1
EXHIBIT 10.18
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of this ______ day of
_______ 2000 (the "Agreement"), by and between Orion Power Holdings, Inc.,
a Delaware corporation (the "Company") and W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Employee").
WHEREAS, the Company has been formed by GS Capital Partners II,
L.P. and Constellation Power Source, Inc. for the purpose of investing in
and managing the operations of a portfolio of electric generating assets in
the United States and Canada;
WHEREAS, the Company and the Employee entered into an employment
agreement on June 1, 1999 (the "Original Agreement") wherein the Company
employed the Employee as Chief Legal Officer, with the responsibilities and
duties of an executive officer of the Company;
WHEREAS, effective November 5, 1999, the Employee was appointed
Executive Vice President of the Company; and
WHEREAS, the Employee and the Company wish to amend and restate the
Original Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and provisions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts such employment by the Company upon the terms and conditions
hereinafter set forth.
2. Duties.
(a) During the Employment Term (as defined in Section 7
hereof), the Employee shall serve as Chief Legal Officer of the Company and,
commencing November 5, 1999 until the last day of his Employment Term, the
2
Employee shall also serve as Executive Vice President, and the Employee shall
perform such duties, services and responsibilities and have the authority
commensurate to such positions as determined from time to time by the Board of
Directors of the Company (the "Board"). The Employee shall report directly to
the Chief Executive Officer of the Company.
The Employee shall devote his full business time, attention and skill
to the performance of such duties, services and responsibilities, and will use
his best efforts to promote the interests of the Company. The Employee will not,
without the prior written approval of the Board, engage in any other business
activity which could interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company.
(b) Location. The Employee will work both in the Company's
Baltimore office and his home office in New York. The Employee understands that
he may be required work in the Company's Baltimore office up to three days per
week, at the discretion of the Chief Executive Officer. The Company shall
reimburse the Employee for all reasonable travel and lodging expenses incurred
by the Employee commuting to and from the Company's Baltimore office, provided
that the Employee complies with the generally applicable policies, practices and
procedures of the Company for submission of expense reports, receipts or similar
documentation of such expenses. Employee shall not be reimbursed for related
meal expenses. If the Company relocates its headquarters to a New York City
metropolitan area office, the Employee understands that he will be required to
work in that office on a full-time basis.
3. Monetary Remuneration.
(a) Base Salary. During the Employment Term, the Company shall
pay to the Employee in consideration of the performance by the Employee of the
Employee's obligations hereunder (including any services as an officer,
employee, or otherwise), a salary (the "Base Salary") at an annual rate of three
hundred and seventy-
-2-
3
five thousand dollars ($375,000). The Base Salary shall be reviewed, and may be
increased (but not decreased), in accordance with the Company's salary review
program or practice applicable to senior executive officers of the Company.
Without limiting the generality of the foregoing, the Base Salary shall be
increased on or before March 1 of each calendar year, beginning with calendar
year 2001, by a percentage no less than the percentage increase in the United
States Consumer Price Index for the Washington-Baltimore metropolitan area for
the preceding calendar year.
The Base Salary shall be payable in accordance with the normal
payroll practices of the Company then in effect and subject to all applicable
taxes required to be withheld by the Company pursuant to federal, state or local
law. The Employee shall be solely responsible for taxes imposed on the Employee
by reason of any compensation and benefits provided hereunder.
(b) Annual Bonus. The Company shall provide the Employee the
opportunity to earn an annual incentive bonus (the "Bonus"). Such Bonus shall be
variable based upon the attainment of performance criteria described below,
shall be payable in an amount equal to 75% of the Base Salary in effect on the
last day of the applicable fiscal year (upon attainment of targeted performance
criteria), may be payable at less than 75% of such Base Salary (at agreed-upon
levels of partial attainment of targeted performance criteria), may be payable
in amounts in excess of 75% of such Base Salary (upon exceeding targeted
performance criteria), but shall in no event exceed 150% of such Base Salary, in
respect of each of the Company's fiscal years ending during the Employment Term,
beginning with the 2000 fiscal year; provided, however, that the Bonus payable
in respect of fiscal year 2000 shall, in any event, not be less than three
hundred and seventy-five thousand dollars ($375,000). Each annual Bonus shall be
payable promptly following a determination by the Board (or a designated
committee thereof) that the applicable performance criteria have been satisfied,
but in no event later than thirty (30) days after the Company's receipt of the
report prepared by its regular
-3-
4
independent certified public accountants with respect to the Company's financial
statements for such fiscal year.
For each fiscal year during the Employment Term, appropriate
performance criteria shall be developed jointly and in good faith by the
Employee and the Board (or designated committee thereof) in connection with the
development and approval of an annual strategic plan for the Company.
Notwithstanding the foregoing, the Company and the Employee acknowledge that
such performance criteria may consist of specific financial or nonfinancial
objectives relating to both the Company and the Employee that are established in
accordance with the foregoing procedures.
4. Benefits.
(a) In addition to the payments described above, during the
Employment Term, the Employee shall be entitled to participate in, in accordance
with the terms and conditions of the applicable plan, program or arrangement,
all of the employee benefit plans or programs, and all of the fringe benefit and
executive perquisites, made available by the Company, to, or for the benefit of,
its senior executive officers or to its employees in general, as such plans,
programs or arrangements may be in effect from time to time. The Employee's
participation in any such plans, programs and arrangements shall be on a basis
no less favorable than that of other senior executive officers of the Company.
Nothing contained in this Agreement shall require the Company to establish any
plan, program or arrangement or shall preclude the Company from amending or
terminating any plan, program or arrangement which heretofore exists or may
hereinafter be established; provided, however, it is the Company's intention
that the general type and level of benefits provided by the Company to its
officers and employees shall be, in the aggregate, generally comparable to the
type and level of benefits offered by similar companies in the Company's general
industry, as determined in good faith by the Board.
-4-
5
(b) In addition to the reimbursement provided for under Section
2(b), during the Employment Term, the Company shall reimburse the Employee for
all reasonable business expenses incurred by the Employee in carrying out the
Employee's duties, services and responsibilities under this Agreement, provided
that the Employee complies with the generally applicable policies, practices and
procedures of the Company for submission of expense reports, receipts or similar
documentation of such expenses.
5. Equity Awards.
(a) 1998 Stock Incentive Plan. Reference is hereby made to the
Company's 1998 Stock Incentive Plan, as amended from time to time (the "Plan").
Defined terms used in this Section 5 but not defined herein shall have the
meanings set forth in the Plan.
(b) IPO Bonus Option. Upon the effective date of the Initial
Public Offering of the Company, the Company shall grant to the Employee a
nonqualified stock option to purchase one hundred and twenty thousand (120,000)
shares of Common Stock (the "IPO Bonus Option") with a per share exercise price
equal to the price per share of Common Stock offered to the public in the
Initial Public Offering. The IPO Bonus Option shall vest ratably on a daily
basis over the period beginning on the date the IPO Bonus Option is granted
pursuant to this Section 5(b) and ending on the fifth anniversary of such date.
(c) Initial Annual Option. Upon the effective date of an
Initial Public Offering of the Company, the Company shall grant to the Employee
a nonqualified option to purchase eighty thousand (80,000) shares of Common
Stock (the "Initial Annual Option"), having a per share exercise price equal to
the price per share of Common Stock offered to the public in the Initial Public
Offering. The Initial Annual Option shall vest ratably on a daily basis over the
period beginning on the date the Initial Annual Option is granted pursuant to
this Section 5(c) and ending on the third anniversary of such date.
-5-
6
(d) Annual Options. On January 1, 2002 and on each January 1
thereafter during the Employment Term, the Company shall grant to the Employee a
nonqualified option to purchase a number of shares of Common Stock as determined
by the Board in its sole discretion (each an "Annual Option"); provided,
however, that each Annual Option shall entitle the Employee to purchase a
minimum of forty thousand (40,000) shares of Common Stock. Each Annual Option
shall have a per share exercise price equal to the Fair Market Value of a share
of Common Stock on the date the Annual Option is granted and shall vest ratably
on a daily basis over the period beginning on the date the Annual Option is
granted pursuant to this Section 5(d) and ending on the third anniversary of
such date.
(e) Accelerated Vesting and Other Conditions. Notwithstanding
the foregoing provisions of this Section 5, the IPO Bonus Option, the Initial
Annual Option, the Annual Options and any other stock options granted to the
Employee by the Company (collectively, "the Options") shall vest fully upon the
termination of the Employee's employment for circumstances described in clause
(i), (iv) or (v) of the definition of Good Reason. The Options granted pursuant
to Sections 5(b) through (d) shall be subject to such additional terms and
conditions as are set forth in an option agreement substantially in the form
attached as Exhibit A hereto.
(f) Company Representations. The Company represents to the
Employee that it does not presently intend to provide the Chief Executive
Officer of the Company with equity-based compensation that would provide more
favorable income tax treatment than the income tax treatment applicable to the
Options granted to the Employee pursuant to the Agreement (unless such officer
receives such favorable tax treatment in consideration of foregoing some other
benefit of value that has been made available to the Employee). If after the
date of this Agreement, the Company provides such officer with options, capital
stock, stock purchase rights or other equity-based compensation arrangements
that provide more favorable income tax treatment to such
-6-
7
officer than the income tax treatment that is applicable to the Options granted
to the Employee pursuant to this Agreement, the Company and the Employee will
make a joint, good faith determination, based on all the facts and circumstances
of the grant of such equity-based compensation to such officer, as to whether a
modification to the Employee's Option arrangement would be necessary to ensure
that the Employee is treated no less favorably than such officer with respect to
the income tax treatment of the equity-based compensation provided to each,
taking into account relative levels of benefit provided to each and their
respective levels of authority (and if the determination is made that such an
adjustment would be necessary, then the Company shall modify this Agreement and
any related agreements as necessary to effect such modification).
(g) Stock Growth Incentive Plan. After the date hereof, the
Company shall establish and adopt a stock growth incentive plan pursuant to
which a specified group of officers, including the Employee, and other key
employees of the Company, as determined in good faith by the Board, will be
eligible to receive additional stock options subject to such terms and
conditions as determined by the Board in good faith.
(h) Stock Purchase Agreement. The Employee and the Company
have entered into that certain Stock Purchase Agreement, substantially in the
form set forth as Exhibit B hereto (the "Stock Purchase Agreement"), and, the
Employee has entered into note agreements with the Company from time to time,
substantially in the form set forth as Annex A to the Stock Purchase Agreement
(the "Notes").
6. Vacations. During the Employment Term, the Employee shall
be entitled to vacation on a basis consistent with that of other senior
executive officers of the Company.
-7-
8
7. Employment Term.
The "Employment Term", as used in this Agreement, shall mean
the period commencing on June 1, 1999 and terminating on the earliest of the
following to occur:
(a) the death of the Employee ("Death");
(b) the termination of the Employee's employment by
mutual agreement of the Company and the Employee;
(c) the termination of the Employee's employment by the
Company for Cause (as defined in Section 8 hereof);
(d) the termination of the Employee's employment by the
Employee for Good Reason (as defined in Section 9 hereof);
(e) the Disability of the Employee (as determined in
accordance with Section 10 hereof);
(f) the termination of the Employee's employment by the
Company other than a termination by the Company for Cause, Disability or
Death; and
(g) the fifth anniversary of the day preceding the first day
of the Employment Term.
8. Cause. In the event of (i) any material breach of the
provisions of this Agreement by the Employee, (ii) the Employee's continued
failure to perform reasonably assigned duties after a demand for substantial
performance is delivered to the Employee by the Board or the Chief Executive
Officer of the Company (where such demand specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that the
Employee has not substantially performed his duties) and the passage of a
reasonable period of time to comply with such demand, (iii) the Employee's
willful misconduct or gross negligence, (iv) conduct by the Employee involving
dishonesty for personal gain, fraud or unlawful activity which is injurious to
the Company, (v) a conviction of or plea of nolo contendere to a felony or any
crime
-8-
9
involving moral turpitude or (vi) the Employee shall breach any provision of
Article I of the Stock Purchase Agreement, the Company shall have the right to
terminate the Employee's employment for "Cause"; provided, however, that the
Employee shall not be terminated for Cause under any of clauses (i) through
(iii) above unless there shall have been delivered to the Employee a copy of a
resolution duly adopted by the Board, at a meeting of such Board (after
reasonable notice to the Employee and an opportunity for the Employee, together
with his counsel, to be heard at such meeting), finding that in the good faith
opinion of the Board, the Employee had engaged in conduct of the type described
in any of clauses (i) through (iii) above and specifying the particulars
thereof.
9. Good Reason. In the event of (i) any material breach by the
Company of this Agreement, any Option Agreement or other material agreement
entered into with, or provided to, the Employee, (ii) a material reduction in
the Employee's title, duties, responsibilities or status, (iii) the assignment
to the Employee of a material amount of different or additional duties that are
significantly inconsistent with the Employee's position, (iv) the relocation of
the Employee, the Company's principal executive offices or all or substantially
all of the Company's executive level employees without the Employee's consent,
to any location outside of the Baltimore, Maryland metropolitan region, provided
however, if the Employee is then residing in the New York City Metropolitan
area, the relocation of the Employee, the Company's principal executive offices
or all or substantially all of the Company's executive level employees to the
New York City Metropolitan area shall not constitute "Good Reason", or (v) a
Change in Control (as defined in the Plan, as in effect from time to time) shall
occur, the Employee shall have the right to terminate his employment for "Good
Reason" by giving the Company notice in writing of the reason for such
termination and the Employment Term shall terminate on the date of the
Employee's termination of employment; provided, however, that with respect to
clause (v) above, the Employee's right to terminate his employment for Good
Reason shall lapse sixty (60) days following
-9-
10
the occurrence of the Change in Control. Anything in this Agreement to the
contrary notwithstanding, any termination of the Employee by the Company without
Cause at any time when the Employee has a basis to resign under clause (i), (iv)
or (v) of the definition of Good Reason shall be treated for all purposes of
this Agreement and all related agreements as a termination by the Employee for
Good Reason under such clause (i), (iv) or (v), as appropriate.
10. Disability. In the event of a physical or mental infirmity
which renders the Employee unable to perform his duties, services and
responsibilities hereunder for a total of one hundred and twenty (120) calendar
days in any twelve (12)-month period (a "Disability"), the Employment Term shall
automatically terminate on such one hundred and twentieth calendar day, without
any further or additional action on the part of the Company.
11. Termination Payments.
(a) In the event that the Employment Term is terminated for
any reason other than by the Company without Cause or by the Employee with Good
Reason: (A) the Company shall pay to the Employee any Base Salary accrued
hereunder on or prior to the date of termination but not theretofore paid to the
Employee; and (B) the Employee shall be entitled, in accordance with the terms
and conditions of the applicable plan, program or arrangement, to all benefits
accrued under any benefit plans, programs or arrangements in which the Employee
shall be a participant as of the date of termination, including any Bonus
earned, declared and payable (but not yet paid) in accordance with Section 3(b)
hereof in respect of the then current fiscal year, or if the Bonus in respect of
the then current fiscal year has not yet been earned, declared and become
payable, in respect of the fiscal year ended immediately prior to the date of
termination (the "Accrued Benefits"). Notwithstanding the foregoing, the Bonus
amount in respect of fiscal year 2000 under Section 3(b) shall be deemed earned,
declared and payable.
-10-
11
(b) Subject to paragraph (c) of this Section 11 below, in the
event that the Employment Term is terminated by the Company without Cause or by
the Employee for Good Reason: (A) the Company shall pay to the Employee any Base
Salary accrued hereunder on or prior to the date of termination but not
theretofore paid to the Employee; (B) the Company shall pay the Employee a lump
sum amount equal to two (2) times the Employee's annual Base Salary at the time
of the Employee's termination of employment; (C) the Company shall pay the
Employee an amount equal to two (2) times the Bonus paid (or to be paid) to the
Employee for the then current fiscal year, or if the Bonus in respect of the
then current fiscal year has not yet been earned, declared and become payable,
in respect of the fiscal year preceding the fiscal year in which such
termination occurs; and (D) the Employee shall be entitled to the Accrued
Benefits. For purposes of clause (C) of this paragraph, the Bonus amount in
respect of fiscal year 2000 under Section 3(b) shall be deemed earned, declared
and payable. Any obligation of the Company pursuant to clauses (B) and (C) of
this paragraph to the extent it exceeds three hundred and seventy-five thousand
dollars ($375,000) is referred to herein as the "Excess Severance Payment."
(c) All payments required to be made by the Company pursuant to
Section 11(a) in connection with the termination of the Employee's employment
shall be payable within 15 days after the effective date of such termination;
provided, however, that if any indebtedness remains outstanding under any Note
as of the date of such termination, the Excess Severance Payment shall be
payable on the 91st day after the effective date of such termination, and the
Excess Severance Payment (less any applicable withholding taxes) will, in whole
or in part, first be applied in full or partial satisfaction of any indebtedness
under any Note that remains outstanding on such 91st day.
(d) The foregoing payments and benefits upon termination shall
constitute the exclusive payments and benefits which shall be due the Employee
upon a
-11-
12
termination of the Employment Term and shall be in lieu of any such benefits
under any plan, program, policy or other arrangement which has heretofore been
or shall hereafter be established by the Company. The Employee shall have no
other rights (other than the Employee's rights to the Accrued Benefits as
provided herein) or remedies under this Agreement or any other plan, program or
arrangement which has heretofore been or shall hereafter be established by the
Company or otherwise in the event that the Employment Term is terminated by the
Company without Cause or by the Employee for Good Reason. The Employee shall not
be required to mitigate the foregoing payments by seeking employment or
otherwise.
(e) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of the Employee by the Company, any affiliate of the Company, any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments") is or will be subject to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"), then the Total
Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Employee retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax), than if the Employee received the entire
amount of such Total Payments. Unless the Employee shall have given prior
written notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Total Payments, by first
reducing or eliminating the portion of the Total Payments which are
not payable in cash and then by reducing or eliminating cash payments, in each
case in reverse order beginning with payments or benefits which are
-12-
13
to be paid the latest in time. Any notice given by the Employee pursuant to the
preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Employee's rights and entitlements to any
benefits or compensation. The determination of whether the Total Payments shall
be reduced pursuant to the foregoing and the amount of such reduction shall be
made, at the Company's expense, by an accounting firm selected by the Company
which is one of the five largest accounting firms in the United States (other
than the Company's regular independent auditor).
12. Employee's Representation and Acknowledgment. The Employee
represents to the Company that his execution and performance of this Agreement
shall not be in violation of any agreement or obligation (whether or not
written) that he may have with or to any person or entity, including without
limitation, any prior employer. The Employee hereby acknowledges and agrees that
this Agreement (and the Exhibits hereto and any other agreement or obligation
referred to herein) shall be an obligation solely of the Company, and the
Employee shall have no recourse whatsoever against any stockholder of the
Company or any of their respective affiliates.
13. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and
understands that in the Employee's position with the Company, the Employee has
been and will be exposed to and receive information relating to the confidential
affairs of the Company, including but not limited to technical information,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, business policies and practices, and other forms of
information considered by the Company to be confidential and in the nature of
trade secrets. The Employee agrees that during the Employment Term and
thereafter, the Employee will keep such information confidential and will not
disclose such information, either directly or indirectly, to any third person or
entity
-13-
14
without the prior written consent of the Company; provided, however, that (i)
the Employee shall have no such obligation to the extent such information is or
becomes publicly known other than as a result of the Employee's breach of his
obligations hereunder and (ii) the Employee may, after giving prior notice to
the Company to the extent practicable under the circumstances, disclose such
information to the extent required by applicable laws or governmental
regulations or judicial or regulatory process. This confidentiality covenant has
no temporal, geographical or territorial restriction. Upon termination of the
Employment Term, the Employee will promptly supply to the Company all property,
keys, notes, memoranda, writings, lists, files, reports, customer lists,
correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical
data or any other tangible product or document which has been produced by,
received by or otherwise submitted to the Employee in the course or otherwise as
a result of the Employee's employment with the Company during or prior to the
Employment Term.
(b) Non-competition. By and in consideration payments and
benefits to be provided to the Employee by the Company hereunder, the Employee's
exposure to the proprietary information of the Company and as an inducement to
the Company to enter into this Agreement with the Employee, the Employee agrees
that while he is employed by the Company and for a period of one (1) year after
the Employee's termination of employment with the Company for any reason (the
"Noncompetition Term"), the Employee will not, directly or indirectly own,
manage, operate, join, control, be employed by, or participate in the ownership,
management, operation or control of, or be connected in any manner, including
but not limited to, holding the positions of shareholder, director, officer,
consultant, independent contractor, employee, partner, or investor, with any
Competing Enterprise; provided, however, Employee shall not be subject to the
covenants contained in this Section 13(b) or Section 13(c) following the
termination of the Employee by the Company without
-14-
15
Cause following the occurrence of a Change in Control (as defined in the Plan,
as in effect from time to time), or termination of the Employee's employment for
circumstances described in clause (v) of the definition of Good Reason. For
purposes of this paragraph, the term "Competing Enterprise" shall mean any
person, corporation, partnership or other entity (or any of their respective
subsidiaries) which, directly or indirectly, is principally engaged in the
business of investing in or managing the operations of electric generating
assets for wholesale resale in the United States and Canada at market-based
rates. Following termination of the Employment Term, the Employee shall promptly
furnish in writing to the Company, its subsidiaries or affiliates, any
information reasonably requested by the Company (including any third party
confirmations) to the extent necessary to confirm the Employee's compliance with
the provisions of this Section 13(b). Notwithstanding anything contained in this
Section 13(b) to the contrary, the Employee shall not be prohibited from
acquiring less than three percent (3%) of any class of securities of a publicly
traded corporation.
(c) Non-solicitation. During the Noncompetition Term, if
applicable, the Employee shall not interfere with the Company's relationship
with, employ or endeavor to entice away from the Company, any person who, on the
date of the termination of the Employment Term, was an employee or customer of
the Company or otherwise had a material business relationship with the Company.
(d) Remedies. The Employee agrees that any breach of the terms
of this Section 13 would result in irreparable injury and damage to the Company
for which the Company would have no adequate remedy at law; the Employee
therefore also agrees that in the event of said breach or any threat of breach,
the Company shall be entitled to an immediate injunction and restraining order
to prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all entities acting for and/or with the Employee,
without having to prove damages, in addition to any other remedies to which the
Company may be entitled at law or in equity. The terms
-15-
16
of this paragraph shall not prevent the Company from pursuing any other
available remedies for any breach or threatened breach hereof, including but not
limited to the recovery of damages from the Employee. The Employee acknowledges
that the Company would not have entered into this Agreement had the Employee not
agreed to the provisions of this Section 13. The Employee and the Company agree
that the provisions of the covenant not to compete set forth in this Section 13
are reasonable. Should a court or arbitrator determine, however, that any
provision of the covenant not to compete is unreasonable or unenforceable,
either in period of time, geographical area, or otherwise, the parties hereto
agree that the covenant should be interpreted and enforced to the maximum extent
possible in accordance with law.
The provisions of this Section 13 shall survive any termination of
the Employment Term, and the existence of any claim or cause of action by the
Employee against the Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of the
covenants and agreements of this Section 13.
14. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of either party to enforce each and every
provision in accordance with its terms. No waiver by either party hereto of any
breach by the other party hereto of any provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions at that time or at any prior or subsequent time.
15. Notices. Every notice relating to this Agreement shall be
in writing and shall be given by personal delivery or by registered or
certified mail, postage prepaid, return receipt requested; to:
-16-
17
If to the Company: Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Employee: W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Either of the parties hereto may change their address for purposes of
notice hereunder by giving notice in writing to such other party pursuant to
this Section 16.
17. Indemnification. During the Employment Term and thereafter, the
Company shall indemnify the Employee to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) in connection with any claim, action or proceeding
(whether civil or criminal) against the Employee as a result of the Employee
serving as an officer of the Company or in any capacity at the request of the
Company, in or with regard to any other entity, employee benefit plan or
enterprise (other than arising out of the Employee's act of willful misconduct,
gross negligence, misappropriation of funds, fraud or breach of this Agreement).
This indemnification shall be in addition to, and not in lieu of, any other
indemnification the Employee shall be entitled to pursuant to the Company's
Certificate of Incorporation or By-laws or otherwise. Following the Employee's
termination of employment, the Company shall continue to cover the
-17-
18
Employee under the Company's directors and officer's insurance, if any, for the
period during which the Employee may be subject to potential liability for any
claim, action or proceeding (whether civil or criminal) as a result of his
service as an officer of the Company or in any capacity at the request of the
Company, in or with regard to any other entity, employee benefit plan or
enterprise on the same terms such coverage was provided during the Employment
Term, at the highest level then maintained for any then current or former
officer.
18. Stockholder Approval. This Agreement is subject to the
requisite approval of the stockholders of the Company as contemplated under
proposed Treasury Regulation Section 1.280G-1, Q/A-6(a)(2)(ii), promulgated
under the Internal Revenue Code of 1986, as amended.
19. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger) and assigns. Notwithstanding the provisions of the
immediately preceding sentence, the Employee shall not assign all or any portion
of this Agreement without the prior written consent of the Company.
20. Entire Agreement. This Agreement (together with the Exhibits
hereto and the other agreements referred to herein) sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter.
21. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part,
such provision or application shall to that extent be severable and shall
not affect other provisions or applications of this Agreement.
22. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
-18-
19
reference to the principles of conflict of laws. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined in
any Maryland state or federal court sitting in The City of Baltimore, and the
parties hereto hereby consent to the jurisdiction of such courts in any such
action or proceeding; provided, however, that neither party shall commence any
such action or proceeding unless prior thereto the parties have in good faith
attempted to resolve the claim, dispute or cause of action which is the subject
of such action or proceeding through mediation by an independent third party.
23. Modifications. Neither this Agreement nor any provision
hereof may be modified, altered, amended or waived except by an instrument
in writing duly signed by the party to be charged.
24. Gender, Tense and Headings. Whenever any words are used herein
in the masculine gender, they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply. Whenever any
words used herein are in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
The headings contained herein are solely for the purposes of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
25. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
26. Registration Rights. Other than in connection with an Initial
Public Offering, as defined in the Plan, the Employee shall have the right,
subject to cut-back arrangements in favor of other non-management stockholders,
to include in any registration statement filed by the Company to register shares
of its Common Stock (whether for its own account or for the account of other
stockholders), shares of
-19-
20
Common Stock issued or issuable upon the exercise of any Options awarded to the
Employee and to have the Company pay all expenses incurred (other than
underwriting discounts and commissions) in connection with the registration of
such shares of Common Stock; provided, that the managing underwriter in
connection with such registration shall have reasonably determined, in its sole
discretion, that such inclusion shall not adversely affect, in any manner, the
public offering of such shares.
-20-
21
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, on the day and year first above written.
ORION POWER HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
----------------------------------
W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-21-
22
EXHIBIT A
(PUBLIC COMPANY AGREEMENT)
ORION POWER HOLDINGS, INC.
FORM OF
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of the ____ day of ____________,
200__, (the "Grant Date") by and between Orion Power Holdings, Inc. (the
"Company"), and _________________________________ (the "Optionee").
WHEREAS, the Company has adopted the Orion Power Holdings,
Inc. 1998 Stock Incentive Plan (the "Plan") in order to provide additional
incentive to certain employees, officers and directors of the Company and its
Subsidiaries;
WHEREAS, the Committee responsible for administration of the
Plan determined to grant an option to the Optionee as provided herein; and
WHEREAS, the Optionee entered into an Employment Agreement
with the Company (the "Employment Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
1.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of _______
Shares, subject to, and in accordance with, the terms and conditions set forth
in this Agreement.
1.2 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
1.3 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.
2. Exercise Price.
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $_____ per Share.
23
3. Duration of Option.
The Option shall be exercisable to the extent and in the
manner provided herein for a period beginning on the Grant Date and ending on
the date preceding the tenth anniversary of the Grant Date (the "Exercise
Term"); provided, however, that the Option may be earlier terminated as provided
in Section 6 hereof.
4. Exercisability of Option.
The Option shall vest and become exercisable as provided in
Section [5(b)] [5(c)] [5(d)]1 of the Employment Agreement. Subject to the
provisions of Section 5 of the Employment Agreement and Section 6 hereof, any
portion of the Option that is unvested at the time of Optionee's termination of
employment with the Company for any reason shall terminate immediately upon the
Optionee's termination of employment with the Company.
5. Manner of Exercise and Payment.
5.1 Subject to the terms and conditions of this Agreement and
the Plan, the Option may be exercised by written notice delivered in person or
by mail to the Secretary of the Company, at its principal executive office. Such
notice shall state that the Optionee is electing to exercise the Option and the
number of Shares in respect of which the Option is being exercised and shall be
signed by the person or persons exercising the Option. If requested by the
Committee, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the right of such person or persons to
exercise the Option. The Option may not be exercised for less than 100 Shares at
a time, unless the number of Shares subject to the Option is not evenly
divisible by 100, in which case the final exercise may be for the remaining
number of Shares. Notwithstanding the preceding, the Option may be exercised
pursuant to such other procedures as may be permitted by the Committee from time
to time (including, without limitation, electronic exercise methods).
5.2 The notice (or other method) of exercise described in
Section 5.1 hereof shall be accompanied by the full exercise price for the
Shares in respect of which the Option is being exercised.
5.3 Upon receipt of notice (or other method) of exercise and
full payment for the Shares in respect of which the Option is being exercised,
the Company shall, subject to Section 12 of the Plan and further subject to the
terms of any note or loan agreement entered into by and between the Optionee and
the Company (a "Note"), take such action as may be necessary to effect the
transfer to the Optionee of the number of Shares as to which such exercise was
effective.
------------------
(1) The IPO Bonus Option vests over five years, pursuant to Section 5(b) of the
Employment Agreement; the Initial Annual Option, and subsequent Annual
Options, vest over three years pursuant to Sections 5(c) and 5(d),
respectively.
24
5.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect to any Shares subject to the
Option until (i) the Option shall have been exercised pursuant to the terms of
this Agreement and the Optionee shall have paid the full exercise price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a shareholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares.
5.5 Payment of the purchase price for the Shares being
purchased pursuant to the exercise of the Option may be made by cash or check,
by a transfer, either actually or by attestation, to the Company of Shares which
the Optionee has held for at least six (6) months and which have a Fair Market
Value on the date of such exercise equal to such purchase price and, if elected
by the Optionee, all applicable Withholding Taxes (as defined in Section 12
hereof), by a cashless exercise method through a registered broker-dealer
pursuant to procedures which are permitted by the Committee from time to time,
by any combination of the foregoing methods, or by such other method as may be
approved by the Committee.
6. Termination of Employment. Subject to Section 5.8 of the Plan and
Section 7 hereof, each Option shall terminate prior to the time set forth in
Section 3 hereof as follows:
6.1 If the employment of the Optionee is terminated by the
Company for any reason other than Disability, death or Cause, or by the Optionee
for Good Reason (as defined in the Employment Agreement), the Optionee may, for
a period ending ninety (90) days after such termination, but in no event beyond
the expiration date of the Option as set forth in Section 3 hereof, exercise the
Option to the extent, and only to the extent, that such Option or portion
thereof was vested and exercisable as of the date of such termination (including
any portion of the Option as to which the vesting is accelerated pursuant to the
Employment Agreement), after which time the Option shall automatically terminate
in full.
6.2 If the employment of the Optionee is terminated
voluntarily by the Optionee, the Optionee may, for a period of ninety (90) days
after such termination, exercise the Option to the extent, and only to the
extent, that such Option or portion thereof was vested and exercisable as of the
date of such termination, after which time the Option shall automatically
terminate in full.
6.3 If the employment of the Optionee is terminated by reason
of Disability, the Optionee may, for a period ending one (1) year after such
termination, but in no event beyond the expiration date of the Option as set
forth in Section 3 hereof, exercise the Option in full, after which time the
Option shall automatically terminate in full.
6.4 If the employment of the Optionee is terminated for Cause,
the Option granted to the Optionee hereunder shall immediately terminate in full
and no rights thereunder may be exercised.
6.5 If the employment of the Optionee is terminated by reason
of death, the Option may, for a period ending one (1) year after the Optionee's
death, but in no event beyond
25
the expiration date of the Option as set forth in Section 3 hereof, be exercised
by the person or persons to whom such rights under the Option shall pass by
will, or by the laws of descent or distribution, in full, after which time the
Option shall terminate in full.
6.6 The Option, to the extent not yet vested and exercisable
(after the application of the acceleration provisions of Sections 6.1, 6.3, 6.5
and 7), shall terminate immediately upon the Optionee's termination of
employment with the Company for any reason.
7. Effect of Change of Control.
Notwithstanding anything contained in this Agreement to the
contrary, in the event of a Change of Control, the Option shall become
immediately and fully vested and exercisable.
8. Non-Transferability.
The Option shall not be transferable other than by will or by
the laws of descent and distribution, except that (i) the Option may be
transferred, assigned or pledged to the Company as security in respect of any
Note and (ii) if approved by the Company in writing, the Option may be
transferred to Permitted Transferees of the Optionee.
9. No Right to Continued Employment.
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to continuance of
employment by the Company, nor shall this Agreement or the Plan interfere in any
way with the right of the Company to terminate the Optionee's employment at any
time.
10. Adjustments.
In the event of a Change in Capitalization, the Committee may
make appropriate adjustments to the number and class of Shares or other stock or
securities subject to the Option and the exercise price for such Shares or other
stock or securities. The Committee's adjustment shall be made in accordance with
the provisions of Section 11 of the Plan and shall be effective and final,
binding and conclusive for all purposes of the Plan and this Agreement.
11. Effect of a Merger, Consolidation or Liquidation.
Subject to Section 7 hereof, upon the effective date of (i)
the liquidation or dissolution of the Company or (ii) a merger or consolidation
of the Company (a "Transaction"), the Option shall continue in effect in
accordance with its terms and the Optionee shall be entitled to receive in
respect of all Shares subject to the Option, upon exercise of the Option, the
same number and kind of stock, securities, cash, property or other consideration
that each holder of Shares was entitled to receive in the Transaction.
26
12. Withholding of Taxes.
The Company shall have the right to deduct from any
distribution of cash to the Optionee an amount equal to the federal, state and
local income taxes and other amounts as may be required by law to be withheld
(the "Withholding Taxes") with respect to the Option. If the Optionee is
entitled to receive Shares upon exercise of the Option, the Optionee shall pay
the Withholding Taxes to the Company in cash, or otherwise provide or make
available to the Company sufficient funds to pay the Withholding Taxes
(including by a transfer of Shares which have been held for at least six (6)
months, if elected by the Optionee), prior to the issuance of such Shares.
13. Optionee Bound by the Plan.
The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
14. Modification of Agreement.
This Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by a written
instrument executed by the parties hereto.
15. Severability.
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
16. Governing Law.
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Delaware without
giving effect to the conflicts of laws principles thereof.
17. Successors in Interest.
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to the benefit of
the Optionee's legal representatives. All obligations imposed upon the Optionee
and all rights granted to the Company under this Agreement shall be final,
binding and conclusive upon the Optionee's heirs, executors, administrators and
successors.
27
ORION POWER HOLDINGS, INC.
Attest: By: ______________________________
______________________________
Secretary
___________________________________
Optionee
28
EXHIBIT B
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
__________________, 1999 by and between Orion Power Holdings Inc., a Delaware
corporation (the "Company"), and W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser are simultaneously entering
into an employment agreement pursuant to which the Purchaser is being employed
as Chief Legal Officer/General Counsel of the Company;
WHEREAS, in connection with the employment of the Purchaser by the
Company, the Company desires to provide the Purchaser with an opportunity to
purchase shares of common stock of the Company, par value $.01 per share (the
"Common Stock") at the same time and at the same price as certain parties to the
Amended and Restated Stockholders' Agreement, dated as of June 25, 1999, by and
among the Company, GS Capital Partners II, L.P. ("GSCP"), Constellation Power
Source Inc. ("Constellation") and the other parties named therein, as amended
from time to time (the "Stockholders' Agreement"); and
WHEREAS, the parties hereto desire to set forth in this Agreement
certain rights, obligations and restrictions with respect to the issuance to,
and ownership by, the Purchaser of capital stock of the Company.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
Section 1.1. Commitment to Purchase Shares. On the terms and subject to
the conditions of this Agreement, the Purchaser hereby commits to purchase 225
shares of Common Stock (or such lesser amount as is required pursuant to the
Purchaser Capital Calls, as defined below) (the "Shares") at $1,000 per share
(the "Purchase Price Per Share"), for an aggregate commitment of $225,000 (the
"Commitment Amount"). The Purchaser shall be required to purchase 17.71 shares
upon the commencement of his employment with the Company and the balance of such
Shares (or such lesser amount as is required pursuant to the Purchaser Capital
Calls) at any time GSCP and Constellation are required to purchase shares of
Common Stock (a "GSCP/Constellation Purchase") as set forth in Section 3(a) of
the Stockholders' Agreement. Written notice of any Purchaser Capital Call shall
be given to the Purchaser at the same time and in the same manner as notice of a
Capital Call (as defined in the Stockholders Agreement) is given to GSCP and
Constellation pursuant to Section 3(a) of the Stockholders' Agreement.
29
Upon each GSCP/Constellation Purchase, the Purchaser will be required to
purchase Shares, at the Purchase Price Per Share, for that portion of the
Commitment Amount that is equal to the product of (a) the Commitment Amount
times (b) a fraction, the numerator of which is the amount to be paid by GSCP to
purchase shares of Common Stock in accordance with Section 3(a)(iv) of the
Stockholders' Agreement pursuant to the Capital Call being made simultaneously
with the Purchaser Capital Call and the denominator of which is GSCP's total
commitment to purchase shares of Common Stock pursuant to Section 3(a)(i) of the
Stockholders' Agreement (such product referred to as the "Purchaser Capital
Call"). In the event that the Purchaser's employment with the Company is
terminated for any reason, the Purchaser's remaining Commitment Amount shall be
reduced to zero. Purchaser's commitment shall be subject to compliance with
applicable federal and state securities laws.
Section 1.2. Consideration. On the terms and subject to the conditions of
this Agreement, in consideration for the sale of the Shares, on the date of such
sale, the Purchaser will (a) pay to the Company 33 1/3% of the purchase price
for such Shares in cash ("Cash Payment") and (b) issue a note in the form
attached hereto as Annex A payable to the order of the Company in the principal
amount of 66 2/3% of the Purchaser's Capital Call (the "Note"), (collectively,
the Purchase Price").
Section 1.3. Delivery of Shares and Payment. On the date of the closing of
the purchase of the Shares (which, with respect to the purchase of any shares
after the initial purchase of shares by the purchaser, closing shall be the same
as that of the closing of the GSCP/Constellation Purchase) (the "Closing"), (i)
the Company shall issue certificates representing the Shares, together with duly
executed stock powers, free and clear of all liens and restrictions of any kind
(except for those imposed by applicable securities laws, this Agreement and the
Note) and (ii) the Purchaser shall deliver or cause to be delivered to the
Company (x) the Cash Payment by wire transfer of immediately available funds, to
an account or accounts designated by the Company in a written notice to the
Purchaser and (y) the Note, duly authorized and executed.
ARTICLE 2
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 2.1. Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. All necessary action, corporate or otherwise, required to have been
taken by or on behalf of the Company by applicable law, its charter documents or
otherwise to authorize (i) the approval, execution and delivery on behalf of the
Company of this Agreement and (ii) the performance by the Company of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby has been taken. This Agreement constitutes a valid and
binding agreement of the Company, enforceable against each respectively in
accordance with its terms, except (x) as the same may be limited by
-2-
30
applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (y) for the limitations imposed by
general principles of equity. The foregoing exceptions are hereinafter referred
to as the "Enforceability Exceptions."
Section 2.2. The Shares. Upon delivery to Purchaser from time to time of
certificates representing the Shares, and upon receipt by Company of the payment
in full therefor, (i) good and valid title to the Shares will pass to Purchaser,
free and clear of all liens and restrictions of any kind (except for those
imposed by applicable securities laws and the Note) and (ii) the Shares will be
validly issued, fully paid and nonassessable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
Section 3.1. Natural Person; Authorization. The Purchaser is a natural
person and competent to execute this Agreement and has taken all action required
by law to authorize the execution and delivery of this Agreement and the
transactions contemplated hereby. Upon execution, this Agreement is the valid
and binding obligation of the Purchaser enforceable in accordance with its
terms, except that such enforcement may be subject to the Enforceability
Exceptions.
Section 3.2. Purchase Entirely for Own Account; Disclosure of Information.
This Agreement is made with the Purchaser in reliance upon the Purchaser's
representations to the Company which by the Purchaser's execution of this
Agreement it hereby confirms, that the Shares to be received by the Purchaser
will be acquired for investment for the Purchaser's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the same. The Purchaser does not
have any contract, undertaking, agreement or arrangement (except as set forth in
this Agreement) with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Shares. The
Purchaser acknowledges that it has received all the information it has requested
or considers necessary or appropriate for deciding whether to purchase the
Shares. The Purchaser further represents that it has had an opportunity to ask
questions and receive answers from the Company regarding the Company and the
terms and conditions of the offering of the Shares and to obtain any additional
information necessary to verify the accuracy of the information given to the
Purchaser.
Section 3.3. Restricted Securities; Accredited Investor. (a) The Purchaser
understands that the Shares are "restricted securities" under the Securities Act
of 1933, as amended ("Act"), as they are being acquired from the Company in a
transaction not involving a public offering and that under the Act and the rules
and regulations thereunder such securities may be resold without registration
under the Act, only in certain limited circumstances. In this connection, the
Purchaser represents that it is familiar with Rule 144 promulgates under the
Act, as presently in
-3-
31
effect, and understands the resale limitations imposed thereby and by the Act.
The Purchaser is an "accredited investor" within the meaning of paragraph (a) of
Rule 501 of Regulation D promulgated under the Act. The Purchaser has sufficient
knowledge and experience to analyze the Company so as to be able to evaluate the
risks and merits of its investments in the Company and is financially able to
bear the risks thereof.
ARTICLE 4
MISCELLANEOUS
Section 4.1. Right of First Refusal. (a) Subject to subsection (d) hereof,
any Shares acquired pursuant to Article I hereof shall be subject to a right of
first refusal in favor of the Company with respect to any proposed sale by the
Purchaser or any subsequent holder (the "Holder") of the Shares. If the Holder
receives and intends to accept an offer to sell or transfer such Shares, the
Holder shall deliver written notice (the "Proposed Sale Notice") by certified
mail, return receipt requested to the Secretary of the Company, at its principal
executive office. The Proposed Sale Notice shall state that the Holder intends
to sell such Shares and the name of the proposed purchaser (the "Proposed
Purchaser") and shall state the number of Shares, the price per Share and the
terms and conditions for the payment of such price (the "Terms of Sale"). The
foregoing right of first refusal shall not apply to any gift (or transfer
without consideration) of any Shares to any Permitted Transferee (as such term
is defined in the Orion Power Holdings, Inc., 1998 Stock Incentive Plan, as
amended from time to time (the "Plan")), so long as such Permitted Transferee
agrees in writing, in such form reasonably acceptable to the Company, that such
Shares shall continue to be subject to the same conditions, restrictions and
covenants in effect immediately prior to such gift or transfer.
(b) The Company shall have thirty (30) days from the date of receipt
of the Proposed Sale Notice to purchase the Shares on the Terms of Sale. The
Company shall exercise its right of first refusal by giving written notice (the
"Purchase Notice") to the Holder. The Purchase Notice shall set forth a date not
more than thirty (30) days after the date of such notice by which the Holder
should deliver the certificate(s) representing such Shares to the Company's
principal executive office.
(c) If the Company elects not to exercise its right of first refusal
within thirty (30) days, the Holder may dispose of the Shares; provided,
however, that such sale (i) is to the Proposed Purchaser, (ii) on the Terms of
Sale, and (iii) occurs within thirty (30) days after the expiration of the
Company's right of first refusal.
(d) The Company's right of first refusal as provided herein shall
expire at the time of an Initial Public Offering.
Section 4.2. Right of Repurchase.
(a) Subject to subsection (b) hereof, in the event that the
Purchaser's employment with the Company is terminated for any reason, the
Company, or such other party as the Company may designate, shall have the right
(as described below) to purchase from the Holder any and all Shares issued
pursuant to Article I hereof. This repurchase right shall be
-4-
32
exercisable by the Company, or such other party as the Company may designate, by
delivery of a repurchase notice to the Holder prior to the date which is six (6)
months after the later of (i) the date of termination of the Purchaser's
employment with the Company for any reason or (ii) the date of issuance of any
Share(s) pursuant to Article I hereof. The price payable to the Holder by the
Company in connection with the Company's purchase of any Share pursuant to this
Section 4.2 shall be determined as follows:
(i) The purchase price per Share shall be the Fair Market
Value (as such term is defined in the Plan) of a Share on the date
preceding the date of purchase in the event that the Purchaser's
employment is terminated at any time for any reason, other than a
termination by the Company for Cause (as such term is defined in the
Employment Agreement, dated June 1, 1999, by and between the Company and
W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇).
(ii) The purchase price per Share shall be equal to the lesser
of (a) the price paid by the Purchaser, and (b) the Fair Market Value of a
Share on the date preceding the date of purchase, in the event that the
Purchaser's employment is terminated by the Company for Cause.
(b) The Company's right of repurchase as provided herein shall
expire at the time of an Initial Public Offering.
Section 4.3. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware applicable
to agreements made and to be performed wholly within such jurisdiction.
Section 4.4. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. No party hereto shall have the
right to assign its rights and obligations under this Agreement, without the
prior written consent of the other party.
Section 4.5. Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested; to:
(a) If to the Company: Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
-5-
33
(b) If to the Employee: W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Section 4.6. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf as of the day and year
first written above.
ORION POWER HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
-6-
34
ANNEX A
FORM OF(1)
ORION POWER HOLDINGS, INC.
NON-RECOURSE SECURED PROMISSORY NOTE AND SECURITY
AGREEMENT
("NOTE")
$ [Date]
---------------------------
FOR VALUE RECEIVED, the undersigned, W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Borrower"), hereby promises to pay to Orion Power Holdings, Inc., a Delaware
corporation (the "Company"), or to the legal holder of this Note at the time of
payment, the principal sum (the "Principal Sum") of [ ]
($_______________)(2) in lawful money of the United States of America. The
Borrower also agrees to pay interest (computed on the basis of a 365 day year)
on any portion of the Principal Sum that remains outstanding from and after the
effective date of this Note until the entire Principal Sum has been paid in
full, at an annual rate of 7% simple interest; provided, however, that interest
on the unpaid Principal Sum shall be payable annually, with the first interest
payment due and payable on December 31, 1999, and with subsequent payments due
and payable on each anniversary of such date; and further, provided, that in no
event shall such interest be charged to the extent it would violate any
applicable usury law. Other than with respect to the Pledged Collateral (as
defined below) to the extent set forth hereunder, the obligations represented by
this Note shall be without recourse to the Borrower.
The proceeds received by the Borrower shall be used solely to
acquire shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") pursuant to the terms set forth in that certain Stock Purchase
Agreement, dated as of _______ ___ , 1999, by and among the Company and the
Borrower (the "Stock Purchase Agreement").
This Note is subject to the following further terms and conditions:
-----------------------------------
(1) To be executed in connection with each stock purchase, upon the
occurrence of each Purchaser Capital Call.
(2) To be equal to two-thirds of the total stock purchased in connection
with each Purchaser Capital Call.
35
1. Payment Upon Maturity. The Principal Sum then outstanding and
all accrued interest thereon shall become due and payable on the first to occur
of (i) the fifth anniversary of the date hereof, (ii) the ninetieth (90th) day
immediately following Borrower's termination of employment with the Company for
any reason whatsoever and (iii) a Change in Control (as such term is defined in
the Orion Power Holdings, Inc. 1998 Stock Incentive Plan, as amended from time
to time (the "Plan")).
2. Payment and Prepayment. All payments and prepayments of the
Principal Sum of and the accrued interest on this Note shall be made to the
Company or its order, or to the legal holder of this Note or such holder's
order, in lawful money of the United States of America at the principal offices
of the Company (or at such other place as the holder hereof shall notify the
Borrower in writing). The Borrower may, at his option, prepay this Note in whole
or in part at any time or from time to time without penalty or premium. Any
prepayments of any portion of the Principal Sum of this Note shall be
accompanied by payment of all interest accrued but unpaid on the portion of
Principal Sum so repaid. Upon full and final payment of the Principal Sum of and
interest accrued on this Note, it shall be surrendered to the Borrower and the
Pledged Collateral (as defined below) shall be released, subject to the terms of
any other note or similar agreement entered into by and between the Company and
the Borrower from time to time.
3. Grant of Security Interest.
(a) As security for the full and punctual payment of the Principal
Sum and accrued interest on this Note when due and payable (whether upon stated
maturity, or otherwise), the Borrower hereby grants and pledges a continuing
lien on and security interest in, and, as a part of such grant and pledge,
hereby pledges, assigns, transfers and conveys to the Company as collateral
security, the following assets, together with any and all dividends and other
distributions made in respect of such assets and any and all securities issued
in substitution or exchange for such assets (the "Pledged Collateral"):
(i) any and all shares of Common Stock beneficially owned by
the Borrower as of the date hereof and any shares
purchased with the proceeds of this Note (the "Pledged
Stock");
(ii) any and all options (the "Options") to purchase Common
Stock granted to the Borrower on or prior to the date
hereof or hereafter, pursuant to the Plan; and
-2-
36
(iii) any and all shares of Common Stock acquired by the
Borrower after the date hereof in connection with the
exercise of Options or pursuant to the terms of the
Stock Purchase Agreement (collectively, the "Additional
Pledged Stock").
(b) The Borrower will defend the Company's right, title and
interest in and to the Pledged Collateral against the claims and demands of all
other persons.
(c) Concurrently with making this Note, the Borrower has delivered
to the Company the certificates representing the Pledged Stock, together with
appropriate undated stock powers duly executed in blank for the Pledged Stock
and the Borrower agrees that he shall deliver to the Company certificates
representing the Additional Pledged Stock upon his acquiring such shares from
time to time. The Borrower agrees to deliver, if necessary or appropriate,
additional undated stock powers duly executed in blank for the Pledged Stock and
to take such additional action as is required from time to time to perfect the
Company's security interest in the Pledged Stock, the Additional Pledged Stock
and the Options.
(d) So long as the Borrower has not defaulted in the timely
payment of principal and interest hereunder, or such default shall not have been
cured within (30) days following the due date of any such payment (a "Default"),
the Borrower shall be entitled to vote the Pledged Stock and the Additional
Pledged Stock and to give all consents, waivers and ratifications in respect of
the Pledged Stock and the Additional Pledged Stock. Upon the occurrence of a
Default, all voting and other consensual rights of the Borrower in the Pledged
Stock and the Additional Pledged Stock shall cease and may be exercised by the
Company.
(e) Upon the occurrence of a Default, the Company shall have and
may exercise all rights and remedies afforded to a secured party under the
Delaware Uniform Commercial Code applicable thereto, and shall have the right to
retain the Pledged Collateral in partial or full satisfaction of the Borrower's
obligations under this Note in accordance with the provisions of, and to the
extent permitted under, the Delaware Uniform Commercial Code. With respect to
the preceding sentence, the Company shall, in its sole discretion, determine the
order in which all or any portion of the assets comprising the Pledged
Collateral shall be applied in satisfaction of the Borrower's obligations under
this Note; provided, however, that the value of any such assets so applied shall
be determined in accordance with paragraph (f) of this Section 3. Borrower
hereby agrees to indemnify the Company and hold it harmless from and against any
and all costs and expenses, including without limitation attorneys fees,
reasonably incurred by the Company in connection with any Default.
-3-
37
(f) In the event of a Default, for purposes of this Note (i) the
value of a share of Common Stock as of any date shall be equal to the Fair
Market Value (as defined in the Plan) of a share of Common Stock as of such
date, except that if the value of a share of Common Stock is determined
following the Borrower's termination of employment by the Company for "Cause"
(as such term is defined in that certain Employment Agreement, dated as of
______________ [date], by and among the Borrower and the Company), then for
purposes of this Note the value of a share of Common Stock shall be deemed to
equal the lesser of (A) the price paid by the Borrower for such share and (B)
the Fair Market Value of such share and (ii) the value of an Option as of any
date shall be equal to the Fair Market Value of the shares of Common Stock
subject to the Option as of such date, less (A) the aggregate exercise price of
such Option and (B) all applicable withholding taxes payable in respect of such
Option.
(g) The Borrower agrees that at any time and from time to time
upon the written request of the Company, the Borrower will execute and deliver
such further documents and do or cause to be done such further acts and things
as the Company may reasonably request in order to effect the purposes of this
Note and the grant of the security interest hereunder.
4. Notice. For the purposes of this Note, notices, demands and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Borrower:
W. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Orion Power Holdings, Inc.
▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
-4-
38
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
5. Miscellaneous.
(a) No delay or failure by the Company or the holder of this Note
in the exercise of any right or remedy shall constitute a waiver thereof, and no
single or partial exercise by the holder hereof of any right or remedy shall
preclude other or future exercise thereof or the exercise of any other right or
remedy.
(b) The headings contained in this Note are for reference purposes
only and shall not affect in any way the meaning or interpretation of the
provisions hereof.
(c) The provisions of this Note shall be governed by and construed
in accordance with laws of the State of Delaware, without giving effect to the
choice of law principles thereof.
IN WITNESS WHEREOF, this Note has been duly executed and delivered
to the Company by the Borrower on the date first above written.
----------------------------------
Borrower
Witness:
------------------------------
-5-