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OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement") is dated as of May , 2000,
by and between NORTHERN STATES POWER COMPANY, a Minnesota corporation ("NSP"),
and NRG ENERGY, INC., a Delaware corporation ("NRG").
A. NSP beneficially owns [147,604,500] shares of Class A Common Stock,
par value $0.01 per share ("Class A Common Stock"), of NRG, which is convertible
into shares of common stock, par value $0.01 per share ("Common Stock") of NRG.
B. On the date hereof, NRG will issue shares of Common Stock in an
initial public offering (the "Initial Public Offering") registered under the
Securities Act of 1933, as amended (the "Securities Act").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, NSP and NRG, for themselves, their
successors, and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings, applicable both to the singular and the plural
forms of the terms described:
"Affiliate" means, with respect to a given Person, any Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to vote
securities having a majority of the voting power for the election of directors
(or other Persons acting in similar capacities) of such Person or otherwise to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" has the meaning ascribed thereto in the preamble hereto, as
such agreement may be amended and supplemented from time to time in accordance
with its terms.
"Applicable Stock" means at any time the (i) shares of Common Stock
Equivalents owned by the NSP Entities owned on the date hereof, plus (ii) shares
of Common Stock Equivalents purchased by the NSP Entities pursuant to Article II
of this Agreement or otherwise, plus (iii) shares of Common Stock Equivalents
that were issued to NSP Entities in respect of shares described in either clause
(i) or clause (ii) in any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event.
"Common Stock Equivalents" means the Common Stock, the Class A Common
Stock, any other class of NRG's capital stock representing the right to vote
generally for the election of
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directors and, if NRG is a subsidiary corporation includable in a consolidated
federal income tax return of NSP, any other security of NRG treated as stock for
purposes of Section 1504 of the Internal Revenue Code of 1986, as amended.
"Follow On Offering" means any firm underwritten offering by the
Company of Common Stock Equivalents registered under the Securities Act on Form
X-0, X-0 or S-3, but excluding offerings registered in connection the a merger
or reorganization, or offerings relating to employee benefit plans on Form S-8
or its successor.
"Market Price" of any shares of Common Stock on any date means (i) in
the event NSP is exercising the Option as a result of an Option Notice delivered
by the Company pursuant to Section 2.2(a), the price to be paid by the person
acquiring shares as described in the Option Notice, (ii) in the event NSP is
exercising the Option as a result of an Option Notice delivered by the Company
pursuant to Section 2.2(b), (a) the average of the last sale price of such
shares for the fifteen trading days immediately preceding such date on The New
York Stock Exchange or, if such shares are not listed thereon, on the principal
national securities exchange or automated interdealer quotation system on which
such shares are traded or (b) if such sale prices are unavailable or such shares
are not so traded, the value of such shares on such date determined in
accordance with agreed-upon procedures reasonably satisfactory to NRG and NSP;
(iii) in the event NSP is exercising the Option as a result of an Option Notice
delivered by the Company pursuant to Section 2.2(c), the net price paid to the
Company by the underwriters in the Follow On Offering (excluding any
underwriting discount or commissions).
"NRG Entities" means NRG and its Subsidiaries, and "NRG Entity" shall
mean any of the NRG Entities.
"NSP Entities" means NSP and its Affiliates (other than Affiliates that
constitute NRG Entities), and "NSP Entity" shall mean any of the NSP Entities.
"Ownership Percentage" means, at any time, the fraction, expressed as a
percentage and rounded to the next highest thousandth of a percent, whose
numerator is the aggregate number of shares of the Applicable Stock and whose
denominator is the aggregate number of outstanding shares of Common Stock
Equivalents of NRG; provided, however, that any shares of Common Stock
Equivalents issued by NRG in violation of its obligations under Article II of
this Agreement shall not be deemed outstanding for the purpose of determining
the Ownership Percentage.
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government (and
any department or agency thereof) or other entity.
"Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled, directly or indirectly, by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof. "Subsidiary," when used
with respect to NSP or NRG, shall also include any other entity Affiliated with
NSP or
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NRG, as the case may be, that NSP and NRG may hereafter agree in writing shall
be treated as a "Subsidiary" for the purposes of this Agreement.
1.2 Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement and references to the
parties shall mean the parties to this Agreement.
ARTICLE II
OPTION
2.1 Option. NRG hereby grants to NSP, on the terms and conditions
set forth herein, a continuing right (the "Option") to purchase from NRG, at the
times set forth herein, the number of shares of Common Stock provided in the
first sentence of Section 2.3. The Option shall be assignable, in whole or in
part and from time to time, by NSP to any NSP Entity. The exercise price for the
shares of Common Stock purchased pursuant to the Option shall be the Market
Price of the Common Stock as of the date of first delivery of an Exercise Notice
with respect to the Option by NSP (or its permitted assignee hereunder) to NRG.
2.2 Notice.
(a) At least 20 business days prior to the date NRG issues
Common Stock Equivalents (other than (i) in connection with the Initial Public
Offering or any Follow On Offering, including the full exercise of all
underwriters' over-allotment options granted in connection therewith, (ii)
issuances of Common Stock Equivalents to any NSP Entity and (iii) pursuant to
any stock option issued under any executive or employee benefit or compensation
plan maintained by NRG (an "Employee Option")) that, in the absence of a full or
partial exercise of the Option, would result in any reduction in the Ownership
Percentage (other than a reduction that does not reduce the Ownership Percentage
to below eighty percent (80%)), NRG will notify NSP in writing (an "Option
Notice") of the date on which such issuance could first occur. Each Option
Notice must specify the date on which NRG intends to issue additional shares
(such issuance being referred to herein as an "Issuance Event" and the date of
such issuance as an "Issuance Event Date"), the number of shares NRG intends to
issue or may issue, and the other terms and conditions of such Issuance Event.
(b) Within 20 business days prior to the beginning of each
fiscal quarter, NRG will notify NSP in writing of the number of shares that
could be issued in such quarter pursuant to any Employee Option (the "Quarterly
Plan Notice"). Each Quarterly Plan Notice must specify the number of shares NRG
could be bound to issue, the exercise price(s) at which shares would be issued,
and any other material terms and conditions of such issuances. The "Issuance
Event" described in a Quarterly Plan Notice shall be deemed to include all
shares issuable in such quarter, and the first day of such quarter shall be
deemed the "Issuance Event Date" for all shares to be issued in such quarter.
NRG shall not permit the issuance of any Common Stock Equivalents pursuant to
any Employee Option in such quarter in excess of the number identified in the
Quarterly Plan Notice.
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(c) At least 30 business days prior to the date NRG issues Common
Stock Equivalents pursuant to a Follow On Offering that, in the absence of a
full or partial exercise of the Option, would result in any reduction in the
Ownership Percentage to below eighty percent (80%), NRG will provide an Option
Notice to NSP, which notice shall include the date on which such issuance could
first occur and the anticipated price range per Common Stock Equivalent at which
NRG would consummate such Follow On Offering.
2.3 Option Exercise and Payment. The Option may be exercised upon the
occurrence of each Issuance Event by NSP (or any NSP Entity to which all or any
part of the Option has been assigned) for a number of shares equal to or less
than the number of shares, if any, that are necessary for the NSP Entities to
maintain, in the aggregate, the Ownership Percentage prior to giving effect to
(a) the applicable Issuance Event and (b) any prior Issuance Event with respect
to which and to the extent NSP had not exercised this Option in full; provided,
however, that the exercise price with respect to shares subject to the Option as
a result of such prior Issuance Event for which notice was given pursuant to
Section 2.2(a) or 2.2(b) shall be determined as of the Issuance Date associated
with such prior Issuance Event. The Option may be exercised at any time after
receipt of an Option Notice and prior to the Issuance Event Date by the delivery
to NRG of a written notice to such effect (an "Exercise Notice") specifying (i)
the number of shares of Common Stock to be purchased by NSP, or any of the NSP
Entities (which may be expressed as a percentage of the shares identified in the
Option Notice) and (ii) a calculation of the exercise price for such shares.
Upon any such exercise of the Option, NRG will, prior to the applicable Issuance
Event Date, deliver to NSP (or any NSP Entity designated by NSP), against
payment therefor, certificates (issued in the name of NSP or its permitted
assignee hereunder or as directed by NSP) representing the shares of Common
Stock being purchased upon such exercise. Payment for such shares shall be made
by wire transfer or intrabank transfer of immediately-available funds to such
account as shall be specified by NRG, for the full purchase price for such
shares. In the event the Exercise Notice is being delivered with respect to a
Follow On Offering, the Exercise Notice shall be delivered within 10 business
days of receipt of the Option Notice, and shall constitute an irrevocable offer
to buy the shares of Common Stock included in the Exercise Notice at the Market
Price upon closing of the Follow On Offering. If NSP fails to give the Exercise
Notice within such 10 business days, NRG shall not be obligated to sell shares
to NSP at the closing of such Follow On Offering.
2.4 Effect of Failure to Exercise. Except as provided in Section 2.3
and 2.5, any failure by NSP to exercise the Option, or any exercise for less
than all shares purchasable under the Option, in connection with any particular
Issuance Event shall not affect NSP's right to exercise the Option in connection
with any subsequent Issuance Event.
2.5 Termination of Option. The Option shall terminate upon the
occurrence of any Issuance Event that, after considering NSP's response thereto
and to any other Issuance Events, results in the Ownership Percentage being less
than 30%, other than any Issuance Event in violation of this Agreement. The
Option, or any portion thereof assigned to any NSP Entity other than NSP, also
shall terminate in the event that the Person to whom the Option, or such portion
thereof has been transferred, ceases to be a NSP Entity for any reason
whatsoever. The Option shall also terminate at the election of NSP.
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ARTICLE III
MISCELLANEOUS
3.1 Limitation of Liability. Neither NSP nor NRG shall be liable to the
other for any special, indirect, incidental or consequential damages of the
other arising in connection with this Agreement.
3.2 Affiliates. NSP agrees and acknowledges that it shall be
responsible for the performance by each NSP Entity of the obligations hereunder
applicable to such NSP Entity.
3.3 Amendments. This Agreement may be amended only by a writing duly
executed by or on behalf of each of the parties hereto; provided that, any
amendments materially adverse to NRG shall be approved by a majority of the
directors of NRG who are not affiliated with NSP.
3.4 Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid, illegal or unenforceable to any
extent, the remainder of this Agreement or such provision of the application of
such provision to such party or circumstances, other than those to which it is
so determined to be invalid, illegal or unenforceable, shall remain in full
force and effect to the fullest extent permitted by law and shall not be
affected thereby, unless such a construction would be unreasonable.
3.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be deemed duly given upon actual receipt,
and shall be delivered (a) in person, (b) by registered or certified mail,
postage prepaid, return receipt requested or (c) by facsimile or other generally
accepted means of electronic transmission (provided that a copy of any notice
delivered pursuant to this clause (c) shall also be sent pursuant to clause
(b)), addressed as follows:
(a) if to NRG, to:
NRG Energy, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: General Counsel
(b) If to NSP, to:
Northern States Power Co.
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attn: General Counsel
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
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3.6 Further Assurances. NSP and NRG shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such instruments
and take such other action as may be necessary or advisable to carry out their
obligations under this Agreement and under any exhibit, document or other
instrument delivered pursuant hereto.
3.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same agreement.
3.8 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Delaware.
3.9 Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
3.10 Successors. This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective successors and
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or remedies.
3.11 Specific Performance. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
NORTHERN STATES POWER COMPANY
By:
---------------------------------
Name:
Title
NRG ENERGY, INC.
By:
---------------------------------
Name:
Title
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