-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RmcrIRXORz199iZnTfOlDnbkJsnNWnM5cexUip2CSluIaSUtaJGxeQQUfjyk/Z9g vERpzOWqTCFtNcjGvS1u/w== 0000950123-99-008289.txt : 19990908 0000950123-99-008289.hdr.sgml : 19990908 ACCESSION NUMBER: 0000950123-99-008289 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990907 GROUP MEMBERS: CALPINE CORP GROUP MEMBERS: CALPINE EAST ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: COGENERATION CORP OF AMERICA CENTRAL INDEX KEY: 0000795185 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 592076187 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-39646 FILM NUMBER: 99707022 BUSINESS ADDRESS: STREET 1: ONE CARLSON PARKWAY STREET 2: SUITE 240 CITY: MINNEAPOLIS STATE: MN ZIP: 55447-4454 BUSINESS PHONE: 6127457900 MAIL ADDRESS: STREET 1: ONE CARLSON PARKWAY STREET 2: SUITE 240 CITY: MINNEAPOLIS STATE: MN ZIP: 55447-4454 FORMER COMPANY: FORMER CONFORMED NAME: NRG GENERATING U S INC DATE OF NAME CHANGE: 19960507 FORMER COMPANY: FORMER CONFORMED NAME: O BRIEN ENVIRONMENTAL ENERGY INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: OBRIEN ENERGY SYSTEMS INC DATE OF NAME CHANGE: 19910804 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CALPINE CORP CENTRAL INDEX KEY: 0000916457 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 770212977 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 50 WEST SAN FERNANDO ST CITY: SAN JOSE STATE: CA ZIP: 95113 BUSINESS PHONE: 4089955115 MAIL ADDRESS: STREET 1: 50 W SAN FERNANDO STREET 2: SUITE 500 CITY: SAN JOSE STATE: CA ZIP: 95113 SC 13D 1 CALPINE CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D (Rule 13d-101) Information to be included in statements filed pursuant to Rule 13d-1(a) and amendments thereto filed pursuant to Rule 13d-2(a) COGENERATION CORPORATION OF AMERICA (Name of Issuer) COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 628950 10 7 (CUSIP Number) Ann B. Curtis Calpine Corporation 50 West San Fernando Street San Jose, CA 95113 (408) 995-5115 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) With a copy to: William R. Collins, Esq. Howard, Smith & Levin LLP 1330 Avenue of the Americas New York, NY 10019 (212) 841-1000 August 26, 1999 (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. 2 SCHEDULE 13D CUSIP No. 628950 10 7 1) Name of Reporting Persons: Calpine Corporation I.R.S. Identification Nos. of Above Person: 77-0498817 2) Check the Appropriate Box if a Member of a Group. [ ] (a) [ ] (b) 3) SEC Use Only 4) Source of Funds. AF, WC, BK 5) [ ] Check if Disclosure of Legal Proceedings is Required pursuant to Items 2(d) or 2(e). 6) Citizenship or Place of Organization. Delaware Number of Shares 7) sole voting power 0 beneficially owned by each 8) shared voting power 3,106,612 reporting person with 9) sole dispositive power 0 10) shared dispositive power 3,106,612 11) Aggregate amount beneficially owned by each reporting person 3,106,612 12) [ ] Check if the Aggregate Amount in Row (11) Excludes Certain Shares. 13) Percent of Class Represented by Amount in Row (11). 45.30% 14) Type of Reporting Person. CO -2- 3 SCHEDULE 13D CUSIP No. 628950 10 7 1) Name of Reporting Persons: Calpine East Acquisition Corp. I.R.S. Identification Nos. of Above Person: 77-0520358 2) Check the Appropriate Box if a Member of a Group. [ ] (a) [ ] (b) 3) SEC Use Only 4) Source of Funds. AF, WC 5) [ ] Check if Disclosure of Legal Proceedings is Required pursuant to Items 2(d) or 2(e). 6) Citizenship or Place of Organization. Delaware Number of Shares 7) sole voting power 0 beneficially owned by each 8) shared voting power 3,106,612 reporting person with 9) sole dispositive power 0 10) shared dispositive power 3,106,612 11) Aggregate amount beneficially owned by each reporting person 3,106,612 12) [ ] Check if the Aggregate Amount in Row (11) Excludes Certain Shares. 13) Percent of Class Represented by Amount in Row (11). 45.30% 14) Type of Reporting Person. CO -3- 4 ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (the "Statement") relates to the common stock, par value $.01 per share (the "Common Stock"), of Cogeneration Corporation of America (the "Company"). The principal executive offices of the Issuer are located at One Carlson Parkway, Suite 240, Minneapolis, Minnesota 55447. ITEM 2. IDENTITY AND BACKGROUND. (a)-(c) and (f) This Statement is filed by Calpine East Acquisition Corp., a Delaware corporation ("Merger Subsidiary"), and Calpine Corporation, a Delaware corporation ("Calpine"). Merger Subsidiary, a wholly-owned subsidiary of Calpine, was organized to acquire the Company and has not conducted any unrelated activities since its organization on August 23, 1999. Calpine is a leading independent power company engaged in the development, acquisition, ownership and operation of power generation facilities and the sale of electricity predominantly in the United States. The principal executive offices of Calpine and Merger Subsidiary are located at 50 West San Fernando Street, San Jose, California 95113. The name, age, business address, present principal occupation or employment, five-year employment history and citizenship of each director and executive officer of Merger Subsidiary and Calpine are set forth in Schedule I hereto. (d) and (e) None of Merger Subsidiary, Calpine or, to the best knowledge of such corporations, any of the persons listed on Schedule I, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The total amount of funds required by Merger Subsidiary to consummate the Merger (as defined below) (including refinancing, if necessary, certain indebtedness of the Company and its subsidiaries, and paying related fees and expenses) is expected to be approximately $233 million. Merger Subsidiary will obtain all funds needed for the Merger from Calpine by means of a capital contribution, loan or a combination thereof. Calpine will obtain such funds (i) from its general corporate funds and/or (ii) by borrowing under its existing Credit Agreement, dated as of September 25, 1996, as amended as of May 15, 1998 (as amended, the "Credit Agreement"), among Calpine, as borrower, the banks and other financial institutions party thereto, as lenders, and the Bank of Nova Scotia, as agent. The Credit Agreement provides for borrowings of up to an aggregate of $100,000,000 of loans on an unsecured basis. Borrowings under the Credit Agreement bear interest at the Bank of Nova Scotia's base rate plus an applicable margin or at LIBOR plus an applicable margin. The Credit Agreement includes customary covenants including financial covenants. -4- 5 As of August 30, 1999, Calpine had (i) cash-on-hand (including cash equivalents and marketable securities) of approximately $250 million and (ii) availability to borrow up to an additional $79 million of loans under the Credit Agreement. The foregoing summary of the source and amount of funds is qualified in its entirety by reference to the text of the Credit Agreement, a copy of which is filed as an exhibit to Calpine's Current Report on Form 8-K, dated May 1, 1996, filed with the Securities and Exchange Commission and is incorporated in this Statement by reference. Although no definitive plan or arrangement for repayment of borrowings under the Credit Agreement have been made, Calpine anticipates such borrowings will be repaid with internally generated funds (including, if the Merger is accomplished, those of the Company) and from other sources which may include the proceeds of future bank refinancings or the public or private sale of debt or equity securities. No decision has been made concerning the method Calpine will use to repay the borrowings under the Credit Agreement. Such decision will be made based on Calpine's review from time to time of the advisability of particular actions, as well as prevailing interest rates, financial and other economic conditions and such other factors as Calpine may deem appropriate. ITEM 4. PURPOSE OF TRANSACTION. On August 26, 1999, Calpine and Merger Subsidiary entered into an Agreement and Plan of Merger (the "Merger Agreement") with the Company which provides that, subject to the terms and conditions thereof, Merger Subsidiary will merge with and into the Company with the Company continuing as the surviving corporation (the "Merger"). Upon consummation of the Merger, all outstanding shares of Common Stock (other than shares held by Calpine or Merger Subsidiary) will be converted into the right to receive $25.00 per share in cash. Concurrently with the execution of the Merger Agreement, Calpine, Merger Subsidiary and NRG Energy, Inc., a Delaware corporation ("NRG"), have entered into a Contribution and Stockholders Agreement, dated as of August 26, 1999 (the "Stockholders Agreement"). The Stockholders Agreement provides that, subject to the terms and conditions thereof, immediately prior to the consummation of the Merger (i) NRG will contribute to Merger Subsidiary a number of shares of Common Stock equal in value to (A) at least 20% of the total equity value of the Company less (B) the value of certain stock options held by NRG employees which are currently directors of the Company which have been or will be cancelled prior to the Merger, for 20% of the ownership interest in Merger Subsidiary and (ii) Calpine will contribute to Merger Subsidiary sufficient cash equal to 80% of the total equity value of the Company. Upon consummation of the Merger, NRG will own 20% and Calpine will own 80% of the outstanding shares of Common Stock of the Company. The total equity value of the Company is defined as the sum of (i) the total number of outstanding shares of Common Stock multiplied by $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 stock options of the Company which are currently exercisable or will become exercisable upon consummation of the Merger. Calpine has also agreed to contribute cash, in the form of a loan, sufficient to satisfy certain -5- 6 obligations of the Company. The Stockholders Agreement provides that the Board of Directors of the Company following the Merger shall consist of no more than seven directors with one director being appointed by NRG. In addition, the consent of NRG is required for the Company or its subsidiaries to take certain actions including, without limitation, actions relating to (i) the issuance of securities, (ii) the sale or disposition of subsidiaries or assets, (iii) amendments to its certificate of incorporation or by-laws, (iv) mergers or consolidations with third parties and (v) certain agreements with affiliates. The Stockholders Agreement prohibits Calpine and NRG from transferring their respective shares of Common Stock of the Company following the Merger for a period of three years without the prior written consent of the other stockholder, which consent cannot be unreasonably withheld or delayed. In addition, pursuant to the Stockholders Agreement, NRG has granted Calpine an irrevocable proxy with respect to all of the shares of Common Stock held by it (constituting 45.3% of the outstanding shares) to vote such shares in favor of approval of the Merger Agreement at a duly convened meeting of the Company's stockholders for such purpose. In the Merger Agreement, the Company has represented that the affirmative vote of the holders of two-thirds of the outstanding shares of the Company's Common Stock is required to approve the Merger. The Stockholders Agreement provides that following the Merger Calpine shall have the right to acquire NRG's 20% interest in the Company during the 365-day period commencing on the third anniversary of the closing of the Merger for the fair market value of the interest as determined by an independent investment bank. In addition, at the closing of the Merger, certain existing operating and management and service agreements between NRG and its affiliates, on the one hand, and the Company and its affiliates, on the other hand, will be terminated at the effective time of the Merger and will be replaced by agreements between the Company and Calpine. The foregoing summary of the Stockholders Agreement is qualified in its entirety by reference to the Stockholders Agreement which is attached hereto as Exhibit 3. There can be no assurances that there will be any transaction resulting from the foregoing. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. As a result of entering into the Stockholders Agreement, Calpine and Merger Subsidiary beneficially own 3,106,612 shares of Common Stock which represents 45.3% of the outstanding shares of Common Stock. See Item 4 of this Statement for a description of the Stockholders Agreement. Except as described in this Statement, neither Calpine, Merger Subsidiary nor, to their knowledge, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has the right to acquire any equity securities of the Company, nor has Calpine, Merger Subsidiary or, to their knowledge, any of the persons or entities referred to above or any of the respective executive officers, directors or subsidiaries of any of the foregoing, effected any transaction in the equity securities -6- 7 of the Company during the past 60 days. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. See Item 4 for a description of the Stockholders Agreement among Calpine, Merger Subsidiary and NRG. Except as described in this Statement, neither Calpine, Merger Subsidiary nor, to their knowledge, any of the persons listed in Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. (1) Joint Filing Agreement, dated September 7, 1999, between Calpine and Merger Subsidiary. (2) Agreement and Plan of Merger, dated as of August 26, 1999, among the Company, Calpine and Merger Subsidiary. (3) Contribution and Stockholders Agreement, dated as of August 26, 1999, among Calpine, Merger Subsidiary and NRG. (4) Confidentiality Agreement, dated May 17, 1999, between Calpine and the Company. (5) Credit Agreement, dated September 25, 1996, among Calpine and the Bank of Nova Scotia (previously filed as an exhibit to Calpine's Current Report on Form 8-K dated May 1, 1996 and incorporated herein by reference). -7- 8 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: September 7, 1999 CALPINE EAST ACQUISITION CORP. By: /s/ Ann B. Curtis ------------- Name: Ann B. Curtis Title: Vice President, Chief Financial Officer and Secretary CALPINE CORPORATION By: /s/ Ann B. Curtis ------------- Name: Ann B. Curtis Title: Executive Vice President -8- 9 EXHIBIT INDEX (1) Joint Filing Agreement, dated September 7, 1999, between Calpine and Merger Subsidiary. (2) Agreement and Plan of Merger, dated as of August 26, 1999, among the Company, Calpine and Merger Subsidiary. (3) Contribution and Stockholders Agreement, dated as of August 26, 1999, among Calpine, Merger Subsidiary and NRG. (4) Confidentiality Agreement, dated May 17, 1999, between Calpine and the Company. (5) Credit Agreement, dated September 25, 1996, among Calpine and the Bank of Nova Scotia (previously filed as an exhibit to Calpine's Current Report on Form 8-K dated May 1, 1996 and incorporated herein by reference). -9- 10 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF CALPINE AND MERGER SUBSIDIARY 1. DIRECTORS AND EXECUTIVE OFFICERS OF CALPINE. The following table sets forth the name, age, business address and present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Calpine. Each such person is a citizen of the United States of America. Unless otherwise indicated below, the business address of each person is c/o Calpine Corporation, 50 West San Fernando Street, San Jose, California, 95113. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Calpine.
Present Principal Occupation Name and or Employment; Material Positions Business Address Age Held During Past Five Years ---------------- --- --------------------------- Peter Cartwright..................... 69 Director of Calpine since 1984, Chairman of the Board since September 1996, President and Chief Executive Officer since 1984. Ann B. Curtis........................ 48 Director of Calpine since September 1996 and Executive Vice President since August 1998. From September 1992 until August 1998, Ms. Curtis was Senior Vice President. Jeffrey E. Garten.................... 52 Director of Calpine since January 1997. Dean of the Yale Dean, School of Management School of Management and William S. Beinecke Professor in Yale University the Practice of International Trade and Finance since Box 208200 November 1995. From November 1993 to October 1995, Mr. New Haven, CT 06520-8200 Garten served as Undersecretary of Commerce of International Trade. Susan C. Schwab...................... 44 Director of Calpine since January 1997. Dean of the Dean, School of Public Affairs School of Public Affairs at the University of Maryland University of Maryland since August 1995. From July 1993 to August 1995, Dr. Room 2101 Van Munching Hall Schwab served as Director, Corporate Business Development College Park, MD 20742 at Motorola, Inc.
I-1 11 George J. Stathakis.................. 68 Director of Calpine since September 1996 and Senior Advisor since December 1994. Mr. Stathakis has been providing financial, business and management advisory services to numerous corporations since 1985. Chairman of the Board and Chief Executive Officer of Ramtron International Corporation, an advanced technology semiconductor company, from 1990 to 1994. John O. Wilson....................... 60 Director of Calpine since January 1997. Senior Research Senior Research Fellow Fellow, Berkeley Roundtable on the International Economy Berkeley Roundtable on the and Executive Vice President and Chief Economist, SDR International Economy (BRIE) Capital Management, Inc. since January 1999. Mr. Wilson 2234 Piedmont Avenue served as Executive Vice President and Chief Economist at University of California, Berkeley Bank of America from August 1984 to January 1999. Berkeley, CA 94720 V. Orville Wright.................... 78 Director of Calpine since January 1997. Mr. Wright served in various positions with MCI Communications Corp., including Vice Chairman and Co-Chief Executive Officer from 1988 to 1991, Vice Chairman and Chief Executive Officer from 1985 to 1987, and President and Chief Operating Officer from 1975 to 1985. Robert D. Kelly...................... 41 Senior Vice President - Finance of Calpine since January 1998 and Vice President - Finance from April 1994 to January 1998.
I-2 12 2. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUBSIDIARY. The following table sets forth the name, age, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years of each director and executive officer of Calpine. Each such person is a citizen of the United States of America. Unless otherwise indicated below, the business address of each person is c/o Calpine Corporation, 50 West San Fernando Street, San Jose, California, 95113. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Calpine.
Present Principal Occupation Name and or Employment; Material Positions Business Address Age Held During Past Five Years ---------------- --- --------------------------- Peter Cartwright................ 69 Chairman of Board, President and Chief Executive Officer of Merger Subsidiary since its incorporation on August 23, 1999. Director of Calpine since 1984, Chairman of the Board of Calpine since September 1996, President and Chief Executive Officer of Calpine since 1984. Ann B. Curtis................... 48 Vice President, Chief Financial Officer and Secretary of Merger Subsidiary since its incorporation on August 23, 1999. Director of Calpine since September 1996 and Executive Vice President of Calpine since August 1998. From September 1992 until August 1998, Ms. Curtis was Senior Vice President of Calpine. Thomas R. Mason................. 55 Executive Vice President of Merger Subsidiary since its incorporation on August 23, 1999. Executive Vice President of Calpine since August 1998. From March 1998 until August 1998, Mr. Mason was Senior Vice President of Calpine. Prior to joining Calpine, Mr. Mason was President and Chief Operating Officer of CalEnergy Operating Services, Inc., a wholly-owned subsidiary of MidAmerican Energy Holdings Company. John T. King.................... 34 Vice President of Merger Subsidiary since its incorporation on August 23, 1999. Vice President-Business Development since September 1997 and employee of Calpine since February 1995. From 1994 to February 1995, Mr. King was Chief Operating Officer of Charter Media, Inc.
I-3 13 Robert D. Kelly................. 41 Vice President of Merger Subsidiary since its incorporation on August 23, 1999. Senior Vice President - Finance of Calpine since January 1998 and Vice President-Finance from April 1994 to January 1998. Charles B. Clark, Jr............ 51 Controller of Merger Subsidiary since its incorporation on August 23, 1999. Vice President and Corporate Controller of Calpine since May 1999. From February 1999 to April 1999, Director of Business Services for Geysers, Calpine Corporation. From March 1998 to November 1998, Mr. Clark was Chief Financial Officer of Hobbs Group, LLC. From February 1997 to February 1998, Mr. Clark was Senior Vice President-Finance and Administration of CNF Industries, Inc. and from May 1988 to January 1997, Mr. Clark was Vice President and Chief Financial Officer of Century Contractors West, Inc. (a predecessor of CNF Industries, Inc.) Lisa M. Bodensteiner............ 37 Assistant Secretary of Merger Subsidiary since its incorporation on August 23, 1999, Vice President and General Counsel of Calpine since April 1999. From February 1998 to March 1999, Ms. Bodensteiner was Calpine's Assistant General Counsel and from February 1996 to February 1998 was Associate Counsel. Prior to joining Calpine, Ms. Bodensteiner was an attorney for Thelen, Marrin, Johnson & Bridges (now Thelen, Reid & Priest).
None of the executive officers and directors of Calpine or Merger Subsidiary currently is a director of, or holds any position with, the Company or any of its subsidiaries. To the knowledge of Calpine and Merger Subsidiary, none of Calpine's or Merger Subsidiary's directors, executive officers, affiliates or associates beneficially owns any equity securities, or rights to acquire any equity securities, of the Company and none has been involved in any transactions with the Company or any of its directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission. I-4 EX-99.1 2 JOINT FILING AGREEMENT 1 Exhibit (1) Joint Filing Agreement The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that it knows or has reason to believe that such information is inaccurate. This Agreement may be executed counterparts and each of such counterparts taken together shall constitute one and the same instrument. Dated: September 7, 1999 CALPINE EAST ACQUISITION CORP. By: /s/ Ann B. Curtis ------------------ Name: Ann B. Curtis Title: Vice President, Chief Financial Officer and Secretary CALPINE CORPORATION By: /s/ Ann B. Curtis ------------------ Name: Ann B. Curtis Title: Executive Vice President EX-99.2 3 AGREEMENT AND PLAN OF MERGER 1 Exhibit (2) AGREEMENT AND PLAN OF MERGER DATED AUGUST 26, 1999 AMONG CALPINE CORPORATION, CALPINE EAST ACQUISITION CORP. AND COGENERATION CORPORATION OF AMERICA 2 TABLE OF CONTENTS AGREEMENT AND PLAN OF MERGER ARTICLE I THE MERGER 4 Section 1.1 The Merger 5 Section 1.2 Effective Time 5 Section 1.3 Effects of the Merger 5 Section 1.4 Charter and By-Laws; Directors and Officers 5 Section 1.5 Conversion of Securities 5 Section 1.6 Payment Agent 7 Section 1.7 Transfer Taxes; Withholding 7 Section 1.8 Return of Payment Fund 8 Section 1.9 No Further Ownership Rights in Company Common Stock 8 Section 1.10 Closing of Company Transfer Books 8 Section 1.11 Lost Certificates 8 Section 1.12 Further Assurances 8 Section 1.13 Closing 9 ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 9 Section 2.1 Organization, Standing and Power 9 Section 2.2 Authority 9 Section 2.3 Consents and Approvals; No Violation 10 Section 2.4 Information Supplied 11 Section 2.5 Actions and Proceedings 11 Section 2.6 Operations of Sub 12 Section 2.7 Brokers 12 Section 2.8 Financing 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 12 Section 3.1 Organization, Standing and Power 12 Section 3.2 Capital Structure 12 Section 3.3 Authority 13 Section 3.4 Consents and Approvals; No Violation 14 Section 3.5 SEC Documents and Other Reports 15 Section 3.6 Information Supplied 15 Section 3.7 Absence of Certain Changes or Events 16 Section 3.8 Permits and Compliance 16 Section 3.9 Tax Matters 17 Section 3.10 Actions and Proceedings 19 Section 3.11 Certain Agreements 19 Section 3.12 ERISA 19 Section 3.13 Compliance with Worker Safety and Environmental Laws 21 Section 3.14 Labor Matters 21 Section 3.15 State Takeover Statute 21 Section 3.16 Required Vote of Company Stockholders 21 Section 3.17 Brokers 22 Section 3.18 Opinion of Financial Advisor 22 Section 3.19 Utility Regulation 22 Section 3.20 Insurance 22 Section 3.21 Related Party Transactions 22 ARTICLE IV COVENANTS OF THE COMPANY 23 Section 4.1 Conduct of Business Pending the Merger 23 Section 4.2 No Solicitation 25
3 ARTICLE V ADDITIONAL AGREEMENTS 27 Section 5.1 Stockholder Meeting 27 Section 5.2 Preparation of the Proxy Statement and Schedule 13e-3 27 Section 5.3 Access to Information 28 Section 5.4 Fees and Expenses 28 Section 5.5 Best Efforts 29 Section 5.6 Public Announcements 30 Section 5.7 Real Estate Transfer and Gains Tax 30 Section 5.8 Indemnification; Directors and Officers Insurance 30 Section 5.9 Notification of Certain Matters 31 Section 5.10 Employee Benefit Plans and Agreements 32 Section 5.11 Performance by Sub 32 Section 5.12 Additional Consents and Approvals 32 ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER 33 Section 6.1 Conditions to Each Party's Obligation to Effect the Merger 33 Section 6.2 Conditions to Obligation of the Company to Effect the Merger 34 Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger 34 ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 35 Section 7.1 Termination 35 Section 7.2 Effect of Termination 36 Section 7.3 Amendment 36 Section 7.4 Waiver 37 ARTICLE VIII GENERAL PROVISIONS 37 Section 8.1 Non-Survival of Representations and Warranties 37 Section 8.2 Notices 37 Section 8.3 Interpretation 38 Section 8.4 Counterparts 38 Section 8.5 Entire Agreement; No Third-Party Beneficiaries 38 Section 8.6 Governing Law 38 Section 8.7 Assignment 38 Section 8.8 Severability 38 Section 8.9 Enforcement of this Agreement 38 Section 8.10 Consent to Jurisdiction 39
3 4 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, dated as of August 26, 1999 (the "Agreement"), is executed by and among CALPINE CORPORATION, a Delaware corporation ("Parent"), CALPINE EAST ACQUISITION CORP., a Delaware corporation and a subsidiary of Parent ("Sub"), and COGENERATION CORPORATION OF AMERICA, a Delaware corporation (the "Company") (Sub and the Company being hereinafter collectively referred to as the "Constituent Corporations"). RECITALS: WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have approved the merger (the "Merger") of Sub with and into the Company, on the terms and subject to the conditions set forth in this Agreement, whereby each outstanding share of common stock, par value $.01 per share, of the Company (the "Company Common Stock") not owned by Parent, Sub or the Company will be converted into the right to receive $25.00 per share (the "Merger Price") in cash pursuant to this Agreement; WHEREAS, simultaneously with the execution and delivery of this Agreement, Parent and NRG Energy, Inc., a Delaware corporation (the "Principal Company Stockholder"), are entering into an agreement (the "Company Stockholder Agreement" and together with this Agreement, the "Transaction Documents") pursuant to which the Principal Company Stockholder and Parent or Sub have agreed to take specified actions in connection with the transactions contemplated by this Agreement; WHEREAS, the Board of Directors of the Company has duly and unanimously adopted resolutions approving the transactions contemplated by the Transaction Documents in form and substance sufficient to render Section 203 of the Delaware General Corporation Law (the "DGCL") inapplicable to Parent and Sub; and WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger. NOW, THEREFORE, in consideration of the premises, representations, warranties and agreements herein contained, the parties agree as follows: ARTICLE I THE MERGER 4 5 Section 1.1 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, Sub shall be merged with and into the Company at the Effective Time (as hereinafter defined). Following the Merger, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL. Section 1.2 Effective Time. The Merger shall become effective when a Certificate of Merger (the "Certificate of Merger"), executed in accordance with the relevant provisions of the DGCL, is filed with the Secretary of State of the State of Delaware; provided, however, that, upon the mutual consent of the Constituent Corporations, the Certificate of Merger may provide for a later date or time of effectiveness of the Merger. When used in this Agreement, the term "Effective Time" shall mean the date and time at which the Certificate of Merger is accepted for record or such later date or time established by the Certificate of Merger. The filing of the Certificate of Merger shall be made on the date of the Closing (as hereinafter defined). Section 1.3 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. Section 1.4 Certificate of Incorporation and By-Laws; Directors and Officers. (a) Certificate of Incorporation and By-Laws. The Certificate of Incorporation of the Company shall be amended as set forth in Exhibit A to this Agreement (the "Amendment"), which amendment shall be effective as soon as practicable after the Company's shareholders have approved the amendment and prior to the Effective Time. At the Effective Time, the Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated to read as did the Certificate of Incorporation of Sub immediately prior to the Effective Time. At the Effective Time, the By-Laws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated to read as did the By-Laws of Sub immediately prior to the Effective Time. As so amended and restated, such Certificate of Incorporation and By-Laws of the Company shall be the Certificate of Incorporation and By-Laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) Directors and Officers. From and after the Effective Time, the directors of Sub at the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. From and after the Effective Time, the officers of the Sub at the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of the Merger and without any action on the part of Sub, the Company or the holders of any securities of the Constituent Corporations: (a) Each issued and outstanding share of common stock, without par value, of Sub shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted 5 6 and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. (b) All shares of Company Common Stock that are held in the treasury of the Company or owned by Parent, Sub or any Subsidiary (as defined in Section 2.1) of either of them shall be canceled and no cash or other consideration shall be delivered in exchange therefor. (c) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 1.5(b) and Dissenting Shares (as defined in Section 1.5(e)) shall be converted into the right to receive an amount of cash equal to the Merger Price without interest. All such shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and each holder of a certificate (the "Certificate") formerly representing any such shares shall cease to have any rights with respect thereto, except the right to receive the cash to be paid to such holder pursuant to Article I hereof (the "Merger Consideration") upon the surrender of a Certificate or Certificates in accordance with Section 1.6 hereof. (d) (i) At the Effective Time, each outstanding option to purchase Company Common Stock (each a "Company Stock Option") granted under the Company Stock Plans (as defined herein), whether or not then exercisable, shall be cancelled and each holder of a cancelled Company Stock Option shall be entitled to receive at the Effective Time or as soon as practicable thereafter from the Company, upon execution and delivery to the Payment Agent (as defined in Section 1.6 below) of an option termination agreement, in form and substance reasonably acceptable to Parent in consideration for the cancellation of such Company Stock Option an amount in cash (the "Option Consideration") equal to (x) the number of shares of Company Common Stock previously subject to such Company Stock Option that but for the cancellation thereof pursuant to the provisions of this Section 1.5(d) would have been currently exercisable (after giving effect to any acceleration of vesting pursuant to the terms of such Company Stock Option as a result of the consummation of the Merger), multiplied by (y) the excess, if any, of the Merger Price over the exercise price per share of Company Common Stock previously subject to such Company Stock Option (such payment to be net of applicable withholding taxes). (ii) Except as provided herein or as otherwise agreed to by the parties and to the extent permitted by the Company Stock Plans, (x) the Company Stock Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its Subsidiaries shall be deleted as of the Effective Time and (y) the Company shall use all reasonable efforts to ensure that following the Effective Time no holder of Company Stock Options or any participant in the Company Stock Plans or any other plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. (e) Notwithstanding anything in this Agreement to the contrary, shares ("Dissenting Shares") of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by Persons who are entitled to demand and have properly demanded dissention rights with respect to such Dissenting Shares pursuant to, and who comply in all respects with, Section 262 of the DGCL ("Section 262") shall not be converted into the Merger Consideration 6 7 as provided in Section 1.5(c), but rather the holders of Dissenting Shares shall be entitled to payment of the fair market value of such Dissenting Shares in accordance with Section 262; provided, however, that if any holder of Dissenting Shares shall fail to perfect or otherwise shall waive, withdraw or lose the right to Dissenting under Section 262, then the right of such holder to be paid the fair value of such holder's Dissenting Shares shall cease and such Dissenting Shares shall be treated as if they had been converted as of the Effective Time into the Merger Consideration, as provided in Section 1.5(c). The Company shall serve prompt notice to Parent of any demands received by the Company for dissenter's rights with respect to any shares of Company Common Stock, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. Section 1.6 Payment Agent. (a) Exchange of Certificates. Parent shall authorize a commercial bank or trust company (or such other Person or Persons as shall be reasonably acceptable to Parent and the Company) to act as Payment Agent hereunder (the "Payment Agent"). As soon as practicable after the Effective Time, Parent shall deposit with the Payment Agent, in trust for the holders of shares of Company Common Stock converted in the Merger and holders of Company Stock Options, an amount of cash equal to or exceeding the aggregate Merger Consideration to be paid to holders of Company Common Stock pursuant to Article I hereof and any Option Consideration to be paid to holders of Company Stock Options pursuant to the terms of Section 1.5(d) (such amount hereinafter the "Payment Fund"). (b) Exchange Procedures. Parent shall instruct the Payment Agent, as soon as practicable after the Effective Time, to mail to each record holder of a Certificate or Certificates a letter of transmittal, which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon actual delivery of the Certificates to the Payment Agent, and shall contain instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender for cancellation to the Payment Agent of all Certificates held by any record holder of a Certificate, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a check representing the Merger Consideration, and any Certificate so surrendered shall forthwith be canceled. Holders of Company Stock Options shall receive payment, if any, for such Company Stock Options pursuant to Section 1.5(d). Section 1.7 Transfer Taxes; Withholding. If any Merger Consideration is to be paid to any Person other than to the Person named in the Certificate surrendered in exchange therefor, it shall be a condition of such exchange that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall pay to the Payment Agent any transfer or other taxes required by reason of the payment of the Merger Consideration to a Person other than to the Person named in the Certificate surrendered, or shall establish to the satisfaction of the Payment Agent that such tax has been paid or is not applicable. Parent or the Payment Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company 7 8 Common Stock or holder of a Company Stock Option such amounts as Parent or the Payment Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code") or under any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or the Payment Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or the holder of a Company Stock Option in respect of which such deduction and withholding was made by Parent or the Payment Agent. For purposes of this Agreement, "Person" shall mean an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. Section 1.8 Return of Payment Fund. Any portion of the Payment Fund which remains undistributed for six months after the Effective Time shall be delivered to Parent, upon demand of Parent, and any such former stockholders who have not theretofore complied with this Article I and holders of Company Stock Options who have not yet received the Option Consideration shall thereafter look only to Parent for payment of their claim for any Merger Consideration or Option Consideration, as the case may be. Neither Parent nor the Surviving Corporation shall be liable to any former holder of Company Common Stock or holder of a Company Stock Option for any cash held in the Payment Fund which is delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 1.9 No Further Ownership Rights in Company Common Stock. The payment of the Merger Consideration upon surrender of any Certificate shall be deemed to constitute full satisfaction of all rights pertaining to the shares of Company Common Stock represented by such Certificate. Section 1.10 Closing of Company Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of shares of Company Common Stock shall thereafter be made on the records of the Company. If, after the Effective Time, Certificates are presented to the Surviving Corporation, the Payment Agent or the Parent, such Certificates shall be canceled and exchanged as provided in this Article I. Section 1.11 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Payment Agent, the posting by such Person of a bond, in such reasonable amount as Parent or the Payment Agent may direct as indemnity against any claim that may be made against them with respect to such Certificate, the Payment Agent will pay the Merger Consideration in exchange for such lost, stolen or destroyed Certificate. Section 1.12 Further Assurances. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Constituent Corporations, or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of the Constituent Corporations, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Constituent 8 9 Corporation, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation's right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such Constituent Corporation and otherwise to carry out the purposes of this Agreement. Section 1.13 Closing. The closing of the transactions contemplated by this Agreement (the "Closing") and all actions specified in this Agreement to occur at the Closing shall take place at the offices of Kaplan, Strangis and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota, at 10:00 a.m., local time, no later than the second business day following the day on which the last of the conditions set forth in Article VI shall have been fulfilled or waived (if permissible) or at such other time and place as Parent and the Company shall agree. ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub represent and warrant to the Company as follows: Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of its place of incorporation and has the requisite corporate power and authority to carry on its business as now being conducted. Parent is duly qualified to do business, and is in good standing in each jurisdiction where the character of the properties owned or held under lease by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect (as hereinafter defined) on Parent. For purposes of this Agreement (a) "Material Adverse Change" or "Material Adverse Effect" means, when used with respect to Parent or the Company, as the case may be, any change or effect that is or could reasonably be expected (as far as can be foreseen at the time) to be materially adverse to the business, assets, liabilities, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a whole, as the case may be; provided, however, that in determining whether a Material Adverse Change or Material Adverse Effect has occurred with respect to either referenced party, any change or effect, to the extent it is attributable to changes in prevailing interest rates or to any change in general economic conditions affecting companies in industries similar to the industries in which the Company and its Subsidiaries or Parent and its Subsidiaries, as the case may be, operate, shall not be considered when determining if a Material Adverse Change or Material Adverse Effect has occurred; and (b) "Subsidiary" means any corporation, partnership, limited liability company, joint venture or other legal entity of which Parent or the Company, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, joint venture or other legal entity. Section 2.2 Authority. On or prior to the date of this Agreement, Parent and Sub 9 10 have each approved the Transactions and the Transaction Documents. Each of Parent and Sub has the requisite corporate power and authority to enter into the Transaction Documents and to consummate the transactions contemplated hereby. The execution and delivery of the Transaction Documents by Parent and Sub to which it is a party and the consummation by Parent and Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent or Sub, as the case may be, subject to the filing of the Certificate of Merger with the Secretary of State of the State of Delaware. The Transaction Documents to which it is a party have been duly executed and delivered by Parent and Sub and constitute the valid and binding obligations of each of Parent or Sub, as the case may be, enforceable against them in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the enforcement of specific performance and other equitable remedies. Section 2.3 Consents and Approvals; No Violation. Assuming that all consents, approvals, authorizations and other actions described in this Section 2.3 have been obtained and all filings and obligations described in this Section 2.3 have been made, the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not result in any violation of, or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under, any provision of (i) the Certificate of Incorporation or the By-Laws of Parent or the Certificate of Incorporation or By-Laws of Sub, (ii) any provision of the comparable charter or organization documents of any of Parent's Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Parent or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Material Adverse Effect on Parent, materially impair the ability of Parent or Sub to perform their respective obligations hereunder or prevent the consummation of any of the transactions contemplated hereby. No filing or registration with, or authorization, consent or approval of, any domestic (federal and state), foreign or supranational court, commission, governmental body, regulatory agency, authority or tribunal (a "Governmental Entity") is required by or with respect to Parent or any of its Subsidiaries in connection with the execution, delivery and performance of any Transaction Agreement by Parent or Sub or is necessary for the consummation of the Transactions, except for (i) in connection, or in compliance, with the provisions of the Hart-Scott-Rodino AntiTrust Improvement Act of 1976 (the "HSR Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the final order of the Federal Energy Regulatory Commission ("FERC") approving the transfer of jurisdictional facilities under Section 203 of the Federal Power Act in connection with the power generating project of one of the Company's subsidiaries in Parlin, New Jersey (the "Regulatory Approval"), (iii) in connection, or in compliance, with the provisions of the New Jersey Industrial Site Recovery Act and the New Jersey Environmental Cleanup Responsibility Act (the "Applicable New Jersey Law"), (iv) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is 10 11 qualified to do business, (v) such filings, authorizations, orders, notices and approvals as may be required by state takeover laws (the "State Takeover Approvals"), and (vi) such consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Parent, or materially impair the ability of Parent or Sub to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby. Neither the Parent nor the Sub is an electric utility or an electric utility holding company or companies, or any affiliate of either, in each case as those terms are utilized by the FERC in regulations or orders implementing the Public Utility Regulatory Policies Act of 1978, as amended, and its successors ("PURPA"). Consummation of the Merger will not result in the loss of the status of any project as a "Qualifying Facility" as defined under PURPA in which the Company or any of its Subsidiaries, directly or indirectly, have an equity interest. Section 2.4 Information Supplied. None of the information to be supplied by Parent or Sub for inclusion or incorporation by reference in the Schedule 13e-3 to be filed pursuant to the Exchange Act in connection with the transactions contemplated by the Transaction Documents (together with any amendments or supplements thereto, the "Schedule 13e-3") or the proxy statement relating to the Stockholder Meeting (as hereinafter defined) (together with any amendments or supplements thereto, the "Proxy Statement") will, (i) in the case of the Schedule 13e-3, at the time of its filing, at the time of the dissemination of the Schedule 13e-3 and until the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) in the case of the Proxy Statement and at the time of the mailing of the Proxy Statement and at the time of the Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Sub with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of the Company or NRG Energy, Inc. for inclusion or incorporation by reference therein. Section 2.5 Actions and Proceedings. As of the date of this Agreement, there are no outstanding orders, judgments, injunctions, awards or decrees of any Governmental Entity against or involving Parent or any of its Subsidiaries, or against or involving any of the present or former directors, officers, employees, consultants, agents or stockholders of Parent or any of its Subsidiaries, as such, or any of its or their properties, assets or business that, individually or in the aggregate, would materially impair the ability of Parent to perform its obligations hereunder. As of the date of this Agreement, there are no actions, suits or claims or legal, administrative or arbitrative proceedings or investigations pending or, to the Knowledge of Parent, threatened against or involving Parent or any of its Subsidiaries or any of its or their present or former directors, officers, employees, consultants, agents or stockholders, as such, or any of its or their properties, assets or business that, individually or in the aggregate, would materially impair the ability of Parent to perform its obligations hereunder. As of the date hereof, there are no actions, suits, labor disputes or other litigation, legal or administrative proceedings or governmental investigations pending or, to the Knowledge of Parent, threatened against or affecting Parent or any of its Subsidiaries or any of its or their present or former officers, directors, employees, consultants, agents or stockholders, as such, or any of its or their properties, assets or business relating to the transactions contemplated by this Agreement. For purposes of this Agreement, "Knowledge of Parent" means the actual knowledge of 11 12 the executive officers of Parent after due inquiry. Section 2.6 Operations of Sub. Sub is a direct subsidiary of Parent, was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. Section 2.7 Brokers. No broker, investment banker or other Person is entitled to any broker's, finder's or other similar fee or commission in connection with the transaction contemplated by this Agreement based upon the arrangements made by or on behalf of Parent or Sub. Section 2.8 Financing. Parent has sufficient capital resources necessary to perform its obligations under the Transaction Documents, including but not limited to the advances under Section 5.11. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Sub that, subject to the disclosures set forth in the letter dated as of the date hereof and delivered on the date hereof by Company to Parent (the "Company Letter"): Section 3.1 Organization, Standing and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as now being conducted. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate (in the case of a Subsidiary that is a corporation) or other power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company and each of its Subsidiaries are duly qualified to do business, and are in good standing, in each jurisdiction where the character of their properties owned or held under lease or the nature of their activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has delivered or otherwise made available to Parent true and complete and correct copies of the Company's Certificate of Incorporation and By-laws and the certificate of incorporation, by-laws or other constitutive documents of each of the Company's Subsidiaries, in each case as amended to the date of this Agreement. Section 3.2 Capital Structure. The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock and 20,000,000 shares of undesignated preferred stock, par value $.01 per share ("Company Preferred Stock"). As of the date of this Agreement, (i) 6,857,269 shares of Company Common Stock were issued and outstanding, all of which were duly authorized, validly issued, fully paid and nonassessable and free of preemptive 12 13 rights, (ii) 39,800 shares of Company Common Stock were held in the treasury of the Company or by Subsidiaries of the Company, (iii) 877,000 shares of Company Common Stock were reserved for issuance pursuant to outstanding Company Stock Options under the Company's stock plans described under Section 3.2 of the Company Letter (collectively, the "Company Stock Plans"), and (iv) 797,000 Company Stock Options are currently exercisable or will become exercisable upon consummation of the Transactions. A true and complete list of the options (and their exercise prices) referred to in clause (iv) above that are entitled to Option Consideration are set forth on Section 3.2 of the Company Letter. No Company Stock Options have been granted since May 31, 1999. The Company Stock Plans are the only benefit plans of the Company or its Subsidiaries under which any securities of the Company or any of its Subsidiaries are issuable. No shares of Company Preferred Stock are outstanding. As of the date of this Agreement, except as set forth above no shares of capital stock or other voting securities of the Company or any Subsidiary were issued, reserved for issuance or outstanding. Except as set forth in this Section 3.2, there are no outstanding equity equivalents or interests in the ownership or earnings of the Company or any Subsidiary and there are no options, warrants, calls, rights or agreements to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or voting securities of the Company or any of its Subsidiaries or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right or agreement. Each outstanding share of capital stock of each Subsidiary of the Company that is a corporation is duly authorized, validly issued, fully paid and nonassessable and each such share is owned by the Company or another Subsidiary of the Company, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances of any nature whatsoever ("Claims"). With respect to the Grays Ferry Cogeneration Partnership, which is the only Subsidiary of the Company which is a partnership (the "Partnership"), CogenAmerica Schuylkill, Inc. has good and valid title to the partnership interests owned by it in the Partnership, free and clear of all Claims. There are no outstanding (i) subscriptions or other rights to purchase or otherwise acquire any partnership interest in the Partnership, (ii) securities convertible into or exchangeable for any partnership interest in the Partnership, or (iii) obligations of the Partnership to issue, deliver or sell any partnership interest, voting securities or securities convertible into or exchangeable for partnership interests in the Partnership. Except for the Subsidiaries of the Company disclosed in the Company SEC Documents (as defined in Section 3.5 below), the Company does not own or control, directly or indirectly, any capital stock or other securities of, or have any ownership interest in, any Person. The Company does not have any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (the "Company Annual Report"), as filed with the Securities and Exchange Commission ("SEC"), is a true, accurate and correct statement in all material respects of all of the information as of December 31, 1998 required to be set forth therein by the regulations of the SEC. Section 3.3 Authority. On or prior to the date of this Agreement, the Board of Directors of the Company has approved this Agreement in accordance with the DGCL, resolved to recommend the adoption of this Agreement by the Company's stockholders and directed that this Agreement be submitted to the Company's stockholders for adoption. The Company has all 13 14 requisite corporate power and authority to enter into each Transaction Document to which it is a Party and, subject, in the case of the Merger, to approval by the stockholders of the Company, to consummate the Merger. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to (x) approval of this Agreement by the stockholders of the Company and (y) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware. This Agreement has been duly executed and delivered by the Company and (assuming the valid authorization, execution and delivery of this Agreement by Parent and Sub and the validity and binding effect of the Agreement on Parent and Sub) constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the enforcement of specific performance and other equitable remedies. The filing of the Proxy Statement with the SEC has been duly authorized by the Company's Board of Directors. Section 3.4 Consents and Approvals; No Violation. Assuming that all consents, approvals, authorizations and other actions described in this Section 3.4 have been obtained and all filings and obligations described in this Section 3.4 have been made, the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, result in any violation of, or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or result in the creation of any Claim upon any of the properties or assets of the Company or any of its Subsidiaries under, any provision of (i) the Certificate of Incorporation or By-Laws of the Company, (ii) any provision of the comparable charter or organization documents of any of the Company's Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the Company or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby or thereby. No filing or registration with, or authorization, consent or approval of, any Governmental Entity is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of any Transaction Document to which it is a party or is necessary for the consummation of the Transactions, except for (i) in connection, or in compliance, with the provisions of the HSR Act, the Securities Act and the Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (iii) such filings, authorizations, notices, orders and approvals as may be required to obtain the Regulatory Approval, the State Takeover Approvals and in connection with the Applicable New Jersey Laws (collectively, the "Governmental Approvals") and (iv) such other consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on the Company, or materially impair the ability of the 14 15 Company to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby. Section 3.5 SEC Documents and Other Reports. (a) The Company has filed all required documents with the SEC since April 30, 1996 pursuant to Sections 13(a) and 15(d) of the Exchange Act (the "Company SEC Documents"). As of their respective dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and, at the respective times they were filed, none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements (including, in each case, any notes thereto) of the Company included in the Company SEC Documents (the "Financial Statements") complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles (except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto), are in accordance with the books and records of the Company and fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Except as disclosed in the Company SEC Documents or as required by generally accepted accounting principles, the Company has not, since December 31, 1998, made any change in the accounting practices or policies applied in the preparation of financial statements. Except as and to the extent set forth in the Company Annual Report, neither the Company nor any of its Subsidiaries had as of December 31, 1998 any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by generally accepted accounting principles to be reflected on the consolidated balance sheet of the Company and its Subsidiaries (including the notes thereto) included in the Financial Statements that are not so reflected. (b) The Company has provided to Parent true and complete copies of the financial statements for its Subsidiaries described in Section 3.5 of the Company Letter (the "Project Financial Statements"). The Project Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto), are in accordance with the books and records of the relevant Subsidiary, and fairly present, in all material respects, the financial position of such Subsidiary as at the respective dates thereof and the results of its operations and its cash flows for the periods then ended. Section 3.6 Information Supplied. Each document required to be filed by the Company with the SEC in connection with the transactions contemplated by this Agreement, including, without limitation, the Proxy Statement and the Schedule 13e-3, and any amendments or supplements thereto will comply in all material respects with the provisions of the Exchange Act. Neither the Proxy Statement (other than with respect to information contained in the Proxy 15 16 Statement provided to the Company by Parent for inclusion in the Proxy Statement) nor any of the information supplied by the Company for inclusion or incorporation by reference in the Schedule 13e-3, together with any amendments or supplements thereto, will (i) in the case of the Proxy Statement, at the time of the mailing of the Proxy Statement and at the time of the Stockholder Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, and (ii) in the case of information supplied by the Company for inclusion or incorporation by reference in the Schedule 13e-3, at the time of its filing, at the time of the dissemination of the Schedule 13e-3 and until the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the Company SEC Documents filed with the SEC prior to the date of this Agreement, since December 31, 1998 to the date hereof, (A) the Company and its Subsidiaries have not incurred any material liability or obligation (indirect, direct or contingent), or entered into any material oral or written agreement or other transaction, that is not in the ordinary course of business or that would result in a Material Adverse Effect on the Company, (B) there has been no change in the capital stock of the Company except for the issuance of shares of the Company Common Stock pursuant to the exercise of Company Stock Options and no dividend or distribution of any kind declared, paid or made by the Company on any class of its stock, (C) there has not been (x) any granting by the Company or any of its Subsidiaries to any executive officer of the Company or any of its Subsidiaries of any increase in compensation, except in the ordinary course of business consistent with prior practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Company SEC Documents, (y) any granting by the Company or any of its Subsidiaries to any such executive officer of any increase in severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Company SEC Documents or (z) any entry by the Company or any of its Subsidiaries into any employment, deferred compensation, severance or termination agreement with any such executive officer, and (D) there has been no event causing a Material Adverse Effect on the Company, nor any development that would, individually or in the aggregate, result in a Material Adverse Effect on the Company. Section 3.8 Permits and Compliance. Each of the Company and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company or any of its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Company Permits"), except where the failure to have any of the Company Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company, and as of the date of this Agreement no suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company (as hereinafter defined), threatened, except where the suspension or cancellation of any of the Company Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is in violation of (A) its Certificate of Incorporation, by-laws or other organizational documents, (B) any applicable law, ordinance, administrative or governmental rule or regulation or (C) any order, decree or judgment of any Governmental Entity having jurisdiction over the Company or any of its Subsidiaries, except, in the case of clauses (B) and (C), for any violations that, 16 17 individually or in the aggregate, would not have a Material Adverse Effect on the Company. Except as disclosed in the Company SEC Documents filed prior to the date of this Agreement, as of the date of this Agreement none of the Company or any of its Subsidiaries is a party to any Material Contract. For purposes of this Agreement, "Material Contract" shall mean any contract or agreement filed as an exhibit to the Company SEC Documents or any other contract or agreement that is material to the business, properties, assets, liabilities, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole. Except as set forth in the Company SEC Documents filed prior to the date of this Agreement, no event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists or, upon the consummation by the Company of the transactions contemplated by this Agreement, will exist under any indenture, mortgage, loan agreement, note or other agreement or instrument for borrowed money, any guarantee of any agreement or instrument for borrowed money, or any lease, contractual license or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any such Subsidiary is bound or to which any of the properties, assets or operations of the Company or any such Subsidiary is subject, other than any defaults that, individually or in the aggregate, would not have a Material Adverse Effect on the Company. All Material Contracts (other than the Affiliate Arrangements (as defined in Section 3.21 below) which will be terminated at the Effective Time) to which the Company or any of its Subsidiaries is a party are in full force and effect and are the valid and binding obligations of the Company or the applicable Subsidiary, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the enforcement of specific performance and other equitable remedies. The Company has made available or delivered to Parent true and complete copies of the Material Contracts and all other documents referred to in the Company Letter, in each case as amended to the date of this Agreement. As of the date of this Agreement, set forth in Section 3.8 of the Company Letter is a description of any material changes to the amount and terms of the indebtedness of the Company and its Subsidiaries as described in the Company Annual Report. For purposes of this Agreement, "Knowledge of the Company" means the actual knowledge of the executive officers of the Company after due inquiry. Section 3.9 Tax Matters. (i) The Company and each of its Subsidiaries have timely filed all federal, and all material state, local, foreign and provincial, Tax Returns required to have been filed or appropriate extensions therefor have been properly obtained, and such Tax Returns are correct and complete, except to the extent that any failure to so file or any failure to be correct and complete would not, individually or in the aggregate, have a Material Adverse Effect on the Company; (ii) all Taxes shown to be due on such Tax Returns have been timely paid, taking into account extensions for payment that have been properly obtained, or such Taxes are being timely and properly contested which contests as of the date of this Agreement have been disclosed in Section 3.9 of the Company Letter; (iii) the Company and each of its Subsidiaries have complied in all material respects with all rules and regulations relating to the withholding of Taxes except to the extent that any failure to comply with such rules and regulations would not, individually or in the aggregate, have a Material Adverse Effect on the Company; (iv) neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of its Taxes; (v) any Tax Returns referred to in clause (i) relating to federal and state income Taxes have been examined by the IRS or the appropriate state taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (vi) no material issues that have been raised 17 18 in writing by the relevant taxing authority in connection with the examination of the Tax Returns referred to in clause (i) are currently pending and each such examination has been completed; (vii) all deficiencies asserted or assessments made as a result of any examination of such Tax Returns by any taxing authority have been paid in full or are being timely and properly contested which contests as of the date of this Agreement have been disclosed in Section 3.9 of the Company Letter; and (viii) no withholding is required under Section 1445 of the Code in connection with the Merger; (ix) neither the Company nor any of its Subsidiaries is party to or bound by any tax-sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority); (x) neither the Company nor any of its Subsidiaries nor any affiliated group that includes any of them shall be required to include in a taxable period ending after the Closing Date any material amount of taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or any comparable provision of state, local, or foreign Tax law, or for any other reason; (xi) neither the Company nor any of its Subsidiaries has made any consent under Section 341 of the Code, no property of the Company or of any of its Subsidiaries is "tax exempt use property" within the meaning of Section 168(h) of the Code, neither the Company nor any of its Subsidiaries is a party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 and none of the assets of the Company or of any of its Subsidiaries is subject to a lease under Section 7701(h) of the Code or under any predecessor section thereof; (xii) neither the Company nor any of its Subsidiaries has requested any extension of time within which to file any Tax return, which return has not yet been filed; and (xiii) no power of attorney with respect to any Taxes has been executed or filed with any taxing authority by or on behalf of the Company or any of its Subsidiaries. The Company has delivered or made available to Parent for inspection (A) true and complete copies of all material Tax returns of the Company and any affiliated group of which the Company is a member and of any of the Company's Subsidiaries relating to Taxes for all taxable periods for which the applicable statute of limitations has not yet expired and (B) complete and correct copies of all material private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents, submitted by, received by or agreed to by or on behalf of the Company or any such group or Subsidiary, or, to the extent related to the income, business, assets, operations, activities or status of the Company or any such group or Subsidiary, submitted by, received by or agreed to by or on behalf of any affiliated group of which the Company is or has ever been a member, and relating to Taxes for all taxable periods for which the statute of limitations has not yet expired. No material liens exist for Taxes (other than liens for Taxes not yet due and payable) with respect to any of the assets or properties of the Company or any of its Subsidiaries. The Federal income Tax returns of the Company and its Subsidiaries and any affiliated group that includes any of them have expressly disclosed any Tax positions of the Company, such Subsidiaries or such group that, if not disclosed, could give rise to material penalties under Section 6662 of the Code. For purposes of this Agreement: (i) "Taxes" means any federal, state, local, foreign or provincial income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or added minimum, ad valorem, value-added, transfer or excise tax, or other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty imposed by any Governmental Entity, and (ii) "Tax Return" means any return, report or similar statement 18 19 (including the attached schedules) required to be filed with respect to any Tax, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. Section 3.10 Actions and Proceedings. Except as set forth in the Company SEC Documents filed prior to the date of this Agreement, there are, as of the date of this Agreement, no outstanding orders, judgments, injunctions, awards or decrees of any Governmental Entity against or involving (i) the Company or any of its Subsidiaries, (ii) to the Knowledge of the Company, any of the present or former directors, officers, employees, consultants, agents or stockholders of the Company or any of its Subsidiaries, as such, (iii) any of the properties, assets or businesses of the Company or any of its Subsidiaries or (iv) any Company Plan (as hereinafter defined) that, individually or in the aggregate, would have a Material Adverse Effect on the Company or materially impair the ability of the Company to perform its obligations hereunder. As of the date of this Agreement, there are no actions, suits or claims or legal, administrative or arbitrative proceedings or investigations pending or, to the Knowledge of the Company, threatened against or involving (i) the Company or any of its Subsidiaries, (ii) to the Knowledge of the Company, any of its or their present or former directors, officers, employees, consultants, agents or stockholders, as such, (iii) any of the properties, assets or businesses of the Company or any of its Subsidiaries or (iv) any Company Plan (as hereinafter defined) that, individually or in the aggregate, would have a Material Adverse Effect on the Company or materially impair the ability of the Company to perform its obligations hereunder. As of the date hereof, there are no actions, suits, labor disputes or other litigation, legal or administrative proceedings or governmental investigations pending or, to the Knowledge of the Company, threatened against or affecting (i) the Company or any of its Subsidiaries, (ii) to the Knowledge of the Company, any of its or their present or former officers, directors, employees, consultants, agents or stockholders, as such, (iii) any of the properties, assets or businesses of the Company or any of its Subsidiaries or (iv) any Company Plan, in each case relating to the transactions contemplated by this Agreement. The Company is not in default with respect to any material final judgment, order or decree of any court or any governmental agency or instrumentality. Section 3.11 Certain Agreements. Except as set forth in Section 3.11 of the Company Letter or as provided pursuant to Section 1.7(d) hereof, neither the Company nor any of its Subsidiaries is a party to any oral or written agreement or plan, including any employment agreement, severance agreement, stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. No holder of any option to purchase shares of Company Common Stock, or shares of Company Common Stock granted in connection with the performance of services for the Company or its Subsidiaries, is or will be entitled to receive cash from the Company or any Subsidiary in lieu of or in exchange for such option or shares as a result of the transactions contemplated by this Agreement, other than as provided in Section 1.5(d). Section 3.12 ERISA (a) Company Plans. Each Company Plan (as hereinafter defined) is listed in Section 3.12(a) of the Company Letter. Except as would not have a Material Adverse Effect on the 19 20 Company, each Company Plan complies in all respects with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code and all other applicable statutes and governmental rules and regulations, and (i) no "reportable event" (within the meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan that is likely to have individually or in the aggregate, a Material Adverse Effect on the Company, and (ii) no action has been taken, or is currently being considered, to terminate any Company Plan subject to Title IV of ERISA. No Company Plan, nor any trust created thereunder, has incurred any "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived. (b) Plan Liabilities. With respect to the Company Plans, no event has occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company or any ERISA Affiliate or Company Plan fiduciary could be subject to any liability under the terms of such Company Plans, ERISA, the Code or any other applicable law, other than liabilities for benefits payable in the normal course, which would have a Material Adverse Effect on the Company. All Company Plans that are intended to be qualified under Section 401(a) of the Code have been determined by the IRS to be so qualified, or a timely application for such determination is now pending or a request for such a determination filed within the remedial amendment period of Section 401(b) of the Code is pending, and the Company is not aware of any reason why any such Company Plan is not so qualified in operation. Neither the Company nor any entity which is treated as a single employer along with the Company under Section 414(b), (c), (m) or (o) of the Code maintains or contributes to, or has ever maintained or contributed to, or been required to contribute to or has otherwise incurred any liability with respect to a "multiemployer plan" within the meaning of Section 3(37) of ERISA or any plan subject to Title IV of ERISA. Except as disclosed in Section 3.12(b) of the Company Letter, neither the Company nor any of its ERISA Affiliates has any liability or obligation under any welfare plan to provide benefits after termination of employment to any employee or dependent other than as required by Section 4980B of the Code. (c) Definitions. As used herein, (i) "Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA), a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, holiday pay, vacation, severance, death benefit, sick leave, fringe benefit, personnel policy, insurance or other plan, arrangement or understanding, in each case established or maintained by the Company or any of its ERISA Affiliates or as to which the Company or any of its ERISA Affiliates has contributed or otherwise may have any liability, and (iii) "ERISA Affiliate" means any corporation or trade or business controlled by, controlling or under common control with the Company within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA. (d) Employment Agreements. Section 3.12(d) of the Company Letter contains a true and complete list of all (i) severance and employment agreements with the current and former directors, officers, employees, independent contractors and consultants of the Company and each ERISA Affiliate containing any obligation or liability on or after the date of this Agreement, (ii) severance programs and policies of the Company and each ERISA Affiliate with or relating to its current and former directors, officers, employees, independent contractors and consultants containing any obligation or liability on or after the date of this Agreement, and (iii) plans, 20 21 programs, agreements and other arrangements of the Company and each ERISA Affiliate with or relating to its current and former directors, officers, employees, independent contractors and consultants containing change of control, acceleration of the time of payment or vesting of benefits or similar provisions currently in effect (collectively, the "Employee Agreements"). Section 3.13 Compliance with Worker Safety and Environmental Laws. The properties, assets and operations of the Company and its Subsidiaries are in compliance with all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees, judgments, permits and licenses relating to public and worker health and safety (collectively, "Worker Safety Laws") and the protection and clean-up of the environment and activities or conditions related thereto, including, without limitation, those relating to the generation, handling, disposal, transportation or release of hazardous materials (collectively, "Environmental Laws"), except for any violations that, individually or in the aggregate, would not have a Material Adverse Effect on the Company. With respect to such properties, assets and operations, including any previously owned, leased or operated properties, assets or operations, there are no events, conditions, circumstances, activities, practices, incidents, actions or plans of the Company or any of its Subsidiaries that may interfere with or prevent compliance or continued compliance with applicable Worker Safety Laws and Environmental Laws, other than any such interference or prevention as would not, individually or in the aggregate with any such other interference or prevention, have a Material Adverse Effect on the Company. None of the Company or any of its Subsidiaries has received or is aware of any claim or notice of violations of any applicable Environmental Laws or Worker Safety Laws other than such claims or violations as would not individually or in the aggregate have a Material Adverse Effect on the Company. Section 3.14 Labor Matters. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or labor contract. Neither the Company nor any of its Subsidiaries has engaged in any unfair labor practice with respect to any Persons employed by or otherwise performing services primarily for the Company or any of its Subsidiaries (the "Company Business Personnel"), and there is no unfair labor practice complaint or grievance against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable state agency pending or threatened in writing with respect to the Company Business Personnel, except where such unfair labor practice, complaint or grievance would not have a Material Adverse Effect on the Company. There is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which may interfere with the respective business activities of the Company or any of its Subsidiaries, except where such dispute, strike or work stoppage would not have a Material Adverse Effect on the Company. Section 3.15 State Takeover Statute. Section 203 of the DGCL is not applicable to the Transactions. Section 3.16 Required Vote of Company Stockholders. The affirmative vote of the holders of two-thirds of the outstanding shares of Company Common Stock is required to approve the Merger. No other vote of the security holders of the Company is required by law, the Certificate of Incorporation or By-laws of the Company or otherwise in order for the Company to consummate the Transactions. 21 22 Section 3.17 Brokers. No broker, investment banker or other Person, other than Donaldson, Lufkin & Jenrette Securities Corporation (the "Financial Advisor"), is entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has furnished Parent a true and correct copy of the engagement agreement with the Financial Advisor. Section 3.18 Opinion of Financial Advisor. The Company has received the opinion of the Financial Advisor addressed to the Company's Board of Directors, dated the date of this Agreement, to the effect that, as of such date, the consideration to be received in the Merger by the holders of the shares of Company Common Stock is fair from a financial point of view to the Company's stockholders, other than NRG Energy, Inc. A signed copy of such opinion has been delivered to Parent. Section 3.19 Utility Regulation. None of the Company or any of its Subsidiaries is (i) subject to regulation under the Public Utility Holding Company Act of 1935 ("PUHCA") (other than any such regulation contemplated by Section 9(a)(2), 32 or 33 of PUHCA), (ii) subject to regulation as an "electric utility" or a "public utility" as such terms are defined in the Federal Power Act (other than as contemplated by 18 C.F.R. Section 292.601(c) or Section 32 or 33 of PUHCA), or (iii) subject to regulation by any state respecting the rates of electric utilities or the financial and organizational regulation of electric utilities as those terms are used in Section 210(e) of the Public Utility Regulatory Policies Act of 1978 ("PURPA"), except with respect to participation in, or ownership of, an "exempt wholesale generator" as such term is defined in Section 32 of PUHCA. Not more than 50% of the ultimate ownership of the projects operated by the Subsidiaries is held by Persons primarily engaged in the generation or sale of electric power (other than electric power solely from qualifying cogeneration facilities, qualifying small power production facilities, exempt wholesale generators or foreign utilities companies (as defined in Section 33 of PUHCA)) within the meaning of the Federal Power Act. Each such project has self-certified itself to be in compliance with such requirements without objection by FERC or FERC has issued a final order stating that each such project is a facility which complies with the definition of "cogeneration facility" as set forth in 18 C.F.R. Section 292.202(c) and which meets all of the requirements for qualification set forth in 18 C.F.R. Section 292.203(b). Section 3.20 Insurance. Section 3.20 of the Company Letter contains a true and complete list of all material insurance policies held by the Company or any of its Subsidiaries. All such policies are in full force and effect and all related premiums have been paid to date. As of the date of this Agreement, there are no pending or, to the Knowledge of the Company, threatened disputes or communications with or from any insurance carrier denying or disputing any claim or regarding cancellation or non-renewal of any such policy which if determined adversely to the Company, would have a Material Adverse Effect on the Company. Section 3.21 Related Party Transactions. No director or officer of the Company or any of its Subsidiaries or any Person which as of the date of this Agreement has a Schedule 13D or 13G on file with the Securities and Exchange Commission with respect to the Company Common Stock (each such Person, a "Significant Holder"), or any member of the immediate family of any 22 23 such director, officer, Significant Holder or any Person in which any such director, officer, Significant Holder, or any member of the immediate family of any such director or officer, is an officer, director, trustee, partner or holder of more than 50% of the outstanding capital stock or equity interests, is a party to any material executory transaction with the Company or any of its Subsidiaries. There are not loans, guarantees, letters of credit or other forms of credit support provided by or on behalf of any director or officer of the Company or any of its Subsidiaries to or in favor of the Company or any of its Subsidiaries. For purposes of this Agreement, "Affiliate Arrangements" shall mean the arrangements identified on Section 3.21 of the Company Letter that will terminate at the Effective Time. ARTICLE IV COVENANTS OF THE COMPANY Section 4.1 Conduct of Business Pending the Merger. Except as expressly permitted by clauses (i) through (xvi) of this Section 4.1 or as set forth in the Company Letter, during the period from the date of this Agreement through the Effective Time, the Company shall, and shall cause each of its Subsidiaries to carry on its business in the ordinary course of its business as currently conducted and, to the extent consistent therewith, use best efforts to preserve intact its current business organizations, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall be unimpaired at the Effective Time. Without limiting the generality of the foregoing, and except as otherwise expressly contemplated by this Agreement or as set forth in the Company Letter, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed): (i) (A) declare, set aside or pay any dividends on, or make any other actual, constructive or deemed distributions in respect of, any of its capital stock, or otherwise make any payments to its stockholders in their capacity as such (other than dividends and other distributions by Subsidiaries), (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (C) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries or any other interests or securities thereof or any rights, warrants or options to acquire any such shares or other interests or securities; (ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any shares of its capital stock or partnership interests, any other voting securities or equity equivalent or any securities convertible into, or any rights, warrants or options to acquire any such shares or interests, voting securities, equity equivalent or convertible securities, other than the issuance of shares of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement in accordance with their current terms. (iii) amend its Certificate of Incorporation or charter or By-Laws; 23 24 (iv) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, limited liability company, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, other than transactions that are in the ordinary course of business consistent with past practice and that have a transaction value less than $250,000 individually or $1,000,000 in the aggregate and not material to the Company and its Subsidiaries taken as a whole; (v) sell, lease or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of its assets, other than transactions that are in the ordinary course of business consistent with past practice and that have a transaction value less than $250,000 individually or $1,000,000 in the aggregate; (vi) incur any indebtedness for borrowed money, guarantee any such indebtedness or make any loans, advances or capital contributions to, or other investments in, any other Person, other than (A) any such obligations incurred in the ordinary course of business consistent with past practices and that are less than $500,000 in the aggregate, and (B) indebtedness, loans, advances, capital contributions and investments between the Company and any of its Subsidiaries or between any of such Subsidiaries; (vii) alter (through merger, liquidation, reorganization, restructuring or in any other fashion) the corporate structure or ownership of the Company or of any of its Subsidiaries; (viii) enter into or adopt any, or amend any existing, severance plan, agreement or arrangement or enter into or amend any Company Plan or employment or consulting agreement, except in the case of any amendments to any Company Plan, for any immaterial changes as required by applicable law; (ix) increase the compensation payable or to become payable to its current or former directors, officers, employees, independent contractors or consultants or grant any severance or termination pay to, or enter into or amend any employment or severance agreement with, any current or former director, officer, employee, independent contractor or consultant of the Company or any of its Subsidiaries, or establish, adopt, enter into, or, except in the case of any amendments to any Company Plan, for any immaterial changes as may be required to comply with applicable law, amend in any material respect or take action to enhance in any material respect or accelerate the payment or vesting of any rights or benefits under, any labor, collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, employee, consultant or independent contractor; (x) violate or fail to perform any obligation or duty imposed upon it or any of its Subsidiaries by any applicable material federal, state or local law, rule, regulation, guideline or ordinance; 24 25 (xi) make any change to accounting policies or procedures (other than actions required to be taken by generally accepted accounting principles); (xii) prepare or file any Tax Return inconsistent with past practice or, on any such Tax Return, take any position, make any election, or adopt any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods; (xiii) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (xiv) enter into any contract which involves aggregate payments in excess of $250,000 for individual contracts or $1,000,000 in the aggregate for all contracts or amend, terminate, renew or waive any rights of material value under, any Material Contract of the Company or any of its Subsidiaries; or other than as described in Section 4.1(xiv) of the Company Letter, make or agree to make any new capital expenditure or expenditures in excess of $250,000 individually or $500,000 in the aggregate; (xv) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than (a) the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent financial statements (or the notes thereto) of the Company included in the Company SEC Documents or incurred in the ordinary course of business consistent with past practice or (b) payments of principal and interest and related fees on indebtedness owed by the Company or any of its Subsidiaries under existing revolving credit facilities and scheduled payments of principal and interest and related fees on any other indebtedness owed by the Company or any of its Subsidiaries under any existing credit facility; (xvi) take any write-down of the value of any asset or take any write-off as uncollectible of any accounts or notes receivable or any portion thereof, except to the extent such write-down or write-off is required by generally accepted accounting principles or is consistent with the historic accounting policies adhered to by the Company or its Subsidiaries, as applicable; or (xvii) authorize, recommend, propose or announce an intention to do any of the foregoing, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing. Section 4.2 No Solicitation. (a) Takeover Proposals. The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor or representative of, the Company or any of its Subsidiaries to, (i) solicit, initiate or encourage the submission of, any Takeover Proposal (as hereafter defined), (ii) enter into any agreement with respect to any Takeover Proposal or (iii) participate in any discussions 25 26 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 proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal; provided, however, that, if the Board of Directors of the Company reasonably determines the Takeover Proposal constitutes a Superior Proposal (as defined below), then, to the extent required by the fiduciary obligations of the Board of Directors of the Company, as determined in good faith by a majority of the disinterested members thereof after receiving the advice of independent legal counsel, the Company may, in response to an unsolicited request therefor, furnish information with respect to the Company to, and enter into discussions with, any Person that has made such Takeover Proposal pursuant to a customary confidentiality agreement. For purposes of this Agreement, (i) "Takeover Proposal" means any proposal for, offer or indication of interest in a merger or other business combination involving the Company or any of its Subsidiaries or any proposal or offer to acquire in any manner, directly or indirectly, a substantial equity interest in, a substantial portion of the voting securities of, or a substantial portion of the assets of the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement, and (ii) "Superior Proposal" means a bona fide Takeover Proposal made by a third party which a majority of the disinterested members of the Board of Directors of the Company determines in its reasonable good faith judgment to be more favorable to the Company's stockholders than the Merger (after receiving the opinion, with only customary qualifications, of the Company's independent financial advisor of nationally recognized reputation that the value of the consideration provided for in such proposal exceeds the value of the consideration provided for in the Merger) and for which financing, to the extent required, is then committed or which, in the reasonable good faith judgment of a majority of such disinterested members (after receiving the advice of the Company's independent financial advisor), is highly likely to be financed by such third party. (b) Recommendation of the Board of Directors. Except as expressly permitted by this Section 4.2, neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Sub, the approval or recommendation by such Board of Directors or any such committee of the Merger or (ii) approve or recommend, propose to approve or recommend, or cause the Company to enter into any letter of intent, agreement in principle or legally binding acquisition agreement (the "Company Acquisition Agreement") relating to any Takeover Proposal. Notwithstanding the foregoing, if the Company has received a Superior Proposal, the Board of Directors of the Company may (subject to this and the following sentences) terminate this Agreement, but only at a time that is more than four (4) business days following Parent's receipt of written notice advising Parent that the Company's Board of Directors is prepared to accept such Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the Person making such Superior Proposal; provided, however, that (x) at the time of such termination, such proposal continues to be a Superior Proposal, taking into account any amendment of the terms of the Merger by Parent or any proposal by Parent to amend the terms of this Agreement, the Merger or any other Takeover Proposal made by Parent (a "New Parent Proposal"), and (y) concurrently with or immediately after such termination, the Company's Board of Directors shall cause the Company to enter into a definitive agreement with respect to such Superior Proposal. (c) Notice of Takeover Proposal. The Company shall advise Parent orally (within one business day) and in writing (as promptly as practicable) of (i) any Takeover Proposal or any inquiry with respect to or which could lead to any Takeover Proposal, (ii) the material terms of 26 27 such Takeover Proposal and (iii) the identity of the Person making any such Takeover Proposal or inquiry. The Company will keep Parent fully informed of the status and details of any such Takeover Proposal or inquiry. (d) Permitted Actions or Disclosures by the Company. Nothing contained in this Section 4.2 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the Board of Directors of the Company, after consultation with independent counsel, failure so to disclose would be inconsistent with its obligations under applicable law; provided, however, that, except as expressly provided in this Section 4.2, neither the Company nor its Board nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to this Agreement or in connection with the Merger, or approve or recommend, or propose publicly to approve or recommend, a Takeover Proposal. ARTICLE V ADDITIONAL AGREEMENTS Section 5.1 Stockholder Meeting. The Company will, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a stockholder meeting (the "Stockholder Meeting") for the purpose of considering the approval of this Agreement and the transactions contemplated hereby. The Company has, through its Board of Directors, recommended to its stockholders the adoption or approval of this Agreement, the Merger and the Amendment, shall use all reasonable efforts to solicit such approvals by its stockholders and shall not withdraw such recommendation. Without limiting the generality of the foregoing, the Company agrees that its obligations pursuant to the first sentence of this Section 5.1 shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of a Takeover Proposal. Section 5.2 Preparation of the Proxy Statement and Schedule 13e-3. The Company shall promptly prepare and, after consultation with Parent, file with the SEC the Proxy Statement and shall use its reasonable best efforts to obtain and furnish the information required to be included in the Proxy Statement and, after consultation with Parent, respond promptly to any comments made by the SEC. In connection with the Company consulting with Parent concerning the Proxy Statement, the Company shall provide Parent a reasonable opportunity to review and comment on the Proxy Statement and amendment or modification thereto prior to filing with the SEC, shall reasonably consider the comments and suggestions of Parent, shall not change without Parent's consent any information provided by Parent for inclusion in the Proxy Statement that the Company requests of Parent, shall promptly notify Parent of the receipt of any comments or other communications from the SEC regarding the Proxy Statement and shall provide Parent a reasonable opportunity to review and comment on any response by the Company to any comments or other communications from the SEC that requires a response. The Company shall mail the Proxy Statement to its stockholders at the earliest practical date. Parent, Sub and (to the extent required by law) their respective affiliates shall promptly prepare and file, concurrent with the filing of the Proxy 27 28 Statement and after consultation with the Company, with the SEC the Schedule 13e-3 and the Company shall reasonably cooperate with Parent in connection with the preparation of the Schedule 13e-3. If at any time prior to the Effective Time any event with respect to Parent, its officers and directors or Sub shall occur, which is required to be described in the Schedule 13e-3 or the Proxy Statement, such event shall be so described, and, in the case of the Schedule 13e-3, Parent will promptly give notice of such event to the Company and an appropriate amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of the Company. If at any time prior to the Effective Time any event with respect to the Company, its officers and directors or any of its Subsidiaries shall occur which is required at that time to be described in the Proxy Statement or the Schedule 13e-3, such event shall be so described, and, in the case of the Proxy Statement, the Company shall promptly notify Parent of such event and an appropriate amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of the Company. Section 5.3 Access to Information. Subject to currently existing contractual and legal restrictions applicable to the Company or any of its Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to, afford to the accountants, counsel, financial advisors and other representatives of Parent hereto reasonable access to, and permit them to make such inspections as they may reasonably require of, during normal business hours during the period from the date of this Agreement through the Effective Time, all their respective properties, books, contracts, commitments and records (including, without limitation, the work papers of independent accountants, if available and subject to the consent of such independent accountants) and, during such period, the Company shall, and shall cause each of its Subsidiaries to, furnish promptly to Parent (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities laws and (ii) all other information concerning its business, properties and personnel as Parent may reasonably request. No investigation pursuant to this Section 5.3 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. All information obtained by Parent pursuant to this Section 5.3 shall be kept confidential in accordance with the Confidentiality Agreement, dated May 17, 1999, between Parent and the Company (the "Confidentiality Agreement"). Section 5.4 Fees and Expenses. (a) Expenses. Except as provided below, all fees and expenses incurred in connection with the Transactions shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated. (b) Termination Fee. The Company shall pay to Parent a termination fee of $7,500,000 if: (i) the Company terminates this Agreement pursuant to Section 7.1(d); (ii) (A) after the date of this Agreement and prior to the termination of this Agreement, any Person makes a Takeover Proposal, (B) this Agreement is terminated pursuant to Section 7.1(b)(iii) or (c) and (C) within 12 months of the date of termination of 28 29 this Agreement, the Company executes a legally binding definitive agreement or an agreement in principle pursuant to which any Person, entity or group (other than Parent, Sub or any of their affiliates), in one transaction or a series of transactions, will acquire more than 50% of the outstanding Company Common Stock or assets of the Company through any open market purchases, merger, consolidation, tender or exchange offer, recapitalization, reorganization or other business combination and such transaction or series of transactions have been consummated (an "Third Party Acquisition Event"); or (iii) (A) after the date of this Agreement and prior to the termination of this Agreement, any Person makes a Takeover Proposal, (B) this Agreement is terminated by Parent pursuant to Section 7.1(e) or (f), and (C) a Third Party Acquisition Event occurs within 12 months of the date of termination of this Agreement. Any termination fee due under this Section 5.4(b) shall be paid by wire transfer of same-day funds on the date of termination of this Agreement in the case of a fee due under clause (i) of the preceding sentence, or on the date such Third Party Acquisition Event is consummated in the case of a fee due under clause (ii) or (iii) of the preceding sentence. The payment of the termination fee pursuant to this Section 5.4(b) shall constitute liquidated damages and shall be the sole and exclusive remedy of Parent and Sub if this Agreement is terminated under the circumstances described above in this Section 5.4(b). Section 5.5 Best Efforts. (a) Consummation of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including, but not limited to: (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from all Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity (including those in connection with the HSR Act, the Regulatory Approval, the Applicable New Jersey Laws, and State Takeover Approvals), (ii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement and the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, (iii) the taking of all reasonable actions to minimize the effects of any State Takeover Approval on the transactions contemplated hereby, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. No party to this Agreement shall consent to any voluntary delay of the consummation of the Merger at the behest of any Governmental Entity without the consent of the other parties to this Agreement, which consent shall not be unreasonably withheld. (b) Representations and Warranties. Each party shall not take any action, or enter into any transaction, which would cause any of its representations or warranties contained in 29 30 this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement. (c) Divestiture. Notwithstanding anything to the contrary contained in this Agreement, in connection with any filing or submission required or action to be taken by either Parent or the Company to effect the Merger and to consummate the other transactions contemplated hereby, the Company shall not, without Parent's prior written consent, commit to any divestiture transaction, and neither Parent nor any of its Affiliates shall be required to divest or hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to, or its ability to retain, the Company or any of the material businesses, product lines or assets of Parent or any of its Subsidiaries or that otherwise would have a Material Adverse Effect on Parent. (d) Company Stock Option Termination Notices. At least sixty (60) days prior to the Effective Time, the Company will give the "Acceleration Notice" as defined in and contemplated by the Company Plans pursuant to which Company Stock Options were granted, provided that the holders of the Company Stock Options shall be entitled to the Option Consideration pursuant to Section 1.5(d) if such holder executes and delivers the option termination agreement as contemplated by Section 1.5(d) above. Section 5.6 Public Announcements. Parent and the Company will not issue any press release with respect to the transactions contemplated by this Agreement or otherwise issue any written public statements with respect to such transactions without prior consultation with the other party, except as may be required by applicable law or by obligations pursuant to any listing agreement with any national securities exchange or the Nasdaq National Market. Section 5.7 Real Estate Transfer and Gains Tax. Parent and the Company agree that either the Company or the Surviving Corporation will pay any state or local tax which is attributable to the transfer of the beneficial ownership of the Company's or its Subsidiaries' real property, if any (collectively, the "Gains Taxes"), and any penalties or interest with respect to the Gains Taxes, payable in connection with the consummation of the Merger. The Company and Parent agree to cooperate with the other in the filing of any returns with respect to the Gains Taxes, including supplying in a timely manner a complete list of all real property interests held by the Company and its Subsidiaries and any information with respect to such property that is reasonably necessary to complete such returns. The portion of the consideration allocable to the real property of the Company and its Subsidiaries shall be determined by Parent in its reasonable discretion. Section 5.8 Indemnification; Directors and Officers Insurance. (a) For six years from and after the Effective Time, Parent agrees to cause the Surviving Corporation to, and shall guarantee the obligation of the Surviving Corporation to, indemnify and hold harmless all past and present officers and directors of the Company and of its Subsidiaries to the same extent such Persons are indemnified as of the date of this Agreement by the Company pursuant to the Company's Certificate of Incorporation, By-Laws or agreements in existence on the date hereof for acts or omissions occurring at or prior to the Effective Time. (b) Parent shall provide, or shall cause the Surviving Corporation to provide, for an aggregate period of not less than six years from the Effective Time, the Company's current 30 31 directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time (the "D&O Insurance") that is substantially similar (with respect to limits and deductibles) to the Company's existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required in any year to expend more than $360,000 for such coverage (the "Maximum Premium"), and provided, further, that if the Surviving Corporation is unable to obtain the amount of such insurance required by this Section 5.8(b) for such aggregate premiums, the Surviving Corporation shall purchase as much insurance as is obtainable for an aggregate annual premium of $360,000. (c) From and after the Effective Time, to the full extent permitted by the law, Parent shall, and shall cause the Company (or any successor to the Company) to, indemnify, defend and hold harmless the present officers and directors of the Company and its Subsidiaries (each an "Indemnified Party") against all losses, claims, damages, liabilities, fees and expenses (including reasonable attorneys' fees and disbursements), judgments, fines and amounts paid in settlement (collectively, "Losses") arising out of actions or omissions occurring at or prior to the Effective Time in connection with this Agreement, the Company Stockholder Agreement and the Transactions; provided, however, that an Indemnified Party shall not be entitled to indemnification under this Section 5.8(c) for Losses arising out of actions or omissions by the Indemnified Party constituting (i) a breach of this Agreement or the Company Stockholder Agreement, (ii) grossly negligent or criminal conduct or fraud, or (iii) any violation of federal, state or foreign securities laws. In order to be entitled to indemnification under this Section 5.8(c), an Indemnified Party must give Parent and the Company prompt written notice of any third party claim which may give rise to any indemnify obligation under this Section 5.8(c), and Parent and the Company shall have the right to assume the defense of any such claim through counsel of their own choosing, subject to such counsel's reasonable judgment that separate defenses that would create a conflict of interest on the part of such counsel are not available. If Parent and the Company do not assume any such defense, they shall be liable for all reasonable costs and expenses of defending such claim incurred by the Indemnified Party, including reasonable fees and disbursements of counsel, and shall advance such reasonable costs and expenses to the Indemnified Party; provided, however, that such advance shall be made only after receiving an undertaking from the Indemnified Party that such advance shall be repaid if it is determined that such Indemnified Party is not entitled to indemnification therefor. Neither Parent nor the Company shall be liable under this Section 5.8(c) for any Losses resulting from any settlement, compromise or offer to settle or compromise any such claim or litigation or other action, without the prior written consent of Parent and the Company. (d) In the event the Surviving Corporation or any successor to the Surviving Corporation (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all its properties and assets to any Person, then, and in each case, proper provision shall be made so that the successors of the Surviving Corporation honor the obligations of the Company set forth in this Section 5.8. Section 5.9 Notification of Certain Matters. Parent shall use its best efforts to give prompt notice to the Company, and the Company shall use its best efforts to give prompt notice to Parent, of: (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, 31 32 of which it is aware and which would be reasonably likely to cause (x) any representation or warranty by it contained in this Agreement to be untrue or inaccurate in any material respect or (y) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied in all material respects by it, (ii) any failure of Parent or the Company, as the case may be, to comply in a timely manner with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder or (iii) any change or event which would be reasonably likely to have a Material Adverse Effect on the Company; provided, however, that the delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 5.10 Employee Benefit Plans and Agreements (a) Company Plans. Parent shall cause the Surviving Corporation to perform the obligations of the Company under, and comply with, the Employee Agreements and to maintain through December 31, 1999 the Company Plans (other than plans providing for the issuance of Company Common Stock or based on the value of Company Common Stock) in effect on the date of this Agreement; provided, however, that Parent shall have no obligation to continue or renew any Employee Agreement or Company Plan that may be terminated in accordance with its terms; and provided, further, however, that nothing in this Agreement shall confer on any individual any right to employment, compensation for employment, or employee benefits. Notwithstanding the foregoing, Parent shall have the right, at its option, to replace the Company Plans with its own benefit plans provided such plans are in the aggregate comparable (taking into account all relevant factors) with the Company Plans. (b) Credit for Prior Service; Waiver of Pre-existing Conditions. In the event that Parent shall merge any Company Plan with any benefit plan of Parent or otherwise modify any Company Plan, prior service with the Company or any of its Subsidiaries will be counted for purposes of employee eligibility, seniority and vesting under such benefit plan, and any pre-existing condition shall be waived for each employee so long as such employee has had medical coverage under the Company Plans for at least six months immediately prior to the Effective Time. (c) Change of Control. Parent agrees that for purposes of any of the Company Plans conferring rights on a current or former employee, officer or director as a result of a change of control of the Company, the consummation of the Merger shall be deemed to constitute a "Change of Control" (as that term is defined in such Company Plans). Section 5.11 Performance by Sub. Parent shall cause Sub to comply with each of its obligations hereunder and pursuant to the Company Stockholder Agreement, including, without limitation, causing Sub to consummate the Merger as contemplated herein, and Parent hereby guarantees the performance by Sub of such obligations. Parent shall cause Sub to vote any shares of Common Stock owned by the Sub on the record date for the Stockholder Meeting to be voted for approval of this Agreement and the Merger. Section 5.12 Additional Consents and Approvals. The Company and Parent agree that they will cooperate and use their commercially reasonable efforts to seek any waiver and/or consent required such that consummation of the Transactions will not constitute a default under the 32 33 terms of (1) that certain Credit Agreement, by and among NRG Generating (Newark) Cogeneration Inc. and NRG Generating (Parlin) Cogeneration Inc., Credit Suisse, Greenwich Funding Corporation and any Purchasing Lender as Lender and Credit Suisse as Agent, dated as of May 17, 1996, as amended by Amendment Number 1, dated June 28, 1996 and (2) that certain Construction and Term Loan Agreement, by and among NRG (Morris) Cogen, L.L.C., The Chase Manhattan Bank and other Banks as Lenders, The Chase Manhattan Bank as Agent and The Chase Manhattan Bank as Collateral Agent, dated September 15, 1997, as amended by the Amendment and Consent, dated December 10, 1997. ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement shall have been duly approved by the requisite vote of stockholders of the Company in accordance with applicable law and the Certificate of Incorporation and By-laws of the Company. (b) HSR and Other Approvals. (i) The waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (ii) All authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by, any Governmental Entity, which the failure to obtain, make or occur would have the effect of making the Merger or any of the transactions contemplated hereby illegal or would have, individually or in the aggregate, a Material Adverse Effect on Parent (assuming the Merger had taken place), shall have been obtained, shall have been made or shall have occurred. (c) Governmental Actions. No statute, rule, regulation, legislation, interpretation, judgment, order or injunction shall be enacted, entered, enforced, promulgated, amended or become applicable to this Agreement or the Merger and no other action shall have been taken by any court or other Governmental Entity other than the application to the Merger of the waiting period under the HSR Act, that, in each case, would be reasonably expected to result in any of the following effects: (i) challenging the acquisition by Parent or Sub of any Company Common Stock, seeking to restrain or prohibit the making or consummation of the Merger or any other Transaction, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective Subsidiaries to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, (iii) seeking to impose limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any shares of Company Common Stock, including the right to vote the Company Common Stock purchased by it on all matters properly 33 34 presented to the stockholders of the Company, (iv) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any material respect the business or operations of the Company and its Subsidiaries in connection with the Offer, the Merger or the Agreement, or (v) which otherwise is reasonably likely to have a Material Adverse Effect on the Company. Section 6.2 Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Performance of Obligations. Each of Parent and Sub shall have performed in all material respects each of its agreements contained in this Agreement required to be performed on or prior to the Effective Time. (b) Representations and Warranties. Each of the representations and warranties of Parent and Sub contained in this Agreement shall be true and correct, provided that such representations and warranties shall be deemed to be true and correct unless the failure of such representations and warranties to be so true and correct would have a Material Adverse Effect on Parent or would prevent Parent from consummating the transactions contemplated by the Agreement, in each case as if such representations and warranties were made at the time of such termination (except to the extent such representations or warranties expressly relate to an earlier date). (c) Certain Consents. In obtaining any approval or consent required to consummate any of the transactions contemplated herein, no Governmental Entity shall have imposed or shall have sought to impose any condition, penalty or requirement which, in the reasonable opinion of the Company, individually or in the aggregate, would have a Material Adverse Effect on Parent (assuming the consummation of the Merger). Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger. The obligations of Parent and Sub to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Performance of Obligations. The Company shall have complied with the provisions of Section 4.1 of the Agreement, and the Company shall have complied with any agreement or covenant in any material respect of the Company to be performed or complied with by it under the Agreement. (b) Representations and Warranties. Each of the representations and warranties of the Company contained in this Agreement shall be true and correct, provided that such representations and warranties shall be deemed to be true and correct unless the failure of such representations and warranties to be so true and correct would have a Material Adverse Effect on the Company or would prevent the Company from consummating the transactions contemplated by the Agreement, in each case as if such representations and warranties were made at the time of such termination (except to the extent such representations or warranties expressly relate to an earlier date). (c) Litigation. There shall not be instituted or pending any suit, action or proceeding by any Governmental Entity or by any other Person initiated as a result of this Agreement 34 35 or any transactions contemplated hereby (i) challenging the acquisition by Parent or Sub of any Company Common Stock, seeking to restrain or prohibit the making or consummation of the Merger or any other Transaction, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective Subsidiaries to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, (iii) seeking to impose limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any shares of Company Common Stock, including the right to vote the Company Common Stock purchased by it on all matters properly presented to the stockholders of the Company, (iv) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any material respect the business or operations of the Company and its Subsidiaries in connection with the Merger or the Agreement, or (v) which otherwise is reasonably likely to have a Material Adverse Effect on the Company. (d) Material Adverse Effect. Since the date of the Agreement, there shall not have occurred any event, change, effect or development that, individually or in the aggregate, has had or would be reasonably expected to have a Material Adverse Effect on the Company. ARTICLE VII TERMINATION, AMENDMENT AND WAIVER Section 7.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after any approval of the matters presented in connection with the Merger by the stockholders of the Company or Parent: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company: (i) if the Merger has not been effected on or prior to the close of business on February 28, 2000 (the "Outside Date"); provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose material and willful failure to fulfill any of its obligations contained in this Agreement has been the cause of, or resulted in, the failure of the Merger to have occurred on or prior to the Outside Date; provided; however that if the sole reason that the Merger shall not have been consummated by the Outside Date is the failure to hold the Stockholder Meeting by February 28, 2000, the Outside Date shall be extended to March 31, 2000; (ii) if any court or other Governmental Entity having jurisdiction over a party hereto shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or 35 36 (iii) if the stockholders of the Company fail to approve this Agreement and the Merger at the Stockholder Meeting or any adjournment or postponement thereof; (c) by Parent if prior to the Effective Time, the Company's Board of Directors or any committee thereof shall have withdrawn or modified in a manner adverse to Sub or Parent its approval or recommendation of the Transactions or shall have recommended or approved a Company Superior Proposal, or shall have resolved to do any of the foregoing; (d) by the Company, upon approval of its Board of Directors in accordance with Section 4.2(b); provided, however, that any termination of this Agreement pursuant to this Section 7.1(d) shall not be effective until the Company has made full payment of all amounts provided under Section 5.4(b); (e) by either Parent or the Company if the other party shall have breached or failed to comply in any material respect with any of its covenants or agreements other than Section 4.1 contained in this Agreement required to be performed or complied with prior to the date of such termination, which failure to comply has not been cured within thirty business days following receipt by such other party of written notice from the non-breaching party of such failure to comply or by Parent if the Company shall have breached or failed to comply with Section 4.1; or (f) by either Parent or the Company if there has been a breach by the other party (in the case of Parent, including any material breach by Sub) of any representation or warranty that individually or in the aggregate has a Material Adverse Effect on the breaching party or would prevent such breaching party from consummating the transactions contemplated by this Agreement. The right of any party hereto to terminate this Agreement pursuant to this Section 7.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any Person controlling any such party or any of their respective officers or directors, whether prior to or after the execution of this Agreement. Section 7.2 Effect of Termination. In the event of termination of this Agreement by either Parent or the Company, as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability hereunder on the part of the Company, Parent, Sub or their respective officers or directors (except for the last sentence of Section 5.3 and the entirety of Sections 5.4, 8.6, 8.7, 8.9 and 8.10, which shall survive the termination); provided, however, that nothing contained in this Section 7.2 shall relieve any party hereto from any liability for any willful breach of a representation or warranty contained in this Agreement or the breach of any covenant contained in this Agreement. Section 7.3 Amendment. This Agreement may be amended by the parties hereto, by or pursuant to action taken by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 36 37 Section 7.4 Waiver. At any time prior to the Effective Time, the parties hereto may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein which may legally be waived. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE VIII GENERAL PROVISIONS Section 8.1 Non-Survival of Representations and Warranties. The representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall terminate at the Effective Time. Section 8.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, one day after being delivered to an overnight courier or when sent via facsimile (with a confirmatory copy sent by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to Calpine Corporation 50 West San Fernando Street San Jose, CA 95113 Attention: John T. King, Vice President Fax: (408) 995-0505 with a copy to: Howard, Smith & Levin LLP 1330 Avenue of the Americas New York, NY 10019 Attention: William R. Collins Fax: (212) 841-1010 (b) if to the Company, to Cogeneration Corporation of America. One Carlson Parkway, Suite 240 Minneapolis, Minnesota 55447-4454 Attention: Julie A. Jorgensen President and Chief Executive Officer Facsimile No.: (612) 745-7901 37 38 with a copy to: Kaplan, Strangis and Kaplan, P.A. 5500 Norwest Center Minneapolis, Minnesota 55402 Attention: Bruce J. Parker Facsimile No.: (612) 375-1143 Section 8.3 Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Section 8.4 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, except and as provided in the last sentence of Section 5.3, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Except as provided pursuant to Section 5.8 and 5.10, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 8.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Section 8.7 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Section 8.8 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement may be consummated as originally contemplated to the fullest extent possible. Section 8.9 Enforcement of this Agreement. The parties hereto agree that 38 39 irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific wording or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to any other remedy to which any party is entitled at law or in equity. Section 8.10 Consent to Jurisdiction. Each of the parties hereto (a) consents to submit itself to the non-exclusive 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, and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 39 40 IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. COGENERATION CORPORATION OF AMERICA By: /s/ Julie A. Jorgensen ------------------------------------------ Julie A. Jorgensen President and Chief Executive Officer CALPINE CORPORATION By: /s/ John T. King ------------------------------------------ John T. King Vice President CALPINE EAST ACQUISITION CORP. By: /s/ John T. King ------------------------------------------ John T. King Vice President 40 41 EXHIBIT A Form of Certificate of Incorporation The following sentence shall be added at the end of Article Seventh of the Company's Amended and Restated Certificate of Incorporation: The provisions of this Article Seventh shall not apply to the transfer of shares of the Corporation's common stock by NRG Energy, Inc. to Calpine East Acquisition Corp. in contemplation of closing the merger contemplated by the agreement and plan of merger dated August __, 1999 among the Corporation, Calpine Corporation and Calpine East Acquisition Corp. EX-99.3 4 CONTRIBUTION AND STOCKHOLDERS AGREEMENT 1 Exhibit (3) CONTRIBUTION AND STOCKHOLDERS AGREEMENT CONTRIBUTION AND STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of August 26, 1999, among CALPINE EAST ACQUISITION CORP., a Delaware corporation (the "Company"), CALPINE CORPORATION, a Delaware corporation ("Buyer"), and NRG ENERGY, INC., a Delaware corporation ("NRG", and together with the Buyer, the "Stockholders"). W I T N E S S E T H: WHEREAS, on the date hereof, the Company is authorized by its Certificate of Incorporation to issue Capital Stock consisting of 1,000 shares of common stock, without par value (the "Common Stock"); WHEREAS, the Company has been formed for the purpose of entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), and, subject to satisfaction or waiver of the conditions set forth in the Merger Agreement, consummating a merger (the "Merger") with and into Cogeneration Corporation of America, a Delaware corporation ("Cogen"), with Cogen continuing as the surviving corporation; WHEREAS, it is contemplated that immediately prior to and following the consummation of the Merger, NRG will own 20% of the issued and outstanding shares of Capital Stock of the Company and the Buyer will own 80% of the issued and outstanding shares of Capital Stock of the Company; and WHEREAS, the parties hereto deem it in their best interests and in the best interests of the Company to provide consistent and uniform management for the Company and desire to enter into this Agreement in order to effectuate that purpose and to set forth their respective rights and obligations in connection with their proposed investment in the Company. NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: 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. "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 Moody's 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 3 (c) certificates of deposit or bankers acceptances or other obligations maturing within 180 days after acquisition thereof issued by a domestic commercial bank which is a member of the Federal Reserve System and has capital, surplus and undivided profits in excess of $500,000,000. "Certificate of Incorporation" means the Amended and Restated Certificate of Incorporation of the Company in the form set forth as Exhibit C hereto, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and pursuant to applicable law. "Cogen" has the meaning specified in the Recitals. "Commission" means the Securities and Exchange Commission and any successor commission or agency having similar powers. "Common Stock" means the common stock, without par value, of the Company and any Capital Stock of the Company that is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. "Company" has the meaning specified in the first paragraph of this Agreement, together with any of its successors or assigns (including, without limitation, Cogen following the consummation of the Merger). "Company Sale" has the meaning specified in Section 8.2(a). "Contribution Date" has the meaning specified in Section 5.1. "Drag-Along Notice" has the meaning specified in Section 8.2(a). "Drag Along Right" has the meaning specified in Section 8.2(b). "Disposing Stockholder" has the meaning specified in Section 8.3(b). "Effective Date" means the date on which the Effective Time (as such term is defined in the Merger Agreement) occurs. "Exchange Act" means, as of any date, the Securities Exchange Act of 1934, as amended. "Fully Diluted Common Stock" means at any time all shares of Common 4 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 Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Independent Third Party" has the meaning specified in Section 8.2(a). "Management Fee" has the meaning specified in Section 9.3(a). "Merger" has the meaning specified in the Recitals. "Merger Agreement" has the meaning specified in the Recitals. "Merger Price" has the meaning specified in Section 5.1(a). "NASD" means the National Association of Securities Dealers, Inc. and its successors and assigns. "Notice of Exercise" has the meaning specified in Section 8.1(a). "NRG Director" has the meaning specified in Section 2.3(b). "Offered Securities" has the meaning specified in Section 8.1(a). "Option" has the meaning specified in Section 8.4(a). "Option Period" has the meaning specified in Section 8.4(a). "Option Price" has the meaning specified in Section 8.4(b). "Permitted Transferee" has the meaning specified in Section 7.2. "Person" means an individual or a corporation, association, partnership, limited liability company, joint venture, organization, business, trust or any other entity or organization, including a government or any subdivision or agency thereof. 5 "Pro Rata Portion" means, with reference to any Stockholder at any time, a fraction, the numerator of which is the number of shares of Common Stock then issued and outstanding and held by such Stockholder, and the denominator of which is the aggregate number of shares of Common Stock then issued and outstanding and held by the Stockholders taken together. "Projected Adjusted Net Income" has the meaning set forth in Section 9.3(a). "Proposed Purchaser" has the meaning specified in Section 8.3(b). "Public Offering" means a public offering and sale of equity securities of the Company pursuant to an effective registration statement under the Securities Act. "Purchase Offer" has the meaning specified in Section 8.3(b). "Quorum of the Board" has the meaning specified in Section 2.3(d). "Registrable Securities" means the following: (a) all shares of Common Stock issued or issuable now or hereafter owned of record or beneficially by any Stockholder and (b) any shares of Capital Stock issued or issuable by the Company in respect of any shares of Common Stock referred to in the foregoing clause (a) by way of a stock dividend or stock split or in connection with a combination or subdivision of shares, reclassification, recapitalization, merger, consolidation or other reorganization of the Company. As to any particular Registrable Securities that have been issued, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144 under the Exchange Act, (iii) they shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer or disposition of them shall not require their registration or qualification under the Securities Act or any similar state law then in force, (iv) they shall have ceased to be outstanding, or (v) with respect to the Registrable Securities held by any Person, when such Registrable Securities, when aggregated with the Registrable Securities held by such Person's Affiliates, constitute 1% or less of the shares of Common Stock at the time outstanding. "Registration Expenses" means any and all out-of-pocket expenses 6 incident to the Company's performance of or compliance with Section 10 hereof, including, without limitation, all Commission, stock exchange and NASD registration and filing fees, all fees and expenses of complying with securities and blue sky laws (including the reasonable fees and disbursements of underwriters' counsel in connection with blue sky qualifications and NASD filings), all fees and expenses of the transfer agent and registrar for the Registrable Securities, all printing expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding underwriting discounts and commissions and applicable transfer and documentary stamp taxes, if any, which shall be borne by the seller of the securities in all cases. "Restricted Period" means the three-year period commencing on the Effective Date. "Securities Act" means, as of any date, the Securities Act of 1933, as amended. "Stockholder" means (i) the Buyer, (ii) NRG or (iii) each Permitted Transferee of any such Person who becomes a party to or bound by the provisions of this Agreement in accordance with the terms hereof. "Subsidiary" means as to any Person a corporation of which outstanding shares of Common Stock having the power to elect a majority of the Board of Directors of such corporation are at the time owned, directly or indirectly through one or more intermediaries, or both, by such Person. "Total Equity Value of the Company" has the meaning specified in Section 5.1(a). "Transfer" has the meaning specified in Section 7.1. "Transfer Notice" has the meaning specified in Section 8.1(a). "Transfer Offer" has the meaning specified in Section 8.1(a). "Transfer Offer Price Per Security" shall have the meaning specified in Section 8.1(a). "Valuation Notice" has the meaning specified in Section 8.4(b). "Valuing Investment Bank" has the meaning specified in Section 8.4(b). 7 "Wholly-Owned Subsidiary" means, with respect to any Person, any Subsidiary of such Person all of the Capital Stock (and all options, warrants, conversion rights and other rights to subscribe for, purchase or acquire such Capital Stock) of which, other than directors' qualifying shares, are owned, beneficially and of record, by such Person or one or more Wholly-Owned Subsidiaries of such Person. ARTICLE II THE COMPANY Section 2.1 Organizational Documents. Attached hereto as Exhibits A and B, respectively, are the current certificate of incorporation and by-laws of the Company. On the Contribution Date but prior to the making of the contributions referred to in Section 5.1 hereof, the Buyer and the Company shall cause the Amended and Restated Certificate of Incorporation of the Company in the form set forth as Exhibit C hereto to be filed with the Secretary of State of the State of Delaware, and the Amended and Restated By-Laws of the Company in the form set forth as Exhibit D hereto shall be approved by the Board of Directors. Section 2.2 Capitalization. Prior to the Contribution Date, the capitalization of the Company shall be 1,000 shares of Common Stock, all of which shall be held by the Buyer. Section 2.3 Board of Directors. The following provisions shall apply with respect to the Board of Directors of the Company commencing on the Contribution Date: (a) Conduct of Business. The parties hereto confirm that it is their intention that the business and affairs of the Company shall be managed by its Board of Directors in the best interests of the Company. (b) Board of Directors. The Board of Directors shall be composed of no more than seven directors. Each Stockholder agrees to vote its shares of Common Stock, whether at a duly-convened meeting or by written consent, to elect no more than seven directors, one of whom shall be nominated by NRG (the "NRG Director") and the remainder of whom shall be nominated by the Buyer (the "Buyer Directors"). (c) Removal; Vacancies. Any director may be removed from the Board of Directors, with or without cause, only upon the affirmative vote of the Stockholders and in accordance with the terms of this Section 2.3(c). The NRG Director shall not be removed, with or without cause, without the prior written consent of NRG. NRG agrees to vote all of its shares of Common Stock for the removal of a Buyer Director upon the request of the Buyer, and agrees not to vote any of its shares of Common Stock for the removal of any Buyer Director under any other circumstance. The Buyer agrees to vote all of its shares of Common Stock for the removal of the NRG Director upon the request of NRG, and agrees not to vote any of its shares of Common Stock of the Company for the removal of the NRG Director under any other circumstance. In the event that any Director is unwilling or unable (by reason of death, resignation or 8 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. 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 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 10 Agreement, NRG has the sole voting power and sole power to issue instructions with respect to the matters set forth in this Agreement, sole power of disposition, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the shares of common stock of Cogen owned by NRG with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. The terms "beneficially own" or "beneficial ownership" with respect to any securities shall mean having "beneficial ownership" of such securities as determined pursuant to Rule 13d-3 under the Exchange Act. Section 3.2 Representations and Warranties of the Buyer. (a) Organization. The Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification. (b) Due Authorization; Non Contravention. The execution and delivery by the Buyer of this Agreement and the performance by the Buyer of its obligations hereunder have been duly authorized by all requisite corporate action and will not violate any provision (x) of the Certificate of Incorporation of the Buyer, as amended or the By-laws of the Buyer, as amended, (y) of law, any order of any court or other agency of government, or (z) of any indenture, agreement or other instrument to which the Buyer or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Buyer, it being understood that, in connection with the transactions contemplated by this Agreement and the Merger Agreement, the parties will make all requisite filings and otherwise comply with the applicable requirements of (i) the HSR Act, (ii) the Exchange Act and the Securities Act, (iii) state securities, takeover or blue sky laws, and (iv) any other laws or regulations. (c) Binding Agreement. This Agreement has been duly executed and delivered by the Buyer and, assuming the due execution and delivery by the other parties hereto, constitutes the legal, valid and binding obligation of the Buyer enforceable in accordance with its terms. ARTICLE IV COVENANTS Section 4.1 Irrevocable Proxy. NRG hereby irrevocably appoints the Buyer, or any 11 designee of the Buyer, with full power of substitution the lawful agent, attorney and proxy of NRG, from the date hereof until the Effective Date or unless this Agreement is terminated pursuant to Article XI hereof, at any meeting of the stockholders of Cogen, however called, or in connection with any written consent of the stockholders of Cogen (including the right to sign its name (as a stockholder) to any consent, certificate or other document relating to Cogen that the law of the State of Delaware may permit or require), to vote (or cause to be voted) the shares of common stock of Cogen held of record or beneficially by NRG (i) in favor of the Merger, the execution and delivery by Cogen of the Merger Agreement and any amendments thereto (so long as any such amendment does not materially adversely affect NRG) and the approval of the terms thereof, the amendment of the Cogen certificate of incorporation as provided in the Merger Agreement, and each of the other actions contemplated by this Agreement and the Merger Agreement, and any amendments hereto or thereto, with NRG's consent pursuant to the terms of this Agreement, and any actions required in furtherance hereof and thereof, (ii) against any proposal for any recapitalization, merger, sale of assets or other business combination between Cogen and any Person (other than the Merger) or any other action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Cogen under the Merger Agreement or this Agreement, (iii) against any of the following actions (other than the transactions contemplated by the Merger Agreement): (1) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving Cogen or any of its Subsidiaries; (2) a sale, lease or transfer of a material amount of assets of Cogen or any of its Subsidiaries or a reorganization, recapitalization, dissolution or liquidation of Cogen of any of its Subsidiaries; (3) (a) any change in the majority of Cogen's board of directors; (b) any material change in the present capitalization of Cogen or any amendment to Cogen's certificate of incorporation (other than such amendment contemplated in connection with the Merger); or (c) any other change in Cogen's corporate structure or business; or (4) any other action which, is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect the Merger or the transactions contemplated by this Agreement or the contemplated economic benefits of any of the foregoing, or impede, interfere with, delay, postpone, discourage or adversely affect the Merger or the transactions contemplated by this Agreement. NRG further agrees to cause its shares of common stock of Cogen that are outstanding and owned by it beneficially to be voted in accordance with the foregoing. NRG agrees that it shall not enter into any agreement, arrangement or understanding with any Person the effect of which would be inconsistent with or violate the provisions of this Section 4.1. NRG intends this proxy to be irrevocable and coupled with an interest and will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by it with respect to its shares of common stock of Cogen. NRG shall not, hereafter, unless and until this Agreement terminates pursuant to the terms hereof, purport to vote (or execute a consent with respect to) its shares of common stock of Cogen (other than through this irrevocable proxy) or grant any other proxy or power of attorney with respect to any such shares, deposit such shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any Person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of such shares. Section 4.2 Additional Covenants. (a) Cooperation. Prior to the Effective Date, each of the Stockholders shall use its reasonable efforts to take all actions and to do all things necessary, proper or advisable in order to permit the consummation of the Merger. The Buyer shall not cause the Merger Agreement to be amended or consent to any proposed amendment of the Merger Agreement, or waive any of its rights thereunder, in any way that would be materially adverse to NRG, without NRG's prior written consent. (b) Operation of Business. Each of the Stockholders 12 acknowledges that the Company is formed solely for the purpose of effectuating the transactions contemplated by this Agreement and the Merger Agreement. The Company shall not transact any business whatsoever during the period commencing on the date hereof and continuing through the Effective Date other than in furtherance of the transactions contemplated by this Agreement or the Merger Agreement. (c) Dividend Policy. Beginning on the fourth anniversary of the Effective Date, the Stockholders will cause the Company to adopt appropriate policies of declaring dividends at the highest level permitted by applicable law, consistent with prudent business practices and having due regard for relevant business, taxation, working capital, financial covenant and operational requirements. (d) Securities Filings. Each of the Buyer, the Company and NRG shall promptly provide to any other party any information requested for the purpose of preparing any filings required to be filed with the Commission pursuant to Sections 13d and 13e of the Exchange Act, and the rules and regulations promulgated thereunder, in connection with this Agreement or the Merger Agreement and the transactions contemplated hereby and thereby. (e) No Solicitation. Neither NRG nor any officer, director, employee, representative or agent of NRG shall, directly or indirectly, solicit, encourage, facilitate, participate in or initiate any discussions or negotiations regarding, or furnish to any Person any information with respect to, or take any other action to facilitate any inquiries or the making of any submission or proposal by any Person (other than the Buyer) which constitutes, or may reasonably be expected to lead to, (a) any sale of shares of common stock of Cogen owned by NRG or (b) any Takeover Proposal or Superior Proposal (as such terms are defined in the Merger Agreement) or any agreement with respect thereto. If NRG, or any officer, director, employee, representative or agent of NRG, receives an inquiry or proposal with respect to the sale of shares of common stock of Cogen, any Takeover Proposal or any inquiry with respect to or which could lead to any sale of shares of its common stock of Cogen or any Takeover Proposal, then NRG shall advise the Buyer orally (within one business day) and in writing (as promptly as practicable) of the terms and conditions, if any, of such inquiry or proposal and the identity of the Person making it. NRG shall, and shall cause its officers, directors, employees, representatives and agents to, immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. This Section 4.2(e) will bind or apply to any Person except in his or her capacity as a director of Cogen (or as an officer of Cogen acting at the direction of Cogen's board of directors) under applicable law and fiduciary duties, in which case his or her actions shall be restricted solely by the terms of the Merger Agreement. (f) Restrictions on Transfer, Proxies and NonInterference. Prior to the Effective Date, NRG hereby agrees, except as contemplated hereby, not to (i) acquire, sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the acquisition, sale, transfer, pledge, encumbrance, assignment or 13 other disposition of, any shares of common stock of Cogen, (ii) grant any proxies, deposit any of its shares of common stock of Cogen into a voting trust or enter into a voting agreement with respect to any of its shares of common stock of Cogen, or (iii) take any action that would make any representation or warranty of NRG contained herein untrue or incorrect or have the effect of preventing or disabling NRG from performing its obligations under this Agreement. NRG agrees to notify the Buyer promptly and to provide all details requested by the Buyer if NRG shall be approached or solicited, directly or indirectly, by any Person with respect to any of the foregoing. (g) Stop Transfer Order. In furtherance of this Agreement, concurrently with the execution of this Agreement, NRG shall and hereby does authorize Cogen's counsel to notify Cogen's transfer agent that there is a stop transfer order with respect to all of NRG's shares of common stock of Cogen (and that this Agreement places limits on the voting and transfer of such shares). (h) Cooperation on Regulatory Matters. If so requested by the Buyer, promptly after the date hereof, NRG will use its reasonable best efforts to cause it and Cogen (if required) to make all filings which are required under the HSR Act and applicable requirements and to seek all regulatory approvals required in connection with the transactions contemplated hereby and by the Merger Agreement. The parties shall furnish to each other such necessary information and reasonable assistance as may be requested in connection with the preparation of filings and submissions to any governmental agency, including, without limitation, filings under the provisions of the HSR Act. NRG shall also use its reasonable efforts to cause Cogen to supply the Buyer with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between Cogen and its representatives and the Federal Trade Commission, the Department of Justice and any other governmental agency or authority and members of their respective staffs with respect to this Agreement and the transactions contemplated hereby. ARTICLE V ADDITIONAL CONTRIBUTIONS 14 Section 5.1. Additional Capital Contributions. Immediately prior to the Effective Date, but after an affirmative vote of Cogen's stockholders approving the Merger Agreement has been duly taken and recorded, the Buyer and NRG shall make contributions of capital to the Company as set forth below, it being understood that all such contributions shall be made simultaneously (the date of such contributions being referred to herein as the "Contribution Date"): (a) Obligations of NRG. NRG shall contribute to the Company that number of shares of common stock of Cogen that have, in the aggregate, a value (based on a $25.00 per share value) equal to (i) 20% of the Total Equity Value of the Company, as hereinafter defined, less (ii) the Adjustment Amount, as hereinafter defined, in exchange for such number of shares of Common Stock as would result in NRG holding 20% of the issued and outstanding shares of Common Stock. "Total Equity Value of the Company" means the sum of (i) an amount determined by multiplying (A) the total number of issued and outstanding shares of common stock of Cogen by (B) $25.00 (the "Merger Price") and (ii) the aggregate amount of the excess of the Merger Price over the exercise price of each of the outstanding options set forth on Schedule 1 hereto which are currently exercisable or will become exercisable upon consummation of the Transactions (as defined in the Merger Agreement). "Adjustment Amount" means an amount determined by multiplying (i) the total number of shares underlying the Cancelled Options, as hereinafter defined, by (ii) the excess of the Merger Price over the exercise price for each Cancelled Option. "Cancelled Options" means those options owned by David H. Peterson, Ronald J. Will and Craig A. Mataczynski 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 David H. Peterson, Ronald J. Will and Craig A. Mataczynski, it would be obligated to contribute to the Company 1,394,973 shares of common stock of Cogen to the Company. NRG may, at its sole option, contribute to the Company additional shares of common stock of Cogen; provided that it shall own 20% of the Common Stock and shall receive no additional consideration in respect of any additional capital contribution of shares of common stock of Cogen to the Company. (b) Obligations of the Buyer. The Buyer shall contribute to the Company cash in an amount equal to 80% of the Total Equity Value of the Company in exchange for such number of shares of Common Stock as would result in the Buyer holding 80% of the issued and outstanding shares of Common Stock. The Buyer represents that if such contribution were made on the date hereof, it would be obligated to contribute $146,539,730, as appropriately adjusted to the extent of any contribution by NRG under the last sentence of Section 5.1(a) above. The requisite cash contribution by the Buyer shall be made in immediately available funds. Additionally, the Buyer will contribute to the Company, in the form a loan pursuant to a Promissory Note in the form attached hereto as Exhibit E, in an original principal amount not less than (i) the amount necessary to repay in full the debt of Cogen listed on Schedule 2 hereto, (ii) the amount necessary to 15 satisfy all other obligations of the Company under this Agreement and the Merger Agreement or any other document related hereto or thereto, and (iii) transaction costs of the Company associated with the transactions contemplated by this Agreement and the Merger Agreement. The Buyer agrees that it shall not consummate the Merger without either (i) causing the outstanding indebtedness of Cogen's Subsidiaries to be refinanced on the substantially the same terms as the Promissory Note in the form attached hereto as Exhibit E; provided, however, that NRG shall have the option to participate in any such refinancing pro rata according to its ownership of the Company or (ii) obtaining consent of the lenders of Cogen's Subsidiaries to the transactions contemplated by the Merger Agreement or this Agreement. Section 5.2 NRG's Obligation to Contribute Shares. In no event shall NRG be obligated to contribute its shares of common stock of Cogen pursuant to Section 5.1(a) unless (i) Cogen's stockholders have duly approved the Merger Agreement and (ii) all of the conditions to closing set forth in the Merger Agreement have been satisfied or waived. Section 5.3 The Buyer's Obligation to Contribute Cash. In no event shall the Buyer be obligated to contribute cash pursuant to Section 5.1(b) above unless all of the conditions to closing set forth in the Merger Agreement have been satisfied or waived. ARTICLE VI MANAGEMENT OF THE COMPANY FOLLOWING THE MERGER Section 6.1 Conduct of Business. (a) Notwithstanding the fact that no vote may be required or that a lesser percentage vote may be specified by law, by the Certificate of Incorporation or the By-Laws, each as amended, by any agreement with any national securities exchange or otherwise, except as hereinafter provided in this paragraph (a) or otherwise in this Agreement, as of the date hereof, neither the Company nor its Subsidiaries shall take or permit any of the following actions to be taken without the specific prior written consent of NRG (which, at the direction of NRG, may be effectuated by the NRG Director), except as otherwise contemplated by Article VIII or in any other provision of this Agreement: (i) The issuance, repurchase, exchange or redemption of any Shares of any Capital Stock (including any Common Stock), or the grant of the right or option to acquire any shares of such Capital Stock, of the Company. (ii) Any sale or disposition of any of the Company's Subsidiaries and, other than in the ordinary course of business, the sale or disposition of property or assets of the Company or its Subsidiaries in excess of 20% of the fair market value of the total assets of the Company. (iii) Any amendment, modification or supplement to, or repeal of, or adoption of any policy or procedures inconsistent with, any provision of the Certificate of Incorporation or By-Laws; provided, that, the Company may amend the Certificate of Incorporation to effect a change of name or a change of registered agent for service of process 16 without NRG's prior written consent. (iv) Any merger, consolidation or other business combination of the Company with any other Person except for any merger or consolidation involving any direct or indirect Wholly-Owned Subsidiary of the Company and except for the Merger. (v) The authorization or entering into by the Company or any of its Subsidiaries of any contract, agreement, transaction or other arrangement or any modification, waiver or amendment to any of the foregoing, with any of the Buyer or its Affiliates with a value (or obligation on the part of the Company or such Subsidiary) in excess of $2,000,000; provided that the Company or its Subsidiaries may enter into (x) contracts, agreements, transactions or other arrangements or modifications, waivers or amendments to the foregoing with any of the Buyer or its Affiliates with a value (or obligation on the part of the Company or such Subsidiary) in excess of $2,000,000 if the terms and provisions thereof are no less favorable to the Company or such Subsidiary than those that would be available in a comparable arms-length transaction and the Buyer shall have certified the same to the Board of Directors prior to the entry into or execution of the same, and (y) the Merger Agreement and any of the transactions or documents contemplated by the Merger Agreement. (vi) The appointment or renewal of the Company's independent auditor if such auditor is not the Buyer's independent auditor, or any change in accounting periods or the accounting principles under which the Company's financial statements are presented except as may be required by GAAP or as are consistent with accounting principles used by the Buyer as of the date of this Agreement. (vii) (a) the dissolution of the Company or any of its Subsidiaries, or the commencing of the process of dissolution; (b) the adoption of a plan of liquidation of the Company or any of its Subsidiaries; and (c) any action by the Company or any of its Subsidiaries to commence any suit, case, proceeding or other action (1) under the Bankruptcy Code or any other existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it, or (2) seeking appointment of a receiver, trustee, custodian, or other similar official for it or for all or any substantial part of its assets or making a general assignment 17 for the benefit of its creditors. (viii) The issuance of any liquidating distributions to the Stockholders. (b) The Stockholders shall take no action that would have the effect of causing the Company to contravene any provision of this Section 6.1. (c) Notwithstanding any provision in Section 6.1(a)(v), the parties agree that the Buyer and/or its designated Affiliates shall be permitted to enter into (i) Operating and Maintenance Agreements with the Company or its Subsidiaries in substantially the respective forms of such agreements existing on the date hereof between NRG and its Affiliates, on one hand, and Cogen's Subsidiaries, on the other hand, (ii) a Management Services Agreement, an Operating and Maintenance Agreement for the Pryor project and Energy Services Agreements in substantially the respective forms agreed to by the parties on the date hereof, and (iii) a Tax Sharing Agreement in substantially the form agreed to by the parties on the date hereof. ARTICLE VII TRANSFERS OF CAPITAL STOCK Section 7.1 Restrictions on Transfer. Each Stockholder agrees that during the Restricted Period, such Stockholder will not offer, sell, transfer, assign or otherwise dispose of (or make any exchange, gift, assignment or pledge of or impose any lien or encumbrance on) (collectively, for purposes of Sections 7 and 8 hereof only, a "Transfer") any of its shares of Common Stock, or options, warrants or rights to subscribe for or purchase shares of Common Stock, without the prior written consent of all the Stockholders, which consent shall not be unreasonably withheld or delayed. For purposes of this Section 7.1, a merger or consolidation or other business combination or any change in control of the Buyer or the ultimate parent company of NRG will not be deemed to be a Transfer. Section 7.2 Exceptions to Restrictions. The provisions of Section 7.1 and Section 8 shall not apply to any of the following transfers: (a) From any Stockholder to any Wholly-Owned Subsidiary of any Stockholder or any Person which owns 100% of the Capital Stock of any Stockholder (each a "Permitted Transferee"), provided that each such Permitted Transferee shall execute a counterpart of and become a party to this Agreement and shall agree in a writing in form and substance satisfactory to the Company to be bound and becomes bound by the terms of this Agreement. (b) Pursuant to a permitted merger or consolidation involving the Company or any of its Subsidiaries. Section 7.3 Applicability. The provisions of this Agreement shall be applied to the shares of Common Stock acquired by any Permitted Transferee of a Stockholder in the same manner and to the same extent as such provisions were applicable to such Common Stock in the hands of such Stockholder. Section 7.4 Endorsement of Certificates. 18 (a) Upon the execution of this Agreement, in addition to any other legend that the Company may deem advisable under the Securities Act and certain state securities laws or required pursuant to the Company's Certificate of Incorporation or By-Laws, all certificates representing issued and outstanding shares of Common Stock that are subject to any of the provisions of this Agreement shall be endorsed as follows: THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO, AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 26, 1999, AMONG THE COMPANY AND ITS STOCKHOLDERS. A COPY OF THE ABOVE-REFERENCED AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT. (b) Except as otherwise expressly provided in this Agreement, all certificates representing shares of Common Stock hereafter issued to or acquired by any of the Stockholders or their successors or assigns (including, without limitation, all certificates representing shares of Common Stock hereafter issued upon conversion of shares of Common Stock of any other class) shall bear the legends set forth above, and the shares of stock represented by such certificates shall be subject to the applicable provisions of this Agreement. The obligations of each party hereto shall be binding upon each transferee to whom shares of Common Stock are Transferred by any party hereto, whether or not such Transfer is permitted under the terms of this Agreement. Prior to consummation of any Transfer, such Stockholder shall cause the Transferee to execute an agreement in form and substance reasonably satisfactory to the other Stockholders hereto, providing that such Transferee shall fully comply with the terms of this Agreement. Prompt notice shall be given to the Company and each Stockholder by the transferor of any Transfer (whether or not to a Permitted Transferee) of any Common Stock. Section 7.5 Improper Transfer. Any attempt to Transfer or encumber any shares of Common Stock other than in accordance with the terms of this Agreement shall be null and void and neither the Company nor any transfer agent of such securities shall give any effect to such attempted Transfer or encumbrance in its stock records. ARTICLE VIII RIGHTS OF FIRST REFUSAL; DRAG-ALONG RIGHTS; TAG-ALONG RIGHTS; PURCHASE OPTION 19 Section 8.1. Right of First Refusal. (a) Except for (i) Transfers to a Permitted Transferee, and (ii) transactions subject to Sections 8.2, 8.3, and 8.4, if at any time after the Restricted Period NRG receives a bona fide offer which NRG desires to accept (a "Transfer Offer") to sell any shares of Common Stock (or options, warrants or rights to subscribe for or purchase shares of Common Stock) owned by it, then NRG shall cause the Transfer Offer to be reduced to writing and shall deliver written notice of such Transfer Offer (a "Transfer Notice"), accompanied by a copy of such Transfer Offer to the Buyer and the Company, setting forth the identity of the offeror, the number and class of shares of Common Stock (or options, warrants or rights) proposed to be transferred (the "Offered Securities"), the price per security contained in the Transfer Offer (the "Transfer Offer Price Per Security"), and all other terms applicable thereto. The Transfer Notice shall also contain an irrevocable offer to sell the Offered Securities to the Buyer at a price equal to the Transfer Offer Price Per Security and upon substantially the same terms as contained in the Transfer Offer. In the event that the form of consideration specified in the Transfer Offer is other than cash, NRG shall use its best efforts to cause the consideration of such Transfer Offer to be reduced to cash. In the event that NRG is unsuccessful in obtaining a Transfer Offer with cash consideration, NRG shall not accept such Transfer Offer. (i) Upon receipt of the Transfer Notice, the Buyer shall then have the right to accept such offer at the Transfer Offer Price Per Security and on the other terms specified in the Transfer Offer with respect to all, but not less than all, of the Offered Securities. The rights of the Buyer pursuant to this clause (ii) shall be exercisable by the delivery of notice to NRG (the "Notice of Exercise") (a copy of which shall also be delivered to the Company) within 30 business days from the date of delivery of the Transfer Notice, which Notice of Exercise shall be deemed an irrevocable acceptance of the Transfer Offer. (ii) In the event that the Buyer exercises its rights to purchase all the Offered Securities in accordance with clause (i) above, then NRG must sell such Offered Securities to the Buyer, at the Transfer Offer Price Per Security and on the 20 other terms specified in the Transfer Offer. (b) If all notices required to be given pursuant to Section 8.1(a) have been duly given and the Buyer does not purchase the Offered Securities pursuant to the provisions hereof, then NRG shall have the right, subject to compliance by NRG with the provisions of Section 7.4(b) hereof, from the date which is the earlier of (i) the expiration of the option period pursuant to Section 8.1(a) or (ii) the date on which NRG receives notice from the Buyer that it will not exercise the option granted pursuant to Section 8.1(a), to sell to such Person which originally made the Transfer Offer the Offered Securities at a price per Offered Security equal to or greater than 100% of the Transfer Offer Price Per Security and on the other terms specified in the Transfer Offer. (c) The consummation of any purchase and sale pursuant to Section 8.1(a) shall take place on such date, not later than 60 calendar days after the expiration of the option period pursuant to Section 8.1(a), as the purchaser shall select. Upon the consummation of any such purchase and sale, NRG shall deliver certificates representing the Offered Securities sold duly endorsed, or accompanied by written instruments of transfer in form satisfactory to the purchaser duly executed by NRG free and clear of any liens, against delivery of the Transfer Offer Price Per Security for each of the Offered Securities purchased by federal funds wired to such bank or financial institution specified in writing by NRG. If the purchase and sale is not consummated within the 60 calendar day period referred to in this subsection (c), then the provisions of Section 8.1 shall again apply to such shares. Section 8.2. Drag-Along. (a) Subject to any approval or other rights in this Agreement, if after the expiration of the Restricted Period, the Buyer sells all or substantially all the Fully Diluted Common Stock owned by it (whether pursuant to a sale, merger or other consolidation, a "Company Sale") in a bona fide arm's-length transaction to a third party that is not an Affiliate of the Buyer or of the Company (an "Independent Third Party"), then the Buyer shall have the right, subject to all the provisions of this Section 8.2 ("Drag-Along Right"), to require NRG to (i) if such Company Sale is structured as a sale of stock, sell, transfer and deliver or cause to be sold, transferred and delivered to such Independent Third Party all shares of Fully Diluted Common Stock, owned or held by it or (ii) if such Company Sale requires the consent or approval of the Company's stockholders, vote NRG's shares of Common Stock in favor thereof, and, in any such event, except to the extent otherwise provided in subsection (c) of this Section 8.2, NRG shall agree to and shall be bound by the same terms, provisions and conditions in respect of the Company Sale as are applicable to the Buyer. The provisions of Section 8.1 shall not apply to any transactions to which this Section 8.2 21 applies. (b) If the Buyer desires to exercise its Drag-Along Rights, it shall give written notice to the other Stockholder ("Drag-Along Notice") of the Company Sale, setting forth the name and address of the transferee, the date on which such transaction is proposed to be consummated (which shall be not less than 30 days after the date such Drag-Along Notice is given), and the proposed amount of cash consideration and terms and conditions of payment offered by such transferee. (c) The obligations of the Stockholders in respect of a Company Sale under this Section 8.2 are subject to the satisfaction of the following conditions: (i) subject to (v) below, upon the consummation of the Company Sale, consideration of equivalent value in cash or Cash Equivalents realized upon such Company Sale shall be paid or distributed in respect of each share of Common Stock then issued and outstanding; (ii) each holder of then currently exercisable rights to acquire shares of Common Stock will be given a reasonable opportunity to exercise such rights prior to the consummation of the Company Sale and thereby to participate in such sale as a holder of such Common Stock; (iii) there shall be no liability of NRG for indemnification in respect of any matters arising pursuant to or in connection with the Company Sale, other than with respect to NRG's ownership of its shares of Common Stock; (iv) NRG shall not be required to make general representations or warranties regarding the financial condition, business, assets or affairs of the Company and its Subsidiaries; (v) the valuation of NRG's shares of Common Stock shall take into account not only the consideration received by the Buyer for its Common Stock but also any consideration received by the Buyer or its for the sale, transfer or disposition of any ownership or other interests, contract rights, permits or any other asset of the Buyer or its Affiliates with respect to its investment in the Company related to or contemplated by the sale of the Buyer's Common Stock; and (vi) NRG shall be given a reasonable opportunity to review and provide comments to the agreements or documents relating to the Company Sale. 22 Section 8.3 Tag-Along Rights. (a) Notwithstanding anything in this Agreement to the contrary, except in the case of (i) transfers to a Permitted Transferee referred to in Section 7.2 and (ii) transactions subject to Section 8.2, the Buyer shall not sell, dispose of or otherwise transfer any shares of Common Stock, options, warrants or rights to subscribe for or purchase shares of Common Stock, unless, prior to the consummation thereof, NRG shall have been afforded the opportunity to join in such sale with respect to all of the shares of Common Stock owned by NRG, as hereinafter provided in this Section 8.3. (b) Prior to consummation of any proposed sale, disposition or transfer of shares of Common Stock (or options, warrants or rights) described in Section 8.3(a), the Buyer (the "Disposing Stockholder") shall cause the person or group that proposes to acquire such shares (the "Proposed Purchaser") to offer NRG in writing ("Purchase Offer") the right to sell all of the shares of Common Stock (or options, warrants or rights) owned by NRG. The Purchase Offer shall be accompanied by a copy of the Proposed Purchaser's final offer to the Disposing Stockholder. If the Purchase Offer is accepted by NRG, then the number of shares of Common Stock (or options, warrants or rights) to be sold to the Proposed Purchaser by the Disposing Stockholder shall be reduced by the aggregate number of shares of Common Stock (or options, warrants or rights) to be purchased by the Proposed Purchaser from NRG pursuant thereto. Such purchase shall be made on the same terms and conditions as the Proposed Purchaser shall have offered to purchase shares of Common Stock to be sold by the Disposing Stockholder (net, in the case of any options, warrants or rights, of any amounts required to be paid by the holder upon exercise thereof); provided, however, that the valuation of NRG's Common Stock shall take into account not only the consideration received by the Buyer for its Common Stock but also only consideration received by the Buyer or its Affiliates for the sale, transfer or disposition of any ownership or other interests, contract rights, permits or any other asset of the Buyer or its Affiliates with respect to its investment in the Company related to or contemplated by the sale of the Buyer's Common Stock. NRG shall have 30 days from the date of receipt of the Purchase Offer during which to accept such Purchase Offer, and the closing of such purchase shall occur within 30 days after such acceptance or at such other time as NRG and the Proposed Purchaser may agree. 23 Section 8.4 Purchase Option. (a) The Buyer shall, for a period of 365 days commencing on the day after the expiration of the Restricted Period (the "Option Period"), have the option to acquire from NRG all, but not less than all, of the shares of Common Stock held by NRG (the "Option"). (b) In the event that the Buyer determines that it may exercise the Option, it shall, at any time during the Option Period or within the 60 days prior to the commencement of the Option Period, give notice to NRG that it intends to obtain a fair market value determination pursuant to this Section 8.4 (the "Valuation Notice"). The fair market value of the Company shall be determined by one nationally recognized and independent investment bank mutually acceptable to NRG and the Buyer (the "Valuing Investment Bank"), it being understood that for the purpose of this Section 8.4 an independent investment bank shall be one which is neither affiliated with nor employed as the primary investment banking firm of NRG, the Buyer or the Company. The Buyer shall include in its Valuation Notice a list of at least three (3) investment banks acceptable to the Buyer as the Valuing Investment Bank and satisfying the criteria set forth in the preceding sentence. Upon receipt of such list, NRG shall promptly notify the Buyer which of such investment banks, if any, is acceptable to it. If NRG rejects each such investment bank as unacceptable to it, NRG shall promptly notify the Buyer of the identity of at least three investment banks acceptable to NRG and satisfying the criteria set forth in the second sentence of this paragraph. Upon receipt of such notice, the Buyer shall promptly notify NRG which of such investment banks, if any, is acceptable to it. NRG and the Buyer shall each act with such promptness and diligence that the procedures described in the foregoing sentences will result in the selection of a Valuing Investment Bank in as short a period of time as practicable. NRG and the Buyer shall each be responsible for 50% of the total fees and expenses charged by the Valuing Investment Bank; provided, however, in the event that the Buyer does not exercise the Option, the Buyer shall be responsible for 100% percent of the total fees and expenses charged by the Valuing Investment Bank. (c) The Valuing Investment Bank may use, among other methodologies, discounted cash flow, comparable transaction and traded company analyses to determine the fair market value of the Company. In determining the fair market value of the Company, the Valuing Investment Bank shall evaluate the Company (i) without any consideration of the 24 management fee to be paid to the Buyer under Section 9.3, (ii) without factoring in any discount arising from NRG's minority ownership position and limited representation on the Company's Board of Directors, and (iii) without any consideration of any discount applicable to an initial Public Offering. Moreover, to the extent that, as of the time of the valuation determination, financing for the Company or its Subsidiaries or their generation assets is available under terms more favorable than those terms in place, the more favorable financing terms shall be utilized by the Valuing Investment Bank in its fair market value determination; provided, however, that to the extent the financing for any of the Subsidiaries at the time of such valuation is on substantially the same material economic terms as the financing for such Subsidiary on the date hereof, such financing terms shall be utilized by the Valuing Investment Bank in its fair market value determination. (d) In the event that the Buyer wishes to exercise the Option, the aggregate price payable to NRG for its Common Stock (the "Option Price") shall be equal to NRG's Pro Rata Portion of the fair market value of the Company (on a consolidated basis) as determined by the Valuing Investment Bank pursuant to Section 8.4(c) above. The Buyer shall exercise the Option by providing written notice to NRG prior to the expiration of the Option Period, which notice shall be irrevocable. Section 8.5 Waiver. For purposes of this Article VIII, any Person who has failed to give notice of the election of an option hereunder within the specified time period will be deemed to have waived its rights with respect thereto on the day immediately following the last day of such period. ARTICLE IX CERTAIN AGREEMENTS Section 9.1. Access to Information Regarding Subsidiaries. The Buyer and the Company shall cause the NRG Director to be provided with all material information regarding the Company's Subsidiaries, including without limitation their respective business, operations, property, assets, condition (financial or otherwise) or prospects thereof, and such other information regarding the Company's Subsidiaries as the NRG Director, may reasonably request. NRG shall at all times preserve in strict confidence all information of a proprietary or confidential nature relating to the business of the Company and which is acquired by virtue of this Agreement and shall use all such information solely in connection with the monitoring of NRG's investment in the Company; provided, that NRG shall be entitled to disclose any such information in confidence to any of its professional advisors or publicly disclose such information to the extent required by law, regulation or Commission filing. Section 9.2. Financial Statements; Inspections. (a) The Company and the Buyer shall provide NRG with (i) the unaudited consolidated and consolidating quarterly financial statements of the 25 Company and each of its Subsidiaries for each calendar quarter within 35 days of the end of such calendar quarter, and (ii) the audited consolidated and consolidating financial statements of the Company and each of its Subsidiaries for each calendar year within 70 days after the end of each calendar year. (b) NRG's independent auditors shall, for purposes of certifying the financial statements of NRG and its direct and indirect parents, have the right, upon reasonable prior notice to the Company, to visit and inspect the properties of the Company and its Subsidiaries and to examine and copy (at NRG's own expense) their books of record and accounts, and to discuss their affairs, finances, and accounts with their officers and their current and prior independent public accountants, all at such times (during normal business hours) as NRG may reasonably request. The foregoing rights are in addition, and are not intended to limit, any rights that NRG may have under the law of the State of Delaware, including Sections 219 and 220 of the Delaware General Corporation Law. Section 9.3 Management Fee. (a) The Company shall pay to the Buyer a management fee (the "Management Fee") determined in accordance with the provisions of this Section 9.3(a). The Management Fee shall be determined in arrears following each calendar year and shall be equal to the amount, if any, by which Actual Adjusted Net Income for the immediately preceding calendar year exceeds the Projected Adjusted Net Income for such calendar year. No Management Fee shall be payable with respect to the year ending December 31, 1999. "Actual Adjusted Net Income" shall mean, for any period, the consolidated net income of the Company for such period determined in accordance with GAAP consistently applied, except that such amount shall be (i) increased by the taxes that were deducted from operating income to arrive at net income for such period, (ii) adjusted to exclude any accrual made for estimated management fees for such period, and (iii) calculated without regard to any extraordinary items of income or expense in such period or other transactions not in the ordinary course of the Company's business in such period. "Projected Adjusted Net Income" shall mean, for any period, the projected pre-tax net income for such period set forth on Schedule 3 hereto, as amended with respect to the line items indicated on Schedule 3, to take account of the adjusted book basis amount and depreciation amount for the applicable period set forth on a schedule approved by the parties as soon as reasonably practicable following the Effective Date. Projected Adjusted Net Income with respect to the year ending December 31, 2000 shall be pro-rated to the extent the Effective Date occurs after December 31, 1999 (such pro-ration to be calculated on the basis of the number of days after the Effective Date remaining in the year divided by 365). (b) Notwithstanding the foregoing, the obligations of the Company to pay the Management Fee shall be null and void and shall no longer apply to any calendar year after the fourth anniversary of the Effective Date. ARTICLE X 26 REGISTRATION RIGHTS Section 10.1 Piggyback Registrations. (a) In no event shall the Company register any of its equity securities during the Restricted Period. If, at any time after the fourth anniversary of the Effective Date, the Company at any time proposes to register any of its equity securities under the Securities Act, whether or not for sale for its own account, on a form and in a manner that would permit registration of Registrable Securities for sale to the public under the Securities Act, it will give written notice to all the holders of Registrable Securities promptly of its intention to do so, describing such securities and specifying the form and manner and the other relevant facts involved in such proposed registration, including, without limitation, (x) the intended method of disposition of the securities offered, including whether or not such registration will be effected through an underwriter in an underwritten offering or on a "best efforts" basis, and, in any case, the identity of the managing underwriter, if any, and (y) the price at which the Registrable Securities are reasonably expected to be sold. Upon the written request of any holder of Registrable Securities delivered to the Company within 30 calendar days after the receipt of any such notice 27 (which request shall specify the Registrable Securities intended to be disposed of by such holder), the Company will effect the registration under the Securities Act of all the Registrable Securities that the Company has been so requested to register; provided, however, that: (i) if, at any time after giving such written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall reasonably determine not to register such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities who shall have made a request for registration as hereinabove provided and thereupon the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the right of any Person to request that such registration be effected as a registration under this Section 10.1; and (ii) if such registration involves an Underwritten Offering, all holders of Registrable Securities requesting to be included in the Company's registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company. (b) The Company shall not be obligated to effect any registration of Registrable Securities under this Section 10.1 incidental to the registration of any of its securities in connection with mergers, acquisitions, exchange offers, dividend reinvestment plans or stock option or other employee benefit plans. (c) If a registration pursuant to this Section 10.1 involves an underwritten offering and the managing underwriter advises the issuer that, in its opinion, the number of securities proposed to be included in such registration should be limited due to market conditions, the Company will so advise each holder of Registrable Securities that has requested registration pursuant to Section 10.1(a), and shares shall be excluded from such offering in the following order until such limitation has been met: First, the Registrable Securities requested to be included in such offering by a Stockholder other than a NRG or any Permitted Transferee of NRG 28 shall be excluded pro rata, based on the respective number of Registrable Securities as to which registration has been so requested by such Stockholders, until all such Registrable Securities shall have been so excluded; second, the Registrable Securities requested to be included in such offering by NRG or any Permitted Transferee of NRG shall be excluded pro rata, based on the respective number of Registrable Securities as to which registration has been so requested by NRG or any Permitted Transferee of NRG, until all such Registrable Securities shall have been so excluded; and thereafter, the securities requested to be registered by the Company shall be excluded. (d) In connection with any underwritten offering with respect to which holders of Registrable Securities shall have requested registration pursuant to this Section 10.1, the Company shall have the right to select the managing underwriter with respect to the offering; provided that such managing underwriter shall be a nationally recognized investment banking firm. (e) The Company will pay all Registration Expenses incurred in connection with each of the registrations of Registrable Securities effected by it pursuant to this Section 10.1. ARTICLE XI TERMINATION Section 11.1. Termination. (a) The provisions of this Agreement shall terminate on the date on which any of the following events first occurs: (i) an initial Public Offering or, (ii) the Merger Agreement is terminated in accordance with its terms. (b) Notwithstanding the foregoing, this Agreement shall in any event terminate with respect to any Stockholder when such Stockholder no longer owns any shares of Common Stock, or other warrants, options or rights to subscribe for or purchase Common Stock. 29 ARTICLE XII MISCELLANEOUS Section 12.1. Successors and Assigns. Except as otherwise provided herein, all the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto. No Stockholder may assign any of its rights or obligations hereunder to any Person other than in accordance with this Agreement to a transferee that has complied in all respects with the requirements of this Agreement. The Company may not assign any of its rights or obligations hereunder to any other Person. If any transferee of any Stockholder shall acquire any shares of Common Stock in any manner, whether by operation of law or otherwise, such shares shall be held subject to all of the terms of this Agreement, and by taking and holding such shares such Person shall be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to comply with all of the terms and provisions of this Agreement. Section 12.2. Amendment and Modification; Waiver of Compliances; Conflicts. (a) This Agreement may be amended only by a written instrument duly executed by each of the Stockholders party hereto. In the event of the amendment or modification of this Agreement in accordance with its terms, the Stockholders shall cause the Board of Directors to meet within 30 calendar days following such amendment or modification or as soon thereafter as is practicable for the purpose of adopting any amendment to the Certificate of Incorporation and By-Laws that may be required as a result of such amendment or modification to this Agreement, and, if required, proposing such amendments to the Stockholders entitled to vote thereon, and the Stockholders agree to vote in favor of such amendments. (b) Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. (c) In the event of any conflict between the provisions of this Agreement and the provisions of any other agreement, the provisions of this Agreement shall govern and prevail. Section 12.3. Notices. All notices and other communications provided for hereunder shall be in writing and delivered by hand or sent by first class mail or sent by telecopy (with such telecopy to be confirmed promptly in writing sent by first class mail), sent as follows: (i) If to the Buyer, addressed to Calpine Corporation 50 West San Fernando Street San Jose, California 95113 30 Attention: John T. King Telecopy: (408) 995-0505 with a copy to: Howard, Smith & Levin LLP 1330 Avenue of the Americas New York, New York 10019 Attention: William R. Collins, Esq. Telecopy No.: (212) 841-1010 (ii) If to NRG, addressed to NRG Energy, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, Minneapolis 55403-2445 Attention: James J. Bender, Esq. Telecopy No.: (612) 373-5392 with a copy to Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue NW Washington, D.C. 20005 Attention: Jeanine L. Matte, Esq. Telecopy No.: (202) 393-5760 31 (iii) If to the Company, addressed to Cogeneration Corporation of America c/o Calpine Corporation 50 West San Fernando Street San Jose, California 95113 Attention: John T. King Telecopy No.: (408) 995-0505 with a copy to Howard, Smith & Levin LLP 1330 Avenue of the Americas New York, New York 10019 Attention: William R. Collins, Esq. Telecopy No.: (212) 841-1010 or to such other address or addresses or telecopy number or numbers as any of the parties hereto may most recently have designated in writing to the other parties hereto by such notice. All such communications shall be deemed to have been given or made when so delivered by hand or sent by telecopy, or three business days after being so mailed. Section 12.4 Entire Agreement: Governing Law; Consent to Jurisdiction (a) This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties hereto with respect to the subject transactions contemplated hereby and supersede all prior oral and written agreements and memoranda and undertakings among the parties hereto with regard to this subject matter. The Company represents to the Stockholders that the rights granted to the holders hereunder do not in any way conflict with and are not inconsistent with the rights granted or obligations accepted under any other agreement (including the Certificate of Incorporation) to which the Company is a party. Neither the Company nor any Subsidiary of the Company will hereafter enter into any agreement with respect to its equity or debt securities which is inconsistent with the rights granted to any Stockholder under this Agreement without obtaining the prior written consent of the Stockholder whose rights would be thereby affected. (b) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to the choice of law principles thereof). (c) Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that it will not 32 attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a federal or state court sitting in the State of Delaware. Section 12.5. Severability. The validity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. Section 12.6. Injunctive Relief. The Stockholders acknowledge and agree that a violation of any of the terms of this Agreement will cause the Stockholders irreparable injury for which an adequate remedy at law is not available. Therefore, the Stockholders agree that each Stockholder shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, (i) to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining any Stockholder from committing any violations of the provisions of this Agreement, and (ii) to compel specific performance of the terms of this Agreement. Section 12.7. Availability of Agreement. For so long as this Agreement shall be in effect, this Agreement shall be made available for inspection by any Stockholder upon request at the principal executive offices of the Company. Section 12.8. Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 12.9. Expenses. Except as otherwise expressly provided in Section 5.1(b) or any other provision of this Agreement, each of the Buyer, the Company and NRG will bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby and the Merger. This Section 12.9 shall survive the termination of this Agreement. Section 12.10. Adjustments to Prevent Dilution, Etc. In the event of a stock dividend or distribution, or any change in the common stock of Cogen by reason of any stock dividend, split-up, reclassification, recapitalization, combination or the exchange of shares, the term "shares" used herein shall be deemed to refer to and include the shares of common stock of Cogen owned by NRG as well as such stock dividends and distributions and any shares into which or for which any or all of the shares of common stock of Cogen may be changed or exchanged. In such event, the amount to be paid per share by the Buyer shall be proportionately reduced. Section 12.11. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [The next page is the signature page] 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. CALPINE CORPORATION By: __________________________ Name: John T. King Title: Vice President - Business Development NRG ENERGY, INC. By: __________________________ Name: David H. Peterson Title: Chairman, President and Chief Executive Officer CALPINE EAST ACQUISITION CORP. By: _________________________ Name: John T. King Title: Vice President 33 EX-99.4 5 CONFIDENTIALITY AGREEMENT 1 Exhibit (4) CONFIDENTIALITY AGREEMENT This Confidentiality Agreement (this "Agreement"), effective May 17, 1999, relates to the proposed exchange of confidential information between Calpine Corporation, a corporation organized under the laws of the State of Delaware ("Calpine"), and Cogeneration Corporation of America, a corporation organized under the laws of the State of Delaware ("CogenAmerica") in connection with the consideration by Calpine of a possible transaction with CogenAmerica or any of CogenAmerica's principal shareholders (each a "Possible Transaction"). CogenAmerica and Calpine agree as follows with respect to (i) confidential information (whether in the form of documents, oral communications or otherwise) disclosed by CogenAmerica to Calpine in connection with a Possible Transaction (the "CogenAmerica Information"), and (ii) confidential information (whether in the form of documents, oral communications or otherwise) disclosed by Calpine to CogenAmerica in connection with a possible Transaction (the "Calpine Information"): 1. (a) Subject to the exceptions set forth in Paragraph 3 Calpine agrees (i) to treat all CogenAmerica Information as the strictly confidential and proprietary information of CogenAmerica and to not use the CogenAmerica Information for any purpose other than the evaluation and performance of a Possible Transaction by Calpine or disclose CogenAmerica Information to third parties other than to Calpine's directors, officers, affiliates, agents advisors (including, without limitation, financial advisors, attorneys and accountants) and employees (collectively, "Calpine Representatives") without the prior written permission of CogenAmerica; and (ii) to not disclose to any person other than to Calpine Representatives that the CogenAmerica Information has been made available, that discussions or negotiations are taking place or have taken place concerning a Possible Transaction, or any of the terms or other facts with respect to a Possible Transaction, including the status thereof and the previous discussions and exchange of correspondence between Calpine and NRG Energy, Inc. ("NRG") relating to CogenAmerica and NRG's ownership interest in CogenAmerica, without the prior written permission of CogenAmerica. (b) Subject to the exceptions set forth in Paragraph 3, CogenAmerica agrees (i) to treat all Calpine Information as the strictly confidential and proprietary information of Calpine and to not use the Calpine Information for any purpose other than the evaluation and performance of a Possible Transaction by CogenAmerica or disclose Calpine Information to third parties other than to CogenAmerica's directors, officers, affiliates, agents advisors (including, without limitation, financial advisors, attorneys and accountants) and employees (collectively, "CogenAmerica Representatives") without the prior written permission of Calpine; and (ii) to not disclose to any person other than to CogenAmerica Representatives that the Calpine Information has been made available, that discussions or negotiations are taking place or have taken place concerning a Possible Transaction, or any of the terms or other facts with respect to a 2 Possible Transaction, including the status thereof and the previous discussions and exchange of correspondence between Calpine and NRG Energy, Inc. ("NRG") relating to CogenAmerica and NRG's ownership interest in CogenAmerica, without the prior written permission of Calpine. 2. Subject to the exceptions set forth in Paragraph 3, Calpine will not disclose any CogenAmerica Information, and CogenAmerica will not disclose any Calpine Information, to any Calpine Representatives or CogenAmerica Representatives, respectively, to whom disclosure is necessary in connection with the evaluation and performance of a Possible Transaction. All Calpine Representatives to whom CogenAmerica Information and other information relating to a Possible Transaction is made available by Calpine shall be under confidentiality obligations with Calpine for the benefit of CogenAmerica consistent with this Agreement. All CogenAmerica Representatives to whom Calpine Information and other information relating to a Possible Transaction is made available by CogenAmerica shall be under confidentiality obligations with CogenAmerica for the benefit of Calpine consistent with this Agreement. 3. (a) The provisions of Paragraphs 1 and 2 shall not apply to any CogenAmerica Information which (i) is or becomes publicly known through no fault of Calpine, (ii) is disclosed to Calpine on a non-confidential basis by a third party whom Calpine believes after due inquiry is entitled to disclose it, (iii) Calpine can demonstrate on the basis of written records was already known to it on a non-confidential basis prior to receipt from CogenAmerica, or (iv) subject to Paragraph 3(c), is required to be disclosed by law or legal process. (b) The provisions of Paragraphs 1 and 2 shall not apply to any Calpine Information which (i) is or becomes publicly known through no fault of CogenAmerica, (ii) is disclosed to CogenAmerica on a non-confidential basis by a third party whom CogenAmerica believes after due inquiry is entitled to disclose it, (iii) CogenAmerica can demonstrate on the basis of written records was already known to it on a nonconfidential basis prior to receipt from Calpine, or (iv) subject to Paragraph 3(c), is required to be disclosed by law or legal process. (c) In the event that Calpine or any of its representatives, or CogenAmerica or any of its representatives receive a request or are required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose all or any part of the information protected by this Agreement (the said party being herein designated as a "Compelled Disclosure Party"), the Compelled Disclosure Party or its representative as the case may be, agrees to (i) immediately notify the other party to this Agreement (the "Protected Party") of the existence, terms and circumstances surrounding such a request or requirement, (ii) consult with the Protected Party on the advisability of taking legally available steps to resist or narrow such request or requirement, and (iii) assist the Protected Party in seeking a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained or that the Protected Party waives compliance with the provisions hereof, (1) the Compelled Disclosure Party or its representative, as the case 2 3 may be, may disclose to any tribunal only that portion of the information protected hereunder which it is advised by counsel is legally required to be disclosed and shall exercise reasonable efforts to obtain assurance that confidential treatment will be accorded such and (2) said party shall not be liable for such disclosure unless disclosure to any such tribunal was caused by or resulted from a previous disclosure by said party, or any of its representatives, not permitted by this Agreement. 4. (a) Upon the written request at any time of CogenAmerica, Calpine agrees that all copies of CogenAmerica Information will be promptly returned to CogenAmerica and that all copies of any analyses, compilations, forecasts, studies or other documents based upon or containing CogenAmerica Information prepared by Calpine, or its directors, officers, affiliates, agents or employees, will be promptly destroyed and such destruction will be promptly confirmed in writing to CogenAmerica. (b) Upon the written request at any time of Calpine, CogenAmerica agrees that all copies of Calpine Information will be promptly returned to Calpine and that all copies of any analyses, compilations, forecasts. studies or other documents based upon or containing Calpine Information prepared by CogenAmerica, or its directors, officers, affiliates, agents or employees, will be promptly destroyed and such destruction will be promptly confirmed in writing to Calpine. 5. Calpine and CogenAmerica agree that Calpine Information and CogenAmerica Information include confidential and proprietary information and trade secrets. Calpine and CogenAmerica acknowledge that remedies at law may be inadequate to protect against breach of this Agreement, and each party hereby agrees that the other party may seek injunctive relief to prevent disclosure of Calpine Information and CogenAmerica Information. 6. It is understood that this Agreement does not obligate either Calpine or CogenAmerica to enter into any further agreement or to consummate in any way a Possible Transaction. Until the execution by both parties of a binding written agreement setting forth the terms and conditions of a Possible Transaction, each party agrees that either party may withdraw from the negotiations concerning a Possible Transaction at any time for any reason without any liability to the other party of any kind whatsoever with respect to a Possible Transaction. 7. Calpine agrees that, until the earlier of eighteen (18) months from the date hereof or the closing of a Possible Transaction, unless such shall have been specifically agreed to in advance by CogenAmerica, Calpine will not, in any manner, directly or indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in or in any way assist any other person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof) or any material portion of the assets of CogenAmerica or any of its subsidiaries, (ii) any tender or exchange offer or merger or other business combination involving CogenAmerica or any of its subsidiaries, (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to CogenAmerica or any of its 3 4 subsidiaries, or (iv) any "Solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of CogenAmerica, (b) form, join or in any way participate in a "group" (as defined under the Securities Exchange Act of 1934, as amended) for any of the purposes referred to in Section 7(a), (c) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of CogenAmerica, (d) take any action which might force CogenAmerica to make a public announcement regarding any of the types of matters set forth in (a) above, or (e) enter into any discussions or arrangements with any third party (other than Calpine Representatives) with respect to any of the foregoing; provided, however, that Calpine shall be entitled to make nonpublic proposals relating to NRG Energy's shareholdings in CogenAmerica and to discuss the terms thereof with CogenAmerica and CogenAmerica Representatives and with NRG Energy, Inc. and its directors, officers, affiliates, agents advisors (including, without limitation, financial advisors, attorneys and accountants) and employees. Calpine also agrees during any such period not to request that CogenAmerica (or its directors, officers, employees or agents), directly or indirectly, amend or waive any provision of this paragraph. 8. This Agreement shall be in force and effect for a period of two (2) years from the date hereof and shall be governed by the laws of the State of New York, excluding its conflicts of laws rules. This Agreement may be executed in counterparts which together will constitute the same instrument. This Agreement may be executed by manual signature transmitted electronically and any such signature will be deemed to be a manual execution. 9. EACH OF CALPINE AND COGENAMERICA HEREBY IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF ANY OF THEM RELATING HERETO. ACCEPTED AND AGREED AS OF THE DATE FIRST WRITTEN ABOVE: Cogeneration Corporation of America Calpine Corporation By: /s/ Julie A. Jorgensen By: /s/ Robert D. Kelly ---------------------- ------------------- Title: President and Chief Executive Officer Title: Senior Vice President Date: May 17, 1999 Date: May 17, 1999 4 -----END PRIVACY-ENHANCED MESSAGE-----