1
EXHIBIT (c)(2)
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:
2
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.
2
3
"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 Xxxxx'x 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
(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).
3
4
"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 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 Xxxx-Xxxxx-Xxxxxx 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).
4
5
"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.
"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
5
6
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 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).
6
7
"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).
"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
7
8
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 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.
8
9
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
9
10
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 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
10
11
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 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
11
12
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 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.
12
13
(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 Non Interference. 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 other disposition of, any shares of common stock
of Cogen, (ii) grant any proxies, deposit any of its shares of
13
14
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
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
14
15
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 Xxxxx X. Xxxxxxxx, Xxxxxx X. Will and Xxxxx X.
Xxxxxxxxxxx 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 Xxxxx X. Xxxxxxxx, Xxxxxx X. Will and Xxxxx X. Xxxxxxxxxxx, 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.
15
16
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 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:
16
17
(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 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
17
18
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 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
18
19
Services Agreement, an Operating and Maintenance Agreement for the Xxxxx
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.
(a) Upon the execution of this Agreement, in addition to any
19
20
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.
20
21
ARTICLE VIII
RIGHTS OF FIRST REFUSAL; DRAG-ALONG RIGHTS;
TAG-ALONG RIGHTS; PURCHASE OPTION
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
21
22
Buyer, at the Transfer Offer Price Per Security and on the 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
22
23
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 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.
23
24
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.
24
25
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
25
26
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
26
27
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
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
27
28
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
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
28
29
(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
29
30
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.
30
31
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
31
32
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
00 Xxxx Xxx Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(ii) If to NRG, addressed to
NRG Energy, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
with a copy to
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Matte, Esq.
Telecopy No.: (000) 000-0000
32
33
(iii) If to the Company, addressed to
Cogeneration Corporation of America
c/o Calpine Corporation
00 Xxxx Xxx Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx
Telecopy No.: (000) 000-0000
with a copy to
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
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).
33
34
(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 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
34
35
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]
35
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CALPINE CORPORATION
By: /s/ Xxxx X. Xxxx
------------------------------------------
Name: Xxxx X. Xxxx
Title: Vice President - Business Development
NRG ENERGY, INC.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman, President and
Chief Executive Officer
CALPINE EAST ACQUISITION CORP.
By: /s/ Xxxx X. Xxxx
------------------------------------------
Name: Xxxx X. Xxxx
Title: Vice President
36
