asset acquisitions - Jackson Walker LLP

“Option Agreement”) -- which exercise will allow Dynegy to improperlytake ownership of Northern Natural Gas Company (“Northern Natural”),which owns a valuable gas pipeline business (the “Pipeline”), previouslyowned and controlled by Plaintiffs.2. This is an extreme and historic case of buyer’s remorse, inwhich a buyer -- Dynegy -- having entered into a binding contract with itseyes wide open that was critical to the survival of its counterpart -- Enron -- got cold feet and backed out by engineering the destruction of thecontemplated merger (the “Merger”), which then forced Enron intobankruptcy. Moreover, not content to simply renege on the MergerAgreement and knowingly relegate Enron, its major competitor, tobankruptcy, Dynegy proceeded to further exploit the wrongful terminationof the Merger Agreement by using it as a predicate for misappropriatingthe Pipeline, thereby exacerbating the enormous damage already causedby its willful misconduct.3. Dynegy agreed to the Merger with full knowledge of Enron’swell-publicized financial crisis and after conducting two weeks of duediligence concerning Enron. Dynegy knew that Enron was in a precariousfinancial condition, and that it was on the verge of being downgraded bythe major credit rating agencies to a non-investment grade credit rating,which likely would force Enron into bankruptcy. Nevertheless, Dynegydesperately coveted Enron, and jumped into the Merger with both feet,precisely because Enron’s well-publicized problems enabled Dynegy to (i)buy Enron, Dynegy’s larger arch-rival, at a steep discount to historicalvalue; (ii) thereby eliminate its larger arch-rival as a competitor; and (iii)become the largest and most-powerful player in the industry.Accordingly, Dynegy pushed to execute the Merger Agreement quicklyand obligated itself to complete the deal except in extraordinarily narrowcircumstances, and by doing so precluded Enron from pursuing alternativetransactions. Dynegy fully understood that Enron was dependent on thecompletion of the Merger for its very survival.4. Dynegy’s contractual right to terminate the Merger Agreementwas severely circumscribed by the terms of such Agreement. In fact,Dynegy publicly admitted, after the Merger Agreement was signed, that itsability to terminate even due to a so-called “material adverse change” wasvery limited and that such provision could only be invoked in the event ofa “substantial, substantial material change.” Indeed, certain of thelimitations on Dynegy’s right to terminate were dictated by the creditrating agencies in order to ensure that Dynegy lived up to its commitmentto complete the Merger.5. Thus, as Dynegy was aware, Enron’s ability to preserve itswholesale trading business was dependent on Enron’s credit ratings notbeing downgraded to below investment grade. Dynegy further understood3068472v1Appendix I – Page 7