STOCK PURCHASE AGREEMENT

EXHIBIT 2.1

 

STOCK PURCHASE AGREEMENT

 

among

 

AMEREN CORPORATION,

 

ILLINOVA CORPORATION,

 

ILLINOVA GENERATING COMPANY

 

and

 

DYNEGY INC.

 

Dated as of February 2, 2004

TABLE OF CONTENTS

 

 

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT, dated as of February 2, 2004, is entered into by and among Ameren Corporation, a Missouri corporation (“ Purchaser ”), Illinova Corporation, an Illinois corporation (“ Seller ”), Illinova Generating Company, an Illinois corporation (“ IGC ”), and Dynegy Inc., an Illinois corporation (“ Dynegy ”). Dynegy, IGC and Seller are referred to herein as the “ Dynegy Parties ”.

 

W I T N E S S E T H:

 

WHEREAS, Seller owns (a) 62,892,213 shares (the “ Common Shares ”) of common stock, without par value, of Illinois Power Company, an Illinois corporation (“ IPC ”), constituting all of the outstanding common stock of IPC and (b) 662,924 shares (the “ Preferred Shares ”) of preferred stock, $50 par value per share, of IPC, constituting approximately 73% of the issued and outstanding preferred stock of IPC, and IGC owns 12,400 shares of common stock, $100 par value per share, of Electric Energy, Inc. (“ EEI ”), an Illinois corporation (the “ EEI Shares ”, and together with the Common Shares and the Preferred Shares, the “ Shares ”);

 

WHEREAS, Dynegy has agreed, as an inducement to Purchaser, to enter into this Agreement;

 

WHEREAS, Seller, IGC, and IPC are wholly-owned subsidiaries of Dynegy (other than with respect to the outstanding shares of preferred stock of IPC that are not Preferred Shares);

 

WHEREAS, Seller and IGC desire to sell, and Purchaser desires to purchase, the Shares upon the terms and subject to the conditions set forth in this Agreement, and Dynegy and Purchaser desire to make an election under Section 338(h)(10) of the Code (as defined below) with respect to the purchase and sale of the Common Shares and the Preferred Shares; 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 a nationally recognized accounting firm mutually acceptable to Seller and Purchaser.

 

“ Action ” shall mean any claim, order, demand, action, suit, arbitration, mediation, inquiry, proceeding or investigation by or before any Governmental Authority.

 

“ Actual IP Contributions ” shall mean the amount by which any cash contributions made by Dynegy or any of its Affiliates after the date hereof and 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 Purchaser, Seller, IGC and Dynegy (including the Exhibits and Schedules hereto), as amended, modified or supplemented from time to time.

 

“ AmerGen Power Supply Agreement ” shall mean the power purchase agreement dated June 30, 1999 by and between Illinois Power Company and AmerGen Energy Company, L.L.C (“ AmerGen ”).

 

“ Ancillary Agreements ” shall mean the PPA, the Transition Services Agreement (if applicable), the Tier 2 Memorandum, the Escrow Agreement, the Blackstart Agreement, the Easement and Facilities Agreement, the Generation Agreement and the Termination 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 Seller, (b) the Bill of Sale and Assignment, effective as of August 31, 2001, between IPC and Seller and (c) the Assignment and Bill of Sale effective as of December 31, 2001, between IPC and Dynegy Midwest Generation, Inc.(“ DMG ”).

 

“ 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.

 

“ Blackstart Agreement ” shall mean the agreement the form of which is set forth on Exhibit F .

 

“ Business ” shall mean the business conducted by the IPC Companies, 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.

 

“ 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.

 

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“ CERCLA ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq.

 

“ Code ” shall mean the United States Internal Revenue Code of 1986, as amended.

 

“ 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 Seller or any IPC Company or any predecessor of or successor to Seller or any IPC Company (or another such predecessor or successor), or any other group of corporations that, 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 Seller or any IPC Company or any predecessor of or successor to Seller or any IPC Company (or another such predecessor or successor).

 

“ Confidentiality Agreement ” shall mean the Confidentiality and Sales Process Agreement, dated July 23, 2003, between Dynegy and Purchaser.

 

“ 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.

 

“ Controlled Group Liability ” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and (v) under corresponding or similar provisions of foreign laws or regulations, in each case with respect to or arising under or out of any “employee benefit plan,” as defined in Section 3(3) of ERISA, maintained or otherwise contributed to by Dynegy, any Seller, or any of their subsidiaries at any time.

 

“ 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(b) .

 

“ Dynegy Group ” shall mean the “affiliated group” (as defined in Section 1504(a) of the Code) of which Dynegy is the common parent, or any other group of corporations that files, has filed or will file Tax Returns on a combined, consolidated or unitary basis with Dynegy (and, in each case, any predecessor or successor to such group).

 

“ 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.

 

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“ 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 or human health and safety (not to include state or federal workplace safety issues), 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, 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.

 

“ 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, known or unknown, violation of Environmental Law at any time prior to the Closing Date in connection with the Business or any of the IPC Assets, or (b) the actual or alleged, known or unknown, 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 IPC 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 IPC 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, disposal or recycling, or (d) all matters listed 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 IPC Asset (or the off-site location to which such molecules of Hazardous Substances had migrated) prior to the Closing Date.

 

“ 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; (b) the liquidation preference of the outstanding shares of preferred stock, $50 par value per share, of IPC, not owned by Seller; (c) any accrued and unpaid dividends on the shares of preferred stock, $50 par value per share, of IPC, not owned by Seller, that are in arrears as a result of the failure of IPC to pay such dividends on the relevant dividend payment date; and (d) 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 the lesser of (a) $240,000 multiplied by the number of days, from and including the first day following the most recent date on which a portion of the Transitional Funding Trust Notes were repaid, through and including the Closing Date, and (b) the amount of restricted cash held by IPC on the Closing

 

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Date dedicated to the retirement of such indebtedness. Existing IPC Obligations as of September 30, 2003 are set forth on Schedule 1.1(d) . For the avoidance of doubt, Existing IPC Obligations shall not include the capital lease related to the Tilton Assets if such assets are transferred to DMG prior to or at the Closing.

 

“ 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 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 may 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 B .

 

“ Generation Assets ” shall mean (a) the “Purchased Assets” described in the Asset Transfer Agreements, including the assets set forth on Schedule 1.1(e) and (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.

 

“ 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 whether known or

 

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unknown, arising from or relating to the Generation Assets or related Excluded Environmental Matters, 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 damage (real or personal) relating to the Generating Assets; or (h) any liabilities of IPC under the Generation Agreement or the Asset Transfer Agreements; provided that Generation Liabilities will not include the matters set forth on Schedule 1.1(c) .

 

“ 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 as defined by and which is prohibited, limited, or regulated under or defined in any Environmental Law.

 

“ HSR Act ” shall mean the Hart-Scott-Rodino 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 Taxing 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

 

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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.

 

“ 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 mark, 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 Seller to IPC on October 1, 1999.

 

“ IPC Assets ” shall mean assets owned or leased by the IPC Companies as of the time of the Closing, after giving effect to asset transfers contemplated by this Agreement.

 

“ IPC Companies ” shall mean IPC 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, which rights or interest are held or used by any of the IPC Companies.

 

“ IPC Owned Real Property ” shall mean each parcel of 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 any of the Dynegy Parties, the actual knowledge (after reasonable inquiry) of the persons listed on Schedule 1.1(f) .

 

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“ 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, deed of trust, pledge, security interest, option, covenant, restriction, easement or other encumbrance of any kind or 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 IPC Assets, the 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 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 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 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.

 

“ 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 § 412 of the Code or § 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

 

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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 (excluding any such lien securing or evidencing a claim in excess of $400,000 that the holder thereof has taken affirmative steps to enforce other than customary notice, perfection or protective filings), and Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course, in each case that do not materially interfere with the present use of the relevant assets or property; (f) Liens listed on Schedule 1.1(b) ; (g) recorded and unrecorded easements, covenants, rights of way and other similar restrictions that do not materially detract from the value and do not materially interfere with the present use of the relevant assets or property; (h) as to any Leased Real 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 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 Shares by Purchaser; (j) Liens created by this Agreement or in connection with the transactions contemplated hereby; and (k) any other Liens that do 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.

 

“ 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 the agreement by and between Dynegy Power Marketing, Inc. (“ DYPM ”) and IPC in the form of Exhibit D , 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 Seller or by Purchaser, pursuant to the provisions of Section 5.3 or 5.23 or are otherwise accepted by Seller and by Purchaser.

 

“ 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).

 

“ PUHCA ” shall mean the Public Utility Holding Company Act of 1935, as amended, including any regulations promulgated thereunder or any successor statutes thereto.

 

“ Purchaser Group Member ” shall mean the IPC Companies, Purchaser, each of their respective Affiliates and each of their respective directors, officers, employees, agents, successors and assigns.

 

“ 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.

 

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“ Release ” shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, empty, dump, pour, emit, leach, discharge, dispersal, leaking or migration or allowing to escape into or through the environment.

 

“ 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 into or on air, land, water or groundwater: (a) monitoring, investigation, sampling, analysis, cleanup, containment, control, remediation, removal, mitigation, response, recovery, corrective action or restoration work as these terms are defined individually or collectively under any Environmental Law or court decision (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.

 

“ Seller Group Member ” shall mean Seller and Dynegy and each of their Affiliates (other than the IPC Companies after the Closing) and each of their respective directors, officers, employees agents, successors and assigns.

 

“ Seller Indemnitors ” shall mean Dynegy and Seller.

 

“ 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.

 

“ Target Fully 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

 

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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 IPC Company.

 

“ Taxing Authority ” shall mean any Governmental Authority exercising any authority to impose, regulate or administer the imposition of Taxes.

 

“ Termination Agreement ” shall mean each of the agreements in the forms of Exhibit C-1 and Exhibit C-2 .

 

“ Tier 2 Memorandum ” shall mean the agreement the form of which is set forth in Exhibit H .

 

“ Tilton 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 “ Tilton 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 (the “ Tilton Ground Lease ”), 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 Tilton 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 Harris Trust and Savings Bank, as trustee.

 

“ Triggering Event ” shall mean the occurrence of any of the “events” set forth in Paragraph 5 of the Escrow Agreement, the form of which is set forth in Exhibit G (the “ Escrow Agreement ”), requiring payment in full or in part, as the case may be, to Seller of the Escrow Funds (as defined in the Escrow Agreement).

 

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“ 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:

 

 

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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

 

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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, with respect to any document, that (i) a document containing the information referred to has actually been provided to the party (or its representative) to whom such information is asserted as having been “made available”, (ii) the party asserting that a document has been made available can show by clear and convincing evidence that the party (or its representative) was provided access to such document or (iii) such document was included in the electronic data room established by Dynegy to which Purchaser (and its representatives) had access prior to the execution of this Agreement.

 

(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 February 2, 2004, and the terms “currently” and “presently” shall mean as of February 2, 2004.

 

(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.

 

(i) Without limiting the rights of the Purchaser Group Members to indemnification pursuant to Sections 9.1(c) through (i) no representation or warranty in Article III is made whatsoever with respect to any of the matters for which indemnification is provided to Purchaser pursuant to Sections 9.1(c) through (i) .

 

(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 Purchaser and Dynegy.

 

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ARTICLE II

 

PURCHASE AND SALE

 

Section 2.1 Purchase and Sale of Shares . Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller and IGC shall sell to Purchaser, and Purchaser shall purchase from Seller and IGC, the Shares.

 

Section 2.2 Purchase Price .

 

(a) The aggregate purchase price for the Shares shall be $2,300,000,000

 

(i) less an amount equal to the Existing IPC Obligations;

 

(ii) plus an amount equal to the amount by which the Actual IP Contributions exceed $17,500,000 or minus an amount equal to the amount by which the Actual IP Contributions are less than $17,500,000, as applicable (the “ Actual IP Contributions Amount ”);

 

(iii) plus the amount by which the Final Adjusted Working Capital is greater than the Target Fully Adjusted Working Capital (if the Final Adjusted Working Capital is greater than the Target Fully Adjusted Working Capital); and

 

(iv) minus the amount by which the Target Fully Adjusted Working Capital is greater than the Final Adjusted Working Capital (if the Target Fully Adjusted Working Capital is greater than the Final Adjusted Working Capital)

 

(such aggregate amount, the “ Purchase Price ”). No later than seven Business Days prior to the Closing, Seller shall deliver to Purchaser a certificate executed on behalf of Seller by the President, Executive Vice President or any Senior Vice President of Seller, dated the date of its delivery, setting forth Seller’s calculation of the amount of the Existing IPC Obligations setting forth in reasonable detail the basis for such calculation. The Purchase Price will be payable as set forth in paragraphs (b) and (c) of this Section 2.2 .

 

(b) At the Closing, Purchaser will pay $2,300,000,000 in cash minus the sum of (i) an amount equal to the Existing IPC Obligations, and (ii) $100,000,000 (representing the amount of the Escrow Funds that are to be delivered at Closing by Purchaser to an Escrow Agent (as defined in the Escrow Agreement), mutually acceptable to Purchaser and Dynegy under the Escrow Agreement; provided , with respect to the reduction set forth in clause (ii) of this paragraph (b), that (A) in the event that a Triggering Event has occurred that would result in a payment to Seller in part of the Escrow Funds had the Escrow Agreement been entered into prior to the occurrence of such Triggering Event, such $100,000,000 amount shall be reduced by the amount that would have been so paid in such event and (B) in the event that a Triggering Event has occurred that would result in a payment to Seller in full of the Escrow Funds had the Escrow Agreement been entered into prior to the occurrence of such Triggering Event, such $100,000,000 amount shall be reduced to zero.

 

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(c) After the Closing the Purchase Price shall be adjusted to reflect the difference between the Target Fully Adjusted Working Capital and the Final Adjusted Working Capital as provided in Section 2.3 and the Actual IP Contributions Amount as of the True-Up Date.

 

Section 2.3 Purchase Price Adjustments .

 

(a) Promptly following the Closing Date, but in no event later than 60 days after the Closing Date, Purchaser shall provide to Seller a certificate executed on behalf of Purchaser by the President, Executive Vice 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 IPC Companies and their respective employees and agents to provide reasonable cooperation to, Seller and its employees and representatives in their review of the Closing Date Statement and shall provide Seller and its employees and representatives reasonable access to the applicable personnel, properties, books and records of Purchaser and the IPC Companies for such purpose. In the event Seller disputes the correctness of the Proposed Final Adjusted Working Capital proposed by Purchaser, Seller shall notify Purchaser in writing of its objections within 30 days after receipt of the Closing Date Statement and shall set forth, in writing and in reasonable detail, the reasons for Seller’s objections. If Seller fails to deliver its notice of objections within 30 days after receipt of the Closing Date Statement, Seller shall be deemed to have accepted Purchaser’s calculation. Seller and Purchaser shall endeavor in good faith to resolve any disputed matters within 15 days after receipt of Seller’s notice of objections. If Seller and Purchaser are unable to resolve the disputed matters, Seller and Purchaser shall promptly refer the disputed matters to the Accounting Firm. The Accounting Firm shall offer Seller 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 Seller 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 Seller and Purchaser. The determination of the Accounting Firm shall be based solely on the written submissions by Seller 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 2.3(b) (whether by failure of Seller to deliver a timely notice of objection, by agreement of Seller and Purchaser or by

 

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termination 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 Fully Adjusted Working Capital, Purchaser shall pay to Seller 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 Fully Adjusted Working Capital, Dynegy or Seller 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 2.3 to resolve any dispute shall be paid one-half by Purchaser and one-half by Seller.

 

(e) Within 10 days after the Closing or as soon as practicable thereafter, Dynegy (after consultation with Purchaser) shall provide Purchaser with its good faith estimate of the Actual IP Contributions. Within 5 days after the receipt of such estimate, (i) Purchaser shall pay to Dynegy an amount equal to the amount by which such estimated Actual IP Contributions exceed $17,500,000 or (ii) Dynegy or Seller shall pay to Purchaser an amount equal to the amount by which such estimated Actual IP Contributions are less than $17,500,000, as applicable. The determination of the Actual IP Contributions (as opposed to the estimate) shall be made at the same time as the “true up” is being conducted under Section 6.2(a)(iv)(B) and shall be subject to the dispute resolution procedures set forth in Section 6.2(a)(iv)(C) and the correction procedures set forth in Section 6.2(a)(iv)(D) .

 

(f) In the event the Accounting Firm is requested to resolve any dispute pursuant to this Section 2.3 , any meetings or proceedings involving the Accounting Firm in connection with such dispute resolution shall be held in New York, New York.

 

Section 2.4 Closing . Upon the terms and subject to the conditions of this Agreement, the sale and purchase of the Shares contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of O’Melveny & Myers LLP, 30 Rockefeller Plaza, New York, New York at 10:00 a.m., New York City time, within 10 Business Days after the day on which all conditions to the obligations of the parties set forth in Article VIII (except for such conditions which by their nature are satisfied on the Closing Date) are satisfied or waived, or at such other place or at such other time or on such other date as Seller 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.

 

Section 2.5 Closing Deliveries by Seller . Subject to the fulfillment or waiver of the conditions set forth in Section 8.1 , at the Closing, Seller shall deliver to Purchaser:

 

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(a)stock certificates evidencing the Common Shares registered in the name of Purchaser or its nominee, stock certificates evidencing the Preferred Shares registered in the name of Purchaser or its nominee, and stock certificates evidencing the EEI Shares registered in the name of Ameren Energy Resources Company or its nominee, in form reasonably satisfactory to Purchaser;

 

(b) a receipt for the portion of the Purchase Price payable at the Closing pursuant to Section 2.2 hereunder;

 

(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 IPC Companies; provided , however , that any of the foregoing items shall be deemed to have been delivered pursuant to this Section 2.5(d) if such item has been delivered to, or is otherwise located at, the offices of an IPC Company;

 

(e) copies of the articles of incorporation of 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 IPC Companies certified as of a recent date by the Secretary of State of the state of its organization;

 

(g) certificate of good standing of 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 IPC Companies certified as of a recent date by the Secretary of State of the state of its organization;

 

(i) certificate of the Secretary of Seller, dated the Closing Date, as to (i) no amendments to the articles of incorporation of Seller since a specified date; (ii) the by-laws of Seller; (iii) the resolutions of the board of directors of Seller and of IPC authorizing the execution, delivery and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of Seller and of IPC executing this Agreement and the Ancillary Agreements;

 

(j) certificate of the Secretary or Assistant 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 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 Ancillary Agreements;

 

(k) all consents and Permits, including those described in Section 8.2(e) , that are received by the Dynegy Parties 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 2.5(k) if such item has been made available to Purchaser prior

 

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to the Closing, remains in full force in effect, and is located at the offices of any IPC Company;

 

(l) a signed resignation by each of the directors of each of the IPC Companies;

 

(m) the certificate required to be delivered pursuant to Section 7.4 ;

 

(n) to the extent applicable, transfer tax declarations, duly executed by the applicable Dynegy Party or Affiliate thereof;

 

(o) the Base Energy Contracts referred to in Section 5.21(c) , duly executed by IPC;

 

(p) a written certification by Dynegy (“ Pollution Control Certification ”) stating that, to the Knowledge of Dynegy, AmerGen Energy Company, L.L.C is in compliance in all material respects with the requirements of Article 6.8(e) of the Asset Purchase Agreement between Illinois Power Company, as Seller, and AmerGen Energy Company, L.L.C, as Buyer, dated June 30, 1999; and

 

(q) in the event a Triggering Event (that would have the effect of requiring the full payment of the Escrow Funds had the Escrow Agreement been entered into prior to such Triggering Event) has not occurred prior to the Closing Date, the Escrow Agreement, duly executed by Seller.

 

Section 2.6 Closing Deliveries by Purchaser . Subject to the fulfillment or waiver of the conditions set forth in Section 8.2 , at the Closing, Purchaser shall deliver, or cause to be delivered to Seller:

 

(a) by wire transfer in immediately available funds to a bank account or bank accounts of Seller designated by written notice to Purchaser at least two Business Days before the Closing, an amount in U.S. dollars equal to the cash portion of the Purchase Price payable at the Closing pursuant to Section 2.2 hereunder (without reduction or setoff of any kind);

 

(b) a receipt for the Shares;

 

(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 Missouri;

 

(e) certificate of good standing of Purchaser issued as of a recent date by the Secretary of State of the State of Missouri;

 

(f) certificate of the Secretary or Assistant 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 of Purchaser authorizing the execution, delivery and performance of this Agreement and the

 

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transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of Purchaser executing this Agreement; and

 

(g) in the event a Triggering Event (that would have the effect of requiring the full payment of the Escrow Funds had the Escrow Agreement been entered into prior to such Triggering Event) has not occurred prior to the Closing Date, the Escrow Agreement, duly executed by Purchaser.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER AND DYNEGY

 

As an inducement to Purchaser to enter into this Agreement, to the execution of the Ancillary Agreements and to consummate the transactions contemplated hereby and by the Ancillary Agreements, except as set forth in the SEC Reports filed prior to the date hereof (it being understood that, in order for this exception to apply, the relevance of any disclosure in the SEC Reports to a particular representation below must be reasonably apparent from the disclosure itself), Seller and Dynegy jointly and severally hereby represent and warrant to Purchaser as follows:

 

Section 3.1 Organization and Qualification .

 

(a) Each Dynegy Party is a corporation duly organized, validly existing and in good standing under the Laws of the State of Illinois. Each Dynegy Party 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. Each Dynegy Party 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. Seller has 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 Capitalization .

 

(a) The authorized capital stock of IPC consists of (i)100,000,000 shares of common stock, no par value, of which 75,643,937 shares are issued and 62,892,213 shares are outstanding and (ii) 15,000,000 total shares of preferred stock, of which (A) 5,000,000 are Serial Preferred Stock, $50 par value, of which 912,675 shares are issued and outstanding, (B)

 

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5,000,000 are Serial Preferred Stock, no par value, none of which are issued and outstanding and (C) 5,000,000 are Preference Stock, no par value, none of which are issued and outstanding. All outstanding shares of IPC are duly authorized, validly issued, fully paid and nonassessable, and free of preemptive rights. Except as set forth above, and other than this Agreement, there are no outstanding subscriptions, options, rights, warrants, convertible securities, stock appreciation rights, phantom equity, or other Contracts obligating IPC to issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of its capital stock of any class.

 

(b) Except for 249,751 shares of preferred stock held by third parties, Seller is the record or beneficial owner of all of the outstanding Equity Interests of IPC, there are no irrevocable proxies with respect to any such Equity Interests, and no Equity Interests of IPC are or may become required to be issued because of any options, warrants, rights to subscribe to, calls or commitments relating to, or securities or rights convertible into or exchangeable or exercisable for, Equity Interests of IPC, and there are no Contracts by which Seller or IPC is bound to issue additional Equity Interests of IPC or securities convertible into or exchangeable or exercisable for any such Equity Interests. All of such Equity Interests are duly authorized, validly issued, fully paid and nonassessable and, except for 249,751 shares of preferred stock held by third parties, are owned by Seller free and clear of all Liens.

 

(c) IGC is the record or beneficial owner of the EEI Shares, which are duly authorized, validly issued, fully paid and nonassessable, and free of preemptive rights, and are owned by IGC free and clear of all Liens.

 

(d) 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 Interests 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 IPC or any of its Affiliates (including such Subsidiary) to issue, sell, redeem, repurchase or otherwise acquire any shares of capital stock or Equity Interests of any Subsidiary of IPC.

 

Section 3.3 Authority . Each Dynegy Party has full corporate power and authority to execute and deliver this Agreement and any Ancillary Agreements to be executed by it and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements to be executed by such Dynegy Party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of such Dynegy Party, and do not require any other authorization or consent of any Dynegy Party, any of its Affiliates or its stockholders. This Agreement has been, and upon its execution and delivery, each Ancillary Agreement to be executed by any Dynegy Party will have been, duly and

 

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validly authorized, executed and delivered by such Dynegy Party and is or will be upon its execution Enforceable against such Dynegy Party.

 

Section 3.4 Consents and Approvals; No Violation . The execution and delivery of this Agreement, the Ancillary Agreements, the Base Energy Contracts, the consummation of the transactions contemplated hereby and thereby, and the performance by Dynegy, Seller, IGC and the IPC Companies of their obligations hereunder and under the Ancillary Agreements and Base Energy Contracts, to the extent applicable, do not and will not:

 

(a) except as listed in Schedule 3.4(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 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) , 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, modification or acceleration or guaranteed payments or a loss of rights under (i) any provision of the articles of incorporation or by-laws of Seller or the articles of incorporation or by-laws (or other similar organizational documents) of any of its Affiliates; or (ii) any provisions of any Contract to which any IPC Company, Seller, IGC or Dynegy is a party or may be subject or bound or by which any IPC Assets or the Business may be subject or bound;

 

(c) upon receipt of the approvals and consents listed on Schedule 3.4(a) , violate the provisions of any Law or Governmental Order, or result in the termination or lapse of any Permit, applicable to Dynegy, Seller, IGC, any IPC Company, any IPC Assets or the Business; or

 

(d) result in the creation of any Lien other than Permitted Liens upon any IPC Asset or properties or assets of any IPC Company, Purchaser or any of its Affiliates or on any Equity Interests of any IPC Company, Purchaser or any of its Affiliates under any applicable Law or under any Contract to which any IPC Company, Seller, or Dynegy is a party or by which any IPC Company, Seller, Dynegy, the IPC Assets or the Business or any of their properties may be subject bound;

 

except, with respect to any of Sections 3.4(a) , 3.4(b)(ii) and 3.4(c) , to the extent any such 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, modification or acceleration or guaranteed payment or loss of right, violation of Law or Governmental Order or Lien would not reasonably be expected, individually or in the aggregate, (A) to result in a Material Adverse Effect or (B) to prevent the consummation of any transactions contemplated hereby or by any Ancillary Agreement.

 

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

 

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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 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; 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 IPC 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 (the “ IPC Financial Statements ”), 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 September 30, 2003: (i) the Business has been conducted in all material respects in the ordinary course; (ii) through the date hereof there has not been any Material Adverse Effect; (iii) 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; (iv) there

 

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has not been any amendment or modification of any term of any outstanding security of any IPC Company; (v) 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; (vi) except as required by applicable Law, no Tax Return has been prepared or filed by or with respect to Seller, the Business, any IPC Asset or any IPC Company that is inconsistent with past practice, no position has been taken, election made, or method adopted by or with respect to Seller or any IPC Company that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns with respect to Seller or such IPC Company in prior periods, no Tax Sharing Arrangement, Tax indemnity Contract or similar Contract or arrangement affecting Seller or any IPC Company has been entered into, amended or modified by Seller or any IPC Company, and no payments under any Tax Sharing Arrangement, Tax indemnity Contract or similar Contract have been made that are outside the ordinary course of business, inconsistent with past practice or inconsistent with the terms thereof; and (vii) there has not been any damage, destruction or other casualty loss with respect to any IPC Assets or the Business that has a value of at least $5,000,000 or is material in the aggregate to the IPC Companies, the Business or the IPC Assets which is not covered by insurance.

 

(b) None of the IPC Companies has any liabilities or obligations (whether known or unknown, 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; or (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.

 

Section 3.8 Taxes .

 

(a) Except as listed in Schedule 3.8 :

 

(i) Each IPC Company has timely filed or will timely file or cause to be timely filed (taking into account all extensions of due dates) all material Tax Returns required by applicable Law to be filed prior to or as of the Closing Date. All such material 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 IPC Company has timely paid, whether or not shown on any Tax Return, all Taxes imposed on it or for which it may otherwise be liable or, with respect to Non-Income Taxes, 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 such 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 Tax Returns referred to in clause (i) have been paid in full.

 

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(iv) No Audit is pending or, to the Knowledge of Seller, threatened with respect to any Tax Returns filed by or with respect to, or Taxes due from or with respect to, any IPC Company. To the Knowledge of Seller, with respect to Taxes for all taxable periods beginning on or after January 1, 2000, no deficiency or adjustment for any Taxes has been threatened, proposed, asserted or assessed against any IPC Company that remains outstanding. There are no Liens for Taxes upon the assets of any IPC Company, except Permitted Liens.

 

(v) No IPC Company has given or been requested to give any waiver of statutes of limitations relating to the payment of Taxes or has executed powers of attorney with respect to Tax matters that will be outstanding as of the Closing Date. No IPC Company is the beneficiary of any extension of time within which to file any Tax Return.

 

(vi) No IPC Company (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 IPC Company that would reasonably be expected to affect any Tax liability relating to any IPC Company for any period after the Closing Date.

 

(vii) All Taxes that any IPC Company 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 Taxing 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 any IPC Company (other than this Agreement) will terminate prior to the Closing and neither Purchaser nor any IPC Company 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) Each IPC Company (other than IPC and IP Gas Supply Company) (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 IPC Company, (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.

 

(x) Dynegy has filed a consolidated Federal income Tax Return with IPC for the taxable year that was two years preceding the current taxable year and as of the Closing Date will be eligible to make a Section 338(h)(10) Election with respect to the Common Shares and the Preferred Shares.

 

(xi) No IPC Company has any liability for the Taxes of any other person (other than any IPC Company) under Treasury Regulation Section 1.1502-6 or any comparable provision of state, local or foreign law, by contract or otherwise.

 

(xii) Each Dynegy Group has filed all material Tax Returns that it was required to file for each taxable period during which any IPC Company was a member of such

 

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Dynegy Group. All such Tax Returns are or will be true, correct and complete in all material respects. All material Income Taxes owed by any Dynegy Group have been paid for each taxable period during which any IPC Company was a member of such group. No Audit is pending or, to the Knowledge of Dynegy or Seller, threatened with respect to any Tax Returns filed by or with respect to, or Taxes due from or with respect to, any Dynegy Group for any taxable period during which any IPC Company was a member of such Dynegy Group. To the Knowledge of Dynegy or Seller, no Taxing Authority has requested any information related to Tax matters from, or with respect to, any Company Group for any taxable period during which any IPC Company was a member of such Company Group. No material deficiency or adjustment for any Taxes has been threatened, proposed, asserted or assessed against any Company Group that remains outstanding for any taxable period during which any IPC Company was a member of such Company Group.

 

(xiii) No IPC Company will be required to include any material item of income in, or exclude a material item of deduction from, taxable income for any Post-Closing Tax Period as a result of any (A) change in method of accounting for a Pre-Closing Tax Period under Code Section 481(c) (or any corresponding or similar provision under state, local or foreign Income Tax law), (B) written and legally binding agreement with a Taxing Authority relating to Taxes, (C) installment sale or open transaction disposition or intercompany transaction made on or prior to the Closing Date, (D) prepaid amount received on or prior to the Closing Date, or (E) deferred intercompany gain or excess loss account described in Treasury regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision under state, local or foreign Income Tax law).

 

(b) No transaction contemplated by this Agreement is subject to withholding under Section 1445 of the Code (relating to “FIRPTA”).

 

(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 . As of the date hereof, except as disclosed in Schedule 3.9 : (a) there are no outstanding Governmental Orders or Actions pending or, to the Knowledge of Seller, threatened against or affecting any IPC Company or any of their present or former directors or officers, any IPC Assets or the Business that would individually reasonably be expected to exceed $500,000, or that would in the aggregate reasonably be expected to exceed $1,000,000, as the case may be, 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 IPC Assets, nor, to the Knowledge of Seller, is any investigation pending by any Governmental Authority with respect to any of the IPC Companies, the Business or any of the IPC Assets; and (c) there is no Governmental Order enjoining any IPC

 

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Company from taking or requiring any IPC Company to take any action of any kind with respect to the Business or any of the IPC 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 Dynegy, Seller or any of their subsidiaries for the benefit of Employees (“Employee Benefit Plans”). There are no Employee Benefit Plans that are sponsored solely for the benefit of Employees. There are no Employee Benefit Plans that are sponsored solely by one or more of the IPC Companies. 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 or Dynegy or any of their respective Affiliates, in each case, entered into with any Employee (“Compensation Arrangements”). There are no plans or arrangements that are “pension plans” within the meaning of Section 3(2) of ERISA but are not intended to be qualified under Section 401(a) of the Code 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 . Seller has 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 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 Dynegy and Seller 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 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 Seller, there are no investigations by any Governmental Agency, termination proceedings or other Actions against or directly involving any Employee Benefit Plan or

 

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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, Seller VEBA and Seller Savings Plan 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 Dynegy, Seller or any 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. Schedule 3.10 identifies each trust funding any Employee Benefit Plan that is intended to meet the requirements of Code Section 501(c)(9), and each such trust meets such requirements and provides no disqualified benefits (as such term is defined in Code Section 4976(b)) or (iii) is unfunded.

 

(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 favorable 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 Dynegy and Seller, 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. Seller has 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. Seller has also made available to Purchaser a list of all amendments as to which a favorable determination letter has not yet been received.

 

(e) None of Dynegy, Seller, any of the IPC Companies or any of their respective Affiliates has 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 made available to Purchaser) to which Transferred Employees are or may become entitled which are not reflected in the actuarial report dated January 1, 2002 provided by Seller to Purchaser and, except as specifically provided in the documents described in Section 3.10(a) or as permitted by Section 5.1 , there are no other amendments to any Employee Benefit Plan or Compensation Arrangement that have been adopted or approved, nor has Dynegy, any IPC Company or any of their respective Affiliates undertaken to make any such amendments or to adopt or approve any new Employee Benefit Plan or Compensation Arrangement.

 

(f) Except for matters that are set forth 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),

 

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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, Seller 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 , neither the execution and delivery of this Agreement nor the consummation of the transaction contemplated by this Agreement and by the Ancillary Agreements will (either alone or in conjunction with any other event) result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment or cause the funding or delivery of any compensation or benefits payable to or in respect of any person rendering services to any IPC Company or result in any limitation on the right of any IPC Company to amend, merge, terminate or receive a reversion of assets from any Employee Benefit Plan or related trust.

 

(h) None of Dynegy, Seller nor any of their respective Affiliates nor, to the Knowledge of Dynegy and Seller, 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 or any of the IPC Companies to the penalty or tax under Section 502(i) or Section 502(l) of ERISA or Section 4975 of the Code.

 

(i) None of Dynegy, Seller 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 or any of the IPC Companies 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 IPC 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) Neither any IPC Company nor any Seller Group Member has caused or allowed the generation, treatment, manufacture, processing, distribution, use, storage, disposal, Release, transport or handling of any Hazardous Substances at any of the IPC 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 Seller, 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 Substances at, on, or beneath, to, from or in the indoor or outdoor environment at any of the Businesses or IPC Asset or any off-site location (including soil, sediment, surface water, groundwater, air or any component of a structure), which would reasonably be expected

 

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to result in a Material Adverse Effect. To the Knowledge of Seller, there are no pending or threatened Actions with respect to the Businesses or the IPC 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 of the Businesses or IPC Assets or any off-site location (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 IPC 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 Seller, there are no pending or threatened Actions seeking to modify, revoke or deny renewal of any of such Permits.

 

(e) To the Knowledge of Seller, no claims have been asserted or threatened against any of the IPC Companies or any Seller Group Member 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 IPC Assets, that, if adversely determined, would reasonably be expected to result in a Material Adverse Effect individually or in the aggregate.

 

(f) None of the IPC Companies and none of the Seller Group Members is subject to any outstanding written Governmental Order or settlement agreement with any Person relating to any of the IPC 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 individually or in the aggregate.

 

(g) To the Knowledge of Seller, no IPC 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) The IPC Companies hold all Permits necessary to entitle the IPC Companies to own or lease, operate and use the IPC Assets (except with respect to IPC Assets not owned or leased by the IPC Companies, before giving effect to asset transfers contemplated by this Agreement), and for the lawful conduct of the Business, other than any Permits for which the failure of an IPC Company to hold such Permits would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect (collectively, the “ Material Permits ”). Schedule 3.12(a) 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(a) , each IPC Company 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

 

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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 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 IPC Company 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 IPC Assets may be subject or bound. To the Knowledge of Seller, there are currently no union organizing activities relative to any IPC Company, the IPC 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 Seller, threatened involving employment matters, (i) there is no labor strike, dispute, slowdown, work stoppage or lockout actually pending or, to the Knowledge of Seller, threatened against or directly and adversely affecting any IPC Company, the IPC Assets or the Business; (ii) there is no unfair labor practice charge or complaint against any IPC Company or involving the IPC Assets or the Business pending or, to the Knowledge of Seller, 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 Seller, 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 Seller, 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.

 

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(c) As of the date of this Agreement, Employees of the IPC Companies who are represented by the Laborers International Union or the Pipefitters receive the same employee benefits as the employees of the IPC Companies who are represented by the International Brotherhood of Electrical Workers (the “IBEW”), as provided for in the Joint Benefits Agreement with the IBEW.

 

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 consideration in an amount in excess of $5,000,000; (ii) any Contract that restricts any IPC Company, the IPC 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; 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 (such Contracts described in clauses (i) through (v), 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 (other than the real property matters identified on Schedule 3.14) . 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 IPC Company 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, 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 Seller, 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

 

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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 mark 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 effect and all applications for any such patent, trademark and service mark 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) As of the date hereof and 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 Seller, 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 Seller, 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 Seller, 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 IPC Properties and the scope of the IPC Companies’ rights in the IPC Properties are sufficient for the operation of the Business in the manner currently operated and in compliance in all material respects with all applicable

 

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Laws. No IPC Company owns, leases or uses in connection with the Business any real property other than the IPC Properties. Except as set forth on Schedule 3.16 or as would not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect: (i) the IPC Companies have good, valid, marketable and insurable fee simple title to the IPC Owned Real Property, a good, valid, marketable 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 (and, in the case of the Leased Real Property, subject to (a) any assignment or transfer restrictions and other terms and conditions contained in any applicable lease, and (b) if applicable, the lack of recordation of such lease or a memorandum thereof in the applicable local real estate recording office); (ii) all improvements and occupancy, and the use of such improvements and occupancy of the IPC Properties, and all business operations thereon conform in all material respects with all applicable zoning, building, fire and safety Laws and, to the Knowledge of Seller, none of the IPC Properties has received any currently effective notice of noncompliance with any Laws; (iii) each lease, sublease, easement, license or other agreement or instrument comprising any portion of the IPC Properties is a valid and binding agreement in full force and effect and Enforceable by the IPC Company which is a party thereto against the other parties thereto, no material default by any of the IPC Companies or, to the Knowledge of Seller, 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 Seller, any other party; (iv) there are, to the Knowledge of Seller, no disputes, oral agreements, or forbearance programs in effect with respect to any such lease, sublease, easement, license or other agreement or instrument; (v) no IPC Company nor any IPC Property is in material breach or default under, or in violation of or noncompliance with, any Liens and, to the Knowledge of Seller, 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 Seller 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 in the manner presently conducted; (viii) none of the IPC Companies has received and, to the Knowledge of Seller, 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; (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; and (xi) there are no pending 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.

 

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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 Seller 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 .

 

(a) Except as set forth in Schedule 3.19 , the IPC Assets constitute all the material assets used in the Business and are sufficient for the conduct of the Business as it is currently conducted.

 

(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 IPC 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 . The IPC Companies have good and marketable title to all of the material IPC 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 IPC Company 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 each of the IPC Companies during the past three years.

 

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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 Seller 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 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 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, hedges, 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 hedges and swaps to which any of the IPC Companies is a party that, to the Knowledge of Seller, are in accordance with the general practices of other similarly situated companies in the industry.

 

Section 3.25 Responsibility for Compliance with Sarbanes-Oxley Act . IPC has responsibility for establishing and maintaining internal control over financial reporting, as defined in the Sarbanes-Oxley Act, of IPC through the Closing to the extent required of IPC through such date in its capacity as a Subsidiary of Dynegy, pursuant to the Sarbanes-Oxley Act.

 

Section 3.26 Insurance . Each of the IPC Companies is currently insured with insurers rated at least A.M. Best A-VII, and are in such amounts and against such types of risks as are customary and appropriate in its industry or otherwise deemed reasonable by Seller. All such policies are in full force and effect; however, except for the coverage required under Section 5.5(c) , coverage of the IPC Companies under Seller’s insurance policies will terminate at Closing. As respects the current policies of insurance covering the IPC Companies, Corporate Risk Management & Insurance has not received any written notice of cancellation with respect to any insurance policy covering any IPC Company, except as would not have a Material Adverse Effect. All premiums due and payable with respect to such policies have been paid. For any written notice of any demand or suit against any IPC Company for damages because of bodily injury, including death, personal injury or property damage made against any IPC Company estimated to have an ultimate liability of $500,000 per occurrence or more, Seller and Dynegy represent that these matters have been reported to

 

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IPC’s excess insurance carrier(s) to the extent that information has been disclosed in writing from the IPC Companies’ personnel to the Corporate Risk Management & Insurance Department (Houston).

 

Section 3.27 Clinton Nuclear Power Station . Except as set forth in Schedule 3.27, as of the date hereof, to Seller’s Knowledge:

 

(a) neither AmerGen nor any of its Affiliates have made demand, notice of claim, claim or potential claim against Seller or any of its Affiliates arising from the Asset Purchase Agreement dated June 30, 1999, between AmerGen and IPC or other agreement related to the sale of the Clinton Nuclear Power Station (“APA”), including any claim for indemnification pursuant to Section 8.1(b) of the APA;

 

(b) neither Seller nor any of its Affiliates have made demand, notice of claim, claim or potential claim against AmerGen arising from the APA or other agreements related to the sale of the Clinton Nuclear Power Station, including any claim for indemnification pursuant to Section 8.1(a) of the APA;

 

(c) no demands, claims or potential claims have been asserted against Seller or any of its Affiliates arising out or related to IPC’s ownership or operation of the Clinton Nuclear Power Station; and

 

(d) no demands, claims or potential claims, liabilities or obligations have been asserted against Seller or any of its Affiliates arising from (or alleged to arise from) the off-site disposal, treatment, storage, transportation or recycling of Hazardous Substances from the Clinton Nuclear Power Station, including any shipments from Clinton Nuclear Power Station prior to December 15, 1999.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

As an inducement to Seller, IGC and Dynegy to enter into this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby, Purchaser hereby represents and warrants to Seller, IGC and Dynegy as follows:

 

Section 4.1 Organization and Qualification .

 

Purchaser is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Missouri, 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 or the Escrow 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 Seller a complete and correct copy of its

 

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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. Purchaser is treated as a corporation for all Tax purposes and is eligible to be the purchaser in a “qualified stock purchase” as such term is defined in Section 338 of the Code.

 

Section 4.2 Authority .

 

Purchaser has full corporate power and authority to execute and deliver this Agreement, the Escrow Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement, the Escrow Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by Purchaser’s board of directors, and no other authorization or consent on Purchaser’s part is necessary to authorize this Agreement, the Escrow Agreement or to consummate the transactions contemplated hereby. This Agreement and the Escrow Agreement have been duly and validly authorized, executed and delivered by Purchaser and is Enforceable against Purchaser.

 

Section 4.3 Conflicts . The execution and delivery of this Agreement, the Escrow Agreement and the consummation of the transactions contemplated hereby, and the performance by Purchaser of its 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, modification 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; (ii) any provisions of any material Contract or other obligation or any Governmental