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Exhibit (3)
CONTRIBUTION AND STOCKHOLDERS AGREEMENT
CONTRIBUTION AND STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of
August 26, 1999, among CALPINE EAST ACQUISITION CORP., a Delaware corporation
(the "Company"), CALPINE CORPORATION, a Delaware corporation ("Buyer"), and NRG
ENERGY, INC., a Delaware corporation ("NRG", and together with the Buyer, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, on the date hereof, the Company is authorized by its
Certificate of Incorporation to issue Capital Stock consisting of 1,000 shares
of common stock, without par value (the "Common Stock");
WHEREAS, the Company has been formed for the purpose of entering into
an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), and, subject to satisfaction or waiver of the conditions set forth
in the Merger Agreement, consummating a merger (the "Merger") with and into
Cogeneration Corporation of America, a Delaware corporation ("Cogen"), with
Cogen continuing as the surviving corporation;
WHEREAS, it is contemplated that immediately prior to and following the
consummation of the Merger, NRG will own 20% of the issued and outstanding
shares of Capital Stock of the Company and the Buyer will own 80% of the issued
and outstanding shares of Capital Stock of the Company; and
WHEREAS, the parties hereto deem it in their best interests and in the
best interests of the Company to provide consistent and uniform management for
the Company and desire to enter into this Agreement in order to effectuate that
purpose and to set forth their respective rights and obligations in connection
with their proposed investment in the Company.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement,
the following terms shall have the following respective meanings:
"Actual Adjusted Net Income" has the meaning specified in
Section 9.3(a).
"Adjustment Amount" has the meaning specified in Section
5.1(a).
"Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" means this Contribution and Stockholders Agreement
as in effect on the date hereof and as hereafter from time to time amended,
modified or supplemented in accordance with the terms hereof.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Sec. 101 et seq., as now in effect and as from time to time hereafter
amended, and any successor or similar statute.
"Board of Directors" means the Board of Directors of the
Company as from time to time hereafter constituted.
"Buyer Directors" has the meaning specified in Section 2.3(b).
"By-Laws" means the Amended and Restated By-Laws of the
Company in the form set forth as Exhibit D hereto, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and pursuant to applicable law.
"Cancelled Options" has the meaning specified in Section
5.1(a).
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock of any Person, including, without limitation, shares
of preferred or preference stock, (ii) all partnership interests (whether
general or limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any Person which is a
limited liability company, and (iv) all equity or ownership interests in any
Person of any other type.
"Cash Equivalents" means
(a) marketable obligations maturing within 180 days after
acquisition thereof issued or fully guaranteed by the United States of America
or an instrumentality or agency thereof,
(b) open market commercial paper, maturing within 180 days
after acquisition thereof, which has the highest credit rating of either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., issued by a
corporation (other than the Company or any of its Subsidiaries or Affiliates)
organized under the laws of any State of the United States of America or of the
District of Columbia, and
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(c) certificates of deposit or bankers acceptances or other
obligations maturing within 180 days after acquisition thereof issued by a
domestic commercial bank which is a member of the Federal Reserve System and has
capital, surplus and undivided profits in excess of $500,000,000.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company in the form set forth as Exhibit C
hereto, and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and pursuant to applicable law.
"Cogen" has the meaning specified in the Recitals.
"Commission" means the Securities and Exchange Commission and
any successor commission or agency having similar powers.
"Common Stock" means the common stock, without par value, of
the Company and any Capital Stock of the Company that is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Company" has the meaning specified in the first paragraph of
this Agreement, together with any of its successors or assigns (including,
without limitation, Cogen following the consummation of the Merger).
"Company Sale" has the meaning specified in Section 8.2(a).
"Contribution Date" has the meaning specified in Section 5.1.
"Drag-Along Notice" has the meaning specified in Section
8.2(a).
"Drag Along Right" has the meaning specified in Section
8.2(b).
"Disposing Stockholder" has the meaning specified in Section
8.3(b).
"Effective Date" means the date on which the Effective Time
(as such term is defined in the Merger Agreement) occurs.
"Exchange Act" means, as of any date, the Securities Exchange
Act of 1934, as amended.
"Fully Diluted Common Stock" means at any time all shares of
Common
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Stock then issued and outstanding and all shares of Common Stock issuable upon
the exercise of any then outstanding warrants, options, conversion rights or
other rights to subscribe for, purchase or acquire shares of Common Stock that
are at the time exercisable.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Independent Third Party" has the meaning specified in Section
8.2(a).
"Management Fee" has the meaning specified in Section 9.3(a).
"Merger" has the meaning specified in the Recitals.
"Merger Agreement" has the meaning specified in the Recitals.
"Merger Price" has the meaning specified in Section 5.1(a).
"NASD" means the National Association of Securities Dealers,
Inc. and its successors and assigns.
"Notice of Exercise" has the meaning specified in Section
8.1(a).
"NRG Director" has the meaning specified in Section 2.3(b).
"Offered Securities" has the meaning specified in Section
8.1(a).
"Option" has the meaning specified in Section 8.4(a).
"Option Period" has the meaning specified in Section 8.4(a).
"Option Price" has the meaning specified in Section 8.4(b).
"Permitted Transferee" has the meaning specified in Section
7.2.
"Person" means an individual or a corporation, association,
partnership, limited liability company, joint venture, organization, business,
trust or any other entity or organization, including a government or any
subdivision or agency thereof.
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"Pro Rata Portion" means, with reference to any Stockholder at
any time, a fraction, the numerator of which is the number of shares of Common
Stock then issued and outstanding and held by such Stockholder, and the
denominator of which is the aggregate number of shares of Common Stock then
issued and outstanding and held by the Stockholders taken together.
"Projected Adjusted Net Income" has the meaning set forth in
Section 9.3(a).
"Proposed Purchaser" has the meaning specified in Section
8.3(b).
"Public Offering" means a public offering and sale of equity
securities of the Company pursuant to an effective registration statement under
the Securities Act.
"Purchase Offer" has the meaning specified in Section 8.3(b).
"Quorum of the Board" has the meaning specified in Section
2.3(d).
"Registrable Securities" means the following: (a) all shares
of Common Stock issued or issuable now or hereafter owned of record or
beneficially by any Stockholder and (b) any shares of Capital Stock issued or
issuable by the Company in respect of any shares of Common Stock referred to in
the foregoing clause (a) by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares, reclassification,
recapitalization, merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been
issued, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144 under the Exchange Act, (iii)
they shall have been otherwise transferred or disposed of, and new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent transfer or disposition of them shall
not require their registration or qualification under the Securities Act or any
similar state law then in force, (iv) they shall have ceased to be outstanding,
or (v) with respect to the Registrable Securities held by any Person, when such
Registrable Securities, when aggregated with the Registrable Securities held by
such Person's Affiliates, constitute 1% or less of the shares of Common Stock at
the time outstanding.
"Registration Expenses" means any and all out-of-pocket
expenses
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incident to the Company's performance of or compliance with Section 10 hereof,
including, without limitation, all Commission, stock exchange and NASD
registration and filing fees, all fees and expenses of complying with securities
and blue sky laws (including the reasonable fees and disbursements of
underwriters' counsel in connection with blue sky qualifications and NASD
filings), all fees and expenses of the transfer agent and registrar for the
Registrable Securities, all printing expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, but excluding underwriting discounts and
commissions and applicable transfer and documentary stamp taxes, if any, which
shall be borne by the seller of the securities in all cases.
"Restricted Period" means the three-year period commencing on
the Effective Date.
"Securities Act" means, as of any date, the Securities Act of
1933, as amended.
"Stockholder" means (i) the Buyer, (ii) NRG or (iii) each
Permitted Transferee of any such Person who becomes a party to or bound by the
provisions of this Agreement in accordance with the terms hereof.
"Subsidiary" means as to any Person a corporation of which
outstanding shares of Common Stock having the power to elect a majority of the
Board of Directors of such corporation are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Total Equity Value of the Company" has the meaning specified
in Section 5.1(a).
"Transfer" has the meaning specified in Section 7.1.
"Transfer Notice" has the meaning specified in Section 8.1(a).
"Transfer Offer" has the meaning specified in Section 8.1(a).
"Transfer Offer Price Per Security" shall have the meaning
specified in Section 8.1(a).
"Valuation Notice" has the meaning specified in Section
8.4(b).
"Valuing Investment Bank" has the meaning specified in Section
8.4(b).
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"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all options, warrants,
conversion rights and other rights to subscribe for, purchase or acquire such
Capital Stock) of which, other than directors' qualifying shares, are owned,
beneficially and of record, by such Person or one or more Wholly-Owned
Subsidiaries of such Person.
ARTICLE II
THE COMPANY
Section 2.1 Organizational Documents. Attached hereto as Exhibits A and
B, respectively, are the current certificate of incorporation and by-laws of the
Company. On the Contribution Date but prior to the making of the contributions
referred to in Section 5.1 hereof, the Buyer and the Company shall cause the
Amended and Restated Certificate of Incorporation of the Company in the form set
forth as Exhibit C hereto to be filed with the Secretary of State of the State
of Delaware, and the Amended and Restated By-Laws of the Company in the form set
forth as Exhibit D hereto shall be approved by the Board of Directors.
Section 2.2 Capitalization. Prior to the Contribution Date, the
capitalization of the Company shall be 1,000 shares of Common Stock, all of
which shall be held by the Buyer.
Section 2.3 Board of Directors. The following provisions shall apply
with respect to the Board of Directors of the Company commencing on the
Contribution Date:
(a) Conduct of Business. The parties hereto confirm
that it is their intention that the business and affairs of
the Company shall be managed by its Board of Directors in
the best interests of the Company.
(b) Board of Directors. The Board of Directors shall be
composed of no more than seven directors. Each Stockholder
agrees to vote its shares of Common Stock, whether at a
duly-convened meeting or by written consent, to elect no
more than seven directors, one of whom shall be nominated by
NRG (the "NRG Director") and the remainder of whom shall be
nominated by the Buyer (the "Buyer Directors").
(c) Removal; Vacancies. Any director may be removed
from the Board of Directors, with or without cause, only
upon the affirmative vote of the Stockholders and in
accordance with the terms of this Section 2.3(c). The NRG
Director shall not be removed, with or without cause,
without the prior written consent of NRG. NRG agrees to vote
all of its shares of Common Stock for the removal of a Buyer
Director upon the request of the Buyer, and agrees not to
vote any of its shares of Common Stock for the removal of
any Buyer Director under any other circumstance. The Buyer
agrees to vote all of its shares of Common Stock for the
removal of the NRG Director upon the request of NRG, and
agrees not to vote any of its shares of Common Stock of the
Company for the removal of the NRG Director under any other
circumstance. In the event that any Director is unwilling or
unable (by reason of death, resignation or
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otherwise) to serve as such or is removed in accordance with
the terms of this Section 2.3(c), then the Stockholders
shall promptly elect the successor or replacement to such
Director upon the nomination of the Stockholder which
appointed such Director.
(d) Quorum of the Board of Directors. A quorum for any
meeting of the Board of Directors shall be at least a
majority of the directors (a "Quorum of the Board");
provided, that at least 48 hours prior written notice of
such meeting is duly given to the NRG Director. No action
may be taken by the Board of Directors at any meeting unless
a Quorum of the Board is present at the time such action is
taken.
(e) Committees of the Board of Directors. The Board of
Directors shall not have any committees, unless approved by
the unanimous consent of all members of the Board of
Directors or unless the NRG Director is a member of such
committee.
Section 2.4 No Conflict with Agreement. Each Stockholder
shall vote its shares of Common Stock, and shall take all actions necessary, to
ensure that the Certificate of Incorporation and By-Laws do not, at any time,
conflict with the provisions of this Agreement. In the event of any conflict
between this Agreement and the Certificate of Incorporation or the By-Laws, the
provisions of this Agreement shall govern and the Company and the Stockholders
shall take action as is required to ensure that the Certificate of Incorporation
and the By-Laws do not conflict with this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of NRG.
(a) Organization. NRG is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware and is duly licensed or
qualified to transact business as a foreign corporation and
is in good standing in each jurisdiction in which the nature
of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or
qualification.
(b) Due Authorization; Non-Contravention. The execution
and delivery by NRG of this Agreement and the performance by
NRG of its obligations hereunder have been duly authorized
by all requisite corporate action and will not violate any
provision (x) of the Certificate of Incorporation of NRG, as
amended, or the By-laws of NRG, as amended, (y) of law, any
order of any court or other agency of government, or (z) of
any indenture, agreement or other instrument to which NRG or
any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the
properties or assets of NRG, it being understood that, in
connection with the transactions contemplated by this
Agreement and the Merger Agreement, the parties will make
all requisite filings and otherwise comply with the
applicable requirements of (i) the HSR Act, (ii) the
Exchange Act and the Securities Act, (iii) state securities,
takeover or blue sky laws, and (iv) any other laws or
regulations.
(c) Binding Agreement. This Agreement has been duly
executed and delivered by NRG and, assuming the due
execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of NRG
enforceable in accordance with its terms.
(d) Ownership of Shares. NRG (or accounts controlled or
beneficially owned by NRG) is the lawful owner of 3,106,612
shares of common stock of Cogen, and has the power to vote
and dispose of such shares. To NRG's knowledge, such shares
of common stock are validly issued, fully paid and
nonassessable, with no personal liability attaching to the
ownership thereof. NRG has good title to its shares of
common stock, free and clear of any liens, adverse claims or
encumbrances whatsoever with respect to the ownership of or
the right to vote such shares. Such shares constitute all of
the shares of common stock of Cogen owned of record or
beneficially by NRG. NRG does not own any options to
purchase or rights to subscribe for or otherwise acquire any
securities of Cogen. Except as otherwise provided in this
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Agreement, NRG has the sole voting power and sole power to
issue instructions with respect to the matters set forth in
this Agreement, sole power of disposition, sole power to
demand appraisal rights and sole power to agree to all of
the matters set forth in this Agreement, in each case with
respect to all of the shares of common stock of Cogen owned
by NRG with no limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and
the terms of this Agreement. The terms "beneficially own" or
"beneficial ownership" with respect to any securities shall
mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Exchange Act.
Section 3.2 Representations and Warranties of the Buyer.
(a) Organization. The Buyer is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware and is duly licensed or
qualified to transact business as a foreign corporation and
is in good standing in each jurisdiction in which the nature
of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or
qualification.
(b) Due Authorization; Non Contravention. The execution
and delivery by the Buyer of this Agreement and the
performance by the Buyer of its obligations hereunder have
been duly authorized by all requisite corporate action and
will not violate any provision (x) of the Certificate of
Incorporation of the Buyer, as amended or the By-laws of the
Buyer, as amended, (y) of law, any order of any court or
other agency of government, or (z) of any indenture,
agreement or other instrument to which the Buyer or any of
its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition
of any lien, charge, restriction, claim or encumbrance of
any nature whatsoever upon any of the properties or assets
of the Buyer, it being understood that, in connection with
the transactions contemplated by this Agreement and the
Merger Agreement, the parties will make all requisite
filings and otherwise comply with the applicable
requirements of (i) the HSR Act, (ii) the Exchange Act and
the Securities Act, (iii) state securities, takeover or blue
sky laws, and (iv) any other laws or regulations.
(c) Binding Agreement. This Agreement has been duly
executed and delivered by the Buyer and, assuming the due
execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of the
Buyer enforceable in accordance with its terms.
ARTICLE IV
COVENANTS
Section 4.1 Irrevocable Proxy. NRG hereby irrevocably appoints the
Buyer, or any
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designee of the Buyer, with full power of substitution the lawful agent,
attorney and proxy of NRG, from the date hereof until the Effective Date or
unless this Agreement is terminated pursuant to Article XI hereof, at any
meeting of the stockholders of Cogen, however called, or in connection with
any written consent of the stockholders of Cogen (including the right to
sign its name (as a stockholder) to any consent, certificate or other
document relating to Cogen that the law of the State of Delaware may permit
or require), to vote (or cause to be voted) the shares of common stock of
Cogen held of record or beneficially by NRG (i) in favor of the Merger, the
execution and delivery by Cogen of the Merger Agreement and any amendments
thereto (so long as any such amendment does not materially adversely affect
NRG) and the approval of the terms thereof, the amendment of the Cogen
certificate of incorporation as provided in the Merger Agreement, and each
of the other actions contemplated by this Agreement and the Merger
Agreement, and any amendments hereto or thereto, with NRG's consent
pursuant to the terms of this Agreement, and any actions required in
furtherance hereof and thereof, (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination
between Cogen and any Person (other than the Merger) or any other action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Cogen under the Merger
Agreement or this Agreement, (iii) against any of the following actions
(other than the transactions contemplated by the Merger Agreement): (1) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving Cogen or any of its Subsidiaries; (2)
a sale, lease or transfer of a material amount of assets of Cogen or any of
its Subsidiaries or a reorganization, recapitalization, dissolution or
liquidation of Cogen of any of its Subsidiaries; (3) (a) any change in the
majority of Cogen's board of directors; (b) any material change in the
present capitalization of Cogen or any amendment to Cogen's certificate of
incorporation (other than such amendment contemplated in connection with
the Merger); or (c) any other change in Cogen's corporate structure or
business; or (4) any other action which, is intended, or could reasonably
be expected, to impede, interfere with, delay, postpone, discourage or
adversely affect the Merger or the transactions contemplated by this
Agreement or the contemplated economic benefits of any of the foregoing, or
impede, interfere with, delay, postpone, discourage or adversely affect the
Merger or the transactions contemplated by this Agreement. NRG further
agrees to cause its shares of common stock of Cogen that are outstanding
and owned by it beneficially to be voted in accordance with the foregoing.
NRG agrees that it shall not enter into any agreement, arrangement or
understanding with any Person the effect of which would be inconsistent
with or violate the provisions of this Section 4.1. NRG intends this proxy
to be irrevocable and coupled with an interest and will take such further
action or execute such other instruments as may be necessary to effectuate
the intent of this proxy and hereby revokes any proxy previously granted by
it with respect to its shares of common stock of Cogen. NRG shall not,
hereafter, unless and until this Agreement terminates pursuant to the terms
hereof, purport to vote (or execute a consent with respect to) its shares
of common stock of Cogen (other than through this irrevocable proxy) or
grant any other proxy or power of attorney with respect to any such shares,
deposit such shares into a voting trust or enter into any agreement (other
than this Agreement), arrangement or understanding with any Person,
directly or indirectly, to vote, grant any proxy or give instructions with
respect to the voting of such shares.
Section 4.2 Additional Covenants.
(a) Cooperation. Prior to the Effective Date, each of
the Stockholders shall use its reasonable efforts to take
all actions and to do all things necessary, proper or
advisable in order to permit the consummation of the Merger.
The Buyer shall not cause the Merger Agreement to be amended
or consent to any proposed amendment of the Merger
Agreement, or waive any of its rights thereunder, in any way
that would be materially adverse to NRG, without NRG's prior
written consent.
(b) Operation of Business. Each of the Stockholders
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acknowledges that the Company is formed solely for the
purpose of effectuating the transactions contemplated by
this Agreement and the Merger Agreement. The Company shall
not transact any business whatsoever during the period
commencing on the date hereof and continuing through the
Effective Date other than in furtherance of the transactions
contemplated by this Agreement or the Merger Agreement.
(c) Dividend Policy. Beginning on the fourth
anniversary of the Effective Date, the Stockholders will
cause the Company to adopt appropriate policies of declaring
dividends at the highest level permitted by applicable law,
consistent with prudent business practices and having due
regard for relevant business, taxation, working capital,
financial covenant and operational requirements.
(d) Securities Filings. Each of the Buyer, the Company
and NRG shall promptly provide to any other party any
information requested for the purpose of preparing any
filings required to be filed with the Commission pursuant to
Sections 13d and 13e of the Exchange Act, and the rules and
regulations promulgated thereunder, in connection with this
Agreement or the Merger Agreement and the transactions
contemplated hereby and thereby.
(e) No Solicitation. Neither NRG nor any officer,
director, employee, representative or agent of NRG shall,
directly or indirectly, solicit, encourage, facilitate,
participate in or initiate any discussions or negotiations
regarding, or furnish to any Person any information with
respect to, or take any other action to facilitate any
inquiries or the making of any submission or proposal by any
Person (other than the Buyer) which constitutes, or may
reasonably be expected to lead to, (a) any sale of shares of
common stock of Cogen owned by NRG or (b) any Takeover
Proposal or Superior Proposal (as such terms are defined in
the Merger Agreement) or any agreement with respect thereto.
If NRG, or any officer, director, employee, representative
or agent of NRG, receives an inquiry or proposal with
respect to the sale of shares of common stock of Cogen, any
Takeover Proposal or any inquiry with respect to or which
could lead to any sale of shares of its common stock of
Cogen or any Takeover Proposal, then NRG shall advise the
Buyer orally (within one business day) and in writing (as
promptly as practicable) of the terms and conditions, if
any, of such inquiry or proposal and the identity of the
Person making it. NRG shall, and shall cause its officers,
directors, employees, representatives and agents to,
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
This Section 4.2(e) will bind or apply to any Person except
in his or her capacity as a director of Cogen (or as an
officer of Cogen acting at the direction of Cogen's board of
directors) under applicable law and fiduciary duties, in
which case his or her actions shall be restricted solely by
the terms of the Merger Agreement.
(f) Restrictions on Transfer, Proxies and
NonInterference. Prior to the Effective Date, NRG hereby
agrees, except as contemplated hereby, not to (i) acquire,
sell, transfer, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the
acquisition, sale, transfer, pledge, encumbrance, assignment
or
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other disposition of, any shares of common stock of Cogen,
(ii) grant any proxies, deposit any of its shares of common
stock of Cogen into a voting trust or enter into a voting
agreement with respect to any of its shares of common stock
of Cogen, or (iii) take any action that would make any
representation or warranty of NRG contained herein untrue or
incorrect or have the effect of preventing or disabling NRG
from performing its obligations under this Agreement. NRG
agrees to notify the Buyer promptly and to provide all
details requested by the Buyer if NRG shall be approached or
solicited, directly or indirectly, by any Person with
respect to any of the foregoing.
(g) Stop Transfer Order. In furtherance of this
Agreement, concurrently with the execution of this
Agreement, NRG shall and hereby does authorize Cogen's
counsel to notify Cogen's transfer agent that there is a
stop transfer order with respect to all of NRG's shares of
common stock of Cogen (and that this Agreement places limits
on the voting and transfer of such shares).
(h) Cooperation on Regulatory Matters. If so requested
by the Buyer, promptly after the date hereof, NRG will use
its reasonable best efforts to cause it and Cogen (if
required) to make all filings which are required under the
HSR Act and applicable requirements and to seek all
regulatory approvals required in connection with the
transactions contemplated hereby and by the Merger
Agreement. The parties shall furnish to each other such
necessary information and reasonable assistance as may be
requested in connection with the preparation of filings and
submissions to any governmental agency, including, without
limitation, filings under the provisions of the HSR Act. NRG
shall also use its reasonable efforts to cause Cogen to
supply the Buyer with copies of all correspondence, filings
or communications (or memoranda setting forth the substance
thereof) between Cogen and its representatives and the
Federal Trade Commission, the Department of Justice and any
other governmental agency or authority and members of their
respective staffs with respect to this Agreement and the
transactions contemplated hereby.
ARTICLE V
ADDITIONAL CONTRIBUTIONS
14
Section 5.1. Additional Capital Contributions. Immediately prior to the
Effective Date, but after an affirmative vote of Cogen's stockholders approving
the Merger Agreement has been duly taken and recorded, the Buyer and NRG shall
make contributions of capital to the Company as set forth below, it being
understood that all such contributions shall be made simultaneously (the date of
such contributions being referred to herein as the "Contribution Date"):
(a) Obligations of NRG. NRG shall contribute to the
Company that number of shares of common stock of Cogen that
have, in the aggregate, a value (based on a $25.00 per share
value) equal to (i) 20% of the Total Equity Value of the
Company, as hereinafter defined, less (ii) the Adjustment
Amount, as hereinafter defined, in exchange for such number
of shares of Common Stock as would result in NRG holding 20%
of the issued and outstanding shares of Common Stock. "Total
Equity Value of the Company" means the sum of (i) an amount
determined by multiplying (A) the total number of issued and
outstanding shares of common stock of Cogen by (B) $25.00
(the "Merger Price") and (ii) the aggregate amount of the
excess of the Merger Price over the exercise price of each
of the outstanding options set forth on Schedule 1 hereto
which are currently exercisable or will become exercisable
upon consummation of the Transactions (as defined in the
Merger Agreement). "Adjustment Amount" means an amount
determined by multiplying (i) the total number of shares
underlying the Cancelled Options, as hereinafter defined, by
(ii) the excess of the Merger Price over the exercise price
for each Cancelled Option. "Cancelled Options" means those
options owned by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Will and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇ listed on Schedule 1 to this Agreement,
which, on or before the Merger Date, have been cancelled for
no consideration and a termination agreement as contemplated
in the Merger Agreement has been signed and provided to the
Buyer. NRG represents that if such contribution were made on
the date hereof and assuming that Cancelled Options includes
all options held by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Will and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, it would be obligated to contribute to
the Company 1,394,973 shares of common stock of Cogen to the
Company. NRG may, at its sole option, contribute to the
Company additional shares of common stock of Cogen; provided
that it shall own 20% of the Common Stock and shall receive
no additional consideration in respect of any additional
capital contribution of shares of common stock of Cogen to
the Company.
(b) Obligations of the Buyer. The Buyer shall
contribute to the Company cash in an amount equal to 80% of
the Total Equity Value of the Company in exchange for such
number of shares of Common Stock as would result in the
Buyer holding 80% of the issued and outstanding shares of
Common Stock. The Buyer represents that if such contribution
were made on the date hereof, it would be obligated to
contribute $146,539,730, as appropriately adjusted to the
extent of any contribution by NRG under the last sentence of
Section 5.1(a) above. The requisite cash contribution by the
Buyer shall be made in immediately available funds.
Additionally, the Buyer will contribute to the Company, in
the form a loan pursuant to a Promissory Note in the form
attached hereto as Exhibit E, in an original principal
amount not less than (i) the amount necessary to repay in
full the debt of Cogen listed on Schedule 2 hereto, (ii) the
amount necessary to
15
satisfy all other obligations of the Company under this
Agreement and the Merger Agreement or any other document
related hereto or thereto, and (iii) transaction costs of
the Company associated with the transactions contemplated by
this Agreement and the Merger Agreement. The Buyer agrees
that it shall not consummate the Merger without either (i)
causing the outstanding indebtedness of Cogen's Subsidiaries
to be refinanced on the substantially the same terms as the
Promissory Note in the form attached hereto as Exhibit E;
provided, however, that NRG shall have the option to
participate in any such refinancing pro rata according to
its ownership of the Company or (ii) obtaining consent of
the lenders of Cogen's Subsidiaries to the transactions
contemplated by the Merger Agreement or this Agreement.
Section 5.2 NRG's Obligation to Contribute Shares. In no event
shall NRG be obligated to contribute its shares of common stock of Cogen
pursuant to Section 5.1(a) unless (i) Cogen's stockholders have duly approved
the Merger Agreement and (ii) all of the conditions to closing set forth in the
Merger Agreement have been satisfied or waived.
Section 5.3 The Buyer's Obligation to Contribute Cash. In no
event shall the Buyer be obligated to contribute cash pursuant to Section 5.1(b)
above unless all of the conditions to closing set forth in the Merger Agreement
have been satisfied or waived.
ARTICLE VI
MANAGEMENT OF THE COMPANY FOLLOWING THE MERGER
Section 6.1 Conduct of Business. (a) Notwithstanding the fact
that no vote may be required or that a lesser percentage vote may be specified
by law, by the Certificate of Incorporation or the By-Laws, each as amended, by
any agreement with any national securities exchange or otherwise, except as
hereinafter provided in this paragraph (a) or otherwise in this Agreement, as of
the date hereof, neither the Company nor its Subsidiaries shall take or permit
any of the following actions to be taken without the specific prior written
consent of NRG (which, at the direction of NRG, may be effectuated by the NRG
Director), except as otherwise contemplated by Article VIII or in any other
provision of this Agreement:
(i) The issuance, repurchase, exchange or
redemption of any Shares of any Capital Stock (including
any Common Stock), or the grant of the right or option
to acquire any shares of such Capital Stock, of the
Company.
(ii) Any sale or disposition of any of the
Company's Subsidiaries and, other than in the ordinary
course of business, the sale or disposition of property
or assets of the Company or its Subsidiaries in excess
of 20% of the fair market value of the total assets of
the Company.
(iii) Any amendment, modification or
supplement to, or repeal of, or adoption of any policy
or procedures inconsistent with, any provision of the
Certificate of Incorporation or By-Laws; provided, that,
the Company may amend the Certificate of Incorporation
to effect a change of name or a change of registered
agent for service of process
16
without NRG's prior written consent.
(iv) Any merger, consolidation or other
business combination of the Company with any other
Person except for any merger or consolidation involving
any direct or indirect Wholly-Owned Subsidiary of the
Company and except for the Merger.
(v) The authorization or entering into by
the Company or any of its Subsidiaries of any contract,
agreement, transaction or other arrangement or any
modification, waiver or amendment to any of the
foregoing, with any of the Buyer or its Affiliates with
a value (or obligation on the part of the Company or
such Subsidiary) in excess of $2,000,000; provided that
the Company or its Subsidiaries may enter into (x)
contracts, agreements, transactions or other
arrangements or modifications, waivers or amendments to
the foregoing with any of the Buyer or its Affiliates
with a value (or obligation on the part of the Company
or such Subsidiary) in excess of $2,000,000 if the terms
and provisions thereof are no less favorable to the
Company or such Subsidiary than those that would be
available in a comparable arms-length transaction and
the Buyer shall have certified the same to the Board of
Directors prior to the entry into or execution of the
same, and (y) the Merger Agreement and any of the
transactions or documents contemplated by the Merger
Agreement.
(vi) The appointment or renewal of the
Company's independent auditor if such auditor is not the
Buyer's independent auditor, or any change in accounting
periods or the accounting principles under which the
Company's financial statements are presented except as
may be required by GAAP or as are consistent with
accounting principles used by the Buyer as of the date
of this Agreement.
(vii) (a) the dissolution of the Company or
any of its Subsidiaries, or the commencing of the
process of dissolution; (b) the adoption of a plan of
liquidation of the Company or any of its Subsidiaries;
and (c) any action by the Company or any of its
Subsidiaries to commence any suit, case, proceeding or
other action (1) under the Bankruptcy Code or any other
existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of
debtors seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it bankrupt or
insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it, or (2)
seeking appointment of a receiver, trustee, custodian,
or other similar official for it or for all or any
substantial part of its assets or making a general
assignment
17
for the benefit of its creditors.
(viii) The issuance of any liquidating
distributions to the Stockholders.
(b) The Stockholders shall take no action that would have
the effect of causing the Company to contravene any provision of
this Section 6.1.
(c) Notwithstanding any provision in Section 6.1(a)(v), the
parties agree that the Buyer and/or its designated Affiliates
shall be permitted to enter into (i) Operating and Maintenance
Agreements with the Company or its Subsidiaries in substantially
the respective forms of such agreements existing on the date
hereof between NRG and its Affiliates, on one hand, and Cogen's
Subsidiaries, on the other hand, (ii) a Management
Services Agreement, an Operating and Maintenance Agreement for
the ▇▇▇▇▇ project and Energy Services Agreements in substantially
the respective forms agreed to by the parties on the date hereof,
and (iii) a Tax Sharing Agreement in substantially the form
agreed to by the parties on the date hereof.
ARTICLE VII
TRANSFERS OF CAPITAL STOCK
Section 7.1 Restrictions on Transfer. Each Stockholder agrees that
during the Restricted Period, such Stockholder will not offer, sell, transfer,
assign or otherwise dispose of (or make any exchange, gift, assignment or pledge
of or impose any lien or encumbrance on) (collectively, for purposes of Sections
7 and 8 hereof only, a "Transfer") any of its shares of Common Stock, or
options, warrants or rights to subscribe for or purchase shares of Common Stock,
without the prior written consent of all the Stockholders, which consent shall
not be unreasonably withheld or delayed. For purposes of this Section 7.1, a
merger or consolidation or other business combination or any change in control
of the Buyer or the ultimate parent company of NRG will not be deemed to be a
Transfer.
Section 7.2 Exceptions to Restrictions. The provisions of Section 7.1
and Section 8 shall not apply to any of the following transfers:
(a) From any Stockholder to any Wholly-Owned Subsidiary of
any Stockholder or any Person which owns 100% of the Capital
Stock of any Stockholder (each a "Permitted Transferee"),
provided that each such Permitted Transferee shall execute a
counterpart of and become a party to this Agreement and shall
agree in a writing in form and substance satisfactory to the
Company to be bound and becomes bound by the terms of this
Agreement.
(b) Pursuant to a permitted merger or consolidation
involving the Company or any of its Subsidiaries.
Section 7.3 Applicability. The provisions of this Agreement shall be
applied to the shares of Common Stock acquired by any Permitted Transferee of a
Stockholder in the same manner and to the same extent as such provisions were
applicable to such Common Stock in the hands of such Stockholder.
Section 7.4 Endorsement of Certificates.
18
(a) Upon the execution of this Agreement, in addition
to any other legend that the Company may deem advisable
under the Securities Act and certain state securities laws
or required pursuant to the Company's Certificate of
Incorporation or By-Laws, all certificates representing
issued and outstanding shares of Common Stock that are
subject to any of the provisions of this Agreement shall be
endorsed as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO,
AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE
PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST
26, 1999, AMONG THE COMPANY AND ITS STOCKHOLDERS. A COPY OF
THE ABOVE-REFERENCED AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. NO REGISTRATION OF TRANSFER OF SUCH
SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
(b) Except as otherwise expressly provided in this
Agreement, all certificates representing shares of Common
Stock hereafter issued to or acquired by any of the
Stockholders or their successors or assigns (including,
without limitation, all certificates representing shares of
Common Stock hereafter issued upon conversion of shares of
Common Stock of any other class) shall bear the legends set
forth above, and the shares of stock represented by such
certificates shall be subject to the applicable provisions
of this Agreement. The obligations of each party hereto
shall be binding upon each transferee to whom shares of
Common Stock are Transferred by any party hereto, whether or
not such Transfer is permitted under the terms of this
Agreement. Prior to consummation of any Transfer, such
Stockholder shall cause the Transferee to execute an
agreement in form and substance reasonably satisfactory to
the other Stockholders hereto, providing that such
Transferee shall fully comply with the terms of this
Agreement. Prompt notice shall be given to the Company and
each Stockholder by the transferor of any Transfer (whether
or not to a Permitted Transferee) of any Common Stock.
Section 7.5 Improper Transfer. Any attempt to Transfer or encumber any
shares of Common Stock other than in accordance with the terms of this Agreement
shall be null and void and neither the Company nor any transfer agent of such
securities shall give any effect to such attempted Transfer or encumbrance in
its stock records.
ARTICLE VIII
RIGHTS OF FIRST REFUSAL; DRAG-ALONG RIGHTS;
TAG-ALONG RIGHTS; PURCHASE OPTION
19
Section 8.1. Right of First Refusal.
(a) Except for (i) Transfers to a Permitted Transferee,
and (ii) transactions subject to Sections 8.2, 8.3, and 8.4,
if at any time after the Restricted Period NRG receives a
bona fide offer which NRG desires to accept (a "Transfer
Offer") to sell any shares of Common Stock (or options,
warrants or rights to subscribe for or purchase shares of
Common Stock) owned by it, then NRG shall cause the Transfer
Offer to be reduced to writing and shall deliver written
notice of such Transfer Offer (a "Transfer Notice"),
accompanied by a copy of such Transfer Offer to the Buyer
and the Company, setting forth the identity of the offeror,
the number and class of shares of Common Stock (or options,
warrants or rights) proposed to be transferred (the "Offered
Securities"), the price per security contained in the
Transfer Offer (the "Transfer Offer Price Per Security"),
and all other terms applicable thereto. The Transfer Notice
shall also contain an irrevocable offer to sell the Offered
Securities to the Buyer at a price equal to the Transfer
Offer Price Per Security and upon substantially the same
terms as contained in the Transfer Offer. In the event that
the form of consideration specified in the Transfer Offer is
other than cash, NRG shall use its best efforts to cause the
consideration of such Transfer Offer to be reduced to cash.
In the event that NRG is unsuccessful in obtaining a
Transfer Offer with cash consideration, NRG shall not accept
such Transfer Offer.
(i) Upon receipt of the Transfer
Notice, the Buyer shall then have the right
to accept such offer at the Transfer Offer
Price Per Security and on the other terms
specified in the Transfer Offer with respect
to all, but not less than all, of the
Offered Securities. The rights of the Buyer
pursuant to this clause (ii) shall be
exercisable by the delivery of notice to NRG
(the "Notice of Exercise") (a copy of which
shall also be delivered to the Company)
within 30 business days from the date of
delivery of the Transfer Notice, which
Notice of Exercise shall be deemed an
irrevocable acceptance of the Transfer
Offer.
(ii) In the event that the Buyer
exercises its rights to purchase all the
Offered Securities in accordance with clause
(i) above, then NRG must sell such Offered
Securities to the Buyer, at the Transfer
Offer Price Per Security and on the
20
other terms specified in the Transfer Offer.
(b) If all notices required to be given pursuant to
Section 8.1(a) have been duly given and the Buyer does not
purchase the Offered Securities pursuant to the provisions
hereof, then NRG shall have the right, subject to compliance
by NRG with the provisions of Section 7.4(b) hereof, from
the date which is the earlier of (i) the expiration of the
option period pursuant to Section 8.1(a) or (ii) the date on
which NRG receives notice from the Buyer that it will not
exercise the option granted pursuant to Section 8.1(a), to
sell to such Person which originally made the Transfer Offer
the Offered Securities at a price per Offered Security equal
to or greater than 100% of the Transfer Offer Price Per
Security and on the other terms specified in the Transfer
Offer.
(c) The consummation of any purchase and sale pursuant
to Section 8.1(a) shall take place on such date, not later
than 60 calendar days after the expiration of the option
period pursuant to Section 8.1(a), as the purchaser shall
select. Upon the consummation of any such purchase and sale,
NRG shall deliver certificates representing the Offered
Securities sold duly endorsed, or accompanied by written
instruments of transfer in form satisfactory to the
purchaser duly executed by NRG free and clear of any liens,
against delivery of the Transfer Offer Price Per Security
for each of the Offered Securities purchased by federal
funds wired to such bank or financial institution specified
in writing by NRG. If the purchase and sale is not
consummated within the 60 calendar day period referred to in
this subsection (c), then the provisions of Section 8.1
shall again apply to such shares.
Section 8.2. Drag-Along.
(a) Subject to any approval or other rights in this
Agreement, if after the expiration of the Restricted Period,
the Buyer sells all or substantially all the Fully Diluted
Common Stock owned by it (whether pursuant to a sale, merger
or other consolidation, a "Company Sale") in a bona fide
arm's-length transaction to a third party that is not an
Affiliate of the Buyer or of the Company (an "Independent
Third Party"), then the Buyer shall have the right, subject
to all the provisions of this Section 8.2 ("Drag-Along
Right"), to require NRG to (i) if such Company Sale is
structured as a sale of stock, sell, transfer and deliver or
cause to be sold, transferred and delivered to such
Independent Third Party all shares of Fully Diluted Common
Stock, owned or held by it or (ii) if such Company Sale
requires the consent or approval of the Company's
stockholders, vote NRG's shares of Common Stock in favor
thereof, and, in any such event, except to the extent
otherwise provided in subsection (c) of this Section 8.2,
NRG shall agree to and shall be bound by the same terms,
provisions and conditions in respect of the Company Sale as
are applicable to the Buyer. The provisions of Section 8.1
shall not apply to any transactions to which this Section
8.2
21
applies.
(b) If the Buyer desires to exercise its Drag-Along Rights,
it shall give written notice to the other Stockholder
("Drag-Along Notice") of the Company Sale, setting forth the name
and address of the transferee, the date on which such transaction
is proposed to be consummated (which shall be not less than 30
days after the date such Drag-Along Notice is given), and the
proposed amount of cash consideration and terms and conditions of
payment offered by such transferee.
(c) The obligations of the Stockholders in respect of a
Company Sale under this Section 8.2 are subject to the
satisfaction of the following conditions: (i) subject to (v)
below, upon the consummation of the Company Sale, consideration
of equivalent value in cash or Cash Equivalents realized upon
such Company Sale shall be paid or distributed in respect of each
share of Common Stock then issued and outstanding; (ii) each
holder of then currently exercisable rights to acquire shares of
Common Stock will be given a reasonable opportunity to exercise
such rights prior to the consummation of the Company Sale and
thereby to participate in such sale as a holder of such Common
Stock; (iii) there shall be no liability of NRG for
indemnification in respect of any matters arising pursuant to or
in connection with the Company Sale, other than with respect to
NRG's ownership of its shares of Common Stock; (iv) NRG shall not
be required to make general representations or warranties
regarding the financial condition, business, assets or affairs of
the Company and its Subsidiaries; (v) the valuation of NRG's
shares of Common Stock shall take into account not only the
consideration received by the Buyer for its Common Stock but also
any consideration received by the Buyer or its for the sale,
transfer or disposition of any ownership or other interests,
contract rights, permits or any other asset of the Buyer or its
Affiliates with respect to its investment in the Company related
to or contemplated by the sale of the Buyer's Common Stock; and
(vi) NRG shall be given a reasonable opportunity to review and
provide comments to the agreements or documents relating to the
Company Sale.
22
Section 8.3 Tag-Along Rights.
(a) Notwithstanding anything in this Agreement to the
contrary, except in the case of (i) transfers to a Permitted
Transferee referred to in Section 7.2 and (ii) transactions
subject to Section 8.2, the Buyer shall not sell, dispose of
or otherwise transfer any shares of Common Stock, options,
warrants or rights to subscribe for or purchase shares of
Common Stock, unless, prior to the consummation thereof, NRG
shall have been afforded the opportunity to join in such sale
with respect to all of the shares of Common Stock owned by
NRG, as hereinafter provided in this Section 8.3.
(b) Prior to consummation of any proposed sale,
disposition or transfer of shares of Common Stock (or options,
warrants or rights) described in Section 8.3(a), the Buyer
(the "Disposing Stockholder") shall cause the person or group
that proposes to acquire such shares (the "Proposed
Purchaser") to offer NRG in writing ("Purchase Offer") the
right to sell all of the shares of Common Stock (or options,
warrants or rights) owned by NRG. The Purchase Offer shall be
accompanied by a copy of the Proposed Purchaser's final offer
to the Disposing Stockholder. If the Purchase Offer is
accepted by NRG, then the number of shares of Common Stock (or
options, warrants or rights) to be sold to the Proposed
Purchaser by the Disposing Stockholder shall be reduced by the
aggregate number of shares of Common Stock (or options,
warrants or rights) to be purchased by the Proposed Purchaser
from NRG pursuant thereto. Such purchase shall be made on the
same terms and conditions as the Proposed Purchaser shall have
offered to purchase shares of Common Stock to be sold by the
Disposing Stockholder (net, in the case of any options,
warrants or rights, of any amounts required to be paid by the
holder upon exercise thereof); provided, however, that the
valuation of NRG's Common Stock shall take into account not
only the consideration received by the Buyer for its Common
Stock but also only consideration received by the Buyer or its
Affiliates for the sale, transfer or disposition of any
ownership or other interests, contract rights, permits or any
other asset of the Buyer or its Affiliates with respect to its
investment in the Company related to or contemplated by the
sale of the Buyer's Common Stock. NRG shall have 30 days from
the date of receipt of the Purchase Offer during which to
accept such Purchase Offer, and the closing of such purchase
shall occur within 30 days after such acceptance or at such
other time as NRG and the Proposed Purchaser may agree.
23
Section 8.4 Purchase Option.
(a) The Buyer shall, for a period of 365 days
commencing on the day after the expiration of the
Restricted Period (the "Option Period"), have the option
to acquire from NRG all, but not less than all, of the
shares of Common Stock held by NRG (the "Option").
(b) In the event that the Buyer determines that it
may exercise the Option, it shall, at any time during
the Option Period or within the 60 days prior to the
commencement of the Option Period, give notice to NRG
that it intends to obtain a fair market value
determination pursuant to this Section 8.4 (the
"Valuation Notice"). The fair market value of the
Company shall be determined by one nationally recognized
and independent investment bank mutually acceptable to
NRG and the Buyer (the "Valuing Investment Bank"), it
being understood that for the purpose of this Section
8.4 an independent investment bank shall be one which is
neither affiliated with nor employed as the primary
investment banking firm of NRG, the Buyer or the
Company. The Buyer shall include in its Valuation Notice
a list of at least three (3) investment banks acceptable
to the Buyer as the Valuing Investment Bank and
satisfying the criteria set forth in the preceding
sentence. Upon receipt of such list, NRG shall promptly
notify the Buyer which of such investment banks, if any,
is acceptable to it. If NRG rejects each such investment
bank as unacceptable to it, NRG shall promptly notify
the Buyer of the identity of at least three investment
banks acceptable to NRG and satisfying the criteria set
forth in the second sentence of this paragraph. Upon
receipt of such notice, the Buyer shall promptly notify
NRG which of such investment banks, if any, is
acceptable to it. NRG and the Buyer shall each act with
such promptness and diligence that the procedures
described in the foregoing sentences will result in the
selection of a Valuing Investment Bank in as short a
period of time as practicable. NRG and the Buyer shall
each be responsible for 50% of the total fees and
expenses charged by the Valuing Investment Bank;
provided, however, in the event that the Buyer does not
exercise the Option, the Buyer shall be responsible for
100% percent of the total fees and expenses charged by
the Valuing Investment Bank.
(c) The Valuing Investment Bank may use, among
other methodologies, discounted cash flow, comparable
transaction and traded company analyses to determine the
fair market value of the Company. In determining the
fair market value of the Company, the Valuing Investment
Bank shall evaluate the Company (i) without any
consideration of the
24
management fee to be paid to the Buyer under Section
9.3, (ii) without factoring in any discount arising from
NRG's minority ownership position and limited
representation on the Company's Board of Directors, and
(iii) without any consideration of any discount
applicable to an initial Public Offering. Moreover, to
the extent that, as of the time of the valuation
determination, financing for the Company or its
Subsidiaries or their generation assets is available
under terms more favorable than those terms in place,
the more favorable financing terms shall be utilized by
the Valuing Investment Bank in its fair market value
determination; provided, however, that to the extent the
financing for any of the Subsidiaries at the time of
such valuation is on substantially the same material
economic terms as the financing for such Subsidiary on
the date hereof, such financing terms shall be utilized
by the Valuing Investment Bank in its fair market value
determination.
(d) In the event that the Buyer wishes to exercise
the Option, the aggregate price payable to NRG for its
Common Stock (the "Option Price") shall be equal to
NRG's Pro Rata Portion of the fair market value of the
Company (on a consolidated basis) as determined by the
Valuing Investment Bank pursuant to Section 8.4(c)
above. The Buyer shall exercise the Option by providing
written notice to NRG prior to the expiration of the
Option Period, which notice shall be irrevocable.
Section 8.5 Waiver. For purposes of this Article VIII, any
Person who has failed to give notice of the election of an option hereunder
within the specified time period will be deemed to have waived its rights with
respect thereto on the day immediately following the last day of such period.
ARTICLE IX
CERTAIN AGREEMENTS
Section 9.1. Access to Information Regarding Subsidiaries. The
Buyer and the Company shall cause the NRG Director to be provided with all
material information regarding the Company's Subsidiaries, including without
limitation their respective business, operations, property, assets, condition
(financial or otherwise) or prospects thereof, and such other information
regarding the Company's Subsidiaries as the NRG Director, may reasonably
request. NRG shall at all times preserve in strict confidence all information of
a proprietary or confidential nature relating to the business of the Company and
which is acquired by virtue of this Agreement and shall use all such information
solely in connection with the monitoring of NRG's investment in the Company;
provided, that NRG shall be entitled to disclose any such information in
confidence to any of its professional advisors or publicly disclose such
information to the extent required by law, regulation or Commission filing.
Section 9.2. Financial Statements; Inspections.
(a) The Company and the Buyer shall provide NRG
with (i) the unaudited consolidated and consolidating
quarterly financial statements of the
25
Company and each of its Subsidiaries for each calendar
quarter within 35 days of the end of such calendar
quarter, and (ii) the audited consolidated and
consolidating financial statements of the Company and
each of its Subsidiaries for each calendar year within
70 days after the end of each calendar year.
(b) NRG's independent auditors shall, for purposes
of certifying the financial statements of NRG and its
direct and indirect parents, have the right, upon
reasonable prior notice to the Company, to visit and
inspect the properties of the Company and its
Subsidiaries and to examine and copy (at NRG's own
expense) their books of record and accounts, and to
discuss their affairs, finances, and accounts with their
officers and their current and prior independent public
accountants, all at such times (during normal business
hours) as NRG may reasonably request. The foregoing
rights are in addition, and are not intended to limit,
any rights that NRG may have under the law of the State
of Delaware, including Sections 219 and 220 of the
Delaware General Corporation Law.
Section 9.3 Management Fee.
(a) The Company shall pay to the Buyer a
management fee (the "Management Fee") determined in
accordance with the provisions of this Section 9.3(a).
The Management Fee shall be determined in arrears
following each calendar year and shall be equal to the
amount, if any, by which Actual Adjusted Net Income for
the immediately preceding calendar year exceeds the
Projected Adjusted Net Income for such calendar year. No
Management Fee shall be payable with respect to the year
ending December 31, 1999.
"Actual Adjusted Net Income" shall mean, for any
period, the consolidated net income of the Company for
such period determined in accordance with GAAP
consistently applied, except that such amount shall be
(i) increased by the taxes that were deducted from
operating income to arrive at net income for such
period, (ii) adjusted to exclude any accrual made for
estimated management fees for such period, and (iii)
calculated without regard to any extraordinary items of
income or expense in such period or other transactions
not in the ordinary course of the Company's business in
such period.
"Projected Adjusted Net Income" shall mean, for
any period, the projected pre-tax net income for such
period set forth on Schedule 3 hereto, as amended with
respect to the line items indicated on Schedule 3, to
take account of the adjusted book basis amount and
depreciation amount for the applicable period set forth
on a schedule approved by the parties as soon as
reasonably practicable following the Effective Date.
Projected Adjusted Net Income with respect to the year
ending December 31, 2000 shall be pro-rated to the
extent the Effective Date occurs after December 31, 1999
(such pro-ration to be calculated on the basis of the
number of days after the Effective Date remaining in the
year divided by 365).
(b) Notwithstanding the foregoing, the obligations
of the Company to pay the Management Fee shall be null
and void and shall no longer apply to any calendar year
after the fourth anniversary of the Effective Date.
ARTICLE X
26
REGISTRATION RIGHTS
Section 10.1 Piggyback Registrations.
(a) In no event shall the Company register any of
its equity securities during the Restricted Period. If,
at any time after the fourth anniversary of the
Effective Date, the Company at any time proposes to
register any of its equity securities under the
Securities Act, whether or not for sale for its own
account, on a form and in a manner that would permit
registration of Registrable Securities for sale to the
public under the Securities Act, it will give written
notice to all the holders of Registrable Securities
promptly of its intention to do so, describing such
securities and specifying the form and manner and the
other relevant facts involved in such proposed
registration, including, without limitation, (x) the
intended method of disposition of the securities
offered, including whether or not such registration will
be effected through an underwriter in an underwritten
offering or on a "best efforts" basis, and, in any case,
the identity of the managing underwriter, if any, and
(y) the price at which the Registrable Securities are
reasonably expected to be sold. Upon the written request
of any holder of Registrable Securities delivered to the
Company within 30 calendar days after the receipt of any
such notice
27
(which request shall specify the Registrable Securities
intended to be disposed of by such holder), the Company
will effect the registration under the Securities Act of
all the Registrable Securities that the Company has been
so requested to register; provided, however, that:
(i) if, at any time after
giving such written notice of its
intention to register any securities
and prior to the effective date of
the registration statement filed in
connection with such registration,
the Company shall reasonably
determine not to register such
securities, the Company may, at its
election, give written notice of
such determination to each holder of
Registrable Securities who shall
have made a request for registration
as hereinabove provided and
thereupon the Company shall be
relieved of its obligation to
register any Registrable Securities
in connection with such registration
(but not from its obligation to pay
the Registration Expenses in
connection therewith), without
prejudice, however, to the right of
any Person to request that such
registration be effected as a
registration under this Section
10.1; and
(ii) if such registration
involves an Underwritten Offering,
all holders of Registrable
Securities requesting to be included
in the Company's registration must
sell their Registrable Securities to
the underwriters selected by the
Company on the same terms and
conditions as apply to the Company.
(b) The Company shall not be obligated to effect
any registration of Registrable Securities under this
Section 10.1 incidental to the registration of any of
its securities in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock
option or other employee benefit plans.
(c) If a registration pursuant to this Section
10.1 involves an underwritten offering and the managing
underwriter advises the issuer that, in its opinion, the
number of securities proposed to be included in such
registration should be limited due to market conditions,
the Company will so advise each holder of Registrable
Securities that has requested registration pursuant to
Section 10.1(a), and shares shall be excluded from such
offering in the following order until such limitation
has been met: First, the Registrable Securities
requested to be included in such offering by a
Stockholder other than a NRG or any Permitted Transferee
of NRG
28
shall be excluded pro rata, based on the respective
number of Registrable Securities as to which
registration has been so requested by such Stockholders,
until all such Registrable Securities shall have been so
excluded; second, the Registrable Securities requested
to be included in such offering by NRG or any Permitted
Transferee of NRG shall be excluded pro rata, based on
the respective number of Registrable Securities as to
which registration has been so requested by NRG or any
Permitted Transferee of NRG, until all such Registrable
Securities shall have been so excluded; and thereafter,
the securities requested to be registered by the Company
shall be excluded.
(d) In connection with any underwritten offering
with respect to which holders of Registrable Securities
shall have requested registration pursuant to this
Section 10.1, the Company shall have the right to select
the managing underwriter with respect to the offering;
provided that such managing underwriter shall be a
nationally recognized investment banking firm.
(e) The Company will pay all Registration Expenses
incurred in connection with each of the registrations of
Registrable Securities effected by it pursuant to this
Section 10.1.
ARTICLE XI
TERMINATION
Section 11.1. Termination.
(a) The provisions of this Agreement shall
terminate on the date on which any of the following
events first occurs: (i) an initial Public Offering or,
(ii) the Merger Agreement is terminated in accordance
with its terms.
(b) Notwithstanding the foregoing, this Agreement
shall in any event terminate with respect to any
Stockholder when such Stockholder no longer owns any
shares of Common Stock, or other warrants, options or
rights to subscribe for or purchase Common Stock.
29
ARTICLE XII
MISCELLANEOUS
Section 12.1. Successors and Assigns. Except as otherwise provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. No Stockholder may assign any of
its rights or obligations hereunder to any Person other than in accordance with
this Agreement to a transferee that has complied in all respects with the
requirements of this Agreement. The Company may not assign any of its rights or
obligations hereunder to any other Person. If any transferee of any Stockholder
shall acquire any shares of Common Stock in any manner, whether by operation of
law or otherwise, such shares shall be held subject to all of the terms of this
Agreement, and by taking and holding such shares such Person shall be entitled
to receive the benefits of and be conclusively deemed to have agreed to be bound
by and to comply with all of the terms and provisions of this Agreement.
Section 12.2. Amendment and Modification; Waiver of Compliances;
Conflicts.
(a) This Agreement may be amended only by a written
instrument duly executed by each of the Stockholders party
hereto. In the event of the amendment or modification of this
Agreement in accordance with its terms, the Stockholders shall
cause the Board of Directors to meet within 30 calendar days
following such amendment or modification or as soon thereafter
as is practicable for the purpose of adopting any amendment to
the Certificate of Incorporation and By-Laws that may be
required as a result of such amendment or modification to this
Agreement, and, if required, proposing such amendments to the
Stockholders entitled to vote thereon, and the Stockholders
agree to vote in favor of such amendments.
(b) Except as otherwise provided in this Agreement, any
failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the
party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or
other failure.
(c) In the event of any conflict between the provisions
of this Agreement and the provisions of any other agreement,
the provisions of this Agreement shall govern and prevail.
Section 12.3. Notices. All notices and other communications provided
for hereunder shall be in writing and delivered by hand or sent by first class
mail or sent by telecopy (with such telecopy to be confirmed promptly in writing
sent by first class mail), sent as follows:
(i) If to the Buyer, addressed to
Calpine Corporation
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
30
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to NRG, addressed to
NRG Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Matte, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
31
(iii) If to the Company, addressed to
Cogeneration Corporation of America
c/o Calpine Corporation
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses or telecopy number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or sent by telecopy, or three
business days after being so mailed.
Section 12.4 Entire Agreement: Governing Law; Consent to
Jurisdiction
(a) This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with
respect to the subject transactions contemplated hereby and
supersede all prior oral and written agreements and memoranda
and undertakings among the parties hereto with regard to this
subject matter. The Company represents to the Stockholders
that the rights granted to the holders hereunder do not in any
way conflict with and are not inconsistent with the rights
granted or obligations accepted under any other agreement
(including the Certificate of Incorporation) to which the
Company is a party. Neither the Company nor any Subsidiary of
the Company will hereafter enter into any agreement with
respect to its equity or debt securities which is inconsistent
with the rights granted to any Stockholder under this
Agreement without obtaining the prior written consent of the
Stockholder whose rights would be thereby affected.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without
giving effect to the choice of law principles thereof).
(c) Each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (b) agrees
that it will not
32
attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees
that it will not bring any action relating to this Agreement
or any of the transactions contemplated by this Agreement in
any court other than a federal or state court sitting in the
State of Delaware.
Section 12.5. Severability. The validity or unenforceability
of any provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
Section 12.6. Injunctive Relief. The Stockholders acknowledge
and agree that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Stockholders agree that each Stockholder shall be
entitled, in addition to any other remedy to which they may be entitled at law
or in equity, (i) to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction, restraining any Stockholder from
committing any violations of the provisions of this Agreement, and (ii) to
compel specific performance of the terms of this Agreement.
Section 12.7. Availability of Agreement. For so long as this
Agreement shall be in effect, this Agreement shall be made available for
inspection by any Stockholder upon request at the principal executive offices of
the Company.
Section 12.8. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 12.9. Expenses. Except as otherwise expressly provided
in Section 5.1(b) or any other provision of this Agreement, each of the Buyer,
the Company and NRG will bear its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby and the Merger.
This Section 12.9 shall survive the termination of this Agreement.
Section 12.10. Adjustments to Prevent Dilution, Etc. In the
event of a stock dividend or distribution, or any change in the common stock of
Cogen by reason of any stock dividend, split-up, reclassification,
recapitalization, combination or the exchange of shares, the term "shares" used
herein shall be deemed to refer to and include the shares of common stock of
Cogen owned by NRG as well as such stock dividends and distributions and any
shares into which or for which any or all of the shares of common stock of Cogen
may be changed or exchanged. In such event, the amount to be paid per share by
the Buyer shall be proportionately reduced.
Section 12.11. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
[The next page is the signature page]
33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
CALPINE CORPORATION
By: __________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President - Business Development
NRG ENERGY, INC.
By: __________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
CALPINE EAST ACQUISITION CORP.
By: _________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
33