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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Comnes, Alan </O=ENRON/OU=NA/CN=RECIPIENTS/CN=ACOMNES< X-To: Belden, Tim </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Tbelden<, DL-Portland World Trade Center </O=ENRON/OU=NA/CN=RECIPIENTS/CN=DL-PortlandWorldTradeCenter< X-cc: X-bcc: X-Folder: \ExMerge - Dean, Craig\Inbox X-Origin: DEAN-C X-FileName: Here is the Q&A on the agreement and the press release. Merger Q&A Nov. 9, 2001 THE DEAL What are the deal terms? The transaction will constitute a stock for stock exchange. The exchange ratio will be 0.2685. As an example, each 1,000 shares of Enron stock will be converted to 269 shares of the combined company upon closing. Total outstanding shares of the combined company are expected to be approximately 700 million shares. ChevronTexaco owns approximately 26 percent of Dynegy's outstanding common stock. ChevronTexaco will invest $1.5 billion in Dynegy immediately, and an additional $1 billion upon closing of the merger. Dynegy will immediately invest $1.5 billion in cash in Enron's Northern Natural Gas subsidiary in exchange for preferred stock. Enron will have immediate access to the $1.5 billion cash investment in Enron's Northern Natural Gas subsidiary. What approvals are required? This merger will require SEC and FERC approvals, the approval of shareholders of both Enron and Dynegy, and expiration or termination of the Hart-Scott-Rodino waiting period. In addition, various approvals are required due to the ownership of Enron's and Dynegy's wholly owned subsidiaries. From a business standpoint, are Enron and Dynegy now one company? Not until closing, which may not occur for a number of months. Until that time we will continue to deal with one another on a commercial level as competitors, just as we have done in the past. In general, this means that we cannot share commercial information, coordinate commercial behavior, agree on prices, etc. We will act towards Dynegy the same way that we would act toward any other competitor. When do you expect the deal to close? The transaction is expected to close by the end of Q3 2002. Why do you believe this is the best deal for shareholders? The Board considered numerous options-stand-alone execution, private equity infusions, strategic partner infusion and a merger with a strategic partner. The Enron Board felt that the merger with Dynegy, coupled with the $1.5 billion equity investment, was the best opportunity for continued growth and shareholder value. What is the ownership structure of the new company? On a converted basis, Enron shareholders will own approximately 36% of the new company, and Dynegy shareholders will own 64%. Post closing, the combined company is expected to have approximately 700 million shares outstanding. What percentage of shareholder votes is required to approve the transaction? A majority of Enron shareholders must approve the transaction, and 2/3 of Dynegy shareholders must approve. Has a new management team been identified? Chuck Watson - Chairman and CEO Steve Bergstrom - President and COO Greg Whalley - Executive Vice President Robert Doty - CFO Watson, Bergstrom and Whalley will make up the combined company's Office of the Chairman. Has Dynegy completed due diligence? Are they satisfied that the potential exposure is manageable? Dynegy has completed significant due diligence and there is no due diligence out as such. Dynegy was fully aware of the matters reported recently with respect to certain financial statement restatements and related party transactions. How will the Board seats be allocated? When the merger is complete, the Board of Directors of the combined company will be comprised of no more than 15 members. Dynegy's designees will include three from ChevronTexaco. Enron will have the right to designate a minimum of three board members. How will the merger impact customers? We expect customers to benefit significantly from this combination. This combination provides a wider and more diverse platform to meet the energy needs of our customers with reliable delivery and predictable pricing. Customers will also benefit from broader supply-sources of the two companies. Does this mean Northern Natural Gas is no longer a part of Enron? No. Northern Natural Gas will remain an important member of the Enron family. If the merger is terminated Dynegy has a right to acquire Northern Natural Gas, subject to a repurchase right of Enron. Is Dynegy buying Northern Natural Gas? No, Dynegy is buying a $1.5 billion preferred stock interest in Northern Natural Gas and acquiring an option to acquire 100% of Northern Natural Gas in certain circumstances if the merger is terminated. What percent of Northern Natural Gas will Dynegy own? They will own preferred stock unless and until the merger is terminated and Dynegy exercises its right under certain circumstances to purchase 100% of Northern Natural Gas. FINANCIAL ISSUES Why is Enron merging at this price? Enron's Board of Directors and management considered numerous options to best serve the interest of our shareholders, including: Stand-alone execution. Private equity infusion. Strategic partner infusion. A merger with a strategic partner. The Board and management feel strongly that a merger with Dynegy, which included an immediate infusion of $1.5 billion in cash, offered the best opportunity for continued growth and enhanced shareholder value. Have you discussed the combination with the rating agencies? Yes. The preliminary assessment by the rating agencies has been positive. ENRON QUESTIONS What are the immediate business benefits of the transaction? This deal confirms the value of Enron's core business and strengthens the company's liquidity. This transaction enables the shareholders of both companies to participate in the upside of the combined enterprise. What will happen to Enron Online? It will continue as EnronOnline until the transaction closes. How will you treat proprietary trading information prior to the deal close? What impact will this have on counterparty trading? Until the deal closes they remain separate companies and will keep confidential trading information confidential. What will happen to Enron's pending asset sales? The asset sales we have previously announced are scheduled to move forward. What happens to the SEC investigation? As we have from the beginning, Enron will continue to fully cooperate with the SEC investigation. What happens to the lines of credit Enron took out last week? Enron drew down on $3 billion from existing credit lines and has obtained commitment letters on an additional $1 billion secured financing. Will any Enron executives have a role in the combined company's senior management team? Yes, Greg Whalley will serve as Executive Vice President and will join Dynegy's Office of the Chairman when the transaction closes. What happens to Ken Lay? Ken Lay will remain as Chairman and CEO of Enron until the transaction closes. He will not join the Dynegy Office of the Chairman. Will Enron complete its new building? Yes. Is Enron's vision still to be the world's leading company? Enron's vision will be revisited once the companies are merged. Will this affect Enron's innovation? A key strength of Enron and Dynegy has been their employees' innovation and we expect this to continue. What will this do to our deregulation efforts? Both Enron and Dynegy share the belief in open markets and competition. We believe our deregulation efforts will continue. DYNEGY ISSUES Dynegy profile: Dynegy Inc. is a leading energy merchant and power generator in North America, the United Kingdom and Continental Europe. A Fortune 100 company, Dynegy in 2000 established its communications business, Dynegy Global Communications, which is engaged in providing network solutions and connectivity to wholesale customers worldwide.. What is ChevronTexaco's relationship to this deal? ChevronTexaco owns approximately 26 percent of Dynegy's outstanding common stock. ChevronTexaco will invest $1.5 billion in Dynegy immediately and an additional $1 billion at the closing of the merger. COMBINED What will the new company's name be? The combined company will retain Dynegy's name. Who will be the CEO of the new company? Chuck Watson, chairman and CEO of Dynegy Inc. will become the Chairman and CEO of the new entity. Who will be president? Steve Bergstrom, president and COO of Dynegy Inc. will become the President and COO of the new entity. Will there be an integration team? Who will be on it? The integration process will be focused on designing a strong and efficient organization. Management from Enron and Dynegy will work together to ensure a smooth, efficient transition. Details of the make-up of the team have not yet been determined. Will the companies merge offices and where? There are currently no plans to merge offices. Considering the size of a combined organization, however, office spaces will be evaluated at a later date. COMMUNITY ISSUES Will Enron Field be renamed? The combined company will determine this. Is Enron's contribution program continuing during this time? The contributions program will still be a focus for Enron, but we have curtailed new giving for now. What does this merger mean for Houston? We believe that it is positive for Houston because two premier energy companies will join forces and remain in the city. EMPLOYMENT ISSUES Will Enron (or Dynegy) employees be laid off as a result of the merger? The merger will be a long and complex process. Some elimination of positions is almost inevitable in this type of merger, and one of the key tasks will be to identify the optimal structure and resourcing of the merged company. How many lay offs will there be? Prior to the merger, we hope to address any need for employment reductions through attrition and reduced hirings. We cannot rule out involuntary separations, but we have not targeted a specific number at this time. If I am laid off, either prior to the merger completion (or as a result of it), what will my severance package be? Will the severance plan change? If an Enron employee is let go prior to the merger, and is eligible for benefits under the Enron Corp. Severance Plan, then the terms of that plan will govern. Post merger, employees will be eligible for benefits under whatever severance plan the merged company adopts. No changes to the severance plan have been made at this time. What happens to our bonuses this year? The 2001 bonus process will continue as usual and will be consistent with previous practice based on company and individual performance. What will happen to my stock options? Your vested unexercised and unvested options will be converted as follows: The number of options will be converted on the same ratio as outstanding shares are converted. Your number of Enron options will be multiplied by 0.2685 to calculate the number of Dynegy options at close. At the closing of the merger, the strike price on your Enron options will be divided by the merger ratio 0.2685 to determine the strike price of the new Dynegy options. Will there be salary adjustments as a result of the merger? Both companies will continue our market-based approach to compensating employees. In addition, both companies have a strong pay for performance philosophy in regard to total cash compensation. Prior to the merger, there will be no changes in Enron's salary structure. Post merger, we will jointly determine our salary strategy and structure. What will happen with benefits and retirement programs? There are no anticipated changes to Enron benefit plans before the merger is completed. Upon completion of the merger we anticipate that there will likely be changes to ensure that one benefits strategy exists for the merged company. Will the analyst and associate program at Enron continue? As we bring both companies together, we will look into the possibility of combining both Dynegy's PACE program with Enron's Associate/Analyst program. Where do I go if I have a question? A detailed general Q & A on the merger is being prepared at present and will be posted on the Enron Update intranet page. Additionally, Enron and Dynegy HR teams are jointly preparing a detailed employee Q & A to address HR-related questions. This will be posted on the same website as the general Q & A. In the interim, if you have a specific question or concern you may email questions@enron.com. INTERNAL ISSUES What will happen to non-Houston locations? Decisions will be made about all locations in the coming weeks. Will moves to the new building continue as planned? Yes, at this time. When will we begin seeing changes in our workplace? Until the merger is completed it is unlikely you will see many changes in the workplace. As things change, we will share this information with you. Will there be a year-end PRC? We are still reviewing the year-end process. Does Dynegy have a performance review process like Enron? Dynegy has a similar performance review to Enron's. Will there still be a Chairman's Award? Yes. Will any early retirement packages be offered? There are no plans to offer such packages at this time. Is there a hiring freeze? Will all open positions at Enron just remain open or be cancelled? We are carefully evaluating every open position and only staffing those that are critical to the business. INTERNAL - COMMUNITY RELATIONS Will the VIP program continue? We are currently evaluating this program. Will the matching gifts program continue? We are currently evaluating this program. What happens to the Enron childcare center? It will continue its current operations. We will re-evaluate operations after the merger. What happens to ClickatHome? We are currently evaluating this program. If employees are laid off, will they be required to pay for their computers from the ClickatHome program? Enron's current policy will remain in effect which states that individuals who leave as a consequence of involuntary termination are not required to pay back the cost of the computer, however, they are required to pay the taxes as stated on heir W2 form. Will the Enron Body Shop remain open? The Body Shop will remain open and continue with normal hours. Once the merger is nearing completion the program will be evaluated. What does this mean for the United Way? Both Enron and Dynegy are supporters of the United Way. The merged entity will also continue to support the UW. The company will match all employee contributions to the United Way as promised.
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