OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement") dated as of November 9, 2001
is by and among CGNN Holding Company, Inc., a Delaware corporation (the
"Grantor"), MCTJ Holding Co. LLC, a Delaware limited liability company (the
"Company"), Enron Corp., an Oregon corporation ("Enron"), Dynegy Holdings Inc.,
a Delaware corporation (the "Grantee") and, solely for the provisions of Section
5.1 hereof, Dynegy Inc., an Illinois corporation ("Dynegy").
RECITALS
A. Merger Agreement. Concurrently with the execution of this Agreement,
Dynegy, Stanford, Inc., a Delaware corporation, Badin, Inc., an Illinois
corporation, Sorin, Inc., an Oregon corporation, and Enron entered into an
Agreement and Plan of Merger (the "Merger Agreement").
B. Membership Interest. Grantor is the sole member of, and owns all of
the membership interests in, the Company.
NOW THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Capitalized Terms. Those capitalized terms used in this Agreement
that are not defined in this Agreement are defined in Annex A hereto and are
used herein with the meanings ascribed to them therein.
2. Option.
2.1. Grant of Option. Subject to the terms and conditions set
forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase all, but not less than all, of the outstanding
membership interests in the Company (the "Option Interests") after the
occurrence of an Exercise Event (as defined in Section 2.5) at the Exercise
Price.
2.2. Purchase Price of Option. In consideration of the grant
of the Option, immediately after the filing under the HSR Act required in
connection with this Agreement, Grantee will pay $1 million to Grantor by wire
transfer of immediately available funds.
2.3. Exercise Price. The exercise price (the "Exercise Price")
of the Option shall be the total sum of (a) $23 million plus (b) $950 million
less (c) the aggregate amount of outstanding principal indebtedness under the
Bank Credit Facility and the Senior Notes and any Permitted Refinancing Debt
related thereto on the Closing Date plus (d) if the amount of Estimated Working
Capital exceeds $-0-, the amount of such excess, minus (d) if the amount of
Estimated Working Capital is less than $-0-, the amount of such shortfall.
2.4. Option Term; Expiration of Option. The Option shall be
exercisable at any time after the occurrence of an Exercise Event set forth in
Section 2.5 and shall remain in full force and effect until the earliest of (a)
the Effective Time as defined in Section 1.3 of the Merger Agreement, (b) the
redemption of all outstanding shares of Series A Preferred Stock in accordance
with its terms or (c) the exchange of Series A Preferred Stock for Enron Common
Stock pursuant to the Exchange Agreement (the "Option Term"). If the Option has
not been exercised prior to the expiration of the Option Term, the rights and
obligations set forth in this Agreement shall expire and terminate.
2.5. Exercise Events. The Option will become exercisable upon
the occurrence of the following events ("Exercise Events"):
2.5.1. Exercise at any time. The Option may be
exercised at any time after:
2.5.1.1. the Merger Agreement has been
terminated pursuant to Section
9.2(b);
2.5.1.2. the Merger Agreement has been
terminated pursuant to Section
9.3(c);
2.5.1.3. the Merger Agreement has been
terminated pursuant to Section
9.4(b);
2.5.1.4. Dynegy notifies Enron that it is
terminating the Merger Agreement
pursuant to Section 9.4(a) of the
Merger Agreement (such notice
constituting a representation by
Dynegy to Enron that Dynegy is
validly entitled to terminate the
Merger Agreement under such Section
9.4(a)).
2.5.2. Exercise at any time beginning six months
plus one day after termination of the Merger
Agreement. The Option may be exercised at
any time beginning six months plus one day
after:
2.5.2.1. the Merger Agreement has been
terminated pursuant to Section 9.1;
2.5.2.2. the Merger Agreement has been
terminated pursuant to Section
9.2(a)); or
2.5.2.3. the Merger Agreement has been
terminated pursuant to Section
9.2(d).
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2.5.3. Exercise at any time beginning one year plus
one day after termination of the Merger
Agreement. The Option may be exercised at
any time beginning one year plus one day
after:
2.5.3.1. the Merger Agreement has been
terminated pursuant to Section
9.2(c);
2.5.3.2. Enron notifies Dynegy that it is
terminating the Merger Agreement
pursuant to Section 9.3(a) of the
Merger Agreement (such notice
constituting a representation by
Enron to Dynegy that Enron is
validly entitled to terminate the
Merger Agreement under such Section
9.3(a);
2.5.3.3. the Merger Agreement has been
terminated pursuant to Section
9.3(b); or
2.5.3.4. the Merger Agreement has been
terminated pursuant to Section
9.4(c);
2.6. Working Capital Adjustment.
2.6.1. Calculation of Final Working Capital. Within
30 days of Closing, Grantee shall prepare
and deliver to Grantor a statement the
("Final Working Capital Statement") setting
forth the amount of Final Working Capital.
Grantor shall have 30 days to review the
Final Working Capital Statement and
supporting documentation and shall have
reasonable access to the books, records and
personnel of Grantee and NNGC for purposes
of verifying the accuracy of the calculation
of Final Working Capital. Grantee's
calculation of Final Working Capital shall
be deemed final and biding unless Grantor
raises an objection in writing within 30
days of its receipt thereof, specifying in
reasonable detail the nature and extent of
such objection. If Grantor raises an
objection to the calculation of Final
Working Capital within such 30-day period,
and if Grantor and Grantee are unable to
resolve such objection within 30 days of the
date Grantee receives such objection, then
the disputed matter shall be submitted for
determination to an accounting firm of
national reputation mutually agreeable to
Grantor and Grantee. The determination of
such accounting firm shall be final and
binding for all purposes. The fees and
expenses of such accounting firm shall be
borne equally by Grantor and Grantee.
2.6.2. Settlement of Working Capital Adjustment. If
Final Working Capital exceeds Estimated
Working Capital, then Grantee will pay
Grantor the amount of such excess. If Final
Working Capital
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is less than Estimated Working Capital, then
Grantor will pay Grantee the amount of such
shortfall. Any such payments will be made
within five (5) Business Days of the
determination of the adjustment by wire
transfer of immediately available funds.
3. Exercise of Option; Conditions; Closing.
3.1. Notice; Closing Location. If the Grantee wishes to
exercise the Option, it shall send a written notice (an "Exercise Notice") (the
date of which being herein referred to as the "Notice Date") to the Grantor
specifying a date (as it may be extended from time to time, the "Closing Date")
not earlier than three (3) Business Days nor later than ten (10) Business Days
from the Notice Date for the closing of the purchase and sale pursuant to the
Option (the "Closing"). The Closing will take place at the offices of Baker
Botts L.L.P., 910 Louisiana, Houston, Texas 77002.
3.2. Extension. If the Closing cannot be effected by reason of
the application of any Law, Regulation or Order, the Closing Date shall be
extended to the tenth Business Day following the expiration or termination of
the restriction imposed by such Law, Regulation or Order. Without limiting the
foregoing, if prior notification to, or Authorization of, any Governmental
Agency is required in connection with the purchase of such Option Interests by
virtue of the application of such Law, Regulation or Order, the Grantee and, if
applicable, the Grantor and the Company shall promptly file the required notice
or application for Authorization and the Grantee, with the cooperation of the
Grantor and the Company, shall expeditiously process the same.
3.3. Conditions to Closing. It shall be a condition to Closing
that:
3.3.1. HSR Clearance. The parties hereto shall have
obtained clearance under the HSR Act to
proceed with the transactions contemplated
hereby.
3.3.2. Release of Guaranties. Unless waived by
Enron, it shall be a condition to Closing
that (a) either any guaranty by Enron or any
Subsidiary of Enron (other than the Company
and NNGC Holdings) of NNGC's indebtedness
under the Bank Credit Facility be released
or all indebtedness under the Bank Credit
Facility be repaid effective as of the
Closing and (b) any guaranty by Enron or any
Subsidiary of Enron (other than NNGC
Holdings) of the Company's indebtedness to
NNGC be released effective as of the
Closing.
3.3.3. Issuance of Series A Preferred Stock. The
Series A Preferred Stock shall have been
issued in accordance with the Subscription
Agreement.
3.3.4. Affiliated Group. Unless waived by Grantee,
it shall be a condition to Closing that at
the Closing Date, each of NNGC Holdings and
NNGC has at all times during its existence
been
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treated by Enron as a member of the
affiliated group of corporations of which
Enron is the common parent filing
consolidated returns for federal income tax
purposes.
3.3.5. Accuracy of Grantor, Representations and
Warranties. Unless waived by Grantee, the
representations and warranties set forth in
Section 5.2 are true and correct as of the
Closing Date.
3.3.6. Accuracy of Grantee Representations and
Warranties. Unless waived by Grantor, the
representations and warranties set forth in
Section 5.1 are true and correct as of the
Closing Date.
3.3.7. No Violation of Law [Grantee]. Unless waived
by Grantee, the Closing shall not violate
any Law, Regulation or Order applicable to
Grantee or any of its Affiliates.
3.3.8. No Violation of Law [Grantor]. Unless waived
by Grantor, the Closing shall not violate
any Law, Regulation or Order applicable to
Grantor or any of its Affiliates.
3.4. Payment and Delivery of Certificates.
3.4.1. Payment. At the Closing, the Grantee shall
pay the Exercise Price to the Grantor in
immediately available funds by wire transfer
to a bank account designated by the Grantor.
3.4.2. Delivery. At the Closing, simultaneously
with the delivery of immediately available
funds as provided above, the Grantor shall
deliver to the Grantee a certificate or
certificates representing the Option
Interests, which Option Interests shall be
duly authorized, validly issued, fully paid
and nonassessable and free and clear of all
Liens, and the Grantee shall deliver to the
Company its written agreement that the
Grantee will not offer to sell or otherwise
dispose of such Option Interests in
violation of applicable Law.
3.5. Certificates. Certificates for the Option Interests
delivered at the Closing shall be endorsed with a restrictive legend that shall
read substantially as follows:
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS AND PURSUANT TO THE TERMS
OF AN OPTION AGREEMENT DATED AS OF NOVEMBER 9, 2001. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.
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3.6. Unlegended Certificates. A new certificate or
certificates evidencing the same membership interests in the Company will be
issued to the Grantee in lieu of the certificate bearing the above legend, and
such new certificate shall not bear such legend, insofar as it applies to the
Securities Act, if the Grantee shall have delivered to the Company a copy of a
letter from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to the Company and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
4. Covenants.
4.1. Section 338(h)(10) Election. Enron and Dynegy shall make
timely and effective elections under Section 338(h)(10) of the Code, and any
similar elections under any applicable state, local, foreign or other income tax
law (collectively, the "Section 338(h)(10) Elections") with respect to Grantee's
purchase for tax purposes of the common stock of NNGC Holdings and the deemed
purchase(s) for tax purposes of the common stock of NNGC and any relevant
subsidiaries of NNGC (collectively, the "Qualified Stock Purchases"). To
facilitate such elections, at the Closing, Grantee shall deliver to Grantor an
Internal Revenue Service Form 8023 and any similar forms under applicable state,
local, foreign or other income tax law (the "Forms") with respect to the
Qualified Stock Purchases, which Forms shall be properly executed by Dynegy and
Enron at the Closing. Grantor and Grantee shall, at or prior to the Closing,
agree to a schedule showing an allocation of the deemed purchase price for the
assets of NNGC among the assets of NNGC and any relevant subsidiaries of NNGC,
consistent with the principles of Section 338(h)(10) of the Code and the
regulations thereunder (the "Allocation"). Grantee shall complete the Forms in a
manner consistent with the Allocation, Dynegy shall cause such Forms to be
timely filed with the appropriate taxing authorities and Grantee shall deliver a
copy of such Forms to Enron as promptly as practicable after filing. If, after
filing such Forms, any changes or supplements are required to the Forms, Grantee
and Grantor shall promptly agree on such changes. Thereafter, Grantee and
Grantor shall complete any required amendments or supplements to the Forms,
Dynegy and Enron shall properly execute such amended Forms, Dynegy shall timely
file the Forms, and any required supplements thereto, and Grantee shall deliver
a copy of such Forms and supplements to Enron as soon as practicable after
filing. Enron and Grantor shall provide such information as Grantee may
reasonably request from Grantor in order to prepare the Forms and any required
amendments or supplements thereto.
4.2. Maintenance of 100% ownership of Company membership
interests, NNGC Holdings capital stock and NNGC common stock; no Liens. Enron
and Grantor hereby covenant that through the Option Term Grantor will maintain
ownership of 100% of the membership interests in the Company, and the Company
will maintain ownership of 100% of the capital stock of NNGC Holdings and NNGC
Holdings will maintain ownership of 100% of the common stock of NNGC, from the
date hereof through the Closing Date. The Company, NNGC Holdings and NNGC hereby
covenant not to issue any equity interests or any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, any equity
interest in the Company, NNGC Holdings or NNGC to any entity other than Grantor
from the date hereof through the Closing Date. Grantor, the Company, Enron, NNGC
Holdings and NNGC will not, directly or indirectly, offer for sale, contract to
sell, sell, distribute, grant any option, right or warrant to purchase, suffer
any Liens upon, pledge, hypothecate or otherwise dispose of any equity interest
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in the Company, NNGC Holdings or NNGC (other than Liens, pledges or
hypothecation of the NNGC Common Stock to secure Debt under the Bank Credit
Facilities), any securities convertible into, or exercisable or exchangeable
for, any equity interests in the Company, NNGC Holdings or NNGC, or any other
rights to acquire any equity interest in the Company, NNGC Holdings or NNGC.
4.3. Continuing Services after the Closing. For a period
beginning on the Closing Date and ending on the earlier to occur of (a) the date
that is six months from the Closing Date, and (b) the Closing Date as defined in
the Purchase Option Agreement, if requested by NNGC, Enron shall cause Enron
Transportation Services Company to provide services (other than cash management
services provided in the Cash Management Program) to NNGC on substantially the
same terms as provided on the date hereof, and Grantee shall cause Grantor to
compensate Enron and its Affiliates for such service at a rate not to exceed the
cost incurred by the entity providing the service. The services will be provided
pursuant to a mutually agreeable customary transition services agreement, which
will contain customary indemnity provisions.
4.4. Termination of waiting period under HSR Act. Enron will,
and will cause Grantor to, use their commercially reasonable best efforts to
obtain early termination of the waiting period under the HSR Act for the
exercise of the Option.
4.5. Forgiveness of debt owed by Enron. After the Exercise and
prior to the Closing, the Company will cause NNGC to cancel and forgive all
indebtedness owed to the Company or any of its Subsidiaries by Enron or its
Affiliates (other than the Company and NNGC Holdings), other than a net amount
of such debt equal to $240 million plus any dividends (whether or not declared)
accrued and unpaid on the shares of Series A Preferred Stock at such time. The
remaining outstanding indebtedness will be evidenced by a note of Enron to NNGC
in substantially the form of Exhibit A.
4.6. No Assets or Operations. Neither the Company nor NNGC
Holdings will acquire any assets, conduct any operations, or incur any
liabilities from the date hereof through the Closing Date except for liabilities
of the Company to NNGC in an amount up to $1,950 million.
4.7. Affirmative Covenants Related to the Company, NNGC
Holdings and NNGC. Enron, Grantee and the Company covenant that for the period
between the execution of this Agreement and the Closing Date, the Company, NNGC
Holdings and NNGC shall, and shall cause each of its Subsidiaries to:
4.7.1. cause all properties owned by it or used or
held for use in the conduct of its business
to be maintained and kept in good condition,
repair and working order (reasonable wear
and tear excepted) and supplied with all
necessary equipment and will cause to be
made all necessary repairs, renewals,
replacements, betterments and improvements
thereof, all as in the judgment of the Board
of Directors may be necessary so that the
business carried on in connection therewith
may be properly and
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advantageously conducted at all times;
provided, that the foregoing shall not
prevent it from discontinuing the
maintenance of any of such properties if
such discontinuance is, in the judgment of
its management, desirable in the conduct of
its business;
4.7.2. preserve and keep in full force and effect
its corporate existence, rights (charter and
statutory), licenses and franchises;
provided, that it shall not be required to
preserve any such right, license or
franchise if the Board of Directors shall
determine that the preservation thereof is
no longer desirable in the conduct of its
business as a whole;
4.7.3. maintain its books, accounts and records in
accordance with GAAP;
4.7.4. comply with all material legal requirements
and material contractual obligations
applicable to its operations and business
and pay all applicable taxes as they become
due and payable; and
4.7.5. permit representatives of the Grantee and
its agents (including their counsel,
accountants and consultants) to have
reasonable access during business hours to
its books, records, facilities, key
personnel, officers, directors, customers,
independent accountants and legal counsel to
the extent that such access is not
prohibited by FERC marketing affiliate
rules.
4.8. Negative Covenants Related to the Company, NNGC Holdings
and NNGC. For the period between the execution of this Agreement and the Closing
Date, Enron, Grantor and the Company covenant that, without the approval of the
Grantee, none of the Company, NNGC Holdings or NNGC will:
4.8.1. Dividends. Directly or indirectly declare or
pay, or permit any Subsidiary to declare or
pay, any dividends, or make or permit any
Subsidiary to make, any distributions upon
any of its equity securities, other than (i)
any dividend or other distribution resulting
from the cancellation by NNGC of Debt owed
by Enron and its Affiliates to NNGC (the
"Intercompany Note Receivable") under the
Cash Management Program; provided that such
cancellation of Debt does not reduce the net
amount of the Intercompany Note Receivable
to less than $240 million plus accrued and
unpaid dividends on the Series A Preferred
Stock and (ii) dividends on the Series A
Preferred Stock;
4.8.2. Redemptions. Except as provided pursuant to
the terms of the Series A Preferred Stock,
directly or indirectly redeem, purchase or
otherwise acquire, any of its equity
securities;
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4.8.3. Issuances. Authorize, issue, or enter into
any agreement providing for the issuance
(contingent or otherwise) of (x) any notes
or debt securities containing equity
features (including, without limitation, any
notes or debt securities issued in
connection with the issuance of equity
securities or containing profit
participation features) or (y) any equity
securities (or any securities convertible
into or exchangeable for any equity
securities, including any warrants or stock
options);
4.8.4. Mergers. Merge or consolidate, or enter into
an agreement providing for any merger or
consolidation, with any Person if the
holders of its capital stock prior to the
transaction will own less than 100% of
NNGC's capital stock after the transaction;
4.8.5. Sale of Assets. Except as provided in
Schedule 4.8.5, sell, lease or otherwise
dispose of any of its assets, other than
obsolete equipment or inventory and asset
sales in the Ordinary Course of Business
consistent with past practice not to exceed
an aggregate of $20 million within any
12-month period;
4.8.6. Bankruptcy. Pursuant to or within the
meaning of Title 11 of the United States
Code or any similar federal, state or
foreign law for the relief of debtors,
commence a voluntary case, consent to the
entry of an order for relief against it in
an involuntary case, consent to the
appointment of a receiver, trustee,
assignee, liquidator or similar official of
it or for all or substantially all of its
property, or make a general assignment for
the benefit of its creditors;
4.8.7. Charter Amendments. Make any amendment to or
waive any provision of its certificate of
incorporation or bylaws, limited liability
company agreement or other organizational
documents, or file any resolution of the
Board of Directors with the Secretary of
State of Delaware, in either case which
materially and adversely affects the holders
of the Series A Preferred Stock;
4.8.8. Investments and Loans. Make any investment
in any Person or any loans or advances to,
or guarantees for the benefit of, any
Affiliate, other than (i) loans to any
wholly owned Subsidiary, (ii) loans of a
maximum amount of $1,950 million from NNGC
to the Company and (iii) loans pursuant to
the Cash Management Program;
4.8.9. Indebtedness. Create, incur, assume or
suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or
suffer to exist, Debt, other than (i) the
Debt outstanding as of the date hereof, (ii)
Debt incurred after the date hereof not
exceeding $450 million in
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the aggregate on the terms contained in or
with interest rate and prepayment provisions
not substantially different from, the terms
contained in that Commitment Letter dated
October 31, 2001 between NNGC and certain
banks and (iii) Permitted Refinancing Debt;
4.8.10. Capital Expenditures. Make, or permit the
NNGC and its Subsidiaries, taken as a whole,
to make capital expenditures (including,
without limitation, payments with respect to
capitalized leases), (i) during the period
from the date hereof through December 31,
2001, totaling in excess of $40 million,
(ii) during the year ending December 31,
2002, totaling in excess of $115 million and
(iii) thereafter, in excess of annual
budgeted amounts, except in each case for
additional expenditures not ordinarily
classified as capital expenditures that are
required to be classified as capital
expenditures by applicable regulatory
requirements; and
4.8.11. Note Receivable. Allow the Intercompany Note
Receivable to be less than a net amount of
$240 million plus accrued and unpaid
dividends on the Series A Preferred Stock.
5. Representations and Warranties.
5.1. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Enron, Grantor and the Company as follows:
5.1.1. Existence; Qualification; Subsidiaries.
Grantee is a corporation duly organized,
validly existing and in good standing under
the laws of its jurisdiction of formation
and has full power and authority to conduct
its business and own and operate its
properties as now conducted, owned and
operated.
5.1.2. Authorization and Enforceability. Grantee
has the full power and authority and has
taken all action necessary to permit Grantee
to execute and deliver this Agreement and to
carry out the terms hereof, and none of such
actions will violate any provision of the
Grantee's Certificate of Incorporation or
any applicable law, regulation, order,
judgment or decree or rule, or result in the
breach of, or constitute a default (or an
event which, with notice or lapse of time or
both would constitute a default) under, any
agreement, instrument or understanding to
which Grantee is a party or by which it is
bound. This Agreement constitutes a legal,
valid and binding obligation of Grantee,
enforceable against Grantee in accordance
with its terms, except to the extent limited
by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws
of general application related to the
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enforcement of creditor's rights generally
and (ii) general principles of equity.
5.1.3. Investment Intent of Grantee. Grantee is
acquiring the Option and, if it exercises
the Option, will acquire the Option
Interests for its own account for investment
and not with a view to distribution.
5.1.4. Sophistication and Financial Condition;
Information. Grantee considers itself to be
an experienced and sophisticated investor
and to have such knowledge and experience in
financial and business matters as are
necessary to evaluate the merits and risks
of an investment in the Option Interests.
Grantee is able to bear the economic risk of
this investment regarding the Company, is
able to hold the Option Interests
indefinitely and has a sufficient net worth
to sustain a loss of its entire investment
in the Company in the event such loss should
occur. Grantee (a) has been furnished with
such information about Enron, Grantor, the
Company and the Option and Option Interests
as it has requested, (b) has made its own
independent inquiry and investigation into,
and based thereon, has formed an independent
judgment concerning the Company and the
Option Interests and (c) is an "accredited"
investor within the meaning of Regulation D
of the Securities Act, as currently in
effect. The Grantee acknowledges that any
certificate representing the Option
Interests will bear a customary legend
regarding restrictions on the
transferability of such Option Interests.
5.2. Representations and Warranties of Enron, NNGC Holdings,
Grantor and the Company. Each of Enron, NNGC Holdings, Grantor and the Company
hereby represents and warrants to Grantee as follows:
5.2.1. Existence; Qualification; Subsidiaries. Each
of Enron, NNGC Holdings, Grantor and the
Company is a corporation or limited
liability company duly organized, validly
existing and in good standing under the laws
of their state of incorporation or
organization and have full corporate or
limited liability company power and
authority to conduct their business and own
and operate their properties as now
conducted, owned and operated. NNGC is
licensed or qualified as a foreign
corporation and is in good standing in all
jurisdictions where it is required to be so
licensed or qualified, to the extent such
concepts are recognized in such
jurisdictions. NNGC is an indirect
subsidiary of Enron.
5.2.2. Authorization and Enforceability. Each of
Enron, NNGC Holdings, Grantor and the
Company have full power and authority and
have taken all required corporate and other
action
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necessary to permit each to execute and
deliver this Agreement and to carry out the
terms hereof, and none of such actions will
violate any provision of each of their
constituent documents or any applicable law,
regulation, order, judgment or decree or
rule of any stock exchange where the Enron
Common Stock is listed, or result in the
breach of, or constitute a default (or an
event which, with notice or lapse of time or
both would constitute a default) under, any
agreement, instrument or understanding to
which any of them is a party or by which it
is bound. This Agreement constitutes a
legal, valid and binding obligation of each
of them, enforceable against each of them in
accordance with its terms, except to the
extent limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and
similar laws of general application related
to the enforcement of creditor's rights
generally and (ii) general principles of
equity.
5.2.3. Ownership of Entire Equity Interest.
5.2.3.1. Grantor owns 100% of the membership
interests of the Company.
5.2.3.2. The Company owns 100% of the
capital stock of NNGC Holdings.
5.2.3.3. NNGC Holdings owns 100% of the
common stock of NNGC.
5.2.4. Third-Party Approvals. Assuming the accuracy
of the representations and warranties of the
Grantee contained in this Agreement and
except for filings under the HSR Act, none
of Enron, NNGC Holdings, Grantor or the
Company are required to obtain any order,
consent, approval or authorization of, or to
make any declaration or filing with, any
Governmental Agency or other third party
(including under any state securities or
"blue sky" laws) in connection with the
execution and delivery of this Agreement, or
the consummation of the transactions
contemplated hereby.
5.2.5. Affiliated Group. Each of NNGC Holdings and
NNGC has at all times during its existence
been treated as a member of the affiliated
group of corporations of which Enron is the
common parent filing consolidated returns
for federal income tax purposes.
5.2.6. Disregarded Entity. The Company is and has
at all times been a disregarded entity for
federal income tax purposes.
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5.2.7. No Other Assets or Operations. The Company
was formed on November 2, 2001. NNGC
Holdings was formed on November 2, 2001. The
Company's only assets are 1,000 shares of
common stock of NNGC Holdings and $1,000 in
cash. NNGC Holdings's only assets are 1,000
shares of common stock of NNGC and $1,000 in
cash. Neither the Company nor NNGC Holdings
has incurred any liabilities (other than the
contemplated liability to NNGC of $1,950
million) or has conducted any operations
since their respective dates of formation.
5.2.8. Capitalization.
5.2.8.1. Capitalization of the Company. As
of the Closing Date after giving
effect to the transactions
contemplated hereby, there shall be
1,000 authorized units representing
membership interests of the
Company. At the time of the
Closing, all of the outstanding
membership interests of the Company
will be validly issued, fully paid
and nonassessable and will have
been issued in compliance with all
applicable securities laws
(including the provisions of the
Securities Act and the rules and
regulations promulgated
thereunder). As of the Closing
Date, the Company has not granted
or issued any options, convertible
securities, warrants, phantom
stock, stock appreciation rights,
calls, pledges, transfer
restrictions (except restrictions
imposed by federal and state
securities laws), Liens, rights of
first offer, rights of first
refusal, antidilution provisions or
commitments of any character
relating to any issued or unissued
membership interests of the
Company.
5.2.8.2. Capitalization of NNGC Holdings. As
of the Closing Date after giving
effect to the transactions
contemplated hereby, the authorized
capital stock of NNGC Holdings
shall be 1,000 shares of common
stock. At the time of the Closing,
all of the outstanding capital
stock of NNGC Holdings will be
validly issued, fully paid and
nonassessable and will have been
issued in compliance with all
applicable securities laws
(including the provisions of the
Securities Act and the rules and
regulations promulgated
thereunder). As of the Closing
Date, NNGC Holdings has not granted
or issued any options, convertible
securities, warrants, phantom
stock, stock appreciation rights,
calls, pledges, transfer
restrictions (except restrictions
imposed by federal and state
securities laws), Liens, rights of
first offer, rights of first
refusal, antidilution provisions or
commitments of
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any character relating to any
issued or unissued shares of
capital stock of NNGC Holdings.
5.2.8.3. Capitalization of NNGC. As of the
Closing Date after giving effect to
the transactions contemplated
hereby, the authorized capital
stock of NNGC shall be as set forth
on Schedule 5.2.8.3 attached
hereto. At the time of the Closing,
(i) all of the outstanding capital
stock of NNGC will be validly
issued, fully paid and
nonassessable and will have been
issued in compliance with all
applicable securities laws
(including the provisions of the
Securities Act and the rules and
regulations promulgated thereunder)
and (ii) no outstanding capital
stock or other equity securities of
NNGC will rank pari passu or senior
in right of payment of dividends or
redemption to the Series A
Preferred Stock. Except as set
forth on Schedule 5.2.8.3, as of
the Closing Date, NNGC has not
granted or issued any options,
convertible securities, warrants,
phantom stock, stock appreciation
rights, calls, pledges, transfer
restrictions (except restrictions
imposed by federal and state
securities laws), Liens (except
Liens on the equity securities
granted to secure Debt), rights of
first offer, rights of first
refusal, antidilution provisions or
commitments of any character
relating to any issued or unissued
shares of capital stock of NNGC.
5.2.9. Financial Statements; Disclosure. The
Financial Statements (including the related
notes and schedules) fairly present in all
material respects the financial position of
NNGC as of their dates, and each of the
statements of operations, cash flows and
changes in shareholders' equity included in
the Financial Statements (including any
related notes and schedules) fairly presents
in all material respects the results of
operations, cash flows or changes in
shareholders' equity, as the case may be, of
NNGC for the periods set forth therein
(subject, in the case of unaudited
statements, to (x) such exceptions as may be
permitted by Form 10-Q of the SEC and (y)
normal year-end audit adjustments which will
not be material), in each case in accordance
with generally accepted accounting
principles consistently applied during the
periods involved, except as may be noted
therein. Except as and to the extent set
forth on the Current Balance Sheet,
including all notes thereto, as of the date
of such balance sheet, NNGC does not have
any Liabilities or obligations of any nature
(whether accrued, absolute, contingent or
otherwise) that would be required to be
reflected on, or reserved against in, a
balance sheet of NNGC or in the notes
thereto prepared in accordance with
generally accepted
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accounting principles consistently applied,
other than Liabilities or obligations which
do not and are not reasonably likely to
have, individually or in the aggregate, a
Material Adverse Effect. All reserves or
adjustments required by generally accepted
accounting principles to be reflected in the
carrying value of the assets included in
such balance sheet have been taken other
than reserves or adjustments which do not
and are not reasonably likely to have,
individually or in the aggregate, a Material
Adverse Effect.
5.2.10. Litigation. As of the date hereof, no
claims, suits, proceedings or investigations
are pending or, to the Company, NNGC
Holdings or NNGC's knowledge, threatened
against NNGC or any officer or director
thereof which, individually or in the
aggregate, could reasonably be expected to
have a Material Adverse Effect.
5.2.11. No Undisclosed Liabilities. NNGC has no
Liabilities except (i) as disclosed on
Schedule 5.2.11 or in the Financial
Statements, (ii) Liabilities incurred in the
Ordinary Course of Business, and (iii) such
other Liabilities that will not result,
individually or in the aggregate, in a
Material Adverse Effect.
5.2.12. Agreements. No event has occurred which,
with notice or lapse of time, would
constitute a default with respect to NNGC,
under any material agreement, arrangement or
understanding to which NNGC is a party, and,
to the knowledge of NNGC, no other Person is
in default under any such agreement.
5.2.13. Environmental Matters.
5.2.13.1. NNGC has been and is in compliance
with all applicable orders of any
court, governmental authority or
arbitration board or tribunal and
any applicable law, ordinance,
rule, regulation or other legal
requirement (including common law)
related to human health and the
environment ("Environmental Laws")
except for such matters as do not
and are not reasonably likely to
have, individually or in the
aggregate, a Material Adverse
Effect. There are no past or
present facts, conditions or
circumstances that interfere with
the conduct of any of its
businesses in the manner now
conducted or which interfere with
continued compliance with any
Environmental Law, except for any
non-compliance or interference that
is not reasonably likely to have,
individually or in the aggregate, a
Material Adverse Effect.
-15-
5.2.13.2. Except for such matters as do not
and are not reasonably likely to
have, individually or in the
aggregate, a Material Adverse
Effect, (i) no judicial or
administrative proceedings or
governmental investigations are
pending or, to the knowledge of
NNGC, threatened against NNGC that
allege the violation of or seek to
impose Liability pursuant to any
Environmental Law, and (ii) there
are no past or present facts,
conditions or circumstances at, on
or arising out of, or otherwise
associated with, any current (or,
to the knowledge of NNGC, former)
businesses, assets or properties of
NNGC, including but not limited to
on-site or off-site disposal,
release or spill of any material,
substance or waste classified,
characterized or otherwise
regulated as hazardous, toxic or
otherwise harmful to human health
or the environment under
Environmental Laws, including
petroleum or petroleum products or
byproducts ("Hazardous Materials")
which facts, conditions or
circumstances violate Environmental
Law or are reasonably likely to
give rise to (x) costs, expenses,
Liabilities or obligations for any
cleanup, remediation, disposal or
corrective action under any
Environmental Law, (y) claims
arising for personal injury,
property damage or damage to
natural resources, or (z) fines,
penalties or injunctive relief.
5.2.13.3. NNGC has not (i) received any
notice of noncompliance with,
violation of, or Liability or
potential Liability under any
Environmental Law or (ii) entered
into any consent decree or order or
is subject to any order of any
court or governmental authority or
tribunal under any Environmental
Law or relating to the cleanup of
any Hazardous Materials, except for
any such matters as do not and are
not reasonably likely to have a
Material Adverse Effect.
5.2.14. Transactions With Affiliates. NNGC is not
party to any agreement, arrangement or
transaction with any officer, director or
Affiliate of NNGC, other than (i) corporate
services and similar arrangements or
transactions pursuant to which NNGC obtains
goods and services used in its Ordinary
Course of Business for which NNGC is charged
expense allocations by Enron consistent with
past practices, (ii) transactions occurring
pursuant to NNGC's participation in the
existing cash management program of Enron
(the "Cash Management Program"), (iii) the
Tax Allocation Agreement, (iv) operational
agreements between NNGC and one or more of
the Affiliates of Enron, such as
interconnect agreements, transportation
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agreements and other agreements, related to
NNGC's facilities and services, and (vi)
arrangements relating to the employment and
compensation of employees in the Ordinary
Course of Business, expense reimbursal and
advances for business purposes in accordance
with the customary policies and procedures
of NNGC.
5.2.15. Taxes.
5.2.15.1. All tax returns, statements,
reports, declarations, estimates
and forms ("Returns") required to
be filed by or with respect to the
Company, NNGC Holdings and NNGC
(including any Return required to
be filed by an affiliated,
consolidated, combined, unitary or
similar group for a taxable year in
which the Company, NNGC Holdings
and NNGC were included in such
group) on or prior to the date
hereof have been properly filed on
a timely basis with the appropriate
governmental authorities, except to
the extent that any failure to file
does not and is not reasonably
likely to have, individually or in
the aggregate, a Material Adverse
Effect, and all taxes due with such
Returns have been duly paid, or
deposited in full on a timely basis
or adequately reserved for in
accordance with GAAP, except to the
extent that any failure to pay or
deposit or make adequate provision
for the payment of such taxes does
not and is not reasonably likely to
have, individually or in the
aggregate, a Material Adverse
Effect. Representations made in
this Section 5.2.15 are made to the
knowledge of the Company, NNGC
Holdings and NNGC to the extent
that the representations relate to
a corporation which was, but is not
currently, a part of the Company,
NNGC Holdings and NNGC's
affiliated, consolidated, combined,
unitary or similar group.
5.2.15.2. Except to the extent not
reasonably likely to have,
individually or in the aggregate, a
Material Adverse Effect, (i) no
audits or other administrative
proceedings or court proceedings
are presently pending with regard
to any taxes or Returns of the
Company, NNGC Holdings or NNGC as
to which any taxing authority has
asserted in writing any claim; (ii)
no governmental authority is now
asserting in writing any deficiency
or claim for taxes or any
adjustment to taxes with respect to
which the Company, NNGC Holdings or
NNGC may be liable with respect to
income and other material taxes
which have not been fully paid or
finally settled; (iii) the Company,
NNGC Holdings and NNGC have no
Liability for taxes
-17-
under Treas. Reg. Section 1.1502-6
or any similar provision of state,
local, or non-U.S. tax law, except
for taxes of the affiliated group
of which Enron is the common
parent, within the meaning of
Section 1504(a)(1) of the Code or
any similar provision of state,
local, or non-U.S. tax law; and
(iv) the Company, NNGC Holdings and
NNGC are not a party to, is bound
by or has any obligation under any
tax sharing, allocation or
indemnity agreement or any similar
agreement or arrangement other than
the Tax Allocation Agreement (which
Tax Allocation Agreement shall be
terminated as of the Closing).
5.2.15.3. For purposes of this Agreement,
"tax" or "taxes" means all net
income, gross income, gross
receipts, sales, use, ad valorem,
transfer, accumulated earnings,
personal holding company, excess
profits, franchise, profits,
license, withholding, payroll,
employment, excise, severance,
stamp, occupation, premium,
property, disability, capital
stock, or windfall profits taxes,
customs duties or other taxes,
together with any interest and any
penalties, additions to tax or
additional amounts imposed by any
taxing authority.
5.2.16. Certain Fees. No fees or commissions will be
payable by the Company, NNGC Holdings or
NNGC to any broker, financial advisor,
finder, investment banker, or bank with
respect to the transactions contemplated by
this Agreement, except that Enron has
retained J. P. Morgan Securities Inc. and
Salomon Smith Barney Inc. as its financial
advisors. The Grantee shall have no
obligation with respect to any fees or with
respect to any claims made by or on behalf
of any Persons for fees of a type
contemplated in this section that may be due
in connection with the transactions
contemplated by this Agreement and which
were incurred by Enron or any of its
Subsidiaries. The Company, NNGC Holdings and
NNGC shall indemnify and hold harmless the
Grantee, its employees, officers, directors,
agents and partners, and their respective
affiliates (as such term is defined under
Rule 405 promulgated under the Securities
Act), from and against all claims, losses,
damages, costs (including the costs of
preparation and attorney's fees) and
expenses suffered in respect to any such
claimed or existing fees.
6. Guarantee by Enron of Grantor's and the Company's Obligations
hereunder. Enron hereby unconditionally guarantees to Grantee the prompt,
faithful and full performance of all of the covenants and obligations of
Grantor, NNGC Holdings and the Company under the terms of this Agreement.
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7. Survival. The representations and warranties of the parties hereto
contained herein, or in any writing delivered pursuant hereto, shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, regardless of any investigation made by the
Grantee or on its behalf, and shall continue until the first anniversary of the
Closing Date, except for the representations and warranties set forth in
Sections 5.1 hereof which shall survive indefinitely, and except for the
representations and warranties set forth in Section 5.2.15 hereof which shall
survive until the date that is ninety (90) days following the expiration of one
applicable statute of limitation.
8. Indemnification.
8.1. Indemnification by Enron and Grantor. In consideration of
Grantee's execution and delivery of this Agreement and the acquisition of the
Option hereunder and in addition to all of Enron's and Grantor's other
obligations under this Agreement, Enron and Grantor shall defend, protect,
indemnify and hold harmless Grantee and all of its Affiliates, officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Dynegy Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, expenses (including, without limitation, costs of suit and attorneys'
fees and expenses) in connection therewith (irrespective of whether any such
Dynegy Indemnitee is a party to the action for which indemnification hereunder
is sought (the "Indemnified Liabilities"), incurred by the Dynegy Indemnitees or
any of them as a result of, or arising out of, or relating to any breach of any
representation, warranty, covenant or agreement made by Enron or Grantor herein;
provided, that with respect to any such claim based upon a breach of a
representation or warranty, a bona fide claim relating thereto has been made
within the applicable survival period specified in Section 7. In addition, Enron
shall indemnify Dynegy and its Affiliates, including NNGC, against any liability
for taxes of the affiliated group of corporations filing a consolidated federal
income tax return of which Enron is the common parent under Treas. Reg. Section
1.1502-6 (or similar principles of state, local or foreign law). Enron and
Grantor shall reimburse the Dynegy Indemnitees for the Indemnified Liabilities
as such Indemnified Liabilities are incurred. To the extent that the foregoing
undertaking by Enron or Grantor may be unenforceable for any reason, Enron and
Grantor shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
8.2. Indemnification by the Grantee. In consideration of Enron
and Grantor execution and delivery of this Agreement and issuance of the Option
hereunder and in addition to all of the Grantee's other obligations under this
Agreement, the Grantee shall defend, protect, indemnify and hold harmless Enron
and Grantor and all of their Affiliates, officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Enron
Indemnitees") from and against any and all Indemnified Liabilities incurred by
the Enron Indemnitees or any of them as a result of, or arising out of, or
relating to any breach of any representation, warranty, covenant or agreement
made by the Grantee herein; provided, that with respect to any such claim based
upon a breach of a representation or warranty, a bona fide claim relating
thereto has been made within the applicable survival period specified in Section
7.1. Grantee shall reimburse the Enron Indemnitees for the Indemnified
Liabilities as such Indemnified Liabilities are incurred. To the
-19-
extent that the foregoing undertaking by Grantee may be unenforceable for any
reason, the Grantee shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
8.3. Indemnification Procedure.
8.3.1. In the case of any claim asserted by a third
party against a party entitled to
indemnification under this Agreement (the
"Indemnified Party"), (i) notice setting
forth with reasonable specificity the facts
and circumstances of which such Person has
received notice shall be given by the
Indemnified Party (such notice, an
"Indemnification Claim Notice") to the party
required to provide indemnification (the
"Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of
any claim as to which indemnity may be
sought, and (ii) the Indemnified Party shall
permit the Indemnifying Party (at the
expense of such Indemnifying Party) to
assume the defense of any claim or any
litigation resulting therefrom; provided,
that (i) counsel for the Indemnifying Party
who shall conduct the defense of such claim
or litigation shall be reasonably
satisfactory to the Indemnified Party, and
the Indemnified Party may participate in
such defense at such Indemnified Party's
expense, and (ii) the failure of any
Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying
Party of its indemnification obligation
under this Agreement except to the extent
that (x) such failure results in a lack of
actual notice to the Indemnifying Party and
(y) such Indemnifying Party is materially
prejudiced as a result of such failure to
give notice. Except with the prior written
consent of the Indemnified Party, no
Indemnifying Party, in the defense of any
such claim or litigation, shall consent to
entry of any judgment or enter into any
settlement that (x) provides for injunctive
or other nonmonetary relief affecting the
Indemnified Party or (y) does not include as
an unconditional term thereof the giving by
each claimant or plaintiff to such
Indemnified Party of a release from all
liability with respect to such claim or
litigation.
8.3.2. In the event that the Indemnifying Party
does not assume and conduct the defense of
any claim subject to indemnification
hereunder in accordance with the provisions
of Section 8.3.1 above, the Indemnified
Party may take over and assume control over
the defense, settlement, negotiations or
litigation relating to any such claim at the
sole cost of the Indemnifying Party;
provided, that if the Indemnified Party does
so take over and assume control, (x) the
Indemnified Party shall not settle such
claim or litigation without the written
consent of the Indemnifying Party, such
consent not to be unreasonably withheld, (y)
the Indemnified Party shall be reimbursed by
the
-20-
Indemnifying Party for reasonable attorneys'
fees and other expenses of defending such
claim upon the presentation of itemized
bills for such expenses to the Indemnifying
Party, and (z) the Indemnifying Party will
remain responsible for any Indemnified
Liabilities that the Indemnified Party may
suffer resulting from, arising out of,
relating to, in the nature of, or caused by
such claim to the fullest extent provided in
this Section 8.
9. Miscellaneous.
9.1. Expenses. Except as otherwise provided in the Merger
Agreement or as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
legal counsel.
9.2. Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
9.3. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions 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 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 hereto
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 to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
9.4. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Texas, regardless of the
Laws that might otherwise govern under applicable principles of conflicts of
law.
9.5. Descriptive Headings. The descriptive headings contained
herein are for convenience or reference only, are not comprehensive, and shall
not affect in any way the meaning or interpretation of this Agreement.
9.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses or sent by
electronic transmission to the telecopier number specified below:
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If to the Company to:
MCTJ Holding Co. LLC
1400 Smith Street
Houston, Texas 77002
Attention: General Counsel
Facsimile (713) 853-3129
with an information copy, which shall not
constitute notice to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: William E. Joor, III, Esq.
Scott N. Wulfe, Esq.
Facsimile: (713) 758-2346
If to the Grantor to:
CGNN Holding Company, Inc.
1400 Smith Street
Houston, Texas 77002
Attention: General Counsel
Facsimile (713) 853-3129
with an information copy, which shall not
constitute notice to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
Attention: William E. Joor, III, Esq.
Scott N. Wulfe, Esq.
Facsimile: (713) 758-2346
If to Grantee to:
Dynegy Holdings Inc.
1000 Louisiana, Suite 5800
Houston, Texas 77002
Attention: General Counsel
Facsimile (713) 507-6808
-22-
with an information copy, which shall not
constitute notice to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: R. Joel Swanson, Esq.
J. David Kirkland, Jr., Esq.
Facsimile: (713) 229-1522
9.7. Counterparts. This Agreement and any amendments hereto
may be executed in counterparts, each of which shall be deemed an original and
all of which taken together shall constitute but a single document.
9.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be sold, assigned
or otherwise disposed of or transferred by either of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
party, except that the Grantee may assign this Agreement to an Affiliate or
Subsidiary of the Grantee; provided, however, that no such assignment shall have
the effect of releasing the Grantee from its obligations hereunder and the
assignee shall be subject to all of the terms and conditions of this Agreement
as if it were the Grantee. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
9.9. Further Assurances. In the event of any exercise of the
Option by the Grantee, the Company and the Grantee shall execute and deliver all
other documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
9.10. Specific Performance. The parties hereto hereby
acknowledge and agree that the failure of any party to this Agreement to perform
its agreements and covenants hereunder will cause irreparable injury to the
other party to this Agreement for which damages, even if available, will not be
an adequate remedy. Accordingly, each of the parties hereto hereby consents to
the granting of equitable relief (including specific performance and injunctive
relief) by any court of competent jurisdiction to enforce any party's
obligations hereunder. The parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
9.11. Complete Agreement; No Third Party Beneficiary. This
Agreement (including the Subscription Agreement, the Merger Agreement and the
other documents and instruments referred to herein and therein) (i) constitutes
the entire agreement and supersedes all prior agreements, conversations,
negotiations and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ENRON CORP.,
an Oregon corporation
By: /s/ RAYMOND M. BOWEN, JR.
------------------------------------
Name: Raymond M. Bowen, Jr.
Title: Authorized Agent
CGNN HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ DREW J. FOSSUM
------------------------------------
Name: Drew J. Fossum
Title: Authorized Agent
MCTJ HOLDING CO. LLC,
a Delaware limited liability company
By: /s/ DREW J. FOSSUM
------------------------------------
Name: Drew J. Fossum
Title: Authorized Agent
DYNEGY HOLDINGS INC.,
a Delaware corporation
By: /s/ HUGH A. TARPLEY
-------------------------------------
Name: Hugh A. Tarpley
Title: Authorized Agent
Solely for the provisions of Section 5.1
hereof:
DYNEGY INC.,
an Illinois corporation
By: /s/ HUGH A. TARPLEY
-------------------------------------
Name: Hugh A. Tarpley
Title: Authorized Agent
-24-
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question; provided,
that none of Dynegy and its Affiliates shall be deemed to be an Affiliate of
Enron. For purposes of this definition of Affiliate, "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities or general partnership or member interests, by contract or otherwise.
Without limiting the generality of the foregoing, a Person shall be deemed to
control any other Person in which it or any of its Affiliates owns, directly or
indirectly, a majority of the ownership interests.
"Agreement" shall mean this Option Agreement.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders certificates, registrations or other approvals granted by
any Governmental Agency.
"Bank Credit Facility" shall mean one or more bank credit facilities
providing credit availability to NNGC in an aggregate principal amount not to
exceed $450 million on the terms contained in, or not substantially different
from the terms contained in, that Commitment Letter dated October 31, 2001
between NNGC and certain banks.
"Business Day" shall mean a day other than Saturday, Sunday or a
federal holiday.
"Cash Management Program" means Enron's existing zero balance cash
management program.
"Closing" shall have the meaning ascribed to such term in Section 2
herein.
"Closing Date" shall have the meaning ascribed to such term in Section
2 herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contingent Obligations" shall mean, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend, letter of credit or other similar
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (other than for collection or
deposit in the ordinary course of business) co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including, without limitation, any such
obligation for which that Person is in effect liable through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain
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the solvency or any balance sheet, income or other financial condition of the
obligor of such obligation, or to make payment for any products, materials or
supplies or for any transportation, services or lease regardless of the
non-delivery or non-furnishing thereof, in any such case if the purpose or
intent of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof. The amount of any Contingent Obligation
shall be equal to the amount of the obligation, or portion thereof, so
guaranteed or otherwise supported.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Current Balance Sheet" means the consolidated balance sheet of NNGC
dated as of September 30, 2001.
"Debt" shall mean, with respect to any Person, the aggregate amount of,
without duplication, (i) all obligations for borrowed money; (ii) all
obligations evidenced by bonds, debentures, notes or other similar instruments;
(iii) all obligations to pay the deferred purchase price of property or
services; (iv) all capitalized lease obligations; (v) all obligations or
liabilities of others secured by a Lien on any asset owned by such person
whether or not such obligation or Liability is assumed, to the extent of the
lesser of such obligation or Liability or the book value of such asset; (vi) all
Contingent Obligations of such person; and (vii) any other obligations or
Liabilities which are required by generally accepted accounting principles to be
shown as debt on a balance sheet, other than trade payables and Liabilities
pursuant to the Tax Allocation Agreement.
"Enron Common Stock" means the common stock, no par value, of Enron.
"Estimated Working Capital" means Grantor's good faith estimate made
within five Business Days of Closing of Working Capital on the Closing Date.
"Exchange Agreement" means that certain Exchange Agreement by and among
Dynegy and Enron executed concurrently herewith.
"Exercise" means exercise of the Option.
"Exercise Price" shall have the meaning ascribed to such term in
Section 2 herein.
"FERC" means the Federal Energy Regulatory Commission.
"Final Working Capital" means the Working Capital on the close of
business on the Closing Date as determined pursuant to Section 2.6.
"Final Working Capital Statement" has the meaning set forth in Section
2.6.
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"Financial Statements" means the audited consolidated financial
statements of NNGC for the two most recent fiscal years and the unaudited
consolidated balance sheet dated September 30, 2001, all of which are attached
as Exhibit B hereto.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time, consistently applied.
"Governmental Agency" means any federal, state, local, foreign or other
governmental agency, instrumentality, commission, authority, board or body.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Law" shall mean all laws, statutes and ordinances of the United
States, any state of the United States, any foreign country, any foreign state
and any political subdivision thereof, including all decisions of Courts having
the effect of law in each such jurisdiction.
"Liability" means any liability or obligation (whether absolute or
contingent, liquidated or unliquidated or due or to become due).
"Lien" means any lien, mortgage, pledge, security interest,
restriction, charge or other encumbrance.
"Material Adverse Effect" means a material adverse effect on (a) the
business condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries or (b) the transactions contemplated by this
Agreement.
"Merger" shall have the meaning ascribed to such term in the Merger
Agreement.
"NNGC" means Northern Natural Gas Company, a Delaware corporation and
its subsidiaries.
"NNGC Holdings" means NNGC Holding Company, Inc., a Delaware
corporation and wholly owned Subsidiary of the Company.
"Notice Date" shall have the meaning ascribed to such term in Section 2
herein.
"Option Interests" has the meaning set forth in Section 2.1.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Agency, federal, foreign, state or local, of competent
jurisdiction.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency).
"Permitted Refinancing Debt" shall mean any Debt of NNGC or any of its
Subsidiaries issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew,
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replace, defease or refund other Debt of NNGC or any of its Subsidiaries (other
than intercompany Debt); provided that:
(1) the principal amount of such Permitted Refinancing
Debt does not exceed the principal amount of, plus
accrued interest on, the Debt so extended,
refinanced, renewed, replaced, defeased or refunded
(plus the amount of necessary fees and expenses
incurred in connection therewith and any premiums
paid on the Debt so extended, refinanced, renewed,
replaced, defeased or refunded);
(2) such Permitted Refinancing Debt has a final maturity
date no earlier than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity
of, the Debt being extended, refinanced, renewed,
replaced, defeased or refunded;
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization or other entity.
"Regulation" shall mean any rule or regulation of any Governmental
Agency having the effect of Law or of any rule or regulation of any
self-regulatory organization, such as the NYSE.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $.01 per share, of NNGC.
"Subscription Agreement" means that certain Subscription Agreement
dated as of November 9, 2001, by and among Enron, NNGC and Dynegy.
"Subsidiary," when used with respect to any Person, shall mean any
corporation, limited liability company, partnership, association or other
business entity of which (a) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
(b) if a partnership, limited liability company, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by such
Person. For purposes hereof, such Person shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person, directly or indirectly, is allocated a
majority of partnership, limited liability company, association or other
business entity gains or losses, or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Allocation Agreement" means that certain undated existing tax
allocation agreement between Enron and NNGC.
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"Weighted Average Life to Maturity" shall mean, when applied to any
Debt at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment,
sinking fund, serial maturity or other required
payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Debt.
"Working Capital" is equal to cash, plus (a) accounts receivable, plus
(b) transportation and exchange gas receivable, less (c) accounts payable, less
(d) transportation and exchange gas payable, less (e) accrued taxes, less (f)
accrued interest. For purposes of clarity, Working Capital excludes the
Intercompany Note Receivable in calculating the Exercise Price.
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Option Agreement - Enron Corp. and Dynegy Inc.
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