESS OR IMPLIED,
ORAL OR WRITTEN, AND IN PARTICULAR, WITHOUT LIMITING ANY OF THE FOREGOING,
WITHOUT ANY IMPLIED WARRANTY OR REPRESENTATION AS TO (A) CONDITION, VALUE,
MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY SPECIFIC PURPOSE AS TO ANY OF
THE ASSETS OR PROPERTIES OF THE IPC COMPANIES, (B) THE OPERATION OF THE BUSINESS
BY PURCHASER AFTER THE CLOSING IN ANY MANNER OR (C) THE PROBABLE SUCCESS OR
PROFITABILITY OF THE OWNERSHIP, USE OR OPERATION OF THE BUSINESS OR THE
PURCHASED ASSETS AND ASSUMED LIABILITIES OF THE IPC COMPANIES BY PURCHASER AFTER
THE CLOSING. Nothing in the foregoing paragraph shall be construed to limit the
provisions of Article IX or fraud claims.
Section 11.3 Materiality. Subject to Section 8.2(b), as used in this
Agreement, the term "material" (except with regard to material compliance) and
the concept of the "material" nature of an effect upon the Purchased Assets, the
Assumed Liabilities, the Business or the IPC Companies shall be measured
relative to the Purchased Assets, the Assumed Liabilities, the Business and the
IPC Companies at the time of such measurement. Despite the fact that there are
items that have been included in the Schedules and may be included elsewhere in
this Agreement, the inclusion of such items shall not be deemed to be an
agreement by any Seller that
87
such items are "material" or to further define the meaning of such term for
purposes of this Agreement.
Section 11.4 Disclosure Schedules.
The Disclosure Schedules to this Agreement are arranged corresponding to
the numbered and lettered sections contained in this Agreement, but the terms of
this Agreement and disclosures in any Schedules shall qualify any other
applicable representation and warranty provision of this Agreement (whether or
not qualified by a Schedule) to the extent the relevance of such disclosure is
reasonably apparent based on the facts specified in such matters described. Five
Business Days following the end of each fiscal quarter and seven days prior to
Closing, Dynegy and Sellers shall supplement the Disclosure Schedules with any
matters Known to Sellers that would have been required to be disclosed had they
existed on the date hereof, which disclosure shall be limited to events or
matters that arise, or otherwise occur after the date hereof (the "Additional
Disclosures"); provided, however, that in no event shall any of Sellers or
Dynegy supplement Section 3.1, 3.2, 3.3, or 3.17. Each Additional Disclosure
shall be in writing and shall be accompanied by a duly executed certificate of
an executive officer of each of Dynegy and each Seller.
Section 11.5 No Consequential or Punitive Damages. Notwithstanding anything
to the contrary elsewhere in this Agreement, no party (or its Affiliates) shall,
under any circumstance, be liable to any other party (or its Affiliates) for any
consequential, special, indirect, exemplary or punitive damages of any kind or
character, including loss of future revenue or income or loss of business
reputation or opportunity, in connection with this Agreement, except for any
such damages awarded to a third party for which an Indemnifying Party is liable
hereunder, or the transactions contemplated hereby.
Section 11.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by facsimile or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.6):
(a) if to Sellers or Dynegy:
Illinois Power Company
000 Xxxxx 00xx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Legal Officer
Facsimile No.: (000) 000-0000
IP Gas Company
000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Legal Officer
Facsimile No.: (000) 000-0000
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and
Dynegy Inc.
0000 Xxxxxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
(b) with a copy to:
O'Melveny & Xxxxx LLP
0000 Xxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxxx
Facsimile No.: (000) 000-0000
(c) if to Purchaser or EED:
New IP Company
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
and
Exelon Energy Delivery Company, LLC
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx LLP
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
Section 11.7 Headings. The descriptive headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 11.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any applicable Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
89
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
Section 11.9 Entire Agreement. Except with respect to the Confidentiality
Agreement (which shall survive in accordance with its terms except as otherwise
specified in Section 5.6), this Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes any and all
prior agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof.
Section 11.10 Assignment. This Agreement may not be assigned by any party,
by operation of Law or otherwise without the prior written consent of the other
party (which consent may be granted or withheld in the sole and absolute
discretion of such other party); provided, however, that Purchaser may assign
any of its rights and obligations under this Agreement to a Subsidiary of
Purchaser so long as EED guarantees such assignee's obligations as provided in
Section 11.19. Any attempted assignment in violation of this Section 11.10 shall
be void. In the event any party (a) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (b) transfers all or substantially all of its
properties and assets to any Person, then and in any such case, proper provision
shall be made so that the successors and assigns of such party shall assume the
obligations set forth in this Agreement.
Section 11.11 No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of the parties and their successors and
permitted assigns and nothing herein is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as provided in this
Agreement.
Section 11.12 Amendment. This Agreement may not be modified or amended
except by and to the extent set forth in an instrument in writing signed by the
parties.
Section 11.13 Waiver. Any party to this Agreement may (a) extend the time
for the performance of any of the obligations or other acts of any other party,
(b) waive any inaccuracies in the representations and warranties of another
party contained herein or in any document delivered by another party pursuant
hereto or (c) waive compliance with any of the agreements or conditions of
another party contained herein. Any such extension or waiver shall be valid only
if, and to the extent, set forth in an instrument in writing signed by the party
to be bound thereby. Any waiver of any term or condition shall not be construed
as a waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
Section 11.14 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state. Subject to
Section 11.20, all actions and proceedings
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arising out of or relating to this Agreement shall be heard and determined in
any New York state or Federal court sitting in the City of New York, and the
parties hereby irrevocably submit to the exclusive jurisdiction of such courts
in any such action or proceeding and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such action or proceeding. Each
party irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to such party at
its address specified in Section 11.6. The parties agree that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
Law. Nothing in this Section 11.14 shall affect the right of any party to serve
legal process in any other manner permitted by Law. The consents to jurisdiction
set forth in this Section 11.14 shall not constitute general consents to service
of process in the State of New York and shall have no effect for any purpose
except as provided in this Section 11.14 and shall not be deemed to confer
rights on any Person other than the parties.
Section 11.15 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.15.
Section 11.16 Specific Performance; Remedies. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof. No failure or delay on the
part of any party in exercising any right, power, privilege or remedy may be, or
may be deemed to be, a waiver thereof; nor may any single or partial exercise of
any right, power, privilege or remedy preclude any other or further exercise of
the same or any other right, power, privilege or remedy.
Section 11.17 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
Section 11.18 Representation by Counsel; Interpretation. The parties each
acknowledge that each party has participated in the drafting of and been
represented by counsel in connection with this Agreement and the transactions
contemplated hereby. Accordingly, any rule of Law or any legal decision that
would require interpretation of any claimed ambiguities in any portions of this
Agreement against the party that drafted it has no application and is expressly
waived. If
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any provision of this Agreement is, in the judgment of the trier of fact,
ambiguous or unclear, that provision shall be interpreted in a reasonable manner
to effect the intent of the parties.
Section 11.19 EED Guaranty. In consideration of the covenants, agreements
and undertakings of Dynegy and its Affiliates contained in this Agreement, EED
hereby guarantees to Dynegy, and its successors and assigns, the full, prompt
and complete payment and performance by Purchaser of all of the covenants,
conditions and agreements of Purchaser contained in this Agreement. EED hereby
waives all notice of default by Purchaser or notice of acceptance of this
Agreement by Dynegy, and consents to any extension that may be given by Dynegy
to Purchaser of time of payment or performance. This guarantee shall be
construed as a continuing absolute and unconditional guarantee of payment and
performance and not as a guarantee of collection. For purposes of this Section
11.19, "Purchaser" shall be deemed to include any and all successors and assigns
of all or any portion of Purchaser's rights and obligations under this Agreement
or any Ancillary Agreement.
Section 11.20 Dispute Resolution.
(a) Informal Resolution. In the event a dispute arises between any one or
more of Dynegy or Sellers, on the one hand, and any one or more of Exelon, EED
or Purchaser, on the other hand, regarding the provisions of this Agreement or
the Promissory Note, including the rights or obligations of any party with
respect to indemnification under Article IX or payment of the Promissory Note,
Dynegy and EED shall use reasonable efforts to reach a reasonable and equitable
resolution of the matter on an expedited basis. In the event such efforts do not
result in the resolution of the dispute, Dynegy or EED may, by written request
directed to the other party, require the Designated Officers of Dynegy and
Purchaser to meet to resolve the dispute. The Designated Officers shall meet to
discuss and resolve the dispute within five days following receipt of such
request.
(b) Arbitration. With respect to any dispute with an amount in controversy
of less than $250,000, if the procedures referenced in Section 11.20(a) are
invoked but do not result in resolution of the dispute within 10 Business Days
after commencement of the meeting between the Designated Officers, either Dynegy
or Purchaser may, at its option, submit the dispute to binding arbitration by
giving notice to the other party, whereupon such dispute shall be resolved by
binding arbitration according to the following provisions. For any dispute to be
resolved by binding arbitration, Dynegy and Purchaser shall each have the right
to designate an arbitrator of its choice, who need not be from the Association
panel of arbitrators, but who shall not have been previously an employee or
agent of or consultant or counsel to either Dynegy or Exelon or their respective
Affiliates and shall not have any direct or indirect interest in Dynegy or
Exelon or their respective Affiliates or the subject matter of the arbitration.
Such designation shall be made by notice to the other party and to the
Association within 10 days after either party gives notice of the demand for
arbitration. The arbitrators designated by the parties shall, within 10 days
after the designation of the last of the two arbitrators to be designated by the
parties, designate a third arbitrator who shall act as chairman of the panel of
three arbitrators who shall hear and make a decision with respect to the dispute
submitted to such arbitration. If the arbitrators designated by Dynegy and
Purchaser cannot or do not select a third arbitrator within such 10-day period,
either Dynegy or Purchaser may apply to the Association for the purpose of
appointing any person listed with the Association as the third independent
arbitrator under the
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expedited rules of the Association. The arbitration shall be held in alternating
locations of the home offices of Dynegy and Purchaser, commencing with the home
offices of Purchaser, or in any other mutually agreed location. The rules of the
Association shall apply to the arbitration to the extent not inconsistent with
the requirements of this Section 11.20. The arbitrators shall hold a one-day
hearing on the dispute within 30 days after appointment of the third arbitrator.
At such hearing, each Dynegy and Purchaser each shall be allowed a period of
four hours to present its case and closing and rebuttal arguments to the
arbitrators, unless otherwise mutually agreed between Dynegy and Purchaser. The
arbitrators shall render their decision in writing within 10 days after the
conclusion of the hearing solely on the basis of the documents, testimony and
arguments presented at the hearing. Not less than 10 days prior to the hearing,
Dynegy and Purchaser shall exchange briefs and documents to be submitted into
evidence at the hearing, but Dynegy and Purchaser and their respective
Affiliates shall not otherwise be required to produce documents or present
witnesses for pre-hearing deposition or interview. Dynegy and Purchaser shall
also provide each other reasonable access to their files and records and the
files and records of their respective Affiliates, to the extent those files and
records are relevant to the dispute, at all times prior to the arbitration
hearing. Each of Dynegy and Purchaser and their respective Affiliates will bear
their own expenses with respect to the arbitration; provided that the
arbitrators, upon application of Dynegy or Purchaser, may assess costs and
expenses against either party if the arbitrators shall deem such assessment just
and equitable. Any award of the arbitrators may be enforced in any court of
competent jurisdiction by a party in whose favor such award is made.
(c) Performance. Each party shall diligently continue to perform its
obligations under this Agreement during the pendency of any dispute or
arbitration proceeding.
(d) Exceptions. The provisions of this Section 11.20 shall not be
applicable to disputes to be resolved pursuant to Section 2.6. or Section
6.2(a)(ii).
* * *
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IN WITNESS WHEREOF, Sellers, Dynegy, Purchaser and EED have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ILLINOIS POWER COMPANY
By:_____________________________________
Name:
Title:
IP GAS SUPPLY COMPANY
By:_____________________________________
Name:
Title:
DYNEGY INC.
By:_____________________________________
Name:
Title:
NEW IP COMPANY
By:_____________________________________
Name:
Title:
EXELON ENERGY DELIVERY COMPANY, LLC
By:_____________________________________
Name:
Title:
Exhibits
--------
Exhibit A Adjusted Working Capital Procedures
Exhibit B Term Sheet for Blackstart Agreement
Exhibit C Term Sheet for Easement and Facilities Agreement
Exhibit D Generation Agreement
Exhibit E-1 Generation Indemnification Termination Agreement (Illinova)
Exhibit E-2 Generation Indemnification Termination Agreement (DHI)
Exhibit F Instrument of Assignment
Exhibit G Instrument of Assumption
Exhibit H Power Purchase Agreement
Exhibit I Promissory Note
Schedules
---------
Schedule 1.1(a) - Reference Balance Sheet
Schedule 1.1(b) - Certain Generation Operations
Schedule 1.1(c) - Exceptions to Excluded Environmental Matters
Schedule 1.1(d) - Existing IPC Obligations
Schedule 1.1(e) - Generation Assets
Schedule 1.1(f) - Knowledge of Purchasers and Sellers
Schedule 1.1(g) - Permitted Liens
Schedule 2.3 - Excluded Liabilities
Schedule 3.2(d) - Subsidiaries
Schedule 3.4(a) - IPC Companies Approvals
Schedule 3.4(b) - Violations, Breaches and Rights to Payment
Schedule 3.7 - Absence of Changes
Schedule 3.8 - Taxes
Schedule 3.9 - Litigation
Schedule 3.10 - Employee Benefit Plans
Schedule 3.11 - Environmental Matters
Schedule 3.12 - Permits and Compliance With Applicable Law
Schedule 3.13(a) - Employee Matters
Schedule 3.14 - Material Contracts
Schedule 3.15 - Intellectual Property Matters
Schedule 3.16(a) - IPC Owned Real Property
Schedule 3.16(b) - Leased Real Property
Schedule 3.16(c) - IPC Other Real Property
Schedule 3.18 - Personal Property
Schedule 3.19 - Certain Affiliate Transactions
Schedule 3.21 - Bank Accounts
Schedule 3.23 - Regulatory Proceedings
Schedule 3.24 - Hedging
Schedule 4.3(a) - Purchaser Approvals
Schedule 4.3(b) - Purchaser Violations, Breaches and Rights to Payment
Schedule 5.1 - Conduct of Business
Schedule 5.1(f) - Capital Expenditures Forecasts
Schedule 5.3(b)(ii) - Initial ICC Rate Filings Minimum Components
Schedule 5.3(e) - The Amendment
Schedule 6.1(c) - Seller Bonus Plans
Schedule 6.1(e) - Affiliate Employees
Schedule 6.2(a) - Seller Pension Plans
Schedule 6.2(b) - Seller Savings Plans
Schedule 6.2(c)(iv) - Certain Transferred Employees and Retirees
Schedule 8.1(b) - Required Regulatory Approvals (Seller)
Schedule 8.1(e) - Required Dynegy Consents
Schedule 8.2(b) - Required Regulatory Approvals (Purchaser)
Schedule 8.2(e) - Required Purchased Entities Consents
EXHIBIT A
Closing Date Statement Procedures
Description of Accounting Policies, Procedures, Principles, Practices,
Classifications, Estimates, Assumptions and Methodologies used
in the preparation of the Working Capital Statements
for the IPC Companies
A. Basis of Presentation
The Adjusted Working Capital policies, procedures and principles described
herein are the basis upon which the Target Adjusted Working Capital has been
calculated and the Proposed Final Adjusted Working Capital and Final Adjusted
Working Capital will be calculated (collectively referred to herein as "Adjusted
Working Capital"). Each Adjusted Working Capital balance will require a
supporting schedule, which shall be prepared in accordance with the procedures
herein and in a prescribed format in accordance with Attachment A-1 to this
Exhibit A (collectively referred to herein as the "Working Capital Statements").
Capitalized terms used but not defined herein have the meanings assigned to them
in the Purchase Agreement to which this Exhibit A is attached.
For purposes of this Exhibit A, Sellers represent that the Reference Balance
Sheet has been prepared from, and is in accordance with, the books and records
of IPC, complies in all material respects with applicable accounting
requirements and with the SEC's published rules and regulations, has been
prepared in accordance with GAAP (except as permitted under Form 10-Q under the
Exchange Act) applied on a consistent basis (except as may be indicated in the
notes thereto) and fairly presents in all material respects in conformity with
GAAP applied on a consistent basis, the consolidated financial position of IPC
as of the date thereof (subject to normal year-end adjustments and the absence
of financial footnotes).
Each Working Capital Statement shall be derived from the accounts of the IPC
Companies in accordance with Attachment A-1 hereto and reflected in the
underlying books and records of such companies. Each Working Capital Statement
will be prepared in accordance with GAAP and in a manner consistent with the
policies, procedures and principles used in connection with the preparation of
the Reference Balance Sheet; provided, however, that in preparing each Working
Capital Statement, the inclusions, exclusions, adjustments and terms set forth
in this Exhibit A shall be given effect. The following are certain policies,
procedures and principles to be used in connection with the calculation of each
Adjusted Working Capital balance and the preparation of the Working Capital
Statements:
1. GAAP: GAAP for purposes of the calculation of each Adjusted Working Capital
balance refers to United States generally accepted accounting principles and
practices in effect as of September 30, 2003. The Working Capital Statements
deviate from GAAP in the following respects, among others: (a) comparative
amounts are not presented; (b) a full complement of financial statements are not
presented; (c) no stockholder's equity is reflected; (d) the full complement of
footnote disclosures required by GAAP are not included; and (e) corporate
liabilities incurred by any of the Affiliates of the IPC Companies (other than
any of the IPC Companies) are not allocated to the IPC Companies (e.g., workers
compensation).
2
2. Cash and Cash Equivalents: All cash and cash equivalents (including any
amounts in the undistributed cash-utility service and merchandise account) are
included in the calculation of each Adjusted Working Capital balance, except for
amounts included in funds for redemption of the Transitional Funding Trust Notes
as reflected in Existing IPC Obligations.
3. Prepayments: All current deferred Income Tax asset and liability balances are
excluded from the calculation of each Adjusted Working Capital balance. All
amounts in the "Deposits" - Adequate Insurance" account are included in the
calculation of Adjusted Working Capital.
4. Clinton Liabilities: The current portion of the liability associated with the
Clinton Power Purchase Agreement is excluded from the calculation of each
Adjusted Working Capital balance. In addition, any current decommissioning
liability payable to the Clinton trust fund is excluded from the calculation of
each Adjusted Working Capital balance.
5. Existing IPC Obligations: The current portion of all Existing IPC
Obligations, as defined in the Purchase Agreement, are excluded from the
calculation of each Adjusted Working Capital balance.
6. Intercompany Note: Interest receivable, if any, under the Intercompany Note
is excluded from the calculation of each Adjusted Working Capital balance. In
addition, any current liability owed to Dynegy or its Affiliates associated with
prepayments of interest on the Intercompany Note is excluded from the
calculation of each Adjusted Working Capital balance.
7. Accrued Taxes: All intercompany Income Tax receivables and payables from any
IPC Company to Dynegy or its Affiliates, if any, and all reserves recorded in
connection with open Income Tax audits are excluded from the calculation of each
Adjusted Working Capital balance.
8. Other Current Liabilities: All legal reserves recorded for Excluded
Liabilities are excluded from the calculation of each Adjusted Working Capital
balance.
9. Excluded Assets and Liabilities: For the avoidance of doubt, Excluded Assets
and Excluded Liabilities are excluded from the calculation of each Adjusted
Working Capital balance.
B. Working Capital Statement Preparation Requirements
The Working Capital Statement prepared in connection with the Proposed Final
Adjusted Working Capital (the "Closing Date Statement") shall clearly identify
all differences from the current assets and liabilities and other accounts
identified in Exhibit A-1 and shall be accompanied by a detailed explanation of
the basis for each such difference. The Closing Date Statement prepared by
Purchaser shall identify in reasonable detail any changes made to each account
included in the Closing Date Statement prepared by Purchaser.
The Proposed Final Adjusted Working Capital shall be determined on a basis
consistent with the manner in which the Target Adjusted Working Capital set
forth on the Working Capital Statement as of September 30, 2003 was prepared.
Consistency of preparation shall mean that, except as otherwise set forth
herein, all principles, classifications, methods, practices and policies used
(regardless of changes made to GAAP after September 30, 2003) in the preparation
of the
3
Working Capital Statement as of September 30, 2003, shall be used or applied in
the determination of the Final Adjusted Working Capital.
The use of estimates is an integral part of the preparation of financial
statements generally and was an integral part of the preparation of the Working
Capital Statement as of September 30, 2003. Such accounting estimates are
inherently subjective and are often accompanied by a range of reasonable
outcomes. Except as otherwise set forth herein, the estimates used in the
determination of the Final Adjusted Working Capital shall be prepared on a basis
consistent with the estimates used in the preparation of the Working Capital
Statement as of September 30, 2003.
Following are additional agreements and clarifications with respect to the
determination of the Adjusted Working Capital:
1. Adjustment of Other Reserves and Valuation Accounts: In the determination of
the Final Adjusted Working Capital, except as otherwise set forth herein, the
amount of any reserves or valuation accounts shall be determined by applying
methods, practices, classifications, policies, factors and underlying data
consistent with those used in determining the reserves or valuation accounts
included in the Working Capital Statement as of September 30, 2003.
2. Exclusion of Certain Reserves and Liabilities: There shall not be considered
in the determination of the Adjusted Working Capital any reserve or any
liability to the extent such reserve or liability (a) arises out of, results
from or relates to any action or omission of Purchaser or any Affiliate of
Purchaser, including any such action or omission in connection with the
transactions contemplated by the Purchase Agreement, (b) arises out of, results
from or relates to any actions taken or contemplated to be taken by Purchaser,
Sellers or any of their Affiliates contemporaneously with or subsequent to the
Closing Date or (c) relates to or is in respect of any Income Taxes.
3. Due Diligence and Transaction Costs: There shall be no amount accrued or
reserved in connection with the determination of the Adjusted Working Capital
for any obligations or liabilities incurred in connection with Purchaser's
efforts related to the transactions contemplated by the Purchase Agreement
(including due diligence), including any fees and expenses of the financial
advisors, counsel, independent accountants or other representatives of
Purchaser. There shall be no amount accrued or reserved for in connection with
any fees, expenses, liabilities or obligations incurred by Sellers in connection
with the transactions contemplated by the Purchase Agreement, including any fees
and expenses of the financial advisors, counsel, independent accountants or
other representatives of Sellers or the IPC Companies.
4. Going Concern: For purposes of determining the Adjusted Working Capital, the
business of the IPC Companies will be considered a "going concern" and all of
the Purchased Assets and Assumed Liabilities shall be deemed to be actively used
in the business of the IPC Companies and not held for sale or disposal.
5. Treatment of Errors, Omissions and Adjustments: If, in connection with
determining the Final Adjusted Working Capital, any errors, omissions, or
adjustments are discovered that affect an amount set forth on the Working
Capital Statement as of September 30, 2003, the Target
4
Adjusted Working Capital shall be adjusted to correct for the effect of such
errors, omissions or adjustments upon mutual agreement of Sellers and the
Purchaser.
C. Definitions for Purposes of Purchase Agreement
As used in the Purchase Agreement, "Adjusted Working Capital" means, as of the
date of determination, the difference between (a) the sum of the current asset
line items set forth on the Working Capital Statement for the relevant date and
(b) the sum of the current liability line items set forth on the Working Capital
Statement for the relevant date, in each case after giving effect to the
adjustments and methodologies set forth in this Exhibit A and as illustrated in
Attachment A-1 hereto.
As used in the Purchase Agreement, "Target Adjusted Working Capital" means
$186,121,876, which amount was derived as set forth on the Working Capital
Statement provided as Attachment A-1 hereto from the Reference Balance Sheet.
5
