As filed with the Securities and Exchange Commission on November 5, 1996
Registration No. 333-_____
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
--------------------
CALENERGY COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 94-2213782
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
--------------------
302 SOUTH 36TH STREET, SUITE 400, OMAHA, NEBRASKA 68131, (402) 341-4500
(Address, including ZIP code, and telephone number, including area code,
of the Registrant's principal executive office)
--------------------
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NEBRASKA 68131
(402) 341-4500
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
--------------------
COPIES TO:
PETER J. HANLON, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [GRAPHIC OMITTED]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE FEE
==================================================================================================================
<S> <C> <C> <C> <C>
9 1/2% SENIOR NOTES DUE 2006...................... $225,000,000 100% $225,000,000 $68,181.82
==================================================================================================================
</TABLE>
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
CALENERGY COMPANY, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Form S-4 Item Number Location in Prospectus
- -------------------- ----------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus ................................ Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus ....................... Inside Front and Outside Back
Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Prospectus Summary; Risk
Factors; Business; Selected
Consolidated Financial and
Operating Data
4. Terms of the Transaction................ Prospectus Summary; Risk
Factors; The Exchange Offer;
Capitalization; Description
of the Notes; Plan of
Distribution
5. Pro Forma Financial Information......... Capitalization; Selected
Historical Consolidated
Financial and Operating Data;
Pro Forma Condensed Combined
Unaudited Financial Data
6. Material Contracts with the Company
Being Acquired.......................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............... Not Applicable
8. Interests of Named Experts and
Counsel ................................ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ............................ Not Applicable
10. Information with Respect to S-3
Registrants ............................ Summary; Business; Selected
Consolidated Financial and
Operating Data; Management's
Discussion and Analysis of
Financial Condition and
Results of Operation
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<PAGE>
11. Incorporation of Certain Information
by Reference............................ Incorporation of Certain
Information by Reference
12. Information with Respect to S-2 or S-3
Registrants............................. Not Applicable
13. Incorporation of Certain Information
by Reference............................ Incorporation of Certain
Information by Reference
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants....... Not Applicable
15. Information with Respect to S-3
Companies. ............................. Not Applicable
16. Information with Respect to S-2 or S-3
Companies............................... Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies......... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. Incorporation of Certain
Information by Reference
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERRE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1996
PROSPECTUS
CALENERGY COMPANY, INC.
OFFER TO EXCHANGE $225,000,000 AGGREGATE PRINCIPAL AMOUNT OF 9 1/2% SENIOR
NOTES DUE 2006 FOR ANY AND ALL OF ITS OUTSTANDING $225,000,000 AGGREGATE
PRINCIPAL AMOUNT OF 9 1/2% SENIOR NOTES DUE 2006 THAT WERE ISSUED AND SOLD IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ____________, 1996, UNLESS EXTENDED
CalEnergy Company, Inc. (the "Company") hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal" and together
with this Prospectus, the "Exchange Offer"), to exchange its 9 1/2% Senior
Notes due 2006 ("Exchange Notes") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for an equal
principal amount of its outstanding 9 1/2% Senior Notes Due 2006 that were
issued and sold in a transaction exempt from registration under the Securities
Act ("Old Notes"), of which $225,000,000 aggregate principal amount is
outstanding. The Exchange Notes and the Old Notes are collectively referred to
herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City
time, on ____________, 1996 (the "Expiration Date"), unless the Exchange Offer
is extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions which may be waived by the Company. The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
There will be no cash proceeds to the Company from the Exchange Offer. See "Use
of Proceeds."
The Old Notes are, and the Exchange Notes will be, unsecured
obligations of the Company ranking pari passu in right of payment of principal
and interest with all other existing and future unsecured obligations of the
Company and will rank senior to all other existing and future subordinated
debt of the Company. The provisions of the indenture pursuant to which the Old
Notes are, and the Exchange Notes will be, issued will permit the Company's
subsidiaries, and certain joint ventures in which the Company will own a
significant interest, to incur substantial indebtedness which would be
effectively senior to the Notes. As of June 30, 1996, on a pro forma basis,
and after giving effect to (i) the acquisition of Falcon (hereinafter
defined), (ii) completion of the Initial Offering (hereinafter defined), (iii)
completion of the Conversions (hereinafter defined) of certain of the
Company's outstanding convertible debt and (iv) the use of a portion of the
proceeds of the Initial Offering to repay the $35.0 million outstanding
balance under the Company's revolving line of credit facility, there would
have been approximately $1,175.6 million of indebtedness that represented the
Company's proportionate share of joint venture and subsidiary debt which would
be effectively senior to the Notes.
(continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
HOLDERS OF OLD NOTES IN CONNECTION WITH THE EXCHANGE OFFER, SEE "RISK FACTORS"
ON PAGE 14 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE
The date of this Prospectus is ________, 1996.
<PAGE>
(continued from previous page)
The Exchange Notes are being offered for exchange in order to satisfy
certain obligations of the Company under the Exchange and Registration Rights
Agreement, dated September 20, 1996 (the "Registration Rights Agreement"),
between the Company and the Initial Purchaser (as defined below). The Exchange
Notes will be obligations of the Company evidencing the same indebtedness as
the Old Notes and will be entitled to the benefits of the same Indenture (as
defined herein), which governs both the Old Notes and the Exchange Notes. The
form and terms (including principal amount, interest rate, maturity and
ranking) of the Exchange Notes are the same as the form and applicable terms of
the Old Notes, except that the Exchange Notes have been registered under the
Securities Act and therefore will not be subject to certain restrictions on
transfer applicable to the Old Notes. In addition, the Old Notes provide that
under certain circumstances which will no longer be applicable following
consummation of the Exchange Offer, including in the event that the Exchange
Offer has not commenced or a shelf registration statement (the "Shelf
Registration Statement") has not been declared effective within 270 days
following September 20, 1996, the date of issuance of the Old Notes (the "Issue
Date"), the interest rate on the Old Notes shall increase by one-half of one
percent (50 basis points) per annum effective on the 271st day following the
Issue Date until the date on which the Exchange Offer is commenced or such
Shelf Registration Statement shall have become effective. If a registration
statement has not been declared effective within two years after the Issue
Date, such one-half of one percent increase in interest rate will become
permanent. Upon consummation of the Exchange Offer, holders of Old Notes will
not be entitled to any increase in the rate of interest thereon. See "The
Exchange Offer."
Prior to the Exchange Offer, there has been no established trading
market for the Old Notes or the Exchange Notes. The Company does not intend to
apply for listing or quotation of the Exchange Notes on any securities
exchange or stock market. Therefore, there can be no assurance as to the
liquidity of any trading market for the Exchange Notes or that an active
public market for the Exchange Notes will develop. Any Old Notes not tendered
and accepted in the Exchange Offer will remain outstanding. To the extent that
Old Notes are tendered and accepted in the Exchange Offer, a holder's ability
to sell untended, or tendered but unaccepted, Old Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of Old
Notes will continue to be subject to the existing restrictions on transfer
thereof and the Company will have no further obligations to such holders to
provide for the registration of the Old Notes under the Securities Act. See
"The Exchange Offer."
The Old Notes were originally issued and sold on September 20, 1996
to CS First Boston Corporation (the "Initial Purchaser") in a transaction not
registered under the Securities Act in reliance upon the exemption provided in
Section 4(2) of the Securities Act (the "Initial Offering"). Accordingly, the
Old Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is
available. The Company is making the Exchange Offer in reliance on the
position of the staff (the "Staff") of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, the Company has not sought its own interpretive letter and there can
be no assurance that the Staff would make a similar determination with respect
to the Exchange Offer. Based on interpretations issued by the Staff, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) the Initial Purchaser to
the extent it acquired Old Notes directly from the Company solely in order to
resell pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (iii) a broker-dealer (which may include
the Initial Purchaser) who acquired Old Notes as a result of market-making or
other trading activities) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Notes.
Based on the position taken by the Staff, the Company believes that
broker-dealers who acquired Old Notes as a result of market-making activities
or other trading activities ("Participating Broker-Dealers") may fulfill their
prospectus delivery requirements with respect to the Exchange Notes received
upon exchange of
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<PAGE>
such Old Notes with a prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale
of such Exchange Notes. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such Exchange Notes. See "Plan Of Distribution."
Any holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 (the "Exchange Offer Registration Statement"), which term shall
include all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, and the rules and regulations promulgated thereunder,
covering the Exchange Notes being offered hereby. This Prospectus does not
contain all the information set forth in the Exchange Offer Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Exchange Notes, reference is hereby made to the Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to in the Exchange Offer
Registration Statement are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Company is subject to
the periodic and other informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and in accordance therewith files
annual and quarterly reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at
its regional offices located at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New
York, New York 10048. The Commission also maintains a Website (http://
www.sec.gov.) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Company's Common Stock is quoted on the New York Stock
Exchange, and copies of the reports, proxy statements and other information
filed by the Company with the Commission may also be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company is required by the terms of the indenture, dated as of
September 20, 1996 (the "Indenture"), between the Company and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"), under which the Notes are
issued, to furnish the Trustee with annual reports containing condensed
financial statements audited by their independent certified public accountants
and with quarterly reports containing unaudited condensed financial statements
for each of the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (file No. 1-9874)
are incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(ii) the Company's Quarterly Reports on Form 10-Q for the three
months ended March 31, 1996 and for the three and six months ended June 30,
1996;
(iii) the Company's Current Reports on Form 8-K or 8-K/A dated March
26, 1996, March 28, 1996, April 1, 1996, April 2, 1996, April 12, 1996, April
17, 1996, July 1, 1996, July 8, 1996, August 7, 1996, August 21, 1996, August
27, 1996 and October 28, 1996; and
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<PAGE>
(iv) the information which appears under the captions "Executive
Officer and Director Compensation," "Security Ownership of Significant
Stockholders and Management" and "Certain Transactions and Relationships" in
the Company's Proxy Statement dated April 5, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the Exchange Offer shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus, or in
any other subsequently filed document which is also incorporated herein by
reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus except as so modified or superseded.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, on the written or
oral request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated into this Prospectus
by reference, other than exhibits to such documents. Requests for such copies
should be directed to Investor Relations, CalEnergy Company, Inc. 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, telephone number (402)
341-4500. In order to ensure timely delivery of such documents, any requests
should be made by , 1996.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS.
IF GIVEN OR MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
FOR NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE
HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH
THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT, NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
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<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.......................................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................3
PROSPECTUS SUMMARY..........................................................6
RISK FACTORS...............................................................14
USE OF PROCEEDS............................................................19
THE EXCHANGE OFFER.........................................................19
CAPITALIZATION.............................................................28
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA..............29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS......................................................32
THE BUSINESS OF THE COMPANY................................................45
DESCRIPTION OF THE NOTES...................................................75
REGISTRATION RIGHTS AGREEMENT.............................................106
UNITED STATES TAXATION....................................................108
PLAN OF DISTRIBUTION......................................................109
LEGAL MATTERS.............................................................109
EXPERTS...................................................................110
INDEX TO FINANCIAL STATEMENTS.............................................F-1
INDEX TO PRO FORMA FINANCIAL STATEMENTS...................................P-1
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus or incorporated by reference herein. Certain capitalized terms used
but not defined in this summary are used herein as defined elsewhere in this
Prospectus. See also the "Risk Factors" included in this Prospectus which
prospective investors should consider before tendering their Old Notes in the
Exchange Offer.
THE COMPANY
CalEnergy Company, Inc., formerly known as California Energy Company,
Inc. (the "Company"), was founded in 1971 and is primarily engaged in the
development and operation of environmentally responsible independent power
production facilities worldwide utilizing geothermal resources, natural gas
and hydroelectric or other energy sources, such as oil and coal. The Company
is the largest independent geothermal power producer in the world (on the
basis of the Company's estimate of the aggregate megawatts ("MW") of electric
generating capacity in operation and under construction).
The Company has an aggregate net legal ownership interest of 916 MW
of electric generating capacity in power production facilities in operation in
the United States having an aggregate net capacity of 1135 MW (of which 570 MW
constitute natural gas fired plants, consisting of the Yuma plant and the
Saranac, Power Resources and NorCon plants owned by the Company's recently
acquired subsidiary, Falcon Seaboard Resources, Inc. (described below)). All
of these facilities are managed and operated by the Company. The Company also
has an aggregate net legal ownership of 191 MW of electric generating capacity
in two power production facilities in operation in the Philippines having an
aggregate net capacity of 191 MW. Both of these facilities are managed and
operated by the Company.
With respect to projects which are financed and under construction,
the Company has an aggregate net ownership interest of 270 MW of electric
generating capacity in two geothermal power projects and one hydroelectric
project in the Philippines having an aggregate net capacity of 459 MW. The
Company is also currently constructing a 55 net MW geothermal project in
Indonesia, in which the Company has an aggregate net ownership interest of 26
MW of electric generating capacity, as the first phase of the Company's
planned Indonesian geothermal project development.
The Company is also currently developing seven additional projects
with executed or awarded power sales contracts in the Philippines, Indonesia
and the United States. The Company is expected to have an approximate net
ownership interest of 760 MW in these development projects (which represent an
aggregate net capacity of 1,423 MW of additional potential electric generating
capacity). Additionally, the Company is developing the Salton Sea Minerals
Extraction Project, in which it plans to recover minerals (potentially
including zinc, manganese, lithium carbide, boric acid and hydrogen sulfide)
in commercial quantities from the geothermal fluids at the Company's Imperial
Valley Projects (as defined herein). Substantial contingencies exist with
respect to development projects, including, without limitation, the need to
obtain financing, permits and licenses and the satisfactory completion of
construction and implementation of commercial operation.
On April 17, 1996, the Company completed the acquisition from Edison
Mission Energy, a unit of Edison International, of the remaining 50%
partnership interests not previously owned by it in the four Partnership
Projects (as defined herein) located in Imperial Valley, California. The
purchase price for the acquisition (the "Partnership Project Acquisition") of
such interests in the four projects, Vulcan, Hoch (Del Ranch), Leathers and
Elmore, was $70.0 million. The Company operates these facilities and sells
power to Southern California Edison ("Edison") under long-term SO4 Agreements
(as hereinafter defined).
On August 7, 1996 the Company completed the acquisition of Falcon
Seaboard Resources, Inc. ("Falcon"), including its ownership interest in three
operating gas-fired cogeneration plants located in New
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<PAGE>
York, Texas and Pennsylvania and a related natural gas pipeline, also located
in New York, for a cash purchase price of $226 million. The three cogeneration
facilities total 520 MW in capacity and sell power under long-term power
purchase agreements.
The Company believes that the Falcon acquisition provides it with the
following benefits:
o Long-term power sales and steam sales contracts that provide an
important financial contribution to cash flow and earnings;
o Highly efficient gas-fired operating facilities which, upon
expiration of their respective power sales contracts, will be
strategically located for future merchant plant sales in areas
that have good access to fuel supply and transportation and
favorable transmission access and proximity to electric load
centers;
o Enhanced fuel diversification and creation of a gas-fired
operating business unit;
o Increased customer diversification;
o Enhanced ability to compete as a low-cost generator during
industry deregulation; and
o Increased size and economies of scale which will permit the
Company to compete more effectively as the electric industry
restructures and consolidates.
The Company's Common Stock is traded on the New York, Pacific and
London Stock Exchanges. As of October 15, 1996, Peter Kiewit Sons' Inc. ("PKS")
was an approximate 33% stockholder of the Company (on a fully diluted basis).
PKS is a large employee-owned construction, mining and telecommunications
company with approximately $3 billion in revenues in 1995. PKS is one of the
largest construction companies in North America and has been in the
construction business since 1884.
On October 28, 1996, the Company announced that CE Electric UK plc,
which is indirectly owned on a 70% basis by the Company and a 30% basis by
PKS, has offered to pay approximately $1.225 billion cash in an unsolicited
offer to acquire all of the ordinary shares and preference shares of Northern
Electric plc ("Northern"), a regional electricity distribution and supply
company in the United Kingdom. Northern is one of the twelve UK regional
electricity companies which came into existence as a result of the
restructuring and subsequent privatization of the UK electricity industry in
1990. Its main business is the distribution and supply of electricity to
approximately 1.5 million customers in the North East of England. For its
fiscal year ended March 31, 1996, Northern had a profit before tax of
approximately $241 million on revenues of approximately $1.44 billion. The
Northern offer is not being made, directly or indirectly, in or into the United
States or by use of the mails or any means or instrumentality (including,
without limitation, facsimile transmission, telex and telephone) of interstate
or foreign commerce of, or any facilities of a national securities exchange of,
the United States and the Northern offer cannot be accepted by any such use,
means, instrumentality or facility or from within the United States. As of
November 1, 1996, CE Electric UK plc owned 13,580,099 ordinary shares of
Northern, representing approximately 13.4% of the issued ordinary share capital
of Northern.
STRATEGY
Overall, the Company's strategy is to continue to engage in new
project development as well as opportunistically engage in company and project
acquisitions which diversify the Company's power generation technologies and
facility geographic locations and enhance its competitive capabilities. The
Company believes that increased domestic deregulation and the resulting
industry consolidation will provide attractive investment and acquisition
opportunities. The Falcon acquisition was implemented in furtherance of this
strategy.
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<PAGE>
Domestically, the Company is focusing on market opportunities in
which it believes it has relative competitive advantages due to its
geotechnical, project management, project financing and operating expertise.
In addition, the Company expects to continue diversification into other
environmentally responsible sources of energy primarily through selected
acquisitions, including acquisitions of partially developed or existing power
generating projects and contracts. The Company is also evaluating the
potential impacts and opportunities of direct access and retail wheeling.
The Company presently believes that the international independent
power market holds the majority of new opportunities for financially
attractive private power development in the next several years, in large part
because the demand for new generating capacity is growing more rapidly in
emerging nations than in the United States. In developing its international
strategy, the Company pursues development opportunities in countries which it
believes have an acceptable risk profile and where the Company's geothermal
resource development and operating experience, project development expertise
or strategic relationship with PKS or local partners are expected to provide
it with a competitive advantage. The Company has financed and has under
construction three projects representing an aggregate of 270 MW of net
ownership of electric generating capacity in the Philippines and is
constructing a 55 net MW project in Indonesia in which the Company has a net
ownership interest of 26 MW of electric generating capacity and which
constitutes the first phase of a planned Indonesia geothermal development of
approximately 1,000 MW under contract. In addition, the Company is currently
pursuing a number of other electric power project opportunities in the
Philippines, Indonesia and other countries. The Company believes that these
countries are ideally suited for the Company to develop, finance and operate
power projects successfully because of their population demographics,
extensive geothermal resources and stated commitments to the development of
private power programs. The Company's development efforts include both
so-called "greenfield" development as well as the acquisition of or
participation in the joint venture development of projects which are under
development or already operating. In greenfield development, the Company
attempts to negotiate power sales contracts for new generation capacity or
engages in competitive bids in response to government agency or utility
requests for proposals for new capacity.
The principal executive offices of the Company are located at 302
South 36th Street, Suite 400, Omaha, Nebraska 68131 and its telephone number
is (402) 341-4500. The Company was incorporated in 1971 under the laws of the
State of Delaware.
THE EXCHANGE OFFER
Registration Rights Agreement............ The Old Notes were sold by the
Company on September 20, 1996 to
the Initial Purchaser, which
placed the Old Notes with
"qualified institutional buyers"
(as defined in Rule 144A under the
Securities Act) and certain
"accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act). In
connection therewith, the Company
executed and delivered for the
benefit of the holders of Old
Notes the Registration Rights
Agreement, providing for, among
other things, the Exchange Offer.
See "Registration Rights
Agreement."
The Exchange Offer....................... The Company is offering to
exchange $225,000,000 aggregate
principal amount of Old Notes for
an equal principal amount of
Exchange Notes. The Exchange Notes
will be obligations of the Company
evidencing the same indebtedness
as the Old Notes and will be
entitled to the benefits of the
Indenture, which governs both the
Old Notes and the Exchange Notes.
The form and terms (including
principal amount, interest rate,
maturity and ranking) of the
Exchange Notes are the same as the
form and terms of the Old Notes,
except that the Exchange Notes
have been registered under
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<PAGE>
the Securities Act and therefore
will not be subject to certain
restrictions on transfer
applicable to the Old Notes and
will not be entitled to
registration rights. In addition,
the Registration Rights Agreement
provides that under certain
circumstances, including in the
event that the Exchange Offer has
not commenced or a Shelf
Registration Statement has not
been declared effective within 270
days following the Issue Date, the
interest rate on the Old Notes shall
increase by one-half of one
percent (50 basis points) per
annum effective on the 271st day
following the date of the Issue
Date until the date on which the
Exchange Offer is commenced or
such Shelf Registration Statement
shall have become effective. If a
registration statement has not
been declared effective within two
years after the Issue Date, such
one-half of one percent increase
in interest rate will become
permanent. Upon consummation of
the Exchange Offer, holders of Old
Notes will not be entitled to any
increase in the rate of interest
thereon or any further
registration rights under the
Registration Rights Agreement.
Resales of Exchange Notes................ Based on interpretations issued by
the Staff of the Commissiosn, the
Company believes that the Exchange
Notes issued pursuant to
the Exchange Offer in exchange for
the Old Notes may be offered for
resale, resold and otherwise
transferred by holders thereof
(other than any holder which is
(i) an "affiliate" of the Company
within the meaning of Rule 405
under the Securities Act, (ii) the
Initial Purchaser to the extent it
acquired Old Notes directly from
the Company solely in order to
resell pursuant to Rule 144A of
the Securities Act or any other
available exemption under the
Securities Act or (iii) a
broker-dealer (which may include
the Initial Purchaser) who
acquired Old Notes as a result of
market-making or other trading
activities), without further
compliance with the registration
and prospectus delivery
requirements of the Securities
Act, provided that such Exchange
Notes are acquired in the ordinary
course of such holder's business
and that such holder is not
participating, and has no
arrangement or understanding with
any person to participate, in a
distribution (within the meaning
of the Securities Act) of such
Exchange Notes.
Each broker-dealer that receives
Exchange Notes for its own account
as a result of market-making or
trading activities pursuant to the
Exchange Offer must acknowledge
that it acquired the Old Notes as
the result of such activities and
must agree that it will deliver a
prospectus meeting the
requirements of the Securities Act
in connection with any resale of
such Exchange Notes. The Letter of
Transmittal states that by so
acknowledging and by delivering a
prospectus, a broker-dealer will
not be deemed to admit that it is
an "underwriter" within the
meaning of the Securities Act.
Based on the position taken by the
Staff, the Company believes that
Participating Broker-Dealers may
fulfill their prospectus delivery
requirements with respect to the
Exchange Notes received upon
exchange of such Old Notes with a
prospectus meeting the
requirements of the Securities
Act, which may be the prospectus
prepared for an exchange offer so
long as it contains a description
of the plan of distribution with
respect to the resale of such
Exchange Notes. Accordingly, this
Prospectus, as it may be amended
or supplemented from time to time,
may be used by a Participating
Broker-Dealer during the period
referred to below in connection
with resales of
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<PAGE>
such Exchange Notes. Subject to
certain provisions set forth in
the Registration Rights Agreement,
the Company has agreed that this
Prospectus, as it may be amended
or supplemented from time to time,
may be used by a Participating
Broker-Dealer in connection with
resales of such Exchange Notes for
a period ending 120 days after the
effectiveness of the Registration
Statement of which this Prospectus
is a part (subject to extension
under certain limited
circumstances described herein)
or, if earlier, when all such
Exchange Notes have been disposed
of by the Participating
Broker-Dealer. See "The Exchange
Offer" and "Plan of Distribution."
Minimum Condition........................ The Exchange Offer is not
conditioned upon any minimum
aggregate principal amount of Old
Notes being tendered for exchange.
Expiration Date.......................... The Exchange Offer will expire
at 5:00 p.m., New York City time,
on ______________, 1996 (the
"Expiration Date"), unless the
Exchange Offer is extended, in
which case the term "Expiration
Date" means the latest date and
time to which the Exchange Offer
is extended.
Withdrawal Rights........................ Tenders may be withdrawn at any
time prior to the Expiration Date.
Any Old Notes which have been
tendered for exchange but which
are not exchanged for any reason
will be returned to the holder
thereof (or credited to the
appropriate account) without cost
to such holder as soon as
practicable after withdrawal,
rejection of tender or termination
of the Exchange Offer.
Interest on the Exchange Notes........... The Exchange Notes will bear
interest at the rate of 9 1/2% per
annum from the most recent date to
which interest has been paid on
the Old Notes or, if no interest
has been paid on the Old Notes,
from September 20, 1996. See
"Description of the Notes." Holders
of Old Notes whose Old Notes are
accepted for exchange will not
receive any payment in respect of
accrued and unpaid interest on such
Old Notes.
Conditions to the Exchange Offer......... The obligation of the Company to
consummate the Exchange Offer is
subject to certain conditions. See
"The Exchange Offer--Conditions to
the Exchange Offer." The Company
may terminate, waive or amend the
Exchange Offer at any time prior
to the Expiration Date.
Procedures for Tendering................. Tendering holders of Old Notes
must complete and sign the Letter
of Transmittal in accordance with
the instructions contained therein
and forward the same by mail,
facsimile or hand delivery,
together with any other required
documents, to the Exchange Agent,
either with the Old Notes to be
tendered or in compliance with the
specified procedures for
guaranteed delivery of Old Notes.
Certain brokers, dealers,
commercial banks, trust companies
and other nominees may also effect
tenders by book-entry transfer.
Holders of Old Notes
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<PAGE>
registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee are
urged to contact such person
promptly if they wish to tender
Old Notes pursuant to the Exchange
Offer. See "The Exchange
Offer--Procedures for Tendering."
Letters of Transmittal and
certificates representing Old
Notes should not be sent to the
Company. Such documents should
only be sent to the Exchange
Agent. Questions regarding how to
tender and requests for
information should be directed to
the Exchange Agent. See "The
Exchange Offer--Exchange Agent."
Acceptance of Old Notes and
Delivery of Exchange Notes............ Subject to certain conditions, the
Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The Exchange Notes issued pursuant
to the Exchange Offer will be
delivered promptly following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange
Offer."
Certain Federal Income Tax
Consequences.......................... The exchange of Old Notes for
Exchange Notes by holders should
not be a sale or exchange or
otherwise a taxable event for
federal income tax purposes, and
holders should not recognize any
taxable gain or loss or any
interest income as a result of
such exchange. See "United States
Taxation."
Exchange Agent........................... IBJ Schroder Bank & Trust Company
is serving as exchange agent (the
"Exchange Agent") in connection
with the Exchange Offer.
Effect on Holders of
Old Notes............................. Holders of Old Notes who do not
tender their Old Notes in the
Exchange Offer will continue to
hold such Old Notes and will be
entitled to all the rights and
limitations applicable thereto
under the Indenture. All
untendered, and tendered but
unaccepted, Old Notes will
continue to be subject to the
restrictions on transfer provided
for in the Old Notes and the
Indenture. To the extent that Old
Notes are tendered and accepted in
the Exchange Offer, the trading
market, if any, for the Old Notes
could be adversely affected. See
"Risk Factors--Consequences of
Exchange and Failure to Exchange."
TERMS OF THE EXCHANGE NOTES AND THE OLD NOTES
The Exchange Offer applies to $225,000,000 aggregate principal amount
of the Old Notes. The Exchange Notes will be obligations of the Company
evidencing the same indebtedness as the Old Notes and will be entitled to the
benefits of the Indenture, which governs both the Old Notes and the Exchange
Notes. The form and applicable terms (including principal amount, interest rate,
maturity and ranking) of the Exchange Notes are the same as the form and terms
of the Old Notes, except that the Exchange Notes have been registered under the
Securities Act and therefore will not be subject to certain restrictions on
transfer applicable to the Old Notes and will not be entitled to registration
rights. See "The Exchange Offer." The Old Notes and the Exchange Notes are
collectively referred to herein as the "Notes."
Notes Offered.............................. $225,000,000 aggregate principal
amount of 9 1/2% Senior Notes due
2006.
Maturity Date.............................. September 15, 2006.
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<PAGE>
Interest Payment Dates..................... Interest on the Notes will be
payable in cash semi-annually on
March 15 and September 15,
commencing on March 15, 1997, to
holders of record on the
immediately preceding March 1 or
September 1, as the case may be.
See "Description of the
Notes--General."
Sinking Fund............................... None.
Form and Registration...................... The Notes may be represented by
one or more Global Notes (the
"Global Notes") registered in the
name of The Depository Trust
Company ("DTC") or its nominee.
Beneficial interests in the Global
Notes will be shown on, and
transfers thereof will be effected
only through, records maintained
by DTC and its participants.
Except as provided herein, Notes
in certificated form will not be
issued. See "Description of the
Notes--Book-Entry-Only Issuance;
The Depository Trust Company."
Optional Redemption........................ The Notes are redeemable at the
option of the Company, in whole or
in part, at any time on or after
September 15, 2001, at the
redemption prices set forth
herein, plus accrued and unpaid
interest, if any, to the date of
redemption. See "Description of
the Notes--Optional Redemption."
Change in Control.......................... Upon the occurrence of a Change of
Control, each Holder will have the
right to require the Company to
repurchase all or any part of such
Holder's Notes at a purchase price
in cash equal to 101% of the
principal thereof on the date of
repurchase in accordance with the
procedures set forth in the
Indenture. See "Description of the
Notes--Certain Covenants--Purchase
of Notes Upon a Change of
Control."
Ranking.................................... The Notes will be senior unsecured
obligations of the Company ranking
pari passu in right of payment of
principal and interest with all
other existing and future senior
unsecured obligations of the
Company. The Company is a holding
company that derives substantially
all of its income from its
operating subsidiaries and joint
venture projects. The Indenture
does not limit the amount of
Non-Recourse Debt (as defined)
which may be incurred by the
Company or at the subsidiary or
project level. Accordingly, the
Notes will effectively be
subordinated to any secured
Non-Recourse Debt of the Company
and to any debt at the project or
subsidiary level. The Notes will
rank senior to all other existing
and future subordinated
indebtedness of the Company. As of
June 30, 1996, on a pro forma
basis, after giving effect to (i)
the acquisition of Falcon, (ii)
the completion of the Initial
Offering, (iii) completion of the
Company's call of its 5.0%
Convertible Subordinated
Debentures due 2000 (the "5%
Convertible Debentures") and the
redemption of its 9.5% Convertible
Subordinated Debenture due 2003
which was issued to Kiewit Energy
Company, a subsidiary of PKS (the
"9.5% Convertible Debenture") and
the conversion of each thereof
into Common Stock of the Company
(collectively, the "Conversions")
and (iv) the use of a portion of
the proceeds of the Initial
Offering to repay the $35 million
balance outstanding under the
Company's revolving line of credit
facility, the Company's total
consolidated indebtedness
(excluding deferred income and
convertible preferred
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<PAGE>
securities of a subsidiary) would
have been $2,102.4 million, its
total consolidated assets would
have been $3,424.8 million and its
stockholders' equity would have
been $755.8 million.
Certain Covenants.......................... The Indenture contains certain
covenants which, among other
things, will restrict the ability
of the Company, its Restricted
Subsidiaries (as defined) and its
Eligible Joint Ventures (as
defined) to incur additional Debt
(as defined) (other than
Non-Recourse Debt), to pay
dividends and make certain other
restricted payments, to encumber
or sell assets, to enter into
transactions with Affiliates (as
defined), to enter into new lines
of business, to make certain
investments, to merge or
consolidate with any other person
or to transfer or lease assets.
These covenants are described in
detail below under the caption
"Description of the Notes--Certain
Covenants."
Events of Default.......................... Events of Default under the
Indenture include, among other
things, (i) default in the payment
of any interest on the Notes which
continues for a period of 30 days,
(ii) default in the payment of
principal, or premium, if any,
when due, including pursuant to a
required repurchase, (iii) the
failure by the Company to perform
any covenant contained in the
Indenture, which breach continues
for 30 days after written notice
thereof, (iv) the failure of the
Company or any Significant
Subsidiary (as defined) to pay
when due beyond any applicable
grace period, or the acceleration
of, Debt (other than Non-Recourse
Debt of Significant Subsidiaries)
in excess of $25 million, (v) the
entry by a court of one or more
judgments against the Company or
any Significant Subsidiary for an
aggregate amount in excess of $25
million, subject to certain
conditions, and (vi) the
occurrence of certain events of
bankruptcy, insolvency or
reorganization. See "Description
of the Notes--Events of Default."
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<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully consider the following risk
factors in addition to the other information appearing in or incorporated by
reference in this Prospectus before tendering their Old Notes in the Exchange
Offer. The risk factors set forth below (other than "Consequences of Exchange
and Failure to Exchange" and "Absence of Public Market") are generally
applicable to the Old Notes as well as the Exchange Notes.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE. Holders of Old
Notes who do not exchange their Old Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfer of
such Old Notes as set forth in the legend thereon as a consequence of the
issuance of the Old Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected.
Based on interpretations by the Staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) the Initial Purchaser to
the extent it acquired Old Notes directly from the Company solely in order to
resell pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act or (iii) a broker-dealer (which may include
the Initial Purchaser) who acquired Old Notes as a result of market-making or
other trading activities) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account as a result of market-making
activities or other trading activities pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes as the result of such activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Notes. Any
holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
ABSENCE OF PUBLIC MARKET. The Exchange Notes are being offered to the
holders of the Old Notes. There is no existing trading market for the Exchange
Notes and there can be no assurance regarding the future development of such a
market for the Exchange Notes or the ability of holders of the Exchange Notes
to sell their Exchange Notes or the price at which such holders may be able to
sell their Exchange Notes. If such a market were to develop, future trading
prices will depend on many factors, including, among other things, prevailing
interest rates, the operating results of the Company, and the market for
similar securities. The Company does not intend to apply for listing or
quotation of the Exchange Notes on any securities exchange or stock market.
LEVERAGE. The Company is substantially leveraged. As of June 30,
1996, the Company's total consolidated liabilities were $2,257.0 million
(excluding deferred income and convertible preferred securities of a
subsidiary), its total consolidated assets were $2,975.1 million and its total
stockholders' equity was $587.9 million. As of such date, on a pro forma
basis, after giving effect to (i) the acquisition of Falcon, (ii) completion
of the Initial Offering, (iii) completion of the Conversions and (iv) the use
of a portion of the proceeds of the
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<PAGE>
Initial Offering to repay the $35 million outstanding balance under the
Company's revolving line of credit facility, the Company's total consolidated
liabilities would have been $2,538.9 million (excluding deferred income and
convertible preferred securities of a subsidiary), its total consolidated
assets would have been $3,424.8 million and its stockholders' equity would
have been $755.8 million. The Company's substantial level of debt presents the
risk that the Company might not generate sufficient cash to service the
Company's indebtedness, including the Notes, or that its leveraged capital
structure could limit its ability to finance the acquisition and development
of additional projects, to compete effectively or to operate successfully
under adverse economic conditions. See "Selected Historical Financial and
Operating Data" and "Capitalization." The Company is also a holding company
which derives substantially all of its operating income from its subsidiaries
and joint ventures. Distributions from such entities are restricted under
various covenants and conditions contained in financing documents by which
they are bound and the stock or assets of substantially all of such entities
is directly or indirectly pledged, to secure various of such financings. See
"Risk Factors--Holding Company Structure," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Notes to the
Consolidated Financial Statements."
HOLDING COMPANY STRUCTURE. As a holding company, the Company is
dependent on distributions from its subsidiaries' and joint ventures'
ownership interests in the projects owned and operated by such entities for
substantially all of its operating income. The Company expects that its future
development efforts will also be structured to involve operating subsidiaries,
joint ventures and partnerships. The Company must rely upon dividends and
other payments from its subsidiaries, partnerships and joint ventures to
generate the funds necessary to meet its obligations, including the payment of
principal, interest and premium, if any, on the Notes. The availability of
distributions from the Company's subsidiaries and projects is subject to the
satisfaction of various covenants and conditions contained in the applicable
subsidiaries' and joint ventures' financing documents. Furthermore, the
Company is structuring Philippine and Indonesian project financing
arrangements containing, and anticipates that future project level financings
will contain, certain conditions and similar restrictions on the distribution
of cash to the Company.
The Company's subsidiaries, partnerships and joint ventures are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments, and do not
guarantee the payment of interest on, premium (if any) or principal of the
Notes. Any right of the Company to receive any assets of any of its
subsidiaries or other affiliates upon any liquidation or reorganization of the
Company (and the consequent right of the holders of the Notes to participate
in the distribution of, or to realize proceeds from, those assets) will be
effectively subordinated to the claims of any such subsidiary's or other
affiliate's creditors (including trade creditors and holders of debt issued by
such subsidiary or other affiliate). As of June 30, 1996, on a pro forma
basis, after giving effect to the acquisition of Falcon, completion of the
Initial Offering, consummation of the Conversions and repayment of the $35
million outstanding balance under the Company's line of credit facility, there
would have been approximately $2,102.4 million of total consolidated
indebtedness (excluding deferred income and convertible preferred securities
of a subsidiary) and approximately $1,175.6 million of indebtedness that
represented the Company's proportionate share of joint venture and subsidiary
debt which would be effectively senior to the Notes. Substantially all of such
latter amount would have been secured by the assets of such joint ventures and
subsidiaries. In addition, as of June 30, 1996, the Company's subsidiary,
CalEnergy Capital Trust, had outstanding approximately $103.9 million of its 6
1/4% Convertible Preferred Securities, Term Income Deferrable Equity
Securities ("TIDES")SM, which would effectively be subordinate to the Notes.
See "Description of Notes--Ranking."
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new power projects utilizing geothermal and other
technologies, both domestically and internationally, the completion of any of
which is subject to substantial risk. The Company has in development or under
construction projects representing an aggregate generating capacity in excess
of the generating capacity of those projects currently in operation.
Development can require the Company to expend significant sums for preliminary
engineering, permitting, fuel supply, resource exploration, legal and other
expenses in preparation for competitive bids which the Company may not win or
before it can be determined whether a project is
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<PAGE>
feasible, economically attractive or capable of being financed. Successful
development and construction is contingent upon, among other things,
negotiation on terms satisfactory to the Company of engineering, construction,
fuel supply and power sales contracts with other project participants, receipt
of required governmental permits and consents and timely implementation of
construction. Further, there can be no assurance that the Company, which is
substantially leveraged, will obtain access to the substantial debt and equity
capital required to continue to develop and construct electric power projects
or to refinance projects. The future growth of the Company is dependent, in
large part, upon the demand for significant amounts of additional electrical
generating capacity and its ability to obtain contracts to supply portions of
this capacity. There can be no assurance that development efforts on any
particular project, or the Company's efforts generally, will be successful.
DEVELOPMENT UNCERTAINTY OUTSIDE THE UNITED STATES. The Company has
various projects under construction outside the United States and a number of
projects under award outside the United States. The financing and development
of projects outside the United States entail significant political and
financial risks (including, without limitation, uncertainties associated with
privatization efforts in the countries involved, currency exchange rate
fluctuations, currency repatriation restrictions, changes in law, political
instability, civil unrest and expropriation) and other structuring issues that
have the potential to cause substantial delays in respect of or material
impairment of the value of the project being developed, which the Company may
not be capable of fully insuring against. The uncertainty of the legal
environment in certain foreign countries in which the Company is developing
and may develop or acquire projects could make it more difficult for the
Company to enforce its rights under agreements relating to such projects. In
addition, the laws and regulations of certain countries may limit the ability
of the Company to hold a majority interest in some of the projects that it may
develop or acquire. The Company's international projects may, in certain
cases, be terminated by the applicable foreign governments.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the
geographic area and sustainable output of geothermal reservoirs can only be
estimated and cannot be definitively established. There is, accordingly, a
risk of an unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, geothermal power production
poses unusual risks of seismic activity. Accordingly, there can be no
assurance that earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the event of
serious seismic disturbances or that such insurance will be available on
commercially reasonable terms. The success of a geothermal project depends on
the quality of the geothermal resource and operational factors relating to the
extraction of the geothermal fluids involved in such project. The quality of a
geothermal resource is affected by a number of factors, including the size of
the reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of resource
operating factors. Production and injection wells can require frequent
maintenance or replacement. Corrosion caused by high-temperature and
high-salinity geothermal fluids may compel the replacement or repair of
certain equipment, vessels or pipelines. New production and injection wells
may be required for the maintenance of operating levels, thereby requiring
substantial capital expenditures.
GENERAL OPERATING UNCERTAINTIES. The operation of a power plant
involves many risks, including the breakdown or failure of power generation
equipment, pipelines, transmission lines or other equipment or
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processes, fuel interruption, and performance below expected levels of output
or efficiency. Each facility may depend on a single or limited number of
entities to purchase electricity or thermal energy, to supply water, to supply
gas, to transport gas, to dispose of wastes or to wheel electricity. The
failure of any such purchasing utility, steam host, water or gas supplier, gas
transporter, wheeling utility or other relevant project participant to fulfill
its contractual obligations could have a material adverse impact on the
Company.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT RISKS. The Company
currently relies on long-term power purchase "Standard Offer No. 4" contracts
(each, an "SO4 Agreement") with a large customer, Edison, to generate a
substantial portion of its operating revenues. Any material failure by Edison
to fulfill its contractual obligations under any of such contracts is likely
to have a material adverse effect on the Company's results of operations. Each
of the Company's SO4 Agreements provides for both capacity payments and energy
payments for a term of between 20 and 30 years. During the first ten years of
the term of each SO4 Agreement, energy payments are based on a pre-set
schedule. Thereafter, while the basis for the capacity payment remains the
same, the required energy payment is Edison's then-current published avoided
cost of energy ("Avoided Cost of Energy"), as determined by the California
Public Utility Commission ("CPUC"). The initial ten-year period expires in
August 1997 for the Company's Navy I Project, March 1999 for its BLM Project
and January 2000 for its Navy II Project. Such ten-year period expired in 1996
with respect to one of the Imperial Valley Projects (as defined herein), and
expires in 1999 for three of its Imperial Valley Projects and in 2000 for the
remaining two Imperial Valley Projects that operate under SO4 Agreements.
Estimates of Edison's future Avoided Cost of Energy vary
substantially in any given year. The Company cannot predict the likely level
of Avoided Cost of Energy prices under its SO4 Agreements with Edison at the
expiration of the fixed-price periods. Edison's Avoided Cost of Energy as
determined by the CPUC is currently substantially below the current scheduled
energy prices under the Company's respective SO4 Agreements and is currently
expected to remain so. For the year ended December 31, 1995, the time
period-weighted average of Edison's Avoided Cost of Energy was 2.1 cents per
kWh, compared to the time period-weighted average for the year ended December
31, 1995 selling prices for energy of approximately 11.4 cents per kWh for the
Company. Thus, the revenues generated by each of the Company's facilities
operating under SO4 Agreements are likely to decline significantly after the
expiration of the applicable fixed price period.
COMPETITION AND DOMESTIC DEREGULATION; INDUSTRY RESTRUCTURING. The
international power production market is characterized by numerous strong and
capable competitors, many of which have more extensive and more diversified
developmental or operating experience (including international experience) and
greater financial resources than the Company. Many of these competitors also
compete in the domestic market. Further, in recent years, the domestic power
production industry has been characterized by strong and increasing
competition with respect to the industry's efforts to obtain new power sales
agreements, which has contributed to a reduction in prices offered to
utilities. In that regard, many utilities often engage in "competitive bid"
solicitations to satisfy new capacity demands. In the domestic market,
competition is expected to increase as the electric utility industry becomes
deregulated. In addition, recent deregulation and industry restructuring
activity may cause certain utilities or other contract parties to attempt to
renegotiate contracts or otherwise fail to perform their contractual
obligations, which in turn could adversely affect the Company's results of
operations.
NATURAL GAS SUPPLY/MINIMUM TAKE CONTRACTS. The primary fuel source
for certain of the Company's projects is natural gas and a substantial portion
of the operating expenses of such facilities consists of the costs of
obtaining natural gas through gas supply agreements and transporting that gas
to the projects under gas transportation agreements. The Company believes it
has contracted for natural gas supplies and transportation covering sufficient
volumes to satisfy the long term fuel requirements of the applicable projects.
The obligations of gas suppliers are corporate undertakings that are not
supported by dedicated reserves in all cases. Unless the gas projects were
able to obtain substitute volumes of natural gas, including the requisite
transportation services for such volumes at a price not materially higher than
the sum of the contract price under the existing gas supply agreements and any
damages paid by the supplier for failure to deliver, the sustained failure of
a supplier to
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comply with its obligation to deliver natural gas in accordance with its gas
supply agreement, including as a result of its failure to maintain the
necessary federal, state and provincial permits, could have a material adverse
effect on the cash flows to the Company.
Under certain gas supply agreements, if a project fails to purchase a
minimum annual quality of natural gas, the project is obligated to pay an
amount equal to the product of the deficiency amount and the applicable
contract price. In certain circumstances, utilities may curtail or schedule
the projects for dispatch off-line. Curtailment or low dispatch levels in
combination with other events could result in the project's inability to
satisfy minimum take provisions through the project's fuel requirements. The
Company intends to manage its requirements for contract volumes under the gas
supply agreements so as to meet the minimum take requirements through a
combination of utilization of nominated volumes in operations and resales of
the remainder of the volumes to third-party customers, if necessary.
The transportation arrangements, including pipelines facilities and
the rates charged for transportation services, are subject to various Federal,
provincial, state and local authorities and, in the case of the Company's
Saranac project, the National Energy Board of Canada. In exercising such
jurisdiction, these regulatory authorities maintain or may maintain authority
to modify aspects of the rates, terms and conditions that govern the
transportation services provided. It is possible that such a modification
could materially increase the fuel transportation costs of the projects. In
addition, certain of the natural gas transportation agreements, and the
approved tariffs of the transporters, contain provisions that allow the
transporter to terminate, or suspend performance under, or reduce the amount
of gas transported for the projects under the agreement upon certain
conditions, such as the taking of an adverse action by a regulatory authority
or if the transporter, in its judgment, deems it necessary to make
modifications or repairs to its pipeline facilities or upon the occurrence of
an event of force majeure. The sustained failure of any transporter to provide
gas transportation services under its natural gas transportation agreement
could have a material adverse effect on a power plant's operations.
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling and operation of new and existing wells. Such laws and
regulations generally require the Company to obtain and comply with a wide
variety of licenses, permits and other approvals. The Company also remains
subject to a number of complex and stringent laws and regulations that both
public officials and private individuals may seek to enforce. There can be no
assurance that existing regulations will not be revised or that new
regulations will not be adopted or become applicable to the Company which
could have an adverse impact on its operations. The implementation of
regulatory changes imposing more comprehensive or stringent requirements on
the Company, which would result in increased compliance costs, could have a
material adverse effect on the Company's results of operations. In addition,
regulatory compliance for the construction of new facilities is a costly and
time-consuming process, and intricate and rapidly changing environmental
regulations may require major expenditures for permitting and create the risk
of expensive delays or material impairment of project value if projects cannot
function as planned due to changing regulatory requirements or local
opposition.
The Public Utility Regulatory Policies Act of 1978, as amended
("PURPA") and the Public Utility Holding Company Act of 1935, as amended
("PUHCA") are two of the laws (including the regulations thereunder) which
affect the Company's operations. PURPA provides to qualifying facilities
("QFs") certain exemptions from federal and state laws and regulations,
including organizational, rate and financial regulation. PUHCA regulates
public utility holding companies and their subsidiaries. The Company is not
and will not be subject to regulation as a holding company under PUHCA as long
as the power plants it owns are QFs under PURPA. QF status is conditioned on
meeting certain criteria, and would be jeopardized, for example, by the loss
of a steam customer or reduction of steam purchases below the amount required
by PURPA. The Company's four cogeneration facilities have steam sales
agreements with existing industrial hosts which agreements must be maintained
in effect in order to maintain QF status. In the event the Company were unable
to avoid the loss of such status for one of its facilities, such an event
could result in termination of a given project's power sales agreement and a
default under the project subsidiary's project financing agreements.
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USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant
to the Exchange Offer. The net proceeds to the Company from the sale of the
Old Notes (after deduction of certain transaction costs) in the Initial Offering
was approximately $218.8 million. The Company intends ultimately to use such net
proceeds to make equity investments in future domestic and international energy
projects, to fund possible project or company acquisitions (although no specific
acquisitions are currently contemplated by the Company other than the
contemplated acquisition of Northern described herein under "Business of the
Company--Recent Development"), for the repayment of debt (including the
outstanding $35.0 million balance under the Company's revolving line of credit
facility), and for other general corporate purposes. Pending such uses, the net
proceeds of the Initial Offering will be invested in, among other things,
deposits with banks, investment grade securities and short-term and medium-term
income producing investments, including government obligations and other money
market instruments.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes to the Initial Purchaser
on September 20, 1996, the Company executed and delivered for the benefit of
the holders of the Old Notes the Registration Rights Agreement. The Exchange
Offer is being made by the Company to satisfy its obligations pursuant to the
Registration Rights Agreement, which requires the Company to use its
reasonable best efforts to (i) cause the Exchange Offer Registration Statement
to be declared effective by the Commission within 270 days of the issuance of
the Old Notes, (ii) keep the Exchange Offer open for a period of not less than
the shorter of (a) the period ending when the last of the remaining Old Notes is
tendered in the Exchange Offer and (b) 30 days from the date notice is mailed
to holders of the Old Notes, and (iii) maintain the Exchange Offer Registration
Statement continuously effective for a period of not less than the longer of
(a) the period until consummation of the Exchange Offer and (b) 120 days after
effectiveness of the Exchange Offer Registration Statement (subject to
extension under certain limited circumstances), provided that in the event
that all resales of Exchange Notes covered by the Exchange Offer Registration
Statement has been made, the Exchange Offer Registration Statement need not
remain continuously effective. In the event that the Exchange Offer has not
commenced or a Shelf Registration Statement has not been declared effective
within 270 days following the date of the Issue Date (each, a "Registration
Default"), the interest rate on the Old Notes shall increase by one-half of one
percent (50 basis points) per annum effective on the 271st day following the
date of the Issue Date until the date on which the Exchange Offer is commenced
or such Shelf Registration Statement shall have become effective. If a
registration statement has not been declared effective within two years after
the Issue Date, such one-half of one percent increase in interest rate will
become permanent. See "Description of Notes--Registration Rights Agreement."
TERMS OF THE EXCHANGE
The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, to exchange Exchange Notes for a like aggregate principal amount
of Old Notes, properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. The
Company will issue, promptly after the Expiration Date, the Exchange Notes in
exchange for a like principal amount of outstanding Old Notes tendered and
accepted in connection with the Exchange Offer. Holders may tender their Old
Notes in whole or in part in a principal amount of $1,000 and integral
multiples thereof, provided that if any Old Notes are tendered for exchange in
part by institutional accredited investors, the untendered principal amount
thereof must be $500,000 or any integral multiple of $1,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered. As of the date of this Prospectus, $225,000,000
aggregate principal amount of the Old Notes is outstanding.
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If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof, or in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the procedures described below under "Procedures for Tendering,"
such non-exchanged Old Notes will be credited to the tendering holder's
account maintained with DTC promptly after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes in connection with the Exchange Offer. The Company will
pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "--Solicitation of Tenders;
Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES
ANY RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL
POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on _____________, 1996,
unless the Company in its sole discretion extends the period during which the
Exchange Offer is open, in which case the term "Expiration Date" means the
latest time and date to which the Exchange Offer is extended. The Company may
extend the Exchange Offer at any time and from time to time by giving oral
(immediately confirmed in writing) or written notice to the Exchange Agent and
by timely public announcement. Without limiting the manner in which the
Company may choose to make any public announcement and subject to applicable
law, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency. During any extension of the Exchange Offer, all Old
Notes previously tendered pursuant to the Exchange Offer will remain subject
to the Exchange Offer.
The Company reserves the right (i) to delay accepting any Old Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not accept
Old Notes not previously accepted for any reason, including if any of the
events set forth herein under "--Conditions to the Exchange Offer" shall have
occurred and shall not have been waived by the Company, or (ii) to amend the
terms of the Exchange Offer in any manner, whether prior to or after the
tender of any of the Old Notes. If any such delay, extension, termination or
amendment occurs, the Company will give oral (immediately confirmed in
writing) or written notice to the Exchange Agent and will either issue a
public announcement or give notice to the holders of the Old Notes as promptly
as practicable.
If the Company waives any material condition to the Exchange Offer,
or amends the Exchange Offer in any other material respect, and if at the time
that notice of such waiver or amendment is first published, sent or given to
holders of Old Notes in the manner specified above, the Exchange Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day from, and including, the date that such notice is
first so published, sent or given, then the Exchange Offer will be extended
until the expiration of such period of five business days.
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This Prospectus and the related Letter of Transmittal and other
relevant materials will be mailed by the Company to record holders of Old
Notes and will be furnished to brokers, banks and similar persons whose names,
or the names of whose nominees appear on the lists of record holders for
subsequent transmittal to beneficial owners of Old Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and
date the Letter of Transmittal, or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof), have the signatures thereon guaranteed if required by the Letter of
Transmittal and mail or otherwise deliver such Letter of Transmittal or such
facsimile, together with any other required documents, or an Agent's Message
in case of book-entry delivery as described below, to the Exchange Agent prior
to the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal on or prior to the Expiration Date, (ii) a timely confirmation of
a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such
procedure is available, into the Exchange Agent's account at DTC (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, along with the Letter of Transmittal must be
received by the Exchange Agent on or prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL (RETURN RECEIPT REQUESTED AND
PROPERLY INSURED) OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. NO LETTERS
OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. To be tendered
effectively, the Old Notes, Letter of Transmittal and all other required
documents, or, in the case of a participant in the Book-Entry Transfer
Facility, an Agent's Message, must be received by the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date. Except in the case of a
participant in the Book-Entry Transfer Facility who transfers Notes by an
Agent's Message, delivery of all documents must be made to the Exchange Agent
at its address set forth on the back of this Prospectus. Holders may also
request their respective brokers, dealers, commercial banks, trust companies
or nominees to effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal. If less
than all of the Old Notes are tendered, a tendering holder should fill in the
amount of Old Notes being tendered in the appropriate box on the Letter of
Transmittal. The entire amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Registrar or any
other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by a firm (an "Eligible Institution") that
is a member of a recognized signature guarantee medallion program within the
meaning of Rule 17Ad-15 under the Exchange Act, unless the Old Notes tendered
pursuant thereto
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are tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Notes on behalf of the registered holder, in each
case as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time
of receipt) and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted by the Company, would be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. None of the
Company, the Exchange Agent or any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been timely cured or waived will be returned without
cost to such holder by the Exchange Agent to the tendering holders of Old
Notes, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion
(i) to purchase or make offers for any Old Notes that remain outstanding
subsequent to the Expiration Date or, as set forth under "--Conditions to the
Exchange Offer," to terminate the Exchange Offer and (ii) to the extent
permitted by applicable law, to purchase Old Notes in the open market, in
privately negotiated transactions or otherwise. The Company has no present
plan to acquire any Old Notes which are not tendered in the Exchange Offer.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
BOOK-ENTRY TRANSFER. The Exchange Agent will make a request to
establish an account with respect to the Old Notes at the Book-Entry Transfer
Facility for purposes of the Exchange Offer within two business days after the
date of this Prospectus. Any financial institution that is a participant in
the Book-Entry Transfer Facility's systems may book-entry deliver Old Notes by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer on or prior
to the Expiration Date. A holder who is a participant in the Book-Entry
Transfer Facility and transfers the Notes by an Agent's Message need not
transmit the Letter of Transmittal to the Exchange Agent to consummate the
exchange.
The term "Agent's Message" means a message transmitted through
electronic means by a Book-Entry Transfer Facility to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Notes
that such participant has received and agrees to be bound by the Letter of
Transmittal and/or the Notice of Guaranteed Delivery (as discussed below),
where applicable.
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GUARANTEED DELIVERY PROCEDURES. If a registered holder of the Old
Notes desires to tender such Old Notes, and the Old Notes are not immediately
available, or time will not permit such holder's Old Notes or other required
documents to reach the Exchange Agent before the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) on or prior to the Expiration Date, the Exchange Agent
received from such Eligible Institution a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof, or in the case of a participant
in the Book-Entry Transfer Facility, an Agent's Message) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery, or, in the case of a
participant in the Book-Entry Transfer Facility, by an Agent's Message),
setting forth the name and address of the holder of Old Notes and the amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and any other documents required
by the Letter of Transmittal are received by the Exchange Agent within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes is received by the Exchange Agent, or in the case
of a participant in the Book-Entry Transfer Facility, as of the date when an
Agent's Message from the participant has been received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Old Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made
only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Old Notes.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Old Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Company will acquire
good and unencumbered title to the tendered Old Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The Transferor also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes. The Transferor further agrees that acceptance of any tendered Old Notes
by the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the
death or incapacity of the Transferor and every obligation of the Transferor
shall be binding upon the heirs, legal representatives, successors, assigns,
executors and administrators of such Transferor.
By tendering Old Notes, the Transferor certifies that (i) it is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, that it is not a broker-dealer that owns Old Notes acquired
directly from the Company, that it is acquiring the Exchange Notes offered
hereby in the ordinary course of such Transferor's business and that such
Transferor has no arrangement with any person to participate in the
distribution of such Exchange Notes or (ii) it is an "affiliate" (as defined
above) of the Company or of the Initial
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Purchaser and that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it.
Each broker-dealer that receives Exchange Notes as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan Of
Distribution."
WITHDRAWAL RIGHTS; NON-EXCHANGED OLD NOTES
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange
Agent at its address set forth on the back of this Prospectus. Any such notice
of withdrawal must specify the name of the person having tendered the Old
Notes to be withdrawn, identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are registered
if different from that of the withdrawing holder, accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. If any Old Notes are tendered for exchange but are not
exchanged for any reason, or if any Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes will be returned to the holder thereof without cost to
such holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to
the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes) as soon as practicable after withdrawal, rejection of tender,
termination of the Exchange Offer or submission of nonexchanged Old Notes.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under
"--Procedures for Tendering."
All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 9 1/2% per annum
from the most recent date to which interest has been paid on the Old Notes or,
if no interest has been paid on the Old Notes, from September 20, 1996.
Interest on the Notes will be payable in cash semi-annually on March
15 and September 15, commencing on March 15, 1997, to holders of record on the
immediately preceding March 1 and September 1. See "Description of the
Notes--General." Holders of Old Notes whose Old Notes are accepted for
exchange will not receive any payment in respect of accrued and unpaid
interest on such Old Notes.
-24-
<PAGE>
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer,
the Company will exchange, and will issue to the Exchange Agent, Exchange
Notes for Old Notes validly tendered and not withdrawn promptly after the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when and if
the Company has given oral (immediately confirmed in writing) or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purposes of receiving Exchange
Notes from the Company and causing the Old Notes to be assigned, transferred
and exchanged. Upon the terms and subject to the conditions of the Exchange
Offer, delivery of Exchange Notes to be issued in exchange for accepted Old
Notes will be made by the Exchange Agent only after timely receipt by the
Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents, or, in the case of a book-entry
delivery, an Agent's Message.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept
for exchange, or to exchange, any Old Notes for any Exchange Notes, and, as
described below, may terminate the Exchange Offer (whether or not any Old
Notes have theretofore been accepted for exchange) or may waive any conditions
to or amend the Exchange Offer, if any of the following conditions have
occurred or exists or have not been satisfied: (a) the Exchange Offer, or the
making of any exchange by a holder, violates any applicable law or any
applicable interpretation of the Staff of the Commission; (b) in the
reasonable judgment of the Company, there shall be threatened, instituted or
pending any action or proceeding before, or any injunction, order or decree
shall have been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission, (i) seeking to
restrain or prohibit the making or consummation of the Exchange Offer or any
other transaction contemplated by the Exchange Offer, (ii) assessing or
seeking any damages as a result thereof, or (iii) resulting in a material
delay in the ability of the Company to accept for exchange or exchange some or
all of the Old Notes pursuant to the Exchange Offer; (c) any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (b)(i), (ii) or (iii) above or, in the reasonable
judgment of the Company, might result in the holders of Exchange Notes having
obligations with respect to resales and transfers of Exchange Notes which are
greater than those described in the interpretations of the Staff referred to
in this Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; (d) there shall have occurred (i) any general suspension of
trading in, or general limitation on prices for securities on the New York
Stock Exchange, (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any limitation by any
governmental agency or authority that adversely affects the extension of
credit to the Company, or (iii) a commencement of a war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States; or, in the case any of the foregoing exists at the time of
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or (e) a material adverse change shall have occurred or be threatened
in the business, condition (financial or otherwise), operations, stock
ownership or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in
whole or in part at any time or from time to time in their sole discretion.
The failure by the Company at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and each right will be deemed
an ongoing right
-25-
<PAGE>
which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of
the foregoing conditions, to amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to (i) the Registration Statement of which this Prospectus constitutes
a part or (ii) the qualification of the Indenture under the Trust Indenture
Act of 1939, as amended.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. IBJ Schroder Bank & Trust Company also acts as
trustee under the Indenture.
Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal, should be directed
to the Exchange Agent at its address and numbers set forth on the back of this
Prospectus. Except in the case of a participant in the Book-Entry Transfer
Facility who transfers Securities by an Agent's Message, delivery to an
address other than as set forth herein, or transmissions of instructions via a
facsimile or telex number other than to the Exchange Agent as set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling tenders for their
customers. The expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing,
accounting, and legal fees, will be paid by the Company and are estimated at
approximately $100,000.
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than a registered holder of the Old Notes tendered, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes in connection with
the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Old Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Company may, at their discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Old Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky
-26-
<PAGE>
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
-27-
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth (i) the consolidated capitalization of
the Company at June 30, 1996, and (ii) the consolidated capitalization of the
Company as adjusted to reflect the acquisition of Falcon on August 7, 1996,
the issuance of the $225 million of Notes being offered hereby, completion of
the Conversions and use of $35 million of the Initial Offering proceeds to
repay the outstanding balance drawn on the Company's revolving line of credit
facility. The table should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere herein
or incorporated herein by reference.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
--------------------------------
ACTUAL AS ADJUSTED
---------- -------------
<S> <C> <C>
Indebtedness:
Revolving line of credit.......................................... $ -- $ --
Construction loans................................................ 305,870 305,870
Project finance loans............................................. 187,172 306,650
Salton Sea notes and bonds........................................ 563,035 563,035
Senior discount notes............................................. 501,798 501,798
9 1/2% Senior Notes............................................... -- 225,000
Limited recourse senior secured notes............................. 200,000 200,000
5% Convertible subordinated debentures............................ 100,000 --
Convertible debt.................................................. 64,850 --
---------- -------------
Total consolidated indebtedness.............................. 1,922,725 2,102,353
---------- -------------
Deferred income................................................... 26,213 26,213
Convertible preferred securities of subsidiary.................... 103,930 103,930
Stockholders' equity:
Preferred stock, no par value, 2,000 shares authorized....... -- --
Common stock, $.0675 par value, 80,000 shares authorized,
52,179 shares issued, 52,176 outstanding (as adjusted 60,153
issued and 60,150 outstanding)............................... 3,523 4,061
Additional paid-in capital........................................ 351,976 519,288
Retained earnings................................................. 238,792 238,792
Treasury stock, 3 common shares at cost........................... (61) (61)
Unearned compensation--restricted stock........................... (6,294) (6,294)
---------- -------------
Total stockholders' equity...................................... 587,936 755,786
---------- -------------
Total capitalization............................................ $2,640,804 $2,988,282
========== =============
</TABLE>
-28-
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND
OPERATING DATA (ALL DATA IN THOUSANDS EXCEPT PER
SHARE DATA AND RATIOS)
The following tables set forth selected historical consolidated
financial and operating data, which should be read in conjunction with the
Company's consolidated financial statements and related notes included herein
and incorporated by reference herein and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus . The selected consolidated data as of and for each of the
five years in the period ended December 31, 1995 have been derived from the
audited historical consolidated financial statements of the Company. The
unaudited consolidated financial statements of the Company as of and for the
six months ended June 30, 1995 and 1996 reflect all adjustments necessary in
the opinion of the Company's management (consisting only of normal recurring
adjustments), for a fair presentation of such financial data. The June 30,
1995 information includes the financial and operating results of Magma
(hereinafter defined) for the 45 days it was 51% owned and the 126 days it was
100% owned by the Company. The June 30, 1996 information includes financial
and operating results for the Imperial Valley Partnership Project interests
for the 91 days they were 50% owned and the 91 days they were 100% owned by
the Company.
<TABLE>
<CAPTION>
SIX MONTHS SIX
ENDED YEAR MONTHS
YEAR ENDED DECEMBER 31, JUNE 30,(2) ENDED ENDED
-------------------------------------------------- -------------- DECEMBER 31, JUNE 30,
1991 1992 1993 1994 1995(1) 1995 1996 1995 1996(2)
---- ---- ---- ---- ------- ---- ---- ------------ --------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of electricity......... $104,155 $115,087 $129,861 $152,047 $332,732 $153,280 $179,308 $502,464 $235,290
Sales of steam............... 2,029 2,255 2,198 2,515 2,898 1,454 1,371 5,144 3,625
Royalties.................... -- -- -- -- 19,482 8,829 5,015 20,462 5,015
Other income................. 9,379 10,187 17,194 31,292 43,611 20,218 20,456 36,961 18,006
Total revenue................ 115,563 $127,529 $149,253 $185,854 $398,723 $183,781 $206,150 $565,031 $261,936
Plant operations, general
and administrative,
royalty and other
expenses................... 41,506 45,183 46,794 55,915 127,340 60,486 65,171 219,652 96,157
Income before depreciation,
amortization, interest,
income taxes,
extraordinary item and
cumulative effect of
change in accounting
principle.................. 74,057 82,346 102,459 129,939 271,383 123,295 140,979 345,379 165,779
Depreciation and
amortization............... 14,752 16,754 17,812 21,197 72,249 29,824 43,713 117,363 59,095
Interest expense, net of
capitalized interest....... 24,439 14,860 23,389 52,906 102,083 55,174 47,996 119,027 52,415
Provision for income taxes... 8,284 11,922 18,184 17,002 30,631 11,788 15,537 34,887 18,928
Income before extraordinary
item and cumulative
effect of change in
accounting principle....... 26,582 38,810 43,074 38,834 66,420 26,509 33,733 78,267 39,604
Minority Interest N/A N/A N/A N/A 3,005 3,005 N/A N/A N/A
Extraordinary item(3)(4)..... N/A (4,991) N/A (2,007) N/A N/A N/A N/A N/A
Cumulative effect of change
in accounting
principle(5)............... N/A N/A 4,100 N/A N/A N/A N/A N/A N/A
Net income................... 26,582 33,819 47,174 36,827 63,415 23,504 33,733 78,267 39,604
Preferred dividends ......... N/A 4,275 4,630 5,010 1,080 1,080 N/A 1,080 N/A
Net income available to
common stockholders........ 26,582 29,544 42,544 31,817 62,335 22,424 33,733 77,187 39,604
Income per share before
extraordinary item and
cumulative effect of
change in accounting
principle.................. 0.75 0.92 1.00 0.95 1.25 0.48 0.62 1.29 0.63
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS SIX
ENDED YEAR MONTHS
YEAR ENDED DECEMBER 31, JUNE 30,(2) ENDED ENDED
-------------------------------------------------- -------------- DECEMBER 31, JUNE 30,
1991 1992 1993 1994 1995(1) 1995 1996 1995 1996(2)
---- ---- ---- ---- ------- ---- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Extraordinary item per
share...................... N/A (0.13) N/A (0.06) N/A N/A N/A N/A N/A
Cumulative effect of change
in accounting principle
per share.................. N/A N/A 0.11 N/A N/A N/A N/A N/A N/A
Net income per share
-- primary................. 0.75 0.79 1.11 0.89 1.25 0.48 0.62 1.29 0.63
Net income per share -- fully
diluted.................... 0.75 0.79 1.09 0.88 1.18 0.47 0.59 1.29 0.63
Weighted average shares
outstanding -- primary..... 35,471 37,495 38,485 35,721 49,971 46,736 54,836 60,010 62,810
OTHER DATA (UNAUDITED):
Capital Expenditures......... 68,377 32,446 87,191 119,013 398,623 146,519 218,704
EBITDA(6)(7)................. 74,057 82,346 102,459 129,939 271,383 123,295 140,979 345,379 165,779
EBITDA/interest
expense, net of
capitalized interest(8).... 3.03 5.54 4.38 2.46 2.66 2.23 2.94 2.90 3.16
EBITDA/fixed
charges(6)(7)(9) .......... 2.47 3.98 3.36 2.06 2.01 1.89 1.93 2.20 2.08
Ratio of earnings to fixed
charges(9)................. 2.00 3.20 2.81 1.74 1.49 1.44 1.40 1.45 1.38
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1996
--------------------------------------------------- -----------------------
PRO
1991 1992 1993 1994 1995(1) ACTUAL FORMA(10)
---- ---- ---- ---- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments ........... $49,279 $ 54,671 $ 127,756 $254,004 $ 72,114 $253,661 $261,938
Properties, plants, contracts
and equipment, net ........... 378,266 393,958 463,514 561,643 1,781,255 2,028,624 2,196,531
Total assets.................... 517,994 580,550 715,984 1,131,145 2,654,038 2,975,127 3,424,828
Revolving line of credit ....... N/A N/A N/A N/A N/A N/A --
Project finance loans........... 221,308 263,604 246,880 233,080 257,933 187,172 306,650
Construction loans.............. N/A N/A N/A 31,503 211,198 305,870 305,870
Senior notes.................... 35,730 35,730 35,730 N/A N/A N/A N/A
Senior discount notes........... N/A N/A N/A 431,946 477,355 501,798 501,798
Salton Sea notes and bonds...... N/A N/A N/A N/A 452,088 563,035 563,035
9 1/2% Senior Notes...... N/A N/A N/A N/A N/A N/A 225,000
Limited recourse senior secured
notes......................... N/A N/A N/A N/A 200,000 200,000 200,000
5% Convertible subordinated
debentures ................... N/A N/A 100,000 100,000 100,000 100,000 --
Convertible debt ............... N/A N/A N/A N/A 64,850 64,850 --
Total liabilities .............. 298,146 336,272 425,393 867,703 2,084,474 2,257,048 2,538,899
Redeemable preferred stock ..... 54,705 54,350 58,800 63,600 N/A N/A N/A
Convertible preferred securities
of subsidiary................. N/A N/A N/A N/A N/A 103,930 103,930
Total stockholders' equity ..... 143,128 168,764 211,503 179,991 543,532 587,936 755,786
</TABLE>
-30-
<PAGE>
(1) Reflects the acquisition of Magma Power Company which was completed on
February 24, 1995.
(2) The Company's operations are seasonal in nature, with a disproportionate
percentage of the income earned in the quarter ending September 30;
therefore, operating results and ratios for interim periods are not
indicative of the results for a full fiscal year.
(3) The refinancing of the Coso Joint Ventures' project financing resulted in
an extraordinary loss in 1992 in the amount of $5.0 million.
(4) The Company's 12% senior notes due 1995 were defeased in the first
quarter of 1994 in connection with the issuance of the 10 1/4% senior
discount notes due 2004, resulting in an extraordinary loss in 1994 in
the amount of $2.0 million.
(5) On January 1, 1993, the Company adopted Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes, resulting in a cumulative
effect adjustment increasing net income by $4.1 million in 1993.
(6) EBITDA means earnings before interest, taxes, depreciation and
amortization.
(7) The 1994 EBITDA balances are before the extraordinary item associated
with the defeasance of the Company's 12% senior notes due 1995.
Information concerning EBITDA is presented here not as a measure of
operating results, but rather as a measure of the Company's ability to
service debt. EBITDA should not be construed as an alternative to either
(i) operating income (determined in accordance with generally accepted
accounting principles) or (ii) cash flow from operating activities
(determined in accordance with generally accepted accounting principles).
(8) For purposes of computing the ratio of EBITDA/interest expense, net of
capitalized interest, EBITDA, as defined above, is divided by interest
expense, net of capitalized interest.
(9) For purposes of computing historical ratios of earnings to fixed charges,
earnings are divided by fixed charges. "Earnings" represent the aggregate
of (a) the pre-tax income of the Company, including its proportionate
share of the pre-tax income of the Coso Project (as defined herein) (and
for the year ended December 31, 1995 and the quarter ended March 31,
1996, the Partnership Projects (as defined herein)), and (b) fixed
charges, less capitalized interest. "Fixed charges" represent interest
(whether expensed or capitalized), amortization of deferred financing and
bank fees, and the portion of rentals considered to be representative of
the interest factor (one-third of lease payments).
(10) The pro forma amounts reflect the April 17, 1996 Partnership Project
Acquisition and the August 7, 1996 acquisition of Falcon, together with
the related borrowing of $35 million on a revolving line of credit
utilized in connection therewith as if they had occurred at the beginning
of the periods presented, completion of the Conversions and, in the case
of the Balance Sheet Data, the issuance of $225 million of 9 1/2% Senior
Notes in the Initial Offering and use of $35 million of the Initial
Offering proceeds to repay the balance of the Company's revolving line of
credit facility. See "Pro Forma Condensed Combined Unaudited Financial
Data."
-31-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars and shares in thousands except per share data)
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial condition and
results of operations during the periods included in the accompanying
statements of operations and should be read in conjunction with the Company's
consolidated financial statements. See "Financial Statements."
For purposes of consistent financial presentation, plant capacity
factors for Navy I, Navy II, and BLM (collectively the Coso Project) are based
upon a capacity amount of 80 net MW for each plant. Plant capacity factors for
Vulcan, Hoch (Del Ranch), Elmore and Leathers (collectively the Partnership
Project) are based on contract nameplate amounts of 34, 38, 38 and 38 net MW
respectively, and for Salton Sea I, Salton Sea II, Salton Sea III and Salton
Sea IV plants (collectively the Salton Sea Project) are based on contract
nameplate amounts of 10, 20, 49.8 and 39.6 net MW respectively (the
Partnership Project and the Salton Sea Project are collectively referred to as
the Imperial Valley Project). Each plant possesses an operating margin which
periodically allows for production in excess of the amount listed above.
Utilization of this operating margin is based upon a variety of factors and
can be expected to vary between calendar quarters, under normal operating
conditions.
The Coso Project and the Partnership Project sell all electricity
generated by the respective plants pursuant to seven long-term SO4 Agreements
between the projects and Edison. These SO4 Agreements provide for capacity
payments, capacity bonus payments and energy payments. Edison makes fixed
annual capacity payments to the projects, and to the extent that capacity
factors exceed certain benchmarks is required to make capacity bonus payments.
The price for capacity and capacity bonus payments is fixed for the life of
the SO4 Agreements and are significantly higher in the months of June through
September. Energy is sold at increasing fixed rates for the first ten years of
each contract and thereafter at Edison's Avoided Cost of Energy.
The fixed energy price periods of the Coso Project SO4 Agreements
extend until at least August 1997, March 1999 and January 2000 for each of the
units operated by the Navy I, BLM and Navy II Partnerships, respectively. The
fixed energy price periods of the Partnership Project SO4 Agreements extend
until February 1996, December 1998, December 1998, and December 1999 for each
of the Vulcan, Hoch (Del Ranch), Elmore and Leathers Partnerships,
respectively.
The Company's SO4 Agreements provide for scheduled price period
energy rates ranging from 12.7 cents per kWh in 1996 to 15.6 cents per kWh in
1999.
The Salton Sea I Project sells electricity to Edison pursuant to a 30
year negotiated power purchase agreement, as amended (the "Salton Sea I PPA"),
which provides for capacity and energy payments. The initial contract capacity
and contract nameplate are each 10 MW. The energy payment is calculated using
a Base Price which is subject to quarterly adjustments based on a basket of
indices. The time period weighted average energy payment for Unit I was 4.99
cents per kWh during 1995. As the Salton Sea I PPA is not an SO4 Agreement,
the energy payments do not revert to Edison's Avoided Cost of Energy.
The Salton Sea II and Salton Sea III Projects sell electricity to
Edison pursuant to 30 year modified SO4 Agreements. The contract capacities
and contract nameplates are 15 MW and 20 MW for Salton Sea II and 47.5 MW and
49.8 MW for Salton Sea III, respectively. The contracts require Edison to make
capacity payments, capacity bonus payments and energy payments. The price for
contract capacity and contract capacity bonus payments is fixed for the life
of the modified SO4 Agreements. The energy payments for the first ten year
period, which expires April 4, 2000, are levelized at a time period weighted
average of 10.6 cents per kWh and 9.8 cents per kWh for Salton Sea II and
Salton Sea III, respectively. Thereafter, the monthly energy payments will be
at Edison's Avoided Cost of Energy. For Salton Sea II only, Edison is entitled
to receive, at no cost, 5%
-32-
<PAGE>
of all energy delivered in excess of 80% of contract capacity for the period
April 1, 1994 through June 30, 2004.
The Salton Sea IV Project sells electricity to Edison pursuant to a
modified SO4 agreement which provides for contract capacity payments on 34 MW
of capacity at two different rates based on the respective contract capacities
deemed attributable to the original Salton Sea PPA option (20 MW) and to the
original Fish Lake PPA (14 MW). The capacity payment price for the 20 MW
portion adjusts quarterly based upon specified indicies and the capacity
payment price for the 14 MW portion is a fixed levelized rate. The energy
payment (for deliveries up to a rate of 39.6 MW) is at a fixed price for 55.6%
of the total energy delivered by Salton Sea IV and is based on an energy
payment schedule for 44.4% of the total energy delivered by Salton Sea IV. The
contract has a 30-year term but Edison is not required to purchase the 20 MW
of capacity and energy originally attributable to the Salton Sea I PPA option
after June 30, 2017, the original termination date of the Salton Sea I PPA.
For the six months ended June 30, 1996, Edison's average Avoided Cost
of Energy was 2.2 cents per kWh which is substantially below the contract
energy prices earned for the six months ended June 30, 1996. Estimates of
Edison's future Avoided Cost of Energy vary substantially from year to year.
The Company cannot predict the likely level of Avoided Cost of Energy prices
under the SO4 Agreements and the modified SO4 Agreements at the expiration of
the scheduled payment periods. The revenues generated by each of the projects
operating under SO4 Agreements could decline significantly after the
expiration of the respective scheduled energy payment periods.
RESULTS OF OPERATIONS
SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
The following operating data represent the aggregate capacity and
electricity production of the Coso Project:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Overall capacity factor............................. 109.5% 106.1% 109.1% 108.1%
kWh produced (in thousands)......................... 574,100 555,900 1,144,000 1,126,900
Installed capacity NMW (average).................... 240 240 240 240
</TABLE>
The increase in the capacity factor for the second quarter of 1996
from the same period in 1995 was due to increases in production at all three
plants. The Navy II and BLM plants had experienced scheduled pre-peak outages
in the second quarter of 1995, however in 1996 scheduled pre-peak outages
occurred in the first quarter of 1996.
The increase in the capacity factor for the six months ended June 30,
1996 from the same period in 1995 resulted from increased production at all
three plants, but primarily reflects increased production at the BLM plant due
to the execution of a steam transfer agreement and construction of the related
interties in the third quarter of 1995.
-33-
<PAGE>
The following operating data represent the aggregate capacity and
electricity production of the Partnership Project:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Overall capacity factor............................. 109.2% 107.5% 103.4% 104.9%
kWh produced (in thousands)......................... 353,000 347,500 668,600 674,650
Installed capacity NMW (average).................... 148 148 148 148
</TABLE>
The overall capacity factor for the Partnership Project increased for
the second quarter of 1996 compared to the second quarter of 1995 due to
operating improvements at the Leathers plant. The overall capacity factor
decreased for the six months ended June 30, 1996 compared to the same period
in 1995 primarily due to scheduled turbine overhauls at Leathers and Elmore in
the first quarter of 1996.
The following operating data represent the aggregate capacity and
electricity production of the Salton Sea Project:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Overall capacity factor............................. 78.7% 78.3% 83.8% 82.5%
kWh produced (in thousands)......................... 159,700 136,400 315,900 286,000
Installed capacity NMW (average)*................... 92.9 79.8 86.3 79.8
</TABLE>
- --------------
* Weighted average for the commencement of operations at the Salton Sea Unit
IV project.
The overall capacity factor for the Salton Sea Project has increased
for the three and six months ended June 30, 1996 compared to the same periods
in 1995 as a result of increased production at the Salton Sea III Project due
to a scheduled turbine overhaul in the second quarter of 1995 and the
commencement of operations at the Salton Sea IV project partially offset by
lower production at the Salton Sea I and Salton Sea II projects.
Roosevelt Hot Springs steam field supplied 100% of customer power
plant steam requirements in the second quarter of 1996. The Company has an
approximate 70% interest in the Roosevelt Hot Springs field. The Desert Peak
power plant operated at 83% of its 10 net megawatt capacity in the second
quarter of 1996. The Yuma power plant availability was effectively 100% during
the second quarter of 1996 and delivered an average of 89% of its 50 net MW
plant capacity, which reflected certain contractual curtailments.
Sales of electricity and steam increased in the second quarter of
1996 to $104,735 from $81,756 for the same period in 1995, a 28.1% increase.
For the six month period ended June 30, 1996, sales of electricity and steam
increased to $180,679 from $154,734 in 1995, a 16.8% increase. These increases
were primarily the result of the Partnership Interest Acquisition and the
commencement of commercial operations at the Salton Sea Unit IV project.
Royalty income decreased in the second quarter of 1996 to $1,122 from
$4,912 in the same period in 1995, a 77.2% decrease. For the six months ended
June 30, 1996, royalty income decreased to $5,015 from $8,829, a 43.2%
decrease. These decreases are a result of the Company no longer recognizing
royalty income
-34-
<PAGE>
received from the Partnership Project as the Partnership Project is now owned
100% by the Company due to the Partnership Interest Acquisition. The Company
continues to receive royalty income from the East Mesa Project and the Mammoth
Project.
Interest and other income decreased in the second quarter of 1996 to
$9,937 from $10,428 for the same period in 1995, a 4.7% decrease. The decrease
reflects that the Company no longer recognizes management services income
received from the Partnership Project as the Partnership Project is now owned
100% by the Company due to the Partnership Interest Acquisition. For the six
months ended June 30, 1996, interest and other income increased to $20,456
from $20,218, a 1.2% increase.
The Company's expenses as a percentage of sales of electricity and
steam were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996* 1995 1996* 1995
----- ---- ----- ----
<S> <C> <C> <C> <C>
Plant operations (net of the Company's management fees
and Yuma fuel cost) 19.9% 22.2% 20.6% 21.9%
General and administration 4.9% 5.9% 5.1% 7.3%
Royalties 5.6% 7.2% 5.7% 6.7%
Depreciation and amortization 24.5% 19.1% 24.2% 19.3%
Interest (less amounts capitalized) 24.0% 36.8% 26.6% 35.7%
---- ---- ---- ----
78.9% 91.2% 82.2% 90.9%
==== ==== ==== ====
</TABLE>
- ---------------
* Excludes loss (associated with negative arbitrage) on equity
investment in Casecnan (currently in construction) and dividends on
convertible preferred securities of subsidiary.
The cost of plant operations increased in the second quarter of 1996
to $22,431 from $20,447 for the same period in 1995, a 9.7% increase. For the
six months ended June 30, 1996, plant operations costs increased to $41,387
from $38,873 in 1995, a 6.5% increase. These increases reflect the Partnership
Interest Acquisition and were partially offset by lower costs at the Coso
Project and the Desert Peak power plant due to continued savings from the
Company's cost control programs.
General and administration costs increased in the second quarter of
1996 to $5,117 from $4,851 for the same period in 1995, a 5.5% increase due to
increased development expenses. For the six months ended June 30, 1996,
corporate administration decreased to $9,296 from $11,277 in 1995, a 17.6%
decrease. This decrease was primarily due to the savings realized by
consolidating the corporate functions from the Magma acquisition.
Royalty costs marginally decreased in the second quarter of 1996 to
$5,896 from $5,922 for the same period in 1995. For the six months ended June
30, 1996 royalty expense marginally decreased to $10,271 from $10,336 in 1995.
Depreciation and amortization increased in the second quarter of 1996
to $25,660 from $15,641 for the same period in 1995, a 64.1% increase. For the
six months ended June 30, 1996, depreciation and amortization increased to
$43,713 from $29,824 in 1995, a 46.6% increase. These increases were primarily
due to the amortization of the allocated purchase price and goodwill related
to the Magma and Partnership Interest acquisitions and the commencement of
operations at the Salton Sea Unit IV project.
Loss on equity investment in Casecnan reflects the Company's share of
interest expense in excess of capitalized interest and interest income at the
Casecnan project, which is currently in construction.
-35-
<PAGE>
Interest expense, less amounts capitalized, decreased in the second
quarter of 1996 to $25,123 from $30,096 for the same period in 1995, a 16.5%
decrease. For the six months ended June 30, 1996, interest expense, less
amounts capitalized decreased to $47,996 from $55,174 in 1995, a 13.0%
decrease. These decreases were due to the offsetting effects of increased
interest expense associated with the senior discount notes, convertible debt,
limited recourse senior secured notes and Salton Sea notes and bonds,
decreased interest expense from merger debt and the associated increase in
capitalized interest on the Company's international and domestic projects in
construction.
Dividends on convertible preferred securities of a subsidiary reflect
financial expense related to these securities which were issued in April,
1996.
The provision for income taxes increased in the second quarter of
1996 to $9,040 from $6,248, for the same period in 1995, a 44.7% increase. For
the six months ended June 30, 1996, provisions for income taxes increased to
$15,537 from $11,788 in 1995, a 31.8% increase. The increase was due to higher
income before taxes.
Net income available for common shareholders increased in the second
quarter of 1996 to $19,272 or $.35 per share from $13,891 or $.27 per share
for the same period in 1995. For the six months ended June 30, 1996, net
income available to common shareholders increased to $33,733 or $.62 per share
from $22,424 or $.48 per share.
Earnings per share for the six months ended June 30, 1996 and 1995
were favorably affected by the Company's stock repurchase plan.
RESULTS OF OPERATIONS
THREE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
Sales of electricity and steam increased to $335,630 in the year
ended December 31, 1995 from $154,562 in the year ended December 31, 1994, a
117.1% increase. This improvement was primarily due to the addition of
production from the Imperial Valley Project, as a result of the acquisition of
Magma Power Company ("Magma") in the first quarter of 1995, an increase in the
Coso Project's electricity revenues to $152,128 from $137,013 due to an
increase in the Coso Project's electric kilowatt hour sales to 2,318.4 million
kWh from 2,238.6 million kWh, and an increased price per kWh in accordance
with the SO4 agreements and an increase in revenue received from the Yuma
Project which commenced operation in late May 1994.
The increase in sales of electricity and steam in 1994 to $154,562
from $132,059 in 1993 was primarily due to a 2.4% increase in the Coso
Project's electric kWh sales to 2,238.6 million kWh from 2,186.7 million kWh,
an increased price per kWh in accordance with the SO4 agreements, and revenue
received from the Yuma Project, which commenced commercial operation in late
May, 1994. The increase in Coso Project kWh sales was primarily due to the
completion of new production wells.
The following operating data includes the aggregate capacity and
electricity production of the Coso Project:
1995 1994 1993
---- ---- ----
Overall capacity factor............ 110.3% 106.5% 104.0%
kWh produced (in thousands)........ 2,318,400 2,238,600 2,186,700
Capacity Factor NMW................ 240 240 240
-36-
<PAGE>
The Coso Plant capacity factor was 112.6% in the fourth quarter of
1995 compared to 112.2%, 106.1% and 110.2% for the third, second and first
quarters of 1995, respectively. A steam transfer agreement was signed and the
interties were constructed in the third quarter of 1995, providing for
increased production primarily at the BLM plant. Technical enhancements
provided for the increase in 1994 from 1993.
The following operating data includes the aggregate capacity and
electricity production of the Partnership Project:
1995 1994 1993
---- ---- ----
Overall Capacity Factor............. 105.9% 103.8% 100.7%
kWh Produced (in thousands)......... 1,373,310 1,346,000 1,305,700
Capacity Factor NMW................. 148 148 148
The Partnership Project capacity factor was 105.8% in the fourth
quarter of 1995 compared to 108.0%, 107.5%, and 102.3% for the third, second,
and first quarters of 1995, respectively. The increased production in 1995 and
1994 are a result of minimizing unscheduled downtime at the plants.
The following operating data includes the aggregate capacity and
electricity production of the Salton Sea Project:
1995 1994 1993
---- ---- ----
Overall Capacity Factor.................. 86.5% 90.8% 91.3%
kWh Produced (in thousands).............. 604,300 634,890 638,262
Capacity Factor NMW...................... 79.8 79.8 79.8
The overall Salton Sea Project capacity factor was 86.8% in the
fourth quarter of 1995 compared to 93.9%, 78.3% and 86.8% for the third,
second and first quarters of 1995, respectively. The Salton Sea Project
capacity factor has decreased in 1995 from 1994 and 1993 due to the scheduled
Salton Sea Unit III overhaul in the second quarter of 1995 and the conversion
of that unit to the pH Mod technology in the fourth quarter of 1995.
Electric sale price per kWh for the Coso Project varies seasonally in
accordance with the rate schedule included in the SO4 agreements. The Coso
Project's average electricity prices per kWh in 1995, 1994 and 1993 were
comprised of (in cents):
ENERGY CAPACITY & BONUS TOTAL
Average fiscal 1995................ 11.81 1.82 13.63
Average fiscal 1994................ 10.91 1.90 12.81
Average fiscal 1993................ 10.11 1.93 12.04
-37-
<PAGE>
Electric sale price per kWh for the Partnership Project also varies
seasonally in accordance with the rate schedule included in the SO4
agreements. The Partnership Project's average electricity prices per kWh in
1995, 1994 and 1993 were comprised of (in cents):
ENERGY CAPACITY & BONUS TOTAL
Average fiscal 1995................ 11.14 2.10 13.24
Average fiscal 1994................ 10.29 2.16 12.45
Average fiscal 1993................ 9.70 2.21 11.91
Electric sale price per kWh for the Salton Sea Project also varies
seasonally in accordance with the rate schedule included in the power purchase
agreements. The Salton Sea Project's average electricity prices per kWh in
1995, 1994 and 1993 were comprised of (in cents):
ENERGY CAPACITY & BONUS TOTAL
Average fiscal 1995................. 9.50 2.33 11.83
Average fiscal 1994................. 10.07 1.67 11.74
Average fiscal 1993*................ 9.54 2.59 12.13
- ---------------
* The 1993 data is for the nine months ended December 31, 1993.
The Roosevelt Hot Springs steam field supplied 100% of customer power
plant steam requirements for each of the past three years. Steam sales from
the Roosevelt Hot Springs field were $2,206, $2,185, and $2,198 in 1995, 1994,
and 1993, respectively. The Desert Peak power plant operated at or near its
ten net megawatt capacity for each of the past three years. Electric sales
from Desert Peak were $5,115, $5,281 and $5,177 for the years 1995, 1994, and
1993, respectively. Beginning in 1996, the Desert Peak power plant will
receive payments for delivered electricity based on Sierra Pacific Power
Company's short-run Avoided Cost of Energy. The Yuma power plant availability
was effectively 100% during 1995 and delivered 89.2% of its 50 net MW plant
capacity. Electric and steam sales from Yuma were $16,975 in 1995 and $10,082
for approximately seven months in 1994.
Royalty income in 1995 of $19,482 is a result of the acquisition of
Magma which receives royalties from the Partnership Project, East Mesa Project
and the Mammoth Project.
Interest and other income increased in 1995 to $43,611 from $31,292
in 1994 and from $17,194 in 1993. The increase reflects management fee income
received from the Partnership Project partially offset by lower interest
income due to lower cash and investment balances.
The Company's cost per kWh was as follows (in cents):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Plant operations (net of Company's management fees and 2.31 1.82 1.98
Yuma fuel cost)...........................................
General and administration................................ .78 .82 1.03
Royalties................................................. .81 .62 .65
Depreciation and amortization............................. 2.41 1.34 1.39
Interest, less amounts capitalized........................ 3.40 3.33 1.82
---- ---- ----
Total.................................................... 9.71 7.93 6.87
==== ==== ====
</TABLE>
-38-
<PAGE>
The Company's expenses as a percentage of sales of electricity and
steam were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Plant operations (net of the Company's management fees 20.6% 18.7% 19.2%
and Yuma fuel cost).......................................
General and administration................................ 7.0 8.4 10.0
Royalties................................................. 7.2 6.4 6.3
Depreciation and amortization............................. 21.5 13.7 13.5
Interest, less amounts capitalized........................ 30.4 34.2 17.7
---- ---- ----
Total.................................................... 86.7% 81.4% 66.7%
==== ==== ====
</TABLE>
The Company's expenses increased in 1995 as a general result of the
acquisition of Magma, the greater electricity production of the Coso Project
and the inclusion of the costs from the Yuma plant for an entire year which
operated for only seven months in 1994.
The cost of plant operations increased to $79,294 in 1995 from $33,015
in 1994, an increase of 140.2%. The addition of the Imperial Valley Project
operations and the full year of operations of the Yuma Project (including fuel
purchases) resulted in the additional plant operations costs. Plant operations
costs for the plants the Company owned in 1994, excluding Yuma, decreased
$2,250 or 8.4% in 1995. The cost per kWh excluding Magma and Yuma fuel costs
decreased to 1.61 cents in 1995 from 1.82 cents and 1.98 cents in 1994 and
1993 respectively. The cost of plant operations increased to $33,015 in 1994
from $25,362 in 1993, an increase of 30.2% as a result of the cost of plant
operations at Yuma.
General and administration costs increased to $23,376 in 1995 from
$13,012 in 1994, an increase of 79.6%. This increase is a result of the
Company's acquisition of Magma. General and administration costs per kWh for
1995, 1994, and 1993, continued to decrease due to a proportionally greater
increase in electrical production than general and administration costs.
General and administration costs decreased to $13,012 in 1994 compared to
$13,158 in 1993, a 1.1% decrease.
Royalty cost increased to $24,308 in 1995 from $9,888 in 1994, a
145.8% increase. The increase was due to the addition of the Imperial Valley
Project, increased revenue from the plants the Company owned in 1994 and
scheduled royalty increases associated with such plants. Overall, the royalty
cost per kWh was 0.81 cents in 1995 compared to 0.62 cents in 1994 and 0.65
cents in 1993. Royalty costs increased to $9,888 in 1994 from $8,274 in 1993,
an increase of 19.5% due to higher electrical sales and effective royalty
rate.
Depreciation and amortization increased to $72,249 in 1995 from
$21,197 in 1994, a 240.8% increase. The increase was due to depreciation and
amortization from the Imperial Valley Project and amortization of excess of
cost over fair value of net assets acquired in connection with the purchase of
Magma. Depreciation and amortization for the plants the Company owned in 1994
increased to $25,935 in 1995 from $21,197 in 1994, a 22.4% increase.
Depreciation and amortization expense for 1995 was 2.41 cents per kWh compared
to 1.34 cents per kWh in 1994. The cost per kWh excluding Magma was 1.49 cents
in 1995. Depreciation and amortization expense increased to $21,197 in 1994
from $17,812 in 1993 a 19.0% increase. The increase in 1994 was due to the
completion of abatement systems and vacuum pumps at the Coso plants and an
increased number of wells.
Interest expense, less amounts capitalized, increased to $102,083 in
1995 from $52,906 in 1994, a 93.0% increase or 3.40 cents per kWh in 1995
compared to 3.33 cents per kWh in 1994. The 1995 increase was primarily due to
the interest expense on the debt used to finance the acquisition of Magma, the
increase in the original issue discount amortization on the 10 1/4% senior
discount notes issued in March 1994 and interest expense on the convertible
debt, partially offset by the defeasance of the 12% senior notes in March
1994. Net
-39-
<PAGE>
interest expense in 1994 increased due primarily to the Company's issuance of
10 1/4% senior discount notes in March 1994. Net interest increased to $52,906
in 1994 from $23,389 in 1993, an increase of 126.2%, or 3.33 cents per kWh in
1994, compared to 1.82 cents per kWh in 1993.
The provision for income taxes increased to $30,631 in 1995 from
$17,002 in 1994, and decreased to $17,002 in 1994 from $18,184 in 1993. The
effective tax rate was 31.6%, 30.5% and 29.7% in 1995, 1994, and 1993,
respectively.
Income before the provision for income taxes increased to $97,051 in
1995 from $55,836 in 1994, a 73.8% increase. Net income available to common
shareholders increased to $62,335 or $1.25 per common share for the year ended
December 31, 1995 compared to $31,817 or $0.89 per common share in 1994 and
$42,544 or $1.11 per common share in 1993. Net income for the year ended
December 31, 1994 was reduced by $2,007 or $0.06 per share due to an
extraordinary item. Net income for the year ended December 31, 1993 was
increased by $4,100 or $0.11 per share due to a cumulative effect of a change
in accounting principle.
Earnings per share in 1995, 1994, and 1993 were favorably affected by
the Company's stock repurchase plan.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and investments were $253,661 at June 30, 1996 as
compared to $72,114 at December 31, 1995. In addition, the Company's share of
the Coso Project cash and investments retained in project control accounts at
June 30, 1996 was $55,828. At December 31, 1995 the Company's share of the
Coso Project and the Partnership Project cash and investments retained in
project control accounts was $77,590. Distributions out of the project control
accounts are made monthly to the Company for operation and maintenance and
capital costs and semiannually to each Coso Project partner for profit sharing
under a prescribed calculation subject to mutual agreement by the partners. In
addition to these liquid instruments, the Company recorded separately
restricted cash of $79,237 and $149,227 at June 30, 1996 and December 31,
1995, respectively. The restricted cash balance as of June 30, 1996 is
comprised primarily of amounts deposited in restricted accounts from which the
Company will source its equity contribution requirements relating to the Upper
Mahiao and Mahanagdong projects, fund certain capital improvements at the
Imperial Valley Project and the Company's proportionate share of Coso Project
cash reserves for the debt service reserve funds. Also, the Company had $3,295
and $34,190 of short term investments as of June 30, 1996 and December 31,
1995, respectively.
Accounts receivable normally represents two months of revenues, and
fluctuates with both production and price per kWh.
The balance due from/to the Joint Ventures relates to operations,
maintenance, and management fees for managing the Coso Project and the
Partnership Project as well as advances and deferred revenue on the
international projects. This amount fluctuates based on the timing of billings
and incurrence of costs.
The Company repurchased 173 and 102 common shares for aggregate
amounts of $3,221 and $1,590 during the first six months of 1996 and 1995,
respectively. At June 30, 1996 the Company held 3 shares of its common stock
at a cost of $61 to provide shares for issuance under the Company's employee
stock option and share purchase plan and other outstanding convertible
securities. The repurchase plan attempts to minimize the dilutive effect of
the additional shares issued under these plans.
On July 8, 1996 the Company obtained a $100,000 three year revolving
credit facility of which the Company had drawn $35,000 as of August 31, 1996.
The facility is unsecured and is available to fund general operating capital
requirements and finance future business opportunities.
-40-
<PAGE>
On June 20, 1996 the Salton Sea Funding Corporation, a wholly owned
indirect subsidiary of the Company (the "Funding Corporation"), completed the
sale to institutional investors of $135,000 aggregate amount of Senior Secured
Series D Notes and Series E Bonds which are nonrecourse to the Company.
The Funding Corporation Series D Notes and Series E Bonds which
mature in May 2000 and May 2011 respectively, bear an interest rate of 7.02%
and 8.30% respectively.
The proceeds of the Initial Offering were used by Funding Corporation
to refinance $96,584 of existing project level indebtedness at the Partnership
Project, to fund a portion of the Partnership Interest Acquisition and for
certain capital improvements at the Imperial Valley.
On April 12, 1996, CalEnergy Capital Trust, a special purpose
Delaware business trust organized by the Company (the "Trust") completed a
private placement (with certain shelf registration rights) of $100,000 of
convertible preferred securities ("TIDES"). In addition, an option to purchase
an additional 78.6 TIDES, or $3,930, was exercised by the underwriters to
cover over-allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation
preference of fifty dollars each. The Company owns all of the common
securities of the Trust. The TIDES and the common securities represent
undivided beneficial ownership interests in the Trust. The assets of the Trust
consist solely of the Company's 6 1/4% Convertible Junior Subordinated
Debentures due 2016 in an outstanding aggregate principal amount of $103,930
("Junior Debentures"). Each TIDES will be convertible at the option of the
holder thereof at any time into 1.6728 shares of CalEnergy Common Stock
(equivalent to a conversion price of $29.89 per share of the Company's Common
Stock), subject to customary anti-dilution adjustments. Until converted into
the Company's Common Stock, the TIDES will have no voting rights with respect
to the Company and, except under certain limited circumstances, will have no
voting rights with respect to the Trust. Distributions on the TIDES (and
Junior Debentures) are cumulative, accrue from the date of initial issuance
and are payable quarterly in arrears, commencing June 15, 1996. The Junior
Debentures are subordinated in right of payment to all senior indebtedness of
the Company and the Junior Debentures are subject to certain covenants, events
of default and optional and mandatory redemption provisions, all as described
in the Junior Debenture Indenture.
In 1995, the Company commenced development of and has obtained
financing for the Casecnan Project, a multipurpose irrigation and
hydroelectric power facility with a rated capacity of approximately 150 net MW
located on the island of Luzon in the Philippines. The total project cost for
the facility is approximately $495,000. The current capital structure consists
of term loans of $371,500 and $123,836 in equity contributions. The Company's
portion of the contributed equity is approximately $61,918. The Overseas
Private Investment Corporation ("OPIC") is providing political risk insurance
on the equity investment.
The project is structured as a 20 year build-own-operate-transfer
("BOOT"), in which the Company's indirect subsidiary CE Casecnan Water and
Energy Company, Inc., a Philippine corporation, will be responsible as the
BOOT operator. The fixed price, date-certain turnkey contractor is Hanbo
Corporation of South Korea.
In 1996, the Company signed agreements with Broken Hill Proprietary
Company Limited ("BHP"), an international mining company, which provides,
among other things, for the Company, at its option, to deliver power for the
mineral extraction process. The initial phase of the project would require at
least 15 MW. A pilot plant has successfully produced zinc at the Company's
Imperial Valley Project. The mining company has completed construction of its
larger demonstration plant. If successfully developed, the mineral extraction
process will provide an environmentally compatible and low cost minerals
recovery methodology. The project is subject to a number of uncertainties and
implementation cannot be assured.
In April 1994, the Company closed the financing for the 119 net MW
Upper Mahiao geothermal power project located in the Philippines. The total
project cost for the facility is approximately $218,000.
-41-
<PAGE>
The Company will supply approximately $56,000 of equity and project
debt financing will constitute the balance of approximately $162,000. A
syndicate of international commercial lenders is providing the construction
financing. The Export-Import Bank of the U.S. ("ExIm Bank") is providing
political risk insurance to the commercial banks on the construction loan and
will provide the preponderance of project term financing upon satisfaction of
conditions associated with commercial operation. As of June 30, 1996, draws on
the construction loan totalled $147,129, equity investments made by
subsidiaries of the Company totalled $56,000 and advances by subsidiaries of
the Company totalled $3,355. These advances will be repaid by draws on the
construction loan. OPIC is providing political risk insurance on the equity
investment by the Company in this project. The Upper Mahiao project commenced
construction in April of 1994, was deemed complete in June, 1996 and began
receiving capacity payments pursuant to the Upper Mahiao Energy Conversion
Agreement ("ECA") in July of 1996. The project is structured as a ten year
BOOT, in which the Company's subsidiary CE Cebu Geothermal Power Company, Inc.
("CE Cebu"), the project company, was responsible for implementing
construction of the geothermal power plant and, as owner, for providing
operations and maintenance during the ten year BOOT period. The electricity
generated by the Upper Mahiao geothermal power plant will be sold to the
PNOC--Energy Development Corporation ("PNOC-EDC"), which is also responsible
for supplying the facility with the geothermal steam. After a ten year
cooperation period, and the recovery by the Company of its capital investment
plus incremental return, the plant will be transferred to PNOC-EDC at no cost.
Ormat Inc. of Sparks, Nevada, is the turnkey contractor for the project.
PNOC-EDC is obligated to pay for electric capacity that is nominated
each year by CE Cebu, irrespective of whether PNOC-EDC is willing or able to
accept delivery of such capacity. PNOC-EDC pays to CE Cebu a fee (the
"Capacity Fee") based on the plant capacity nominated to PNOC-EDC in any year
(which, at the plant's design capacity, is approximately 95% of total contract
revenues) and a fee (the "Energy Fee") based on the electricity actually
delivered to PNOC-EDC (approximately 5% of total contract revenues). The
Capacity Fee serves to recover the capital costs of the project, to recover
fixed operating costs and to cover return on investment. The Energy Fee is
designed to cover all variable operating and maintenance costs of the power
plant. Payments under the Upper Mahiao ECA are denominated in U.S. dollars, or
computed in U.S. dollars and paid in Philippine pesos at the then-current
exchange rate, except for the Energy Fee, which will be used to pay Philippine
peso-denominated expenses. Significant portions of the Capacity Fee and Energy
Fee are indexed to U.S. and Philippine inflation rates, respectively.
PNOC-EDC's payment requirements, and its other obligations under the Upper
Mahiao ECA are supported by the Government of the Philippines through a
performance undertaking.
In August 1994, the Company closed the financing for the 165 net MW
Mahanagdong project located in the Philippines. The total project cost for the
facility is approximately $320,000. The capital structure consists of a term
loan of $240,000 and approximately $80,000 in equity contributions. OPIC and a
consortium of international commercial lenders is providing the construction
debt financing facility. The debt provided by the commercial lenders is
insured against political risk by the Ex-Im Bank. Ten year term debt financing
(which will replace the construction debt) will be provided by Ex-Im Bank and
by OPIC. The Mahanagdong project has commenced construction and as of June 30,
1996, the Company's proportionate share of draws on the construction loan
totalled $65,005, equity investments made by a subsidiary of the Company
totalled $31,580 and advances by subsidiaries of the Company totalled $2,566.
OPIC is providing political risk insurance on the equity. The Mahanagdong
project is targeted for service in July, 1997. As with the Upper Mahiao
project, the Mahanagdong project is structured as a ten year BOOT, in which
the Company will be responsible for implementing construction of the
geothermal power plant and, as owner, for providing operations and maintenance
for the ten year BOOT period. After a ten year cooperation period, and the
recovery by the Company of its capital investment plus incremental return, the
plant will be transferred to PNOC-EDC at no cost.
The electricity generated by the Mahanagdong project will be sold to
PNOC-EDC, on a "take or pay" basis, which is also responsible for supplying
the facility with the geothermal steam. The terms of the Mahanagdong ECA are
substantially similar to those of the Upper Mahiao ECA. All of PNOC-EDC's
obligations under the Mahanagdong ECA are supported by the Government of the
Philippines through a performance undertaking. The Capacity Fees are expected
to be approximately 97% of total revenues at the
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<PAGE>
design capacity levels and the Energy Fees are expected to be approximately 3%
of such total revenues. The Mahanagdong project will be built, owned and
operated by CE Luzon Geothermal Power Company, a Philippine corporation, that
is expected to be owned post-completion as follows: 45% by the Company, 45% by
Kiewit, and up to 10% by another industrial company. The turnkey contractor
consortium consists of Kiewit Construction Group, Inc. (with an 80% interest)
and CE Holt Co., a wholly owned subsidiary of the Company (with a 20%
interest).
In December 1994, financing was closed and construction commenced on
the Malitbog Project, a 216 net MW geothermal project, located on the island
of Leyte. The Malitbog Project will be built, owned and operated by Visayas
Geothermal Power Company ("VGPC"), a Philippine general partnership that is
wholly owned, indirectly, by the Company. VGPC will sell 100% of its capacity
on substantially the same basis as described above for the Upper Mahiao
Project to PNOC-EDC, which will in turn sell the power to the National Power
Corporation of the Philippines.
The Malitbog Project has a total project cost of approximately
$280,000, including interest during construction and project contingency
costs. A consortium of international lenders and OPIC have provided a total of
$210,000 of construction and term loan facilities, the $135 million
international commercial bank portion of which is supported by political risk
insurance from OPIC. As of June 30, 1996, draws on the construction loan
totalled $93,736, the equity investments made by subsidiaries of the Company
totalled $70,000 and advances by subsidiaries of the Company totalled $5,069.
The advances will be repaid by draws on the construction loan. The Company's
equity contribution to VGPC of $70,000 is covered by political risk insurance
from OPIC and the Multilateral Investment Guarantee Agency ("MIGA"). As with
the Upper Mahiao project, the Malitbog project is structured as a ten year
BOOT, in which the Company will be responsible for implementing construction
of the geothermal power plant and, as owner, for providing operations and
maintenance for the ten year BOOT period. After a ten year cooperation period,
and the recovery by the Company of its capital investment plus incremental
return, the plant will be transferred to PNOC-EDC at no cost. The Malitbog
Project is being constructed by Sumitomo Corporation pursuant to a
fixed-price, date-certain, turnkey supply and construction contract. Unit 1
was deemed complete in late July 1996 and commercial operation of Unit 2 and
Unit 3 is scheduled to commence in July 1997.
Magma is seeking new long-term final SO4 power purchase agreements in
southern California through the bidding process adopted by the CPUC under its
1992 Biennial Resource Plan Update ("BRPU"). In its 1992 BRPU, the CPUC cited
the need for an additional 9,600 MW of power production through 1999 among
California's three investor-owned utilities, Edison, SDG&E and Pacific Gas and
Electric Company (collectively, the "IOUs"). Of this amount, 275 MW was set
aside for bidding by independent power producers (such as Magma) utilizing
renewable resources. Pursuant to an order of the CPUC dated June 22, 1994
(confirmed on December 21, 1994), Magma was awarded 163 MW for sale to Edison
(69 net MW) and SDG&E (94 net MW), with in-service dates in 1997 and 1998.
However, the IOUs have to date challenged and may continue to challenge the
order and there can be no assurance that power sales contracts will be
executed or that any such projects will be completed.
In light of the regulatory uncertainty concerning the BRPU awards
resulting from such IOU challenges, in March 1995 Magma entered into a
settlement agreement with Edison relating to the 69 net MW of capacity awarded
to Magma as a winning bidder in the BRPU solicitation. The agreement (which is
subject to CPUC approval) provides for three lump sum termination payments in
lieu of signing a power sales contract with Edison for the 69 net MW of BRPU
capacity. The amount of the termination payments is subject to a
confidentiality agreement but provides Edison's ratepayers with very
significant savings when compared to payments that would otherwise be made to
Magma over the life of the proposed BRPU power sales contract The agreement
also provides Edison with an option, which can be exercised at any time prior
to February 1, 2002, to negotiate a power sales contract for 69 net MW of
geothermal capacity and energy on commercially reasonable prices and terms,
without giving effect to termination payments previously paid.
The Company is actively seeking to develop, construct, own and
operate new power projects and infrastructure projects utilizing geothermal
and other technologies, both domestically and internationally, the
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<PAGE>
completion of any of which is subject to substantial risk. Development can
require the Company to expend significant sums for preliminary engineering,
field development, permitting, legal and other financing related costs. The
Company's future growth is dependent, in large part, upon the demand for
significant amounts of additional electrical generating capacity and the
Company's ability to obtain contracts to supply portions of this capacity.
There can be no assurance that development, financing or construction efforts
on any particular project, or the Company's efforts generally, will be
successful.
The Company believes that the international independent power market
holds the majority of new opportunities for financially attractive private
power development in the next several years. The financing, construction and
development of projects outside the United States entail significant political
and financial risks (including, without limitation, uncertainties associated
with first time privatization efforts in the countries involved, currency
exchange rate fluctuations, currency repatriation restrictions, political
instability, civil unrest and expropriation) and other structuring issues that
have the potential to cause substantial delays or material impairment of value
to the project being developed, which the Company may not be fully capable of
insuring against. The uncertainty of the legal environment in certain foreign
countries in which the Company may develop or acquire projects could make it
more difficult for the Company to enforce its rights under agreements relating
to such projects. In addition, the laws and regulations of certain countries
may limit the ability of the Company to hold a majority interest in some of
the projects that it may develop or acquire. The Company's international
projects may, in certain cases, be terminated by a government.
Inflation has not had a substantial impact on the Company's operating
revenues and costs; energy payments for electricity for the Coso Project,
Partnership Project, Salton Sea II and Salton Sea III will continue to be
based upon scheduled rates and are not adjusted for inflation through the
initial ten-year period of each power purchase agreement.
-44-
<PAGE>
THE BUSINESS OF THE COMPANY
CalEnergy Company, Inc., formerly known as California Energy Company,
Inc. (the "Company"), was founded in 1971 and is primarily engaged in the
development and operation of environmentally responsible independent power
production facilities worldwide utilizing geothermal resources, natural gas
and hydroelectric or other energy sources, such as oil and coal.
The Company is the largest independent geothermal power producer in
the world (on the basis of the Company's estimate of the aggregate megawatts
("MW") of electric generating capacity in operation and under construction).
The Company has an aggregate net legal ownership interest of 916 MW of
electric generating capacity in power production facilities in the United
States having an aggregate net capacity of 1,135 MW (of which 570 MW
constitute natural gas fired plants, consisting of the Yuma plant and the
Saranac, Power Resources and NorCon plants owned by the Company's recently
acquired subsidiary, Falcon). All of these facilities are managed and operated
by the Company. The Company also has an aggregate net legal ownership of 191
MW of electric generating capacity in two geothermal power production
facilities in operation in the Philippines having an aggregate net capacity of
191 MW. Both of these facilities are managed and operated by the Company.
With respect to projects that are financed and under construction,
the Company has an aggregate net ownership interest of 270 MW of electric
generating capacity in two geothermal power projects and one hydroelectric
project in the Philippines having an aggregate net capacity of 459 MW. The
Company is also currently constructing a 55 net MW geothermal project in
Indonesia, in which the Company has an aggregate net ownership interest of 26
MW of electric generating capacity, as the first phase of the Company's
planned Indonesian geothermal project development.
The Company is also currently developing seven additional projects
with executed or awarded power sales contracts in the Philippines, Indonesia
and the United States. The Company is expected to have an approximate net
ownership interest of 760 MW in these development projects (which represent an
aggregate net capacity of 1,423 MW of additional potential electric generating
capacity). Substantial contingencies exist with respect to development
projects, including, without limitation, the need to obtain financing, permits
and licenses and the satisfactory completion of construction.
IMPERIAL VALLEY PARTNERSHIP PROJECT ACQUISITION
On April 17, 1996, the Company completed the acquisition from Edison
Mission Energy, a unit of Edison International, of the remaining 50%
partnership interests not previously owned by it in the four Partnership
Projects located in Imperial Valley, California. The purchase price for the
acquisition of such interests in the four projects, Vulcan, Hoch (Del Ranch),
Leathers and Elmore, was $70.0 million. The Company operates the facilities
and sells power to Southern California Edison ("Edison") under long-term SO4
Agreements. This acquisition resulted in the Company owning an additional 74
net MW of generating capacity and provides the Company with the opportunity to
achieve operational efficiencies associated with owning 100% of the Imperial
Valley facilities.
FALCON ACQUISITION
On August 7, 1996, the Company completed the acquisition of Falcon,
including its ownership interest in three operating gas-fired cogeneration
plants located in New York, Texas and Pennsylvania and a related natural gas
pipeline, also located in New York, for a cash purchase price of $226 million.
The three cogeneration facilities total 520 MW in capacity and sell power
under long-term power purchase agreements.
-45-
<PAGE>
The Falcon projects acquired were as follows:
<TABLE>
<CAPTION>
COMPANY'S COMPANY'S PPA POWER STEAM
MW OWNERSHIP(2) MW(2) EXPIRATION PURCHASER HOSTS
--- ------------ --------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Saranac(1)............... 240 75% 180 6/2009 NYSEG Georgia-
Pacific and Tenneco
Power Resources.......... 200 100% 200 9/2003 TUEC Fina Oil &
Chemical Co.
NorCon................... 80 80% 64 12/2017 NIMO Welch Foods
--
Total.................. 520 444
---
</TABLE>
- ---------------
(1) In addition, the Company acquired North Country Gas Pipeline.
(2) Net MW owned indicates current legal ownership, but, in some cases, does
not reflect the current allocation of partnership distributions.
The Company believes the Falcon acquisition provides it with the
following benefits:
o Long-term power sales and steam sales contracts that provide an
important financial contribution to cash flow and earnings;
o Highly efficient gas-fired operating facilities which, upon
expiration of their respective power sales contracts, will be
strategically located for future merchant plant sales in areas
which have good access to fuel supply and transportation and
favorable transmission access and proximity to electric load
centers;
o Enhanced fuel diversification and creation of a gas-fired
operating business unit;
o Increased customer diversification;
o Enhanced ability to compete as a low-cost generator throughout
industry deregulation; and
o Increased size and economies of scale which will permit the
Company to more effectively compete as the electric industry
restructures and consolidates.
RECENT DEVELOPMENT
On October 28, 1996, the Company announced that CE Electric UK plc,
which is indirectly owned on a 70% basis by the Company and a 30% basis by
PKS, has offered to pay approximately $1.225 billion cash in an unsolicited
offer to acquire all of the ordinary shares and preference shares of Northern
Electric plc ("Northern"), a regional electricity distribution and supply
company in the United Kingdom. Northern is one of the twelve UK regional
electricity companies which came into existence as a result of the
restructuring and subsequent privatization of the UK electricity industry in
1990. Its main business is the distribution and supply of electricity to
approximately 1.5 million customers in the North East of England. For its
fiscal year ended March 31, 1996, Northern had a profit before tax of
approximately $241 million on revenues of approximately $1.44 billion. The
Northern offer is not being made, directly or indirectly, in or into the United
States or by use of the mails or any means or instrumentality (including,
without limitation, facsimile transmission, telex and
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<PAGE>
telephone) of interstate or foreign commerce of, or any facilities of a
national securities exchange of, the United States and the Northern offer
cannot be accepted by any such use, means, instrumentality or facility or from
within the United States. As of November 1, 1996, CE Electric UK plc owned
13,580,099 shares of Northern, representing approximately 13.4% of the issued
ordinary share capital of Northern.
THE GLOBAL POWER MARKET
The opportunity for independent power generation has expanded from a
United States market consisting of cogeneration and small power production
projects to a global competitive market for power generation. Many foreign
countries have initiated restructuring and privatization policies that
encourage the development of independent power generation.
In the United States, the independent power industry expanded rapidly
in the 1980s, facilitated by the enactment of PURPA. PURPA was enacted to
encourage the production of electricity by non-utility companies as well as to
lessen reliance on imported fuels. According to the Utility Data Institute,
independent power producers were responsible for the installation of
approximately 30,000 MW of capacity, or 50%, of the U.S. electric generation
capacity which has been placed in service since 1988.
As the size of the United States independent power market has
increased, available domestic power capacity and competition in the industry
have also significantly increased. Over the past decade, obtaining a power
sales contract from a United States utility has generally become increasingly
difficult, expensive and competitive. Many states now require power sales
contracts to be awarded through competitive bidding, which both increases the
cost of obtaining such contracts and decreases the chances of obtaining such
contracts as bids significantly outnumber awards in most competitive
solicitations. The federal Energy Policy Act of 1992 is expected to further
increase domestic competition. During 1995 and 1996, many states began to
accelerate the movement toward more competition in the electric power market
and extensive federal and state legislative and regulatory reviews are
underway in an effort to further such competition. In addition, recent
deregulation and industry restructuring activity may cause certain utilities
or other contract parties to attempt to renegotiate contracts or otherwise
fail to perform their contractual obligations, which in turn could adversely
affect the Company's results of operations. On September 1, 1996, the
California legislature adopted an industry restructuring bill that would
provide for a phased-in competitive power generation industry, with a power
pool and independent system operator, and also would permit direct access to
generation for all power purchasers outside the power exchange under certain
circumstances. Under the bill, consistent with the requirements of PURPA,
existing qualifying facilities power sales agreements would be honored. The
Company cannot predict the final form or timing of the proposed industry
restructuring or the result on its operations.
Large amounts of new electric power generating capacity are required
in developing countries. The movement toward privatization in some developing
countries has created significant new markets outside the United States. In
1990, the World Bank estimated that developing countries will need
approximately 380,000 MW of new power generating capacity through the end of
the decade. The need for such rapid expansion has caused many countries to
select private power development as their only practical alternative and to
restructure their legislative and regulatory systems to facilitate such
development. The Company believes that this significant need for power has
created strong local support for private power projects in many foreign
countries and increased the availability of attractive long-term power
contracts. The Company intends to take advantage of opportunities in these new
markets and to develop, construct and acquire power generation projects
outside the United States.
The international independent power production market is
characterized by numerous strong and capable competitors, many of which have
more extensive and more diversified developmental or operating experience
(including international experience) and greater financial resources than the
Company. Many of these competitors also participate in the domestic market.
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<PAGE>
STRATEGY
Overall, the Company's strategy is to continue to engage in new
project development as well as opportunistically engage in company and project
acquisitions which diversify the Company's power generation technologies and
facility geographic locations and enhance its competitive capabilities. The
Company believes that increased domestic deregulation and the resulting
industry consolidation will provide attractive investment and acquisition
opportunities. The Falcon acquisition was implemented in furtherance of this
strategy.
Domestically, the Company is focusing on market opportunities in
which it believes it has relative competitive advantages due to its
geotechnical, project management, project financing and operating expertise.
In addition, the Company expects to continue diversification into other
environmentally responsible sources of energy primarily through selected
acquisitions, including acquisitions of partially developed or existing power
generating projects and contracts. The Company is also evaluating the
potential impacts and opportunities of direct access and retail wheeling.
The Company presently believes that the international independent
power market holds the majority of new opportunities for financially
attractive private power development in the next several years, in large part
because the demand for new generating capacity is growing more rapidly in
emerging nations than in the United States. In developing its international
strategy, the Company pursues development opportunities in countries which it
believes have an acceptable risk profile and where the Company's geothermal
resource development and operating experience, project development expertise
or strategic relationship with PKS or local partners are expected to provide
it with a competitive advantage. The Company has financed and has under
construction three projects representing an aggregate of 270 MW of net
ownership of electric generating capacity in the Philippines and is currently
constructing a 55 net MW project in Indonesia in which the Company has a net
ownership interest of 26 MW of electric generating capacity and which
constitutes the first phase of a planned Indonesia geothermal development of
approximately 1,000 MW under contract. In addition, the Company is currently
pursuing a number of other electric power project opportunities in countries
including the Philippines and Indonesia. The Company believes that these
countries are well suited for the Company to develop, finance and operate
power projects successfully because of their population demographics,
extensive geothermal resources and stated commitments to the development of
private power programs. The Company's development efforts include both
so-called "greenfield" development as well as the acquisition of or
participation in the joint venture development of projects which are under
development or already operating. In greenfield development, the Company
attempts to negotiate power sales contracts for new generation capacity or
engages in competitive bids in response to government agency or utility
requests for proposals for new capacity.
In pursuing its international strategy, the Company intends to own a
significant equity interest in, and to operate, the projects it develops or
acquires. In order to compete more effectively internationally, the Company's
strategy is to attempt to diversify its project portfolio from a country, fuel
source and customer perspective, extend its future equity funding capacity
through joint ventures and utilize fixed-price, turnkey construction contracts
with contractors experienced in the construction of power plants or other
infrastructure facilities. The Company also believes that it is important in
foreign transactions to work with local partners who are knowledgeable
concerning local culture, politics and commercial practices and who provide a
visible local presence and local project representation.
With respect to emerging market projects, the Company's policy is to
attempt to minimize currency risks, including the devaluation of local
currencies versus the U.S. dollar, as well as the risk of availability of hard
currency convertibility. To date, all of the Company's executed power sales
contracts contain provisions which index the Company's revenues to U.S.
dollars or provide for the payment of capacity payments in U.S. dollars. To
the extent possible, the Company attempts to secure "political risk" insurance
from government agencies such as the OPIC or similar multilateral agencies or
commercial sources to limit its risk in emerging market countries. In
addition, the Company endeavors to involve the World Bank, export credit
agencies or multilateral funding sources in its international project
financings. The Company believes multilateral lending agencies, export credit
agencies, international commercial financing and political risk insurance are
generally
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<PAGE>
available for certain international private power projects, particularly those
utilizing indigenous fuel sources in renewable or otherwise environmentally
responsible generating facilities. The Company believes that the involvement
of these institutions will enhance an international project's position in
emerging market countries.
The Company has an international joint venture agreement with PKS
which the Company believes enhances the Company's capabilities in foreign
power markets. The joint venture agreement is limited to international
activities and provides that, if both the Company and PKS agree to participate
in a project, they will share all development costs equally. The Company and
PKS each will provide 50% of the equity required for financing a project
developed by the joint venture, and the Company will operate and manage such
project. The agreement creates a joint development structure under which, on a
project by project basis, the Company will be the development manager,
managing partner and/or project operator, an equal equity participant with PKS
and a preferred participant in the construction consortium and PKS will be an
equal equity participant and the preferred turnkey construction contractor.
The joint venture agreement may be terminated by either party on 15 days
written notice, provided that such termination cannot affect the pre-existing
contractual obligations of either party.
In order to augment its technical capabilities, in 1993 the Company
acquired CE Holt Company, formerly known as The Ben Holt Co. ("CE Holt"), a
California based engineering firm with over 25 years of geothermal experience,
specializing in feasibility studies, process design, detailed engineering,
procurement, construction and operation of geothermal power plants, gathering
systems and related facilities. CE Holt and its affiliates are joint venture
participants with PKS affiliates in the EPC consortium for the construction of
the Mahanagdong project in the Philippines and the Dieng project in Indonesia
and it is anticipated that CE Holt may enter into similar arrangements with
PKS affiliates for the construction of certain additional projects in
Indonesia.
Development can require the Company to expend significant sums for
preliminary engineering, permitting, legal and other expenses in preparation
for competitive bids which the Company may not win or before it can be
determined whether a project is feasible, economically attractive or capable
of being financed. Successful development and construction is contingent upon,
among other things, negotiation on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales contracts with other
project participants, receipt of required governmental permits and consents
and timely implementation of construction. Further, there can be no assurance
that the Company will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional electrical
generating capacity and its ability to obtain contracts to supply portions of
this capacity. There can be no assurance that development efforts on any
particular project, or the Company's efforts generally, will be successful.
The financing and development of projects outside the United States
entail significant political and financial risks (including, without
limitation, uncertainties associated with first-time privatization efforts in
the countries involved, currency exchange rate fluctuations, currency
repatriation restrictions, political instability, civil unrest and
expropriation) and other structuring issues that have the potential to cause
substantial delays in respect of or material impairment of the value of the
project being developed, which the Company may not be capable of fully
insuring against. The uncertainty of the legal environment in certain foreign
countries in which the Company is developing and may develop or acquire
projects could make it more difficult for the Company to enforce its rights
under agreements relating to such projects. In addition, the laws and
regulations of certain countries may limit the ability of the Company to hold
a majority interest in some of the projects that it may develop or acquire.
The Company's international projects may, in certain cases, be terminated by
the applicable foreign governments.
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<PAGE>
GEOTHERMAL ENERGY
Geothermal energy is a clean, renewable and generally sustainable
energy source that, because it does not utilize combustion in the production
of electricity, releases significantly lower levels of emissions than result
from energy generation based on the burning of fossil fuels. Geothermal energy
is derived from the natural heat of the earth when water comes sufficiently
close to hot molten rock to heat the water to temperatures of 400 degrees
Fahrenheit or more. The heated water then ascends toward the surface of the
earth where it, if geological conditions are suitable for its commercial
extraction, can be extracted by drilling geothermal wells. The energy
necessary to operate a geothermal power plant is typically obtained from
several such wells, which are drilled using established technology similar to
that employed in the oil and gas industry.
Geothermal production wells are normally located within approximately
one to two miles of the power plant as geothermal fluids cannot be transported
economically over longer distances. From the well heads, the heated fluid
flows through pipelines to a series of separators where it is separated into
water, brine and steam. The steam is passed through a turbine which drives a
generator to generate electricity. Once the steam has passed through the
turbine, it is then cooled and condensed back into water which, along with any
brine, is returned to the geothermal reservoir via injection wells. The
geothermal reservoir is a renewable source of energy if natural ground water
sources and re-injection of extracted geothermal fluids are adequate over the
long term to replenish the geothermal reservoir after the withdrawal of
geothermal fluids.
The generation of electric power from geothermal resources has
certain advantages when compared to other methods of electric power
generation. Geothermal energy facilities produce significantly less emissions
than fossil fuel power plants. Geothermal energy facilities typically have
higher capital costs due to the front end cost of reservoir development but
tend to have significantly lower variable costs than fossil fuel based power
plants because fuel does not need to be separately purchased. The utilization
of geothermal power is preferred by certain governments so as to minimize the
import, or maximize the export, of hydrocarbons. Geothermal power facilities
also enjoy certain tax benefits in the United States and are eligible to be
qualifying facilities ("QFs") under PURPA, which provides for certain
beneficial federal regulatory treatment.
Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the
geographic area and sustainable output of geothermal reservoirs can only be
estimated and cannot be definitively established. There is, accordingly, a
risk of an unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, geothermal power resources
usually occur in areas of high seismic activity. There can be no assurance
that earthquake, property damage or business interruption insurance will be
adequate to cover all potential losses sustained in the event of serious
seismic disturbances or that such insurance will be available on commercially
reasonable terms.
The success of a geothermal project depends on the quality of the
geothermal resource and operational factors relating to the extraction of the
geothermal fluids involved in such project. The quality of a geothermal
resource is affected by a number of factors, including the size of the
reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations.
Geothermal energy is most prevalent where the different sections or
plates of the Earth's crust meet. Productive geothermal resources are found
throughout the Pacific Rim (the so-called "Ring of Fire"), including
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<PAGE>
the western United States, Latin America, Hawaii, Indonesia, the Philippines,
Malaysia and New Zealand. These areas are experiencing high rates of
population growth and increased demand for new electric generating capacity.
THE COMPANY'S PROJECTS
The Company has net ownership interests of an aggregate of (i) 1,107
MW in 19 projects in operation representing an aggregate net capacity of 1,326
MW of electric generating capacity, (ii) 296 MW in four projects under
construction representing an aggregate net capacity of 514 MW of electric
generating capacity and (iii) 760 MW in seven projects in development stages
with signed power sales agreements or under award representing an aggregate
net capacity of 1,423 MW of electric generating capacity. The following table
sets out the Company's various projects in operation, under construction and
in development pursuant to signed power sales agreements or awarded mandates.
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<PAGE>
INTERNATIONAL PROJECTS
PROJECTS IN OPERATION
<TABLE>
<CAPTION>
FACILITY NET PROJECT
NET OWNER COMMERCIAL
FUEL CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT SOURCE (IN MW)(1) (IN MW) LOCATION DATE EXPIRATION(2) TYPE PURCHASER(3)
------- ------ ---------- ------- -------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Upper Mahiao
(8)........... Geo 119 119 Leyte, the 1996 CO+10 Build, PNOC-
Philippines Own EDC
Transfer (GOP)(4)
Malitbog-Unit I Geo 72 72 Leyte, the 1996 CO+10 Build, PNOC-
--- --- Philippines Own EDC
Transfer (GOP)(4)
Total in
Operation..... 191 191
--- ---
</TABLE>
PROJECTS IN CONSTRUCTION
<TABLE>
<CAPTION>
FACILITY NET PROJECT
NET OWNER COMMERCIAL
FUEL CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT SOURCE (IN MW)(1) (IN MW) LOCATION DATE EXPIRATION(2) TYPE PURCHASER(3)
------- ------ ---------- --------- -------- --------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mahanagdong(5).. Geo 165 74 Leyte, the 1997 CO+10 Build, PNOC-
Philippines Own EDC
Transfer (GOP)(4)
Malitbog-Unit
II and III...... Geo 144 144 Leyte, the 1996-1997 CO+10 Build, PNOC-
Philippines Own EDC
Transfer (GOP)(4)
Casecnan(5)(6).. Hydro 150 52 Luzon, the 1999 CO+20 Build, NIA
Philippines Own (GOP)(4)
Transfer
Dieng Unit I(5). Geo 55 26 Central 1997 CO+30 Build, PLN
--- --- Java, Own (GOI)
Indonesia Transfer
Total in Operation....... 514 296
--- ---
</TABLE>
-52-
<PAGE>
PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS
<TABLE>
<CAPTION>
FACILITY NET PROJECT
NET OWNER COMMERCIAL
FUEL CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT SOURCE (IN MW)(1) (IN MW) LOCATION DATE EXPIRATION(2) TYPE PURCHASER(3)
------- ------ ---------- ------- -------- ---- ----------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dieng(5)(7)...... Geo 345 162 Central 1998-1999 CO+30 Build, PLN
Java, Own (GOI)
Indonesia Transfer
Patuha(5)(7)..... Geo 400 200 Western 1998-1999 CO+30 Build, PLN
Java, Own (GOI)
Indonesia Transfer
Bali(5)(7)....... Geo 400 120 Bali, 1998-1999 CO+30 Build, PLN
Indonesia Own (GOI)
Transfer
Alto Peak........ Geo 70 70 Leyte, the 1998 CO+10 Build, PNOC-EDC
-- -- Philippines Own (GOP)(4)
Transfer
Total Contracted/
Awarded.......... 1,215 552
----- ---
Total
International
Projects......... 1,920 1,039
----- -----
</TABLE>
- ---------------
(1) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Net Capacity (in MW) represents facility gross
capacity (in MW) less parasitic load. Parasitic load is electrical output
used by the facility and not made available for sale to utilities or
other outside purchasers. Net MW owned indicates current legal ownership,
but, in some cases, does not reflect the current allocation of
partnership distributions.
(2) Commercial Operation (CO) plus number of years.
(3) PNOC-Energy Development Corporation (PNOC-EDC); Government of the
Philippines (GOP); P.T. PLN (Persero) (PLN); Government of Indonesia
(GOI); and Philippine National Irrigation Administration (NIA).
(4) Government of the Philippines undertaking supports PNOC-EDC's and NIA's
respective obligations.
(5) PKS has elected to exercise its ownership option pursuant to its joint
venture agreement with the Company.
(6) NIA also purchases water from this facility.
(7) Significant contingencies exist in respect of awards, including without
limitation, the need to obtain financing, permits and licenses, and the
completion of construction.
(8) Construction of these facilities has been completed and, accordingly,
these facilities have been "deemed complete" by PNOC-EDC and are
currently receiving the full capacity payments under the "take or pay"
provisions of their contracts with PNOC-EDC, pending NPC making available
to these projects a full capacity transmission line. In the interim
(until a full capacity transmission line is in place), the Upper Mahiao
project is currently supplying up to 40 MW of electric generation at
PNOC's request on a daily dispatch basis.
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<PAGE>
DOMESTIC PROJECTS
PROJECTS IN OPERATION
<TABLE>
<CAPTION>
FACILITY
NET NET PROJECT
CAPACITY (IN OWNERSHIP COMMERCIAL
FUEL MW) INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT SOURCE (1)(2)(3) (IN MW) LOCATION DATE EXPIRATION TYPE PURCHASER (4)
- ------- ------ ------------ --------- -------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Navy I... Geo 88 41 China Lake, CA 8/1987 8/2011 SO4 Edison
BLM...... Geo 88 42 China Lake, CA 3/1989 3/2019 SO4 Edison
Navy II.. Geo 88 44 China Lake, CA 1/1990 1/2010 SO4 Edison
Vulcan... Geo 34 34 Imperial 2/1986 2/2016 SO4 Edison
Valley, CA
Hoch (Del
Ranch)... Geo 38 38 Imperial 1/1989 12/2018 SO4 Edison
Valley, CA
Elmore... Geo 38 38 Imperial 1/1989 12/2018 SO4 Edison
Valley, CA
Leathers. Geo 38 38 Imperial 1/1990 12/2019 SO4 Edison
Valley, CA
Salton Sea
I.... Geo 10 10 Imperial 7/1987 6/2017 Negot. Edison
Valley, CA
Salton Sea
II... Geo 20 20 Imperial 4/1990 4/2020 SO4 Edison
Valley, CA
Salton Sea
III.. Geo 50 50 Imperial 2/1989 2/2019 SO4 Edison
Valley, CA
Salton Sea
IV... Geo 40 40 Imperial 6/1996 CO+30 Negot. Edison
Valley, CA
Saranac.. Gas 240 180 Plattsburgh, NY 6/1994 6/2009 Negot. NYSEG
Power
Resources Gas 200 200 Big Spring, TX 6/1988 9/2003 Negot. TUEC
NorCon... Gas 80 64 Erie, PA 12/1992 12/2017 Negot. NIMO
Yuma Gas 50 50 Yuma, AZ 5/1994 5/2024 Negot. SDG&E
Cogen....
Roosevelt Geo 23 17 Milford, UT 5/1984 1/2021 Gathered Steam UP&L
Hot Springs
(9)......
Desert 10 10
Peak..... Geo Desert Peak, NV 12/1985 Not Fixed Negot. SPPC
-- --
Total in
Operation 1,135 916
----- ---
</TABLE>
PROJECTS IN CONSTRUCTION
None
PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS
<TABLE>
<CAPTION>
FACILITY NET
CAPACITY NET PROJECT
(IN OWNERSHIP COMMERCIAL
FUEL MW) INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT SOURCE (1)(2)(3) (IN MW) LOCATION DATE EXPIRATION TYPE PURCHASER (4)
- ------- ------ ------------ --------- ------------ ------------ -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salton Sea TBD
Mineral
Extraction Imperial
(7)(9)..... Geo 15 15 Valley, CA TBD Negot. BHP
Newberry/Glass 30 30 1997/1998 CO+50 Negot. BPA/EWEB
Mountain... Geo OR/CA
BRPU(5)....... Geo 163 163 Imperial TBD TBD FS04 Edison
--- --- Valley, CA
Total
-54-
<PAGE>
Contracted/
Awarded....... 208 208
--- ---
Total
Domestic
Projects...... 1,343 1,124
----- -----
Total Projects 3,263 2,163
===== =====
</TABLE>
- ---------------
(1) Excludes royalty income received by Magma from the Mammoth and East Mesa
plants.
(2) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Net Capacity (in MW) for projects in operation
represents gross electric output of the facility less the parasitic load.
Parasitic load is electrical output used by the facility and not made
available for sale to utilities or other outside purchasers. Net MW owned
indicates current legal ownership, but, in some cases, does not reflect
the current allocation of partnership distributions.
(3) With respect to the Vulcan, Hoch (Del Ranch), Elmore, Leathers, Salton
Sea I, Salton Sea II and Salton Sea III Projects, this represents
contract nameplate.
(4) Southern California Edison Company (Edison); San Diego Gas & Electric
Company (SDG&E); Utah Power & Light Company (UP&L); Sierra Pacific Power
Company (SPPC); Bonneville Power Administration (BPA); Eugene Water and
Electric Board (EWEB); Broken Hill Proprietary Limited ("BHP"); New York
State Electric & Gas Corporation (NYSEG); Texas Utilities Electric
Company (TUEC); and Niagara Mohawk Power Corporation (NIMO).
(5) Edison and SDG&E are currently challenging the BRPU award; accordingly,
no power sales contracts are currently signed. Magma has negotiated a
buyout and option agreement relating to the Edison BRPU award (69 MW)
which is subject to a confidentiality agreement and to CPUC approval and
is currently negotiating a buyout agreement with SDG&E.
(6) Commercial Operation (CO) plus number of years.
(7) Actual MW may vary depending on operating and reservoir conditions and
final plant design. Significant contingencies exist in respect of awards,
including without limitation, the need to obtain financing, permits and
licenses, and the completion of construction.
(8) Represents the electrical equivalent of delivered steam.
(9) In 1996, the Company entered into an agreement with BHP, an international
mining company, with respect to minerals extraction which provides the
Company the right to deliver the power needs for the mineral extraction
facilities planned to be constructed. The MOU contemplates that the
mining company would contribute all capital required to construct the
extraction facilities. The Company would receive a sale price for the
minerals extracted from the geothermal brine. The international mining
company has successfully completed and commenced operation of a small
scale pilot minerals extraction facility to extract zinc of a commercial
quality and in commercial quantities. Accordingly, the mining company is
completing a demonstration project and plans to construct extraction
facilities at the Salton Sea for various minerals as commercial viability
is demonstrated.
INTERNATIONAL PROJECTS
PROJECTS IN OPERATION OR CONSTRUCTION
The Company has two Philippines power projects in operation: the
Upper Mahiao geothermal project (119 net MW) and the Malitbog Unit I
geothermal project (72 net MW). Both of these projects recently achieved
"deemed completion" status under their contracts and are receiving the full
capacity payments under
-55-
<PAGE>
their "take or pay" provisions pending completion by NPC of a full capacity
transmission line. Currently, the Upper Mahiao plant is providing up to 40 MW
(the capacity of the interim transmission line) to PNOC-EDC on a daily
dispatch basis.
The Company has four international power projects currently under
construction, which are located in the Philippines and Indonesia. These
projects total 514 net MW of capacity, consisting of three such projects in
the Philippines, the Mahanagdong geothermal project (165 net MW), the Malitbog
geothermal project (144 net MW) and the Casecnan combined irrigation and
hydroelectric project (150 net MW), and Dieng Unit I, a 55 net MW geothermal
project in Indonesia in which the Company has an aggregate net ownership
interest of 26 MW of electric generating capacity. Dieng Unit I constitutes
the first phase of a planned development of approximately 1,000 MW under award
in Indonesia.
THE PHILIPPINES. According to the 1995 Power Development Program
(1995-2005) (the "PDP") of NPC, industrial growth, a rising standard of living
and an expanding power distribution network have resulted in increased demand
for electrical power in the Philippines by an average of 6% per year since
1987. NPC has projected that over the next 10 years the need for additional
generating capacity in the Philippines will exceed 14,000 MW.
The PDP proposes to meet this demand by increasing the participation
of the private sector in power generation to 32% in 2000, and to 61% in 2005,
through direct sales to utilities by independent power producers ("IPPs") and
the use of BOOT projects. NPC also will offer existing power plants to the
private sector through rehabilitate-operate-maintain and
rehabilitate-operate-lease arrangements. In addition, the Department of Energy
of the Philippines ("DOE"), which was created in part to deregulate the energy
sector and privatize government energy agencies, has submitted to the
Philippine Congress a plan to further restructure and liberalize the
electrical power market, including separating the generating and transmission
functions of the NPC and introducing retail wheeling. The government entities
that will lead implementation of the restructuring will be DOE, NPC and the
Energy Regulatory Board ("ERB"), the agency that regulates retail prices of
electricity and petroleum projects.
Demand growth is expected to increase as industrialization continues,
living standards rise and the power distribution network expands. According to
the PDP, for the period 1996 to 2000, projected peak power demand is estimated
to increase by approximately 60%, 64%, and 90% for Luzon, the Visayas, and
Mindanao, respectively. For the country, total projected peak power is
estimated to increase by 3,826 MW or 65% from 1996 to 2000. For the period
2001 to 2005, projected peak power is estimated to increase by approximately
50%, 43%, and 59% for Luzon, the Visayas, and Mindanao, respectively. For the
country, total projected peak power is estimated to increase by 5,459 MW or
51% from 2001 to 2005.
The objective of the electricity supply industry was initially set
forth by Presidential Decree No. 40, dated November 7, 1972 (the "Decree").
The Decree called for the hastening of the electrification of the country,
particularly the rural areas, and specifically mandates NPC to set up
electricity transmission line grids and generation facilities on the major
islands of the country.
In 1993, the Philippine Congress, pursuant to Republic Act 7648,
granted President Ramos emergency powers to remedy the Philippine energy
crisis, including authority to (i) exempt power projects from public bidding
requirements, (ii) increase power rates and (iii) reorganize NPC. Until 1987,
NPC had a monopoly on power generation and transmission in the Philippines. In
that year the government elected to tap the private sector to implement power
generation projects by passing Executive Order No. 215, which authorized
private sector development of priority infrastructure. In 1991, the Philippine
Congress enacted Republic Act No. 6957, which authorized private development
of priority infrastructure projects on a "build-operate-transfer" and a
"build-transfer" basis. In addition, under that Act, such power projects were
made eligible for certain tax benefits, including exemption from Philippine
national income taxes for at least six years and exemption from, or
reimbursement for, customs duties and value added taxes on capital equipment
to be incorporated into such projects. In 1994, certain amendments to Republic
Act No. 6957 were approved by the Philippine Congress and
-56-
<PAGE>
signed into law (R.A. 7718). Among other things, such amendments provide for
the financing of "unsolicited proposals" on a "build-operate-transfer" basis.
As a result, as of the end of 1994, approximately 39% of NPC's total system
capacity was being operated and maintained by the private sector under various
schemes of private power generation.
In an effort to remedy the shortfall of electricity, the Philippines,
NPC and PNOC-EDC continue to jointly solicit bids for private power projects.
Among private power projects selected through this solicitation process were
the Upper Mahiao (the "Upper Mahiao Project"), Mahanagdong (the "Mahanagdong
Project"), Malitbog (the "Malitbog Project") and Alto Peak (the "Alto Peak
Project") geothermal power projects, as described below. In addition, the
Casecnan ("Casecnan Project") combined irrigation and hydroelectric power
project was awarded through an "unsolicited proposal." Geothermal power has
been identified as a preferred alternative by the Government of the
Philippines due to the domestic availability and the minimal environmental
effects of geothermal power in comparison to other forms of power production.
PNOC-EDC, which is responsible for developing the Philippines' domestic energy
sources, has been successful in the exploration and development of geothermal
resources.
UPPER MAHIAO. In 1994, the Company closed the financing and commenced
construction of the Upper Mahiao Project, a 119 net MW geothermal project to
be located in the Greater Tongonan area of the island of Leyte in the
Philippines. The Upper Mahiao facility was "deemed complete" by PNOC-EDC as of
June 17, 1996, meaning that construction of the facility was completed on time
but the required full capacity transmission line was not completed and
provided to CE Cebu Geothermal Power Company, Inc. ("CE Cebu"), a Philippine
corporation that is approximately 100% indirectly owned by the Company. During
deemed completion, PNOC-EDC is required to pay all capacity fees under the
take or pay provisions of the contract. PNOC-EDC is paying such capacity fees
on a timely basis.
Based on a recent agreement with PNOC-EDC, the "deemed completion"
has been modified, effective September 13, 1996, to allow delivery of up to 40
MW of power through a temporary transmission facility. This amendment will
allow for payment to CE Cebu of fees for energy delivered in addition to
continuing the payment for the full capacity fee. CE Cebu sells 100% of its
capacity on a "take-or-pay" basis (described below) to PNOC-EDC, which in turn
sells the power to NPC for distribution to the island of Cebu, located about
40 miles west of Leyte.
The Upper Mahiao Project had a total project cost of approximately
$218 million, including interest during construction, project contingency
costs and a debt service reserve fund. A consortium of international banks
provided approximately $162 million in project-financed construction loans,
supported by political risk insurance from the ExIm Bank. The construction
loan is expected to be converted to a term loan promptly after NPC completes
the full capacity transmission line, which is currently expected by the first
quarter of 1997. The largest portion of the term loan for the project will
also be provided by ExIm Bank. The Company's equity contribution to the Upper
Mahiao Project is $56 million. Subject to the pledge of the project company's
stock to the lenders, the Company has arranged for political risk insurance of
its equity investment through OPIC. The financing is collateralized by all the
assets of the project.
Under the terms of an energy conversion agreement, executed on
September 6, 1993 (the "Upper Mahiao ECA"), CE Cebu will own and operate the
Upper Mahiao Project during the ten-year cooperation period, after which
ownership will be transferred to PNOC-EDC at no cost.
The Upper Mahiao Project is located on land provided by PNOC-EDC at
no cost. It will take geothermal steam and fluid, also provided by PNOC-EDC at
no cost, and convert its thermal energy into electrical energy to be sold to
PNOC-EDC on a "take-or-pay" basis. Specifically, PNOC-EDC is obligated to pay
for the electric capacity that is nominated each year by CE Cebu, irrespective
of whether PNOC-EDC is willing or able to accept delivery of such capacity.
PNOC-EDC will pay to CE Cebu a fee (the "Capacity Fee") based on the plant
capacity nominated to PNOC-EDC in any year (which, at the plant's design
capacity, is approximately 95% of total contract revenues) and a fee (the
"Energy Fee") based on the electricity actually
-57-
<PAGE>
delivered to PNOC-EDC (approximately 5% of total contract revenues). The
Capacity Fee serves to recover the capital costs of the project, to recover
fixed operating costs and to cover return on investment. The Energy Fee is
designed to cover all variable operating and maintenance costs of the power
plant. Payments under the Upper Mahiao ECA will be denominated in U.S.
dollars, or computed in U.S. dollars and paid in Philippine pesos at the
then-current exchange rate, except for the Energy Fee, which will be used to
pay Philippine peso-denominated expenses. Significant portions of the Capacity
Fee and Energy Fee will be indexed to U.S. and Philippine inflation rates,
respectively. PNOC-EDC's payment requirements, and its other obligations under
the Upper Mahiao ECA, are supported by the Government of the Philippines
through a performance undertaking.
The payment of the Capacity Fee is not excused if PNOC-EDC fails to
deliver or remove the steam or fluids or fails to provide the transmission
facilities, even if its failure was caused by a force majeure event. In
addition, PNOC-EDC must continue to make Capacity Fee payments if there is a
force majeure event (e.g., war, nationalization, etc.) that affects the
operation of the Upper Mahiao Project and that is within the reasonable
control of PNOC-EDC or the Government of the Philippines or any agency or
authority thereof. If CE Cebu fails to meet certain construction milestones or
the power plant fails to achieve 70% of its design capacity by the date that
is 120 days after the scheduled completion date (as that date may be extended
for force majeure and other reasons under the Upper Mahiao ECA), the Upper
Mahiao Project may, under certain circumstances, be deemed "abandoned," in
which case the Upper Mahiao Project must be transferred to PNOC-EDC at no
cost, subject to any liens existing thereon.
PNOC-EDC is obligated to purchase CE Cebu's interest in the facility
under certain circumstances, including (i) extended outages resulting from the
failure of PNOC-EDC to provide the required geothermal fluid, (ii) certain
material changes in policies or laws which adversely affect CE Cebu's interest
in the project, (iii) transmission failure, (iv) failure of PNOC-EDC to make
timely payments of amounts due under the Upper Mahiao ECA, (v) privatization
of PNOC-EDC or NPC, and (vi) certain other events. Prior to completion of the
Upper Mahiao Project, the buy-out price will be equal to all costs incurred
through the date of the buy-out, including all Upper Mahiao Project debt, plus
an additional rate of return on equity of ten percent per annum. In a
post-completion buy-out, the price will be the net present value (at a
discount rate based on the last published Commercial Interest Reference Rate
of the Organization for Economic Cooperation and Development) of the total
remaining amount of Capacity Fees over the remaining term of the Upper Mahiao
ECA.
MAHANAGDONG. In 1994 the Company also closed the financing and
commenced construction of the Mahanagdong Project, a 165 net MW geothermal
project, which will also be located on the island of Leyte. The Mahanagdong
Project will be built, owned and operated by CE Luzon Geothermal Power
Company, Inc. ("CE Luzon"), a Philippine corporation that during construction
is indirectly owned 50% by the Company and 50% by PKS. Up to a 10% financial
interest in CE Luzon may be purchased at completion by another industrial
company at the option of such company. The Mahanagdong Project will sell 100%
of its capacity on a similar basis as described above for the Upper Mahiao
Project to PNOC-EDC, which will in turn sell the power to NPC for distribution
to the island of Luzon.
Mahanagdong has a total project cost of approximately $320 million,
including interest during construction, project contingency costs and a debt
service reserve fund. The capital structure consists of a project financing
construction and term loan of approximately $240 million provided by OPIC,
ExIm Bank and a consortium of international banks, and approximately $80
million in equity contributions. Political risk insurance from ExIm Bank has
been obtained for the commercial lenders. The Company's equity investment for
the Mahanagdong Project will be approximately $40 million. Subject to the
pledge of the project company's stock to the lenders, the Company has arranged
for political risk insurance on its equity investment through OPIC. The
financing is collateralized by all the assets of the project.
The Mahanagdong Project is being constructed by a consortium (the
"EPC Consortium") of Kiewit Construction Group, Inc. ("KCG") and CE Holt
pursuant to fixed-price, date-certain, turnkey supply and construction
contracts (collectively, the "Mahanagdong EPC"). The obligations of the EPC
Consortium under
-58-
<PAGE>
the Mahanagdong EPC are supported by a guaranty of KCG at an aggregate amount
equal to approximately 50% of the Mahanagdong EPC price. KCG, a wholly owned
subsidiary of PKS, is the lead member of the EPC Consortium, with an 80%
interest. KCG performs construction services for a wide range of public and
private customers in the U.S. and internationally. Construction projects
undertaken by KCG during 1994 included transportation projects, including
highways, bridges, airports and railroads, power facilities, buildings and
sewer and waste disposal systems, and water supply systems, utility
facilities, dams and reservoirs. KCG accounts for 70% of PKS's revenues,
contributing $2.1 billion in revenues in 1994. KCG has an extensive background
in power plant construction.
CE Holt will provide design and engineering services for the EPC
Consortium, and holds a 20% interest. The Company has provided a guaranty of
CE Holt's obligations under the Mahanagdong EPC Contract.
The terms of an energy conversion agreement, executed on September
18, 1993 (the "Mahanagdong ECA"), are substantially similar to those of the
Upper Mahiao ECA. The Mahanagdong ECA provides for an approximately three-year
construction period and a ten-year cooperation period. At the end of the
cooperation period, the facility will be transferred to PNOC-EDC at no cost.
All of PNOC-EDC's obligations under the Mahanagdong ECA are supported by the
Government of the Philippines through a performance undertaking. The capacity
fees are expected to be approximately 97% of total revenues at the design
capacity levels and the energy fees are expected to be approximately 3% of
such total revenues.
MALITBOG. In 1994, the Company closed the financing and commenced
construction of the Malitbog Project, a 216 net MW geothermal project, to be
constructed in two phases, 72 net MW (1996) and 144 net MW (1997) also located
on the island of Leyte. The Malitbog Project will be built, owned and operated
by VGPC, a Philippine general partnership that is wholly owned, indirectly, by
the Company. Unit I of the Malitbog facility was "deemed complete" by PNOC-EDC
as of July 25, 1996, meaning that construction of the first 72 net MW unit was
completed on time but the required transmission line was not completed and
provided to VGPC. During deemed completion, PNOC-EDC is required to pay all
capacity fees under the take or pay provisions of the contract. VGPC is
selling 100% of its capacity on substantially the same basis as described
above for the Upper Mahiao Project to PNOC-EDC, which will in turn sell the
power to NPC.
The Malitbog Project has a total project cost of approximately $280
million, including interest during construction and project contingency costs.
A consortium of international banks and OPIC have provided a total of $210
million of construction and term loan facilities, the $135 million
international bank portion of which is supported by political risk insurance
from OPIC. The Company's equity contribution to VGPC was $70 million. The
Company's equity participation is covered by political risk insurance from
OPIC.
Units II and III of the Malitbog Project are being constructed by
Sumitomo Corporation ("Sumitomo") pursuant to a fixed-price, date-certain,
turnkey supply and construction contract (the "Malitbog EPC"). The Malitbog
EPC provides that certain liquidated damages will be paid by Sumitomo for
failure to meet certain scheduled test dates, including the payment of any
liquidated damages or penalties required to be paid by VGPC to PNOC-EDC under
an energy conversion agreement executed on September 10, 1993 (the "Malitbog
ECA"), subject to limitations on the total amount of liquidated damages
payable by Sumitomo. The Malitbog EPC also provides for the payment of certain
liquidated damages on a per unit basis if upon completion of the facility,
tests do not demonstrate such unit's ability to operate at a net generating
capacity of at least 74.1 MW. Pursuant to a reimbursement undertaking, Magma
has agreed to reimburse Sumitomo for draws, if any, by PNOC-EDC on the
construction bond provided by Sumitomo on behalf of Magma in excess of the
liquidated damage amounts provided in the Malitbog EPC.
Sumitomo is one of the principal trading and investment companies in
Japan, and has built power plants around the world, often on a turnkey basis.
As of February 6, 1996, Sumitomo had a credit rating of "Aaa3" from Moody's
Investors Service, Inc. ("Moody's"). The Malitbog EPC requires Sumitomo to
provide engineering, procurement, construction, start-up and testing services
with respect to the facility.
-59-
<PAGE>
Commercial operation of Units II and III are scheduled to commence
prior to July 25, 1997, subject to extension upon the occurrence of certain
events (each such date, a "Guaranteed Completion Date"). VGPC will be subject
to certain penalties if any generating unit does not achieve commercial
operation by the applicable Guaranteed Completion Date, and PNOC-EDC may, in
its sole discretion, terminate the Malitbog ECA if any generating unit does
not achieve commercial operation within 90 days of the applicable Guaranteed
Completion Date. Pursuant to the terms of the consent agreement (the "PNOC-EDC
Consent Agreement") entered into by PNOC-EDC and VGPC, among others, PNOC-EDC
has agreed that it will not so terminate the Malitbog ECA without providing
the lenders and OPIC an additional 90 days within which to cure such
abandonment. If the lenders and OPIC are proceeding with due diligence and in
good faith to cure such abandonment, such period may be extended for an
additional 90 days with PNOC-EDC's consent (which shall not be unreasonably
withheld). In the event of such a termination, VGPC will transfer all of its
right, title and interest in the Malitbog Project to PNOC-EDC upon payment by
PNOC-EDC of the buy-out price for each generating unit that is not so delayed,
but without compensation for any generating unit that is so delayed.
The Malitbog Project is located on land provided by PNOC-EDC at no
cost. The electrical energy produced by the facility will be sold to PNOC-EDC
on a take-or-pay basis. Specifically, PNOC-EDC is obligated to make payments
(the "Capacity Payments") to VGPC based upon the available capacity of the
Malitbog Project. The Capacity Payments equal approximately 100% of total
revenues. The Capacity Payments will be payable so long as the Malitbog
Project is available to produce electricity, even if the Malitbog Project is
not operating due to scheduled maintenance, because PNOC-EDC fails to supply
steam to the Malitbog Project as required or because NPC is unable (or
unwilling) to accept delivery of electricity from the Malitbog Project. In
addition, PNOC-EDC must continue to make the Capacity Payments if there is a
force majeure event (e.g., war, nationalization, etc.) that affects the
operation of the Malitbog Project and that is within the reasonable control of
PNOC-EDC or the Government of the Philippines or any agency or authority
thereof. The Capacity Payments are designed to cover, under expected operating
conditions, the Malitbog Project's operating and maintenance expenses and
VGPC's debt service and to provide a return on investment to the partners in
VGPC. A substantial majority of the Capacity Payments are required to be made
by PNOC-EDC in dollars. The portion of Capacity Payments payable by PNOC-EDC
in pesos is expected to vary over the term of the Malitbog ECA from 10% of
VGPC's revenues in the early years of the Cooperation Period (as defined
below) to 23% of VGPC's revenues at the end of the Cooperation Period.
Payments made in pesos will generally be made to a peso-denominated account
and will be used to pay peso-denominated operation and maintenance expenses
with respect to the Malitbog Project and Philippine withholding taxes, if any,
on the Malitbog Project's debt service. The Government of the Philippines has
entered into a performance undertaking (the "Performance Undertaking"), which
provides that all of PNOC-EDC's obligations pursuant to the Malitbog ECA carry
the full faith and credit of, and are affirmed and guaranteed by, the
Government of the Philippines.
PNOC-EDC is obligated to purchase VGPC's interest in the facility
under certain circumstances, including (i) certain material changes in
policies or laws which adversely affect VGPC's interest in the project, (ii)
any event of force majeure which delays performance by more than 90 days and
(iii) certain other events. Prior to completion of the Malitbog Project, the
buy-out price generally will be equal to 100% of all costs incurred through
the date of the buy-out. In a post-completion buy-out, the price will be the
net present value of the capital cost recovery fees that would have been due
for the remainder of the Cooperation Period with respect to such generating
unit(s).
The Malitbog ECA cooperation period will expire ten years after the
date of commencement of commercial operation of unit 3. At the end of the
cooperation period, the facility will be transferred to PNOC-EDC at no cost,
on an "as is" basis. All of PNOC-EDC's obligations under the Malitbog ECA are
supported by the Government of the Philippines through a performance
undertaking. The capacity fees are 100% of total revenues and there is no
energy fee.
CASECNAN. In November 1995, the Company closed the financing and
commenced construction of the Casecnan Project, a combined irrigation and 150
net MW hydroelectric power generation project located in the central part of
the island of Luzon in the Republic of the Philippines. The Casecnan Project
will consist
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generally of diversion structures in the Casecnan and Denip Rivers that will
divert water into a tunnel of approximately 23 kilometers. The tunnel will
transfer the water from the Casecnan and Denip Rivers into the Pantabangan
Reservoir for irrigation and hydroelectric use in the Central Luzon area. An
underground powerhouse located at the end of the water tunnel and before the
Pantabangan Reservoir will house a power plant consisting of approximately 150
MW of newly installed rated electrical capacity. A tailrace tunnel of
approximately three kilometers will deliver water from the water tunnel and
the new powerhouse to the Pantabangan Reservoir, providing additional water
for irrigation and increasing the potential electrical generation at two
downstream existing hydroelectric facilities of the NPC.
CE Casecnan Water and Energy Company, Inc., a Philippine corporation
("CE Casecnan") is developing the Casecnan Project under the terms of the
Project Agreement between CE Casecnan and the National Irrigation
Administration ("NIA"). Under the Project Agreement, CE Casecnan will develop,
finance and construct the Casecnan Project over an estimated four-year
construction period, and thereafter own and operate the Casecnan Project for
20 years (the "Cooperation Period"). During the Cooperation Period, NIA is
obligated to accept all deliveries of water and energy, and so long as the
Casecnan Project is physically capable of operating, NIA will pay CE Casecnan
a guaranteed fee for the delivery of water and a guaranteed fee for the
delivery of electricity, regardless of the amount of water or electricity
actually delivered. In addition, NIA will pay a fee for all electricity
delivered in excess of a threshold amount up to a specified amount. NIA will
sell the electric energy it purchases to NPC, although NIA's obligations to CE
Casecnan under the Project Agreement are not dependent on NPC's purchase of
the electricity from NIA. All fees to be paid by NIA to CE Casecnan are
payable in U.S. dollars. The guaranteed fees for the delivery of water and
energy are expected to provide approximately 70% of CE Casecnan's revenues.
The Project Agreement provides for additional compensation to the CE
Casecnan upon the occurrence of certain events, including increases in
Philippine taxes and adverse changes in Philippine law. Upon the occurrence
and during the continuance of certain force majeure events, including those
associated with political action, NIA may be obligated to buy the Casecnan
Project from CE Casecnan at a buy out price expected to be in excess of the
aggregate principal amount of the outstanding debt securities, together with
accrued but unpaid interest. At the end of the Cooperation Period, the
Casecnan Project will be transferred to NIA and NPC for no additional
consideration on an "as is" basis.
The Republic of the Philippines has provided a Performance
Undertaking under which NIA's obligations under the Project Agreement are
guaranteed by the full faith and credit of the Republic of the Philippines.
The Project Agreement and the Performance Undertaking provide for the
resolution of disputes by binding arbitration in Singapore under international
arbitration rules.
The Casecnan Project will be constructed on a joint and several basis
by Hanbo Corporation and You One Engineering & Construction Co., Ltd.
(collectively, the "Contractor"), both of which are South Korean corporations,
pursuant to a fixed-price, date-certain, turnkey construction contract (the
"Turnkey Construction Contract"). Hanbo Corporation, which holds a controlling
interest in You One, is an international construction company. You One is a
leading contractor in tunnel projects with over 25 years experience in tunnel
construction, using both the drill-and-blast and tunnel boring machine ("TBM")
methods. It currently has access to nine TBMs and five additional cutter head
assemblies.
The Contractor's obligations under the Turnkey Construction Contract
are guaranteed by Hanbo Steel Company, Ltd. ("Hanbo Steel"), a large South
Korean steel company. In addition, the Contractor's obligations under the
Turnkey Construction Contract are secured by an unconditional, irrevocable
standby letter of credit issued by Korea First Bank ("KFB") in the approximate
amount of $118 million. The total cost of the Casecnan Project, including
development, construction, testing and startup, is estimated to be
approximately $495 million.
INDONESIA. Indonesia, which has the world's fourth largest
population, has experienced rapid growth in electricity demand. The Company
believes that annual load growth has exceeded 13% since 1980. Furthermore, the
Company believes that rapid expansion in industrial growth has created a
backlog of unconnected industrial
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users in excess of 4,000 MW. In its sixth five-year plan, the Indonesian
government has called for the addition of 12,000 MW of additional generating
capacity by 1999. The long range plan calls for an additional 15,000 MW to be
added by the year 2004. The plans call for approximately 75% of this capacity
to be added by independent power producers. Although Indonesia is a member of
OPEC and is also the world's largest exporter of liquified natural gas, the
Indonesian government has announced that it wishes to maintain sufficient
amounts of oil for export, which will require a shift to coal fired generation
and the use of other energy sources, such as geothermal.
It is estimated that Indonesia has sufficient geothermal steam
potential to generate 16,000 MW, centered in the Java and Sumatra areas (the
two most populous of the 13,000 islands in Indonesia). To date, less than 150
MW of geothermal facilities have been commissioned, as the government of
Indonesia was not encouraging the development of geothermal energy.
The Indonesian state-owned utility has recently been converted to a
limited liability company, P.T. PLN (Persero) ("PLN"), as a first step toward
the privatization of its two largest generating subsidiaries. The main
objective of Indonesia's electric energy policy has been to secure a
continuity of supply at reasonable rates for households (more than 50% of
which have been reported to have no power) and to minimize the utilization of
hydrocarbons. Rural electrification will remain an important component of the
energy policy as PLN is targeting the addition of 2 million customers a year.
Indonesia is rated "Baa3" by Moody's and "BBB" by Standard & Poor's
Ratings Group ("S&P"). The Company believes that Indonesia represents an
attractive development opportunity, as it combines growing power needs with
ample geothermal resources and creditworthy contract parties.
DIENG UNIT 1. On December 2, 1994, a subsidiary of the Company,
Himpurna California Energy Ltd. ("HCE") executed a joint operation contract
(the "Dieng JOC") for the development of the geothermal steam field and
geothermal power facilities at the Dieng geothermal field, located in Central
Java (the "Dieng Project") with Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara ("Pertamina"), the Indonesian national oil company, and executed a
"take-or-pay" energy sales contract (the "Dieng ESC") with both Pertamina and
PLN, the Indonesian national electric utility. HCE was formed pursuant to a
joint development agreement with P.T. Himpurna Enersindo Abadi ("P.T. HEA"),
its Indonesian partner, which is a subsidiary of Himpurna, an association of
Indonesian military veterans, whereby the Company and P.T. HEA have agreed to
work together on an exclusive basis to develop the Dieng Project (the "Dieng
Joint Venture"). The Dieng Joint Venture is structured with subsidiaries of
the Company holding an approximate 47% interest (including certain assignments
of dividend rights representing an economic interest of 2%), and subsidiaries
of PKS holding an approximate 47% interest (including certain assignments of
dividend rights representing an economic interest of 2%) and P.T. HEA holding
a 6% interest in the Dieng Project. The construction contractor for the Dieng
Unit I project, a joint venture of PKS and CE Holt, is on schedule to complete
the Unit I plant and commence commercial operation by the fourth quarter of
1997. Major activities since the notice to proceed was issued to the
contractor in March 1996 have focused on site civil work, including site
preparation, foundation work, and access road construction. The
turbine/generator purchased from the Italian national utility, ENEL, has been
shipped from Italy and delivered to the site.
All government approvals necessary for closing have been received,
including a support letter from the Republic of Indonesia, an off-shore loan
board (Decree 39) approval, consents to assignment from the Republic of
Indonesia, PLN and Pertamina, and all required environmental approvals.
Financial closing and first disbursement of construction loan funds occurred
on October 3, 1996.
Pursuant to the Dieng JOC and ESC, Pertamina has granted to HCE the
geothermal field and the wells and other facilities presently located thereon
and HCE will build, own and operate power production units with an aggregate
capacity of up to 400 MW. HCE will accept the field operation responsibility
for developing and supplying the geothermal steam and fluids required to
operate the plant. The Dieng JOC is structured as a build own transfer
agreement and will expire (subject to extension by mutual agreement) on the
date which is the later
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of (i) 42 years following effectiveness of the Dieng JOC and (ii) 30 years
following the date of commencement of commercial generation of the final unit
completed. Upon the expiration of the proposed Dieng JOC, all facilities will
be transferred to Pertamina at no cost. HCE is required to pay Pertamina a
production allowance equal to three percent of HCE's net operating income from
the Dieng Project, plus a further amount based upon the negotiated value of
existing Pertamina geothermal production facilities that the Company expects
will be made available by Pertamina.
Pursuant to the Dieng ESC, PLN agreed to purchase and pay for all of
the Project's capacity and energy output on a "take or pay" basis regardless
of PLN's ability to accept such energy made available from the Dieng Project
for a term equal to that of the Dieng JOC. The price paid for electricity
includes a base energy price per kWh multiplied by the number of kWhs the
plants deliver or are "capable of delivering," whichever is greater. Energy
price payments are also subject to adjustment for inflation. PLN will also pay
a capacity payment based on plant capacity. All such payments are payable in
U.S. dollars.
HCE began well testing in the fourth quarter of 1995 and issued a
notice to proceed for the construction and supply of an initial 55 net MW unit
("Dieng Unit I") in the first quarter of 1996. PT Kiewit/Holt Indonesia, a
consortium consisting of KCG and CE Holt, will construct Dieng Unit I pursuant
to a fixed price, date certain, turnkey construction contract ("Construction
Contract"). Affiliates of KCG and CE Holt will provide the engineered supply
with respect to Dieng Unit I pursuant to a fixed price, date certain, turnkey
supply contract ("Supply Contract"). The Construction Contract and Supply
Contract are sometimes referred to herein as the "Dieng EPC" and KCG, CE Holt
and their affiliates party to the Construction Contract and Supply Contract
are sometimes referred to herein, collectively, as the "Construction
Consortium." The obligations of the Construction Consortium under the
Construction and Supply Contracts are supported by a guaranty of KCG and CE
Holt Company. KCG is the lead member of the Construction Consortium, with a
60% interest. HCE will be responsible for operating and managing the Dieng
Project.
Pursuant to the Dieng JOC and ESC, the Company presently intends to
proceed on a modular basis with construction of three additional units to
follow Dieng Unit I, resulting in an aggregate first phase net capacity at
this site of 220 MW. The Company estimates that the total project cost of
these units will be approximately $450 million. The next phase is expected to
expand the total capacity to 400 MW. The cost of the full Dieng Project is
estimated to approximate $1 billion.
The Dieng field has been explored domestically for over 20 years and
CE Holt has been active in the area for more than five years. Pertamina has
drilled a total of 27 wells to date. The Company has a significant amount of
data, which it believes to be reliable as to the production capacity of the
field. However, a number of significant steps, both financial and operational,
must be completed before the Dieng Project can proceed further. These steps,
none of which can be assured, include completing the drilling of wells and the
construction of the plant for Dieng Unit I and obtaining required regulatory
permits and approvals, completing the well testing, entering into a
construction agreement and other project contracts, and arranging financing
for the other units at Dieng.
PROJECTS IN DEVELOPMENT
The following is a summary description of certain information
concerning the Company's development projects. Since this project is still in
development there can be no assurance that this information will not change
materially over time. In addition, there can be no assurance that development
efforts on any particular project, or the Company's efforts generally, will be
successful.
PHILIPPINES
ALTO PEAK. The Alto Peak Project is a smaller geothermal project in
the same general area of Leyte as the Upper Mahiao, Mahanagdong and Malitbog
Projects. A subsidiary of the Company and PNOC-EDC have executed a 70 net MW
Energy Conversion Agreement, dated May 7, 1994. The general terms and
conditions
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are similar to the Malitbog ECA. However, the plant design has not been
initiated because PNOC-EDC has not finalized the steam conditions (pressure,
composition and pH). PNOC-EDC is still drilling and testing the geothermal
wells that will supply steam to such project. Consequently, the ECA has been
extended and the Company has not commenced financing arrangements for the Alto
Peak Project.
INDONESIA
DIENG. Pursuant to the Dieng JOC and ESC, the Company intends to
proceed on a modular basis with construction of additional units to follow
Dieng Unit I, resulting in an aggregate first phase net capacity at this site
of 220 MW. The Company estimates that the total project cost of these units
will be approximately $450 million. The next phase is expected to expand the
total capacity to 400 MW. The cost of the full Dieng Project is estimated to
approximate $1 billion. See the discussion set forth above concerning
construction of Dieng Unit I for a more complete description of the Dieng
Project.
PATUHA. The Company is also developing a geothermal power plant in
the Patuha geothermal field in Java, Indonesia (the "Patuha Project").
Subsidiaries of the Company will have a 50% interest and subsidiaries of PKS
will have a 50% interest in the Patuha Project.
On December 2, 1994, the project company developing the Patuha
Project, Patuha Power, Ltd. ("Patuha Power") executed both a joint operation
contract and an energy sales contract, each of which contains terms
substantially similar to those described above for the Dieng Project. Patuha
Power intends to proceed on a modular basis similar to the Dieng Project, with
an aggregate capacity of up to 400 MW. The Company estimates that the total
cost will be approximately $1 billion. The Company began well testing and
exploration in the fourth quarter of 1995 and expects to commence construction
of the first unit in 1997.
The Patuha Project remains subject to a number of significant
uncertainties, as described above in connection with the Dieng Project, and
there can be no assurance that the Patuha Project will proceed or reach
commercial operation.
BALI. The Company and PT Panutan Group, an Indonesian consortium of
energy, oil, gas and mining companies, have formed a joint venture to pursue
the development of geothermal resources in Bali (the "Bali Project"). The PT
Panutan Group is entitled to contribute up to 40% of the total equity and
obtain up to 40% of the net profit of the Bali Project. On November 17, 1995,
the project company developing the Bali Project, Bali Energy Ltd. ("Bali
Energy"), executed both a joint operation contract and an energy sales
contract, each of which currently contains terms substantially similar to
those described above for the Dieng Project. Bali Energy intends to proceed on
a modular basis similar to the Dieng Project, with an aggregate capacity of up
to 400 MW. The Company estimates that the total cost of the Bali Project will
be approximately $1 billion. The Company presently intends to begin well
testing and exploration in late 1996 or early 1997 and expects to commence
construction of the first unit in 1998.
The Company presently intends to develop the Bali Project and other
possible projects in Indonesia using a structure similar to that contemplated
for the Dieng Project.
The Bali Project remains subject to a number of significant
uncertainties, as described above for the Dieng Project, and there can be no
assurance that the Company will pursue the Bali Project or that it will
proceed or reach commercial operation.
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DOMESTIC PROJECTS
PROJECTS IN OPERATION
THE COSO PROJECT
In 1979, the Company entered into a 30-year contract (the "Navy
Contract") with the United States Department of the Navy (the "Navy") to
develop geothermal power facilities located on approximately 5,000 acres of
the Naval Air Weapons Station at China Lake, California (150 miles northeast
of Los Angeles). In 1985, the Company entered into a 30-year lease (the "BLM
Lease") with the United States Bureau of Land Management ("BLM") for
approximately 19,000 acres of land adjacent to the land covered by the Navy
Contract. The Navy Contract and the BLM Lease provide for certain royalty
payments as a percentage of gross revenue and certain other formulas. The
Company formed three joint ventures (the "Coso Joint Ventures") with one
primary joint venture partner to develop and construct the three facilities
which comprise the Navy I project (the "Navy I Project"), the BLM project (the
"BLM Project") and the Navy II project (the "Navy II Project") (collectively
the "Coso Project").
The Coso Partnerships are as follows: (i) Coso Finance Partners,
which owns the Navy I Project (the "Navy I Partnership"), (ii) Coso Energy
Developers, which owns the BLM Project (the "BLM Partnership") and (iii) Coso
Power Developers, which owns the Navy II Project (the "Navy II Partnership"
and, together with the Navy I Partnership and the BLM Partnership, the "Coso
Partnerships"). The Company holds ownership interests of approximately 46% in
the Navy I Partnership; approximately 48% in the BLM Partnership; and 50% in
the Navy II Partnership. The Company consolidates its respective share of the
operating results of the Coso Partnerships into its financial statements. Each
of the Coso Partnerships is managed by a management committee which consists
of two representatives of the Company and two representatives of the Company's
partners. The Company is the managing partner of each of the Coso Partnerships
and operates the Coso Project, for which it receives fees from the Coso
Partnerships.
The Coso Project sells all electricity generated by the respective
plants pursuant to three long-term SO4 Agreements between the Navy I
Partnership, the BLM Partnership, and the Navy II Partnership, respectively,
and Edison. These SO4 Agreements provide for capacity payments, capacity bonus
payments and energy payments. Edison makes fixed annual capacity payments to
the Coso Partnerships and, to the extent that capacity factors exceed certain
benchmarks, is required to make capacity bonus payments. The price for
capacity and capacity bonus payments is fixed for the life of the SO4
Agreements. Energy is sold at increasing fixed rates for the first ten years
of each contract and thereafter at Edison's Avoided Cost of Energy. The fixed
price periods of the SO4 Agreements extend until at least August 1997, March
1999 and January 2000 for each of the units operated by the Navy I, BLM and
Navy II Partnerships, respectively, at rates of 11.8 cents per kWh in 1995.
The Company's share of the revenues received by the Coso Partnerships for 1994
and 1995 was $137.0 million and $152.1 million, respectively.
The physical facilities used for geothermal energy production are
substantially the same at the Navy I, BLM and Navy II Projects.
THE NAVY I PROJECT. The geothermal resource for the Navy I Project
currently is produced from approximately 32 wells. The Navy I Project consists
of three turbine generators, each with approximately 32 gross MW of electrical
generating capacity. Based on an assumed net capacity of 80 MW, the Navy I
Project operated at an average operating capacity factor of 111.2% in 1993,
114.0% in 1994 and 112.1% in 1995.
THE BLM PROJECT. The BLM Project's geothermal resource currently is
produced from approximately 20 wells. The BLM Project consists of three
turbine generators. Two of these turbine generators are located at the BLM
East site in a dual flash system, and one is located at the BLM West site in a
single flash system, each with an electrical generating capacity of 32 gross
MW. Based on an assumed net capacity of 80 MW, the BLM Project operated at an
average operating capacity factor of 98.1% in 1993, 99.5% in 1994 and 107.5%
in 1995.
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THE NAVY II PROJECT. The geothermal resource for the Navy II Project
currently is produced from approximately 25 wells. The Navy II Project
consists of three individual turbine generators, each with approximately 32
gross MW of electrical generating capacity. Based on an assumed net capacity
of 80 MW, the Navy II Project operated at an average operating capacity factor
of 102.6% in 1993, 105.9% in 1994 and 111.3% in 1995.
IMPERIAL VALLEY PROJECT
The Company currently operates eight geothermal plants in the
Imperial Valley in California (the "Imperial Valley Project"). Four of these
Imperial Valley Project plants (the "Partnership Projects") were developed by
Magma which originally owned a 50% interest. On April 17, 1996, the Company
completed the Partnership Project Acquisition pursuant to which the Company
acquired the remaining 50% interests in each of the Partnership Projects for
$70 million. The Partnership Projects consist of the Vulcan, Hoch (Del Ranch),
Elmore and Leathers projects (the "Vulcan Project," the "Hoch (Del Ranch)
Project," the "Elmore Project" and the "Leathers Project," respectively).
The remaining four operating Imperial Valley Project plants (the
"Salton Sea Projects") are wholly owned by subsidiaries of Magma. Three of
these plants were purchased on March 31, 1993 from Union Oil Company of
California. These geothermal power plants consist of the Salton Sea I project
(the "Salton Sea I Project"), the Salton Sea II project (the "Salton Sea II
Project") and the Salton Sea III project (the "Salton Sea III Project"). The
fourth plant, the Salton Sea IV project (the "Salton Sea IV Project"),
commenced commercial operations in 1996.
The Salton Sea Projects operated at a combined contract nameplate
factor of 91.3% in 1993, 90.8% in 1994 and 86.5% in 1995. The Partnership
Projects operated at a combined contract nameplate factor of 100.7% in 1993,
103.8% in 1994 and 105.9% in 1995.
VULCAN. The Vulcan Project sells electricity to Edison under a
30-year SO4 Agreement that commenced on February 10, 1986. The Vulcan Project
has a contract capacity and contract nameplate of 29.5 MW and 34 MW,
respectively. Under the SO4 Agreement, Edison is obligated to pay the Vulcan
Project a capacity payment, a capacity bonus payment and an energy payment.
The price for contract capacity payments is fixed for the life of
such SO4 Agreement. The as-available capacity price is based on a payment
schedule as approved by the CPUC from time to time. The contract energy
payment increased each year for the first ten years, which period expired on
February 9, 1996. Thereafter, the energy payments are based on Edison's
Avoided Cost of Energy. The energy payment per kWh was 11.8 cents for 1995.
The Vulcan Project is unleveraged.
HOCH (DEL RANCH). The Hoch (Del Ranch) Project sells electricity to
Edison under a 30-year SO4 Agreement that commenced on January 2, 1989. The
contract capacity and contract nameplate are 34 MW and 38 MW, respectively.
The provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.
The price for contract capacity payments is fixed for the life of the
SO4 Agreement. The energy payments per kWh for the first ten-year period,
which expires on January 1, 1999, are fixed at rates ranging from 11.8 cents
for 1995 to 14.6 cents for 1998. Thereafter, the energy payments will be based
on Edison's Avoided Cost of Energy.
ELMORE. The Elmore Project sells electricity to Edison under a
30-year SO4 Agreement that commenced on January 1, 1989. The contract capacity
and contract nameplate are 34 MW and 38 MW, respectively. The provisions of
such SO4 Agreement are substantially the same as the SO4 Agreement with
respect to the Vulcan Project.
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The price for contract capacity payments is fixed for the life of the
SO4 Agreement. The energy payments per kWh for the first ten-year period,
which expires on December 31, 1998, are fixed at rates ranging from 11.8 cents
in 1995 to 14.6 cents in 1998. Thereafter, the energy payments will be based
on Edison's Avoided Cost of Energy.
LEATHERS. The Leathers Project sells electricity to Edison pursuant
to a 30-year SO4 Agreement that commenced on January 1, 1990. The contract
capacity and contract nameplate are 34 MW and 38 MW, respectively. The
provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.
The price for contract capacity payments is fixed for the life of the
SO4 Agreement. The energy payments per kWh for the first ten-year period,
which expires on December 31, 1999, are fixed at rates ranging from 11.8 cents
in 1995 to 15.6 cents in 1999. Thereafter, the energy payments are based on
Edison's Avoided Cost of Energy.
SALTON SEA I PROJECT. The Salton Sea I Project sells electricity to
Edison pursuant to a 30-year negotiated power purchase agreement, as amended
(the "Salton Sea I PPA"), which provides for capacity and energy payments. The
contract capacity and contract nameplate are each 10 MW.
The capacity payment is based on the firm capacity price which is
currently $127.80/kW-year. The contract capacity payment adjusts quarterly
based on a basket of energy indices for the term of the Salton Sea I PPA. The
energy payment is calculated using a Base Price (defined as the initial value
of the energy payment (4.701 cents per kWh for the second quarter of 1992)),
which is subject to quarterly adjustments based on a basket of indices. The
time period weighted average energy payment for Salton Sea I was 4.99 cents
per kWh during 1995. As the Salton Sea I PPA is not an SO4 Agreement, the
energy payments do not revert to Edison's Avoided Cost of Energy.
SALTON SEA II PROJECT. The Salton Sea II Project sells electricity to
Edison pursuant to a 30-year modified SO4 Agreement that commenced on April 5,
1990. The contract capacity and contract nameplate are 15 MW (16.5 MW during
on-peak periods) and 20 MW, respectively. The contract requires Edison to make
capacity payments, capacity bonus payments and energy payments. The price for
contract capacity and contract capacity bonus payments is fixed for the life
of the modified SO4 Agreement. The energy payments for the first ten-year
period, which period expires on April 4, 2000, are levelized at a time period
weighted average of 10.6 cents per kWh. Thereafter, the monthly energy
payments will be Edison's Avoided Cost of Energy. For the period April 1, 1994
through March 31, 2004, Edison is entitled to receive, at no cost, 5% of all
energy delivered in excess of 80% of contract capacity.
SALTON SEA III PROJECT. The Salton Sea III Project sells electricity
to Edison pursuant to a 30-year modified SO4 Agreement that commenced on
February 13, 1989. The contract capacity is 47.5 MW and the contract nameplate
is 49.8 MW. The SO4 Agreement requires Edison to make capacity payments,
capacity bonus payments and energy payments for the life of the SO4 Agreement.
The price for contract capacity payments is fixed at $175/kW per year. The
energy payments for the first ten-year period, which period expires on
February 12, 1999, are levelized at a time period weighted average of 9.8
cents per kWh. Thereafter, the monthly energy payments will be Edison's
Avoided Cost of Energy.
SALTON SEA IV PROJECT. The Salton Sea IV Project consists of the
consolidated expansion project pursuant to the Salton Sea I PPA and the Fish
Lake SO4 described below. The Salton Sea I Project had an option to supply an
additional 20 MW of power to Edison under the Salton Sea I PPA. Magma, through
its wholly-owned subsidiary, Fish Lake Power Company ("FLPC"), acquired in
1992 a modified SO4 Agreement (the "Fish Lake SO4") to supply electric power
to Edison from a 16 MW geothermal power plant proposed to be built at Fish
Lake in Esmeralda County, Nevada (the "Fish Lake Project").
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In 1994, Magma and Edison negotiated the consolidation of the
expansion portion of the Salton Sea I PPA and the Fish Lake SO4 (the "Amended
PPA"). The Amended PPA was approved by the CPUC on April 26, 1995. The Amended
PPA is a 30 year contract and provides for contract capacity payments based on
a blended rate of 20/34 of $121.72/kW-year in 1992 dollars escalated quarterly
by an index plus 14/34 of $158/kW-year. The Amended PPA provides for energy
payments pursuant to a schedule to commence in 1996 at 16/36 of 8.8 cents per
kWh plus 20/36 of 4.7 cents per kWh in 1992 dollars escalated by an index.
Construction of the Salton Sea IV Project was completed and
commencement of commercial operation occurred in 1996.
YUMA.
During 1992, the Company acquired a development stage 50 MW natural
gas-fired cogeneration project in Yuma, Arizona (the "Yuma Project"). The Yuma
Project is designed to be a QF under PURPA and to provide 50 MW of electricity
to San Diego Gas & Electric Company ("SDG&E") under an existing 30-year power
purchase contract. The energy is sold at SDG&E's Avoided Cost of Energy and
the capacity is sold to SDG&E at a fixed price for the life of the power
purchase contract. The power is wheeled to SDG&E over transmission lines
constructed and owned by Arizona Public Service Company ("APS"). An agreement
for interconnection and a firm transmission service agreement have been
executed between APS and the Yuma Project entity and have been accepted for
filing by the Federal Energy Regulatory Commission ("FERC").
The Yuma Project commenced commercial operation in May 1994. The
project entity has executed steam sales contracts with an adjacent industrial
entity to act as its thermal host in order to maintain its status as a QF,
which is a requirement of its SDG&E contract. Since the industrial entity has
the right under its agreement to terminate the agreement upon one year's
notice if a change in its technology eliminates its need for steam, and in any
case to terminate the agreement at any time upon three years notice, there can
be no assurance that the Yuma Project will maintain its status as a QF.
However, if the industrial entity terminates the agreement, the Company
anticipates that it will be able to locate an alternative thermal host in
order to maintain its status as a QF or build a greenhouse at the site for
which the Company believes it would obtain QF status. A natural gas supply and
transportation agreement has been executed with Southwest Gas Corporation,
terminable under certain circumstances by the Company and Southwest Gas
Corporation. The Yuma Project is unleveraged other than intercompany debt.
ROOSEVELT HOT SPRINGS.
The Company operates and owns an approximately 70% interest in a 25
MW geothermal steam field which supplies geothermal steam to a power plant
owned by Utah Power & Light Company ("UP&L") located on the Roosevelt Hot
Springs property under a 30-year steam sales contract. The Company obtained
approximately $20.3 million of cash under a pre-sale agreement with UP&L
whereby UP&L paid in advance for the steam produced by the steam field. The
Company must make certain penalty payments to UP&L if the steam produced does
not meet certain quantity and quality requirements.
DESERT PEAK.
The Company is the owner and operator of a 10 MW geothermal plant at
Desert Peak, Nevada. The Desert Peak Project had been selling electricity to
Sierra Pacific Power Company ("SPPCo")under a power sales contract that
expired December 31, 1995. A new letter agreement was executed providing for
the sale of capacity and energy at SPPCo's avoided cost.
ROYALTY INTEREST IN THE MAMMOTH PLANTS.
Magma receives royalty revenues from a 10 MW and a 12 MW contract
nameplate geothermal power plant (the "First Mammoth Plant" and the "Second
Mammoth Plant," respectively, and referred to herein,
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collectively, as the "Mammoth Plants") at Mammoth Lakes, California.
Electricity from the Mammoth Plants is sold to Edison under two long-term
power purchase agreements. The First Mammoth Plant and the Second Mammoth
Plant began commercial operation in 1985 and 1991, respectively. Magma leases
both property and geothermal resources to support the Mammoth Plants in return
for certain base royalty and bonus royalty payments. For the First Mammoth
Plant and the Second Mammoth Plant, the base royalty is 12.5% and 12%,
respectively, of gross electricity sales revenues. The bonus royalty for the
Mammoth Plants is 50% of the excess of annual gross electricity sales revenues
over an annual revenue standard based on the Mammoth Plants operating at 85%
of contract capacity.
ROYALTY INTEREST IN THE EAST MESA PLANT.
Magma also receives royalty revenues from a 37 MW contract nameplate
geothermal power plant (with two units) at East Mesa in Imperial Valley,
California (the "East Mesa Plant"). Electricity from the plant is sold to
Edison pursuant to two SO4 Agreements formerly held by Magma, and Magma is
entitled to receive a senior payment of 4% of gross electricity sales revenues
and a junior payment of 10% of gross electricity sales revenues. To date, such
junior payment has not been received.
FALCON ACQUISITION.
On August 7, 1996 the Company completed the acquisition of Falcon,
including its ownership interest in three operating gas-fired cogeneration
plants located in New York, Texas and Pennsylvania and a related natural gas
pipeline, also located in New York, for a cash purchase price of $226 million.
The three cogeneration facilities, which are described below, total 520 MW in
capacity and sell power under long-term power purchase agreements.
THE SARANAC PROJECT. Saranac is a 240 MW natural gas-fired
cogeneration facility located in Plattsburgh, New York, which began commercial
operation in June 1994. Saranac has entered into a 15-year power purchase
agreement (the "Saranac PPA") with New York State Electric & Gas Corporation
("NYSEG"). Saranac is a QF and has entered into 15-year steam purchase
agreements (the "Saranac Steam Purchase Agreements") with Georgia-Pacific
Corporation and Tenneco Packaging Corporation.
Saranac has a 15-year natural gas supply contract (the "Saranac Gas
Supply Agreement") with Shell Canada Ltd. ("Shell Canada") to supply 100% of
Saranac's fuel requirements. Shell Canada is responsible for production and
delivery of natural gas to the U.S.-Canadian border; the gas is then
transported by the North Country Gas Pipeline Corporation ("NCGP") the
remaining 22 miles to the plant. NCGP is a wholly-owned subsidiary of Saranac
Power Partners, L.P. (the "Saranac Partnership"), which also owns Saranac.
NCGP also transports gas for NYSEG and Georgia-Pacific.
Each of the Saranac PPA, the Saranac Steam Purchase Agreements and
the Saranac Gas Supply Agreement contains rates that are fixed for the
respective contract terms. Revenues escalate at a higher rate than fuel costs.
The Saranac Partnership is comprised of subsidiaries of (i) Falcon
Seaboard and (ii) Tomen Corporation ("Tomen") and General Electric Capital
Corporation ("GECC").
On February 14, 1995, NYSEG filed with the FERC a Petition for a
Declaratory Order seeking FERC to declare that the rates NYSEG pays under its
PPA with Saranac, which was approved by the New York State Public Service
Commission ("NYPSC"), were in excess of the level permitted under PURPA and
authorize the NYPSC to reform the PPA. On April 12, 1995, the FERC by a
unanimous (5-0) decision issued an order denying the various forms of relief
requested by NYSEG and finding that the rates required under the NYSEG/Saranac
PPA were consistent with PURPA and the FERC's regulations. On May 11, 1995,
NYSEG requested rehearing of the order and, by order issued July 19, 1995, the
FERC unanimously (5-0) denied the request. On June 14, 1995, NYSEG petitioned
the United States Court of Appeals for the District of Columbia
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Circuit for review of FERC's April 12, 1995 order. FERC moved to dismiss
NYSEG's petition for review on July 28, 1995 and the Court has not yet acted
on FERC's motion to dismiss. Based on the advice of its outside legal counsel,
the Company believes Saranac's position is meritorious and that it will
prevail before the D.C. Circuit if the matter is ultimately heard on its
merits.
THE POWER RESOURCES PROJECT. Power Resources is a 200 MW natural
gas-fired cogeneration project located near Big Spring, Texas, which has a
15-year power purchase agreement (the "Power Resources PPA") with Texas
Utilities Electric Company. Power Resources began commercial operation in June
1988. Power Resources is a QF and has entered into a 15-year steam purchase
agreement (the "Power Resources Steam Purchase Agreement") with Fina Oil and
Chemical Company ("Fina"), a subsidiary of Petrofina S.A. of Belgium.
Power Resources has two natural gas supply agreements in place.
Natural Gas Clearinghouse ("NGC") has entered into a 10-year agreement (the
"NGC Gas Supply Agreement") which ends May 1997. In addition, Power Resources
has entered into an agreement (the "FSGC Gas Supply Agreement") with Falcon
Seaboard Gas Corporation ("FSGC") for the remainder of Power Resources' fuel
requirements through December 2003. FSGC has fulfilled its commitments to
Power Resources, Inc. ("PRI") to date using a combination of spot purchases
plus short-term contracts. In June 1995 FSGC and Louis Dreyfus Natural Gas
Corporation ("Dreyfus") executed an eight-year natural gas supply agreement
(the "FSGC-Dreyfus Gas Supply Agreement"), with which FSGC will fulfill its
supply commitment to PRI from October 1995 to the end of the term of the Power
Resources PPA. Accordingly, through the combination of the NGC Gas Supply
Agreement and the FSGC-Dreyfus Gas Supply Agreement, all gas requirements have
been contracted for through the end of the Power Resources PPA.
Each of the Power Resources PPA, the Power Resources Steam Purchase
Agreement and the FSGC Gas Supply Agreement contains rates that are fixed for
the respective contract terms. Revenues escalate at a higher rate than fuel
costs.
THE NORCON PROJECT. NorCon is an 80 MW natural gas-fired cogeneration
facility located in North East, Pennsylvania which began commercial operation
in December 1992. NorCon has a 25-year power purchase agreement (the "NorCon
PPA") with Niagara Mohawk Power Corporation ("NIMO"). NorCon is a QF and has
entered into a 20-year steam purchase agreement (the "NorCon Thermal Energy
Agreement") with Welch Foods Inc., a Cooperative ("Welch Foods").
NorCon has a 15-year natural gas supply contract (the "NorCon Gas
Purchase Agreement") with Dreyfus to supply 100% of NorCon's fuel
requirements. A twenty-year natural gas transportation agreement has been
entered into with National Fuel Gas Supply Corporation ("National Fuel") to
provide transportation to NorCon. Transportation costs are deducted from
payments made pursuant to the NorCon Gas Purchase Agreement.
The NorCon PPA has rates that are subject to a specified floor
amount. The NorCon Thermal Energy Agreement contains rates that escalate at an
inflation-based index, and the NorCon Gas Purchase Agreement's rates are fixed
per a schedule for the contract term.
NorCon Power Partners, L.P. (the "NorCon Partnership"), which owns
NorCon, is comprised of subsidiaries of Falcon and Tomen.
The NorCon project has had a number of on-going contractual disputes
with NIMO which are unresolved and in August 1996 NIMO proposed a buyout of
the NorCon PPA as part of a generic restructuring by NIMO of all of its QF
contracts in an effort to restructure NIMO's purchased power obligations to
meet the challenge of industry deregulation and avoid what NIMO alleges as the
risk of a possible NIMO insolvency. The Company believes that any contractual
restructuring or even a NIMO insolvency would not have a material adverse
effect on its consolidated financial results of operations.
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BENEFITS OF FALCON ACQUISITION. The Company believes the Falcon
acquisition provides it with the following benefits:
o Long-term power sales and steam sales contracts that
provide an important financial contribution to cash flow and
earnings;
o Highly efficient gas-fired operating facilities which, upon
expiration of their respective power sales contracts, will
be strategically located for future merchant plant sales in
areas which have good access to fuel supply and
transportation and favorable transmission access and
proximity to electric load centers;
o Enhanced fuel diversification and creation of a gas-fired
operating business unit;
o Increased customer diversification;
o Enhanced ability to compete as a low-cost generator
throughout industry deregulation; and
o Increased size and economies of scale which will permit the
Company to more effectively compete as the electric industry
restructures and consolidates.
PROJECTS IN DEVELOPMENT
SALTON SEA MINERALS EXTRACTION. The Company signed an agreement with
BHP, a large international mining company in 1996 which provides, among other
things, for the Company, at its option, to deliver power for the mineral
extraction process (the "Salton Sea Extraction Project"). The initial phase of
the project would require delivery of approximately 15 MW. A pilot plant has
successfully produced zinc at the Company's Imperial Valley Project. BHP has
completed construction of its larger demonstration plant. If successfully
developed, the mineral extraction process will provide an environmentally
compatible and low cost minerals recovery methodology. The project is subject
to a number of uncertainties and implementation cannot be assured.
NEWBERRY/GLASS MOUNTAIN. Under a Bonneville Power Administration
("BPA") geothermal pilot program, the Company has been developing a 30 MW net
geothermal project which was originally located in the Newberry Known
Geothermal Resource Area in Deschutes County, Oregon (the "Newberry Project").
Pursuant to two power sales contracts executed in September 1994, the Company
has agreed to sell 20 MW to BPA and 10 MW to Eugene Water and Electric Board
("EWEB") from the Project. In addition, BPA and EWEB together have an option
to purchase up to an additional 100 MW of production from the Newberry Project
under certain circumstances. In a public-private development effort, the
Company is responsible for development, permitting, financing, construction
and operation of the project (which will be 100% owned by the Company), while
EWEB will cooperate in the development efforts by providing assistance with
government and community affairs and sharing in certain development costs (up
to 30%). The Newberry Project is currently expected to commence commercial
operation in late 1997 or early 1998. The power sales contracts provide that
under certain circumstances the contracts may be utilized at an alternative
location. Pursuant to its resource exploration program, the Company has
determined that the geothermal resource at Newberry is not sufficient to
support the contracts and accordingly has determined to utilize the contracts
at its leasehold position in Glass Mountain in northern California, where it
has two successful production wells. Movement of the contracts to this
alternative location is subject to approval by BPA and EWEB and obtaining a
final environmental impact statement relating to the new site location.
Completion of the Newberry Project is subject to a number of significant
uncertainties and cannot be assured.
THE BRPU PROCESS. Magma was seeking new long-term final SO4
Agreements in the Salton Sea area through the bidding process adopted by the
CPUC under its 1992 Biennial Resource Plan Update ("BRPU"). In its BRPU, the
CPUC cited the need for an additional 9,600 MW of power production through
1999 among
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California's three investor-owned utilities, Edison, SDG&E and Pacific Gas and
Electric Company. Of this amount, 275 MW was set aside for bidding by
independent power producers (such as Magma) utilizing renewable resources.
Pursuant to an order of the CPUC dated June 22, 1994 (confirmed on December
21, 1994), Magma was awarded 163 MW for sale to Edison and SDG&E, with
in-service dates in 1997 and 1998. On February 23, 1995 the Federal Energy
Regulatory Commission ("FERC") issued an order finding that the CPUC's BRPU
program violated PURPA and FERC's implementing regulations and recommended
negotiated settlements. In response, the CPUC issued an Assigned Commissioners
Ruling encouraging settlements between the final winning bidders and the
utilities. The utilities are expected to continue to challenge the BRPU and,
in the light of the regulatory uncertainty, there can be no assurance that
power sales contracts will be executed or that any such projects will be
completed. In light of these developments, the Company agreed to execute an
agreement with Edison on March 16, 1995 providing that in certain
circumstances it would withdraw its Edison BRPU bid in consideration for the
payment of certain sums. Such agreement is subject to CPUC approval but does
not affect the Company's award from SDG&E. Agreement in principle on a
settlement with SDG&E has been obtained, but is subject to finalization.
REGULATORY, ENERGY AND ENVIRONMENTAL MATTERS
The Company is subject to a number of environmental laws and other
regulations affecting many aspects of its present and future operations,
including the construction or permitting of new and existing facilities, the
drilling and operation of new and existing wells and the disposal of various
geothermal solids. Such laws and regulations generally require the Company to
obtain and comply with a wide variety of licenses, permits and other
approvals. No assurance can be given, however, that in the future all
necessary permits and approvals will be obtained and all applicable statutes
and regulations complied with. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may require major
expenditures for permitting and create the risk of expensive delays or
material impairment of project value if projects cannot function as planned
due to changing regulatory requirements or local opposition. The Company
believes that its operating power facilities are currently in material
compliance with all applicable federal, state and local laws and regulations.
There can be no assurance that existing regulations will not be revised or
that new regulations will not be adopted or become applicable to the Company
which could have an adverse impact on its operations. In particular, the
independent power market in the United States is dependent on the existing
energy regulatory structure, including PURPA and its implementation by utility
commissions in the various states.
Each of the Company's operating domestic power facilities meets the
requirements promulgated under PURPA to be qualifying facilities. Qualifying
facility status under PURPA provides two primary benefits. First, regulations
under PURPA exempt qualifying facilities from the Public Utility Holding
Company Act of 1935, as amended ("PUHCA"), most provisions of the Federal
Power Act (the "FPA") and the state laws concerning rates of electric
utilities, and financial and organization regulations of electric utilities.
Second, FERC's regulations promulgated under PURPA require that (1) electric
utilities purchase electricity generated by qualifying facilities, the
construction of which commenced on or after November 9, 1978, at a price based
on the purchasing utility's full Avoided Cost, (2) the electric utility sell
back-up, interruptible, maintenance and supplemental power to the qualifying
facility on a non-discriminatory basis and (3) the electric utility
interconnect with a qualifying facility in its service territory.
Currently, Congress is considering proposed legislation that would
amend PURPA by eliminating the requirement that utilities purchase electricity
from qualifying facilities at prices based on Avoided Costs. The Company does
not know whether such legislation will be passed or what form it may take. The
Company believes that if any such legislation is passed, it would apply to new
projects only and thus, although potentially impacting the Company's ability
to develop new domestic projects, it would not affect the Company's existing
qualifying facilities. There can be no assurance, however, that any
legislation passed would not adversely impact the Company's existing domestic
projects.
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In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity
consumers. On September 1, 1996, the California legislature adopted an
industry restructuring bill that would provide for a phased-in competitive
power generation industry with a power pool and independent system operator
and also would permit direct access to generation for all power purchasers
outside the power exchange under certain circumstances. Under the bill,
consistent with the requirements of PURPA, existing qualifying facilities
power sales agreements would be honored. The Company cannot predict the final
form or timing of the proposed industry restructuring or the results of its
operations.
The structure of such federal and state energy regulations have in
the past, and may in the future, be the subject of various challenges and
restructuring proposals by utilities and other industry participants. The
implementation of regulatory changes in response to such changes or
restructuring proposals, or otherwise imposing more comprehensive or stringent
requirements on the Company, which would result in increased compliance costs,
could have a material adverse effect on the Company's results of operations.
EMPLOYEES
As of June 30, 1996, the Company and its subsidiaries employed
approximately 667 people. Neither the Coso Partnerships, Falcon nor the
Imperial Valley Project partnerships hire or retain any employees. All
employees necessary to the operation of the Coso Project and Falcon projects
are provided by the Company under certain plant and field operations and
maintenance agreements. All employees necessary to operate the Imperial Valley
Projects are provided by an affiliate of the Company under certain
administrative services and operation and maintenance agreements.
International development activities in Indonesia and the Philippines are
principally performed by employees of affiliates of the Company and operations
will be performed by employees of the local project entities. The Company's
affiliates currently maintain offices in Manila and Jakarta.
COMPETITION AND DOMESTIC DEREGULATION
The Company competes with other independent power producers,
including affiliates of utilities, in obtaining long-term contracts to sell
electric power and steam to utilities. In addition, utilities may elect to
expand or create generating capacity through their own direct investments in
new plants. Over the past decade, obtaining a power sales contract from a
utility has generally become increasingly difficult, expensive and
competitive. Many states now require power sales contracts to be awarded by
competitive bidding, which both increases the cost of obtaining such contracts
and decreases the chances of obtaining such contracts as bids significantly
outnumber awards in most competitive solicitations. Finally, in the domestic
market the Energy Act is expected to increase competition. During 1995 and
1996, several states began to accelerate the movement toward more competition
in the electric power market and extensive federal and state legislative and
regulatory reviews are underway in an effort to further such competition. As a
result of this increased competition, it may be difficult to obtain a power
sales agreement for a proposed project in the United States, and the terms and
conditions of any such contract may be less favorable than those in prior
agreements.
The international independent power production market is
characterized by numerous strong and capable competitors, many of which have
more extensive and more diversified developmental or operating experience
(including international experience) and greater financial resources than the
Company. Many of these competitors also participate in the domestic market.
INSURANCE
The Company's operating facilities are insured for $600 million per
occurrence for general property damage and $600 million per occurrence for
business interruption, subject to a $25,000 deductible for property damage
($500,000 for turbine generator and machinery) and a 45-day deductible on
business interruption.
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Catastrophic insurance (earthquake and flood) is capped at $200 million per
occurrence for property damage and $200 million per occurrence for business
interruption, with a deductible that is the higher of 5% of the loss or $2.5
million per occurrence. Liability insurance coverage is $51 million with a
$75,000 deductible. Operators' extra expense (control of well) insurance is
$10 million per occurrence with a $25,000 deductible, which is non-auditable.
The policies are issued by international and domestic syndicates with each
domestic company rated A-or better by A.M. Best Co. Inc. There can be no
assurance, however, that earthquake, property damage, business interruption or
other insurance will be adequate to cover all potential losses sustained by
the Company or that such insurance will continue to be available on
commercially reasonable terms.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
Certain of the Company's projects are parties to litigation or contractual
disputes. See "Business--Domestic Projects."
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DESCRIPTION OF THE NOTES
The Old Notes have been, and the Exchange Notes will be, issued under
an Indenture (the "Indenture") dated as of September 20, 1996 between the
Company and IBJ Schroder Bank & Trust Company (the "Trustee"). The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture, a copy of which is available upon request from
the Company and the Trustee, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Wherever particular Sections or
defined terms of the Indenture are referred to, such Sections or defined terms
are incorporated herein by reference. A summary of certain defined terms used
in the Indenture and referred to in the following summary description of the
Notes is set forth below under "Certain Definitions."
GENERAL
The Old Notes are, and the Exchange Notes will be, senior unsecured
obligations of the Company, will rank pari passu with all other senior
unsecured indebtedness of the Company, will be limited to $225 million
aggregate principal amount and will mature on September 15, 2006.
The principal of, premium, if any, and any interest on the Notes will
be payable, and the Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York (which
initially will be the corporate trust office of the Trustee), or at such
additional offices or agencies as the Company from time to time may designate
for such purpose. At the option of the Company, payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address may appear in the Security Register. While the Notes are represented
by Global Notes, the Company will make payments of principal and interest by
wire transfer to DTC or its nominee, as the case may be, which will distribute
payments to beneficial holders in accordance with its customary procedures.
The Notes (other than Global Notes and beneficial interests therein) are
transferable and exchangeable at the office of the Security Registrar. The
Company has initially appointed the Trustee as the Paying Agent and the
Security Registrar.
Interest on the Notes will accrue at the rate of 9 1/2% per annum and
will be payable semi-annually in arrears on each March 15 and September 15,
commencing March 15, 1997, to the Holders thereof at the close of business on
the preceding March 1 and September 1, respectively. Interest on overdue
principal and (to the extent permitted by applicable law) on overdue interest
will accrue at a rate of 1% in excess of the rate per annum borne by the
Notes. Interest on the Notes will be computed on the basis of a 360-day year
of twelve 30-day months.
Interest on the Old Notes is also subject to increase in certain
circumstances if the Company does not file a registration statement relating
to the Exchange Offer or if the registration statement is not declared
effective within certain time periods, or if certain other conditions are not
satisfied. See "Registration Rights Agreement--Exchange Offer."
The Old Notes have been, and the Exchange Notes will be, issued
without coupons and in fully registered form only in denominations of $1,000
and integral multiples thereof.
The Company is subject to the informational reporting requirements of
Sections 13 and 15(d) under the Exchange Act and, in accordance therewith,
files certain reports and other information with the Commission. See
"Available Information." In addition, if Sections 13 and 15(d) cease to apply
to the Company, the Company will covenant in the Indenture to file comparable
reports and information with the Trustee and the Commission, and mail such
reports and information to Noteholders at their registered addresses, for so
long as any Notes remain outstanding.
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OPTIONAL REDEMPTION
The Notes may be redeemed at the Company's option, in whole or in
part, at any time on or after September 15, 2001 and prior to maturity, upon
not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
interest (if any) to the date of redemption, if redeemed during the 12-month
period commencing on or after September 15 of the years set forth below:
YEAR REDEMPTION PRICE
---- ----------------
2001.............................. 104.750%
2002.............................. 103.167%
2003.............................. 101.583%
2004 and thereafter............... 100.000%
If less than all the outstanding Notes are to be redeemed, the Notes
or portions of Notes to be redeemed will be selected by the Trustee pro rata
or otherwise in such manner as the Trustee deems to be fair and appropriate in
the circumstances.
The Notes will not be subject to any mandatory sinking fund.
RANKING
The Old Notes are, and the Exchange Notes will be, general, unsecured
senior obligations of the Company and will rank pari passu with all other
unsecured senior indebtedness of the Company. As of June 30, 1996, the
Company's total consolidated indebtedness was $1,922.7 million (excluding
deferred income and convertible preferred securities of a subsidiary), its
total consolidated assets were $2,975.1 million and its stockholders' equity
was $587.9 million. At such date, on a pro forma basis, after giving effect to
the completion of the Initial Offering, the use of a portion of the proceeds
therefrom to repay the $35.0 million outstanding balance of the Company's
revolving line of credit, the Company's acquisition of Falcon, and the
Conversions, the Company's total consolidated indebtedness (excluding deferred
income and convertible preferred securities of a subsidiary) would have been
$2,102.4 million, its total consolidated assets would have been $3,424.8
million and its stockholders' equity would have been $755.8 million. See
"Capitalization" and "Selected Historical Consolidated Financial and Operating
Data." The Indenture does not limit the amount of Non-Recourse Debt which may
be incurred by the Company or at the subsidiary or project level. As a result,
the Notes are effectively subordinated to any secured Non-Recourse Debt of the
Company and to indebtedness and other obligations of the Company's
subsidiaries and the partnerships and joint ventures in which the Company has
direct or indirect interests. See "Investment Considerations--High Leverage:
Additional Debt Permitted at Subsidiary or Project Level; Priority of Project
Debt."
CERTAIN COVENANTS
The Indenture contains certain covenants, including the ones
summarized below, which covenants will be applicable (unless they are waived
or amended or unless the Notes are defeased, see "Defeasance" below) so long
as any of the Notes are outstanding.
Limitation on Debt
The Company will not Incur any Debt, including Acquisition Debt,
unless, after giving effect to the incurrence of such Debt and the receipt and
application of the proceeds therefrom, the Fixed Charge Ratio of the Company
would be equal to or greater than 2.0 to 1.
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Notwithstanding the foregoing, the Company may Incur each and all of
the following: (i) Company Refinancing Debt, (ii) Debt of the Company to any
of its Restricted Subsidiaries or any Eligible Joint Venture that is expressly
subordinated in right of payment to the Notes, provided that any transfer of
such Debt by a Restricted Subsidiary or an Eligible Joint Venture (other than
to another Restricted Subsidiary or another Eligible Joint Venture), or any
transfer of the Company's ownership interest, or a portion thereof, in such
Restricted Subsidiary or such Eligible Joint Venture or the interest, or a
portion thereof, of Kiewit in a Permitted Joint Venture or an Eligible Joint
Venture (which transfer has the effect of causing such Restricted Subsidiary
or such Eligible Joint Venture to cease to be a Restricted Subsidiary or an
Eligible Joint Venture, as the case may be), will be deemed to be an
Incurrence of Debt that is subject to the provisions of this covenant other
than this clause (ii), (iii) Debt in an aggregate principal amount not to
exceed $100 million outstanding at any one time may be issued under or in
respect of Permitted Working Capital Facilities, (iv) Non-Recourse Debt
Incurred in respect of one or more Permitted Facilities in which the Company
has a direct or indirect interest, (v) Debt in respect of Currency Protection
Agreements or Interest Rate Protection Agreements, (vi) Purchase Money Debt,
provided that the amount of such Debt (net of any original issue discount)
does not exceed 90% of the fair market value of the Property acquired, (vii)
the Notes and other Debt outstanding as of the date of original issuance of
the Notes (other than Debt to the extent that it is extinguished, retired,
defeased or repaid in connection with the original issuance of the Notes),
including Debt that is Incurred in respect of interest or discount on such
Debt (or Redeemable Stock issued as dividends in respect of Redeemable Stock)
pursuant to the terms of the agreement or instrument that governs such Debt
(or such Redeemable Stock) as in effect on the date of original issuance of
the Notes and (viii) Debt in an aggregate principal amount not to exceed $75
million outstanding at any one time.
Limitation on Subsidiary Debt
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture, to Incur any Debt.
Notwithstanding the foregoing, each and all of the following Debt may
be Incurred by a Restricted Subsidiary or an Eligible Joint Venture: (i) Debt
outstanding as of the date of original issuance of the Notes, (ii) Debt owed
by a Restricted Subsidiary or an Eligible Joint Venture to the Company or
another Restricted Subsidiary of the Company or another Eligible Joint Venture
that either directly or indirectly owns all or a portion of the Company's
interest in, or directly or indirectly is owned by, such Restricted
Subsidiary, or such Eligible Joint Venture, as the case may be, (iii)
Non-Recourse Debt Incurred in respect of one or more Permitted Facilities,
provided that such Restricted Subsidiary or such Eligible Joint Venture has a
direct or an indirect interest (which may include Construction Financing
provided by the Company to the extent permitted under the covenant described
under "Limitation on Restricted Payments" below as a "Permitted Investment")
in one or more of such Permitted Facilities in respect of which one or more
Restricted Subsidiaries or Eligible Joint Ventures shall have a direct or
indirect interest, (iv) Subsidiary Refinancing Debt, (v) Acquired Debt, (vi)
Debt in respect of Currency Protection Agreements or Interest Rate Protection
Agreements, (vii) Permitted Funding Company Loans and (viii) Permitted
Facilities Debt, provided that at the time of Incurrence thereof and after
giving effect to the application of the proceeds thereof, the aggregate
principal amount of Permitted Facilities Debt shall not exceed 15% of total
consolidated Debt of the Company computed in accordance with GAAP.
Limitation on Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, make
any Restricted Payment unless at the time of such Restricted Payment and after
giving effect thereto (a) no Event of Default and no event that, after the
giving of notice or lapse of time or both, would become an Event of Default,
has occurred and is continuing, (b) the Company could Incur at least $1 of
Debt under the provision described in the first paragraph of "Limitation on
Debt" above and (c) the aggregate amount of all Restricted Payments made by
the Company, its Restricted Subsidiaries and the Eligible Joint Ventures (the
amount so made, if other than in cash, to be determined in good faith by the
Chief Financial Officer, as evidenced by an Officers' Certificate, or, if more
than $30 million, by the Board of
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Directors, as evidenced by a Board resolution) after March 24, 1994, is less
than the sum (without duplication) of (i) 50% of the Adjusted Consolidated Net
Income of the Company for the period (taken as one accounting period)
beginning on the first day of the first fiscal quarter that begins after March
24, 1994 and ending on the last day of the fiscal quarter immediately prior to
the date of such calculation, provided that if throughout any fiscal quarter
within such period the Ratings Categories applicable to the Notes are rated
Investment Grade by Standard & Poor's Corporation and Moody's Investors
Service, Inc. (or if both do not make a rating of the Notes publicly
available, an equivalent Rating Category is made publicly available by another
Rating Agency), then 100% (instead of 50%) of the Adjusted Consolidated Net
Income (if more than zero) with respect to such fiscal quarter will be
included pursuant to this clause (i), and provided further that if Adjusted
Consolidated Net Income for such period is less than zero, then minus 100% of
the amount of such net loss, plus (ii) 100% of the aggregate net cash proceeds
received by the Company from and after March 24, 1994 from (A) the issuance
and sale (other than to a Restricted Subsidiary or an Eligible Joint Venture)
of its Capital Stock (excluding Redeemable Stock, but including Capital Stock
other than Redeemable Stock issued upon conversion of, or in exchange for
Redeemable Stock or securities other than its Capital Stock), (B) the issuance
and sale or the exercise of warrants, options and rights to purchase its
Capital Stock (other than Redeemable Stock) and (C) the issuance and sale of
convertible Debt upon the conversion of such convertible Debt into Capital
Stock (other than Redeemable Stock), but excluding the net proceeds from the
issuance, sale, exchange, conversion or other disposition of its Capital Stock
(I) that is convertible (whether at the option of the Company or the holder
thereof or upon the happening of any event) into (x) any security other than
its Capital Stock or (y) its Redeemable Stock or (II) that is Capital Stock
referred to in clauses (ii) and (iii) of the definition of "Permitted
Payment", plus (iii) the net reduction in Investments of the types specified
in clauses (iv) and (v) of the definition of "Restricted Payment" that result
from payments of interest on Debt, dividends, or repayment of loans or
advances, the proceeds of the sale or disposition of the Investment or other
return of the amount of the original Investment to the Company, the Restricted
Subsidiary or the Eligible Joint Venture that made the original Investment
from the Person in which such Investment was made, provided that (x) the
aggregate amount of such payments will not exceed the amount of the original
Investment by the Company or such Restricted Subsidiary that reduced the
amount available pursuant to this clause (c) for making Restricted Payments
and (y) such payments may be added pursuant to this clause (iii) only to the
extent such payments are not included in the calculation of Adjusted
Consolidated Net Income, provided further that if Investments of the types
specified in clauses (iv) and (v) of the Definition of "Restricted Payment"
have been made in any Person and such Person thereafter becomes a Restricted
Subsidiary or an Eligible Joint Venture, then the aggregate amount of such
Investment (to the extent that they have reduced the amount available pursuant
to this clause (c) for making Restricted Payments), net of the amounts
previously added pursuant to this clause (iii), may be added to the amount
available for making Restricted Payments, plus (iv) an amount equal to the
principal amount of Debt of the Company extinguished in connection with the
conversion into Common Stock of the Company of the Company's 5% Convertible
Subordinated Debentures due 2000 and its 9.5% Convertible Subordinated
Debenture due 2003. The foregoing clause (c) will not prevent the payment of
any dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of its declaration without violation of the
provisions of this covenant.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Venture will be deemed to have made an Investment at the time
that a Person that is a Restricted Subsidiary of the Company or an Eligible
Joint Venture ceases to be a Restricted Subsidiary or an Eligible Joint
Venture (other than as a result of being designated as an Unrestricted
Subsidiary), although any subsequent Investment made by the Company, its
Restricted Subsidiaries and Eligible Joint Ventures in such Person will be
Investments that will be subject to the foregoing paragraph unless and until
such time as such Person becomes a Restricted Subsidiary or an Eligible Joint
Venture. Notwithstanding the foregoing, (i) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, in the manner provided in the
definition of "Unrestricted Subsidiary," will be an Investment that will be
subject to the foregoing paragraph and (ii) the transfer of the Company's
interest (or any portion thereof) in an entity that has been deemed to be an
Eligible Joint Venture, directly or indirectly, to an Unrestricted Subsidiary
will be an Investment (to the extent of the interest transferred) that will be
subject to the foregoing paragraph.
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Restricted Payments are defined in the Indenture to exclude Permitted
Payments, which include Permitted Investments. See "Certain Definitions"
below.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, create or cause to become, or
as a result of the acquisition of any Person or Property, or upon any Person
becoming a Restricted Subsidiary or an Eligible Joint Venture, remain subject
to, any consensual encumbrance or consensual restriction of any kind on the
ability of any Restricted Subsidiary or any Eligible Joint Venture to (a) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary or such Eligible Joint Venture
owned by the Company, any other Restricted Subsidiary or any other Eligible
Joint Venture, (b) make payments in respect of any Debt owed to the Company,
any other Restricted Subsidiary of the Company or any Eligible Joint Venture,
(c) make loans or advances to the Company or to any other Restricted
Subsidiary of the Company or any other Eligible Joint Venture that is directly
or indirectly owned by such Restricted Subsidiary or such Eligible Joint
Venture or (d) transfer any of its Property to the Company or to any other
Restricted Subsidiary or any other Eligible Joint Venture that directly or
indirectly owns or is owned by such Restricted Subsidiary or such Eligible
Joint Venture, other than those encumbrances and restrictions created or
existing (i) on the date of the original issuance of the Notes, (ii) pursuant
to the Indenture, (iii) in connection with the Incurrence of any Debt
permitted under the provisions described in clause (iii) of the second
paragraph of "Limitation on Subsidiary Debt" above, provided that, in the case
of Debt owed to Persons other than the Company, its Restricted Subsidiaries
and any Eligible Joint Venture, the President or the Chief Financial Officer
of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such encumbrances or restrictions are required to effect
such financing and are not materially more restrictive, taken as a whole, on
the ability of the applicable Restricted Subsidiary or the applicable Eligible
Joint Venture to make the payments, distributions, loans, advances or
transfers referred to in clauses (a) through (d) above than encumbrances and
restrictions, taken as a whole, customarily accepted (or, in the absence of
any industry custom, reasonably acceptable) in comparable financings or
comparable transactions in the applicable jurisdiction, (iv) in connection
with the execution and delivery of an electric power or thermal energy
purchase contract, or other contract related to the output or product of, or
services rendered by one or more Permitted Facilities to which such Restricted
Subsidiary or such Eligible Joint Venture is a supplying party or other
contracts with customers, suppliers and contractors to which such Restricted
Subsidiary or such Eligible Joint Venture is a party and where such Restricted
Subsidiary or such Eligible Joint Venture is engaged, directly or indirectly,
in the development, design, engineering, procurement, construction,
acquisition, ownership, management or operation of one or more of such
Permitted Facilities, provided that the President or the Chief Financial
Officer of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such encumbrances or restrictions are required to effect
such contracts and are not materially more restrictive, taken as a whole, on
the ability of the applicable Restricted Subsidiary or the applicable Eligible
Joint Venture to make the payments, distributions, loans, advances or
transfers referred to in clauses (a) through (d) above than encumbrances and
restrictions, taken as a whole, customarily accepted (or, in the absence of
any industry custom, reasonably acceptable) in comparable financings or
comparable transactions in the applicable jurisdiction, (v) in connection with
any Acquired Debt, provided that such encumbrance or restriction was not
incurred in contemplation of such Person becoming a Restricted Subsidiary or
an Eligible Joint Venture and provided further that such encumbrance or
restriction does not extend to any other Property of such Person at the time
it became a Restricted Subsidiary or an Eligible Joint Venture, (vi) in
connection with the Incurrence of any Debt permitted under clause (iv) of the
provision described in the second paragraph of "Limitation on Subsidiary Debt"
above, provided that, in the case of Debt owed to Persons other than the
Company and its Restricted Subsidiaries, the President or the Chief Financial
Officer of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such encumbrances or restrictions taken as a whole are not
materially more restrictive than the encumbrances and restrictions applicable
to the Debt and/or equity being exchanged or refinanced, (vii) customary
non-assignment provisions in leases or other contracts entered into in the
ordinary course of business of the Company, any Restricted Subsidiary or any
Eligible Joint Venture, (viii) any restrictions imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or Property of any Restricted Subsidiary or Joint Venture
that apply pending the closing of such sale or disposition, (ix) in connection
with Liens on the Property of such Restricted Subsidiary or such
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Eligible Joint Venture that are permitted by the covenant described under
"Limitation on Liens" below but only with respect to transfers referred to in
clause (d) above, (x) in connection with the Incurrence of any Debt permitted
under clause (ii) of the provisions described in the second paragraph of
"Limitation on Subsidiary Debt" above or (xi) in connection with the
Incurrence of any Permitted Facilities Debt permitted under clause (viii) of
the provisions described in the second paragraph of "Limitation on Subsidiary
Debt" above, provided that any such encumbrance or restriction relates only to
those Restricted Subsidiaries or Eligible Joint Ventures having a direct or
indirect interest in the Permitted Facilities in respect of which such
Permitted Facilities Debt was Incurred.
Limitation on Dispositions
Subject to the covenant described under "Mergers, Consolidations and
Sales of Assets" below, the Company will not make, and will not permit any of
its Restricted Subsidiaries or any Eligible Joint Venture to make, any Asset
Disposition unless (i) the Company, the Restricted Subsidiary or the Eligible
Joint Venture, as the case may be, receives consideration at the time of each
such Asset Disposition at least equal to the fair market value of the Property
or securities sold or otherwise disposed of (to be determined in good faith by
the Chief Financial Officer, as evidenced by an Officers' Certificate, or, if
more than $30 million, by the Board of Directors, as evidenced by a Board
resolution), (ii) at least 85% of such consideration is received in cash or
Cash Equivalents or, if less than 85%, the remainder of such consideration
consists of Property related to the business of the Company as described in
the first sentence of the covenant described under "Limitation on Business"
below, and (iii) unless otherwise required under the terms of Senior Debt, at
the Company's election, the Net Cash Proceeds are either (A) invested in the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (B) applied to the payment of any Debt of the Company or and
of its Restricted Subsidiaries or any Eligible Joint Venture (or as otherwise
required under the terms of such Debt), provided that, no such payment of Debt
(x) under Permitted Working Capital Facilities or any other revolving credit
agreement will count for this purpose unless the related loan commitment,
standby facility or the like will be permanently reduced by an amount equal to
the principal amount so repaid or (y) owed to the Company, a Restricted
Subsidiary thereof or an Eligible Joint Venture will count for this purpose,
provided further that such investment or such payment, as the case may be,
must be made within 365 days from the later of the date of such Asset
Disposition or the receipt by the Company, such Restricted Subsidiary or such
Eligible Joint Venture of the Net Cash Proceeds related thereto. Any Net Cash
Proceeds from Asset Dispositions that are not applied as provided in clause
(A) or (B) of the preceding sentence will constitute "Excess Proceeds." Excess
Proceeds will be applied, as described below, to make an offer (an "Offer") to
purchase Notes at a purchase price equal to 100% of principal thereof, plus
accrued interest, if any, to the date of purchase.
Notwithstanding anything in the foregoing to the contrary, the
Company, its Restricted Subsidiaries and the Eligible Joint Ventures may
exchange with other Persons (i) Property that constitutes a Restricted
Subsidiary or an Eligible Joint Venture for Property that constitutes a
Restricted Subsidiary or an Eligible Joint Venture, (ii) Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture for Property
that does not constitute a Restricted Subsidiary or an Eligible Joint Venture,
(iii) Property that does not constitute a Restricted Subsidiary or an Eligible
Joint Venture for Property that does not constitute a Restricted Subsidiary or
an Eligible Joint Venture and (iv) Property that does not constitute a
Restricted Subsidiary or an Eligible Joint Venture for Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture, provided
that in each case the fair market value of the Property received is at least
equal to the fair market value of the Property exchanged as determined in good
faith by the Chief Financial Officer, as evidenced by an Officers'
Certificate, or, if more than $25 million, by the Board of Directors, as
evidenced by a Board resolution, provided that the Investment in the Property
received in the exchanges described in clauses (ii) and (iii) of the prior
sentence will be subject to the covenant described under "Limitation on
Restricted Payments" above. Notwithstanding anything in the foregoing to the
contrary, the Company may not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, make an Asset Disposition of
any of their interest in, or Property of, any of the Coso Project other than
for consideration consisting solely of cash.
To the extent that any or all of the Net Cash Proceeds of any Foreign
Asset Disposition are prohibited from (or delayed in) being repatriated to the
United States by applicable local law, the portion of such Net Cash
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Proceeds so affected will not be required to be applied at the time provided
above but may be retained by any Restricted Subsidiary or any Eligible Joint
Venture so long, but only so long, as the applicable local law does not permit
(or delays) repatriation to the United States. If such Net Cash Proceeds are
transferred by the Restricted Subsidiary or Eligible Joint Venture that
conducted the Foreign Asset Disposition to another Restricted Subsidiary or
Eligible Joint Venture, the Restricted Subsidiary or Eligible Joint Venture
receiving such Net Cash Proceeds must not be directly or indirectly obligated
on any Debt owed to and Person other than the Company. The Company will take
or cause such Restricted Subsidiary or such Eligible Joint Venture to take all
actions required by the applicable local law to permit such repatriation
promptly. Once repatriation of any of such Net Cash Proceeds is permitted
under the applicable local law, repatriation will be effected immediately and
the repatriated Net Cash Proceeds will be applied in the manner set forth in
this covenant as if such Asset Disposition had occurred on the date of such
repatriation. In addition, if the Chief Financial Officer determines, in good
faith, as evidenced by an Officers' Certificate, that repatriation of any or
all of the Net Cash Proceeds of any Foreign Asset Disposition would have a
material adverse tax consequence to the Company, the Net Cash Proceeds so
affected may be retained outside of the United States by the applicable
Restricted Subsidiary or the applicable Eligible Joint Venture for so long as
such material adverse tax consequence would continue. Notwithstanding the
foregoing provisions of this paragraph to the contrary, if applicable local
law prohibits (or delays) the repatriation of Net Cash Proceeds of a Foreign
Asset Disposition but such local law does not prohibit the application of such
Net Cash Proceeds pursuant to the first sentence of the first paragraph of
this covenant, the Company may apply such Net Cash Proceeds pursuant to such
provision.
If the Notes tendered pursuant to an Offer have an aggregate purchase
price that is less than the Excess Proceeds available for the purchase of the
Notes, the Company, may use the remaining Excess Proceeds for (general
corporate purposes without regard to the provisions of this covenant. The
Company will not be required to make an Offer pursuant to this covenant if the
Excess Proceeds available therefor are less than $10 million, provided that
the lesser amounts of such Excess Proceeds will be carried forward and
cumulated for each 36 consecutive month period for purposes of determining
whether an Offer is required with respect to any Excess Proceeds of any
subsequent Asset Dispositions. Any such lesser amounts so carried forward and
cumulated need not be segregated or reserved and may be used for general
corporate purposes, provided that such use will not reduce the amount of
cumulated Excess Proceeds or relieve the Company of its obligation hereunder
to make an Offer with respect thereto.
The Company will make an Offer by mailing to each Holder, with a copy
to the Trustee, within 30 days after the receipt of Excess Proceeds that cause
the cumulated Excess Proceeds to exceed $10 million, a written notice that
will specify the purchase date, which will not be less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date"), that will
contain certain information concerning the business of the Company that the
Company believes in good faith will enable the Holders to make an informed
decision and that will contain information concerning the procedures
applicable to the Offer (including, without limitation, the right of
withdrawal) and the effect of such Offer on the Notes tendered. Holders that
elect to have their Notes purchased will be required to surrender such Notes
at least one Business Day prior to the Purchase Date. If at the expiration of
the Offer period the aggregate purchase price of the Notes properly tendered
by Holders pursuant to the Offer exceeds the amount of such Excess Proceeds,
the Notes or portions of Notes to be accepted for purchase will be selected by
the Trustee in such manner as the Trustee deems to be fair and appropriate in
the circumstances.
If the Company is prohibited by applicable law from making the Offer
or purchasing Notes thereunder, the Company need not make an Offer pursuant to
this covenant for so long as such prohibition is in effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with an Offer.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries or and Eligible Joint Venture to, directly or indirectly, conduct
any business or enter into or permit to exist any transaction or series
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of related transactions (including, but not limited to, the purchase, sale or
exchange of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with any Affiliate of the Company,
such Restricted Subsidiary or such Eligible Joint Venture, as the case may be,
unless (i) such business, transaction or series of related transactions is in
the best interest of the Company such Restricted Subsidiary or such Eligible
Joint Venture, (ii) such business, transaction or series of related
transactions is on terms no less favorable to the Company, such Restricted
Subsidiary or such Eligible Joint Venture than those that could be obtained in
a comparable arm's length transaction with a Person that is not such an
Affiliate and (iii) with respect to such business, transaction or series of
related transactions that has a fair market value or involves aggregate
payments equal to, or in excess of, $10 million, such business, transaction or
series of transactions is approved by a majority of the Board of Directors
(including a majority of the disinterested directors), which approval is set
forth in a Board resolution delivered to the Trustee certifying that, in good
faith, the Board of Directors believes that such business, transaction or
series of transactions complies with clauses (i) and (ii) above.
Limitation on Liens
The Company may not Incur any Debt that is secured, directly or
indirectly, with, and the Company will not, and will not permit any of its
Restricted Subsidiaries or an Eligible Joint Venture to, grant a Lien on the
Property of the Company, its Restricted Subsidiaries or any Eligible Joint
Venture now owned or hereafter acquired unless contemporaneous therewith or
prior thereto the Notes are equally and ratably secured except for (i) any
such Debt secured by Liens existing on the Property of any entity at the time
such Property is acquired by the Company, any of its Restricted Subsidiaries
or any Eligible Joint Venture, whether by merger, consolidation, purchase of
such Property or otherwise, provided that such Liens (x) are not created,
incurred or assumed in contemplation of such Property being acquired by the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture and
(y) do not extend to any other Property of the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture, (ii) any other Debt that is
required by the terms thereof to be equally and ratably secured as a result of
the Incurrence of Debt that is permitted to be secured pursuant to another
clause of this covenant, (iii) Liens that are granted in good faith to secure
Debt (A) contemplated by clause (iv) of the covenant described under
"Limitation on Debt" above or (B) contemplated by clauses (ii), (iii), (vi)
and (viii) of the covenant described under "Limitation on Subsidiary Debt"
above, provided that, in the case of Debt owed to a Person other than the
Company or a Restricted Subsidiary, the President or Chief Financial Officer
of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such Liens are required in order to effect such financing
and are not materially more restrictive, taken as a whole, than Liens, taken
as a whole, customarily accepted (or in the absence of industry custom,
reasonably acceptable) in comparable financings or comparable transactions in
the applicable jurisdiction, (iv) Liens existing on the date of the original
issuance of the Notes, (v) Liens incurred to secure Debt incurred by the
Company as permitted by clause (vi) of the covenant described under
"Limitation on Debt" above, provided that such Liens may not cover any
Property other than that being purchased and improvements and additions
thereto, (vi) Liens on any Property of the Company securing Permitted Working
Capital Facilities, Guarantees thereof and any Interest Rate Protection
Agreements or Currency Protection Agreements, provided that such Liens may not
extend to the Capital Stock owned by the Company in any Restricted Subsidiary
of the Company or any Eligible Joint Venture, (vii) Liens in respect of
extensions, renewals, refundings or refinancings of any Debt secured by the
Liens referred to in the foregoing clauses, provided that the Liens in
connection with such renewal, extension, refunding or refinancing will be
limited to all or part of the specific property that was subject to the
original Lien, (viii) Liens incurred to secure obligations in respect of
letters of credit, bankers' acceptances, surety, bid, operating and
performance bonds, performance guarantees or other similar instruments or
obligations (or reimbursement obligations with respect thereto) (in each case,
to the extent incurred in the ordinary course of business), (ix) any Lien
arising by reason of (A) any judgment, decree or order of any court, so long
as such Lien is being contested in good faith and is appropriately bonded, and
any appropriate legal proceedings that may have been duly initiated for the
review of such judgment, decree or order have not been finally terminated or
the period within which such proceedings may be initiated has not expired, (B)
taxes, duties, assessments, imposts or other governmental charges that are not
yet delinquent or are being contested in good faith, (C) security for payment
of worker's compensation or other insurance, (D) security for the performance
of tenders, contracts (other than contracts for the payment of money) or
leases, (E) deposits to secure public or statutory
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obligations, or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business, (F) the operation of
law in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums that are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings that suspend the collection
thereof, (G) easements, rights-of-way, zoning and similar covenants and
restrictions and other similar encumbrances or title defects that do not in
the aggregate materially interfere with the ordinary conduct of the business
of the Company, any of its Restricted Subsidiaries or any Eligible Joint
Venture or (H) leases and subleases of real property that do not interfere
with the ordinary conduct of the business of the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture and that are made on
customary and usual terms applicable to similar properties, or (x) Liens, in
addition to the foregoing, that secure obligations not in excess of $5 million
in the aggregate.
Purchase of Notes Upon a Change of Control
Upon the occurrence of a Change of Control, each Holder of the Notes
will have the right to require that the Company repurchase such Holder's Notes
at a purchase price in cash equal to 101% of the principal thereof on the date
of purchase plus accrued interest, if any, to the date of purchase.
The Change of Control provisions may not be waived by the Trustee or
by the Board of Directors, and any modification thereof must be approved by
each Holder. Nevertheless, the Change of Control provisions will not
necessarily afford protection to Holders, including protection against an
adverse effect on the value of the Notes, in the event that the Company or its
Subsidiaries Incur additional Debt, whether through recapitalizations or
otherwise.
Within 30 days following a Change of Control, the Company will mail a
notice to each Holder, with a copy to the Trustee, stating (1) that a Change
of Control has occurred and that such Holder has the right to require the
Company to purchase such Holder's Notes at the purchase price described above
(the "Change of Control Offer"), (2) the circumstances and relevant facts
regarding such Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after giving effect to
such Change of Control), (3) the purchase date (which will be not earlier than
30 days nor later than 60 days from the date such notice is mailed) (the
"Purchase Date"), (4) and thereafter interest on and such Note will continue
to accrue, (5) any Note properly tendered pursuant to the Change of Control
Offer will cease to accrue interest after the Purchase Date (assuming
sufficient moneys for the purchase thereof are deposited with the Trustee),
(6) that Holders electing to have a Note purchased pursuant to a Change of
Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder To Elect Purchase" on the reverse of the Note completed, to
the paying agent at the address specified in the notice prior to the close of
business on the fifth Business Day prior to the Purchase Date, (7) that a
Holder will be entitled to withdraw such Holder's election if the paving agent
receives, not later than the close of business on the third Business Day (or
such shorter periods as may, be required by applicable law) preceding the
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes the Holder
delivered for purchase, and a statement that such Holder is withdrawing his
election to have such Notes purchased and (8) that Holders that elect to have
their Notes purchased only in part will be issued new Notes having a principal
amount equal to the portion of the Notes that were surrendered but not
tendered and purchased.
On the Purchase Date, the Company will (i) accept for payment all
Notes or portions thereof tendered pursuant to the Change of Control Offer,
(ii) deposit with the Trustee money sufficient to pay the purchase price of
all Notes or portions thereof so tendered for purchase and (iii) deliver or
cause to be delivered to the Trustee the Notes properly tendered together with
an Officers' Certificate identifying the Notes or portions thereof tendered to
the Company for purchase. The Trustee will promptly mail, to the Holders of
the Notes properly tendered and purchased, payment in an amount equal to the
purchase price, and promptly authenticate and mail to each Holder a new Note
having a principal amount equal to any portion of such Holder's Notes that
were surrendered but not tendered and purchased, the Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Purchase Date.
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If the Company is prohibited by applicable law from making the Change
of Control Offer or purchasing Notes thereunder, the Company need not make a
Change of Control Offer pursuant to this covenant for so long as such
prohibition is in effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with a Change of Control Offer.
Limitation on Business
The Company will, and will cause its Restricted Subsidiaries and the
Eligible Joint Ventures to, engage only in (i) the ownership, design,
engineering, procurement, construction, development, acquisition, operation,
servicing, management or disposition of Permitted Facilities, (ii) the
ownership, creation, development, acquisition, servicing, management or
disposition of Restricted Subsidiaries and Joint Ventures that own, construct,
develop, design, engineer, procure, acquire, operate, service, manage or
dispose of Permitted Facilities, (iii) obtaining, arranging or providing
financing incident to any of the foregoing and (iv) other related activities
incident to any of the foregoing. The Company will not, and will not permit
and of its Restricted Subsidiaries or any Eligible Joint Venture to, make any
Investment or otherwise acquire any Property that is not directly related to
the business of the Company as described in the preceding sentence
(collectively, the "Ineligible Investments") other than as a part of an
Investment or an acquisition of Property that is predominantly and directly
related to the business of the Company as described above, and if the
aggregate fair market value of such Ineligible Investments in the aggregate
exceeds 20% (the "Percentage Limit") of the total assets of the Company and
its consolidated Restricted Subsidiaries (as determined in accordance with
GAAP) as determined in good faith by the Chief Financial Officer, as evidenced
by an Officers' Certificate, the Company, its Restricted Subsidiaries and the
Eligible Joint Ventures must cease acquiring any additional Ineligible
Investments and, within 18 months of the acquisition that caused the
Ineligible Assets to exceed the Percentage Limit, must return to compliance
with the Percentage Limit by disposing of Ineligible Assets or otherwise,
provided that such 18-month period may be extended up to an additional six
months if, despite the Company's active efforts during such 18-month period to
dispose of such Ineligible Investments or to otherwise come into compliance
with such Percentage Limit, the Company is unable to do so because of
regulatory restrictions or delays or adverse market conditions.
Limitation on Certain Sale-Leasebacks
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, Incur or otherwise become
obligated with respect to any sale-leaseback (other than a sale-leaseback with
respect to a Permitted Facility that is Non-Recourse) unless, (i) (a) if
effected by the Company, the Company would be permitted to Incur such
obligation under the covenant described under "Limitation on Debt" above or,
(b) if effected by a Restricted Subsidiary or an Eligible Joint Venture, such
Restricted Subsidiary or such Eligible Joint Venture would be permitted to
Incur such obligation under the covenant described under "Limitation on
Subsidiary Debt" above, assuming for the purpose of this covenant and the
covenants described under "Limitation on Debt" and "Limitation on Subsidiary
Debt" that (x) the obligation created by such sale-leaseback is a Capitalized
Lease and (y) the Capitalized Lease Obligation with respect thereto is the
Attributable Value thereof, (ii) the Company, such Restricted Subsidiary or
such Eligible Joint Venture is permitted to grant a Lien with respect to the
property that is the subject of such sale-leaseback under the covenant
described under "Limitation on Liens" above, (iii) the proceeds of such
sale-leaseback are at least equal to the fair market value of the property
sold (determined in good faith as evidenced by an Officers' Certificate
delivered to the Trustee in respect of a transaction involving less than $25
million, or, if equal to or in excess of $25 million, by the Board of
Directors, as evidenced by a Board resolution) and (iv) the Net Cash Proceeds
of the sale-leaseback are applied pursuant to the covenants described under
"Limitation on Dispositions" above.
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Limitation on Sale of Subsidiary Preferred Stock
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture to create, assume or otherwise cause or suffer to exist
any Preferred Stock except: (i) Preferred Stock outstanding on the date of the
Indenture, including Preferred Stock issued as dividends in respect of such
Preferred Stock pursuant to the terms of the agreement or instrument that
governs such Preferred Stock as in effect on the date of original issuance of
the Notes, (ii) Preferred Stock held by the Company, a Restricted Subsidiary
of the Company or an Eligible Joint Venture, (iii) Preferred Stock issued by a
Person prior to the time (a) such Person becomes a Restricted Subsidiary or an
Eligible Joint Venture, (b) such Person merges with or into another Restricted
Subsidiary or another Eligible Joint Venture or (c) a Restricted Subsidiary,
or an Eligible Joint Venture merges with or into such Person (in a transaction
in which such Person becomes a Restricted Subsidiary or an Eligible Joint
Venture), provided that such Preferred Stock was not issued in anticipation of
such Person becoming a Restricted Subsidiary or an Eligible Joint Venture or
of such merger, (iv) Preferred Stock issued or agreed to be issued by a
Restricted Subsidiary or an Eligible Joint Venture in connection with the
financing of the construction, design, engineering, procurement, equipping,
developing, operation, ownership, management, servicing or acquisition of one
or more Permitted Facilities in which the Company or one or more Restricted
Subsidiaries or Eligible Joint Ventures has a direct or indirect interest or
the retirement of Debt or Preferred Stock secured by any such Permitted
Facility or in order to enhance the repatriation of equity, advances or income
or the increase of after-tax funds available for distribution to the owners of
any such Permitted Facility (v) Preferred Stock issued or agreed to be issued
by a Restricted Subsidiary or an Eligible Joint Venture in satisfaction of
legal requirements applicable to a Permitted Facility or to maintain the
ordinary course of conduct of such Restricted Subsidiary's or such Eligible
Joint Venture's business in the applicable jurisdiction and (vi) Preferred
Stock that is exchanged for, or the proceeds of which are used to refinance,
any Preferred Stock permitted to be outstanding pursuant to clauses (i)
through (v) hereof (or any extension, renewal or refinancing thereof), having
a liquidation preference not to exceed the liquidation preference of the
Preferred Stock so exchanged or refinanced and having a redemption period no
shorter than the redemption period of the Preferred Stock so exchanged or
refinanced.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
The Company may not consolidate with, merge with or into, or transfer
all or substantially all its Property (as an entirety or substantially an
entirety in one transaction or a series of related transactions), to any
Person unless: (i) the Company will be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the Property of the Company is transferred will
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and will expressly assume in
writing all the obligations of the Company, under the Indenture and the Notes,
(ii) immediately after giving effect to such transaction, no Event of Default
and no event or condition that through the giving of notice or lapse of time
or both would become an Event of Default will have occurred and be continuing,
(iii) immediately after giving effect to such transaction on a pro forma
basis, the Company or the surviving entity would be able to Incur at least $1
of Debt under the provision described in the first paragraph of "Limitation on
Debt" above and (iv) the Net Worth of the Company or the surviving entity, as
the case may be, on a pro forma basis after giving effect to such transaction
(without giving effect to the fees and expenses incurred in respect of such
transaction), is not less than the Net Worth of the Company immediately prior
to such transaction.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Ventures may merge with or into, or be consolidated with, an
Unrestricted Subsidiary of the Company, except to the extent that such
Unrestricted Subsidiary has been designated a Restricted Subsidiary as
provided in the Indenture in advance of or in connection with such merger.
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MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Notes at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the Holders of the Notes,
except that no such modification may (i) extend the final maturity of any of
the Notes, reduce the principal amount thereof, reduce any amount payable on
redemption or purchase thereof or impair the right of any Holder to institute
suit for the payment thereof or make any change in the covenants regarding a
Change of Control or an Asset Disposition or the related definitions without
the consent of the Holder of each of the Notes so affected or (ii) reduce the
percentage of Notes, the consent of the Holders of which is required for any
such modification, without the consent of the Holders of all Notes then
outstanding.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: (i) default
as to the payment of principal, or premium, if any, on any Note or as to any
payment required in connection with a Change of Control or an Asset
Disposition, (ii) default as to the payment of interest on any Note for 30
days after payment is due, (iii) failure to make an offer required under
either of the covenants described under "Limitation on Dispositions" or
"Purchase of Notes Upon a Change of Control" above or a failure to purchase
Notes tendered in respect of such offer, (iv) default in the performance, or
breach, of any covenant, agreement or warranty contained in the Indenture and
the Notes and such failure continues for 30 days after written notice is given
to the Company by the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes, as provided in the Indenture, (v) default on
any other Debt of the Company or any Significant Subsidiary (other than
Non-Recourse Debt of Significant Subsidiaries) if either (x) such default
results from failure to pay principal of such Debt in excess of $25 million
when due after any applicable grace period or (y) as a result of such default,
the maturity of such Debt has been accelerated prior to its scheduled maturity
and such default has not been cured within the applicable grace period, and
such acceleration has not been rescinded, and the principal amount of such
Debt, together with the principal amount of any other Debt of the Company and
its Significant Subsidiaries (not including Non-Recourse Debt of the
Significant Subsidiaries) that is in default as to principal, or the maturity
of which has been accelerated, aggregates $25 million or more, (vi) the entry
by a court of one or more judgments or orders against the Company or any
Significant Subsidiary for the payment of money that in the aggregate exceeds
$25 million (excluding the amount thereof covered by insurance or by a bond
written by a Person other than an Affiliate of the Company), which judgments
or orders have not been vacated, discharged or satisfied or stayed pending
appeal within 60 days from the entry thereof, provided that such a judgment or
order will not be an Event of Default if such judgment or order does not
require any payment by the Company or any Significant Subsidiary, except to
the extent that such judgment is only against Property that secures
Non-Recourse Debt that was permitted under the Indenture, and the Company
could, at the expiration of the applicable 60 day period, after giving effect
to such judgment or order and the consequences thereof, Incur at least $1 of
Debt under the provision described in the first paragraph of "Limitation on
Debt" above, and (vii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any of its Significant Subsidiaries.
The Indenture provides that the Trustee may withhold notice to the
Holders of any default (except in payment of principal of, premium, if any, or
interest on the Notes and any payment required in connection with a Change of
Control or an Asset Disposition) if the Trustee considers it in the interest
of Holders to do so.
The Indenture provides that if an Event of Default (other than an
event of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary) has occurred and is continuing, either the Trustee or
the Holders of not less than 25% in principal amount of the Notes then
outstanding may declare the Default Amount of all Notes to be due and payable
immediately, but upon certain conditions such declaration may be annulled and
past defaults (except, unless theretofore cured, a default in payment of
principal of, premium, if any, or interest on the Notes or any payment
required in connection with a Change of Control or an Asset Disposition, as
the case may be) may be waived by the Holders of a majority in principal
amount of the Notes
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then outstanding. If an Event of Default due to the bankruptcy, insolvency or
reorganization of the Company or a Significant Subsidiary occurs, the
Indenture provides that the Default Amount of all Notes will become
immediately due and payable.
The Holders of a majority in principal amount of the Notes then
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee under the
Indenture, subject to certain limitations specified in the Indenture, provided
that the Holders of Notes must have offered to the Trustee reasonable
indemnity against expenses and liabilities. The Indenture requires the annual
filing by the Company with the Trustee of a written statement as to compliance
with the principal covenants contained in the Indenture.
DEFEASANCE
Legal Defeasance
The Indenture provides that the Company will be deemed to have paid
and will be discharged from any and all obligations in respect of the Notes,
on the 123rd day after the deposit referred to below has been made (or
immediately if an Opinion of Counsel is delivered to the effect described in
clause (B)(iii)(y) below), and the provisions of the Indenture will cease to
be applicable with respect to the Notes (except for, among other matters,
certain obligations to register the transfer or exchange of the Notes, to
replace stolen, lost or mutilated Notes, to maintain paying agencies and to
hold monies for payment in trust) if, among other things, (A) the Company has
deposited with the Trustee, in trust, money and/or U.S. Government Obligations
that through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on the Notes, on the
respective Stated Maturities of the Notes or, if the Company makes
arrangements satisfactory to the Trustee for the redemption of the Notes prior
to their Stated Maturity, on any earlier redemption date in accordance with
the terms of the Indenture and the Notes, (B) the Company has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred and the Company had paid or redeemed such Notes on the applicable
dates, which Opinion of Counsel must be based upon a ruling of the Internal
Revenue Service to the same effect or a change in applicable federal income
tax law or related Treasury regulations after the date of the Indenture or (y)
a ruling directed to the Trustee or the Company received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of Counsel,
(ii) an Opinion of Counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and (iii) an Opinion
of Counsel to the effect that either (x) after the passage of 123 days
following the deposit, the trust fund will not be subject to the effect of
Section 547 or 548 of the U.S. Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law or (y) based upon existing precedents, if the matter
were properly briefed, a court should hold that the deposit of moneys and/or
U.S. Government Obligations as provided in clause (A) would not constitute a
preference voidable under Section 547 or 548 of the U.S. Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, (C) immediately after
giving effect to such deposit on a pro forma basis, no Event of Default, or
event that after the giving of notice or lapse of time or both would become an
Event of Default, will have occurred and be continuing on the date of such
deposit or (unless an Opinion of Counsel is delivered to the effect described
in clause (B)(iii)(y) above) during the period ending on the 123rd day after
the date of such deposit and the deposit will not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound and (D) if at
such time the Notes are listed on a national securities exchange, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the
Notes will not be delisted as a result of such deposit, defeasance and
discharge.
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Covenant Defeasance
The Indenture further provides that the provisions of clause (iii)
under "Mergers, Consolidations and Sales of Assets" and all the covenants
described herein under "Certain Covenants," clause (iv) under "Events of
Default" with respect to such covenants and with respect to clause (iii) under
"Mergers, Consolidations and Sales of Assets," clauses (i) and (iii) with
respect to certain offers for the Notes required by certain covenants and
clauses (v) and (vi) under "Events of Default" will cease to be applicable to
the Company, its Restricted Subsidiaries and its Eligible Joint Ventures upon
the satisfaction of the provisions described in clauses (A), (B)(ii) and
(iii), (C) and (D) of the preceding paragraph and the delivery by the Company
to the Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and the defeasance of
certain covenants and Events of Default and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred and the
Company had paid or redeemed such Notes on the applicable dates.
Defeasance and Certain Other Events of Default
If the Company exercises its option to omit compliance with certain
covenants and provisions of the Indenture with respect to the Notes as
described in the immediately preceding paragraph and the Notes are declared
due and payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Notes at the
time of their Stated Maturity or scheduled redemption, but may not be
sufficient to pay amounts due on the Notes at the time of acceleration
resulting from such Event of Default. The Company will remain liable for such
payments.
THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in
accordance with, the law of the State of New York, including Section 5-1401 of
the New York General Obligations Law, but otherwise without regard to conflict
of laws rules.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
"Acquired Debt" is defined to mean Debt Incurred by a Person prior to
the time (i) such Person becomes a Restricted Subsidiary of the Company or an
Eligible Joint Venture, (ii) such Person merges with or into a Restricted
Subsidiary of the Company or an Eligible Joint Venture, or (iii) a Restricted
Subsidiary of the Company or an Eligible Joint Venture merges with or into
such Person (in a transaction in which such Person becomes a Restricted
Subsidiary of the Company or an Eligible Joint Venture), provided that, after
giving effect to such transaction, any Non-Recourse Debt of such Person could
have been Incurred pursuant to clause (iii) of the provision described under
"Limitation on Subsidiary Debt", any Permitted Facilities Debt of such Person
could have been Incurred pursuant to clause (viii) of the provision described
under "Limitation on Subsidiary Debt" and would not otherwise violate any
other provision of the Indenture, and all the other Debt of such Person could
have been Incurred by the Company at the time of such merger or acquisition
pursuant to the provision described in the first paragraph of "Limitation on
Debt" above, and provided further that such Debt
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was not Incurred in connection with, or in contemplation of, such merger or
such Person becoming a Restricted Subsidiary of the Company or an Eligible
Joint Venture.
"Acquisition Debt" is defined to mean Debt of any Person existing at
the time such Person is merged into the Company or assumed in connection with
the acquisition of Property from any such Person (other than Property acquired
in the ordinary course of business), including Debt Incurred in connection
with, or in contemplation of, such Person being merged into the Company (but
excluding Debt of such Person that is extinguished, retired or repaid in
connection with such merger or acquisition).
"Adjusted Consolidated Net Income" is defined to mean for any period,
for any Person (the "Referenced Person") the aggregate Net Income (or loss) of
the Referenced Person and its consolidated Subsidiaries for such period
determined in conformity with GAAP, provided that the following items will be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the Net Income (or loss) of any other Person (other than a Subsidiary of
the Referenced Person) in which any third Person has an interest, except to
the extent of the amount of dividends or other distributions actually paid in
cash to the Referenced Person during such period, or after such period and on
or before the date of determination, by such Person in which the interest is
held, which dividends and distributions will be included in such computation,
(ii) solely for the purposes of calculating the amount of Restricted Payments
that may be made pursuant to the provision described in clause (c) of the
first paragraph of "Limitation on Restricted Payments" above (and in such
case, except to the extent includable pursuant to clause (i) above), the Net
Income (if positive) of any other Person accrued prior to the date it becomes
a Subsidiary of the Referenced Person or is merged into or consolidated with
the Referenced Person or any of its Subsidiaries or all or substantially all
the Property of such other Person are acquired by the Referenced Person or any
of its Subsidiaries, (iii) the Net Income (if positive) of any Subsidiary of
the Referenced Person to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary to such Person or to any
other Subsidiary of such Net Income is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Subsidiary,
(iv) any gains or losses (on an after-tax basis) attributable to Asset Sales
(except, solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to the provision described in clause (c) of
the first paragraph of "Limitation on Restricted Payments" above, any gains or
losses of the Company and any of its Restricted Subsidiaries from Asset Sales
of Capital Stock of Unrestricted Subsidiaries), (v) the cumulative effect of a
change in accounting principles and (vi) any amounts paid or accrued as
dividends on Preferred Stock of any Subsidiary of the Referenced Person that
is not held by the Referenced Person or another Subsidiary thereof. When the
"Referenced Person" is the Company, the foregoing references to "Subsidiaries"
will be deemed to refer to "Restricted Subsidiaries."
"Affiliate" of any Person is defined to mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") when used with respect to any
Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. For the
purpose of the covenant described under "Limitation on Transactions with
Affiliates" above, the term "Affiliate" will be deemed to include only Kiewit,
any entity owning beneficially 10% or more of the Voting Stock of the Company
and their respective Affiliates other than the Restricted Subsidiaries and the
Eligible Joint Ventures and the other equity investors in the Restricted
Subsidiaries and the Eligible Joint Ventures (solely on account of their
investments in the Restricted Subsidiaries and the Eligible Joint Ventures),
and for such purpose such term also will be deemed to include the Unrestricted
Subsidiaries.
"Asset Acquisition" is defined to mean (i) an investment by the
Company, any of its Subsidiaries or any Joint Venture in any other Person
pursuant to which such Person will become a direct or indirect Subsidiary of
the Company or a Joint Venture or will be merged into or consolidated with the
Company, any of its Subsidiaries or any Joint Venture or (ii) an acquisition
by the Company, any of its Subsidiaries or any Joint Venture of the Property
of any Person other than the Company, any of its Subsidiaries or any Joint
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Venture that constitutes substantially all of an operating unit or business of
such Person.
"Asset Disposition" is defined to mean any sale, transfer,
conveyance, lease or other disposition (including by way of merger,
consolidation or sale-leaseback) by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture to any Person (other than to the
Company, a Restricted Subsidiary of the Company or an Eligible Joint Venture
and other than in the ordinary course of business) of any Property of the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture
other than any shares of Capital Stock of the Unrestricted Subsidiaries.
Notwithstanding the foregoing to the contrary, the term "Asset Disposition"
will include the sale, transfer, conveyance or other disposition of any shares
of Capital Stock of any Unrestricted Subsidiary to the extent that the Company
or any of its Restricted Subsidiaries or Eligible Joint Ventures made an
Investment in such Unrestricted Subsidiary pursuant to clause (vii) of the
definition of "Permitted Payment," and the Company will, and will cause each
of its Restricted Subsidiaries and Eligible Joint Ventures to, apply pursuant
to the covenant described under "Limitation on Dispositions" that portion of
the Net Cash Proceeds from the sale, transfer, conveyance or other disposition
of such Unrestricted Subsidiary that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment." For purposes of this definition, any disposition in
connection with directors' qualifying shares or investments by foreign
nationals mandated by applicable law will not constitute an Asset Disposition.
In addition, the term "Asset Disposition" will not include (i) any sale,
transfer, conveyance, lease or other disposition of the Capital Stock or
Property of Restricted Subsidiaries or Eligible Joint Ventures pursuant to the
terms of any power sales agreements or steam sales agreements to which such
Restricted Subsidiaries or such Eligible Joint Ventures are parties on the
date of the original issuance of the Notes or pursuant to the terms of any
power sales agreements or steam sales agreements, or other agreements or
contracts that are related to the output or product of, or services rendered
by, a Permitted Facility as to which such Restricted Subsidiary or such
Eligible Joint Venture is the supplying party, to which such Restricted
Subsidiaries or such Eligible Joint Ventures become a party after such date if
the President or Chief Financial Officer of the Company determines in good
faith (evidenced by an Officers' Certificate) that such provisions are
customary (or, in the absence of any industry custom, reasonably necessary) in
order to effect such agreements and are reasonable in light of comparable
transactions in the applicable jurisdiction, (ii) any sale, transfer,
conveyance, lease or other disposition of Property governed by the covenant
described under "Mergers, Consolidations and Sales of Assets" above, (iii) any
sale, transfer, conveyance, lease or other disposition of any Cash
Equivalents, (iv) any transaction or series of related transactions consisting
of the sale, transfer, conveyance, lease or other disposition of Capital Stock
or Property with a fair market value aggregating less than $5 million and (v)
any Permitted Payment or any Restricted Payment that is permitted to be made
pursuant to the covenant described under "Limitation on Restricted Payments"
above. The term "Asset Disposition" also will not include (i) the grant of or
realization upon a Lien permitted under the covenant described under
"Limitation on Liens" above or the exercise of remedies thereunder, (ii) a
sale-leaseback transaction involving substantially all the Property
constituting a Permitted Facility pursuant to which a Restricted Subsidiary of
the Company or an Eligible Joint Venture sells the Permitted Facility to a
Person in exchange for the assumption by that Person of the Debt financing the
Permitted Facility and the Restricted Subsidiary or the Eligible Joint Venture
leases the Permitted Facility from such Person, (iii) dispositions of Capital
Stock, contract rights, development rights and resource data made in
connection with the initial development of Permitted Facilities, or the
formation or capitalization of Restricted Subsidiaries or Eligible Joint
Ventures in respect of the initial development of Permitted Facilities, in
respect of which only an insubstantial portion of the prospective Construction
Financing that would be required to commence commercial operation has been
funded or (iv) transactions determined in good faith by the Chief Financial
Officer, as evidenced by an Officers' Certificate, made in order to enhance
the repatriation of Net Cash Proceeds for a Foreign Asset Disposition or in
order to increase the after-tax proceeds thereof available for immediate
distribution to the Company. Any Asset Disposition that results from the bona
fide exercise by any governmental authority of its claimed or actual power of
eminent domain need not comply with the provisions of clauses (i) and (ii) of
the covenant described under "Limitation on Dispositions" above. Any Asset
Disposition that results from a casualty loss need not comply with the
provisions of clause (i) of the covenant described under "Limitation on
Dispositions" above.
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"Asset Sale" is defined to mean the sale or other disposition by the
Company, any of its Subsidiaries or any Joint Venture (other than to the
Company, another Subsidiary of the Company or another Joint Venture) of (i)
all or substantially all of the Capital Stock of any Subsidiary of the Company
or any Joint Venture or (ii) all or substantially all of the Property that
constitutes an operating unit or business of the Company, any of its
Subsidiaries or any Joint Venture.
"Attributable Value" means, as to a Capitalized Lease Obligation
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the capitalized amount thereof that would
appear on the face of a balance sheet of such Person in accordance with GAAP.
"Average Life" is defined to mean, at any date of determination with
respect to any Debt security or Preferred Stock, the quotient obtained by
dividing (i) the sum of the product of (A) the number of years from such date
of determination to the dates of each successive scheduled principal or
involuntary liquidation value payment of such Debt security or Preferred
Stock, respectively, multiplied by (B) the amount of such principal or
involuntary liquidation value payment by (ii) the sum of all such principal or
involuntary liquidation value payments.
"Board of Directors" is defined to mean either the Board of Directors
of the Company or any duly authorized committee of such Board.
"Business Day" is defined to mean a day that, in the city (or in any
of the cities, if more than one) where amounts are payable in respect of the
Notes, is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close.
"Capital Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) in, or interests (however
designated) in, the equity of such Person that is outstanding or issued on or
after the date of Indenture, including, without limitation, all Common Stock
and Preferred Stock and partnership and joint venture interests in such
Person.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any Property of which the discounted present value of the rental
obligations of such Person as lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of such Person, and "Capitalized Lease
Obligation" means the rental obligations, as aforesaid, under such lease.
"Cash Equivalent" is defined to mean any of the following: (i)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), (ii) time deposits and certificates of deposit of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws of any other
country having total assets in excess of $500,000,000 with a maturity date not
more than two years from the date of acquisition, (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clauses (i) or (v) that was entered into with any bank meeting
the qualifications set forth in clause (ii) or another financial institution
of national reputation, (iv) direct obligations issued by any state or other
jurisdiction of the United States of America or any other country or any
political subdivision or public instrumentality thereof maturing, or subject
to tender at the option of the holder thereof, within 90 days after the date
of acquisition thereof and, at the time of acquisition, having a rating of A
from Standard & Poor's Corporation ("S&P") or A-2 from Moody's Investors
Service, Inc. ("Moody's") (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee), (v) commercial paper issued by (a) the
parent corporation of any commercial bank organized in the United States
having capital and surplus in excess of $500,000,000 or any commercial bank
organized under the laws of any other country having total assets in excess of
$500,000,000, and (b) others having one of the two highest ratings obtainable
from either S&P or Moody's (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee) and in each case
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maturing within one year after the date of acquisition, (vi) overnight bank
deposits and bankers' acceptances at any commercial bank organized in the
United States having capital and surplus in excess of $500,000,000 or any
commercial bank organized under the laws of any other country having total
assets in excess of $500,000,000, (vii) deposits available for withdrawal on
demand with any commercial bank organized in the United States having capital
and surplus in excess of $500,000,000 or any commercial bank organized under
the laws of any other country having total assets in excess of $500,000,000,
(viii) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (i) through (vi) and
(ix), and (ix) auction rate securities or money market preferred stock having
one of the two highest ratings obtainable from either S&P or Moody's (or, if
at any time neither S&P nor Moody's may be rating such obligations, then from
another nationally recognized rating service acceptable to the Trustee).
"Change of Control" is defined to mean the occurrence of one or more
of the following events:
(i) for so long as at least $25 million principal amount of
the Company's 5% Convertible Subordinated Debentures due July 1, 2000
remain outstanding and are not defeased, (x) a report is filed on
Schedule 13D or 14D-1 (or any successor schedule, form or report)
pursuant to the Exchange Act, disclosing that any person (for the
purposes of this provision only, as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing) has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of 50% or more of the then outstanding shares of the
Voting Stock of the Company and (y) such beneficial ownership is
acquired by means of a tender offer in which cash is the sole
consideration paid and the purchase price for each share tendered is
less than the conversion price then in effect under the Company's 5%
Convertible Subordinated Debentures due July 1, 2000; provided that a
person will not be deemed to be the beneficial owner of, or to own
beneficially, any securities tendered until such tendered securities
are accepted for purchase under the tender offer;
(ii) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than Kiewit, is or becomes the
beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company (for the purposes of this clause (ii), any
person will be deemed to beneficially own any Voting Stock of any
corporation (the "specified corporation") held by any other
corporation (the "parent corporation"), if such person "beneficially
owns" (as so defined), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such parent corporation) and
Kiewit "beneficially owns" (as so defined), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the
Voting Stock of the Company and does not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company;
(iii) during any one-year period, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors elected by such Board of
Directors or nominated for election by the shareholders of the
Company by a vote of at least a majority of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office, unless a majority
of such new directors were elected or appointed by Kiewit; or
(iv) the Company or its Restricted Subsidiaries sell,
convey, assign, transfer, lease or otherwise dispose of all or
substantially all the Property of the Company and the Restricted
Subsidiaries taken as a whole;
provided that with respect to the foregoing subparagraphs (ii), (iii) and
(iv), a Change of Control will not be deemed to have occurred unless and until
a Rating Decline has occurred as well.
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"Common Stock" is defined to mean with respect to any Person, Capital
Stock of such Person that does not rank prior, as to the payment of dividends
or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Company Refinancing Debt" is defined to mean Debt issued in exchange
for, or the proceeds of which are used to refinance (including to purchase),
outstanding Notes or other Debt of the Company Incurred pursuant to clauses
(i), (iv), and (vii) of "Limitation on Debt" and Debt Incurred pursuant to the
first paragraph under "Limitation on Debt" in an amount (or, if such new Debt
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, with an original issue
price) not to exceed the amount so exchanged or refinanced (plus accrued
interest and all fees, premiums (in excess of the accreted value) and expenses
related to such exchange or refinancing), for which purpose the amount so
exchanged or refinanced will be deemed to equal the lesser of (x) the
principal amount of the Debt so exchanged or refinanced and (y) if the Debt
being exchanged or refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such exchange or refinancing, provided that (A) such Debt will be subordinated
in right of payment to the Notes at least to the same extent, if any, as the
Debt so exchanged or refinanced is subordinated to the Notes, (B) such Debt
will be Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse,
(C) the Average Life of the new Debt will be equal to or greater than the
Average Life of the Debt to be exchanged or refinanced and (D) the final
Stated Maturity of the new Debt will not be sooner than the earlier of the
final Stated Maturity of the Debt to be exchanged or refinanced or six months
after the final Stated Maturity of the Notes, provided that if such new Debt
refinances the Notes in part only, the final Stated Maturity of such new Debt
must be at least six months after the final Stated Maturity of the Notes.
"Consolidated EBITDA" of any Person for any period is defined to mean
the Adjusted Consolidated Net Income of such Person, plus, only to the extent
deducted in computing Adjusted Consolidated Net Income and without
duplication, (i) income taxes, excluding income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
Asset Sales, all determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, (ii) Consolidated Fixed
Charges, (iii) depreciation and amortization expense, all determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP and (iv) all other non-cash items reducing Adjusted
Consolidated Net Income for such period, all determined on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with
GAAP, and less all non-cash items increasing Adjusted Consolidated Net Income
during such period, provided that depreciation and amortization expense of any
Subsidiary of such Person and any other non-cash item of any Subsidiary of
such Person that reduces Adjusted Consolidated Net Income will be excluded
(without duplication) in computing Consolidated EBITDA, except to the extent
that the positive cash flow associated with such depreciation and amortization
expense and other non-cash items is actually distributed in cash to such
Person during such period, provided further that as applied to the Company,
cash in respect of depreciation and amortization and other non-cash items of
Restricted Subsidiaries and Eligible Joint Ventures may be deemed to have been
distributed or paid to the Company to the extent that such cash (I) is or was
under the exclusive dominion and control of such Restricted Subsidiary or such
Eligible Joint Venture and is or was free and clear of the Lien of any other
Person, (II) is or was immediately available for distribution and (III) could
be or could have been repatriated to the United States by means that are both
lawful and commercially reasonable, provided that the amount of the cash
deemed by this sentence to have been distributed or paid will be reduced by
the amount of tax that would have been payable with respect to the
repatriation thereof, provided further that any cash that enables the
recognition of depreciation and amortization and other non-cash items pursuant
to this sentence may not be used to enable the recognition of depreciation and
amortization and other non-cash items with respect to any prior or subsequent
period, regardless of whether such cash is distributed to the Company, and
provided further that the recognition of any depreciation and amortization and
other non-cash items as a result of this sentence will be determined in good
faith by the Chief Financial Officer, as evidenced by an Officers' Certificate
that will set forth in reasonable detail the relevant facts and assumptions
supporting such recognition. When the "Person" referred to above is the
Company, the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
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"Consolidated Fixed Charges" of any Person is defined to mean, for
any period, the aggregate of (i) Consolidated Interest Expense, (ii) the
interest component of Capitalized Leases, determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP,
excluding any interest component of Capitalized Leases in respect of that
portion of a Capitalized Lease Obligation of a Subsidiary that is Non-Recourse
to such Person, and (iii) cash and non-cash dividends due (whether or not
declared) on the Preferred Stock of any Subsidiary of such Person held by any
Person other than such Person and any Redeemable Stock of such Person or any
Subsidiary of such Person. When the "Person" referred to above is the Company,
the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
"Consolidated Interest Expense" of any Person is defined to mean, for
any period, the aggregate interest expense in respect of Debt (including
amortization of original issue discount and non-cash interest payments or
accruals) of such Person and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, including all commissions,
discounts, other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs associated with Interest Rate
Protection Agreements and Currency Protection Agreements and any amounts paid
during such period in respect of such interest expense, commissions,
discounts, other fees and charges that have been capitalized, provided that
Consolidated Interest Expense of the Company will not include any interest
expense (including all commissions, discounts, other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs associated with Interest Rate Protection Agreements or Currency
Protection Agreements) in respect of that portion of any Debt that is
Non-Recourse, and provided further that Consolidated Interest Expense of the
Company in respect of a Guarantee by the Company of Debt of another Person
will be equal to the commissions, discounts, other fees and charges that would
be due with respect to a hypothetical letter of credit issued under a bank
credit agreement that can be drawn by the beneficiary thereof in the amount of
the Debt so guaranteed if (i) the Company is not actually making directly or
indirectly interest payments on such Debt and (ii) GAAP does not require the
Company on an unconsolidated basis to record such Debt as a liability of the
Company. When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
"Construction Financing" is defined to mean the debt and/or equity
financing provided (over and above the owners' equity investment) to permit
the acquisition, development, design, engineering, procurement, construction
and equipping of a Permitted Facility and to enable it to commence commercial
operations, provided that Construction Financing may remain outstanding after
the commencement of commercial operations of a Permitted Facility, without any
increase in the amount of such financing, and such Construction Financing will
not cease to be Construction Financing.
"Currency Protection Agreement" is defined to mean, with respect to
any Person, any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement intended to protect such Person against
fluctuations in currency values to or under which such Person is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Debt" is defined to mean, with respect to any Person, at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bankers' acceptances, surety, bid,
operating and performance bonds, performance guarantees or other similar
instruments or obligations (or reimbursement obligations with respect thereto)
(except, in each case, to the extent incurred in the ordinary course of
business), (iv) all obligations of such Person to pay the deferred purchase
price of property or services, except Trade Payables, (v) the Attributable
Value of all obligations of such Person as lessee under Capitalized Leases,
(vi) all Debt of others secured by a Lien on any Property of such Person,
whether or not such Debt is assumed by such Person, provided that, for
purposes of determining the amount of any Debt of the type described in this
clause, if recourse with respect to such Debt is limited to such Property, the
amount of such Debt will be limited to the lesser of the fair market value of
such Property or the amount of such Debt, (vii) all Debt of others Guaranteed
by such Person to the extent such Debt is Guaranteed by such Person, (viii)
all Redeemable Stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends and (ix) to the
extent not otherwise
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included in this definition, all net obligations of such Person under Currency
Protection Agreements and Interest Rate Protection Agreements.
For purposes of determining any particular amount of Debt that is or
would be outstanding, Guarantees of, or obligations with respect to letters of
credit or similar instruments supporting (to the extent the foregoing
constitutes Debt), Debt otherwise included in the determination of such
particular amount will not be included. For purposes of determining compliance
with the Indenture, in the event that an item of Debt meets the criteria of
more than one of the types of Debt described in the above clauses, the
Company, in its sole discretion, will classify such item of Debt and only be
required to include the amount and type of such Debt in one of such clauses.
"Default Amount" is defined to mean the principal amount plus accrued
interest.
"Eligible Joint Venture" is defined to mean a Joint Venture (other
than a Subsidiary) (i) that is or will be formed with respect to the
construction, development, acquisition, servicing, ownership, operation or
management of one or more Permitted Facilities and (ii) in which the Company
and Kiewit together, directly or indirectly, own at least 50% of the Capital
Stock therein (of which the Company must own at least half (in any event not
less than 25% of the total outstanding Capital Stock)) and (iii) in respect of
which the Company alone or in combination with Kiewit, directly or indirectly,
(a) controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitation, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is an Eligible Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be
an Eligible Joint Venture if (x) Kiewit disposes of any securities issued by
the Company and, as a result of such disposition, Kiewit becomes the
beneficial owner (as such term is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of less than 25% of the
outstanding shares of Voting Stock of the Company or (y) (I) as a result of
any action other than a disposition of securities by Kiewit, Kiewit becomes
the beneficial owner of less than 25% of the outstanding shares of Voting
Stock of the Company and (II) thereafter Kiewit disposes of any securities
issued by the Company as a result of which the beneficial ownership by Kiewit
of the outstanding Voting Stock of the Company is further reduced, provided
that thereafter such Joint Venture may become an Eligible Joint Venture if
Kiewit becomes the beneficial owner of at least 25% of the outstanding shares
of Voting Stock of the Company and the other conditions set forth in this
definition are fulfilled.
"Fixed Charge Ratio" is defined to mean the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of any Person for
the Reference Period immediately prior to the date of the transaction giving
rise to the need to calculate the Fixed Charge Ratio (the "Transaction Date")
to (ii) the aggregate Consolidated Fixed Charges of such Person during such
Reference Period, provided that for purposes of such computation, in
calculating Consolidated EBITDA and Consolidated Fixed Charges, (1) the
Incurrence of the Debt giving rise to the need to calculate the Fixed Charge
Ratio and the application of the proceeds therefrom (including the retirement
or defeasance of Debt) will be assumed to have occurred on the first day of
the Reference Period, (2) Asset Sales and Asset Acquisitions that occur during
the Reference Period or subsequent to the Reference Period and prior to the
Transaction Date (but including any Asset Acquisition to be made with the Debt
Incurred pursuant to (1) above) and related retirement of Debt pursuant to an
Offer (in the amount of the Excess Proceeds with respect to which such Offer
has been made or would be made on the Transaction Date if the purchase of
Notes pursuant to such Offer has not occurred on or before the Transaction
Date) will be assumed to have occurred on the first day of the Reference
Period, (3) the Incurrence of any Debt during the Reference Period or
subsequent to the Reference Period and prior to the Transaction Date and the
application of the proceeds therefrom (including the retirement or defeasance
of other Debt) will be assumed to have occurred on the first day of such
Reference Period, (4) Consolidated Interest Expense attributable to any Debt
(whether existing or being Incurred) computed on a pro forma basis and bearing
a floating interest rate will be computed
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as if the rate in effect on the date of computation had been the applicable
rate for the entire period unless the obligor on such Debt is a party to an
Interest Rate Protection Agreement (that will remain in effect for the twelve
month period after the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) will be used and (5) there will be excluded from Consolidated
Fixed Charges any Consolidated Fixed Charges related to any amount of Debt
that was outstanding during or subsequent to the Reference Period but is not
outstanding on the Transaction Date, except for Consolidated Fixed Charges
actually incurred with respect to Debt borrowed (as adjusted pursuant to
clause (4)) (x) under a revolving credit or similar arrangement to the extent
the commitment thereunder remains in effect on the Transaction Date or (y)
pursuant to the provision described in clause (iii) in the second paragraph of
"Limitation on Debt" above. For the purpose of making this computation, Asset
Sales and Asset Acquisitions that have been made by any Person that has become
a Restricted Subsidiary of the Company or an Eligible Joint Venture or been
merged with or into the Company or any Restricted Subsidiary of the Company or
an Eligible Joint Venture during the Reference Period, or subsequent to the
Reference Period and prior to the Transaction Date, will be calculated on a
pro forma basis, as will be all the transactions contemplated by the
calculations referred to in clauses (1) through (5) above with respect to the
Persons or businesses that were the subject of such Asset Sales and Asset
Dispositions, assuming such Asset Sales or Asset Acquisitions occurred on the
first day of the Reference Period.
"Foreign Asset Disposition" means an Asset Disposition in respect of
the Capital Stock or Property of a Restricted Subsidiary of the Company or an
Eligible Joint Venture to the extent that the proceeds of such Asset
Disposition are received by a Person subject in respect of such proceeds to
the tax laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" is defined to mean generally accepted accounting principles in
the U.S. as in effect as of the date of the Indenture, applied on a basis
consistent with the principles, methods, procedures and practices employed in
the preparation of the Company's audited financial statements, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession.
"Guarantee" is defined to mean any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any Debt
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt of such other Person (whether arising by virtue of partnership
arrangements (other than solely by reason of being a general partner of a
partnership), or by agreement to keep-well, to purchase assets, goods,
securities or services, or to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Debt of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part), provided
that the term "Guarantee" will not include endorsements for collection or
deposit in the ordinary course of business or the grant of a Lien in
connection with any Non-Recourse Debt. The term "Guarantee" used as a verb has
a corresponding meaning.
"Holder", "holder of Notes", "Noteholder" and other similar terms are
defined to mean the registered holder of any Note.
"Incur" is defined to mean with respect to any Debt, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Debt, provided that neither the accrual of interest (whether
such interest is payable in cash or kind) nor the accretion of original issue
discount will be considered an Incurrence of Debt. The term "Incurrence" has a
corresponding meaning.
"Interest Rate Protection Agreement" is defined to mean, with respect
to any Person, any interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap
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agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
intended to protect such Person against fluctuations in interest rates to or
under which such Person or any of its Subsidiaries is a party or a beneficiary
on the date of the Indenture or becomes a party or a beneficiary thereafter.
"Investment" in a Person is defined to mean any investment in, loan
or advance to, Guarantee on behalf of, directly or indirectly, or other
transfer of assets to such Person (other than sales of products and services
in the ordinary course of business).
"Investment Grade" is defined to mean with respect to the Notes, (i)
in the case of S&P, a rating of at least BBB-, (ii) in the case of Moody's, a
rating of at least Baa3, and (iii) in the case of a Rating Agency other than
S&P or Moody's, the equivalent rating, or in each case, any successor,
replacement or equivalent definition as promulgated by S&P, Moody's or other
Rating Agency as the case may be.
"Joint Venture" is defined to mean a joint venture, partnership or
other similar arrangement, whether in corporate, partnership or other legal
form.
"Kiewit" is defined to mean and include Kiewit Energy Company and any
other Subsidiary of Peter Kiewit Sons', Inc., Kiewit Construction Group Inc.
or Kiewit Diversified Group, Inc.
"Lien" is defined to mean, with respect to any Property, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such Property, but will not include any partnership, joint
venture, shareholder, voting trust or other similar governance agreement with
respect to Capital Stock in a Subsidiary or Joint Venture. For purposes of the
Indenture, the Company will be deemed to own subject to a Lien any Property
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such Property.
"Net Cash Proceeds" from an Asset Disposition is defined to mean cash
payments received (including any cash payments received by way of a payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received (including any cash received upon sale or disposition of
any such note or receivable), excluding any other consideration received in
the form of assumption by the acquiring Person of Debt or other obligations
relating to the Property disposed of in such Asset Disposition or received in
any form other than cash) therefrom, in each case, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses of any
kind (including consent and waiver fees and any applicable premiums, earn-out
or working interest payments or payments in lieu or in termination thereof)
incurred, (ii) all federal, state, provincial, foreign and local taxes and
other governmental charges required to be accrued as a liability under GAAP
(a) as a consequence of such Asset Disposition, (b) as a result of the
repayment of any Debt in any jurisdiction other than the jurisdiction where
the Property disposed of was located or (c) as a result of any repatriation of
any proceeds of such Asset Disposition, (iii) a reasonable reserve for the
after-tax cost of any indemnification payments (fixed and contingent)
attributable to seller's indemnities to the purchaser undertaken by the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture in
connection with such Asset Disposition (but excluding any payments that by the
terms of the indemnities will not, under any circumstances, be made during the
term of the Notes), (iv) all payments made on any Debt that is secured by such
Property, in accordance with the terms of any Lien upon or with respect to
such Property, or that must by its terms or by applicable law or in order to
obtain a required consent or waiver be repaid out of the proceeds from or in
connection with such Asset Disposition, and (v) all distributions and other
payments made to holders of Capital Stock of Restricted Subsidiaries or
Eligible Joint Ventures (other than the Company or its Restricted
Subsidiaries) as a result of such Asset Disposition.
"Net Income" of any Person for any period is defined to mean the net
income (loss) of such Person for such period, determined in accordance with
GAAP, except that extraordinary and non-recurring gains and losses as
determined in accordance with GAAP will be excluded.
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"Net Worth" of any Person is defined to mean, as of any date, the
aggregate of capital, surplus and retained earnings (including any cumulative
currency translation adjustment) of such Person and its consolidated
Subsidiaries as would be shown on a consolidated balance sheet of such Person
and its consolidated Subsidiaries prepared as of such date in accordance with
GAAP. When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
"Non-Recourse", as applied to any Debt or any sale-leaseback, is
defined to mean any project financing that is or was Incurred with respect to
the development, acquisition, design, engineering, procurement, construction,
operation, ownership, servicing or management of one or more Permitted
Facilities in respect of which the Company or one or more Restricted
Subsidiaries or Eligible Joint Ventures has a direct or indirect interest,
provided that such financing is without recourse to the Company, any
Restricted Subsidiary or any Eligible Joint Venture other than any Restricted
Subsidiary or any Eligible Joint Venture that does not own any Property other
than one or more of such Permitted Facilities or a direct or indirect interest
therein, provided further that such financing may be secured by a Lien on only
(i) the Property that constitutes such Permitted Facilities, (ii) the income
from and proceeds of such Permitted Facilities, (iii) the Capital Stock of,
and other Investments in, any Restricted Subsidiary or Eligible Joint Venture
that owns the Property that constitutes any such Permitted Facility, and (iv)
the Capital Stock of, and other Investments in, any Restricted Subsidiary or
Eligible Joint Venture obligated with respect to such financing and of any
Subsidiary or Joint Venture (that is a Restricted Subsidiary or an Eligible
Joint Venture) of such Person that owns a direct or indirect interest in any
such Permitted Facility, and provided further that an increase in the amount
of Debt with respect to one or more Permitted Facilities pursuant to the
financing provided pursuant to the terms of this definition (except for the
first refinancing of Construction Financing) may not be Incurred to fund or
enable the funding of any dividend or other distribution in respect of Capital
Stock. The fact that a portion of financing with respect to a Permitted
Facility is not Non-Recourse will not prevent other portions of the financing
with respect to such Permitted Facility from constituting Non-Recourse Debt if
the foregoing requirements of this definition are fulfilled with respect to
such other portions.
"Officers' Certificate" is defined to mean a certificate signed by
the Chairman of the Board of Directors, the President or any Vice President
and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the
Controller, the Assistant Controller, the Secretary or any Assistant Secretary
of the Company and delivered to the Trustee. Each such certificate will comply
with Section 314 of the Trust Indenture Act and include the statements
provided for in the Indenture if and to the extent required thereby.
"Opinion of Counsel" is defined to mean an opinion in writing signed
by legal counsel who may be an employee of or counsel to the Company or who
may be other counsel satisfactory to the Trustee. Each such opinion will
comply with Section 314 of the Trust Indenture Act and include the statements
provided for in the Indenture, if and to the extent required thereby.
"Permitted Facility" is defined to mean (i) an electric power or
thermal energy generation or cogeneration facility or related facilities
(including residual waste management and facilities that use thermal energy
from a cogeneration facility), and its or their related electric power
transmission, fuel supply and fuel transportation facilities, together with
its or their related power supply, thermal energy and fuel contracts and other
facilities, services or goods that are ancillary, incidental, necessary or
reasonably related to the marketing, development, construction, management,
servicing, ownership or operation of the foregoing, owned by a utility or
otherwise, as well as other contractual arrangements with customers, suppliers
and contractors or (ii) any infrastructure facilities related to (A) the
treatment of water for municipal and other uses, (B) the treatment and/or
management of waste water, (C) the treatment, management and/or remediation of
waste, pollution and/or potential pollutants and (D) any other process or
environmental purpose.
"Permitted Facilities Debt" is defined to mean any Debt that is or
was Incurred with respect to the direct or indirect development, acquisition,
design, engineering, procurement, construction, operation, ownership,
servicing or management of one or more Permitted Facilities (x) currently in
development by the Company (directly or
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indirectly) or which are hereafter acquired or developed by the Company
(directly or indirectly) and (y) in which the Company or one or more
Restricted Subsidiaries or Eligible Joint Ventures has a direct or indirect
interest.
"Permitted Funding Company Loans" is defined to mean (a) Debt of a
Restricted Subsidiary, all the Capital Stock of which is owned, directly or
indirectly, by the Company and that (x) does not own any direct or indirect
interest in a Permitted Facility and (y) is not directly or indirectly
obligated on any Debt owed to any Person other than the Company, a Restricted
Subsidiary or an Eligible Joint Venture (a "Funding Company"), owed to a
Restricted Subsidiary or an Eligible Joint Venture that is not directly or
indirectly obligated on any Debt owed to any Person other than the Company, a
Restricted Subsidiary or an Eligible Joint Venture (except to the extent that
it has pledged the Capital Stock of its Subsidiaries and Joint Ventures to
secure Non-Recourse Debt) (a "Holding Company"), provided that such Debt (i)
does not require that interest be paid in cash at any time sooner than six
months after the final Stated Maturity of the Notes, (ii) does not require any
payment of principal at any time sooner than six months after the final Stated
Maturity of the Notes, (iii) is subordinated in right of payment to all other
Debt of such Restricted Subsidiary other than Debt Incurred pursuant to clause
(vii) of the covenant described under "Limitation on Subsidiary Debt," all of
which will be pari passu, and (iv) is evidenced by a subordinated note in the
form attached to the Indenture, and (b) Debt of a Holding Company to a Funding
Company.
"Permitted Investment" is defined to mean any Investment that is made
directly or indirectly by the Company and its Restricted Subsidiaries in (i) a
Restricted Subsidiary or Eligible Joint Venture (excluding for the purpose of
this clause (i) any Construction Financing) that, directly or indirectly, is
or will be engaged in the construction, development, acquisition, operation,
servicing, ownership or management of a Permitted Facility or in any other
Person as a result of which such other Person becomes such a Restricted
Subsidiary or an Eligible Joint Venture, provided that at the time that any of
the foregoing Investments is proposed to be made, no Event of Default or event
that, after giving notice or lapse of time or both, would become an Event of
Default, will have occurred and be continuing, (ii) Construction Financing
provided by the Company (A) to any of its Restricted Subsidiaries (other than
an Eligible Joint Venture) up to 100% of the Construction Financing required
by such Restricted Subsidiary and (B) to any Eligible Joint Venture a portion
of the Construction Financing required by such Eligible Joint Venture that
does not exceed the ratio of the Capital Stock in such Eligible Joint Venture
that is owned directly or indirectly by the Company to the total amount of the
Capital Stock in such Eligible Joint Venture that is owned directly and
indirectly by the Company and Kiewit together (provided that the Company may
provide such Construction Financing to such Eligible Joint Venture only if
Kiewit provides the balance of such Construction Financing or otherwise causes
it to be provided), if, in either case, (x) the aggregate proceeds of all the
Construction Financing provided is not more than 85% of the sum of the
aggregate proceeds of all the Construction Financing and the aggregate owners'
equity investment in such Restricted Subsidiary or such Eligible Joint
Venture, as the case may be, (y) the Company receives a pledge or assignment
of all the Capital Stock of such Restricted Subsidiary or such Eligible Joint
Venture, as the case may be, that is owned by a non-governmental Person (other
than the Company, its Subsidiaries or the Eligible Joint Ventures) that is
permitted to be pledged for such purpose under applicable law and (z) neither
the Company nor Kiewit reduces its beneficial ownership in such Restricted
Subsidiary or such Eligible Joint Venture, as the case may be, prior to the
repayment in full of the Company's portion of the Construction Financing,
(iii) any Cash Equivalents, (iv) prepaid expenses, negotiable instruments held
for collection and lease, utility and workers' compensation, performance and
other similar deposits in the ordinary course of business consistent with past
practice, (v) loans and advances to employees made in the ordinary course of
business and consistent with past practice, (vi) Debt incurred pursuant to
Currency Protection Agreements and Interest Rate Protection Agreements as
otherwise permitted by the Indenture, (vii) bonds, notes, debentures or other
debt securities and instruments received as a result of Asset Dispositions to
the extent permitted by the covenants described under "Limitation on
Dispositions" above and "Limitation on Business" above, (viii) any Lien
permitted under the provisions described under "Limitation on Liens" above,
(ix) bank deposits and other Investments (to the extent they do not constitute
Cash Equivalents) required by lenders in connection with any Non-Recourse
Debt, provided that the President or the Chief Financial Officer of the
Company determines in good faith, as evidenced by an Officers' Certificate,
that such bank deposits or Investments are required to effect such financings
and are not materially more restrictive, taken as a whole, than comparable
requirements, if any, in comparable financings in the applicable jurisdiction
or (x) any Person to the extent made with Capital Stock
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(other than Redeemable Stock) of the Company (whether by way of purchase,
merger, consolidation or otherwise) to the extent permitted by the covenants
described under "Limitation on Business" above.
"Permitted Joint Venture" is defined to mean a Joint Venture (i) that
is or will be formed with respect to the construction, development,
acquisition, servicing, ownership, operation or management of one or more
Permitted Facilities and (ii) in which (A) the Company or (B) the Company and
Kiewit together, directly or indirectly, own at least 70% of the Capital Stock
therein (of which the Company must own at least half (in any event not less
than 35% of the total outstanding Capital Stock)), provided that if applicable
non-U.S. law restricts the amount of Capital Stock that the Company may own,
the Company must own at least 70% of the amount of Capital Stock that it may
own pursuant to such law, which in any event must be not less than 35% of the
total outstanding Capital Stock therein and (iii) in respect of which the
Company alone or in combination with Kiewit, directly or indirectly, (a)
controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitation, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is a Permitted Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be a
Permitted Joint Venture if (x) Kiewit disposes of any securities issued by the
Company and, as a result of such disposition, Kiewit becomes the beneficial
owner (as such term is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of less than 25% of the
outstanding shares of Voting Stock of the Company or (y) (I) as a result of
any action other than a disposition of securities by Kiewit, Kiewit becomes
the beneficial owner of less than 25% of the outstanding shares of Voting
Stock of the Company and (II) thereafter Kiewit disposes of any securities
issued by the Company as a result of which the beneficial ownership by Kiewit
of the outstanding Voting Stock of the Company is further reduced, provided
that thereafter such Joint Venture may become a Permitted Joint Venture if
Kiewit becomes the beneficial owner of at least 25% of the outstanding shares
of Voting Stock of the Company and the other conditions set forth in this
definition are fulfilled.
"Permitted Payments" is defined to mean, with respect to the Company,
any of its Restricted Subsidiaries or any Eligible Joint Venture, (i) any
dividend on shares of Capital Stock of the Company payable (or to the extent
paid) solely in Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Redeemable
Stock) of the Company and any distribution of Capital Stock (other than
Redeemable Capital Stock) of the Company in respect of the exercise of any
right to convert or exchange any instrument (whether Debt or equity and
including Redeemable Capital Stock) into Capital Stock (other than Redeemable
Capital Stock) of the Company, (ii) the purchase or other acquisition or
retirement for value of any shares of the Company's Capital Stock, or any
option, warrant or other right to purchase shares of the Company's Capital
Stock with additional shares of, or out of the proceeds of a substantially
contemporaneous issuance of, Capital Stock other than Redeemable Stock, (iii)
any defeasance, redemption, purchase or other acquisition for value of any
Debt that by its terms ranks subordinate in right of payment to the Notes with
the proceeds from the issuance of (x) Debt that is subordinate to the Notes at
least to the extent and in the manner as the Debt to be defeased, redeemed,
purchased or otherwise acquired is subordinate in right of payment to the
Notes, provided that such subordinated Debt provides for no mandatory payments
of principal by way of sinking fund, mandatory redemption or otherwise
(including defeasance) by the Company (including, without limitation at the
option of the holder thereof other than an option given to a holder pursuant
to a "change of control" or an "asset disposition" covenant that is no more
favorable to the holders of such Debt than comparable covenants for the Debt
being defeased, redeemed, purchased or acquired or, if none, the covenants
described under "Limitation on Dispositions" and "Purchase of Notes Upon a
Change of Control" above and such Debt is not in an amount (net of any
original issue discount) greater than, any Stated Maturity of the Debt being
replaced and the proceeds of such subordinated Debt are utilized for such
purpose within 45 days of issuance or (y) Capital Stock (other than Redeemable
Stock), (iv) Restricted Payments in an amount not to exceed $75 million in the
aggregate provided that no payment may be made pursuant to this clause (iv) if
an Event of Default, or an event that, after giving notice or lapse of time or
both, would become an Event of
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Default, has occurred and is continuing, (v) any payment or Investment
required by applicable law in order to conduct business operations in the
ordinary course, (vi) a Permitted Investment and (vii) Investments in
Unrestricted Subsidiaries and other Persons that are not Restricted
Subsidiaries or Eligible Joint Ventures in an amount not to exceed $100
million in the aggregate, provided that no payment or Investment may be made
pursuant to this clause (vii) if an Event of Default, or an event that, after
giving notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing. Notwithstanding the foregoing, the amount of
Investments that may be made pursuant to clauses (iv) or (vii), as the case
may be, may be increased by the net reduction in Investments of the type made
previously pursuant to clauses (iv) or (vii), as the case may be, that result
from payments of interest on Debt, dividends, or repayment of loans or
advances, the proceeds of the sale or disposition of the Investment or other
return of the amount of the original Investment to the Company, the Restricted
Subsidiary or the Eligible Joint Venture that made the original Investment
from the Person in which such Investment was made or any distribution or
payment of such Investment to the extent that such distribution or payment
constituted either a Restricted Payment or a Permitted Payment, provided that
(x) the aggregate amount of such payments will not exceed the amount of the
original Investment by the Company, such Restricted Subsidiary or Eligible
Joint Venture that reduced the amount available pursuant to clause (iv) or
clause (vii), as the case may be, for making Restricted Payments and (y) such
payments may be added pursuant to this proviso only to the extent such
payments are not included in the calculation of Adjusted Consolidated Net
Income.
"Permitted Working Capital Facilities" is defined to mean one or more
loan or credit agreements providing for the extension of credit to the Company
for the Company's working capital purposes, which credit agreements will be
ranked pari passu with or subordinate to the Notes in right of payment and may
be secured or unsecured.
"Person" is defined to mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) or preferred or preference stock of
such Person that is outstanding or issued on or after the date of original
issuance of the Notes.
"Property" of any Person is defined to mean all types of real,
personal, tangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
GAAP.
"Purchase Money Debt" means Debt representing, or Incurred to
finance, the cost of acquiring any Property, provided that (i) any Lien
securing such Debt does not extend to or cover any other Property other than
the Property being acquired and (ii) such Debt is Incurred, and any Lien with
respect thereto is granted, within 18 months of the acquisition of such
Property.
"Rating Agencies" is defined to mean (i) S&P and (ii) Moody's or
(iii) if S&P or Moody's or both do not make a rating of the Notes publicly
available, a nationally recognized securities rating agency or agencies, as
the case may be, selected by the Company, which will be substituted for S&P,
Moody's or both, as the case may be.
"Rating Category" is defined to mean (i) with respect to S&P, any of
the following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories), (ii) with respect to Moody's, any of the following categories:
Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the
equivalent of any such category of S&P or Moody's used by another Rating
Agency. In determining whether the rating of the Notes has decreased by one or
more gradations, gradations within Rating Categories (+ and -for S&P, 1, 2 and
3 for Moody's or the equivalent gradations for another Rating Agency) will be
taken into account (e.g., with respect
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to S&P, a decline in a rating from BB+ to BB, as well as from BB-to B+, will
constitute a decrease of one gradation).
"Rating Decline" is defined to mean the occurrence of the following
on, or within 90 days after, the earlier of (i) the occurrence of a Change of
Control and (ii) the date of public notice of the occurrence of a Change of
Control or of the public notice of the intention of the Company to effect a
Change of Control (the "Rating Date") which period will be extended so long as
the rating of the Notes is under publicly announced consideration for possible
downgrading by any of the Rating Agencies: (a) in the event that the Notes are
rated by either Rating Agency on the Rating Date as Investment Grade, the
rating of the Notes by both such Rating Agencies will be reduced below
Investment Grade, or (b) in the event the Notes are rated below Investment
Grade by both such Rating Agencies on the Rating Date, the rating of the Notes
by either Rating Agency will be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or Debt
having a scheduled maturity prior to the Stated Maturity of the Notes,
provided that any Capital Stock that would not constitute Redeemable Stock but
for provisions thereof giving holders thereof the right to require the Company
to purchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or a "change of control" occurring prior to the Stated Maturity of the
Notes will not constitute Redeemable Stock if the "asset sale" or "change of
control" provision applicable to such Capital Stock is no more favorable to
the holders of such Capital Stock than the provisions contained in the
covenants described under "Limitation on Dispositions" and "Purchase of Notes
Upon a Change of Control" above and such Capital Stock specifically provides
that the Company will not purchase or redeem any such Capital Stock pursuant
to such covenants prior to the Company's purchase of Notes required to be
purchased by the Company under the covenants described under "Limitation on
Dispositions" and "Purchase of Notes Upon a Change of Control" above.
"Reference Period" is defined to mean the four most recently
completed fiscal quarters for which financial information is available
preceding the date of a transaction giving rise to the need to make a
financial calculation.
"Restricted Payment" is defined to mean (i) any dividend or other
distribution on any shares of the Company's Capital Stock, provided that a
dividend or other distribution consisting of the Capital Stock of an
Unrestricted Subsidiary will not constitute a Restricted Payment except to the
extent of the portion thereof that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment," (ii) any payment on account of the purchase, redemption,
retirement or acquisition for value of the Company's Capital Stock, (iii) any
defeasance, redemption, purchase or other acquisition or retirement for value
prior to the scheduled maturity of any Debt ranked subordinate in right of
payment to the Notes other than repayment of Debt of the Company to a
Restricted Subsidiary or an Eligible Joint Venture, (iv) any Investment made
in a Person (other than the Company or any Restricted Subsidiary or any
Eligible Joint Venture) and (v) designating a Restricted Subsidiary as an
Unrestricted Subsidiary (the Restricted Payment made upon such a designation
to be determined as the fair market value of the Capital Stock of such
Restricted Subsidiary owned directly or indirectly by the Company at the time
of the designation). Notwithstanding the foregoing, "Restricted Payment" will
not include any Permitted Payment, except that any payment made pursuant to
clauses (iv) and (v) of the definition of "Permitted Payment" will be counted
in the calculation set forth in clause (c) of the covenant described under
"Limitation on Restricted Payments."
"Restricted Subsidiary" is defined to mean any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
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"Senior Debt" is defined to mean the principal of and interest on all
Debt of the Company whether created, Incurred or assumed before, on or after
the date of original issuance of the Notes (other than the Notes), provided
that Senior Debt will not include (i) Debt that, when Incurred and without
respect to any election under Section 1111(b) of Title 11, United States Code,
was without recourse to the Company, (ii) Debt of the Company to any Affiliate
and (iii) any Debt of the Company that, by the terms of the instrument
creating or evidencing the same, is specifically designated as being junior in
right of payment to the Notes or any other Debt of the Company.
"Significant Subsidiary" is defined to mean a Restricted Subsidiary
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act and the Exchange Act.
"Stated Maturity" is defined to mean, with respect to any debt
security or any installment of interest thereon, the date specified in such
debt security as the fixed date on which any principal of such debt security
or any such installment of interest is due and payable.
"Subsidiary" is defined to mean, with respect to any Person
including, without limitation, the Company and its Subsidiaries, (i) any
corporation or other entity of which such Person owns, directly or indirectly,
a majority of the Capital Stock or other ownership interests and has ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, and (ii) with respect to the Company and, as
appropriate, its Subsidiaries, any Permitted Joint Venture, including, without
limitation, Coso Land Company Joint Venture, Coso Finance Partners, Coso
Energy Developers and Coso Power Developers, provided that in respect of any
Subsidiary that is not a Permitted Joint Venture, the Company must exercise
control over such Subsidiary and its Property to the same extent as a
Permitted Joint Venture.
"Subsidiary Refinancing Debt" is defined to mean Debt issued in
exchange for, or the proceeds of which are used to refinance (including to
purchase), outstanding Debt of a Restricted Subsidiary or an Eligible Joint
Venture, including, without limitation, Construction Financing, in an amount
(or, if such new Debt provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, with
an original issue price) not to exceed the amount so exchanged or refinanced
(plus accrued interest or dividends and all fees, premiums (in excess of
accreted value) and expenses related to such exchange or refinancing), for
which purpose the amount so exchanged or refinanced will not exceed, in the
case of Debt, the lesser of (x) the principal amount of the Debt so exchanged
or refinanced and (y) if the Debt being exchanged or refinanced was issued
with an original issue discount, the accreted value thereof (as determined in
accordance with GAAP) at the time of such exchange or refinancing, and, in the
case of an equity investment made in lieu of or as part of Construction
Financing, Debt, in an amount not to exceed the capital and surplus shown on
the balance sheet of such Restricted Subsidiary or Eligible Joint Venture,
provided that (A) such Debt will be Non-Recourse if the Debt so exchanged or
refinanced is Non-Recourse and (B) the Average Life of the new Debt will be
equal to or greater than the Average Life of the Debt to be exchanged or
refinanced, provided further that upon the first refinancing of any
Construction Financing of a Restricted Subsidiary or an Eligible Joint
Venture, (i) the amount of the Subsidiary Refinancing Debt issued in exchange
for or to refinance such Construction Financing will not be limited by this
provision and (ii) the Subsidiary Refinancing Debt issued in exchange for or
to refinance such Construction Financing will not be subject to the provisions
of the foregoing clause (B) of this provision.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors Incurred, created, assumed or Guaranteed by such Person or any of
its Subsidiaries or Joint Ventures arising in the ordinary course of business.
"Unrestricted Subsidiary" is defined to mean any Subsidiary of the
Company that becomes an Unrestricted Subsidiary in accordance with the
requirements set forth in the next sentence. The Company may designate any
Restricted Subsidiary as an Unrestricted Subsidiary if (a) such designation is
in compliance with the first paragraph of the covenant described under
"Limitation on Restricted Payments" above and (b) after giving effect to such
designation, such Subsidiary does not own, directly or indirectly, a majority
of the Capital Stock or the Voting Stock of any other Restricted Subsidiary
unless such other Restricted Subsidiary is
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designated as an Unrestricted Subsidiary at the same time. Any such
designation will be effected by filing with the Trustee an Officers'
Certificate certifying that such designation complies with the requirements of
the immediately preceding sentence. No Debt or other obligation of an
Unrestricted Subsidiary may be with recourse to the Company, any of its
Restricted Subsidiaries, any Eligible Joint Venture or any of their respective
Property except to the extent otherwise permitted by the provisions of the
Indenture. An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary if (i) all the Debt of such Unrestricted Subsidiary could be
Incurred under the provision described under "Limitation on Subsidiary Debt"
above or (ii) any portion of such Debt could not be Incurred under such
provision, if the Company could borrow all such remaining Debt under the
provision described in the first paragraph under "Limitation on Debt" above.
"U.S. Government Obligations" is defined to mean securities that are
(i) direct obligations of the U.S. for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the U.S., the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
U.S., that, in either case are not callable or redeemable at the option of the
issuer thereof, and will also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government
Obligations or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of
a depository receipt, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest
on or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" is defined to mean, with respect to any Person,
Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors (or persons fulfilling similar responsibilities) of such
Person.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect
transfers of interests in the global certificate or certificates issued in
connection with the Exchange Notes. The Exchange Notes will be issued only as
fully registered securities registered in the name of Cede & Co. (as nominee
for DTC). One or more fully registered global Notes certificates (the "Global
Certificates") will be issued, representing, in the aggregate, the Exchange
Notes, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Notes within the DTC system must be made by or through
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of Notes ("Beneficial Owner") is
in turn to be recorded on the Participants' and Indirect Participants'
records. Beneficial Owners will not receive
-104-
<PAGE>
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants or Indirect Participants through which the Beneficial Owners
purchased Notes. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Notes, except
in the event that use of the book-entry system for the Notes is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Notes;
DTC's records reflect only the identity of the Participants to whose accounts
such Notes are credited, which may or may not be the Beneficial Owners. The
Participants and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to
Participants, by Participants to Indirect Participants, and by Participants
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Redemption notices in respect of the Notes held in book-entry form
shall be sent to Cede & Co. If less than all of the Notes are being redeemed,
DTC will determine the amount of the interest of each Participant to be
redeemed in accordance with its procedures.
Distributions on the Notes held in book-entry form will be made to
DTC in immediately available funds. DTC's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments by
Participants and Indirect Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participants and Indirect Participants and not of DTC
or the Company, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of distributions to DTC is the
responsibility of the Company, disbursement of such payments to Participants
is the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Participants and Indirect
Participants.
Except as provided herein, a Beneficial Owner of an interest in a
Global Certificate will not be entitled to receive physical delivery of Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Notes.
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving notice to the Company. Under
such circumstances, in the event that a successor securities depository is not
obtained, certificates for the Notes are required to be printed and delivered.
Additionally, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository). In that event,
certificates for the Notes will be printed and delivered. In each of the above
circumstances, the Company will appoint a paying agent with respect to the
Notes.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Notes as
represented by a Global Certificate.
-105-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
In connection with the sale of the Old Notes to the Initial
Purchaser, the Company executed and delivered for the benefit of the holders
of the Old Notes the Registration Rights Agreement, which provided that the
Company will file and cause to become effective, at its cost, the Exchange
Offer Registration Statement with respect to a registered offer to exchange
the Old Notes for the Exchange Notes which are in all material respects
identical to the Old Notes, except the Exchange Notes will not contain terms
with respect to transfer restrictions or increases in interest rate due to a
Registration Default. Upon such Exchange Offer Registration Statement being
declared effective, the Company agreed to offer the Exchange Notes in return
for surrender of the Old Notes. The Exchange Offer will be made by the Company
to satisfy its obligations pursuant to the Registration Rights Agreement, which
also requires the Company to use its reasonable best efforts to (i) cause the
Exchange Offer Registration Statement to be declared effective by the
Commission prior to the 270th day from the Issue Date, (ii) keep the Exchange
Offer open for a period of not less than the shorter of (a) the period ending
when the last of the remaining Old Notes is tendered in the Exchange Offer and
(B) 30 days from the date notice is mailed to holders of the Old Notes, and
(iii) maintain the Exchange Offer Registration Statement continuously
effective for a period of not less than the longer of (a) the period until
consummation of the Exchange Offer and (b) 120 days after effectiveness of the
Exchange Offer Registration Statement (subject to extension under certain
limited circumstances), provided that in the event that all exchanges of Old
Notes for Exchange Notes covered by the Exchange Offer Registration Statement
has been made, the Exchange Offer Registration Statement need not remain
continuously effective. For each Old Note surrendered to the Company under the
Exchange Offer, the Holder will receive Exchange Notes aggregating an equal
principal amount. Interest on each Exchange Note shall accrue from the last
Interest Payment Date on which interest was paid on the Note so surrendered
or, if no interest has been paid, since the Issue Date.
Under existing Commission interpretations, the Exchange Notes would
be freely transferable by holders other than affiliates of the Company after
the Exchange Offer without further registration under the Securities Act if
the holder of the Exchange Notes represents that it is acquiring the Exchange
Notes in the ordinary course of its business, that it has no arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes and that it is not an affiliate of the Company, as such terms
are interpreted by the Commission; provided, however, that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange
Offer will have a prospectus delivery requirement with respect to resales of
such Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Old Notes) with the prospectus contained in the Exchange
Offer Registration Statement. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers and other persons,
if any, with similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes.
A holder of Old Notes (other than certain specified holders) who
wishes to exchange such Old Notes for Exchange Notes in the Exchange Offer
will be required to represent that any Exchange Notes to be received by it
will be acquired in the ordinary course of its business and that at the time
of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 of the Securities Act, or
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
Any Old Notes that remain outstanding after consummation of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
In the event that the Company determines in good faith that
applicable interpretations of the Staff of the Commission or other
circumstances specified in the Registration Rights Agreement do not permit the
Company to effect the Exchange Offer, the Company has agreed to use its
reasonable best efforts (subject to customary
-106-
<PAGE>
representations and agreements of the Holders) to have a shelf registration
statement covering resale of the Old Notes declared effective and kept
effective until three years after the Issue Date, subject to certain
exceptions. In addition, the Company may postpone or suspend the filing or the
effectiveness of any registration statement if such action is taken by the
Company in good faith and for valid business reasons, including the
acquisition or divestiture of assets, other pending corporate developments,
public filings with the Commission or other similar events. The Company has
agreed, in the event of such a shelf registration, to provide to each Holder
copies of the prospectus, notify each such Holder when a registration
statement for the Old Notes had become effective and take certain other
actions as are appropriate to permit such resales of the Old Notes.
In the event that the Exchange Offer is not commenced or such
registration statement has not been declared effective within 270 days
following the Issue Date, the interest rate on the Old Notes shall
increase by one-half of one percent per annum (50 basis points) effective on
the 271st day following the Issue Date until the date on which the Exchange
Offer is commenced or such registration statement shall have become effective.
If a registration statement has not been declared effective within two years
after the Issue Date, such increase in interest rate will become permanent.
A Holder that sells Old Notes pursuant to a shelf registration
generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sale and will be required to agree in writing to be bound
by the provisions of the Registration Rights Agreement which are applicable to
such holder (including certain indemnification obligations).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all provisions of the Registration Rights
Agreement, a copy of which is available upon request from the Company.
-107-
<PAGE>
UNITED STATES TAXATION
GENERAL
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes has been
prepared by Willkie Farr & Gallagher, counsel to the Company, and is, in the
opinion of Willkie Farr & Gallagher, an accurate summary of such consequences
to the typical purchaser of Notes. The summary deals only with Notes held as
capital assets by initial purchasers who are United States holders, and not
with subsequent holders of the Notes or with special classes of holders, such
as dealers in securities or currencies, life insurance companies, persons
holding Notes as a hedge or hedged against currency risks or as part of a
straddle, or tax-exempt organizations. For this purpose, a "United States
holder" is a person who is, for United States federal income tax purposes, (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the regulations thereunder, and other relevant sources of
authority. All such sources of authority may be amended or otherwise changed
at any time, and these amendments or other changes may be given retroactive
effect.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE PARTICULAR CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES UNDER THE CODE AND THE LAWS OF ANY OTHER TAXING
JURISDICTION.
INTEREST INCOME
The fixed portion of interest on the Notes, i.e., 9.1/2% interest
that will be paid whether or not an effective Registration Statement is filed
with respect to the Notes, will be includible in the income of a Holder under
the Holder's regular method of accounting.
The proper tax treatment of the additional interest (the "Contingent
Interest") in the event of a Registration Default (as described in
"Registration Rights Agreement") is uncertain under existing law. The Treasury
has, from time to time, proposed regulations governing contingent payments of
interest, but the currently proposed regulations would not, under their
applicable effective date, apply to the Notes, and previously proposed
regulations have been withdrawn. Absent applicable regulations, the Company
intends to deduct the Contingent Interest and report it to Holders of the
Notes based on a daily accrual method only with respect to periods for which
there is a Registration Default.
PURCHASE, SALE, RETIREMENT AND EXCHANGE OF THE NOTES
A Holder's tax basis in a Note will initially be its U.S. dollar
cost. A Holder will generally recognize gain or loss on the sale or retirement
of a Note equal to the difference between the amount realized on the sale or
retirement and the tax basis of the Note. Except to the extent attributable to
accrued but unpaid interest (which will be includible in income, as described
above, and will not be includible in income a second time upon the sale or
retirement), gain or loss recognized on the sale or retirement of a Note will
be capital gain or loss and will be long-term capital gain or loss if the Note
was held for more than one year.
An exchange of an Old Note for an Exchange Note pursuant to the
Exchange Offer should not be a taxable event to Holders for federal income tax
purposes. The exchange of an Old Note for an Exchange Note should not be
considered a taxable "exchange" for federal income tax purposes because an
Exchange Note should not be considered to differ materially in kind or extent
from an Old Note. If, however, the exchange of an Old Note for an Exchange
Note were treated as an "exchange" for federal income tax purposes, such an
exchange should constitute a tax-free recapitalization for federal income tax
purposes. Accordingly, an Exchange Note should have the same issue price as an
Old Note and a Holder should have the same adjusted basis and holding period
in the Exchange Note as it had in an Old Note immediately before the exchange.
-108-
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments
of principal and interest made on a Note and the proceeds of the sale of a
Note before maturity within the United States to non-corporate United States
holders, and "backup withholding" at a rate of 31% will apply to such payments
if the United States holder fails to provide an accurate taxpayer
identification number or to report all interest and dividends required to be
shown on its federal income tax returns.
Any amount paid as backup withholding will be creditable against the
United States holder's U.S. federal income tax liability.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON
A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
as a result of market-making activities or other trading activities in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Old Notes
if such Old Notes were acquired by such Participating Broker-Dealers for their
own accounts as a result of such activities. The Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Notes for a period ending 120 days after the Registration Statement
of which this Prospectus is a part has been declared effective (subject to
extension under certain limited circumstances) or, if earlier, when all such
Exchange Notes have been disposed of by the Participating Broker-Dealer. See
"The Exchange Offer--Resales of Exchange Notes."
The Company will not receive any proceeds from the issuance of the
Exchange Notes offered hereby. Exchange Notes received by broker-dealers for
their own accounts in connection with the Exchange Offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that
were received by it for its own account in connection with the Exchange Offer
and any broker or dealer that participates in a distribution of such Exchange
Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes will be
passed upon for the Company by Willkie Farr & Gallagher, One Citicorp Center,
153 East 53rd Street, New York, New York.
-109-
<PAGE>
EXPERTS
The consolidated financial statements and financial statement
schedule of CalEnergy Company, Inc. and subsidiaries as of December 31, 1995
and 1994 and each of the three years in the period ended December 31, 1995
included or incorporated by reference in this Prospectus and the consolidated
financial statements of Magma Power Company and subsidiaries, a wholly-owned
subsidiary of CalEnergy Company, Inc., for the year ended December 31, 1995
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing in this
Prospectus and incorporated herein by reference in this Prospectus.
The balance sheets of Falcon Seaboard Resources, Inc. as of December
31, 1995 and 1994 and the related statements of operations, retained earnings
(deficit) and cash flows for each of the three years in the period ended
December 31, 1995 incorporated in this Prospectus by reference to the
Company's Form 8-K/A dated August 27, 1996 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference.
With respect to the Company's unaudited interim financial information
for the three and six month periods ended June 30, 1996 and 1995, included
herein, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their report included in the Company's report on Form 10-Q for the
quarter ended June 30, 1996 and included herewith, they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their reports on such information should be
restricted in light of the limited nature of the review procedures applied.
The balance sheets of BN Geothermal Inc., Conejo Energy Company, San
Felipe Energy Company and Niguel Energy Company as of December 31, 1995 and
1994 and the related statements of operations, shareholder's equity and cash
flows for each of the three years in the period ended December 31, 1995,
incorporated by reference into this Prospectus by reference to the Company's
Form 8-K/A dated July 1, 1996, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report.
The consolidated balance sheet of Magma Power Company, and
subsidiaries as of December 31, 1994 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1994, incorporated by reference to
the Company's Form 10-K dated December 31, 1995 in this Prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
-110-
<PAGE>
CALENERGY COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994 ............................. F-2
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994,
and 1993 ............................................................................... F-3
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995,
1994 and 1993 .......................................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31 1995, 1994 and
1993 ................................................................................... F-5
Notes to Consolidated Financial Statements ............................................... F-6
Independent Auditors' Report ............................................................. F-28
Interim Consolidated Financial Statements:
Report of Independent Accountants ........................................................ F-29
Consolidated Balance Sheets, June 30, 1996 and December 31, 1995 ......................... F-30
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1996
and 1995 ............................................................................... F-31
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 ... F-32
Notes to Consolidated Financial Statements ............................................... F-33
</TABLE>
F-1
<PAGE>
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND DECEMBER 31, 1994
DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and investments ................................................... $ 72,114 $ 254,004
Joint venture cash and investments (Note 9) ............................ 77,590 54,087
Restricted cash (Notes 3, 7, 9 and 10) ................................. 149,227 131,775
Short-term investments ................................................. 34,190 50,000
Accounts receivable .................................................... 57,909 28,272
Due from Joint Ventures ................................................ 27,273 --
Properties, plants, contracts and equipment, net (Notes 5, 7, 9 and 10) 1,778,589 561,643
Notes receivable--Joint Ventures (Note 19) ............................. 14,254 12,627
Excess of cost over fair value of net assets acquired, net (Note 3) ... 302,288 --
Equity investment in Casecnan (Note 8) ................................. 60,815 --
Deferred charges and other assets ...................................... 79,789 38,737
------------- -------------
Total assets ......................................................... $2,654,038 $1,131,145
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable ....................................................... $ 6,638 $ 1,679
Other accrued liabilities .............................................. 87,892 42,658
Project finance loans (Note 9) ......................................... 257,933 233,080
Construction loans (Note 10) ........................................... 211,198 31,503
Senior discount notes (Note 11) ........................................ 477,355 431,946
Salton Sea notes and bonds (Note 5) .................................... 452,088 --
Limited recourse senior secured notes (Note 5) ......................... 200,000 --
Convertible subordinated debentures (Note 12) .......................... 100,000 100,000
Convertible debt (Note 13) ............................................. 64,850 --
Deferred income taxes (Note 14) ........................................ 226,520 26,568
Due to Joint Ventures .................................................. -- 269
------------- -------------
Total liabilities .................................................... 2,084,474 867,703
------------- -------------
Deferred income (Note 7) ............................................... 26,032 19,851
------------- -------------
Commitments and contingencies (Notes 6 and 18) .........................
Redeemable preferred stock (Note 13) ................................... -- 63,600
------------- -------------
Stockholders' equity (Notes 13, 15, 16 and 17):
Preferred stock--authorized 2,000 shares, no par value (Note 15) ...... -- --
Common stock--par value $0.0675 per share, authorized 80,000 and
60,000 shares, issued 50,680 and 35,649 shares, outstanding 50,593 and
31,849 shares ......................................................... 3,421 2,407
Additional paid in capital ............................................. 343,406 100,421
Retained earnings ...................................................... 205,059 142,937
Treasury stock--87 and 3,800 common shares at cost ..................... (1,348) (65,774)
Unearned compensation--restricted stock (Note 16) ...................... (7,006) --
------------- -------------
Total stockholders' equity ........................................... 543,532 179,991
------------- -------------
Total liabilities and stockholders' equity ........................... $2,654,038 $1,131,145
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue:
Sales of electricity .................................. $ 335,630 $ 154,562 $ 132,059
Royalty income ........................................ 19,482 -- --
Interest and other income ............................. 43,611 31,292 17,194
----------- ----------- -----------
Total revenues ...................................... 398,723 185,854 149,253
----------- ----------- -----------
Cost and expenses:
Plant operations ...................................... 79,294 33,015 25,362
General and administration ............................ 23,376 13,012 13,158
Royalties ............................................. 24,308 9,888 8,274
Depreciation and amortization ......................... 72,249 21,197 17,812
Loss on equity investment in Casecnan ................. 362 -- --
Interest .............................................. 134,637 62,837 30,205
Less interest capitalized ............................. (32,554) (9,931) (6,816)
----------- ----------- -----------
Total expenses ...................................... 301,672 130,018 87,995
----------- ----------- -----------
Income before provision for income taxes .............. 97,051 55,836 61,258
Provision for income taxes (Note 14) .................. 30,631 17,002 18,184
----------- ----------- -----------
Income before change in accounting principle and
extraordinary item ................................... 66,420 38,834 43,074
Cumulative effect of change in accounting principle
(Note 14) ............................................ -- -- 4,100
Extraordinary item (Note 20) .......................... -- (2,007) --
----------- ----------- -----------
Income before minority interest and preferred
dividends ............................................ 66,420 36,827 47,174
Minority interest ..................................... 3,005 -- --
----------- ----------- -----------
Net income ............................................ 63,415 36,827 47,174
Preferred dividends ................................... 1,080 5,010 4,630
----------- ----------- -----------
Net income available to common stockholders .......... $ 62,335 $ 31,817 $ 42,544
=========== =========== ===========
Income per share before change in accounting principle
and extraordinary item ............................... $ 1.25 $ .95 $ 1.00
Cumulative effect of change in accounting principle
(Note 14) ............................................ -- -- .11
Extraordinary item (Note 20) .......................... -- (.06) --
----------- ----------- -----------
Net income per share--primary ......................... $ 1.25 $ .89 $ 1.11
=========== =========== ===========
Net income per share--fully diluted ................... $ 1.18 $ .88 $ 1.09
=========== =========== ===========
Average number of shares outstanding--primary ........ 49,971 35,721 38,485
=========== =========== ===========
Fully diluted shares .................................. 57,742 40,166 40,781
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1995
Dollars and Shares in Thousands, Except Per Share Amounts
<TABLE>
<CAPTION>
OUTSTANDING ADDITIONAL
COMMON COMMON PAID-IN
SHARES STOCK CAPITAL
------------- --------- ------------
<S> <C> <C> <C>
Balance December 31, 1992 ............ 35,258 $ 2,380 $ 97,977
Exercise of stock options ............ 258 18 937
Issuance of stock for purchase of
The Ben Holt Co. .................... 87 6 1,551
Purchase of treasury stock ........... (157) -- --
Preferred stock dividends, Series C,
including cash distributions of $100 -- -- --
Tax benefit from stock plan .......... -- -- 500
Net income before preferred dividends -- -- --
------------- --------- ------------
Balance December 31, 1993 ............ 35,446 2,404 100,965
Exercise of stock options ............ 46 3 379
Purchase of treasury stock ........... (3,765) -- --
Exercise of stock options from
treasury stock ...................... 96 -- (1,473)
Employee stock purchase plan issues
from treasury stock ................. 26 -- (122)
Preferred stock dividends, Series C,
including cash distribution of $121 -- -- --
Tax benefit from stock plan .......... -- -- 672
Net income before preferred dividends -- -- --
------------- --------- ------------
Balance December 31, 1994 ............ 31,849 2,407 100,421
Equity offering ...................... 18,170 1,004 240,825
Exercise of stock options ............ 102 7 303
Restricted stock ..................... 500 -- 848
Amortization of unearned compensation -- -- --
Employee stock purchase plan issues . 41 3 559
Exercise of stock options from
treasury stock ...................... 33 -- (416)
Purchase of treasury stock ........... (102) -- --
Preferred stock dividends, Series C,
including cash distribution of $43 . -- -- --
Tax benefit from stock plan .......... -- -- 866
Net income before preferred dividends -- -- --
------------- --------- ------------
Balance December 31, 1995 ............ 50,593 $ 3,421 $ 343,406
============= ========= ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RETAINED TREASURY UNEARNED
EARNINGS STOCK COMPENSATION TOTAL
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Balance December 31, 1992 ............ $ 68,407 $ -- $ -- $ 168,764
Exercise of stock options ............ -- -- -- 955
Issuance of stock for purchase of
The Ben Holt Co. .................... -- -- -- 1,557
Purchase of treasury stock ........... -- (2,897) -- (2,897)
Preferred stock dividends, Series C,
including cash distributions of $100 (4,550) -- -- (4,550)
Tax benefit from stock plan .......... -- -- -- 500
Net income before preferred dividends 47,174 -- -- 47,174
----------- ----------- -------------- -----------
Balance December 31, 1993 ............ 111,031 (2,897) -- 211,503
Exercise of stock options ............ -- -- -- 382
Purchase of treasury stock ........... -- (65,119) -- (65,119)
Exercise of stock options from
treasury stock ...................... -- 1,772 -- 299
Employee stock purchase plan issues
from treasury stock ................. -- 470 -- 348
Preferred stock dividends, Series C,
including cash distribution of $121 (4,921) -- -- (4,921)
Tax benefit from stock plan .......... -- -- -- 672
Net income before preferred dividends 36,827 -- -- 36,827
----------- ----------- -------------- -----------
Balance December 31, 1994 ............ 142,937 (65,774) -- 179,991
Equity offering ...................... -- 56,801 -- 298,630
Exercise of stock options ............ -- -- -- 310
Restricted stock ..................... -- 8,652 (9,500) --
Amortization of unearned compensation -- -- 2,494 2,494
Employee stock purchase plan issues . -- -- -- 562
Exercise of stock options from
treasury stock ...................... -- 563 -- 147
Purchase of treasury stock ........... -- (1,590) -- (1,590)
Preferred stock dividends, Series C,
including cash distribution of $43 . (1,293) -- -- (1,293)
Tax benefit from stock plan .......... -- -- -- 866
Net income before preferred dividends 63,415 -- -- 63,415
----------- ----------- -------------- -----------
Balance December 31, 1995 ............ $ 205,059 $ (1,348) $ (7,006) $ 543,532
=========== =========== ============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended December 31, 1995
Dollars in Thousands
<TABLE>
<CAPTION>
1995 1994 1993
------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 63,415 $ 36,827 $ 47,174
Adjustments to reconcile net cash flow from operating activities:
Depreciation and amortization .................................. 65,244 21,197 17,812
Amortization of excess of cost over fair value
of net assets acquired ........................................ 7,005 -- --
Amortization of original issue discount ........................ 45,409 31,946 --
Amortization of deferred financing costs ....................... 8,979 1,687 1,013
Amortization of unearned compensation .......................... 2,494 -- --
Provision for deferred income taxes ............................ 13,983 8,258 3,098
Loss on equity investment in Casecnan .......................... 362 -- --
Expense of previously deferred financing costs ................. -- 198 --
Changes in other items:
Accounts receivable ........................................... 213 (6,614) (5,486)
Accounts payable and other accrued liabilities ................ 3,838 23,864 (784)
Deferred income ............................................... 6,181 (437) (876)
Income tax payable ............................................ 2,084 (4,500) 4,000
Other assets .................................................. -- -- (177)
------------- ----------- -----------
Net cash flows from operating activities ....................... 219,207 112,426 65,774
------------- ----------- -----------
Cash flows from investing activities:
Capital expenditures relating to power plants and
development of existing projects ............................... (25,884) (37,717) (26,860)
Acquisition of equipment ........................................ (1,236) (361) (1,104)
Purchase of Magma, net of cash acquired ......................... (907,614) (3,043) --
Upper Mahiao--construction in progress .......................... (140,350) (48,554) --
Mahanagdong--construction in progress ........................... (55,117) (21,443) --
Malitbog--construction in progress .............................. (94,188) -- --
Investment in Casecnan .......................................... (61,177) -- --
Other International development ................................. (8,973) (2,445) --
Salton Sea Expansion ............................................ (62,430) -- --
Pacific Northwest, Nevada, and Utah exploration costs .......... (10,445) (8,493) (19,060)
Decrease (increase) in short-term investments ................... 80,565 (50,000) --
Decrease (increase) in restricted cash .......................... (17,452) (83,670) 14,409
Decrease in other investments and assets ........................ 14,519 1,847 941
Yuma--construction in progress .................................. -- -- (40,167)
Transmission line deposit ....................................... -- -- 7,684
------------- ----------- -----------
Net cash flows from investing activities ....................... (1,289,782) (253,879) (64,157)
------------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common and treasury stock and
exercise of stock options ...................................... 299,649 1,580 2,912
Proceeds from Salton Sea notes and bonds ........................ 475,000 -- --
Proceeds from limited recourse senior secured notes ............ 200,000 -- --
Proceeds from merger facility ................................... 500,000 -- --
Recapitalization of merger facility ............................. (500,000) -- --
Repayment of project loans ...................................... (153,752) (13,800) (16,724)
Construction loans .............................................. 179,695 31,503 --
Repayment of Salton Sea notes and bonds ......................... (22,912) -- --
Deferred charges relating to debt financing ..................... (34,733) (11,905) (2,582)
Decrease (increase) in amounts due from Joint Ventures ......... (29,169) 316 (3,146)
Purchase of treasury stock ...................................... (1,590) (65,119) (2,897)
Proceeds from issue of Senior Discount Note ..................... -- 400,000 --
Proceeds from issue of convertible subordinated debentures ..... -- -- 100,000
Defeasance of senior notes ...................................... -- (35,730) --
------------- ----------- -----------
Net cash flows from financing activities ....................... 912,188 306,845 77,563
------------- ----------- -----------
Net increase (decrease) in cash and investments ................. (158,387) 165,392 79,180
------------- ----------- -----------
Cash and investments at beginning of period ..................... 308,091 142,699 63,519
------------- ----------- -----------
Cash and investments at end of period ........................... $ 149,704 $ 308,091 $ 142,699
============= =========== ===========
Interest paid (net of amounts capitalized) ...................... $ 50,840 $ 12,624 $ 20,136
============= =========== ===========
Income taxes paid ............................................... $ 14,812 $ 4,926 $ 6,819
============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Dollars and Shares in Thousands, Except Per Share Amounts
1. BUSINESS
CalEnergy Company, Inc. (the "Company"), formerly California Energy
Company, Inc., was formed in 1971. It is primarily engaged in the development
of geothermal resources and conversion of such resources into electrical power
and steam for sale to electric utilities, and the development and operation of
other environmentally responsible forms of power generation.
The Company has organized several partnerships and joint ventures (herein
referred to as Coso Joint Ventures) in order to develop geothermal energy at
the China Lake Naval Air Weapons Station, Coso Hot Springs, China Lake,
California. Collectively, the projects undertaken by these Coso Joint Ventures
are referred to as the Coso Project. The Company is the operator and holds
interests between 46.4% and 50% in the Coso Joint Ventures after payout.
Payout is achieved when a Coso Joint Venture has returned the initial capital
to the Coso Joint Venturers. In addition, the Company is developing geothermal
resources in Northern California and Oregon (collectively the Pacific
Northwest). In January 1991, the Company acquired a power plant and an
interest in steam fields in Nevada and Utah (See Note 7). In 1992, the Company
entered into the natural gas-fired electrical generation market through the
purchase of a development opportunity in Yuma, Arizona. Commercial operation
of the Yuma project commenced in late May 1994. In 1993, the Company started
developing a number of international power project opportunities where private
power generating programs have been initiated, including the Philippines and
Indonesia. In addition, in January 1995, the Company acquired approximately
51% of Magma Power Company ("Magma") and completed the acquisition in February
1995 by acquiring the remaining percentage of approximately 49% of Magma
Common Stock. Magma's operating assets include four projects referred to as
the Partnership Project of which Magma has a 50% interest, the Salton Sea
Project of which Magma owns 100% and certain royalties received from the
Partnership Project and other non related projects (See Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and its proportionate share of the joint
ventures in which it has invested. All significant inter-enterprise
transactions and accounts have been eliminated.
INVESTMENTS AND RESTRICTED CASH
Investments other than restricted cash are primarily commercial paper and
money market securities. The restricted cash balance includes such securities
and mortgage backed securities, and is mainly composed of amounts deposited in
restricted accounts from which the Company will source its equity contribution
requirements relating to the Upper Mahiao, Mahanagdong, Malitbog, Salton Sea
Unit IV projects and of the Coso Joint Ventures' and Partnership Project's
debt service reserve funds. The debt service reserve funds are legally
restricted to their use and require the maintenance of specific minimum
balances.
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115 ("SFAS 115") "Accounting for Certain
Investments in Debt and Equity Securities." Adoption of SFAS 115 had no
material effect on the Company's individual or combined financial position or
results of operations. In accordance with the provisions of SFAS 115, the
Company classifies its investments, and accounts for changes in fair value, as
follows:
o Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
o Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
o Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of
stockholders' equity.
At December 31, 1995, all of the Company's investments are classified as
held-to-maturity and are accounted for at their amortized cost basis. The
carrying amount of the investments approximates the fair value based on quoted
market prices as provided by the financial institution which holds the
investments.
WELL, RESOURCE DEVELOPMENT AND EXPLORATION COSTS
The Company follows the full cost method of accounting for costs incurred
in connection with the exploration and development of geothermal resources.
All such costs, which include dry hole costs and the cost of drilling and
equipping production wells and directly attributable administrative and
interest costs, are capitalized and amortized over their estimated useful
lives when production commences. The estimated useful lives of production
wells are ten to twenty years depending on the characteristics of the
underlying resource; exploration costs and development costs, other than
production wells, are generally amortized over the weighted average remaining
term of the Company's power and steam purchase contracts. For purposes of
current period visibility and disclosure, all such costs are identified in the
Consolidated Statements of Cash Flows as they are incurred.
DEFERRED WELL AND REWORK COSTS
Well rework costs are deferred and amortized over the estimated period
between reworks. These deferred costs of $7,086 and $733 at December 31, 1995
and 1994, respectively, are included in other assets.
PROPERTIES, PLANTS, CONTRACTS, EQUIPMENT AND DEPRECIATION
The cost of major additions and betterments are capitalized, while
replacements, maintenance, and repairs that do not improve or extend the lives
of the respective assets are expensed.
Depreciation of the operating power plant costs, net of salvage value, is
computed on the straight-line method over the estimated useful lives,
resulting in a composite rate of depreciation of approximately 2.67% per
annum. Depreciation of furniture, fixtures and equipment, which are recorded
at cost, is computed on the straight-line method over the estimated useful
lives of the related assets, which range from three to ten years.
The Magma acquisition by the Company has been accounted for as a purchase
business combination pursuant to the principles of APB Opinion No. 16
"Business Combinations." In applying APB No. 16, all identifiable assets
acquired and liabilities assumed were assigned a portion of the cost of
acquiring Magma, equal to their fair values at the date of the acquisition and
include the following:
Power sales agreements are amortized separately over (1) the remaining
portion (1 to 5 years) of the scheduled price periods of the power sales
agreements and (2) the 20 year avoided cost periods of the power sales
agreements using the straight-line method.
Mineral reserves are amortized on the units of production method.
Process licenses and related technologies are amortized using the
straight-line method over the estimated useful life of the license.
Total acquisition costs in excess of the fair values assigned to the net
assets acquired are amortized over a 40 year period using the straight
line method.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
CAPITALIZATION OF INTEREST AND DEFERRED FINANCING COSTS
Prior to the commencement of operations, interest is capitalized on the
costs of the plants and geothermal resource development to the extent
incurred. Capitalized interest and other deferred charges are amortized over
the lives of the related assets.
Deferred financing costs are amortized over the term of the related
financing. Loan fees are amortized using the implicit interest method; other
deferred financing costs are amortized using the straight-line method.
REVENUE RECOGNITION
Revenues are recorded based upon service rendered and electricity and steam
delivered to the end of the month. See Note 7 for contractual terms of power
sales agreements. Royalties contractually payable to the Company by the
Partnership Project are recorded on an accrual basis, net of the Company's 50%
share of the corresponding partnership project expense. Royalties earned from
providing geothermal resources to power plants operated by other geothermal
power producers are recorded on an accrual basis.
DEFERRED INCOME TAXES
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The adoption of
SFAS 109 changes the Company's method of accounting for income taxes from the
deferred method as required by Accounting Principles Board Opinion No. 11 to
an asset and liability approach.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as discussed herein. Fair
values have been estimated based on quoted market prices for debt issues
listed on exchanges. Fair values of financial instruments that are not
actively traded are based on market prices of similar instruments and/or
valuation techniques using market assumptions. Although management uses its
best judgement in estimating the fair value of these financial instruments,
there are inherent limitations in any estimation technique. Therefore, the
fair value estimates presented herein are not necessarily indicative of the
amounts which the Company could realize in a current transaction.
The Company assumes that the carrying amount of short-term financial
instruments approximates their fair value. For these purposes, short-term is
defined as any item that matures, reprices, or represents a cash transaction
between willing parties within six months or less of the measurement date.
NET INCOME PER COMMON SHARE
Primary and fully diluted earnings per common share are based on the
weighted average number of common and dilutive common equivalent shares
outstanding during the period computed using the treasury stock method. Fully
diluted earnings per share also assumes the conversion of the Convertible
Subordinated Debentures into 4,444 common shares at a conversion price of
$22.50 per share (even though the common share price was $19.50 at December
31, 1995) and the exercise of all dilutive stock options outstanding at their
option prices, with the option exercise proceeds used to repurchase shares of
common stock at the ending market price for fully diluted earnings per share.
For primary earnings per share, shares of common stock are assumed to be
repurchased at the average price for the period.
CASH FLOWS
The statement of cash flows classifies changes in cash according to
operating, investing, or financing activities. Investing activities include
capital expenditures incurred in connection with the power plants,
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
wells, resource development, and exploration costs. The Company considers all
investment instruments purchased with a maturity of three months or less to be
cash equivalents. Restricted cash is not considered a cash equivalent.
RECLASSIFICATION
Certain amounts in the fiscal 1994 and 1993 financial statements and
supporting footnote disclosures have been reclassified to conform to the
fiscal 1995 presentation. Such reclassification did not impact previously
reported net income or retained earnings.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. PURCHASE OF MAGMA POWER COMPANY
On January 10, 1995, the Company acquired approximately 51% of the
outstanding shares of common stock of Magma Power Company (the "Magma Common
Stock") through a cash tender offer (the "Magma Tender Offer") and completed
the Magma acquisition on February 24, 1995 by acquiring the approximately 49%
of the outstanding shares of Magma Common Stock not owned by the Company
through a merger. Magma is engaged in independent power operations similar to
those of the Company. The results of operations of the Company include the
results of operations of Magma from January 10, 1995, to December 31, 1995
adjusted for the Company's percentage ownership during that time period.
The Magma acquisition has been accounted for as a purchase business
combination pursuant to the principles of APB Opinion No. 16 "Business
Combinations." In applying APB No. 16, all identifiable assets acquired and
liabilities assumed were assigned a portion of the cost of acquiring Magma,
equal to their fair values at the date of the acquisition. The total cost of
the acquisition was allocated as follows:
Cash ................................................................. $ 62,116
Operating facilities and project cash ................................ 291,365
Power sales agreements ............................................... 173,730
Mineral reserves ..................................................... 160,768
Construction in progress ............................................. 93,174
Process license and other ............................................ 39,304
Excess of cost over fair value of net assets acquired, net of deferred
taxes of $168,914 .................................................. 137,455
--------
$957,912
========
The fair value of operating facilities, net of salvage value, and
exploration and development cost is depreciated using the straight-line method
over the remaining portion (approximately 24 years) of the original 30 year
life.
Power sales agreements have been assigned values separately for each of (1)
the remaining portion (1 to 5 years) of the scheduled price periods of the
power sales agreements; (2) the 20 year avoided cost periods of the power
sales agreements, and are being amortized separately over such periods using
the straight line method; and (3) the 163 net MW BRPU Award for which the
related plants will either be constructed or the contract rights will be
bought out; amortization of such values has been deferred until the plants
have been constructed and production commences or the buyout proceeds have
been applied against such values.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
The Salton Sea reservoir contains commercial quantities of extractable
minerals. The fair value has been allocated to mineral reserves which was
based on the estimated net cash flows generated from producing such minerals.
The fair value assigned to the mineral reserves will be amortized on the units
of production method upon commencement of commercial production.
Fair value has been assigned to contracts for which the plants are
presently under construction and energy production is not expected to commence
before 1996. Accordingly, revenues, period operating costs, depreciation of
the remaining capital costs to be incurred for the completion of such
facilities and amortization of this acquisition cost are not presently
included in the Company's statements of operations.
A process license was allocated fair value which represents the economic
benefits expected to be realized from the installation of the license and
related technology at the Imperial Valley. The fair value assigned to the
process license is being amortized using the straight-line method over the
remaining estimated useful life of the license. Deferred finance costs are
being amortized using the level yield method over the term of the related
debt.
Total acquisition costs in excess of the fair values assigned to the net
assets acquired is amortized over a 40 year period using the straight-line
method.
The Magma Tender Offer was financed with a $245,600 facility from Credit
Suisse (the "Tender Facility"). Loans under the Tender Facility were made to
the Company on a nonrecourse basis, secured by the Magma stock acquired, and
the Company lent the proceeds of such loans to Magma in exchange for a secured
term note from Magma (the "Tender Note"). The loans under the Tender Facility
were repaid from funds received from the Merger Facilities, described below.
Secured bank financing in the amount of $500,000 was provided by Credit
Suisse (the "Merger Facilities") on specified terms and subject to customary
conditions. Such funds, together with the net proceeds of a public equity
offering (see Note 4) and general corporate funds of the Company, were used to
complete the Magma acquisition.
In July 1995, the Company recapitalized Magma and the related Merger
Facilities from proceeds received through the issuance of notes and bonds as
described in Note 5.
Unaudited proforma combined revenue, net income and primary earnings per
share of the Company and Magma for the twelve months ended December 31, 1995
and 1994, as if the acquisition had occurred at the beginning of 1994 after
giving effect to certain proforma adjustments related to the acquisition were
$400,648, $62,367 and $1.18, compared to $368,276, $30,978 and $.57,
respectively.
4. EQUITY OFFERING
Simultaneous with the acquisition of the remaining equity interest of Magma
on February 24, 1995, the Company completed a public offering (the "Offering")
of 18,170 shares of common stock, which amount included a direct sale by the
Company to Peter Kiewit Sons, Inc. of 1,500 shares and the exercise of
underwriter over-allotment options for 1,500 shares, at a price of $17.00 per
share. The Company received net proceeds of $300,388 from the Offering.
5. DEBT OFFERINGS
On July 21, 1995 the Company issued $200,000 of 9 7/8% Limited Recourse
Senior Secured Notes Due 2003 (the "Notes"). Interest on the Notes is payable
on June 30 and December 30 of each year, commencing December 1995. The Notes
are secured by an assignment and pledge of 100% of the outstanding capital
stock of Magma and are recourse only to such Magma capital stock, the
Company's interest in a secured Magma note and general assets of the Company
equal to the Restricted Payment Recourse Amount (as defined in the Note
Indenture).
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
At any time or from time to time on or prior to June 30, 1998, the Company
may, at its option, use all or a portion of the net cash proceeds of a Company
equity offering (as defined in the Note Indenture) and shall at any time use
all of the net cash proceeds of any Magma equity offering (as defined in the
Note Indenture) to redeem up to an aggregate of 35% of the principal amount of
the Notes originally issued at a redemption price equal to 109.875% of the
principal amount thereof plus accrued interest to the redemption date. On or
after June 30, 2000, the Notes are redeemable at the option of the Company, in
whole or in part, initially at a redemption price of 104.9375% declining to
100% on June 30, 2002 and thereafter, plus accrued interest to the date of
redemption.
Concurrent with the issuance of the Notes, the Company through its wholly
owned subsidiary, Salton Sea Funding Corporation ("Funding Corporation"),
completed a sale to institutional buyers of $475,000 principal amount of
Salton Sea Notes and Bonds, which are nonrecourse to the Company. These debt
securities were rated Baa3 by Moody's and BBB-by Standard & Poor's. The
Funding Corporation debt securities were offered in three tranches as follows:
$232,750 6.69% Senior Secured Series A Notes Due May 30, 2000
$133,000 7.37% Senior Secured Series B Bonds Due May 30, 2005
$109,250 7.84% Senior Secured Series C Bonds Due May 30, 2010
The Salton Sea Notes and Bonds are secured by the Company's three existing
Salton Sea plants, the 40 net MW Salton Sea Unit IV plant as well as an
assignment of the right to receive various royalties payable to Magma in
connection with its Imperial Valley properties and distributions from the
Partnership Project. In connection with the Salton Sea debt issuance, the
Company has, subject to certain conditions, committed to fund any costs of
construction in connection with the construction of the Salton Sea Unit IV
project over and above the initial budgeted amount of $135,000 in the event
such budgeted amount is insufficient to cause substantial completion of the
expansion project prior to January 1, 1998.
Each of the Company's direct or indirect subsidiaries is organized as a
legal entity separate and apart from the Company and its other subsidiaries.
It should not be assumed that any asset of any such subsidiary will be
available to satisfy the obligations of the Company or any of its other such
subsidiaries; provided, however, that unrestricted cash or other assets which
are available for distribution may, subject to applicable law and the terms of
financing arrangements of such parties, be advanced, loaned, paid as dividends
or otherwise distributed or contributed to the Company or affiliates thereof.
Substantially all of the assets of each subsidiary listed below (except
Vulcan/BN Geothermal Power Company and certain other subsidiaries involved in
project financing activities) have been encumbered to secure obligations owed
to the creditors of such subsidiary:
Fish Lake Power Company
Salton Sea Brine Processing L.P.
Salton Sea Power Generation L.P.
Vulcan Power Company
CalEnergy Operating Company
Salton Sea Funding Corporation
Salton Sea Power Company
Salton Sea Royalty Company
Vulcan/BN Geothermal Power Company
Del Ranch, L.P.
Elmore, L.P.
Leathers, L.P.
The net proceeds of the Notes and the Salton Sea Notes and Bonds were used
to (a) recapitalize Magma and the related Merger Facilities (b) refinance
approximately $102,000 of existing indebtedness
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
of the Salton Sea Projects, and (c) provide funding for the Salton Sea Unit IV
in the amount of $115,000. Pursuant to the Depositary Agreement, Funding
Corporation established a debt service reserve fund in the form of a letter of
credit in the initial amount of $50,000 from which scheduled interest and
principal payments can be made. Annual repayment of the Notes and the Salton
Sea Notes and Bonds for the years beginning January 1, 1996 are as follows:
1996 .......................................... $ 48,106
1997 .......................................... 64,378
1998 .......................................... 74,938
1999 .......................................... 35,108
2000 .......................................... 19,572
Thereafter ................................... 409,986
---------
$652,088
=========
6. INTEREST RATE SWAP AGREEMENTS
In January 1993, the Coso Joint Ventures entered into five year deposit
interest rate swap agreements. The subject deposits represent debt service
reserves established in conjunction with refinancing the Coso Joint Ventures
loans through Coso Funding Corp. The deposit interest rate swaps effectively
convert interest earned on the debt service reserve deposits from a variable
rate to a fixed rate, in order to match the nature of the interest rate on the
borrowings used to fund the debt service reserve deposits. The Company's
proportion of the deposit amount of $25,056 included in restricted cash and
investments accretes annually to a maximum amount of approximately $29,300 in
1997. Under the agreements, which mature on January 11, 1998, the Coso Joint
Ventures make semi-annual payments to the counter party at variable rates
based on LIBOR, reset and compounded every three months, and in return receive
payments based on a fixed rate of 6.34%. The effective LIBOR rate ranged from
5.6875% to 6.375% during 1995 and was 5.9375% at December 31, 1995. The
counter party to these agreements is a large multi-national financial
institution.
In September 1993, the Company entered into a three year deposit interest
rate swap agreement, which effectively converts a notional deposit balance of
$75,000 from a variable rate to a fixed rate. The Company makes semi-annual
payments to the counter party at effectively the LIBOR rate, reset every six
months, and in return receives payments based on a fixed rate of 4.87%. The
counter party to this agreement is the same counter party to the Coso Joint
Ventures.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
7. PROPERTIES, PLANTS, CONTRACTS AND EQUIPMENT
Properties, plants, contracts and equipment comprise the following at
December 31:
1995 1994
---------- ----------
Operating project costs:
Power plants .................................... $ 623,778 $314,027
Wells and resource development .................. 271,242 174,651
Power sales agreements .......................... 185,749 --
Licenses, equipment and other ................... 58,052 9,674
Wells and resource development in progress ..... 465 434
---------- ----------
Total operating facilities ..................... 1,139,286 498,786
Less accumulated depreciation and amortization (162,970) (95,480)
---------- ----------
Net operating facilities ........................ 976,316 403,306
---------- ----------
Mineral reserves ................................ 211,576 39,275
Construction in progress:
Upper Mahiao ................................... 188,904 48,554
Malitbog ....................................... 146,735 --
Mahanagdong .................................... 76,560 21,443
Salton Sea Unit IV ............................. 108,769 --
Pacific Northwest geothermal development costs 58,311 46,620
Other international development ................ 11,418 2,445
---------- ----------
Total ........................................ $1,778,589 $561,643
========== ==========
COSO PROJECT OPERATING FACILITIES
The Coso Project operating facilities comprise the Company's proportionate
share of the assets of three of its Joint Ventures; Coso Finance Partners
(Navy I Joint Venture), Coso Energy Developers (BLM Joint Venture), and Coso
Power Developers (Navy II Joint Venture).
NAVY I PLANT
The Navy I Plant consists of three turbines, of which one unit commenced
delivery of firm power in August 1987, and the second and third units in
December 1988. The 80 net MW Plant is located on land owned by and leased from
the U.S. Navy to December 2009, with a 10 year extension at the option of the
Navy. Under terms of the Navy I Joint Venture, profits and losses were
allocated approximately 49% before payout of Units 2 and 3 and approximately
46.4% thereafter to the Company. As of December 31, 1994, payout had been
reached on Units 2 and 3 of the Navy I Plant.
BLM PLANT
The BLM Plant consists of two turbines at one site (BLM East), which
commenced delivery of firm power in March and May, 1989, respectively, and one
turbine at another site (BLM West) which commenced delivery of firm power in
August, 1989. The BLM Plant is situated on lands leased from the U.S. Bureau
of Land Management under a geothermal lease agreement that extends until
October 31, 2035. The lease may be extended to 2075 at the option of the BLM.
Under the terms of the BLM Joint Venture agreement, the Company's share of
profits and losses before and after payout is approximately 45% and 48%,
respectively. The BLM Plant reached payout in June 1994.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
NAVY II PLANT
The Navy II Plant consists of three turbines, of which two units commenced
delivery of firm power in January 1990, and the third in February 1990. The 80
net MW Plant is located on the southern portion of the Navy lands. Under terms
of the Joint Venture, all profits, losses and capital contributions for Navy
II are divided equally by the two partners.
IMPERIAL VALLEY PROJECT OPERATING FACILITIES
Magma currently operates seven geothermal power plants in the Imperial
Valley in California. Four of these plants were developed by Magma and are
owned by the partnerships in which Magma is the managing general partner and
operator and owns 50% interests. The Partnership Project consists of the
Vulcan, Hoch (Del Ranch), Elmore, and Leather Partnerships. The remaining
three plants which comprise the Salton Sea Project are wholly owned by
subsidiaries of Magma and were purchased on March 31, 1993 from Union Oil
Company of California. These geothermal power plants consist of the Salton Sea
I, Salton Sea II and the Salton Sea III. The Partnership Project and the
Salton Sea Project are collectively referred to as the Imperial Valley
Project. The Imperial Valley Project commencement dates and contract
nameplates are as follows:
IMPERIAL VALLEY PLANTS COMMENCEMENT DATE CONTRACT NAMEPLATE
- ---------------------- ----------------- ------------------
Vulcan .................... February 10, 1986 34 MW
Hoch (Del Ranch) .......... January 2, 1989 38 MW
Elmore .................... January 1, 1989 38 MW
Leathers .................. January 1, 1990 38 MW
Salton Sea I .............. July 1, 1987 10 MW
Salton Sea II ............. April 5, 1990 20 MW
Salton Sea III ............ February 13, 1989 49.8 MW
SIGNIFICANT CUSTOMER
All of the Company's sales of electricity from the Coso Project and
Imperial Valley Project, which comprise approximately 93% of 1995 electricity
and steam revenues, are to Edison and are under long-term power purchase
contracts.
The Coso Project and the Partnership Project sell all electricity generated
by the respective plants pursuant to seven long-term SO4 Agreements between
the project and Edison. These SO4 Agreements provide for capacity payments,
capacity bonus payments and energy payments. Edison makes fixed annual
capacity payments to the projects, and to the extent that capacity factors
exceed certain benchmarks is required to make capacity bonus payments. The
price for capacity and capacity bonus payments is fixed for the life of the
SO4 Agreements. Energy is sold at increasing fixed rates for the first ten
years of each contract and thereafter at Edison's Avoided Cost of Energy.
The fixed price periods of the Coso Project SO4 Agreements extend until at
least August 1997, March 1999 and January 2000 for each of the units operated
by the Navy I, BLM and Navy II Partnerships, respectively.
The fixed price periods of the Partnership Project SO4 Agreements extend
until February 1996, December 1998, December 1998, and December 1999 for each
of the Vulcan, Hoch (Del Ranch), Elmore and Leathers Partnerships,
respectively.
The Company's SO4 Agreements provide for rates ranging from 11.4 cents per
kWh in 1995 to 15.6 cents per kWh in 1999.
Salton Sea I sells electricity to Edison pursuant to a 30-year negotiated
power purchase agreement, as amended (the "Salton Sea I PPA"), which provides
for capacity and energy payments. The energy
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
payment is calculated using a Base Price which is subject to quarterly
adjustments based on a basket of indices. The time period weighted average
energy payment for Unit 1 was 4.99 cents per kWh during 1995. As the Salton
Sea I PPA is not an SO4 Agreement, the energy payments do not revert to
Edison's Avoided Cost of Energy.
Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year modified SO4 Agreements that provide for capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and
contract capacity bonus payments is fixed for the life of the modified SO4
Agreements. The energy payments for the first ten year period, which period
expires in April 2000 and February 1999 are levelized at a time period
weighted average of 10.6 cents per kWh and 9.8 cents per kWh for Salton Sea II
and Salton Sea III, respectively. Thereafter, the monthly energy payments will
be Edison's Avoided Cost of Energy. For Salton Sea II only, Edison is entitled
to receive, at no cost, 5% of all energy delivered in excess of 80% of
contract capacity through March 31, 2004.
For the year ended December 31, 1995, Edison's average Avoided Cost of
Energy was 2.1 cents per kWh which is substantially below the contract energy
prices earned for the year ended December 31, 1995. Estimates of Edison's
future Avoided Cost of Energy vary substantially from year to year. The
Company cannot predict the likely level of Avoided Cost of Energy prices under
the SO4 Agreements and the modified SO4 Agreements at the expiration of the
scheduled payment periods. The revenues generated by each of the projects
operating under SO4 Agreements could decline significantly after the
expiration of the respective scheduled payment periods.
ROYALTY EXPENSE
Royalty expense comprises the following for the years ended:
1995 1994 1993
---- ---- ----
Navy I, Unit 1 ........ $ 1,622 $1,641 $1,556
Navy I, Units 2 and 3 3,394 3,174 2,924
BLM ................... 3,036 2,842 1,868
Navy II ............... 5,571 1,963 1,717
WSG ................... 287 268 209
Vulcan ................ 1,207 -- --
Leathers .............. 1,968 -- --
Elmore ................ 1,713 -- --
Hoch (Del Ranch) ...... 1,932 -- --
Salton Sea 1 & 2 ...... 1,147 -- --
Salton Sea 3 .......... 2,431 -- --
-------- -------- --------
Total ............. $24,308 $9,888 $8,274
======== ======== ========
The amount of royalties paid by Navy I to the U.S. Navy to develop
geothermal energy for Navy I, Unit 1 on the lands owned by the Navy comprises
(i) a fee payable during the term of the contract based on the difference
between the amounts paid by the Navy to Edison for specified quantities of
electricity and the price as determined under the contract (which currently
approximates 73% of that paid by the Navy to Edison), and (ii) $25,000 payable
in December 2009, of which the Company's share is $11,600. The $25,000 payment
is secured by funds placed on deposit monthly, which funds, plus accrued
interest, will aggregate $25,000. The monthly deposit is currently $50. As of
December 31, 1995, the balance of funds deposited approximated $4,457, which
amount is included in restricted cash and accrued liabilities.
Units 2 and 3 of Navy I and the Navy II power plants are on Navy lands, for
which the Navy receives a royalty based on electric sales revenue at the
initial rate of 4% escalating to 22% by the end of the contract in December
2019. The BLM is paid a royalty of 10% of the value of steam produced by the
geothermal resource supplying the BLM Plant.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
The Partnership Project pays royalties based on both energy revenues and
total electricity revenues. Hoch (Del Ranch) and Leathers pay royalties of 5%
of energy revenues and 1% of total electricity revenue. Elmore pays royalties
of 5% of energy revenues. Vulcan pays royalties of 4.167% of energy revenues.
The Salton Sea Project's weighted average royalty expense in 1995 was
approximately 3.4%. The royalties are paid to numerous recipients based on
varying percentages of electrical revenue or steam production multiplied by
published indices.
YUMA PROJECT
During 1992, the Company acquired a development stage 50 net MW natural
gas-fired cogeneration project in Yuma, Arizona (the "Yuma Project"). The Yuma
Project is designed to be a Qualifying Facility ("QF") under PURPA and to
provide 50 net MW of electricity to San Diego Gas & Electric Company ("SDG&E")
under an existing 30-year power purchase contract. The electricity is sold at
SDG&E's Avoided Cost of Energy. The power is wheeled to SDG&E over
transmission lines constructed and owned by Arizona Public Service Company
("APS"). An agreement for interconnection and a firm transmission service
agreement have been executed between APS and the Yuma Project entity and have
been accepted for filing by the Federal Energy Regulatory Commission.
The Yuma Project commenced commercial operation in May 1994. The project
entity has executed steam sales contracts with an adjacent industrial entity
to act as its thermal host in order to maintain its status as a QF, which is a
requirement of its SDG&E contract. Since the industrial entity has the right
under its contract to terminate the agreement upon one year's notice if a
change in its technology eliminates its need for steam, and in any case to
terminate the agreement at any time upon three years notice, there can be no
assurance that the Yuma Project will maintain its status as a QF. However, if
the industrial entity terminates the agreement, the Company anticipates that
it will be able to locate an alternative thermal host in order to maintain its
status as a QF or build a greenhouse at the site for which the Company
believes it would obtain QF status. A natural gas supply and transportation
agreement has been executed with Southwest Gas Corporation, terminable under
certain circumstances by the Company and Southwest Gas Corporation.
MINERAL RESERVES--NEVADA AND UTAH PROPERTIES
On May 3, 1990, the Company entered into a definitive purchase agreement
with a subsidiary of Chevron Corporation ("Chevron") for the acquisition of
certain geothermal operations, including interests in approximately 83,750
acres of geothermal properties in Nevada and Utah, for an aggregate purchase
price of approximately $51,100. These property interests consist largely of
leasehold interests, including properties leased from the BLM and from private
landowners.
The property acquired from Chevron includes:
Roosevelt Hot Springs. The Company operates and owns an approximately 70%
interest in a geothermal steam field which supplies geothermal steam to a
23 net MW power plant owned by Utah Power & Light Company ("UP&L") located
on the Roosevelt Hot Springs property under a 30-year steam sales
contract. The Company obtained approximately $20,317 cash under a pre-sale
agreement with UP&L whereby UP&L paid in advance for the steam produced by
the steam field. The Company must make certain penalty payments to UP&L if
the steam produced does not meet certain quantity and quality
requirements.
Desert Peak. The Company is the owner and operator of a 10 net MW
geothermal plant at Desert Peak, Nevada that is currently selling
electricity to Sierra Pacific Power Company ("Sierra") under a power sales
agreement that expires December 31, 1995 and that may be extended on a
year-to-year basis as agreed by the parties. The December 31, 1995 price
for electricity under this
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
contract was 6.6 cents per kWh, comprising an energy payment of 2.1 cents
per kWh (which is adjustable pursuant to an inflation-based index) and a
capacity payment of 4.5 cents per kWh. The Company is currently selling
power to Sierra at Sierra's Avoided Cost.
PACIFIC NORTHWEST GEOTHERMAL DEVELOPMENT COSTS
In the Pacific Northwest, the Company has acquired leasehold rights and has
performed certain geological evaluations to determine the resource potential
of the underlying properties. Recovery of those costs is ultimately dependent
upon the Company's ability to prove geothermal reserves and sell geothermal
steam, or to obtain financing, build power plants, gain access to high voltage
transmission lines, and sell the resultant electricity at favorable prices or,
sell its leaseholds. In the opinion of management, the Company will be able to
recover its development costs through the generation of electricity for sale.
In September 1994, the Company executed the final Power Purchase Agreements
with Bonneville Power Administration ("BPA") and Eugene Water and Electric
Board ("EWEB") for a 30 MW geothermal pilot project planned to be constructed
at the Newberry site near Bend, Oregon. The Company agreed to sell 20 net MW
to BPA and 10 net MW to Eugene Water and Electric Board ("EWEB") from the
Newberry Project. In addition, BPA and EWEB together have an option to
purchase up to an additional 100 net MW of production from the Newberry
Project under certain circumstances. In a public-private development effort,
the Company is responsible for development, permitting, financing,
construction and operation of the project (which will be 100% owned by the
Company), while EWEB will cooperate in the development efforts by providing
assistance with government and community affairs and sharing in the
development costs (up to 30%). The Newberry Project is currently expected to
commence commercial operation in 1998. The power sales agreements provide that
under certain circumstances the contracts may be utilized at an alternative
location. Completion of the Newberry Project is subject to a number of
significant uncertainties and cannot be assured.
SFAS 121
On January 1, 1996, the Company intends to adopt Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Management
anticipates that the adoption of SFAS 121 will not have a material effect on
the Company's financial statements.
8. EQUITY INVESTMENT IN CASECNAN
The Company has a 35% ownership interest in the Casecnan Project, a
multipurpose irrigation and hydroelectric power facility with a rated capacity
of approximately 150 net MW located on the island of Luzon in the Philippines.
The assets and liabilities of the Casecnan Project as of December 31, 1995
were $500,672 and $378,299 respectively.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
9. PROJECT LOANS
Project loans, which are nonrecourse to the Company, comprise the following
at December 31:
1995 1994
--------- ---------
Coso Funding Corp. project loans with fixed
interest rates (weighted average interest rates
of 8.29% and 8.13% at December 31, 1995 and
1994, respectively) with scheduled repayments
through December 2001 ......................... $203,226 $233,080
Partnership Project loans with variable interest
rates (weighted average interest rates of
6.44% at December 31, 1995) and scheduled
repayments through September 2002 .. ........... 54,707 --
--------- ---------
Total Project Loans ......................... $257,933 $233,080
========= =========
The Coso Funding Corp. project loans are from Coso Funding Corp. ("Funding
Corp."). Funding Corp. is a single-purpose corporation formed to issue notes
for its own account and as an agent acting on behalf of the Coso Project. On
December 16, 1992, pursuant to separate credit agreements executed between
Funding Corp. and each Coso Joint Venture the proceeds from Funding Corp.'s
note offering were loaned to the Coso Project. The proceeds of $560,245 were
used by the Coso Project to (i) purchase and retire project finance debt
comprised of the term loans and construction loans in the amount of $424,500,
(ii) fund contingency funds in the amount of $68,400, (iii) fund debt service
reserve funds in the amount of $40,000, and (iv) finance $27,345 of capital
expenditures and transaction costs. The contingency fund and debt service
reserve fund were required by the project loan agreements.
The contingency fund represented the approximate maximum amount, if any,
which could theoretically have been payable by the Coso Project to third
parties to discharge all liens of record and other contract claims encumbering
the Coso Project's plants at the time of the project loans. The contingency
fund was established in order to obtain investment-grade ratings to facilitate
the offer and sale of the notes by Funding Corp., and such establishment did
not reflect the Coso Project's view as to the merits or likely disposition of
such litigation or other contingencies. On June 9, 1993, MPE and the Mission
Power Group, subsidiaries of Edison Corp., and the Coso Project reached a
final settlement of all of their outstanding disputes and claims relating to
the construction of the Coso Project. As a result of the various payments and
releases involved in such settlement, the Coso Project agreed to make a net
payment of $20,000 to MPE from the cash reserves of the Coso Project
contingency fund and MPE agreed to release its mechanics' liens on the Coso
Project. After making the $20,000 payment, the remaining balance of the Coso
Project contingency fund (approximately $49,300) was used to increase the Coso
Project debt reserve fund from approximately $43,000 to its maximum
fully-funded requirement of $67,900. The remaining $24,400 balance of
contingency fund was retained within the Coso Project for future capital
expenditures and for Coso Project debt service payments. Since the Coso
Project debt service reserve is fully funded in advance, Coso Project cash
flows otherwise intended to fund the Coso Project debt service reserve fund,
subject to satisfaction of certain covenants and conditions contained in the
Coso Joint Ventures' refinancing documents, may be available for distribution
to the Company in its proportionate share.
The Funding Corp. project loans are collateralized by, among other things,
the power plants, geothermal resource, debt service reserve funds, contingency
funds, pledge of contracts, and an assignment of all such Coso Project's
revenues which will be applied against the payment of obligations of each Coso
Joint Venture, including the project loans. Each Coso Joint Venture's assets
will secure only its own project loan, and will not be cross-collateralized
with assets pledged under other Coso Joint Venture's credit agreements. The
project loans are nonrecourse to any partner in the Coso Joint Ventures
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
and Funding Corp. shall solely look to such Coso Joint Venture's pledged
assets for satisfaction of such project loans. However, the loans are
cross-collateralized by the available cash flow of each Coso Joint Venture.
Each Coso Joint Venture after satisfying a series of its own obligations has
agreed to advance support loans (to the extent of available cash flow and,
under certain conditions, its debt service reserve funds) in the event
revenues from the supporting Coso Joint Ventures are insufficient to meet
scheduled principal and interest on their separate project loans.
Partnership Project loans include the Company's pro-rata share of the debt
of the Del Ranch, Elmore, and Leathers partnerships and is nonrecourse to the
Company and subsidiaries, however, it is collateralized by substantially all
of the assets of these partnerships. A Secured Credit Agreement with a group
of international banks, with Morgan Guaranty Trust Company ("Morgan") as the
agent bank provides for direct bank loans at specified premiums over a choice
of either the bank's prime rate, the London Interbank Offered Rate ("LIBOR")
or the CD Base rate. As an alternative, each partnership may elect to issue
commercial paper and medium-term notes supported by letters of credit issued
by Fuji Bank, Limited, which are secured, in turn, by the project debt
facility with the Company. The partnerships had no direct bank borrowings at
December 31, 1995. The loans of each partnership are reduced by semiannual
principal payments in March and September of each year. The last principal
payment is scheduled for September 15, 2001 for the Del Ranch and Elmore loans
and September 15, 2002 for the Leathers loan.
The annual repayments of the project loans for the years beginning January
1, 1996 and thereafter are as follows:
COSO FUNDING CORP PARTNERSHIP PROJECT TOTAL
----------------- ------------------- ---------
1996 ......... $ 54,881 $12,831 $ 67,712
1997 ......... 41,729 13,347 55,076
1998 ......... 38,912 13,347 52,259
1999 ......... 31,717 8,578 40,295
2000 ......... 4,080 2,953 7,033
Thereafter .. 31,907 3,651 35,558
----------------- ------------------- ---------
$203,226 $54,707 $257,933
================= =================== =========
10. CONSTRUCTION LOANS
The Construction Loans which are nonrecourse to the Company, comprise the
following at December 31:
1995 1994
---------- ---------
Upper Mahiao Construction Loan with variable
interest rates (weighted average interest rate
of 8.31%) with scheduled project term
repayments through 2006 ........................ $134,619 $24,508
Mahanagdong Construction Loan with variable
interest rates (weighted average interest rate
of 8.02%) with scheduled project term
repayments through 2007 ........................ 39,716 6,995
Malitbog Construction Loan with variable
interest rates (weighted average interest
rate of 8.42%) with scheduled project term
repayments through 2005 ........................ 36,863 --
---------- ---------
$211,198 $31,503
========== =========
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
Draws on the construction loan and accrued liabilities for the Upper
Mahiao geothermal power project at December 31, 1995 totalled $134,619 and
$2,313, respectively. A syndicate of international commercial banks is
providing the construction financing with interest rates at LIBOR or "Prime"
with interest payments due every quarter and at LIBOR maturity. The weighted
average interest rate at December 31, 1995 is approximately 8.31%. The
Export-Import Bank of the U.S. ("Ex-Im Bank") is providing political risk
insurance to commercial banks on the construction loan and will provide the
majority of the project term financing of approximately $162,000 upon
satisfaction of the conditions associated with commercial operation. The term
financing for the Ex-Im Bank loan will be for a ten-year term at a fixed
interest rate of 5.95%. The accrued liabilities represent invoices which were
received, but not paid, by December 31, 1995 and retention on the construction
and supply contracts.
The Company's share of draws on the construction loan and accrued
liabilities for the Mahanagdong geothermal power project at December 31, 1995
totalled $39,716 and $6,592 respectively. The construction debt financing is
provided by the Overseas Private Investment Corporation ("OPIC") and a
consortium of commercial lenders led by Bank of America NT&SA. The
construction loan interest rates are at LIBOR or "Prime" with interest
payments due quarterly and at LIBOR maturity. The debt provided by the
commercial lenders will be insured by Ex-Im Bank against political risks.
Ten-year project term debt financing of approximately $120,000 will be
provided by Ex-Im Bank (which will replace the bank construction debt) and by
OPIC. The majority of the term financing is expected to be provided by the
Ex-Im Bank at a fixed interest rate of 6.92%. The accrued liabilities
represent invoices which were received, but not paid, by December 31, 1995 and
retention on the construction and supply contracts.
Draws on the construction loan and accrued liabilities for the Malitbog
Geothermal Power Project at December 31, 1995 totalled $36,863 and $18,678,
respectively. Credit Suisse and OPIC have provided the construction and term
loan facilities. The eight year project term loan facilities will be at
variable interest rates. The international bank portion of the debt will be
insured by OPIC against political risks and the Company's equity contribution
to Visayas Geothermal Power Company ("VGPC") is covered by political risk
insurance from the Multilateral Investment Guarantee Agency and OPIC.
11. SENIOR DISCOUNT NOTES
In March 1994, the Company issued $400,000 of 10 1/4% Senior Discount Notes
which accrete to an aggregate principal amount of $529,640 at maturity in
2004. The original issue discount (the difference between $400,000 and
$529,640) will be amortized from issue date through January 15, 1997, during
which time no cash interest will be paid on the Senior Discount Notes.
Commencing July 15, 1997, cash interest on the Senior Discount Notes will be
payable semiannually on January 15 and July 15 of each year. The Senior
Discount Notes are redeemable at any time on or after January 15, 1999. The
redemption prices commencing in the twelve month period beginning January 15,
1999 (expressed in percentages of the principal amount) are 105.125%,
103.417%, 101.708%, and 100% for 1999, 2000, 2001, and 2002, respectively,
plus accrued interest through the redemption date in each case. The Senior
Discount Notes are unsecured senior obligations of the Company.
The Senior Discount Notes prohibit payment of cash dividends unless certain
financial ratios are met and the dividends do not exceed 50% of the Company's
accumulated adjusted consolidated net income as defined, subsequent to April
1, 1994, plus the proceeds of any stock issuance.
12. CONVERTIBLE SUBORDINATED DEBENTURES
In June of 1993, the Company issued $100,000 principal amount of 5%
convertible subordinated debentures ("debentures") due July 31, 2000. The
debentures are convertible into shares of the Company's common stock at any
time prior to redemption or maturity at a conversion price of $22.50 per
share, subject to adjustment in certain circumstances. Interest on the
debentures is payable semi-annually in arrears on July 31 and January 31 of
each year, commencing on July 31, 1993. The debentures are
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
redeemable for cash at any time on or after July 31, 1996 at the option of the
Company. The redemption prices commencing in the twelve month period beginning
July 31, 1996 (expressed in percentages of the principal amount) are 102%,
101%, 100% and 100% in 1996, 1997, 1998 and 1999, respectively. The debentures
are unsecured general obligations of the Company and subordinated to all
existing and future senior indebtedness of the Company.
13. EXCHANGE OF PREFERRED STOCK TO CONVERTIBLE DEBT
On November 19, 1991, the Company sold one thousand shares of convertible
preferred stock, Series C, at $50,000 per share to Kiewit Energy Company, in a
private placement. Each share of the Series C preferred stock was convertible
at any time at $18.375 per common share into two thousand seven hundred and
twenty-one shares of common stock subject to customary adjustments. The Series
C preferred stock had a dividend rate of 8.125%, commencing March 15, 1992
through conversion date or December 15, 2003. The dividends, which were
cumulative, were payable quarterly in convertible preferred stock, Series C,
through March 15, 1995 and in cash on subsequent dividend dates.
Pursuant to the terms of the Securities Purchase Agreement, the Company
exercised its rights to exchange the preferred stock, Series C, on March 15,
1995 for $64,850 principal amount 9.5% convertible subordinated debenture of
the Company due 2003, with the same conversion features of the preferred
stock, Series C.
The Company is obligated to redeem 20% of the outstanding debt each
December 15, commencing 1999 through 2003, plus accrued interest.
At any time after March 15, 1995, upon 20 days notice, the Company may
redeem all, or any portion consisting of at least $5,000, of the convertible
debt, then outstanding, provided that the Company's common stock has traded at
or above 150% of the then effective conversion price, for any 20 trading days
out of 30 consecutive trading days ending not more than five trading days
prior to notice of redemption.
14. INCOME TAXES
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The adoption of
SFAS 109 changed the Company's method of accounting for income taxes from the
deferred method as required by Accounting Principles Board Opinion No. 11 to
an asset and liability approach. Under SFAS 109, the net excess deferred tax
liability as of January 1, 1993 was determined to be $4,100. This amount was
reflected in 1993 income as the cumulative effect of a change in accounting
principle. It primarily represents the recognition of the Company's tax credit
carryforwards as a deferred tax asset. There was no cash impact to the Company
upon the required adoption of SFAS 109. Under SFAS 109, the effective tax rate
increased to approximately 30% in 1993 from 23.5% in 1992. This increase was
due to the Company's tax credit carryforward being recognized as an asset and
unavailable to reduce the current period's effective tax rate for computing
the Company's provision for income taxes.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
Provision for income tax is comprised of the following at December 31:
1995 1994 1993
-------- -------- --------
Currently payable:
State ......................................... $ 5,510 $ 1,970 $ 3,300
Federal ....................................... 11,138 5,829 7,686
-------- -------- --------
16,648 7,799 10,986
-------- -------- --------
Deferred:
State ......................................... 921 1,017 385
Federal ....................................... 13,062 7,241 6,813
-------- -------- --------
13,983 8,258 7,198
-------- -------- --------
Total after benefit of extraordinary item ..... 30,631 16,057 18,184
Tax benefit attributable to extraordinary item -- 945 --
-------- -------- --------
Total before benefit of extraordinary item .. $30,631 $17,002 $18,184
======== ======== ========
The deferred expense is primarily temporary differences associated with
depreciation and amortization of certain assets.
A reconciliation of the federal statutory tax rate to the effective tax
rate applicable to income before provision for income taxes follows:
1995 1994 1993
------- ------- -------
Federal statutory rate .......................... 35.00% 35.00% 35.00%
Percentage depletion in excess of cost depletion (7.38) (6.85) (6.70)
Investment and energy tax credits ............... (1.80) (3.04) (4.62)
State taxes, net of federal tax effect ......... 4.09 4.48 3.90
Cumulative effect of change in federal tax rate -- -- 1.90
Goodwill amortization ........................... 2.53 -- --
Non-Deductible Expense .......................... 1.10 -- --
Lease investment ................................ (2.18) -- --
Other ........................................... .20 .86 .20
------- ------- -------
31.56% 30.45% 29.68%
======= ======= =======
Deferred tax liabilities (assets) are comprised of the following at
December 31:
1995 1994
---------- ---------
Depreciation and amortization, net $ 349,079 $119,947
Other .............................. 4,043 3,590
---------- ---------
353,122 123,537
---------- ---------
Deferred income .................... (7,709) (2,190)
Loss carryforwards ................. (3,050) (31,592)
Energy and investment tax credits . (52,857) (40,748)
Alternative minimum tax credits ... (52,480) (22,379)
Jr. SO4 royalty receivable ......... (5,865) --
Other .............................. (4,641) (60)
---------- ---------
(126,602) (96,969)
---------- ---------
Net deferred taxes ................. $ 226,520 $ 26,568
========== =========
As of December 31, 1995, the Company has an unused net operating loss (NOL)
carryover of approximately $8,714 for regular federal tax return purposes
which expires in 2007. In addition, the
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
Company has unused investment and geothermal energy tax credit carryforwards
of approximately $52,857 expiring between 2002 and 2010. The Company also has
approximately $52,480 of alternative minimum tax credit carryforwards which
have no expiration date.
15. PREFERRED STOCK
Series A: On December 1, 1988, the Company distributed a dividend of one
preferred share purchase right ("right") for each outstanding share of common
stock. The rights are not exercisable until ten days after a person or group
acquires or has the right to acquire, beneficial ownership of 20% or more of
the Company's common stock or announces a tender or exchange offer for 30% or
more of the Company's common stock. Each right entitles the holder to purchase
one one-hundredth of a share of Series A junior preferred stock for $52. The
rights may be redeemed by the Board of Directors up to ten days after an event
triggering the distribution of certificates for the rights. The rights plan
was amended in February 1991 so that the agreement with Kiewit Energy (see
Note 12) would not trigger the exercise of the rights. The rights will expire,
unless previously redeemed or exercised, on November 30, 1998. The rights are
automatically attached to, and trade with, each share of common stock.
16. STOCK OPTIONS AND RESTRICTED STOCK
The Company has issued various stock options. As of December 31, 1995, a
total of 9,552 shares are reserved for stock options, of which 9,291 shares
have been granted and remain outstanding at prices of $3.00 to $19.00 per
share.
The Company has stock option plans under which shares were reserved for
grant as incentive or non-qualified stock options, as determined by the Board
of Directors. The plans allow options to be granted at 85% of their fair
market value at the date of grant. Generally, options are issued at 100% of
fair market value at the date of grant. Options granted under the 1986 Plan
become exercisable over a period of three to five years and expire if not
exercised within ten years from the date of grant or, in some instances a
lesser term. Prior to the 1986 Plan, the Company granted 256 options at fair
market value at date of grant which had terms of ten years and were
exercisable at date of grant. In addition, the Company had issued
approximately 138 options to consultants on terms similar to those issued
under the 1986 Plan. The non-1986 plan options are primarily options granted
to Kiewit Energy; see Note 17.
On January 1, 1996, the Company intends to adopt the disclosure
requirements of Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation." Management anticipates that
adoption of SFAS 123 will not have a material effect on the Company's
financial statements.
The Company granted 500 shares of restricted common stock with an aggregate
market value of $9,500 in exchange for the relinquishment of 500 stock options
which were cancelled by the Company. The shares have all rights of a
shareholder, subject to certain restrictions on transferability and risk of
forfeiture. Unearned compensation equivalent to the market value of the shares
at the date of issuance was charged to Stockholders' equity. Such unearned
compensation is being amortized over the vesting period of which 125 shares
were immediately vested and the remaining 375 shares vest straight-line over
five years. Accordingly, $2,494 of unearned compensation was charged to
general and administrative expense in 1995.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
Transactions in Stock Options
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES AVAILABLE ----------------------------------------
FOR GRANT UNDER OPTION PRICE PER
1986 OPTION PLAN SHARES SHARE TOTAL
---------------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Balance December 31, 1992 ............... 816 7,397* $ 3.00-$15.938 $ 80,021
Options granted ......................... (1,396) 1,396 $ 17.75-$19.00 26,209
Options terminated ...................... 19 (20) $ 3.00-$14.875 (114)
Options exercised ....................... -- (259) $ 3.00-$14.875 (1,185)
Additional shares reserved under
1986 Option Plan ....................... 1,000 -- -- --
-------- -------- ------------------ ----------
Balance December 31, 1993 ............... 439 8,514* $ 3.00-$19.00 104,931
-------- -------- ------------------ ----------
Options granted ......................... (954) 1,243 $ 16.00-$17.25 19,260
Options terminated ...................... 15 (15) $ 3.00-$15.938 (205)
Options exercised ....................... -- (141) $ 3.00-$15.938 (709)
Additional shares reserved under
1986 Option Plan ....................... 586 -- -- --
-------- -------- ------------------ ----------
Balance December 31, 1994 ............... 86 9,601* $ 3.00-$19.00 123,277
-------- -------- ------------------ ----------
Options granted ......................... (396) 396 $ 15.81-$19.00 7,188
Options terminated ...................... 571 (571) $14.875-$19.00 (10,673)
Options exercised ....................... -- (135) $ 3.00-$15.938 (460)
-------- -------- ------------------ ----------
Balance December 31, 1995 ............... 261 9,291* $ 3.00-$19.00 $119,332
-------- -------- ------------------ ----------
Options which became exercisable during:
Year ended December 31, 1995 ........... 985 $ 12.63-$19.00 $ 17,512
Year ended December 31, 1994 ........... 1,015 $11.625-$19.00 $ 15,776
Year ended December 31, 1993 ........... 592 $ 3.00-$19.00 $ 10,180
Options exercisable at:
December 31, 1995 ...................... 8,229* $ 3.00-$19.00 $100,886
December 31, 1994 ...................... 7,897* $ 3.00-$19.00 $ 93,705
December 31, 1993 ...................... 7,026* $ 3.00-$19.00 $ 78,644
-------- ------------------ ----------
</TABLE>
- ------------
* Includes Kiewit Enterprises. See Note 17.
17. COMMON STOCK SALES & RELATED OPTIONS
The Company and Kiewit Energy Company, Inc. ("Kiewit") signed a Stock
Purchase Agreement and related agreements, dated as of February 18, 1991.
Kiewit is a subsidiary of Peter Kiewit Sons', Inc. of Omaha, Nebraska, a large
construction, mining, and telecommunications company with diversified
operations. Under the terms of the agreements, Kiewit purchased 4,000 shares
of common stock at $7.25 per share and received options to buy 3,000 shares at
a price of $9 per share exercisable over three years and an additional 3,000
shares at a price of $12 per share exercisable over five years (subject to
customary adjustments).
In May 1994, pursuant to a special antidilution provision of the 1991 Stock
Purchase Agreement between the Company and Kiewit, the Company increased
Kiewit's existing option (granted in 1991) to purchase 3,000 shares at $12 per
share by an additional 289 shares as a final adjustment under such provisions.
In connection with this initial stock purchase, the Company and Kiewit also
entered into certain other agreements pursuant to which (i) Kiewit and its
affiliates agreed not to acquire more than 34% of the outstanding common stock
(the "Standstill Percentage") for a five-year period, (ii) Kiewit became
entitled to nominate at least three of the Company's directors, and (iii) the
Company and Kiewit agreed
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
to use their best efforts to negotiate and execute a joint venture agreement
relating to the development of certain geothermal properties in Nevada and
Utah.
On June 19, 1991, the board approved a number of amendments to the Stock
Purchase Agreement and the related agreements. Pursuant to those amendments,
the Company reacquired from Kiewit the rights to develop the Nevada and Utah
properties, and Kiewit agreed to exercise options to acquire 1,500 shares of
common stock at $9.00 per share, providing the Company with $13,500 in cash.
The Company also extended the term of the $9.00 and $12.00 options to seven
years; modified certain of the other terms of these options; granted to Kiewit
an option to acquire an additional 1,000 shares of the common stock at $11.625
per share (closing price for the shares on the American Stock Exchange on June
18, 1991) for a ten year term; and increased the Standstill Percentage from
34% to 49%.
On November 19, 1991, the Board approved the issuance by the Company to
Kiewit of one thousand shares of Series C preferred stock for $50,000, as
described in Note 13. In connection with the sale of the Series C preferred
stock to Kiewit, the Standstill Agreement was amended so that the 49%
Standstill Percentage restriction would apply to voting stock rather than just
common stock.
18. LITIGATION
As of December 31, 1995 there were no material outstanding lawsuits.
19. RELATED PARTY TRANSACTIONS
The Company charged and recognized a management fee and interest on
advances to its Coso Joint Ventures, which aggregated approximately $6,075,
$5,569 and $5,354 in the years ended December 31, 1995, 1994 and 1993. The
Company's note receivable from the Coso Joint Ventures bears a fixed interest
rate of 12.5% and is payable on or before March 19, 2002. This note is
subordinated to the senior project loan on the project.
The Company's wholly owned subsidiaries charge and recognize a management,
operator, guaranteed capacity and brine fee to its Partnership Project. A
management and operator fee is also charged to the Salton Sea Project. These
fees aggregated approximately $50,793 for the year ended December 31, 1995.
The Mahanagdong Project is being constructed by a consortium (the "EPC
Consortium") of Kiewit Construction Group, Inc. ("KCG") and the CE Holt
Company, a wholly owned subsidiary of the Company, pursuant to fixed-price,
date-certain, turnkey supply and construction contracts (collectively, the
"Mahanagdong EPC"). The obligations of the EPC Consortium under the
Mahanagdong EPC are supported by a guaranty of KCG at an aggregate amount
equal to approximately 50% of the Mahanagdong EPC price. The Mahanagdong EPC
provides for maximum liability for liquidated damages of up to $100,500 and
total liability of up to $201,000. KCG, a wholly owned subsidiary of Peter
Kiewit Sons', Inc. ("PKS"), is the lead member of the EPC Consortium, with an
80% interest, KCG performs construction services for a wide range of public
and private customers in the U.S. and internationally. CE Holt Company will
provide design and engineering services for the EPC Consortium, and holds a
20% interest. The Company has provided a guaranty of CE Holt Company's
obligations under the Mahanagdong EPC Contract.
The Company participates in an international joint venture agreement with
PKS which the Company believes enhances its capabilities in foreign power
markets. The joint venture agreement is limited to international activities
and provides that if both the Company and PKS agree to participate in a
project, they will share all development costs equally. Each of the Company
and PKS will provide 50% of the equity required for financing a project
developed by the joint venture and the Company will operate and manage such
project. The agreement creates a joint development structure under which, on a
project by project basis, the Company will be the development manager,
managing partner and/or project operator,
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
and equal equity participant and PKS will be the preferred turnkey
construction contractor. The joint venture agreement may be terminated by
either party on 15 days written notice, provided that such termination cannot
affect the pre-existing contractual obligations of either party.
20. EXTRAORDINARY ITEM
In conjunction with the Company's Senior Discount Note offering in 1994
(See Note 11), the 12% Senior Notes were defeased. This resulted in an
extraordinary item in the amount of $2,007, after the income tax effect of
$945. The extraordinary item represents the amount necessary to defease the
interest payments and the unamortized portion of the deferred financing costs
on the $35,730 Senior Notes.
21. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of the
following information about the fair value of certain financial instruments
for which it is practicable to estimate that value. For purposes of the
following disclosure, the fair value of a financial instrument is the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation. Although
management uses its best judgment in estimating the fair value of these
financial instruments, there are inherent limitations in any estimation
techniques. Therefore, the fair value estimates presented herein are not
necessarily indicative of the amounts which the Company could realize in a
current transaction.
The methods and assumptions used to estimate fair value are as follows:
Debt instruments--The fair value of all debt issues listed on exchanges has
been estimated based on the quoted market prices. The fair value of
convertible debt (see Note 13) is not practicable to estimate due to the
convertible features of the debt.
Interest rate swap agreements--The fair value of interest rate swap
agreements is estimated based on quotes from the counter party to these
instruments and represents the estimated amounts that the Company would expect
to receive or pay to terminate the agreements. It is the Company's intention
to hold the swap agreements to their intended maturity.
Other financial instruments--All other financial instruments of a material
nature fall into the definition of short-term and fair value is estimated as
the carrying amount.
The carrying amounts in the table below are included in the consolidated
balance sheets under the indicated captions except for the interest rate swaps
which are discussed in Note 6.
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Financial assets:
Interest rate swap receivable . $ 61 $ 561 $ 110 $ 1,281
Financial liabilities:
Project finance loans .......... 257,933 269,624 233,080 227,144
Construction loans ............. 211,198 211,198 31,503 31,503
Senior discount notes .......... 477,355 503,158 431,946 413,013
Salton Sea notes and bonds .... 452,088 459,629 -- --
Limited recourse senior secured
notes ......................... 200,000 210,500 -- --
Convertible subordinated
debentures .................... 100,000 100,500 100,000 100,000
Interest rate swap payable .... 226 672 453 5,347
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (Continued)
22. QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of the Company's quarterly results of operations for
the years ended December 31, 1995 and December 31, 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED*
1995:(1) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -------- ---------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Sales of electricity and steam .... $72,978 $81,756 $102,423 $78,473
Royalties .......................... 3,917 4,912 5,372 5,281
Other income ....................... 9,790 10,428 11,922 11,471
---------- --------- -------------- -------------
Total revenue ...................... 86,685 97,096 119,717 95,225
Total costs and expenses ........... 68,527 76,957 79,898 76,290
---------- --------- -------------- -------------
Income before provision for income
taxes and minority interest ...... 18,158 20,139 39,819 18,935
Provision for income taxes ......... 5,540 6,248 12,457 6,386
---------- --------- -------------- -------------
Net income before minority interest 12,618 13,891 27,362 12,549
---------- --------- -------------- -------------
Minority interest .................. 3,005 -- -- --
Net income ......................... 9,613 13,891 27,362 12,549
Preferred dividends ................ 1,080 -- -- --
---------- --------- -------------- -------------
Net income attributable to common
shares ............................ $ 8,533 $13,891 $ 27,362 $12,549
========== ========= ============== =============
Net income per share--primary ..... $ .21 $ .27 $ .52 $ .24
========== ========= ============== =============
Net income per share--fully diluted $ .21 $ .27 $ .48 $ .18
========== ========= ============== =============
</TABLE>
<TABLE>
<CAPTION>
1994: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Sales of electricity and steam ... $30,819 $36,850 $49,498 $37,395
Other income ...................... 4,591 8,404 9,026 9,271
--------- --------- -------------- -------------
Total revenue ..................... 35,410 45,254 58,524 46,666
Total costs and expenses .......... 22,753 33,198 37,771 36,296
--------- --------- -------------- -------------
Income before provision for income
taxes ............................ 12,657 12,056 20,753 10,370
Provision for income taxes ........ 4,050 3,677 6,340 2,935
--------- --------- -------------- -------------
Net income before extraordinary
item ............................. 8,607 8,379 14,413 7,435
Extraordinary item(2) ............. (2,007) -- -- --
--------- --------- -------------- -------------
Net income ........................ 6,600 8,379 14,413 7,435
Preferred dividends ............... 1,200 1,236 1,275 1,299
--------- --------- -------------- -------------
Net income attributable to common
shares ........................... $ 5,400 $ 7,143 $13,138 $ 6,136
========= ========= ============== =============
Net income per share before
extraordinary item ............... $ .20 $ .20 $ .38 $ .18
========= ========= ============== =============
Net income per
share--extraordinary item(2) .... (.06) -- -- --
--------- --------- -------------- -------------
Net income per share--primary .... $ .14 $ .20 $ .38 $ .18
========= ========= ============== =============
Net income per share--fully
diluted .......................... $ .14 $ .20 $ .36 $ .18
========= ========= ============== =============
</TABLE>
- ------------
* The Company's operations are seasonal in nature with a disproportionate
percentage of income earned in the second and third quarters.
(1) Reflects acquisition of Magma, see Note 3.
(2) See Note 20.
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CalEnergy Company, Inc.
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of CalEnergy
Company, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CalEnergy Company, Inc. and
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 14, the consolidated financial statements give effect
to the Company's adoption, effective January 1, 1993, of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Deloitte & Touche LLP
Omaha, Nebraska
January 26, 1996
F-28
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
CalEnergy Company, Inc.
Omaha, Nebraska
We have reviewed the accompanying consolidated balance sheet of CalEnergy
Company, Inc. and subsidiaries as of June 30, 1996, and the related
consolidated statements of operations for the three and six month periods
ended June 30, 1996 and 1995 and the related consolidated statements of cash
flows for the six month periods ended June 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of CalEnergy Company, Inc. and
subsidiaries as of December 31, 1995, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended
(not presented herein), and in our report dated January 26, 1996, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1995 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 17, 1996 (August 7, 1996 as to Note 9)
F-29
<PAGE>
CALENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and investments .......................................... $ 253,661 $ 72,114
Joint venture cash and investments ............................ 55,828 77,590
Restricted cash ............................................... 79,237 149,227
Short-term investments ........................................ 3,295 34,190
Accounts receivable ........................................... 79,771 57,909
Due from joint ventures ....................................... 17,215 27,273
Properties, plants, contracts and equipment, net (Note 3) .... 2,028,624 1,781,255
Notes receivable--joint ventures .............................. 11,909 14,254
Excess of cost over fair value of net assets acquired, net ... 297,807 302,288
Equity investment in Casecnan ................................. 59,595 60,815
Deferred charges and other assets ............................. 88,185 77,123
------------ -------------
Total assets ................................................ $2,975,127 $2,654,038
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable .............................................. $ 6,753 $ 6,638
Other accrued liabilities ..................................... 91,575 87,892
Project loans ................................................. 187,172 257,933
Construction loans ............................................ 305,870 211,198
Senior discount notes ......................................... 501,798 477,355
Salton Sea notes and bonds .................................... 563,035 452,088
Limited recourse senior secured notes ......................... 200,000 200,000
Convertible subordinated debentures ........................... 100,000 100,000
Convertible debt .............................................. 64,850 64,850
Deferred income taxes ......................................... 235,995 226,520
------------ -------------
Total liabilities ........................................... 2,257,048 2,084,474
------------ -------------
Deferred income ............................................... 26,213 26,032
Convertible preferred securities of subsidiary ................ 103,930 --
Commitments and contingencies (Notes 6, 8 and 9) ..............
Stockholders' equity:
Preferred stock--authorized 2,000 shares, no par value ....... -- --
Common stock--par value $0.0675 per share, authorized 80,000
shares, issued 52,179 and 50,680 shares, outstanding 52,176
and 50,593 at June 30, 1996 and December 31, 1995,
respectively ................................................. 3,523 3,421
Additional paid in capital .................................... 351,976 343,406
Retained earnings ............................................. 238,792 205,059
Treasury stock--3 and 87 common shares at June 30, 1996 and
December 31, 1995, respectively, at cost ..................... (61) (1,348)
Unearned compensation--restricted stock ....................... (6,294) (7,006)
------------ -------------
Total stockholders' equity .................................. 587,936 543,532
------------ -------------
Total liabilities and stockholders' equity ................. $2,975,127 $2,654,038
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
CALENERGY COMPANY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------- ----------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Sales of electricity and steam ...... $104,735 $81,756 $180,679 $154,734
Royalty income ....................... 1,122 4,912 5,015 8,829
Interest and other income ............ 9,937 10,428 20,456 20,218
---------- --------- ---------- ----------
Total revenues ..................... 115,794 97,096 206,150 183,781
---------- --------- ---------- ----------
Costs and expenses:
Plant operations ..................... 22,431 20,447 41,387 38,873
General and administration ........... 5,117 4,851 9,296 11,277
Royalty expense ...................... 5,896 5,922 10,271 10,336
Depreciation and amortization ....... 25,660 15,641 43,713 29,824
Loss on equity investment in Casecnan 1,812 -- 2,774 --
Interest expense ..................... 36,725 35,733 71,504 65,295
Less interest capitalized ............ (11,602) (5,637) (23,508) (10,121)
Dividends on convertible preferred
securities of subsidiary (Note 6) .. 1,443 -- 1,443 --
---------- --------- ---------- ----------
Total costs and expenses ........... 87,482 76,957 156,880 145,484
---------- --------- ---------- ----------
Income before income taxes ........... 28,312 20,139 49,270 38,297
Provision for income taxes ........... 9,040 6,248 15,537 11,788
---------- --------- ---------- ----------
Income before minority interest ..... 19,272 13,891 33,733 26,509
Minority interest .................... -- -- -- 3,005
---------- --------- ---------- ----------
Net income ........................... 19,272 13,891 33,733 23,504
Preferred dividends (paid in kind) .. -- -- -- 1,080
---------- --------- ---------- ----------
Net income available for common
shareholders ........................ $ 19,272 $13,891 $ 33,733 $ 22,424
========== ========= ========== ==========
Net income per share--primary ....... $ .35 $ .27 $ .62 $ .48
========== ========= ========== ==========
Net income per share--fully diluted
(Note 5) ............................ $ .33 $ .26 $ .59 $ .47
========== ========= ========== ==========
Average number of common and common
equivalent shares outstanding ...... 55,404 52,156 54,836 46,736
========== ========= ========== ==========
Fully diluted shares (Note 5) ....... 66,472 60,189 64,726 53,259
========== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
CALENERGY COMPANY, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................ $ 33,733 $ 23,504
Adjustments to reconcile net cash flow from operating activities:
Depreciation and amortization ........................................ 39,849 26,652
Amortization of excess of cost over fair value of net assets acquired 3,864 3,172
Amortization of original issue discount .............................. 24,443 22,108
Amortization of deferred financing costs ............................. 4,253 5,377
Amortization of deferred compensation ................................ 712 --
Provision for deferred income taxes .................................. 6,275 4,594
Loss on equity investment in Casecnan ................................ 2,774 --
Changes in other items: ..............................................
Accounts receivable ................................................. (11,127) (17,794)
Accounts payable and accrued liabilities ............................ 646 (15,041)
Deferred income ..................................................... 181 (50)
Income tax payable .................................................. 2,091 --
----------- -----------
Net cash flows from operating activities ............................. 107,694 52,522
Cash flows from investing activities:
Malitbog construction ................................................. (64,353) (28,412)
Upper Mahiao construction ............................................. (23,734) (62,736)
Mahanagdong construction .............................................. (29,451) (16,873)
Salton Sea Unit IV construction ....................................... (49,223) (27,684)
Indonesian and other development ...................................... (30,597) (2,812)
Pacific Northwest, Nevada and Utah .................................... (2,716) (1,081)
Capital expenditures relating to existing operating projects ......... (18,630) (6,921)
Purchase of Partnership Interest, net of cash acquired ................ (58,044) --
Decrease in short-term investments .................................... 30,895 82,955
Decrease in restricted cash ........................................... 83,216 7,483
Decrease in other investments and assets .............................. 9,833 5,648
Purchase of Magma, net of cash acquired ............................... -- (906,226)
----------- -----------
Net cash flows from investing activities ............................. (152,804) (956,659)
----------- -----------
Cash flows from financing activities:
Proceeds from convertible preferred securities of subsidiary ......... 103,930 --
Proceeds from Salton Sea notes and bonds .............................. 135,000 --
Repayment of Salton Sea notes and bonds ............................... (24,053) --
Proceeds and net benefits from sale of common and treasury stock and
exercise of options .................................................. 13,183 298,987
Repayment of project finance loans .................................... (119,053) (54,924)
Construction loans .................................................... 94,672 57,367
Decrease (increase) in amounts due from joint ventures ................ 9,003 (2,854)
Purchase of treasury stock ............................................ (3,221) (1,590)
Proceeds from merger loan ............................................. -- 500,000
Repayment of merger loan .............................................. -- (8,000)
Deferred financing costs .............................................. (4,566) (22,782)
----------- -----------
Net cash flows from financing activities ............................. 204,895 766,204
----------- -----------
Net increase (decrease) in cash and cash equivalents .................. 159,785 (137,933)
Cash and cash equivalents at beginning of period ...................... 149,704 308,091
----------- -----------
Cash and cash equivalents at end of period ............................ $ 309,489 $ 170,158
=========== ===========
Supplemental disclosures: .............................................
Interest paid, net of amount capitalized .............................. $ 22,776 $ 34,886
=========== ===========
Income taxes paid ..................................................... $ 9,154 $ 6,380
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND PER KWH AMOUNTS)
----------------
1. General:
In the opinion of management of CalEnergy Company, Inc. (the "Company"),
the accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1996 and the results of
operations for the three and six months ended June 30, 1996 and 1995, and cash
flows for the six months ended June 30, 1996 and 1995.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, and its proportionate share of the accounts
of the partnerships and joint ventures in which it has invested except for
Casecnan which is accounted for under the equity method.
The results of operations for the three and six months ended June 30, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.
Certain amounts in the 1995 financial statements and supporting footnote
disclosures have been reclassified to conform to the 1996 presentation. Such
reclassification did not impact previously reported net income or retained
earnings.
2. Other Footnote Information:
Reference is made to the Company's most recently issued annual report that
included information necessary or useful to the understanding of the Company's
business and financial statement presentations. In particular, the Company's
significant accounting policies and practices were presented as Note 2 to the
consolidated financial statements included in that report.
3. Properties, Plants, Contracts and Equipment:
Properties, plants, contracts and equipment comprise the following:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
--------------- -----------------
(UNAUDITED)
<S> <C> <C>
Operating project costs:
Power plants ................................... $ 843,570 $ 623,778
Wells, resource, and development ............... 382,009 329,414
Power sales agreements ......................... 184,258 188,415
Licenses, equipment and other .................. 58,133 58,052
Wells and resource development in progress .... 112 465
--------------- -----------------
Total operating facilities ..................... 1,468,082 1,200,124
Less accumulated depreciation and amortization (205,021) (164,184)
--------------- -----------------
Net operating facilities ................... 1,263,061 1,035,940
Mineral and resource reserves .................. 198,927 212,929
Construction in progress:
Upper Mahiao .................................. 212,638 188,904
Malitbog ...................................... 212,471 146,735
Salton Sea Unit IV ............................ -- 108,769
Mahanagdong ................................... 106,011 76,560
Indonesian and other development .............. 35,516 11,418
--------------- -----------------
Total ...................................... $2,028,624 $1,781,255
=============== =================
</TABLE>
F-33
<PAGE>
4. Income Taxes:
The Company's effective tax rate continues to be less than the statutory
rate primarily due to the depletion deduction and the generation of energy tax
credits in 1996. The significant components of the deferred tax liability are
the temporary differences between the financial reporting basis and income tax
basis of the power plants and the well and resource development costs, and in
addition, the offsetting benefits of operating loss carryforwards and
investment and geothermal energy tax credits. The income tax provision for the
six months ended June 30, 1996, is approximately 60% current tax expense and
40% deferred tax expense.
5. Net Income Per Common Share:
Fully diluted earnings per common share assumes the conversion of the
convertible debt into 3,529 common shares at a conversion price of $18.375 per
share, the conversion of the convertible subordinated debentures into 4,444
common shares at a conversion price of $22.50 per share, the conversion of the
convertible preferred securities of subsidiary into 3,477 common shares at a
conversion price of $29.89 per share and the exercise of all dilutive stock
options outstanding at their option prices, with the option exercise proceeds
used to repurchase shares of common stock at the ending market price.
6. Issuance of Convertible Preferred Securities:
On April 12, 1996, CalEnergy Capital Trust, a special purpose Delaware
business trust organized by the Company (the "Trust") completed a private
placement (with certain shelf registration rights) of $100,000 of convertible
preferred securities ("TIDES"). In addition, an option to purchase an
additional 78.6 TIDES, or $3,930, was exercised by the underwriters to cover
over-allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation preference
of fifty dollars each. The Company owns all of the common securities of the
Trust. The TIDES and the common securities represent undivided beneficial
ownership interests in the Trust. The assets of the Trust consist solely of
the Company's 6 1/4% Convertible Junior Subordinated Debentures due 2016 in an
outstanding aggregate principal amount of $103,930 ("Junior Debentures"). Each
TIDES will be convertible at the option of the holder thereof at any time into
1.6728 shares of CalEnergy Common Stock (equivalent to a conversion price of
$29.89 per share of the Company's Common Stock), subject to customary
anti-dilution adjustments.
Until converted into the Company's Common Stock, the TIDES will have no
voting rights with respect to the Company and, except under certain limited
circumstances, will have no voting rights with respect to the Trust.
Distributions on the TIDES (and Junior Debentures) are cumulative, accrue from
the date of initial issuance and are payable quarterly in arrears, commencing
June 15, 1996. The Junior Debentures are subordinated in right of payment to
all senior indebtedness of the Company and the Junior Debentures are subject
to certain covenants, events of default and optional and mandatory redemption
provisions, all as described in the Junior Debenture Indenture.
7. Purchase of Edison Mission Energy's Partnership Interest:
On April 17, 1996 the Company completed the acquisition of Edison Mission
Energy's partnership interests ("the Partnership Interest Acquisition") in
four geothermal operating facilities in California for a cash purchase price
of $70,000. The acquisition will be accounted for as a purchase.
The four projects, Vulcan, Hoch (Del Ranch), Leathers and Elmore, are
located in the Imperial Valley of California. The Company operates the
facilities and sells power to Southern California Edison ("Edison") under
long-term SO4 contracts. Prior to this transaction, the Company was a 50%
owner of these facilities. The Partnership Interest Acquisition results in
CalEnergy owning an additional 74 net MW of generating capacity.
Unaudited pro forma combined revenue, net income and primary earnings per
share of the Company and the Partnership Interest Acquisition (including the
issuance of Salton Sea Funding Corporation Senior Secured Series D Notes and
Series E Bonds described in Note 8) for the six months ended
F-34
<PAGE>
June 30, 1996 as if the acquisition had occurred at the beginning of the year
after giving effect to certain pro forma adjustments related to the
acquisition were $224,836, $34,825 and $.64, respectively, compared to
$228,576, $27,831 and $.53 for the same period last year.
8. Debt Offering:
On June 20, 1996 the Salton Sea Funding Corporation, a wholly owned
indirect subsidiary of the Company, (the "Funding Corporation"), completed a
sale to institutional investors of $135,000 aggregate amount of Senior Secured
Series D Notes and Series E Bonds which are nonrecourse to the Company.
The Funding Corporation Series D Notes and Series E Bonds which mature in
May 2000 and May 2011 respectively, bear an interest rate of 7.02% and 8.30%
respectively.
The proceeds of the offering were used by the Funding Corporation to
refinance $96,584 of existing project level indebtedness, to fund a portion of
the purchase price for certain acquired partnership interests described in
Note 7 and for certain capital improvements at the Imperial Valley Project.
9. Subsequent Events:
On July 8, 1996 the Company executed a definitive agreement for the
purchase of Falcon Seaboard Resources, Inc. for a cash price of $226,000.
Closing was completed August 7, 1996. Through the acquisition, the Company
will indirectly acquire significant ownership interest in three operating
gas-fired cogeneration facilities and a related natural-gas pipelines. The
acquisition will be accounted for as a purchase. The plants are located in
Texas, Pennsylvania and New York and total 520 MW in capacity.
Also on July 8, 1996 the Company obtained a $100,000 three year revolving
credit facility of which the Company has drawn $35,000 as of July 31, 1996.
The facility is unsecured and is available to fund general operating capital
requirements and finance future business opportunities.
F-35
<PAGE>
CALENERGY COMPANY, INC.
INDEX TO PRO FORMA FINANCIAL STATEMENTS
Pro Forma Condensed Combined Unaudited Financial Data:
Condensed Combined Unaudited Balance Sheet as of June 30, 1996 ......... P-3
Condensed Combined Unaudited Statement of Earnings for the year ended
December 31, 1995 ...................................................... P-4
Condensed Combined Unaudited Statement of Earnings for the six months
ended June 30, 1996 .................................................... P-5
Notes to Pro Forma Condensed Combined Unaudited Financial Data ......... P-6
P-1
<PAGE>
PRO FORMA CONDENSED COMBINED UNAUDITED FINANCIAL DATA
The following Pro Forma Condensed Combined Unaudited Balance Sheet as of
June 30, 1996 and the Pro Forma Condensed Combined Unaudited Statements of
Earnings for the year ended December 31, 1995 and the six months ended June
30, 1996 of CalEnergy Company, Inc. (the "Company") combine the historical
consolidated balance sheets of the Company, and (i) Falcon Seaboard Resources,
Inc. ("F.S.R.I.") and (ii) BN Geothermal, Inc., Niguel Energy Company, San
Felipe Energy Company and Conejo Energy Company (collectively referred to as
the "Acquired Companies") as if the acquisitions of F.S.R.I. and the Acquired
Companies had been effected on June 30, 1996 and the historical statements of
earnings as if the acquisitions of F.S.R.I. and the Acquired Companies had
been effected at the beginning of each of the periods presented. The
acquisitions of F.S.R.I. and the Acquired Companies are recorded under the
purchase method of accounting, after giving effect to the applicable pro forma
adjustments and assumptions described in the accompanying notes.
The Company has completed its preliminary assessment of the fair values of
F.S.R.I. and the Acquired Companies' assets and liabilities. The Company
expects to finalize its fair value assessment in 1996. Accordingly, the final
combined amounts may differ from the pro forma amounts set forth herein.
The pro forma financial data also reflects the effects of the call for
redemption by the Company of its convertible debt and the assumed conversion
thereof into common stock of the Company and the issuance of and application
of proceeds from the 9 1/2% Senior Notes being offered hereby.
The pro forma condensed combined unaudited financial data are intended for
informational purposes only and are not intended to present the results that
would have actually occurred if the acquisition of F.S.R.I. and the Acquired
Companies had been in effect on the assumed dates and for the assumed periods,
and are not necessarily indicative of the results that may be obtained in the
future.
P-2
<PAGE>
PRO FORMA CONDENSED COMBINED UNAUDITED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
(3B)
COMPANIES (3A, C AND 4)
F.S.R.I. NOT PRO FORMA PRO FORMA
THE COMPANY CONSOLIDATED ACQUIRED ADJUSTMENTS COMBINED
------------ -------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and Investments ............... $ 253,661 $ 18,797 $ (312) $ (10,208) $ 261,938
Joint venture cash and investments 55,828 -- -- -- 55,828
Restricted cash .................... 79,237 7,863 -- -- 87,100
Short-term investments ............. 3,295 -- -- -- 3,295
Accounts receivable ................ 79,771 7,157 (1,275) -- 85,653
Due from Joint Ventures ............ 17,215 1,661 (1,483) -- 17,393
Properties, plants, contracts and
equipment, net .................... 2,028,624 80,676 (17,423) 104,654 2,196,531
Notes receivable--partnerships .... 11,909 -- -- -- 11,909
Excess of cost over fair value of
net assets acquired, net .......... 297,807 2,184 (2,184) 99,206 397,013
Equity investments ................. 59,595 9,117 -- 136,375 205,087
Deferred income taxes .............. -- 2,393 1,607 (4,000) --
Deferred charges and other assets . 88,185 10,119 (4,849) 9,626 103,081
------------ -------------- ----------- ------------- ------------
Total assets ..................... $2,975,127 $139,967 $(25,919) $ 335,653 $3,424,828
============ ============== =========== ============= ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts payable ................... $ 6,753 $ 718 $ (718) $ -- $ 6,753
Other accrued liabilities .......... 91,575 8,184 (1,167) 4,000 102,592
Revolving line of credit ........... -- -- -- -- --
Project finance loans .............. 187,172 119,493 (15) -- 306,650
Construction loans ................. 305,870 -- -- -- 305,870
Senior discount notes .............. 501,798 -- -- -- 501,798
9 1/2% Senior Notes ................ -- -- -- 225,000 225,000
Salton Sea notes and bonds ......... 563,035 -- -- -- 563,035
Limited recourse senior secured
notes ............................. 200,000 -- -- -- 200,000
Convertible subordinated debentures 100,000 -- -- (100,000) --
Convertible debt ................... 64,850 -- -- (64,850) --
Deferred income taxes .............. 235,995 -- -- 91,206 327,201
------------ -------------- ----------- ------------- ------------
Total liabilities ................ 2,257,048 128,395 (1,900) 155,356 2,538,899
Deferred income .................... 26,213 8,605 (15) (8,590) 26,213
Convertible preferred securities of
subsidiary ........................ 103,930 -- -- -- 103,930
Total stockholders' equity ......... 587,936 2,967 (24,004) 188,887 755,786
------------ -------------- ----------- ------------- ------------
Total liabilities and
stockholders' equity ........... $2,975,127 $139,967 $(25,919) $ 335,653 $3,424,828
============ ============== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these pro
forma unaudited condensed financial statements.
P-3
<PAGE>
PRO FORMA CONDENSED COMBINED UNAUDITED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(1,2C&D) PRO
THE ACQUIRED FORMA
COMPANY COMPANIES ADJUSTMENTS
---------- ----------- -------------
<S> <C> <C> <C>
Revenues:
Sales of electricity and steam .......... $335,630 $ -- $97,728
Royalty income .......................... 19,482 -- 980
Interest and other income ............... 43,611 -- (959)
---------- ----------- -------------
Total revenues ......................... 398,723 -- 97,749
---------- ----------- -------------
Cost and expenses:
Plant operations ........................ 79,294 -- 45,604
General and administration .............. 23,376 2,740 1,064
Royalties ............................... 24,308 -- --
Depreciation and amortization ........... 72,249 -- 24,994
Interest ................................ 134,637 -- 10,937
Less interest capitalized ............... (32,554) -- (1,347)
---------- ----------- -------------
Total costs and expenses ............... 301,310 2,740 81,252
---------- ----------- -------------
Income (loss) before provision for
income taxes ........................... 97,413 (2,740) 16,497
Equity in (earnings) loss of affiliates 362 -- --
Provision for income taxes .............. 30,631 (2,959) 5,363
---------- ----------- -------------
Income (loss) before minority interest
and preferred dividends ................ 66,420 219 11,134
Minority interest ....................... 3,005 -- (3,005)
---------- ----------- -------------
Net income (loss) ....................... 63,415 219 14,139
Preferred dividends ..................... 1,080 -- --
---------- ----------- -------------
Net income (loss) available to common
stockholders ........................... $ 62,335 $ 219 $14,139
========== =========== =============
Net income per share--primary ........... $ 1.25
----------
Net income per share--fully diluted .... $ 1.18
----------
Average number of shares
outstanding--primarily ................. 49,971
----------
Fully diluted shares .................... 57,742
----------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(3B)
COMPANIES (1,3D&4A) PRO
THE COMPANY F.S.R.I. NOT FORMA PRO FORMA
AS ADJUSTED CONSOLIDATED ACQUIRED ADJUSTMENTS COMBINED
------------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales of electricity and steam .......... $433,358 $ 74,250 $ -- $ -- $507,608
Royalty income .......................... 20,462 -- -- -- 20,462
Interest and other income ............... 42,652 20,589 16,580 (9,700) 36,961
------------- -------------- ----------- ------------- -----------
Total revenues ......................... 496,472 94,839 16,580 (9,700) 565,031
------------- -------------- ----------- ------------- -----------
Cost and expenses:
Plant operations ........................ 124,898 48,782 6,366 -- 167,314
General and administration .............. 27,180 28,513 27,288 (375) 28,030
Royalties ............................... 24,308 -- -- -- 24,308
Depreciation and amortization ........... 97,243 7,889 1,486 13,717 117,363
Interest ................................ 145,574 14,980 198 (7,428) 152,928
Less interest capitalized ............... (33,901) -- -- -- (33,901)
------------- -------------- ----------- ------------- -----------
Total costs and expenses ............... 385,302 100,164 35,338 5,914 456,042
------------- -------------- ----------- ------------- -----------
Income (loss) before provision for
income taxes ........................... 111,170 (5,325) (18,758) (15,614) 108,989
Equity in (earnings) loss of affiliates 362 (16,776) -- 12,249 (4,165)
Provision for income taxes .............. 33,035 3,963 -- (2,111) 34,887
------------- -------------- ----------- ------------- -----------
Income (loss) before minority interest
and preferred dividends ................ 77,773 7,488 (18,758) (25,752) 78,267
Minority interest ....................... -- -- -- -- --
------------- -------------- ----------- ------------- -----------
Net income (loss) ....................... 77,773 7,488 (18,758) (25,752) 78,267
Preferred dividends ..................... 1,080 -- -- -- 1,080
------------- -------------- ----------- ------------- -----------
Net income (loss) available to common
stockholders ........................... $ 76,693 $ 7,488 $(18,758) $(25,752) $ 77,187
============= ============== =========== ============= ===========
Net income per share--primary ........... $ 1.45 $ 1.29
------------- -----------
Net income per share--fully diluted .... $ 1.37 $ 1.29
------------- -----------
Average number of shares
outstanding--primarily ................. 52,772 60,010
------------- -----------
Fully diluted shares .................... 60,543 60,543
------------- -----------
</TABLE>
The accompanying notes are an integral part of these pro forma unaudited
condensed financial statements.
P-4
<PAGE>
PRO FORMA CONDENSED COMBINED UNAUDITED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(1,2C&D) PRO
THE ACQUIRED FORMA
COMPANY COMPANIES ADJUSTMENTS
---------- ----------- -------------
<S> <C> <C> <C>
Revenues:
Sales of electricity and steam .......... $180,679 $ -- $18,250
Royalty income .......................... 5,015 -- --
Interest and other income ............... 20,456 -- 436
---------- ----------- -------------
Total revenues ......................... 206,150 -- 18,686
---------- ----------- -------------
Cost and expenses:
Plant operations ........................ 41,387 -- 9,911
General and administration .............. 10,739 684 --
Royalties ............................... 10,271 -- --
Depreciation and amortization ........... 43,713 -- 5,259
Interest ................................ 71,504 -- 1,700
Less interest capitalized .............. (23,508) -- --
---------- ----------- -------------
Total costs and expenses ............... 154,106 684 16,870
---------- ----------- -------------
Income (loss) before provision for
income taxes ........................... 52,044 (684) 1,816
Equity in (earnings) loss of affiliates 2,774 -- --
Provision for income taxes .............. 15,537 (644) 683
---------- ----------- -------------
Net income (loss) ....................... $ 33,733 $ (40) $ 1,133
========== =========== =============
Net income per share--primary ........... $ 0.62
----------
Net income per share--fully diluted .... $ 0.59
----------
Average number of shares
outstanding--primarily ................. 54,836
----------
Fully diluted shares .................... 64,726
----------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(3B)
COMPANIES (1,3D&4A) PRO
THE COMPANY F.S.R.I. NOT FORMA PRO FORMA
AS ADJUSTED CONSOLIDATED ACQUIRED ADJUSTMENTS COMBINED
------------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales of electricity and steam .......... $198,929 $ 39,986 $ -- $ -- $238,915
Royalty income .......................... 5,015 -- -- -- 5,015
Interest and other income ............... 20,892 6,291 4,327 (4,850) 18,006
------------- -------------- ----------- ------------- -----------
Total revenues ......................... 224,836 46,277 4,327 (4,850) 261,936
------------- -------------- ----------- ------------- -----------
Cost and expenses:
Plant operations ........................ 51,298 23,886 1,146 -- 74,038
General and administration .............. 11,423 13,511 12,860 (226) 11,848
Royalties ............................... 10,271 -- -- -- 10,271
Depreciation and amortization ........... 48,972 15,316 12,052 6,859 59,095
Interest ................................ 73,204 7,099 25 (4,355) 75,923
Less interest capitalized .............. (23,508) -- -- -- (23,508)
------------- -------------- ----------- ------------- -----------
Total costs and expenses ............... 171,660 59,812 26,083 2,278 207,667
------------- -------------- ----------- ------------- -----------
Income (loss) before provision for
income taxes ........................... 53,176 (13,535) (21,756) (7,128) 54,269
Equity in (earnings) loss of affiliates 2,774 (13,162) -- 6,125 (4,263)
Provision for income taxes .............. 15,576 (129) -- 3,481 18,928
------------- -------------- ----------- ------------- -----------
Net income (loss) ....................... $ 34,826 $ (244) $(21,756) $(16,734) $ 39,604
============= ============== =========== ============= ===========
Net income per share--primary ........... $ 0.64 $ 0.63
------------- -----------
Net income per share--fully diluted .... $ 0.60 $ 0.63
------------- -----------
Average number of shares
outstanding--primarily ................. 54,836 62,810
------------- -----------
Fully diluted shares .................... 64,726 64,726
------------- -----------
</TABLE>
The accompanying notes are an integral part of these pro
forma unaudited condensed financial statements.
P-5
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED UNAUDITED
FINANCIAL DATA
(TABLE IN THOUSANDS)
On August 7, 1996, CalEnergy Company, Inc. (the "Company") acquired all of
the stock of Falcon Seaboard Resources, Inc. ("F.S.R.I."), including its
ownership interests in three operating gas-fired cogeneration plants, Saranac
Power Partners, L.P., Power Resources, Inc. and Norcon Power Partners, L.P.,
for $226 million in cash. Certain assets, liabilities and subsidiaries of
F.S.R.I. were distributed out of F.S.R.I. prior to the Company's acquisition
of F.S.R.I. stock.
On April 17, 1996, a subsidiary of the Company acquired all of the stock of
BN Geothermal, Inc. ("BNG"), Niguel Energy Company ("Niguel"), San Felipe
Energy Company ("San Felipe") and Conejo Energy Company (collectively referred
to as the "Acquired Companies") from Edison Mission Energy for $70 million.
The Acquired Companies own 50% partnership interests in each of the Imperial
Valley partnership projects (the "Partnership Projects") in which the Company
had an existing 50% ownership interest resulting from the acquisition of Magma
Power Company ("Magma"). During the first quarter of 1995, the Company
acquired the stock of Magma.
The acquisitions of F.S.R.I., the Acquired Companies and Magma have been
accounted for as purchase business combinations pursuant to the principles of
APB Opinion No. 16, "Business Combinations." In applying APB No. 16, all
identifiable assets acquired and liabilities assumed are assigned a portion of
the cost of acquiring F.S.R.I., the Acquired Companies and Magma, equal to
their fair values at the date of the acquisitions. The net cash flow
projections used for determining the fair values in the purchase accounting
were those used for the acquisitions as prepared by the Company and reflect
estimated cost reductions. The resulting purchase accounting adjustments are
based on the fair values determined in purchase accounting and the historical
financial statements of F.S.R.I., the Acquired Companies and the Partnership
Projects in which the Acquired Companies have invested and Magma.
The Pro Forma Condensed Combined Unaudited Financial Data are based on the
following assumptions:
1. The acquisition of F.S.R.I., the Acquired Companies and Magma occurred
at the beginning of the periods presented for statements of earnings
purposes.
2. The acquisition on April 17, 1996 of the Acquired Companies is
reflected in the Company's historical June 30, 1996, consolidated
historical financial statements beginning April 1, 1996. The pro forma
adjustments to reflect the effect of the acquisition of the Acquired
Companies are as follows:
A. The adjustments which have been made to the assets and liabilities
of the Acquired Companies to reflect the effect of the acquisitions
accounted for as a purchase business combination follow:
Property and plant ...................... $(101,999)
Power sale agreements ................... 44,797
Other assets and liabilities ............ (4,882)
------------
Net decrease in assets and liabilities $ (62,084)
============
B. The Salton Sea Funding Corporation Series D notes and Series E bonds
were issued and all existing project level debt of the Partnership
Projects was paid off at the beginning of the period presented.
P-6
<PAGE>
C. The pro forma adjustments to the Pro Forma Condensed Combined
Unaudited Statements of Earnings are as follows:
i. Provide depreciation and amortization of the fair values
assigned to all identifiable assets as described below and
capitalize interest on costs allocated to projects under
development and construction. The Company's policy is to
provide depreciation and amortization expense upon the
commencement of revenue production over the estimated
remaining useful life of the identifiable assets and to
periodically assess the carrying value of such assets for
possible impairment in accordance with the provisions of
Statement of Financial Accounting Standards No. 121.
The fair value of property and equipment, net of salvage
value, and exploration and development cost is depreciated
using the straight line method over the remaining portion
(approximately 23 years) of the original 30-year life.
Power sales agreements have been assigned values separately
for each of (1) the remaining portion of the scheduled
price periods of the power sales agreements and (2) the 20
year avoided cost periods of the power sales agreements and
are being amortized separately over such periods using the
straight line method.
ii. Adjust interest relating to (1) the issuance of the Salton
Sea Funding Corporation Series D notes and Series E bonds
net of the repayment of all project level debt at the
Partnership Projects and (2) the use of existing funds.
iii. Change in income tax expense as a result of pro forma
adjustments which affect taxable income.
D. For the year ended December 31, 1995, reflect the Magma Acquisition
as a purchase business combination beginning January 1, 1995.
3. The pro forma adjustments to reflect the effect of the F.S.R.I.
acquisition are as follows:
A. The adjustments which have been made to the assets and liabilities
of F.S.R.I. to reflect the effect of the acquisition accounted for
as a purchase business combination follow:
Property and plant ....................... $ 58,050
Power sale agreements .................... 46,604
Goodwill ................................. 99,206
Equity investments ....................... 136,375
Other assets and liabilities ............. 8,008
Deferred taxes ........................... (95,206)
----------
Net increase in assets and liabilities $253,037
==========
B. The F.S.R.I. historical statements have been adjusted to reflect
the exclusion of F.S.R.I. assets, liabilities and subsidiaries not
acquired by the Company and eliminate historical general and
administrative expenses and project development expenses of
F.S.R.I. which will no longer be incurred by F.S.R.I. These
F.S.R.I. assets, liabilities and subsidiaries were distributed out
of F.S.R.I. prior to the acquisition of F.S.R.I.'s stock by the
Company.
C. The cash which the Company used to acquire F.S.R.I., including
estimated transaction costs, has been provided for in the pro forma
adjustments as follows:
Reduce cash on hand ............ $194,000
Increase short-term borrowings 35,000
----------
Total sources of cash ........ $229,000
==========
P-7
<PAGE>
D. The pro forma adjustments to the Pro Forma Condensed Combined
Unaudited Statements of Earnings are as follows:
i. Provide depreciation and amortization of the fair values
assigned to all identifiable assets as described below. The
Company's policy is to provide depreciation and amortization
expense upon the commencement of revenue production over the
estimated remaining useful life of the identifiable assets
and to periodically assess the carrying value of such assets
for possible impairment in accordance with the provisions of
Statement of Financial Accounting Standards No. 121.
The fair value of property and equipment is depreciated using
the straight line method over the remaining portion (between
22-28 years) of the original 30-year life.
Power sales agreements have been assigned values for the
remaining contract period and are being amortized over such
period using the straight line method.
The fair values assigned to F.S.R.I.'s equity investments are
being amortized over the remaining contract periods using the
straight line method.
ii. Record amortization of the excess of the purchase price over
the net assets acquired using the straight line method over
the remaining weighted average useful life of the facilities
acquired (25 years).
iii. Record anticipated incremental general and administrative
expenses of CECI of $850,000 per year and reclassify
historical state franchise taxes from general and
administrative expenses to income tax expense.
iv. Adjust interest relating to (1) the borrowings under the
Company's revolving line of credit and (2) the use of existing
funds.
v. Change in income tax expense as a result of pro forma
adjustments which affect taxable income.
4. The pro forma adjustments also include the effect of:
A. The call for redemption of $164.85 million of convertible debt and
the assumed conversion thereof into common stock of the Company.
B. The issuance by the Company of $225 million of Notes being offered
hereby and the use of a portion of the proceeds therefrom to pay off
the $35 million balance on the revolving line of credit.
P-8
<PAGE>
CALENERGY COMPANY, INC.
All tendered Senior Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Confirm By Telephone:
(212) 858-2103
Attention: Reorganization Department
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
Securities Processing Window
Floor SC-1
New York, New York 10004
Attention: Reorganization Department
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Department
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder, such as the
Company, the power to indemnify its directors and officers against liabilities
for certain of their acts. Article EIGHTH of the Company's Restated
Certificate of Incorporation and Article V of the Company's By-Laws provides
for indemnification of directors and officers of the Company to the extent
permitted by the DGCL. Article V of the Company's By-Laws further provides
that the Registrant may enter into contracts providing indemnification to the
full extent authorized or permitted by the DGCL and that the Company may
create a trust fund, grant a security interest and/or use other means to
ensure the payment of such amounts as may become necessary to effect
indemnification pursuant to such contracts or otherwise.
Section 102(b)(7) of the DGCL permits a provision in the certificate
of incorporation of each corporation organized thereunder, such as the
Company, eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its stockholders for monetary
damages for certain breaches of fiduciary duty as a director. Article EIGHTH
of the Company's Restated Certificate of Incorporation eliminates the personal
liability of directors to the full extent permitted by the DGCL.
The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of the Company's
Restated Certificate of Incorporation and Article V of the Company's By-Laws.
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided that such officer or director acted in
good faith and in a manner reasonably believed to be in or not opposed to the
corporation's best interests, and, for criminal proceedings, had no reasonable
cause to believe his conduct was illegal. A Delaware corporation may indemnify
officers and directors in an action by or in the right of the corporation
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation in the performance of his duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer or director actually and reasonably incurred.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
3.1 The Company's Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 of the Company's Form 10-K for the year
ended December 31, 1992, File No. 1-9874 (the "1992 Form 10-K")).
3.2 Certificate of Amendment of the Company's Restated Certificate of
Incorporation, dated June 23, 1993 (incorporated by reference to the
Company's Form 8-A, dated July 28, 1993, File No. 1-9874 ("Form 8-A).
3.3 Certificate of Amendment of the Company's Restated Certificate of
Incorporation dated February 23, 1995 (incorporated by reference to
Exhibit 3.3 to the Company's Form 10-K/A Amendment (dated March 31,
1995) to the Company's Form 10-K for the year ended December 31,
1994, File No. 1-9874 (the "1994 Form 10-K)).
3.4 Certificate of Ownership and Merger, effective March 26, 1996.
3.5 The Company's Certificate of Designation with respect to the
Company's Series C Redeemable Convertible Exchangeable Preferred
Stock, dated November 20, 1991, including a form of the 9.5%
Convertible Subordinated Debentures due 2003 (incorporated by
reference to Exhibit 3.1 of the Company's 1992 Form 10-K).
3.6 The Company's By-Laws as amended through May 11, 1995.
4.1 Indenture, dated as of September 20, 1996, between the Company and
IBJ Schroder Bank & Trust Company, as trustee, relating to
$225,000,000 principal amount of 9 1/2% Senior Notes due 2006.
4.2 Exchange and Registration Rights Agreement, dated as of September
20, 1996,.between the Company and CS First Boston Corporation.
4.3 Specimen copy of form of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Company's Form 10-K for the year
ended December 31, 1993, File No. 1-9874 (the "1993 Form 10-K")).
4.4 Shareholders Rights Agreement between the Company and Manufacturers
Hanover Trust Company of California dated December 1, 1988
(incorporated by reference to Exhibit 1 to Company's Form 8-K dated
December 5, 1988, File No. 1-9874).
4.5 Amendment Number 1 to Shareholder Rights Agreement, dated February
15, 1991 (incorporated by reference to Exhibit 4.2 to the Company's
1992 Form 10-K).
4.6 Escrow Deposit Agreement between Bank of American National Trust and
Savings Association and the Company dated March 3, 1994 (incorporated
by reference to Exhibit 4.7 to the Company's 1993 Form 10-K).
5 Opinion of Willkie Farr & Gallagher.
10.1 Joint Venture Agreement for China Lake Joint Venture between the
Company and Caithness Geothermal 1980 Ltd., restated as of January 1,
1984 (incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1, 33-7770).
II-2
<PAGE>
10.2 Amended Joint Venture Agreement for Coso Land Company between the
Company and Caithness Geothermal 1980 Ltd., dated as of June 1, 1983
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1, 33-7770).
10.3 Amended General Partnership Agreement for Coso Finance Partners
between China Lake Operating Company and ESCA I L.P. dated July 13,
1988 (incorporated by reference to Exhibit to the Company's 1992 Form
10-K).
10.4 First Supplemental Amendment to the Amended and Restated General
Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. (Undated) (incorporated by reference
to Exhibit 10.4 to the Company's 1992 Form 10-K).
10.5 Second Supplemental Amendment to the Amended and Restated General
Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. dated as of July 13, 1988
(incorporated by reference to Exhibit 10.5 to the Company's 1992 Form
10-K).
10.6 Third Supplemental Amendment to the Amended and Restated General
Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. dated as of December 16, 1992
(incorporated by reference to Exhibit 10.6 to the Company's 1992 Form
10-K).
10.7 General Partnership Agreement for Coso Finance Partners II between
China Lake Geothermal Management Company and ESCA II L.P. dated July
7, 1987 (incorporated by reference to Exhibit 10.7 to the Company's
1992 Form 10-K).
10.8 Restated General Partnership Agreement for Coso Energy Developers
between Coso Hotsprings Intermountain Power Inc. and Caithness Coso
Holdings L.P. dated as of March 31, 1988 (incorporated by reference
to Exhibit 10.8 to the Company's 1992 Form 10-K).
10.9 First Amendment to the Restated General Partnership Agreement for
Coso Energy Developers between Coso Hotsprings Intermountain Power,
Inc. and Caithness Coso Holdings, L.P. dated as of March 31, 1988
(incorporated by reference to Exhibit 10.9 to the Company's 1992 Form
10-K).
10.10 Second Amendment to the Restated General Partnership Agreement for
Coso Energy Developers between Coso Hotsprings Intermountain Power,
Inc. and Caithness Coso Holdings LP. dated as of December 16, 1992
(incorporated by reference to Exhibit 10.10 to the Company's 1992
Form 10-K).
10.11 Amended and Restated General Partnership Agreement for Coso Power
Developers between Coso Technology Corporation and Caithness Navy II
Group L.P. dated July 31, 1989 (incorporated by reference to Exhibit
10.11 to the Company's 1992 Form 10-K).
10.12 First Amendment to the Amended and Restated General Partnership for
Coso Power Developers between Coso Technology Corporation and
Caithness Navy II Group L.P. dated as of March 19, 1991 (incorporated
by reference to Exhibit 10.12 to the Company's 1992 Form 10-K).
10.13 Second Amendment to the Amended and Restated General Partnership
Agreement for Coso Power Developers between Coso Technology
Corporation and Caithness Navy II Group L.P. dated as of December 16,
1992 (incorporated by reference to Exhibit 10.13 to the Company's
1992 Form 10-K).
10.14 Form of Amended and Restated Field Operation and Maintenance
Agreement between Coso Joint Ventures and the Company dated as of
December 16, 1992 (incorporated by reference to Exhibit 10.14 to the
Company's 1992 Form 10-K).
II-3
<PAGE>
10.15 Form of Amended and Restated Project Operation and Maintenance
Agreement between Coso Joint Venture and the Company dated as of
December 16, 1992 (incorporated by reference to Exhibit 10.15 to the
Company's 1992 Form 10-K).
10.16 Trust Indenture between Coso Funding Corp. and Bank of America
National Trust and Savings Association dated as of December 16, 1992
(incorporated by reference to Exhibit 10.16 to the Company's 1992
Form 10-K).
10.17 Form of Amended and Restated Credit Agreement between Coso Funding
Corp. and Coso Joint Ventures dated as of December 16, 1992
(incorporated by reference to Exhibit 10.17 to the Company's 1992
Form 10-K).
10.18 Form of Support Loan Agreement among Coso Joint Ventures dated
December 16, 1992 (incorporated by reference to Exhibit 10.18 to the
Company's 1992 Form 10-K).
10.19 Form of Project Loan Pledge Agreement between Coso Joint Ventures and
Bank of America National Trust and Savings dated as of December 16,
1992 (incorporated by reference to Exhibit 10.19 to the Company's
1992 Form 10-K).
10.20 Power Purchase Contracts between Southern California Edison Company
and:
(a) China Lake Joint Venture, executed June 4, 1984 with a term
of 24 years;
(b) China Lake Joint Venture, executed February 1, 1985 with a term
of 23 years; and
(c) Coso Geothermal Company, executed February 1, 1985 with a term of
30 years (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1, 33-7770).
10.21 Contract No. N62474-79-C-5382 between the United States of America
and China Lake Joint Venture, restated October 19, 1983 as
"Modification P00004," including modifications through "Modification
P00026", dated December 16, 1992 (the "Navy Contract") (incorporated
by reference to Exhibit 10.21 to the Company's 1992 Form 10-K).
10.22 Modification to Contract No. P00028, dated June 28, 1993,
Modification to Contract No. P00029, dated October 4, 1994 and
Modification to Contract No. P00031, dated December 19, 1994 all
amending the Navy Contract (incorporated by reference to Exhibit
10.22 to the Company's Form 10-K/A Amendment (dated March 31, 1995)
to the Company's 1994 Form 10-K).
10.23 Lease between the BLM and Coso Land Company, effective November 1,
1985 (with Designation of Geothermal Operator) (incorporated by
reference to Exhibit 10.8 to the Company's Registration Statement on
Form S-1, 33-7770).
10.24 Stock Purchase Agreement between the Company and Kiewit Energy
Company dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit I to the Company's Form 8-K
dated February 26, 1991).
10.25 Amendment No. 2 to Stock Purchase Agreement between Kiewit Energy
Company and the Company dated as of January 8, 1992 (incorporated by
reference to Exhibit 10.24 to the Company's 1992 Form 10-K).
10.26 Amendment No. 3 to Stock Purchase Agreement between Kiewit Energy
Company and the Company dated as of April 2, 1993 (incorporated by
reference to Exhibit 10.25 to the Company's 1993 Form 10-K).
10.27 Shareholders Agreement between the Company and Kiewit Energy Company
dated as of February 18, 1991, as amended as of June 19, 1991 and as
of November 20, 1991 (incorporated by reference to
II-4
<PAGE>
Exhibit 1 to the Company's Form 8-K dated February 26, 1991, Exhibit
1 to the Company's Form 8-K dated July 18, 1992, and Exhibit 3 to the
Company's Form 8-K dated November 23, 1991).
10.28 Amendment No. 3 to Shareholder's Agreement between the Company and
Kiewit Energy Company dated as of April 2, 1993 (incorporated by
reference to Exhibit 14 to the Company's Form 8-A).
10.29 Amendment No. 4 to Shareholder's Agreement between the Company and
Kiewit Energy Company dated as of July 20, 1993 (incorporated by
reference to Exhibit 10.28 to the Company's 1993 Form 10-K).
10.30 Registration Rights Agreement between the Company and Kiewit Energy
Company dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit 1 to the Company's Form 8-K
dated February 26, 1991, and Exhibit 1 to the Company's Form 8-K
dated July 18, 1992).
10.31 Registration Rights Agreement between the Company and Kiewit Energy
Company dated June 19, 1991, as amended November 20, 1991
(incorporated by reference to Exhibit 1 of the Company's Form 8-K
dated June 19, 1991 and Exhibit 4 to the Company's Form 8-K dated
November 21, 1991).
10.32 Stock Option Agreement between the Company and Kiewit Energy Company
dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit 1 to the Company's Form 8-K
dated February 26, 1991, and Exhibit 1 to the Company's Form 8-K
dated July 18, 1992).
10.33 Amendment No. 2 to Stock Option Agreement between the Company and
Kiewit Energy Company dated as of May 12, 1994 "(incorporated by
reference to Exhibit 10.33 to the Company's Form 10-K/A Amendment
(dated March 31, 1994) to the Company's 1995 Form 10-K)."
10.34 Stock Option Agreement between the Company and Kiewit Energy Company
dated as of June 19, 1991 (incorporated by reference to Exhibit 1 to
the Company's Form 8-K dated July 18, 1991).
10.35 Securities Purchase Agreement between the Company and Kiewit Energy
Company dated as of November 20, 1991 (incorporated by reference to
Exhibit 2 to the Company's Form 8-K dated November 21, 1991).
10.36 Sublease between the Company and Kiewit Energy Company dated March
15, 1991 (incorporated by reference to Exhibit 10.32 to the Company's
1992 Form 10-K).
10.37 Amended and Restated 1986 Stock Option Plan, as amended (incorporated
by reference to Exhibit 10.33 to the Company's 1992 Form 10-K).
10.38 1994 Employee Stock Purchase Plan (incorporated by reference to
Exhibit A to the Company's 1994 Proxy Statement).
10.39 Indenture dated March 24, 1994 between the Company and IBJ Schroder
Bank and Trust Company (incorporated by reference to Exhibit 3 to the
Company's Form 8-K dated March 28, 1994).
10.40 Amended and Restated Employment Agreement between the Company and
David L. Sokol dated as of August 21, 1995.
10.41 Restricted Stock Exchange Agreement between the Company and David L.
Sokol dated as of November 29, 1995.
10.42 Termination Agreement between the Company and Richard R. Jaros dated
as of December 9, 1993 (incorporated by reference to Exhibit 10.41 to
the Company's 1993 Form 10-K).
II-5
<PAGE>
10.43 Employment Agreement between the Company and Thomas R. Mason dated as
of January 21, 1995 (incorporated by reference to Exhibit 10.45 to
the Company's Form 10-K/A Amendment (dated March 31, 1995) to the
Company's 1994 Form 10-K).
10.44 Standard Offer Number 2, Standard Offer for Power Purchase with a
Firm Capacity Qualifying Facility effective June 15, 1990 ("S02")
between San Diego Gas & Electric Company and Bonneville Pacific
Corporation (incorporated by reference to Exhibit 10.42 to the
Company's 1993 Form 10-K).
10.45 Amendment Number One to the S02 dated September 25, 1990
(incorporated by reference to Exhibit 10.43 to the Company's 1993
Form 10-K).
10.46 Joint Venture Agreement among the Company, Kiewit Diversified Group
Inc. and Kiewit Construction Group Inc. dated December 14, 1993
(incorporated by reference to Exhibit 10.44 to the Company's 1993
Form 10-K).
10.47 Agreement and Plan of Merger between the Company, CE Acquisition
Company, Inc. and Magma dated December 5, 1994 (incorporated by
reference to (c)(3) to Exhibit 99.1 to the Company's Current Report
on Form 8-K dated December 9, 1994.
10.48 Stock Purchase Agreement between CalEnergy Imperial Valley Company,
Inc. and Edison Mission Energy, dated as of March 27, 1996.
10.49 Standard Offer No. 4 Power Purchase Agreement (Elmore), dated June
15, 1984, between Southern California Edison Company and Magma
Electric Company including Amendments No. 1 and No. 2 (incorporated
by reference to Exhibit 10.14 to Magma Power Company's Amendment No.
1 to Registration Statement Form S-4 dated February 2, 1988 ("Magma
1988 Form S-4")).
10.50 Standard Offer No. 4 Power Purchase Agreement (Del Ranch) dated
February 22, 1984, between Southern California Edison Company and
Imperial Energy Corporation, including Amendments No. 1 and No. 2
(incorporated by reference to Exhibit 10.15 to the Magma 1988 Form
S-4).
10.51 Standard Offer No. 4 Power Purchase Agreement (Vulcan), dated June
15, 1984, between Southern California Edison Company and Magma
Electric Company including Amendment No. 1 (incorporated by reference
to Exhibit 10.16 to the Magma 1988 Form S-4).
10.52 Standard Offer No. 4 Power Purchase Agreement (River Ranch), dated
April 16, 1985, between Southern California Edison Company and
Imperial Energy Corporation, including Amendment No. 1 (incorporated
by reference to Exhibit 10.20 to the Magma 1988 Form S-4).
10.53 Partnership Agreement dated August 30, 1985 between Vulcan Power
Company and BN Geothermal, Inc. (incorporated by reference to Exhibit
10.88 to the Magma Power Company's Form 8 Amendment (dated December
18, 1990) to Magma Power Company's Form 10-K for the year ended
December 31, 1989 ("Magma Form 8")).
10.54 Amended and Restated Limited Partnership Agreement of Del Ranch,
Ltd., a California Limited Partnership, dated March 14, 1988 by and
among Red Hill Geothermal, Inc. and Conejo Energy Company, as General
Partners, and Magma Power Company and Conejo Energy Company, as
Original Limited Partners (incorporated by reference to Exhibit 10.53
to the Magma Power Company Annual Report on Form 10-K for the year
ended December 31, 1987, File No. 0-10533 ("1987 Magma Form 10-K")).
10.55 Limited Partnership Agreement of Leathers, L.P., dated August 15,
1988 by and among Red Hill Geothermal, Inc. and San Felipe Energy
Company, as General Partners, and Magma Power Company and San Felipe
Energy Company, as Limited Partners (incorporated by reference to
Exhibit 10.79 to
II-6
<PAGE>
the Magma Power Company Annual Report on Form 10-K for the year ended
December 31, 1988, File No. 0-10533 ("1988 Magma Form 10-K")).
10.56 Amended and Restated Limited Partnership Agreement of Elmore, Ltd., a
California Limited Partnership, dated March 14, 1988 by and among Red
Hill Geothermal, Inc. and Niguel Energy Company, as General Partners,
and Magma Power Company and Niguel Energy Company, as Original
Limited Partners (incorporated by reference to Exhibit 10. 55 to the
1987 Magma Form 10-K).
10.57 Loan Agreement dated as of October 1, 1990 between California
Pollution Control Financing Authority and Desert Valley Company,
relating to the California Pollution Control Financing Authority
Pollution Control Revenue Bonds Small Business Series 1990-A (the
"$4,000,000 Monofill Bond Financing") (incorporated by reference to
Exhibit 10.92 to the Magma Power Company Form 10-K for the year ended
December 31, 1990, File No. 0-10533 (the "1990 Magma Form 10-K").
10.58 Master Reimbursement Agreement dated as of October 1, 1990, by and
among the California Pollution Control Financing Authority, Desert
Valley Company and the Sanwa Bank, Limited, Los Angeles Branch,
relating to the $4,000,000 Monofill Bond Financing (incorporated by
reference to Exhibit 10.93 to the 1990 Magma Form 10-K).
10.59 Sale and Purchase Agreement between Union Oil Company of California
and Magma Power Company effective as of December 31, 1992
(incorporated by reference to Exhibit 10.97 to the Magma Power
Company Form 8 dated June 2, 1993).
10.60 Contract for the Purchase and Sale of Electric Power (Unit I) from
the Salton Sea Geothermal Generating Facility between Southern
California Edison Company and Earth Energy, Inc., dated May 8, 1987,
including Amendment No. 1 to such contract, dated March 30, 1993
(incorporated by reference to Exhibit 10.101 to the Magma Power
Company Form 10-K for the year ended December 31, 1993, File No.
0-10533 (the "1993 Magma Form 10-K")).
10.61 Power Purchase Contract (Unit II) by and between Southern California
Edison Company and Westmoreland Geothermal Associates, dated April
16, 1985, including Amendment No. 1 to such contract, dated December
18, 1987 (incorporated by reference to Exhibit 10.102 to the 1993
Magma Form 10-K).
10.62 Power Purchase Contract (Unit III) between Southern California Edison
Company and Union Oil Company Salton Sea III , dated April 16, 1985
(incorporated by reference to the 1993 Magma Form 10-K).
10.63 Consolidated, Amended and Restated Power Purchase Agreement (Unit IV)
between Southern California Edison Company and Fish Lake Power
Company and Salton Sea Power Generation L.P. (incorporated by
reference to Exhibit 10.9 to the Registration Statement on Form S-4
dated August 9, 1995 of Salton Sea Funding Corporation 33-95538 (the
"Funding Corporation S-4").
10.64 125 MW Power Plant - Upper Mahiao Agreement (the "Upper Mahiao ECA")
dated September 6, 1993 between PNOC-Energy Development Corporation
("PNOC-EDC") and Ormat Inc. as amended by the First Amendment to 125
MW Power Plant Upper Mahiao Agreement dated as of January 28, 1994,
the Letter Agreement dated February 10, 1994, the Letter Agreement
dated February 18, 1994 and the Fourth Amendment to 125 MW Power
Plant Upper Mahiao Agreement dated as of March 7, 1994 (incorporated
by reference to Exhibit 10.95 to the Company's Form 10-K/A Amendment
(dated March 31, 1995) to the Company's 1994 Form 10-K).
10.65 Credit Agreement dated April 8, 1994 among CE Cebu Geothermal Power
Company, Inc., the Banks thereto, Credit Size as Agent (incorporated
by reference to Exhibit 10.96 to the Company's Form 10-K/A Amendment
(dated March 31, 1995) to the Company's 1994 Form 10-K).
II-7
10.66 Credit Agreement dated as of April 8, 1994 between CE Cebu Geothermal
Power Company, Inc., Export-import Bank of the United States
(incorporated by reference to Exhibit 10.97 to the Company's Form
10-K/A Amendment (dated March 31, 1995) to the Company's 1994 Form
10-K).
10.67 Pledge Agreement among CE Philippines Ltd., Ormat-Cebu Ltd., Credit
Suisse as Collateral Agent and CE Cebu Geothermal Power Company, Inc.
dated as of April 8, 1994 (incorporated by reference to Exhibit 10.98
to the Company's Form 10-K/A Amendment (dated March 31, 1995) to the
Company's 1994 Form 10-K).
10.68 Overseas Private Investment Corporation Contract of Insurance dated
April 8, 1994 between the Overseas Private investment Corporation
("OPIC") and the Company through its subsidiaries CE International
Ltd., CE Philippines Ltd., and Ormat-Cebu Ltd. (incorporated by
reference to Exhibit 10.99 to the Company's Form 10-K/A Amendment
(dated March 31, 1995) to the Company's 1994 Form 10-K).
10.69 180 MW Power Plant - Mahanagdong Agreement ("Mahanagdong ECA") dated
September 18, 1993 between PNOC-EDC and CE Philippines Ltd. and the
Company, as amended by the First Amendment to Mahanagdong ECA dated
June 22, 1994, the Letter Agreement dated July 12, 1994, the Letter
Agreement dated July 29, 1994, and the Fourth Amendment to
Mahanagdong ECA dated March 3, 1995 (incorporated by reference to
Exhibit 10.100 to the Company's Form 10-K/A Amendment (dated March
31, 1995) to the Company's 1994 Form 10-K).
10.70 Credit Agreement dated as of June 30, 1994 among CE Luzon Geothermal
Power Company, Inc., American Pacific Finance Company, the Lenders
party thereto, and Bank of America National Trust and Savings
Association as Administrative Agent (incorporated by reference to
Exhibit 10.101 to the Company's Form 10-K/A Amendment (dated March
31, 1995) to the Company's 1994 Form 10-K).
10.71 Credit Agreement dated as of June 30, 1994 between CE Luzon
Geothermal Power Company, Inc. and Export-Import Bank of the United
States (incorporated by reference to Exhibit 10.102 to the Company's
Form 10-K/A Amendment (dated March 31, 1995) to the Company's 1994
Form 10-K).
10.72 Finance Agreement dated as of June 30, 1994 between CE Luzon
Geothermal Power Company, Inc. and Overseas Private Investment
Corporation (incorporated by reference to Exhibit 10.103 to the
Company's Form 10-K/A Amendment (dated March 31, 1995) to the
Company's 1994 Form 10-K).
10.73 Pledge Agreement dated as of June 30, 1994 among CE Mahanagdong Ltd.,
Kiewit Energy International (Bermuda) Ltd., Bank of America National
Trust and Savings Association as Collateral Agent and CE Luzon
Geothermal Power Company, Inc. (incorporated by reference to Exhibit
10.104 to the Company's Form 10-K/A Amendment (dated March 31, 1995)
to the Company's 1994 Form 10-K).
10.74 Overseas Private Investment Corporation Contract of Insurance dated
July 29, 1994 between OPIC and the Company, CE International Ltd., CE
Mahanagdong Ltd. and American Pacific Finance Company and Amendment
No. 1 dated August 3, 1994 (incorporated by reference to Exhibit
10.105 to the Company's Form 10-K/A Amendment (dated March 31, 1995)
to the Company's 1994 Form 10-K).
10.75 231 MW Power Plant - Malitbog Agreement ("Malitbog ECA) dated
September 10, 1993 between PNOC-EDC and Magma Power Company and the
First and Second Amendments thereto dated December 8, 1993 and March
10, 1994, respectively (incorporated by reference to Exhibit 10.106
to the Company's Form 10-K/A Amendment (dated March 31, 1995) to the
Company's 1994 Form 10-K).
10.76 Credit Agreement dated as of November 10, 1994 among Visayas Power
Capital Corporation, the Banks parties thereto and Credit Suisse Bank
Agent (incorporated by reference to Exhibit 10. 107 to the Company's
Form 10-K/A Amendment (dated March 31, 1995) to the Company's 1994
Form 10-K).
II-8
<PAGE>
10.77 Finance Agreement dated as of November 10, 1994 between Visayas
Geothermal Power Company and Overseas Private Investment Corporation
(incorporated by reference to Exhibit 10.108 to the Company's Form
10-K/A Amendment (dated March 31, 1995) to the Company's 1994 Form
10-K).
10.78 Pledge and Security Agreement dated as of November 10, 1994 among
Broad Street Contract Services, Inc., Magma Power Company, Magma
Netherlands B.V. and Credit Suisse as Bank Agent (incorporated by
reference to Exhibit 10.109 to the Company's Form 10-K Amendment
(dated March 31, 1995) to the Company's 1994 Form 10-K).
10.79 Overseas Private Investment Corporation Contract of Insurance dated
December 21, 1994 between OPIC and Magma Netherlands, B.V.
(incorporated by reference to Exhibit 10.110 to the Company's Form
10-K/A Amendment (dated March 31, 1995) to the Company's 1994 Form
10-K).
10.80 Agreement as to Certain Common Representations, Warranties, Covenants
and Other Terms, dated November 10, 1994 between Visayas Geothermal
Power Company, Visayas Power Capital Corporation, Credit Suisse, as
Bank Agent, OPIC and the Banks named therein (incorporated by
reference to Exhibit 10.111 to the Company's Form 10-K/A Amendment
(dated March 31, 1995) to the Company's 1994 Form 10-K).
10.81 Indenture dated as of July 21, 1995 between Salton Sea Funding
Corporation ("Funding Corporation") and Chemical Trust Company of
California (incorporated by reference to Exhibit 4.1(a) to the
Funding Corporation Form S-4).
10.82 First Supplemental Indenture dated as of October 18, 1995 between
Funding Corporation and Chemical Trust Company of California
(incorporated by reference to Exhibit 4.l(b) to the Funding
Corporation Form S-4).
10.83 Second Supplemental Indenture, dated as of June 20, 1996, between
Funding Corporation and Chemical Trust Company of California
(incorporated by reference to Exhibit 4.1(c) to Funding Corporation's
Registration Statement on Form S-4 dated July 29, 1996, 333-07527
(the "July 1996 Funding Corporation S-4")).
10.84 Third Supplemental Indenture, dated as of July 29, 1996, between
Funding Corporation and Chemical Trust Company of California
(incorporated by reference to Exhibit 4.1(d) to the July 1996 Funding
Corporation S-4).
10.85 Indenture dated July 21, 1995 between the Company and The Bank of New
York (incorporated by reference to the Company's Amendment No. 1 to
Registration Statement on Form S-3 dated May 17, 1995).
10.86 Modification to Contract No. P00019 dated August 1, 1995,
Modification to Contract No. P00020 dated August 1, 1995,
Modification to Contract No. P00034 dated February 8, 1995 and
Modification to Contract No. P00035 dated February 8, 1995, amending
the Navy Contract.
10.87 Trust Indenture between Chemical Trust of California and CE Casecnan
Water and Energy Company, Inc. dated November 27, 1995 (incorporated
by reference to Exhibit 4.1 of the Registration Statement on Form S-4
dated January 25, 1996 of CE Casecnan Water and Energy Company, Inc.,
333-00608 ("Casecnan S-4")).
10.88 Amended and Restated Casecnan Project Agreement between the National
Irrigation Administration and CE Casecnan Water and Energy Company
Inc. dated June 26, 1995 (incorporated by reference to the Casecnan
Form S-4).
10.89 Stock Purchase Agreement, dated as of July 3, 1996, by and among
CE/FS Holding Company, Inc.,
II-9
<PAGE>
David H. Dewhurst and all the remaining owners of capital stock of
Falcon Seaboard Resources, Inc. (incorporation by reference to
Exhibit 99.1 to the Company's Form 8-K, dated July 8, 1996, File No.
1-9874).
12 Statement Regarding Computation of Ratios.
13 The Company's 1995 Annual Report (only the portions thereof
specifically incorporated herein by reference are deemed filed
herewith).
15 Awareness letter of Deloitte & Touche LLP.
21 Subsidiaries of the Registrant.
23.1 Independent Accountants' Consents of Deloitte & Touche, LLP.
23.2 Independent Accountants' Consent of Arthur Andersen LLP.
23.3 Independent Accountants' Consent of Coopers & Lybrand L.L.P.
23.4 Consent of Willkie Farr & Gallagher (included in their opinion filed
as Exhibit 5).
24 Powers of Attorney (included on signature pages).
25 Statement on Form T-1 of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Letter to Clients.
99.4 Letter to Nominees.
(b) Financial Statement Schedules:
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements and schedule of the Company included in
its Form 10-K for the year ended December 31, 1995, incorporated herein by
reference.
II-10
<PAGE>
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to the provisions, described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the option of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this Prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4 of the Securities Act, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Omaha, State of
Nebraska, on November 4, 1996.
CALENERGY COMPANY, INC.
/s/ David L. Sokol
---------------------------------
By: David L. Sokol
Title: Director, Chairman of the
Board and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of CalEnergy Company, Inc., do
hereby severally constitute and appoint Steven A. McArthur and John G. Sylvia,
our true and lawful attorney and agent, jointly and severally, to do any and
all acts and things in our name and behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorney and agent, may deem necessary
or advisable to enable said Corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement on Form S-4, including specifically, but without limitation, power
and authority to sign for us or any of us, in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto; and we do each hereby ratify and confirm all that said attorney and
agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ David L. Sokol Director, Chairman of the November 4, 1996
- ------------------------ Board and Chief Executive
David L. Sokol Officer (Principal
Executive Officer)
/s/ John G. Sylvia Director, Senior Vice November 4, 1996
- ------------------------ President, Chief Financial
John G. Sylvia Officer and Treasurer
(Principal Financial
Officer)
/s/ Gregory E. Abel Executive Vice President, November 4, 1996
- ------------------------ Controller and Chief
Gregory E. Abel Accounting Officer
(Principal Accounting
Officer)
II-12
<PAGE>
/s/ Edgar D. Aronson Director November 1, 1996
- ------------------------
Edgar D. Aronson
/s/ Judith E. Ayres Director November 4, 1996
- ------------------------
Judith E. Ayres
/s/ James Q. Crowe Director November 4, 1996
- ------------------------
James Q. Crowe
/s/ Richard K. Davidson Director November 4, 1996
- ------------------------
Richard K. Davidson
/s/ Richard R. Jaros Director November 4, 1996
- ------------------------
Richard R. Jaros
/s/ Ben Holt Director November 4, 1996
- ------------------------
Ben Holt
/s/ John R. Shiner Director November 1, 1996
- ------------------------
John R. Shiner
/s/ Bernard W. Reznicek Director November 1, 1996
- ------------------------
Bernard W. Reznicek
/s/ Walter Scott, Jr. Director November 4, 1996
- ------------------------
Walter Scott, Jr.
/s/ David E. Wit Director November 4, 1996
- ------------------------
David E. Wit
Director November , 1996
- ------------------------
David H. Dewhurst
II-13
<PAGE>
EXHIBIT INDEX
4.1 -- Indenture, dated as of September 20, 1996, between the Company and
IBJ Schroder Bank & Trust Company, as trustee, relating to
$225,000,000 principal amount of 9 1/2% Senior Notes due 2006.
4.2 -- Exchange and Registration Rights Agreement, dated as of September
20, 1996, between the Company and CS First Boston Corporation.
5 -- Opinion of Willkie Farr & Gallagher.
15 -- Awareness Letter of Deloitte & Touche, LLP
12 -- Statement Regarding Computation of Ratios.
23.1 -- Independent Accountants' Consents of Deloitte & Touche, LLP.
23.2 -- Independent Accountants' Consent of Arthur Andersen LLP.
23.3 -- Independent Accountants' Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of Willkie Farr & Gallagher (included in their opinion
filed as Exhibit 5).
24 -- Powers of Attorney (included on signature pages).
25 -- Statement on Form T-1 of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Letter to Clients.
99.4 -- Letter to Nominees.
- -------------------------------------------------------------------------------
CALENERGY COMPANY, INC.
-------------------------------
Indenture
Dated as of September 20, 1996
-------------------------------
$225,000,000
9 1/2% Senior Notes due 2006
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
- -------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss.310(a)(1)............................................................. 609
(a)(2)............................................................. 609
(a)(3)................................................... Not Applicable
(a)(4)................................................... Not Applicable
(b)........................................................... 608, 610
ss.311(a)................................................................ 613
(b)................................................................ 613
(c)...................................................... Not Applicable
ss.312(a)........................................................... 701, 702
(b)................................................................ 702
(c)................................................................ 702
ss.313(a)................................................................ 703
(b)................................................................ 703
(c)................................................................ 703
(d)................................................................ 703
ss.314(a)................................................................ 704
(a)(4)........................................................ 101, 704
(b)...................................................... Not Applicable
(c)(1)............................................................. 102
(c)(2)............................................................ 102
(c)(3)................................................... Not Applicable
(d)...................................................... Not Applicable
(e)............................................................... 102
(f)...................................................... Not Applicable
ss.315(a)................................................................ 601
(b)............................................................... 602
(c)............................................................... 601
(d)............................................................... 601
(e)............................................................... 514
ss.316(a)................................................ 101("Outstanding")
(a)(1)(A)..................................................... 502, 512
(a)(1)(B)..................................................... 513
(a)(2)................................................... Not Applicable
(b)............................................................... 508
(c)............................................................... 104
ss.317(a)(1)............................................................ 503
(a)(2)............................................................ 504
(b)............................................................... 1003
ss.318(a)............................................................... 107
(b)...................................................... Not Applicable
(c)............................................................. 107
- -------------------
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
PARTIES .................................................................................. 1
RECITALS OF THE COMPANY ................................................................... 1
ARTICLE ONE
Definitions and Other Provisions of General Application .................... 1
Section 101. Definitions ................................................................. 1
Section 102. Compliance Certificates and Opinions ........................................ 37
Section 103. Form of Documents Delivered to Trustee ...................................... 38
Section 104. Acts of Holders; Record Dates ............................................... 38
Section 105. Notices, Etc., to Trustee and Company ....................................... 41
Section 106. Notice to Holders; Waiver ................................................... 42
Section 107. Conflict with Trust Indenture Act ........................................... 42
Section 108. Effect of Headings and Table of Contents .................................... 43
Section 109. Successors and Assigns ...................................................... 43
Section 110. Separability Clause ......................................................... 43
Section 111. Benefits of Indenture ....................................................... 43
Section 112. Governing Law ............................................................... 43
Section 113. Legal Holidays .............................................................. 44
Section 114. No Recourse Against Others .................................................. 44
Section 115. Duplicate Originals ......................................................... 44
ARTICLE TWO
The Securities .............................................................. 45
Section 201. Global and Certificated Securities .......................................... 45
Section 202. Execution and Authentication ................................................ 47
Section 203. Registrar and Paying Agent .................................................. 48
Section 204. Paying Agent To Hold Money in Trust ......................................... 49
Section 205. Holder Lists ................................................................ 49
Section 206. Transfer and Exchange ....................................................... 49
Section 207. Mutilated, Destroyed, Lost and Stolen Securities ............................ 57
Section 208. Temporary Securities and Certificated Securities ............................ 58
Section 209. Payment of Interest; Interest Rights Preserved .............................. 60
Section 210. Persons Deemed Owners ....................................................... 61
Section 211. Cancellation ................................................................ 61
Section 212. Denominations ............................................................... 62
Section 213. Computation of Interest ..................................................... 62
- ------------
* Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture.
-i-
<PAGE>
PAGE
------
Section 214. CUSIP Numbers ............................................................... 62
Section 215. Single Class ................................................................ 62
ARTICLE THREE
Form of Security ............................................................ 62
Section 301. Forms Generally ............................................................. 62
Section 302. Form of Initial Security .................................................... 62
Section 303. Form of Exchange and Private Exchange Security .............................. 73
ARTICLE FOUR
Satisfaction and Discharge .................................................. 82
Section 401. Satisfaction and Discharge of Indenture ..................................... 82
ARTICLE FIVE
Remedies .................................................................... 83
Section 501. Events of Default ........................................................... 83
Section 502. Acceleration of Maturity; Rescission and Annulment .......................... 86
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee ............ 87
Section 504. Trustee May File Proofs of Claim ............................................ 88
Section 505. Trustee May Enforce Claims Without Possession of Securities ................. 89
Section 506. Application of Money Collected .............................................. 89
Section 507. Limitation on Suits ......................................................... 90
Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest .. 91
Section 509. Restoration of Rights and Remedies .......................................... 91
Section 510. Rights and Remedies Cumulative .............................................. 91
Section 511. Delay or Omission Not Waiver ................................................ 91
Section 512. Control by Holders .......................................................... 92
Section 513. Waiver of Past Defaults ..................................................... 92
Section 514. Undertaking for Costs ....................................................... 92
Section 515. Waiver of Stay or Extension Laws ............................................ 93
ARTICLE SIX
The Trustee ................................................................. 93
Section 601. Certain Duties and Responsibilities ......................................... 93
Section 602. Notice of Defaults; Notice of Acceleration .................................. 94
Section 603. Certain Rights of Trustee ................................................... 95
Section 604. Not Responsible for Recitals or Issuance of Securities ...................... 96
-ii-
<PAGE>
PAGE
------
Section 605. May Hold Securities ......................................................... 96
Section 606. Money Held in Trust ......................................................... 97
Section 607. Compensation and Reimbursement .............................................. 97
Section 608. Conflicting Interests ....................................................... 98
Section 609. Corporate Trustee Required; Eligibility ..................................... 98
Section 610. Resignation and Removal; Appointment of Successor ........................... 99
Section 611. Acceptance of Appointment by Successor ...................................... 100
Section 612. Merger, Conversion, Consolidation or Succession to Business ................. 101
Section 613. Preferential Collection of Claims Against Company ........................... 101
Section 614. Appointment of Authenticating Agent ......................................... 101
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company ........................... 103
Section 701. Company to Furnish Trustee Names and Addresses of Holders ................... 103
Section 702. Preservation of Information; Communications to Holders ...................... 104
Section 703. Reports by Trustee .......................................................... 104
Section 704. Reports by Company .......................................................... 105
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease ........................ 105
Section 801. Company May Consolidate, Etc. Only on Certain Terms ......................... 105
Section 802. Successor Substituted ....................................................... 107
ARTICLE NINE
Supplemental Indentures ..................................................... 107
Section 901. Supplemental Indentures Without Consent of Holders .......................... 107
Section 902. Supplemental Indentures with Consent of Holders ............................. 108
Section 903. Execution of Supplemental Indentures ........................................ 110
Section 904. Effect of Supplemental Indentures ........................................... 110
Section 905. Conformity with Trust Indenture Act ......................................... 110
Section 906. Reference in Securities to Supplemental Indentures .......................... 110
-iii-
<PAGE>
PAGE
------
ARTICLE TEN
Covenants ................................................................... 111
Section 1001. Payment of Principal, Premium and Interest .................................. 111
Section 1002. Maintenance of Office or Agency ............................................. 111
Section 1003. Money for Security Payments to be Held in Trust ............................. 112
Section 1004. Existence ................................................................... 113
Section 1005. Maintenance of Properties ................................................... 113
Section 1006. Payment of Taxes and Other Claims ........................................... 114
Section 1007. Maintenance of Insurance .................................................... 114
Section 1008. Limitation on Debt .......................................................... 115
Section 1009. Limitation on Subsidiary Debt ............................................... 116
Section 1010. Limitation on Restricted Payments ........................................... 117
Section 1011. Limitation on Transactions with Affiliates .................................. 119
Section 1012. Limitation on Liens ......................................................... 120
Section 1013. Purchase of Securities Upon a Change of Control ............................. 122
Section 1014. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries 123
Section 1015. Limitation on Dispositions .................................................. 125
Section 1016. Limitation on Certain Sale-Leasebacks ....................................... 129
Section 1017. Provision of Financial Information .......................................... 130
Section 1018. Limitation on Sale of Subsidiary Preferred Stock............................. 131
Section 1019. Statement by Officers as to Default; Compliance Certificates ............... 132
Section 1020. Waiver of Certain Covenants ................................................. 132
Section 1021. Limitation on Business ...................................................... 133
ARTICLE ELEVEN
Redemption of Securities .................................................... 134
Section 1101. Right of Redemption ......................................................... 134
Section 1102. Applicability of Article .................................................... 135
Section 1103. Election to Redeem; Notice to Trustee ....................................... 135
Section 1104. Selection by Trustee of Securities to Be Redeemed ........................... 135
Section 1105. Notice of Redemption ........................................................ 135
Section 1106. Deposit of Redemption Price ................................................. 136
Section 1107. Securities Payable on Redemption Date ....................................... 136
Section 1108. Securities Redeemed in Part ................................................. 137
-iv-
<PAGE>
PAGE
------
ARTICLE TWELVE
Defeasance and Covenant Defeasance ............................................... 137
Section 1201. Company's Option to Effect Defeasance or Covenant Defeasance ..................... 137
Section 1202. Defeasance and Discharge ......................................................... 138
Section 1203. Covenant Defeasance .............................................................. 138
Section 1204. Conditions to Defeasance or Covenant Defeasance .................................. 139
Section 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous
Provisions ....................................................................... 142
Section 1206. Reinstatement .................................................................... 142
APPENDIX ................................................................................. A-1
-v-
</TABLE>
<PAGE>
INDENTURE, dated as of September 20, 1996, between CalEnergy Company,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 302
South Thirty-Sixth Street, Omaha, Nebraska 68131, and IBJ Schroder Bank & Trust
Company, a New York banking corporation, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company and the Trustee each agree as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Company's 9 1/2% Senior Notes due 2006 (the "Initial Securities") and, if and
when issued pursuant to a registered exchange for Initial Securities, the
Company's 9 1/2% Senior Notes due 2006 (the "Exchange Securities") and if and
when issued pursuant to a private exchange for Initial Securities, the
Company's 9 1/2% Senior Notes due 2006 (the "Private Exchange Securities",
together with the Exchange Securities and the Initial Securities, the
"Securities"):
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
(a) For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
(2) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (whether or not such is
indicated herein);
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case may
be, of this Indenture;
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(6) "or" is not exclusive;
(7) provisions apply to successive events and transactions; and
(8) each reference herein to a rule or form of the Commission shall
mean such rule or form and any rule or form successor thereto, in each
case as amended from time to time.
Whenever this Indenture requires that a particular ratio or amount be
calculated with respect to a specified period after giving effect to certain
transactions or events on a pro forma basis, such calculation shall be made as
if the transactions or events occurred on the first day of such period, unless
otherwise specified.
"Acquired Debt" means Debt Incurred by a Person prior to the time (i)
such Person becomes a Restricted Subsidiary of the Company or an Eligible Joint
Venture, (ii) such Person merges with or into a Restricted Subsidiary of the
Company or an Eligible Joint Venture, or (iii) a Restricted Subsidiary of the
Company or an Eligible Joint Venture merges with or into such Person (in a
transaction in which such Person becomes a Restricted Subsidiary of the Company
or an Eligible Joint Venture), provided that, after giving effect to such
transaction, any Non-Recourse Debt of such Person could have been Incurred
pursuant to clause (iii) of Section 1009(b), any Permitted Facilities Debt of
such Person could have been Incurred pursuant to clause (viii) of Section
1009(b) and would not otherwise violate any other provision of this
-2-
<PAGE>
Indenture, and all the other Debt of such Person could have been Incurred by
the Company at the time of such merger or acquisition pursuant to the provision
described in Section 1008(a), and provided further that such Debt was not
Incurred in connection with, or in contemplation of, such merger or such Person
becoming a Restricted Subsidiary of the Company or an Eligible Joint Venture.
"Acquisition Debt" means Debt of any Person existing at the time such
Person is merged into the Company or assumed in connection with the
acquisition of Property from any such Person (other than Property acquired in
the ordinary course of business), including Debt Incurred in connection with,
or in contemplation of, such Person being merged into the Company (but
excluding Debt of such Person that is extinguished, retired or repaid in
connection with such merger or acquisition).
"Adjusted Consolidated Net Income" means for any period, for any Person
(the "Referenced Person") the aggregate Net Income (or loss) of the Referenced
Person and its consolidated Subsidiaries for such period determined in
conformity with GAAP, provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication): (i) the Net
Income (or loss) of any other Person (other than a Subsidiary of the Referenced
Person) in which any third Person has an interest, except to the extent of the
amount of dividends or other distributions actually paid in cash to the
Referenced Person during such period, or after such period and on or before the
date of determination, by such Person in which the interest is held, which
dividends and distributions shall be included in such computation, (ii) solely
for the purposes of calculating the amount of Restricted Payments that may be
made pursuant to the provision described in clause (c) of Section 1010(a) (and
in such case, except to the extent includable pursuant to clause (i) above),
the Net Income (if positive) of any other Person accrued prior to the date it
becomes a Subsidiary of the Referenced Person or is merged into or consolidated
with the Referenced Person or any of its Subsidiaries or all or substantially
all the Property of such other Person are acquired by the Referenced Person or
any of its Subsidiaries, (iii) the Net Income (if positive) of any Subsidiary
of the Referenced Person, to the extent that the declaration or payment of
dividends or similar distributions by the Subsidiary to such Person or to any
other Subsidiary of such Net Income is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to the Subsidiary,
(iv) any gains
-3-
<PAGE>
or losses (on an after-tax basis) attributable to Asset Sales (except, solely
for the purposes of calculating the amount of Restricted Payments that may be
made pursuant to the provision described in clause (c) of Section 1010(a), any
gains or losses of the Company and any of its Restricted Subsidiaries from
Asset Sales of Capital Stock of Unrestricted Subsidiaries), (v) the cumulative
effect of a change in accounting principles and (vi) any amounts paid or
accrued as dividends on Preferred Stock of any Subsidiary of the Referenced
Person that is not held by the Referenced Person or another Subsidiary thereof.
When the "Referenced Person" is the Company, the foregoing references to
"Subsidiaries" shall be deemed to refer to "Restricted Subsidiaries."
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with") when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. For the purpose of
Section 1011, the term "Affiliate" includes only Kiewit, any entity
beneficially owning 10% or more of the Voting Stock of the Company and their
respective Affiliates other than the Restricted Subsidiaries and the Eligible
Joint Ventures and the other equity investors in the Restricted Subsidiaries
and the Eligible Joint Ventures (solely on account of their investments in the
Restricted Subsidiaries and the Eligible Joint Ventures), and for such purpose
such term also includes the Unrestricted Subsidiaries.
"Asset Acquisition" means (i) an investment by the Company, any of its
Subsidiaries or any Joint Venture in any other Person pursuant to which such
Person shall become a direct or indirect Subsidiary of the Company or a Joint
Venture or shall be merged into or consolidated with the Company, any of its
Subsidiaries or any Joint Venture or (ii) an acquisition by the Company, any of
its Subsidiaries or any Joint Venture of the Property of any Person other than
the Company, any of its Subsidiaries or any Joint Venture that constitutes
substantially all of an operating unit or business of such Person.
"Asset Disposition" means any sale, transfer, conveyance, lease or
other disposition (including by way of merger, consolidation or sale-leaseback)
by the Company,
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any of its Restricted Subsidiaries or any Eligible Joint Venture to any Person
(other than to the Company, a Restricted Subsidiary of the Company or an
Eligible Joint Venture and other than in the ordinary course of business) of
any Property of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture other than any shares of Capital Stock of the Unrestricted
Subsidiaries. Notwithstanding the foregoing to the contrary, the term "Asset
Disposition" shall include the sale, transfer, conveyance or other disposition
of any shares of Capital Stock of any Unrestricted Subsidiary to the extent
that the Company or any of its Restricted Subsidiaries or Eligible Joint
Ventures made an Investment in such Unrestricted Subsidiary pursuant to clause
(vii) of the definition of "Permitted Payment," and the Company shall, and
shall cause each of its Restricted Subsidiaries and Eligible Joint Ventures to,
apply pursuant to Section 1015 that portion of the Net Cash Proceeds from the
sale, transfer, conveyance or other disposition of such Unrestricted
Subsidiary that is equal to the portion of the total Investment in such
Unrestricted Subsidiary that is represented by the Investment that was made
pursuant to clause (vii) of the definition of "Permitted Payment." For purposes
of this definition, any disposition in connection with directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall not
constitute an Asset Disposition. In addition, the term "Asset Disposition"
shall not include (i) any sale, transfer, conveyance, lease or other
disposition of the Capital Stock or Property of Restricted Subsidiaries or
Eligible Joint Ventures pursuant to the terms of any power sales agreements or
steam sales agreements to which such Restricted Subsidiaries or such Eligible
Joint Ventures are parties on the Issue Date of the Securities or pursuant to
the terms of any power sales agreements or steam sales agreements, or other
agreements or contracts that are related to the output or product of, or
services rendered by, a Permitted Facility as to which such Restricted
Subsidiary or such Eligible Joint Venture is the supplying party, to which such
Restricted Subsidiaries or such Eligible Joint Ventures become a party after
such date if the President or Chief Financial Officer of the Company
determines in good faith (evidenced by an Officers' Certificate) that such
provisions are customary (or, in the absence of any industry custom, reasonably
necessary) in order to effect such agreements and are reasonable in light of
comparable transactions in the applicable jurisdiction, (ii) any sale,
transfer, conveyance, lease or other disposition of Property governed by
Section 801, (iii) any sale, transfer, conveyance, lease or other disposition
of any Cash Equivalents, (iv) any transaction or series of related
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transactions consisting of the sale, transfer, conveyance, lease or other
disposition of Capital Stock or Property with a fair market value aggregating
less than $5 million and (v) any Permitted Payment or any Restricted Payment
that is permitted to be made pursuant to Section 1010. The term "Asset
Disposition" also shall not include (i) the grant of or realization upon a Lien
permitted under Section 1012 or the exercise of remedies thereunder, (ii) a
sale-leaseback transaction involving substantially all the Property
constituting a Permitted Facility pursuant to which a Restricted Subsidiary of
the Company or an Eligible Joint Venture sells the Permitted Facility to a
Person in exchange for the assumption by that Person of the Debt financing the
Permitted Facility and the Restricted Subsidiary or the Eligible Joint Venture
leases the Permitted Facility from such Person, (iii) dispositions of Capital
Stock, contract rights, development rights and resource data made in connection
with the initial development of Permitted Facilities, or the formation or
capitalization of Restricted Subsidiaries or Eligible Joint Ventures in
respect of the initial development of Permitted Facilities, in respect of
which only an insubstantial portion of the prospective Construction Financing
that would be required to commence commercial operation has been funded or (iv)
transactions determined in good faith by the Chief Financial Officer, as
evidenced by an Officers' Certificate, made in order to enhance the
repatriation of the Net Cash Proceeds for a Foreign Asset Disposition or in
order to increase the after-tax proceeds thereof available for immediate
distribution to the Company. Any Asset Disposition that results from the bona
fide exercise by any governmental authority of its claimed or actual power of
eminent domain need not comply with the provisions of clauses (i) and (ii) of
Section 1015(a). Any Asset Disposition that results from a casualty loss need
not comply with the provisions of clause (i) of Section 1015(a).
"Asset Sale" means the sale or other disposition by the Company, any of
its Subsidiaries or any Joint Venture (other than to the Company, another
Subsidiary of the Company or another Joint Venture) of (i) all or substantially
all of the Capital Stock of any Subsidiary of the Company or any Joint Venture
or (ii) all or substantially all of the Property that constitutes an operating
unit or business of the Company, any of its Subsidiaries or any Joint Venture.
"Attributable Value" means, as to a Capitalized Lease Obligation under
which any Person is at the time liable and at any date as of which the amount
thereof is to be determined, the capitalized amount thereof that
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would appear on the face of a balance sheet of such Person in accordance with
GAAP.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 hereof to act on behalf of the Trustee to authenticate
Securities.
"Average Life" means, at any date of determination with respect to any
Debt security or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of (A) the number of years from such date of determination to
the dates of each successive scheduled principal or involuntary liquidation
value payment of such Debt security or Preferred Stock, respectively,
multiplied by (B) the amount of such principal or involuntary liquidation value
payment by (ii) the sum of all such principal or involuntary liquidation value
payments.
"Board of Directors" means either the Board of Directors of the Company or
any duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors (unless the context specifically requires that such resolution be
adopted by a majority of the Disinterested Directors, in which case by a
majority of such directors) and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means a day that, in the city (or in any of the cities, if
more than one) where amounts are payable in respect of the Securities, is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in, or interests (however designated) in, the equity of
such Person that is outstanding or issued on or after the date of Indenture,
including, without limitation, all Common Stock and Preferred Stock and
partnership and joint venture interests in such Person.
"Capitalized Lease" means, as applied to any Person, any lease of any
Property of which the discounted present value of the rental obligations of
such Person as lessee, in conformity with GAAP, is required to be capitalized
on the balance sheet of such Person, and "Capitalized Lease
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Obligation" means the rental obligations, as aforesaid, under such lease.
"Cash Equivalent" means any of the following: (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof), (ii) time deposits
and certificates of deposit of any commercial bank organized in the United
States having capital and surplus in excess of $500,000,000 or any commercial
bank organized under the laws of any other country having total assets in
excess of $500,000,000 with a maturity date not more than two years from the
date of acquisition, (iii) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in clauses (i) or (v)
that were entered into with any bank meeting the qualifications set forth in
clause (ii) or another financial institution of national reputation, (iv)
direct obligations issued by any state or other jurisdiction of the United
States of America or any other country or any political subdivision or public
instrumentality thereof maturing, or subject to tender at the option of the
holder thereof, within 90 days after the date of acquisition thereof and, at
the time of acquisition, having a rating of A from S&P or A-2 from Moody's (or,
if at any time neither S&P nor Moody's may be rating such obligations, then
from another nationally recognized rating service acceptable to the Trustee),
(v) commercial paper issued by (a) the parent corporation of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws of any other
country having total assets in excess of $500,000,000, and (b) others having
one of the two highest ratings obtainable from either S&P or Moody's (or, if at
any time neither S&P nor Moody's may be rating such obligations, then from
another nationally recognized rating service acceptable to the Trustee) and in
each case maturing within one year after the date of acquisition, (vi)
overnight bank deposits and bankers' acceptances at any commercial bank
organized in the United States having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws of any other
country having total assets in excess of $500,000,000, (vii) deposits available
for withdrawal on demand with any commercial bank organized in the United
States having capital and surplus in excess of $500,000,000 or any commercial
bank organized under the laws of any other country having total assets in
excess of $500,000,000, (viii) investments in money market funds substantially
all of whose assets comprise securities of
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the types described in clauses (i) through (vi) and (ix), and (ix) auction rate
securities or money market preferred stock having one of the two highest
ratings obtainable from either S&P or Moody's (or, if at any time neither S&P
nor Moody's may be rating such obligations, then from another nationally
recognized rating service acceptable to the Trustee).
"Certificated" means any Security which is not a Global Security.
"Change of Control" means the occurrence of one or more of the following
events:
(i) for so long as at least $25 million principal amount of the
Company's 5% Convertible Subordinated Debentures due July 1, 2000 remain
outstanding and are not defeased, (x) a report is filed on Schedule 13D or
14D-1 (or any successor schedule, form or report) pursuant to the Exchange
Act, disclosing that any person (for the purposes of this provision only,
as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act or any successor provision to either of the foregoing)
has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation promulgated
under the Exchange Act) of 50% or more of the then outstanding shares of
the Voting Stock of the Company and (y) such beneficial ownership is
acquired by means of a tender offer in which cash is the sole
consideration paid and the purchase price for each share tendered is less
than the conversion price then in effect under the Company's 5%
Convertible Subordinated Debentures due July 1, 2000; provided that a
person shall not be deemed to be the beneficial owner of, or to own
beneficially, any securities tendered until such tendered securities are
accepted for purchase under the tender offer;
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than Kiewit, is or becomes the beneficial
owner (as defined in clause (i) above), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock of the Company (for
the purposes of this clause (ii), any person shall be deemed to
beneficially own any Voting Stock of any corporation (the "specified
corporation") held by any other corporation (the "parent corporation"), if
such person "beneficially owns" (as so defined), directly or indirectly,
more than 35% of the voting power of
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the Voting Stock of such parent corporation) and Kiewit "beneficially
owns" (as so defined), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of the Company and does
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of
the Company;
(iii) during any one-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together
with any new directors elected by such Board of Directors or nominated for
election by the shareholders of the Company by a vote of at least a
majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office, unless
a majority of such new directors were elected or appointed by Kiewit; or
(iv) the Company or its Restricted Subsidiaries sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all the
Property of the Company and the Restricted Subsidiaries taken as a whole;
provided that with respect to the foregoing subparagraphs (ii), (iii) and (iv),
a Change of Control shall not be deemed to have occurred unless and until a
Rating Decline has occurred as well.
"Common Stock" means with respect to any Person, Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture and thereafter "Company" shall mean
such successor Person.
"Company Refinancing Debt" means Debt issued in exchange for, or the
proceeds of which are used to refinance (including to purchase), outstanding
Securities or other Debt of the Company Incurred pursuant to clauses (i), (iv),
and (vii) of Section 1008(b) and Debt Incurred
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pursuant to Section 1008(a) in an amount (or, if such new Debt provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, with an original issue price) not to
exceed the amount so exchanged or refinanced (plus accrued interest and all
fees, premiums (in excess of the accreted value) and expenses related to such
exchange or refinancing), for which purpose the amount so exchanged or
refinanced shall be deemed to equal the lesser of (x) the principal amount of
the Debt so exchanged or refinanced and (y) if the Debt being exchanged or
refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such exchange or
refinancing, provided that (A) such Debt shall be subordinated in right of
payment to the Securities at least to the same extent, if any, as the Debt so
exchanged or refinanced is subordinated to the Securities, (B) such Debt shall
be Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse, (C)
the Average Life of the new Debt shall be equal to or greater than the Average
Life of the Debt to be exchanged or refinanced and (D) the final Stated
Maturity of the new Debt shall not be sooner than the earlier of the final
Stated Maturity of the Debt to be exchanged or refinanced or six months after
the final Stated Maturity of the Securities, provided that if such new Debt
refinances the Securities in part only, the final Stated Maturity of such new
Debt must be at least six months after the final Stated Maturity of the
Securities.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated EBITDA" of any Person for any period means the Adjusted
Consolidated Net Income of such Person, plus, only to the extent deducted in
computing Adjusted Consolidated Net Income and without duplication, (i) income
taxes, excluding income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or Asset Sales, all determined
on a consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, (ii) Consolidated Fixed Charges, (iii) depreciation and
amortization expense, all determined on a consolidated basis for such Person
and its consolidated Subsidiaries in accordance with GAAP and (iv) all other
non-cash items reducing Adjusted Consolidated Net Income for such period, all
determined on a consolidated basis for such Person and
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its consolidated Subsidiaries in accordance with GAAP, and less all
non-cash items increasing Adjusted Consolidated Net Income during such period,
provided that depreciation and amortization expense of any Subsidiary of such
Person and any other non-cash item of any Subsidiary of such Person that
reduces Adjusted Consolidated Net Income shall be excluded (without
duplication) in computing Consolidated EBITDA, except to the extent that the
positive cash flow associated with such depreciation and amortization expense
and other non-cash items is actually distributed in cash to such Person during
such period, provided further that as applied to the Company, cash in respect
of depreciation and amortization and other non-cash items of Restricted
Subsidiaries and Eligible Joint Ventures may be deemed to have been distributed
or paid to the Company to the extent that such cash (I) is or was under the
exclusive dominion and control of such Restricted Subsidiary or such Eligible
Joint Venture and is free and clear of the Lien of any other Person, (II) is
immediately available for distribution and (III) could be or could have been
repatriated to the United States by means that are both lawful and commercially
reasonable, provided that the amount of the cash deemed by this sentence to
have been distributed or paid shall be reduced by the amount of tax that would
have been payable with respect to the repatriation thereof, provided further
that any cash that enables the recognition of depreciation and amortization and
other non-cash items pursuant to this sentence may not be used to enable the
recognition of depreciation and amortization and other non-cash items with
respect to any prior or subsequent period, regardless of whether such cash is
distributed to the Company, and provided further that the recognition of any
depreciation and amortization and other non-cash items as a result of this
sentence shall be determined in good faith by the Chief Financial Officer, as
evidenced by an Officers' Certificate that shall set forth in reasonable detail
the relevant facts and assumptions supporting such recognition. When the
"Person" referred to above is the Company, the foregoing references to
"Subsidiaries" shall be deemed to refer to "Restricted Subsidiaries."
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate of (i) Consolidated Interest Expense, (ii) the interest component of
Capitalized Leases, determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, excluding any interest
component of Capitalized Leases in respect of that portion of a Capitalized
Lease Obligation of a Subsidiary that is Non-Recourse to such Person, and (iii)
cash and non-cash dividends due (whether or not declared) on the Preferred
Stock of any
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Subsidiary of such Person held by any Person other than such Person and any
Redeemable Stock of such Person or any Subsidiary of such Person. When the
"Person" referred to above is the Company, the foregoing references to
"Subsidiaries" shall be deemed to refer to "Restricted Subsidiaries."
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate interest expense in respect of Debt (including amortization of
original issue discount and non-cash interest payments or accruals) of such
Person and its consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP, including all commissions, discounts, other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and net costs associated with Interest Rate Protection Agreements and
Currency Protection Agreements and any amounts paid during such period in
respect of such interest expense, commissions, discounts, other fees and
charges that have been capitalized, provided that Consolidated Interest Expense
of the Company shall not include any interest expense (including all
commissions, discounts, other fees and charges owed with respect to letters of
credit and bankers' acceptance financing and net costs associated with Interest
Rate Protection Agreements or Currency Protection Agreements) in respect of
that portion of any Debt that is Non-Recourse, and pr ovided further that
Consolidated Interest Expense of the Company in respect of a Guarantee by the
Company of Debt of another Person shall be equal to the commissions, discounts,
other fees and charges that would be due with respect to a hypothetical letter
of credit issued under a bank credit agreement that can be drawn by the
beneficiary thereof in the amount of the Debt so guaranteed if (i) the Company
is not actually making directly or indirectly interest payments on such Debt
and (ii) GAAP does not require the Company on an unconsolidated basis to record
such Debt as a liability of the Company. When the "Person" referred to above is
the Company, the foregoing references to "Subsidiaries" shall be deemed to
refer to "Restricted Subsidiaries."
"Construction Financing" means the debt and/or equity financing provided
(over and above the owners' equity investment) to permit the acquisition,
development, design, engineering, procurement, construction and equipping of a
Permitted Facility and to enable it to commence commercial operations, provided
that Construction Financing may remain outstanding after the commence ment of
commercial operations of a Permitted Facility, without any increase in the
amount of such financing, and
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such Construction Financing shall not cease to be Construction Financing.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered, which address as of the date of this Indenture is located at One
State Street, New York, New York 10004.
"Currency Protection Agreement" means, with respect to any Person, any
foreign exchange contract, currency swap agreement or other similar agreement
or arrangement intended to protect such Person against fluctuations in currency
values to or under which such Person is a party or a beneficiary on the date of
this Indenture or becomes a party or a beneficiary thereafter.
"Debt" means, with respect to any Person, at any date of determination
(without duplication), (i) all indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person in respect of
letters of credit, bankers' acceptances, surety, bid, operating and performance
bonds, performance guarantees or other similar instruments or obligations (or
reimbursement obligations with respect thereto) (except, in each case, to the
extent incurred in the ordinary course of business), (iv) all obligations of
such Person to pay the deferred purchase price of property or services, except
Trade Payables, (v) the Attributable Value of all obligations of such Person as
lessee under Capitalized Leases, (vi) all Debt of others secured by a Lien on
any Property of such Person, whether or not such Debt is assumed by such
Person, provided that, for purposes of determining the amount of any Debt of
the type described in this clause, if recourse with respect to such Debt is
limited to such Property, the amount of such Debt shall be limited to the
lesser of the fair market value of such Property or the amount of such Debt,
(vii) all Debt of others Guaranteed by such Person to the extent such Debt is
Guaranteed by such Person, (viii) all Redeemable Stock valued at the greater of
its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends and (ix) to the extent not otherwise included in this definition, all
net obligations of such Person under Currency Protection Agreements and
Interest Rate Protection Agreements.
For purposes of determining any particular amount of Debt that is or
would be outstanding, Guarantees of, or obligations with respect to letters of
credit or similar instruments supporting (to the extent the foregoing
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constitutes Debt), Debt other wise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with this Indenture, in the event that an item of Debt meets the criteria of
more than one of the types of Debt described in the above clauses, the Company,
in its sole discretion, shall classify such item of Debt and only be required
to include the amount and type of such Debt in one of such clauses.
"Default" means any event that is, or after notice or passage of time, or
both, would be, an Event of Default.
"Default Amount" means the principal amount plus accrued interest.
"Depositary" means the Person designated as Depositary by the Company
pursuant to Section 201(a) until a successor depositary shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Depositary" shall mean or include each Person who is then a Depositary
hereunder. For purposes of this Indenture, unless otherwise specified pursuant
to Section 201(a), any such Depositary shall, at the time of its designation
and at all times during which it serves as Depositary, be a clearing agency
registered under the Exchange Act and any other applicable statute or
regulation.
"Disinterested Director" means, with respect to any proposed transaction
between the Company, a Restricted Subsidiary of the Company or an Eligible
Joint Venture, as applicable, and an Affiliate thereof, a member of the Board
of Directors who would not be a party to, or have a financial interest in, such
transaction and is not an officer, director or employee of, and does not have
a financial interest in, such Affiliate. For purposes of this definition, no
person would be deemed not to be a Disinterested Director solely because such
person holds Capital Stock of the Company.
"Eligible Joint Venture" means a Joint Venture (other than a Subsidiary)
(i) that is or shall be formed with respect to the construction, development,
acquisition, servicing, ownership, operation or management of one or more
Permitted Facilities and (ii) in which the Company and Kiewit together,
directly or indirectly, own at least 50% of the Capital Stock therein (of
which the Company must own at least half (in any event not less than 25% of the
total outstanding Capital Stock)) and (iii) in respect of which the Company
alone or in combi-
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nation with Kiewit, directly or indirectly, (a) controls, by voting power,
board or management committee membership, or through the provisions of any
applicable partnership, shareholder or other similar agreement or under an
operating, maintenance or management agreement or otherwise, the management and
operation of the Joint Venture or any Permitted Facilities of the Joint Venture
or (b) otherwise has significant influence over the management or operation of
the Joint Venture or any Permitted Facility of the Joint Venture in all
material respects (significant influence includes, without limitation, the
right to control or veto any material act or decision) in connection with such
management or operation. Any Joint Venture that is an Eligible Joint Venture
pursuant to this definition because of the ownership of Capital Stock therein
by Kiewit shall cease to be an Eligible Joint Venture if (x) Kiewit disposes of
any securities issued by the Company and, as a result of such disposition,
Kiewit becomes the beneficial owner (as such term is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of
less than 25% of the outstanding shares of Voting Stock of the Company or (y)
(I) as a result of any action other than a disposition of securities by Kiewit,
Kiewit becomes the beneficial owner of less than 25% of the outstanding shares
of Voting Stock of the Company and (II) thereafter Kiewit disposes of any
securities issued by the Company as a result of which the beneficial ownership
by Kiewit of the outstanding Voting Stock of the Company is further reduced,
provided that thereafter such Joint Venture may become an Eligible Joint
Venture if Kiewit becomes the beneficial owner of at least 25% of the
outstanding shares of Voting Stock of the Company and the other conditions set
forth in this definition are fulfilled.
"Exchange Act" refers to the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Exchange Offer Registration Statement" has the meaning given to that term
in the Registration Rights Agreement.
"Exchange Securities" means the 9 1/2% Senior Notes due 2006 to be issued
pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"Fixed Charge Ratio" means the ratio, on a pro forma basis, of (i) the
aggregate amount of Consolidated EBITDA of any Person for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
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calculate the Fixed Charge Ratio (the "Transaction Date") to (ii) the aggregate
Consolidated Fixed Charges of such Person during such Reference Period,
provided that for purposes of such computation, in calculating Consolidated
EBITDA and Consolidated Fixed Charges, (1) the Incurrence of the Debt giving
rise to the need to calculate the Fixed Charge Ratio and the application of the
proceeds therefrom (including the retirement or defeasance of Debt) shall be
assumed to have occurred on the first day of the Reference Period, (2) Asset
Sales and Asset Acquisitions that occur during the Reference Period or
subsequent to the Reference Period and prior to the Transaction Date (but
including any Asset Acquisition to be made with the Debt Incurred pursuant to
(1) above) and any related retirement of Debt pursuant to an Offer to Purchase
(in the amount of the Excess Proceeds with respect to which such Offer to
Purchase has been made or would be made on the Transaction Date if the
purchase of Securities pursuant to such Offer to Purchase has not occurred on
or before the Transaction Date) shall be assumed to have occurred on the first
day of the Reference Period, (3) the Incurrence of any Debt during the
Reference Period or subsequent to the Reference Period and prior to the
Transaction Date and the application of the proceeds therefrom (including the
retirement or defeasance of other Debt) shall be assumed to have occurred on
the first day of such Reference Period, (4) Consolidated Interest Expense
attributable to any Debt (whether existing or being Incurred) computed on a pro
forma basis and bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period unless the obligor on such Debt is a party to an Interest Rate
Protection Agreement (that shall remain in effect for the twelve month period
after the Transaction Date) that has the effect of fixing the interest rate on
the date of computation, in which case such rate (whether higher or lower)
shall be used and (5) there shall be excluded from Consolidated Fixed Charges
any Consolidated Fixed Charges related to any amount of Debt that was
outstanding during or subsequent to the Reference Period but is not outstanding
on the Transaction Date, except for Consolidated Fixed Charges actually
incurred with respect to Debt borrowed (as adjusted pursuant to clause (4)) (x)
under a revolving credit or similar arrangement to the extent the commitment
thereunder remains in effect on the Transaction Date or (y) pursuant to the
provision described in clause (iii) of Section 1008(b). For the purpose of
making this computation, Asset Sales and Asset Acquisitions that have been made
by any Person that has become a Restricted Subsidiary of the Company or an
Eligible Joint Venture or been merged with or into the Company or any
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Restricted Subsidiary of the Company or an Eligible Joint Venture during the
Reference Period, or subsequent to the Reference Period and prior to the
Transaction Date shall be calculated on a pro forma basis, as shall be all the
transactions contemplated by the calculations referred to in clauses (1)
through (5) above with respect to the Persons or businesses that were the
subject of such Asset Sales and Asset Acquisitions, assuming such Asset Sales
or Asset Acquisitions occurred on the first day of the Reference Period.
"Foreign Asset Disposition" means an Asset Disposition in respect of the
Capital Stock or Property of a Restricted Subsidiary of the Company or an
Eligible Joint Venture to the extent that the proceeds of such Asset
Disposition are received by a Person subject in respect of such proceeds to the
tax laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the U.S. as in
effect as of the date of this Indenture, applied on a basis consistent with the
principles, methods, procedures and practices employed in the preparation of
the Company's audited financial statements, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Global Security" means a Security evidencing all or a part of the
Securities, issued in the name of the nominee of the Depositary, or pursuant to
the Depositary's instruction, in accordance with Section 201(a) and bearing the
legend for such Securities prescribed in Section 206(d).
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and, without
limiting the generality of the foregoing, any Debt obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt of such other
Person (whether arising by virtue of partnership arrangements (other than
solely by reason of being a general partner of a partnership), or by agreement
to keep-well, to purchase assets, goods, securities or services, or to
take-or-pay, or to maintain financial statement condi-
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tions or otherwise) or (ii) entered into for purposes of assuring in any other
manner the obligee of such Debt of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided that
the term "Guarantee" shall not include endorsements for collection or deposit
in the ordinary course of business or the grant of a Lien in connection with
any Non-Recourse Debt. The term "Guarantee" used as a verb has a corresponding
meaning.
"Holder," "holder of Securities," "Securityholder" and other similar terms
are defined to mean the registered holder of any Security.
"Illiquidity Event" has the meaning given to that term in the Registration
Rights Agreement.
"Incur" means with respect to any Debt, to incur, create, issue, assume,
Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Debt, provided
that neither the accrual of interest (whether such interest is payable in cash
or kind) nor the accretion of original issue discount shall be considered an
Incurrence of Debt. The term "Incurrence" has a corresponding meaning.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including,
for all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and
govern this instrument and any such supplemental indenture, respectively.
"Initial Purchaser" means CS First Boston Corporation.
"Initial Securities" means the 9 1/2% Senior Notes due 2006 issued under
this Indenture on the Issue Date.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Agreement" means, with respect to any Person,
any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement
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or arrangement intended to protect such Person against fluctuations in interest
rates to or under which such Person or any of its Subsidiaries is a party or a
beneficiary on the date of this Indenture or becomes a party or a beneficiary
thereafter.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Initial Shelf Registration Statement" has the meaning given to that term
in the Registration Rights Agreement.
"Investment" in a Person means any investment in, loan or advance to,
Guarantee on behalf of, directly or indirectly, or other transfer of assets to
such Person (other than sales of products and services in the ordinary course
of business).
"Investment Grade" means with respect to the Securities, (i) in the case
of S&P, a rating of at least BBB-, (ii) in the case of Moody's, a rating of
at least Baa3, and (iii) in the case of a Rating Agency other than S&P or
Moody's, the equivalent rating, or in each case, any successor, replacement or
equivalent definition as promulgated by S&P, Moody's or other Rating Agency as
the case may be.
"Issue Date" means the date on which the Securities are first
authenticated and delivered under the Indenture.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.
"Kiewit" means and includes Kiewit Energy Company and any other Subsidiary
of Peter Kiewit Sons', Inc., Kiewit Construction Group Inc. or Kiewit
Diversified Group, Inc.
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property, but shall not include any partnership, joint venture, shareholder,
voting trust or other similar governance agreement with respect to Capital
Stock in a Subsidiary or Joint Venture. For purposes of this Indenture, the
Company shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale
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<PAGE>
agreement, capital lease or other title retention agreement
relating to such Property.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" from an Asset Disposition means cash payments received
(including any cash payments received by way of a payment of principal pursuant
to a note or installment receivable or otherwise, but only as and when received
(including any cash received upon sale or disposition of any such note or
receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
Property disposed of in such Asset Disposition or received in any form other
than cash) therefrom, in each case, net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses of any kind (including
consent and waiver fees and any applicable premiums, earn-out or working
interest payments or payments in lieu or in termination thereof) incurred, (ii)
all federal, state, provincial, foreign and local taxes and other governmental
charges required to be accrued as a liability under GAAP (a) as a consequence
of such Asset Disposition, (b) as a result of the repayment of any Debt in any
jurisdiction other than the jurisdiction where the Property disposed of was
located or (c) as a result of any repatriation of any proceeds of such Asset
Disposition, (iii) a reasonable reserve for the after-tax cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture in connection with such Asset
Disposition (but excluding any payments that by the terms of the indemnities
shall not, under any circumstances, be made during the term of the Securities),
(iv) all payments made on any Debt that is secured by such Property, in
accordance with the terms of any Lien upon or with respect to such Property, or
that must by its terms or by applicable law or in order to obtain a required
consent or waiver be repaid out of the proceeds from or in connection with such
Asset Disposition, and (v) all distributions and other payments made to holders
of Capital Stock of Restricted Subsidiaries or Eligible Joint Ventures (other
than the Company or its Restricted Subsidiaries) as a result of such Asset
Disposition.
"Net Income" of any Person for any period means the net income (loss)
of such Person for such period, determined in accordance with GAAP, except that
extraordinary and non-recurring gains and losses as determined in accordance
with GAAP shall be excluded.
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"Net Worth" of any Person is defined to mean, as of any date, the
aggregate of capital, surplus and retained earnings (including any cumulative
currency translation adjustment) of such Person and its consolidated
Subsidiaries as would be shown on a consolidated balance sheet of such Person
and its consolidated Subsidiaries prepared as of such date in accordance with
GAAP. When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" shall be deemed to refer to "Restricted
Subsidiaries."
"Non-Recourse", as applied to any Debt or any sale-leaseback, means any
project financing that is or was Incurred with respect to the development,
acquisition, design, engineering, procurement, construction, operation,
ownership, servicing or management of one or more Permitted Facilities in
respect of which the Company or one or more Restricted Subsidiaries or Eligible
Joint Ventures has a direct or indirect interest, provided that such financing
is without recourse to the Company, any Restricted Subsidiary or any Eligible
Joint Venture other than any Restricted Subsidiary or any Eligible Joint
Venture that does not own any Property other than one or more of such Permitted
Facilities or a direct or indirect interest therein, provided further that such
financing may be secured by a Lien on only (i) the Property that constitutes
such Permitted Facilities, (ii) the income from and proceeds of such Permitted
Facility, (iii) the Capital Stock of, and other Investments in, any Restricted
Subsidiary or Eligible Joint Venture that owns the Property that constitutes
any such Permitted Facility and (iv) the Capital Stock of, and other
Investments in, any Restricted Subsidiary or Eligible Joint Venture obligated
with respect to such financing and of any Subsidiary or Joint Venture (that is
a Restricted Subsidiary or an Eligible Joint Venture) of such Person that owns
a direct or indirect interest in any such Permitted Facility, and provided
further that an increase in the amount of Debt with respect to one or more
Permitted Facilities pursuant to the financing provided pursuant to the terms
of this definition (except for the first refinancing of Construction Financing)
may not be Incurred to fund or enable the funding of any dividend or other
distribution in respect of Capital Stock. The fact that a portion of financing
with respect to a Permitted Facility is not Non-Recourse shall not prevent
other portions of the financing with respect to such Permitted Facility from
constituting Non-Recourse Debt if the foregoing requirements of this definition
are fulfilled with respect to such other portions.
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<PAGE>
"Offer to Purchase" means, as appropriate, a Change of Control Offer
pursuant to Section 1013 or an Excess Proceeds Offer pursuant to Section 1015.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, the President or any Vice President and by the Chief
Financial Officer, the Treasurer, an Assistant Treasurer, the Controller, the
Assistant Controller, the Secretary or any Assistant Secretary of the Company
and delivered to the Trustee. Each such certificate will comply with Section
314 of the Trust Indenture Act and include the statements provided for in this
Indenture if and to the extent required thereby.
"Opinion of Counsel" means an opinion in writing signed by legal counsel
who may be an employee of or counsel to the Company or who may be other counsel
satisfactory to the Trustee. Each such opinion shall comply with Section 314 of
the Trust Indenture Act and include the statements provided for in this
Indenture, if and to the extent required thereby.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities that have come due or that are to be called for
redemption, for whose payment or redemption money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent (other
than the Company or a Restricted Subsidiary) in trust for the Holders of
such Securities; provided that if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture
or provision for giving such notice within 10 days of such date of
determination, satisfactory to the Trustee, has been made;
(iii) Securities that have been paid pursuant to Section 207 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide pur-
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<PAGE>
chaser in whose hands such Securities are valid obligations of the
Company; and
(iv) Securities as to which Defeasance has been effected pursuant to
Section 1202;
provided that in determining whether the Holders of the requisite principal
amount of the Outstanding Securities have given, made or taken any request,
demand, authorization, direction, notice, consent, waiver or other action
hereunder as of any date, Securities owned by the Company or any other obligor
upon the Securities or any Affiliate or Restricted Subsidiary of the Company or
of such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent,
waiver or other action, only Securities which the Trustee knows to be so owned
shall be so disregarded, Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon
the Securities or any Restricted Subsidiary of the Company or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Facility" means (i) an electric power or thermal energy
generation or cogeneration facility or related facilities (including residual
waste management and facilities that use thermal energy from a cogeneration
facility), and its or their related electric power transmission, fuel supply
and fuel transportation facilities, together with its or their related power
supply, thermal energy and fuel contracts and other facilities, services or
goods that are ancillary, incidental, necessary or reasonably related to the
marketing, development, construction, management, servicing, ownership or
operation of the foregoing, owned by a utility or otherwise, as well as other
contractual arrangements with customers, suppliers and contractors or (ii) any
infrastructure facilities related to (A) the treatment of water for municipal
and other uses, (B) the treatment and/or management of waste water, (C) the
treatment, management and/or remediation of waste, pollution and/or potential
pollutants and (D) any other process or environmental purpose.
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"Permitted Facilities Debt" means any Debt that is or was Incurred with
respect to the direct or indirect development, acquisition, design,
engineering, procurement, construction, operation, ownership, servicing or
management of one or more Permitted Facilities (x) currently in development by
the Company (directly or indirectly) or which are hereafter acquired or
developed by the Company (directly or indirectly) and (y) in which the Company
or one or more Restricted Subsidiaries or Eligible Joint Ventures has a direct
or indirect interest.
"Permitted Funding Company Loans" means (a) Debt of a Restricted
Subsidiary, all the Capital Stock of which is owned, directly or indirectly by
the Company and that (x) does not own any direct or indirect interest in a
Permitted Facility and (y) is not directly or indirectly obligated on any Debt
owed to any Person other than the Company, a Restricted Subsidiary or an
Eligible Joint Venture (a "Funding Company"), owed to a Restricted Subsidiary
or an Eligible Joint Venture that is not directly or indirectly obligated on
any Debt owed to any Person other than the Company, a Restricted Subsidiary or
an Eligible Joint Venture (a "Holding Company"), provided that such Debt (i)
does not require that interest be paid in cash at any time sooner than six
months after the final Stated Maturity of the Securities, (ii) does not require
any payment of principal at any time sooner than six months after the final
Stated Maturity of the Securities, (iii) is subordinated in right of payment to
all other Debt of such Restricted Subsidiary other than Debt Incurred pursuant
to clause (vii) of Section 1009(b), all of which shall be pari passu and (iv)
is evidenced by a subordinated note in the form attached to the Indenture as
Exhibit A and that shall not contain or be governed by any contractual
provisions other than those set forth in Exhibit A, and (b) Debt of a Holding
Company to a Funding Company.
"Permitted Investment" means any Investment that is made directly or
indirectly by the Company and its Restricted Subsidiaries in (i) a Restricted
Subsidiary or Eligible Joint Venture (excluding for the purpose of this clause
(i) any Construction Financing) that, directly or indirectly, is or shall be
engaged in the construction, development, acquisition, operation, servicing,
ownership or management of a Permitted Facility or in any other Person as a
result of which such other Person becomes such a Restricted Subsidiary or an
Eligible Joint Venture, provided that at the time that any of the foregoing
Investments is proposed to be made, no Event of Default or event that, after
giving notice or lapse of time or both, would become an Event of Default, shall
have oc-
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<PAGE>
curred and be continuing, (ii) Construction Financing provided by the Company
(A) to any of its Restricted Subsidiaries (other than an Eligible Joint
Venture) up to 100% of the Construction Financing required by such Restricted
Subsidiary and (B) to any Eligible Joint Venture a portion of the Construction
Financing required by such Eligible Joint Venture that does not exceed the
ratio of the Capital Stock in such Eligible Joint Venture that is owned
directly or indirectly by the Company to the total amount of the Capital Stock
in such Eligible Joint Venture that is owned directly and indirectly by the
Company and Kiewit together (provided that the Company may provide such
Construction Financing to such Eligible Joint Venture only if Kiewit provides
the balance of such Construction Financing or otherwise causes it to be
provided), if, in either case, (x) the aggregate proceeds of all the
Construction Financing provided is not more than 85% of the sum of the
aggregate proceeds of such Construction Financing and the aggregate owners'
equity investment in such Restricted Subsidiary or such Eligible Joint Venture,
as the case may be, (y) the Company receives a pledge or assignment of all the
Capital Stock of such Restricted Subsidiary or such Eligible Joint Venture, as
the case may be, that is owned by non-governmental Person (other than the
Company, its Subsidiaries or the Eligible Joint Ventures) that is permitted to
be pledged for such purpose under applicable law and (z) neither the Company
nor Kiewit reduces its beneficial ownership in such Restricted Subsidiary or
such Eligible Joint Venture, as the case may be, prior to the repayment in full
of the Company's portion of the Construction Financing, (iii) any Cash
Equivalents, (iv) prepaid expenses, negotiable instruments held for collection
and lease, utility and workers' compensation, performance and other similar
deposits in the ordinary course of business consistent with past practice, (v)
loans and advances to employees made in the ordinary course of business and
consistent with past practice, (vi) Debt incurred pursuant to Currency
Protection Agreements and Interest Rate Protection Agreements as otherwise
permitted by this Indenture, (vii) bonds, notes, debentures or other debt
securities and instruments received as a result of Asset Dispositions to the
extent permitted by Sections 1015 and 1021, (viii) any Lien permitted under
Section 1012 and (ix) bank deposits and other Investments (to the extent they
do not constitute Cash Equivalents) required by lenders in connection with any
Non-Recourse Debt, provided that the President or the Chief Financial Officer
of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such bank deposits or Investments are required to effect such
financings and are not materially more restrictive, taken as a whole, than
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comparable requirements, if any, in comparable financings in the applicable
jurisdiction or (x) any Person to the extent made with Capital Stock (other
than Redeemable Stock) of the Company (whether by way of purchase, merger,
consolidation or otherwise) to the extent permitted under Section 1021.
"Permitted Joint Venture" means a Joint Venture (i) that is or shall be
formed with respect to the construction, development, acquisition, servicing,
ownership, operation or management of one or more Permitted Facilities and (ii)
in which (A) the Company or (B) the Company and Kiewit together, directly or
indirectly, own at least 70% of the Capital Stock therein (of which the Company
must own at least half (in any event not less than 35% of the total outstanding
Capital Stock)), provided that if applicable non-U.S. law restricts the amount
of Capital Stock that the Company may own, the Company must own at least 70% of
the amount of Capital Stock that it may own pursuant to such law, which in any
event must be not less than 35% of the total outstanding Capital Stock therein
and (iii) in respect of which the Company alone or in combination with Kiewit,
directly or indirectly, (a) controls, by voting power, board or management
committee membership, or through the provisions of any applicable partnership,
shareholder or other similar agreement or under an operating, maintenance or
management agreement or otherwise, the management and operation of the Joint
Venture or any Permitted Facilities of the Joint Venture or (b) otherwise has
significant influence over the management or operation of the Joint Venture
or any Permitted Facility of the Joint Venture in all material respects
(significant influence includes, without limitation, the right to control or
veto any material act or decision) in connection with such management or
operation. Any Joint Venture that is a Permitted Joint Venture pursuant to this
definition because of the ownership of Capital Stock therein by Kiewit shall
cease to be a Permitted Joint Venture if (x) Kiewit disposes of any securities
issued by the Company and, as a result of such disposition, Kiewit becomes the
beneficial owner (as such term is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of less than 25% of the
outstanding shares of Voting Stock of the Company or (y) (I) as a result of any
action other than a disposition of securities by Kiewit, Kiewit becomes the
beneficial owner of less than 25% of the outstanding shares of Voting Stock of
the Company and (II) thereafter Kiewit disposes of any securities issued by the
Company as a result of which the beneficial ownership by Kiewit of the
outstanding Voting Stock of the Company is further reduced, provided that
thereafter such Joint Venture may
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<PAGE>
become a Permitted Joint Venture if Kiewit becomes the beneficial owner of at
least 25% of the outstanding shares of the Voting Stock of the Company and the
other conditions set forth in this definition are fulfilled.
"Permitted Payments" means, with respect to the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture, (i) any dividend on
shares of Capital Stock of the Company payable (or to the extent paid) solely
in Capital Stock (other than Redeemable Stock) or in options, warrants or other
rights to purchase Capital Stock (other than Redeemable Stock) of the Company
and any distribution of Capital Stock (other than Redeemable Capital Stock) of
the Company in respect of the exercise of any right to convert or exchange any
instrument (whether Debt or equity and including Redeemable Capital Stock) into
Capital Stock (other than Redeemable Capital Stock) of the Company, (ii) the
purchase or other acquisition or retirement for value of any shares of the
Company's Capital Stock, or any option, warrant or other right to purchase
shares of the Company's Capital Stock with additional shares of, or out of the
proceeds of a substantially contemporaneous issuance of, Capital Stock other
than Redeemable Stock, (iii) any defeasance, redemption, purchase or other
acquisition for value of any Debt that by its terms ranks subordinate in right
of payment to the Securities with the proceeds from the issuance of (x) Debt
that is subordinate to the Securities at least to the extent and in the manner
as the Debt to be defeased, redeemed, purchased or otherwise acquired is
subordinate in right of payment to the Securities, provided that such
subordinated Debt provides for no mandatory payments of principal by way of
sinking fund, mandatory redemption or otherwise (including defeasance) by the
Company (including, without limitation, at the option of the holder thereof
other than an option given to a holder pursuant to a "change of control" or an
"asset disposition" covenant that is no more favorable to the holders of such
Debt than comparable covenants for the Debt being defeased, redeemed, purchased
or acquired or, if none, Sections 1013 and 1015 and such Debt is not in an
amount (net of any original issue discount) greater than, any Stated Maturity
of the Debt being replaced and the proceeds of such subordinated Debt are
utilized for such purpose within 45 days of issuance or (y) Capital Stock
(other than Redeemable Stock), (iv) Restricted Payments in an amount not to
exceed $75 million in the aggregate provided that no payment may be made
pursuant to this clause (iv) if an Event of Default, or an event that, after
giving notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing, (v) any payment or Investment required by
applicable
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law in order to conduct business operations in the ordinary course, (vi) a
Permitted Investment and (vii) Investments in Unrestricted Subsidiaries and
other Persons that are not Restricted Subsidiaries or Eligible Joint Ventures
in an amount not to exceed $100 million in the aggregate, provided that no
payment or Investment may be made pursuant to this clause (vii) if an Event of
Default, or an event that, after giving notice or lapse of time or both, would
become an Event of Default, has occurred and is continuing. Notwithstanding the
foregoing, the amount of Investments that may be made pursuant to clauses (iv)
and (vii), as the case may be, may be increased by the net reduction in
Investments of the type made previously pursuant to clauses (iv) and (vii), as
the case may be, that result from payments of interest on Debt, dividends, or
repayment of loans or advances, the proceeds of the sale or disposition of the
Investment or other return of the amount of the original Investment to the
Company, the Restricted Subsidiary or the Eligible Joint Venture that made the
original Investment from the Person in which such Investment was made or any
distribution or payment of such Investment to the extent that such distribution
or payment constituted either a Restricted Payment or a Permitted Payment,
provided that (x) the aggregate amount of such payments shall not exceed the
amount of the original Investment by the Company, such Restricted Subsidiary
or Eligible Joint Venture that reduced the amount available pursuant to clause
(iv) or clause (vii), as the case may be, for making Restricted Payments and
(y) such payments may be added pursuant to this proviso only to the extent such
payments are not included in the calculation of Adjusted Consolidated Net
Income.
"Permitted Working Capital Facilities" means one or more loan or credit
agreements providing for the extension of credit to the Company for the
Company's working capital purposes, which credit agreements shall be ranked
pari passu with or subordinate to the Securities in right of payment and may be
secured or unsecured.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 207 in exchange for or in lieu of a
mutilated, destroyed, lost
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or stolen Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) or preferred or preference stock of such Person that is
outstanding or issued on or after the Issue Date of the Securities.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchaser to issue and deliver to
the Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9 1/2% Senior Notes due 2006 to be
issued pursuant to this Indenture in connection with a Private Exchange
effected pursuant to the Registration Rights Agreement.
"Property" of any Person means all types of real, personal, tangible or
mixed property owned by such Person whether or not included in the most recent
consolidated balance sheet of such Person under GAAP.
"Purchase Date" means, as appropriate, the Change of Control Purchase Date
under Section 1013 or the Excess Proceeds Purchase Date under Section 1015.
"Purchase Money Debt" means Debt representing, or Incurred to finance, the
cost of acquiring any Property, provided that (i) any Lien securing such Debt
does not extend to or cover any other Property other than the Property being
acquired and (ii) such Debt is incurred, and any Lien with respect thereto is
granted, within 18 months of the acquisition of such Property.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or
Moody's or both do not make a rating of the Securities publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P, Moody's or both,
as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa,
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Ca, C and D (or equivalent successor categories) and (iii) the equivalent of
any such category of S&P or Moody's used by another Rating Agency. In
determining whether the rating of the Securities has decreased by one or more
gradations, gradations within Rating Categories (+ and - for S&P, 1, 2 and 3
for Moody's or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to S&P, a decline in a rating from BB+
to BB, as well as from BB- to B+, shall constitute a decrease of one
gradation).
"Rating Decline" means the occurrence of the following on, or within 90
days after, the earlier of (i) the occurrence of a Change of Control and (ii)
the date of public notice of the occurrence of a Change of Control or of the
public notice of the intention of the Company to effect a Change of Control
(the "Rating Date") which period shall be extended so long as the rating of the
Securities is under publicly announced consideration for possible downgrading
by any of the Rating Agencies): (a) in the event that the Securities are rated
by either Rating Agency on the Rating Date as Investment Grade, the rating of
the Securities by both such Rating Agencies shall be reduced below Investment
Grade, or (b) in the event the Securities are rated below Investment Grade by
both such Rating Agencies on the Rating Date, the rating of the Securities by
either Rating Agency shall be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Securities, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Securities or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Debt having a
scheduled maturity prior to the Stated Maturity of the Securities, provided
that any Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require the Company to
purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or
a "change of control" occurring prior to the Stated Maturity of the Securities
shall not constitute Redeemable Stock if the "asset sale" or "change of
control" provision applicable to such Capital Stock is no more favorable to the
holders of such Capital Stock than the provisions contained in Section 1013 and
1015 and such Capital Stock specifically provides that the Company shall not
purchase or redeem any
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such Capital Stock pursuant to such covenants prior to the Company's purchase
of Securities required to be repurchased by the Company under Sections 1013 and
1015.
"Redemption Date" when used with respect to any Security to be redeemed,
means the date fixed for redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Reference Period" means the four most recently completed fiscal quarters
for which financial information is available preceding the date of a
transaction giving rise to the need to make a financial calculation.
"Registered Exchange Offer" means an offer by the Company, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement dated as of September 20, 1996 between the Company and the Initial
Purchaser.
"Regular Record Date", for the interest payable on any Interest Payment
Date means the March 1 or September 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee corporate, the president, any vice president,
the secretary, any assistant secretary, any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Company's Capital Stock, provided that a dividend or other
distribution consisting of the Capital Stock of an Unrestricted Subsidiary
shall not constitute a Restricted Payment except to the extent of the portion
thereof that is equal to the
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portion of the total Investment in such Unrestricted Subsidiary that is
represented by the Investment that was made pursuant to clause (vii) of the
definition of "Permitted Payment," (ii) any payment on account of the purchase,
redemption, retirement or acquisition for value of the Company's Capital Stock,
(iii) any defeasance, redemption, purchase or other acquisition or retirement
for value prior to the scheduled maturity of any Debt ranked subordinate in
right of payment to the Securities other than repayment of Debt of the Company
to a Restricted Subsidiary or an Eligible Joint Venture, (iv) any Investment
made in a Person (other than the Company or any Restricted Subsidiary or any
Eligible Joint Venture) and (v) designating a Restricted Subsidiary as an
Unrestricted Subsidiary (the Restricted Payment made upon such a designation to
be determined as the fair market value of the Capital Stock of such Restricted
Subsidiary owned directly or indirectly by the Company at the time of the
designation). Notwithstanding the foregoing, "Restricted Payment" shall not
include any Permitted Payment, except that any payment made pursuant to clauses
(iv) and (v) of the definition of "Permitted Payment" shall be counted in the
calculation set forth in clause (c) of Section 1010(a).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation.
"Securities" means, collectively, the Initial Securities, the Exchange
Securities and the Private Exchange Securities.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Senior Debt" means the principal of and interest on all Debt of the
Company whether created, Incurred or assumed before, on or after the Issue Date
of the Securities (other than the Securities), provided that Senior Debt shall
not include (i) Debt that, when Incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, was without recourse to
the Company, (ii) Debt of the Company to any Affiliate and (iii) any Debt of
the Company that, by the terms of the instrument creating or evidencing the
same, is specifically designated as being junior in right of payment to the
Securities or any other Debt of the Company.
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"Shelf Registration Statement" means a registration statement filed by the
Company, in connection with the offer and sale of Initial Securities or Private
Exchange Securities pursuant to the Registration Rights Agreement.
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 209.
"Stated Maturity" means, with respect to any debt security or any
installment of interest thereon, the date specified in such debt security as
the fixed date on which any principal of such debt security or any such
installment of interest is due and payable.
"Subsidiary" means, with respect to any Person including, without
limitation, the Company and its Subsidiaries, (i) any corporation or other
entity of which such Person owns, directly or indirectly, a majority of the
Capital Stock or other ownership interests and has ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions, and (ii) with respect to the Company and, as appropriate, its
Subsidiaries, any Permitted Joint Venture, including, without limitation, Coso
Land Company Joint Venture, Coso Finance Partners, Coso Energy Developers and
Coso Power Developers, provided that in respect of any Subsidiary that is not a
Permitted Joint Venture, the Company must exercise control over such Subsidiary
and its Property to the same extent as a Permitted Joint Venture.
"Subsidiary Refinancing Debt" means Debt issued in exchange for, or the
proceeds of which are used to refinance (including to purchase), outstanding
Debt of a Restricted Subsidiary or an Eligible Joint Venture, including,
without limitation, Construction Financing, in an amount (or, if such new Debt
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, with an original issue
price) not to exceed the amount so exchanged or refinanced (plus accrued
interest or dividends and all fees, premiums (in excess of accreted value) and
expenses related to such exchange or refinancing), for which purpose the amount
so exchanged or refinanced shall not exceed, in the case of Debt, to the lesser
of (x) the principal amount of the Debt so exchanged or refinanced and (y) if
the Debt being exchanged or refinanced was
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issued with an original issue discount, the accreted value thereof (as
determined in accordance with GAAP) at the time of such exchange or
refinancing, and, in the case of an equity investment made in lieu or as part
of Construction Financing Debt, in an amount not to exceed the capital and
surplus shown on the balance sheet of such Restricted Subsidiary or Eligible
Joint Venture, provided that (A) such Debt shall be Non-Recourse, if the Debt
so exchanged or refinanced is Non-Recourse and (B) the Average Life of the new
Debt shall be equal to or greater than the Average Life of the Debt to be
exchanged or refinanced, provided further that upon the first refinancing of
any Construction Financing of a Restricted Subsidiary or an Eligible Joint
Venture, (i) the amount of the Subsidiary Refinancing Debt issued in exchange
for or to refinance such Construction Financing shall not be limited by this
provision and (ii) the Subsidiary Refinancing Debt issued in exchange for or
to refinance such Construction Financing shall not be subject to the
provisions of the foregoing clause (B) of this provision.
"Trade Payables" means, with respect to any Person, any accounts payable
or any other indebtedness or monetary obligation to trade creditors Incurred,
created, assumed or Guaranteed by such Person or any of its Subsidiaries or
Joint Ventures arising in the ordinary course of business.
"Transfer Restricted Securities" means IAI Securities and the Securities
that bear or are required to bear the legend set forth in Section 206(d).
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Indenture was executed; provided that in the event
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" shall mean, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any Subsidiary of the Company that becomes
an Unrestricted Subsidiary in accordance with the requirements set forth in the
next sentence. The Company may designate any Restricted Subsidiary as an
Unrestricted Subsidiary if (a) such designation is in compliance with Section
1010(a) and (b)
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after giving effect to such designation, such Subsidiary does not own, directly
or indirectly, a majority of the Capital Stock or the Voting Stock of any other
Restricted Subsidiary unless such other Restricted Subsidiary is designated as
an Unrestricted Subsidiary at the same time. Any such designation shall be
effected by filing with the Trustee an Officers' Certificate certifying that
such designation complies with the requirements of the immediately preceding
sentence. No Debt or other obligation of an Unrestricted Subsidiary may be with
recourse to the Company, any of its Restricted Subsidiaries, any Eligible Joint
Venture or any of their respective Property except to the extent otherwise
permitted by the provisions of this Indenture. An Unrestricted Subsidiary may
be designated as a Restricted Subsidiary if (i) all the Debt of such
Unrestricted Subsidiary could be Incurred under Section 1009, or (ii) any
portion of such Debt could not be incurred thereunder, if the Company could
borrow all such remaining Debt pursuant to Section 1008(a).
"U.S. Government Obligations" means securities that are (i) direct
obligations of the U.S. for the payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the U.S., the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the U.S.,
that, in either case are not callable or redeemable at the option of the issuer
thereof, and shall also include a depositary receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligations or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depositary
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depositary receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depositary receipt.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
(or persons fulfilling similar responsibilities) of such Person.
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(b)Other definitions:
Defined Term Defined in Section
- ------------ ------------------
Act 104
Change of Control Offer 1013(b)
Change of Control Purchase Date 1013(b)
Covenant Defeasance 1203
Defaulted Interest 210
Defeasance 1202
Default Amount 502
Excess Proceeds 1015(a)
Excess Proceeds Offer 1015(a)
Excess Proceeds Purchase Date 1015(e)
Event of Default 501
IAI 201
IAI Securities 201(c)
Ineligible Investments 1021
Notice of Default 501(5)
Paying Agent 203
Purchase Agreement 201
Record Expiration Date 104
Security Registrar 203
Surviving Entity 801
10% Limit 1021
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion shall be
given in the form of an Officers' Certificate, if to be given by an
officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act
and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
If several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
If any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more
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instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, if it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section 104.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. If such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security register kept
by the Security Registrar.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities, provided that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to,
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the giving or making of any notice, declaration, request or direction referred
to in the next paragraph. If any record date is set pursuant to this paragraph,
the Holders of Outstanding Securities on such record date, and no other
Holders, shall be entitled to take the relevant actions whether or not such
Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable Record
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities on such record date; and provided further that for the purpose of
determining whether Holders of the requisite principal amount of such
Securities have taken such action, no Security shall be deemed to have been
Outstanding on such record date unless it is also Outstanding on the date such
action is to become effective. Nothing in this paragraph shall prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be
cancelled and of no effect), nor shall anything in this paragraph be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its
own expense, shall cause notice of such record date, the proposed action by
Holders and the applicable Record Expiration Date to be given to the Trustee in
writing and to each Holder of Securities in the manner set forth in Section
106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Record Expiration Date by Holders of the requisite principal amount of
Outstanding Securities on such record date; and provided further that for the
purpose of determining whether Holders of the requisite principal amount of
such Securities have taken such action, no Security shall be deemed to have
been Outstanding on such record date unless it is also Out-
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standing on the date such action is to become effective. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action (whereupon the record date previously set shall
automatically and without any action by any Person be cancelled and of no
effect), nor shall anything in this paragraph be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the matter(s) to be submitted
for potential action by Holders and the applicable Record Expiration Date to be
given to the Company in writing and to each Holder of Securities in the manner
set forth in Section 106.
With respect to any record date set pursuant to this Section 104, the
party hereto that sets such record date may designate any day as the "Record
Expiration Date" and from time to time may change the Record Expiration Date to
any earlier or later day, provided that no such change shall be effective
unless notice of the proposed new Record Expiration Date is given to the other
party hereto in writing, and to each Holder of Securities in the manner set
forth in Section 106, on or before the existing Record Expiration Date. If a
Record Expiration Date is not designated with respect to any record date set
pursuant to this Section 104, the party hereto that set such record date shall
be deemed to have initially designated the 180th day after such record date as
the Record Expiration Date with respect thereto, subject to its right to change
the Record Expiration Date as provided in this paragraph. Notwithstanding the
foregoing, no Record Expiration Date shall be later than the 180th day after
the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard
to all or any part of the principal amount of such Security or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
and mailed, first-class postage prepaid, to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture, Attention: General Counsel, or at any
other address previously furnished in writing to the Trustee by the
Company.
Section 106. Notice to Holders; Waiver.
When this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. Neither the failure to mail
or give such notice as otherwise provided herein, nor any defect in any notice
so mailed or given to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. When this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be part of and
govern this
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Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein, the Cross-Reference Table and the
Table of Contents are for convenience only and shall not affect the
construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
it being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person other than the parties hereto and their successors hereunder
and the Holders of Securities, any benefit or any legal or equitable right,
remedy or claim under this Indenture. This Indenture may not be used to
interpret another indenture, loan agreement or debt agreement of the Company or
any of its Subsidiaries. No such other indenture or loan or debt agreement may
be utilized to interpret this Indenture.
Section 112. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
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BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE
LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE SECURITIES TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 113. Legal Holidays.
If any Interest Payment Date, Redemption Date, Purchase Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) need not be made on such date but may be made
on the next succeeding Business Day with the same force and effect (including
with respect to the accrual of interest) as if made on the Interest Payment
Date, Redemption Date or Purchase Date, or at the Stated Maturity.
Section 114. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 115. Duplicate Originals.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
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ARTICLE TWO
The Securities
Section 201. Global and Certificated Securities.
The Initial Securities and the Trustee's certificate of authentication
shall be substantially in the form set out in Section 302. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication with respect thereto shall be substantially in the form set out
in Section 303. The Securities may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company) or as required by Section
206(d). Each Security shall be dated the date of its authentication.
The Initial Securities are being offered and sold by the Company pursuant
to a Purchase Agreement, dated September 18, 1996, between the Company and the
Initial Purchaser (the "Purchase Agreement").
(a) Global Securities. Initial Securities offered and sold to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) (a
"QIB") in reliance on Rule 144A under the Securities Act ("Rule 144A") as
provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global securities in definitive, fully registered form
without interest coupons with the global security legend and restricted
security legend set forth in Section 206(d) hereto (each, a "Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary (or with such other custodian as the Depositary may direct),
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Security may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
The Depositary Trust Company shall act as initial Depositary. If at any
time the Depositary for the Securities represented by one or more Global
Securities notifies the Company that it is unwilling or unable
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to continue as Depositary of the Securities or if at any time the Depositary
shall no longer be eligible as provided in the second sentence of the
definition of "Depositary" and a successor Depositary is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such condition, the Company shall promptly execute, and the Trustee shall
promptly authenticate and deliver, Securities in Certificated form without
coupons, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security or Securities then
outstanding in exchange for such Global Security or Securities, and this
Section 201(a) and Section 201(b) shall no longer be applicable to the
Securities. In addition, the Company may at any time and in its sole discretion
determine that the Securities shall no longer be represented by Global
Securities. In such event the Company shall promptly execute, and the Trustee,
upon receipt of a Company Order evidencing such determination by the Company,
shall promptly authenticate and deliver, Securities in Certificated form
without coupons, in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Global Security or Securities then
outstanding in exchange for such Global Security or Securities and this Section
201(a) and Section 201(b) shall no longer be applicable to the Securities. Upon
the exchange of the Global Securities for such Securities in Certificated form
without coupons, in authorized denominations, such Global Securities shall be
cancelled by the Trustee. Such Securities in Certificated form issued in
exchange for the Global Securities pursuant to this Section 201(a) and Section
201(b) shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Securities to the Persons in whose names such Securities are so
registered.
Notwithstanding any other provision hereof to the contrary,
so long as the outstanding Securities are represented by one or more Global
Securities, the Company shall pay or cause to be paid the principal of, and
interest on, such Global Securities to the Depositary or its nominee by wire
transfer of immediately available funds on the date such payments are due in
accordance with the operational arrangements of the Depositary, as such
arrangements are amended from time to time.
(b) Book-Entry Provisions. This Section 201(b) shall apply only to the
Global Security or Securities deposited with or on behalf of the Depositary.
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The Company shall execute and the Trustee shall, in accordance with this
Section 201(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Securities or the nominee of such Depositary and (b) shall
be delivered by the Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to the Global Security or
Securities held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security or Securities for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in the Global
Security or Securities.
(c) Certificated Securities. Except as provided in this Section or
Sections 206 or 208, owners of beneficial interests in the Global Security or
Securities will not be entitled to receive physical delivery of Certificated
Securities. Purchasers of Initial Securities who are institutional "accredited
investors" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act (each an "IAI") and who are not QIBs will receive certificated Initial
Securities which (subject to the other provisions of Section 206) will bear the
restricted securities legend set forth in Section 206(d) hereto (such
securities as held by an IAI are herein referred to as "IAI Securities");
provided, however, that upon transfer of such certificated Initial Securities
to a QIB such certificated Initial Securities will, unless the Global
Securities have previously been exchanged, be exchanged for an interest in a
Global Security pursuant to the provisions of Section 206.
Section 202. Execution and Authentication.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents, under its corporate
seal
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reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
Section 203. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Security
Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"). The Security Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company may have one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Security Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the Trust Indenture Act. The agreement
shall implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any such agent.
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If the Company fails to maintain a Security Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 607. The Company or any of its U.S. wholly owned
Subsidiaries may act as Paying Agent, Security Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Security Registrar and
Paying Agent in connection with the Securities.
Section 204. Paying Agent To Hold Money in Trust.
At least one Business Day prior to each due date of the principal and
interest on any Security, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal and interest when so becoming due. The Company
shall require each Paying Agent (other than the Trustee) to agree in writing
that the Paying Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or one of its U.S. wholly
owned Subsidiaries acts as Paying Agent, it shall segregate the money held by
it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent (other than the Trustee) to pay all money held
by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
Section 205. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Security Registrar, the Company shall
furnish to the Trustee, in writing at least five Business Days before each
interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Holders.
Section 206. Transfer and Exchange.
(a) Transfer and Exchange of IAI Securities. When IAI Securities are
presented to the Security Registrar or a co-registrar with a request:
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(x) to register the transfer of such IAI Securities; or
(y) to exchange such IAI Securities for an equal principal amount of
IAI Securities of other authorized denominations,
the Security Registrar or co-registrar shall register the transfer or make the
exchange as requested if the requirements set forth in this Indenture for such
transaction are met; provided, however, that the IAI Securities surrendered for
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Security
Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
206(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by
the following additional information and documents, as applicable:
(A) if such IAI Securities are being delivered to the Security
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such IAI Securities are being transferred to the Company,
a certification to that effect (in the form set forth on the reverse
of the Security); or
(C) if such IAI Securities are being transferred (w) pursuant to
an exemption from registration in accordance with Rule 144 under the
Securities Act or (x) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification
to that effect (in the form set forth on the reverse of the
Security), and (ii) if the Company so requests, other evidence
reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 206(d)(i).
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(b) Restrictions on Transfer of an IAI Security for a Beneficial Interest
in a Global Security. An IAI Security may not be exchanged for a beneficial
interest in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of an IAI Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) certification (in the form set forth on the reverse of the
Security), that such IAI Security is being transferred to a QIB in
accordance with Rule 144A under the Securities Act; and
(ii) written instructions (which may be in the form of electronic
instructions) directing the Trustee to make, or to cause to be made, an
adjustment on its books and records with respect to the Global Security or
Securities to reflect an increase in the aggregate principal amount of the
Securities represented by the Global Security or Securities,
then the Trustee shall cancel or cause to be cancelled such IAI Security in
accordance with the standing instructions and procedures existing between the
Depositary and the Security Registrar, the aggregate principal amount of
Securities represented by the Global Security or Securities to be increased
accordingly. If no Global Security is then outstanding, the Company shall issue
and the Trustee shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Security in the appropriate
principal amount.
(c) Transfer and Exchange of Global Securities. (i) The transfer and
exchange of the Global Security or Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if any) and
the procedures of the Depositary therefor, if applicable.
(ii) Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 208), the Global Security may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
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(iii) In the event that a Global Security is exchanged for
Certificated Securities pursuant to Section 208, prior to the consummation
of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities
may be exchanged only in accordance with such procedures as are consistent
with the provisions of this Section 206 (including the certification
requirements set forth on the reverse of the Initial Securities intended
to ensure that such transfers comply with Rule 144A) and such other
procedures as may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by this Section 206, each Security
certificate evidencing a Global Security and each Security certificate
evidencing an IAI Security (and all Securities issued in exchange or
substitution for a Global Security or IAI Security) shall bear a legend in
substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THE
TRANSFEROR REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (i) PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT, AND THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO ABOVE.
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Each IAI Security will also bear the following additional legend:*
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT AND THE COMPANY SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT AND THE COMPANY MAY REASONABLY REQUIRE
TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
Each Global Security will also bear the following legend:**
"This Security is issued in global form and registered in the name
of the Depositary or a nominee thereof. Unless and until it is exchanged
in whole or in part for Securities in definitive form in accordance with
the terms hereof and of the Indenture referred to on the reverse hereof,
this Security may not be transferred except as a whole by the Depositary
to a nominee of the Depositary, or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of the Depositary to the Company or its agent for
registration of transfer, exchange or payment, and any certificate issued
is registered in the name of the Depositary or its nominee and any payment
is made to the Depositary or its nominee, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since
the registered owner hereof has an interest herein."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Certificated Security, the Security Registrar shall permit the Holder
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* Include if a IAI Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a), (1), (2), (3) or (7) under the
Securities Act).
* This legend should only be added if the Security is issued
in global form.
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thereof to exchange such Transfer Restricted Security for a
Certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer
of such Transfer Restricted Security;
(B) in the case of any Transfer
Restricted Security that is represented by a Global Security,
the Security Registrar shall permit the Holder thereof to
request the issuance of a certificated Security that does not
bear the legend set forth above and rescind any restriction
on the transfer of such Transfer Restricted Security, if the
sale or exchange was made in reliance on Rule 144 and the
Holder certifies to that effect in writing to the Security
Registrar (such certification to be in the form set forth on
the reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Security or such Private Exchange Security will cease to
apply, the requirements requiring that any such Initial Security or such
Private Exchange Security issued to certain Holders be issued in global
form will cease to apply, and a certificated Initial Security or Private
Exchange Security without legends will be available to the transferee of
the Holder of such Initial Securities or Private Exchange Securities or
upon receipt of directions to transfer such Holder's interest in a Global
Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to such Initial Securities
that Initial Securities issued to certain Holders be issued in global form
will cease to apply, certificated Initial Securities with the restricted
securities legend set forth in Section 206(d) hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in certificated form will be available
to Holders that do exchange such Initial Securities in such Registered
Exchange Offer.
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(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities
are offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain holders be issued in global form will
still apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Section 206(d) hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(e) Cancellation or Adjustment of Global Securities. At such time as all
beneficial interests in the Global Securities have either been exchanged for
certificated Securities, redeemed, repurchased or cancelled, such Global
Securities shall be returned to the Trustee for cancellation or retained and
cancelled by the Trustee. At any time prior to such cancellation, if any
beneficial interests in the Global Securities are exchanged for certificated
Securities, redeemed, repurchased or cancelled, the principal amount of
Securities represented by such Global Securities shall be reduced and an
adjustment shall be made by the Trustee or the custodian to reflect such
reduction on the books and records of the custodian for such Global Securities
with respect to such Global Securities.
(f) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate within a reasonable time
Certificated Securities, IAI Securities and Global Securities at the
Security Registrar's or co-registrar's written request accompanied by an
equal principal amount of Securities to be cancelled and, if the Security
Registrar is not the Trustee, the Security Registrar shall provide to the
Trustee an opinion of counsel acceptable to the Trustee and the Company to
the effect that the Security Registrar has received all of the instruments
and documents required by this Section 206 for such transfer or exchange.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection
therewith.
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(iii) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Security
Registrar or any co-registrar may deem and treat the person in whose name
a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent, the
Security Registrar or any co-registrar shall be affected by notice to the
contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) IAI Purchasers. Each purchaser of Securities that is an IAI must
execute and deliver a purchaser's letter for the benefit of the Initial
Purchaser and the Company, substantially in the form of the Appendix hereto,
whereby such IAI (a) agrees to the restrictions on transfer set forth in this
Indenture, (b) confirms that it is (i) acquiring Securities having a minimum
purchase price of not less than $500,000 for any separate account for which it
is acting; (ii) acquiring such Securities for certain qualified accounts, as
specified therein over which it exercises sole investment discretion; and (iii)
not acquiring the Securities with a view to distribution thereof or with any
present intention of offering or selling any of the Securities except in
accordance with Rule 144A under the Securities Act, and (c) acknowledges that
the registrar and transfer agent for the Securities will not be required to
accept for registration of transfer any Securities acquired by it, except upon
presentation of evidence satisfactory to the Company and the transfer agent
that the restrictions on transfer set forth above have been complied with, and
that any such Securities will be in Certificated form bearing the restricted
Securities and IAI Securities legends set forth in Section 206(d).
(h) No Obligation of the Trustee.
(i) The Trustee (whether in its capacity as trustee, Security
Registrar or Paying Agent) shall have no responsibility or obligation to
any beneficial owner of any Global Security, a member of, or a participant
in the Depositary or other Person with
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respect to the accuracy of the records of the Depositary or its nominee or
of any participant or member thereof, with respect to any ownership
interest in the Securities or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments to
be made to Holders under the Securities shall be given or made only to or
upon the order of the registered Holders (which shall be the Depositary or
its nominee in the case of a Global Security). The rights of beneficial
owners in the Global Securities shall be exercised only through the
Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee (whether in its capacity as trustee, Security
Registrar or Paying Agent) may rely and shall be fully protected in
relying upon information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
(ii) The Trustee (whether in its capacity as trustee, Security
Registrar or Paying Agent) shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law, regulations or
exchange rules with respect to any transfer of any interest in any
Security (including any transfers between or among Depositary
participants, members or beneficial owners in the Global Securities, or
transfers of registered or beneficial ownership interests in Global
Securities to any IAI or in IAI Securities from any IAI) other than to
require delivery of such certificates and other documentation or evidence
as are expressly required by, and to do so if and when expressly required
by, the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
Section 207. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
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If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 207 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section 207 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 208. Temporary Securities and Certificated Securities.
(a) Until Certificated Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Certificated Securities but
may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate Certificated Securities and deliver them in exchange
for temporary Securities.
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(b) The Global Security or Securities deposited with the
Depositary or with the Trustee as custodian for the Depositary pursuant to
Section 201 shall be transferred to the beneficial owners thereof in the form
of certificated Securities in an aggregate principal amount equal to the
principal amount of such Global Security, in exchange for such Global
Securities, only if such transfer complies with Section 206 and (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time such Depositary ceases to
be a "clearing agency" registered under the Exchange Act and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)
a Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the
issuance of certificated Securities under this Indenture.
(c) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Securities, an equal aggregate principal amount of Initial
Securities of authorized denominations. Any portion of the Global Securities
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any Initial Security
delivered in exchange for an interest in a Global Security shall, except as
otherwise provided by Section 206(d), bear the restricted securities legend set
forth in Section 206(d) hereto.
(d) Subject to the provisions of Section 208(c), the registered Holder of
the Global Security may grant proxies and otherwise authorize any Person,
including agent members, participants and Persons that may hold interests
through agent members, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 208(b), the Company will promptly make available to the Trustee a
reasonable supply of Certificated Securities in fully registered form without
interest coupons.
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Section 209. Payment of Interest; Interest Rights Preserved.
Interest on any Security that is payable and is punctually paid or duly
provided for on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security that is payable but is not punctually paid or
duly provided for on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as provided in this clause. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest that shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to each
Holder in the manner specified in Section 106 not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
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business on such Special Record Date and shall no longer be payable pursuant to
the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 210. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 209) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 211. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any Offer to Purchase pursuant to
Section 1013 or 1015 shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section 211,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order; provided
that the Trustee shall not be required to destroy cancelled Securities.
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Section 212. Denominations.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 principal amount and any integral multiple
thereof, provided that the IAI Securities shall be issued in minimum
denominations of $500,000 and integral multiples of $1,000 above that amount.
Section 213. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 214. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices
of redemption or repurchase as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption or
repurchase shall not be affected by any defect in or omission of such numbers.
Section 215. Single Class.
The Company and the Trustee agree that for the purposes of this Indenture,
the Initial Securities, the Exchange Securities and the Private Exchange
Securities shall be deemed to be a single class of securities.
ARTICLE THREE
Form of Security
Section 301. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be in
substantially the forms set forth in (i) Section 302, with respect to Initial
Securities; and (ii) Section 303 with respect to Exchange Securities and
Private Exchange Securities.
Section 301. Form of Initial Security.
(A) [FORM OF FACE OF INITIAL SECURITY]
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CALENERGY COMPANY, INC.
9 1/2% Senior Notes due 2006
No. _________ $_________________
CUSIP No. 129466AB4
CalEnergy Company, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _________________, or registered
assigns, the principal sum of ___________________ Dollars on September 15,
2006, and to pay interest thereon from September 20, 1996 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on March 15 and September 15 in each year, commencing March
15, 1997 at the rate of 9 1/2% per annum, until the principal hereof is paid or
duly provided for, provided that any principal and premium, if any, and any
such installment of interest, that is overdue shall bear interest at the rate
of 10 1/2% per annum (to the extent that the payment of such interest shall be
legally enforceable), from the dates such amounts are due until they are paid
or duly provided for, provided further that if an Illiquidity Event (as defined
in the Registration Rights Agreement) occurs, additional interest (in addition
to the interest otherwise payable with respect to this Security) shall accrue
with respect to this Security until but not including the date on which such
Illiquidity Event shall cease to exist (and provided no other Illiquidity Event
with respect to any Securities shall then be continuing), at the rate of one
half of one percent (0.50%) per annum, which additional interest shall be
payable by the Company to the Holders of all Securities at the times, in the
manner and subject to the same terms and conditions set forth in the Indenture,
as nearly as may be, as though the interest rate provided in this Security had
been increased by one half of one percent (0.50%) per annum. Notwithstanding
that the Illiquidity Event may cease to exist, in the event that an Exchange
Offer Registration Statement or an Initial Shelf Registration Statement has not
become effective by September 20, 1998, the interest rate on this Security
otherwise payable as provided in the Indenture shall permanently remain
increased by such one half of one percent (0.50%) per annum.
Any such additional interest accrued on this Security but unpaid on the
date on which such interest ceases to accrue (the "Cure Date") shall be due and
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payable on the first Interest Payment Date following the next Regular Record
Date following such Cure Date (or the Regular Record Date occurring on such
Cure Date, if such Cure Date is a Regular Record Date) to the holders of record
of this Security on such record date. Subject to the foregoing, the interest
payable, and punctually paid or duly provided for, on any Interest Payment
Date shall, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the March 1 or September 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
defaulted interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of (and premium, if any) and any interest on this
Security shall be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, or at such
additional offices or agencies as the Company from time to time may designate
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts,
provided that payment of the principal of (and premium, if any, on) this
Security shall be made only upon presentation and surrender hereof at any such
office or agency and, at the option of the Company, payment of interest may be
made by check mailed to the address of the Person entitled there to as such
address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be
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entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CALENERGY COMPANY, INC.
By:
--------------------------
Title:
Attest:
- --------------------------------------------------------
Title:
- ------------------------------------------------------------------------------
Form of Trustee's Certificate of Authentication.
Dated:
This is one of the Securities referred to in the within-mentioned
Indenture.
IBJ SCHRODER BANK & TRUST COMPANY,
As Trustee
By
----------------------------------------
Authorized Signatory
(B) Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 9 1/2% Senior Notes due 2006 (herein called the
"Securities"), limited in aggregate principal amount of $225,000,000, issued
and to be issued under an Indenture, dated as of September 20, 1996 (herein
called the "Indenture", which term shall have the meaning assigned to it in
such instrument), between the Company and IBJ Schroder Bank & Trust Company, as
Trustee (herein called the "Trustee" which term includes any successor trustee
under the Indenture), and reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the
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terms upon which the Securities are, and are to be, authenticated and
delivered.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time on or after September 15, 2001 and
prior to maturity, as a whole or in part, at the election of the Company, at
the following Redemption Prices (expressed as percentages of the principal
amount), if redeemed during the 12-month period commencing on or after
September 15 of the years indicated,
Redemption
Year Price
2001......................104.750%
2002......................103.167%
2003......................101.583%
2004 and thereafter.......100.000%
together in the case of any such redemption with accrued interest, if any, to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date shall be payable to the Holders of such
Securities, or one or more predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
The Securities do not have the benefit of any sinking fund obligations.
Upon the occurrence of a Change of Control, the Company shall be required
to make an Offer to Purchase all or a specified portion of the Securities at a
Purchase Price in cash equal to 101 percent of the principal amount thereof on
any Purchase Date plus accrued and unpaid interest, if any, to such Purchase
Date, as specified in the Indenture. If the Company, any Restricted Subsidiary
or any Eligible Joint Venture consummates an Asset Disposition, under certain
circumstances, the Company shall be required to make an Offer to Purchase up to
all or a specified portion of the Securities at a Purchase Price in cash equal
to 100 percent of the principal amount thereof on any Purchase Date plus
accrued and unpaid interest, if any, to such Purchase Date, in an amount equal
to any Net Cash Proceeds from such an Asset Disposition that are not used to
reinvest in the business of the Company and/or repay in a permanent reduction
of Debt of the Company or Debt of its Restricted Subsidiaries or Eligible Joint
Ventures. Holders of Securities shall receive notice of any such Offer to
Purchase from
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the Company prior to the related Purchase Date and may elect to
have such Securities purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing on the reverse side of the Security.
In the event of redemption, or purchase pursuant to an Offer to Purchase,
of this Security in part only, a new Security or Securities for the portion
hereof not redeemed or purchased shall be issued in the name of the Holder
hereof upon surrender of this Security to the Trustee for cancellation thereof.
The Indenture contains provisions for defeasance at any time of the entire
Debt of this Security or certain restrictive covenants and Events of Default
with respect to this Security, including, without limitation, covenants
relating to Offers to Purchase, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount of the Securities, in the manner
and with the effect provided in the Indenture. The Default Amount in respect of
this Security as of any particular date shall equal 100% of the principal
amount of this Security plus accrued and unpaid interest, if any, to such date.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. In addition, without
the consent of any Holder of a Security, the Indenture and the Securities may
be amended and supplemented to cure any ambiguity or inconsistency, make other
changes that shall not adversely affect the rights of the Holders or certain
other matters specified in the Indenture. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not nota-
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ion of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver, or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25 percent in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not
have received from the Holders of a majority in principal amount of Securities
at the time Outstanding a direction inconsistent with such request and shall
have failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates
expressed herein (or, in the case of redemption, on or after the Redemption
Date or, in the case of any purchase of this Security required to be made
pursuant to an Offer to Purchase, on or after the Purchase Date).
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place, manner and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York (which initially shall be the corporate trust office of the Trustee), duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, shall be issued to the designated transferee or transferees.
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The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, provided that IAI
Securities shall be issued in minimum denominations of $500,000, and integral
multiples of $1,000 above that amount. As provided in the Indenture and subject
to certain limitations therein set forth, Securities are exchangeable for a
like aggregate principal amount of Securities of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
A director, officer, employee, stockholder or incorporator of the Company
shall not have any liability for any obligations of the Company under this
Security or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder by accepting this Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of this Security.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for
all purposes, whether or not this Security is overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed under the State of New York, without regard to principles of
conflicts of law.
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ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Your Signature:___________________________
(sign exactly as name appears on the
other side of this Security)
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a financial
institution that is a member of the
Securities Transfer Agent Medallion Program
("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock
Exchange, Inc. Medallion Signature Program
("MSP") or such other signature guarantee
program as may be determined by the Security
Registrar in addition to, or in substitution
for, STAMP, SEMP or MSP, all in accordance
with the Securities Exchange Act of 1934, as
amended.)
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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER RESTRICTED SECURITIES
This certificate relates to $_______ principal amount of Securities held in
(check applicable space) ____ global form or ____ certificated form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Security Registrar by written order or electronically
by DWAC to deliver in exchange for its beneficial interest in a Global
Security held by the Depositary a Security or Securities in
certificated, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
[ ] has requested the Security Registrar by the Assignment or other written
order to exchange or register the transfer of the aforementioned
principal amount of the attached Security.
The undersigned confirms that the transfer of this Security does not require
registration under the Securities Act of 1933, as amended, because, such
Security is being:
CHECK ONE BOX BELOW:
(1) [ ] acquired for the undersigned's own account, without transfer
(in satisfaction of Section 206(a)(ii)(A) or 206(d)(ii)(A) of
the Indenture); or
(2) [ ] transferred to the Company; or
(3) [ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended; or
(4) [ ] transferred pursuant to and in compliance with Rule 144 under
the Securities Act of 1933, as amended; or
(5) [ ] transferred pursuant to an effective registration statement
under the Securities Act of 1933, as amended; or
(6) [ ] transferred pursuant to another available exemption from the
registration require-
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<PAGE>
ments of the Securities Act of 1933, as amended, and set forth
below.
Unless one of the boxes is checked, the Security Registrar will refuse to
register any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that if box
(4) or (6) is checked, the Company may require other evidence reasonably
satisfactory to it as to the compliance with the restrictions set forth in the
legend on the face of this Security.
Dated:
-------------------------------
Signature of
Transferor
Signature Guarantee:
----------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor
institution," that is, a bank, stockbroker, saving and
loan association or credit union meeting the requirements
of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
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Section 303. Form of Exchange Security and Private Exchange Security.
(A)
[OF FACE OF EXCHANGE SECURITY AND PRIVATE EXCHANGE SECURITY]
CALENERGY COMPANY, INC.
9 1/2% Senior Notes due 2006
No. _________ $__________
CUSIP No.__________
CalEnergy Company, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to _________________, or
registered assigns, the principal sum of __________________ Dollars on
September 15, 2006, and to pay interest thereon from their date of issue and
thereafter from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually on March 15 and September 15 in
each year, at the rate of 9 1/2% per annum, until the principal hereof is paid
or duly provided for, provided that any principal and premium, if any, and any
such installment of interest, that is overdue shall bear interest at the rate
of 10 1/2% per annum (to the extent that the payment of such interest shall be
legally enforceable), from the dates such amounts are due until they are paid
or duly provided for, and such interest shall be payable on demand. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date shall, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the March 1 or September 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid or duly provided for shall forth with cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment
of such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less
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than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any interest on
this Security shall be made at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New York, or at such
additional offices or agencies as the Company from time to time may designate
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
debts, provided that payment of the principal of (and premium, if any, on)
this Security shall be made only upon presentation and surrender hereof at any
such office or agency and, at the option of the Company, payment of interest
may be made by check mailed to the address of the Person entitled there to as
such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CALENERGY COMPANY, INC.
By:
---------------------------
Title:
Attest:
---------------------------
Title:
---------------------------
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Form of Trustee's Certificate of Authentication.
Dated:
This is one of the Securities referred to in the within-mentioned
Indenture.
IBJ SCHRODER BANK & TRUST COMPANY,
As Trustee
By
---------------------------------------
Authorized Signatory
(B) Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 9 1/2% Senior Notes due 2006 (herein called the
"Securities"), limited in aggregate principal amount of $225,000,000, issued
and to be issued under an Indenture, dated as of September 20, 1996 (herein
called the "Indenture", which term shall have the meaning assigned to it in
such instrument), between the Company and IBJ Schroder Bank & Trust Company,
as Trustee (herein called the "Trustee" which term includes any successor
trustee under the Indenture), and reference is hereby made to the Indenture
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail, at any time on or after September 15, 2001
and prior to maturity, as a whole or in part, at the election of the Company,
at the following Redemption Prices (expressed as percentages of the principal
amount), if redeemed during the 12-month period commencing on or after
September 15 of the years indicated,
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Redemption
Year Price
---- ----------
2001...................................................... 104.750%
2002...................................................... 103.167%
2003...................................................... 101.583%
2004 and thereafter....................................... 100.000%
together in the case of any such redemption with accrued interest, if any, to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date shall be payable to the Holders of such
Securities, or one or more predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
The Securities do not have the benefit of any sinking fund
obligations.
Upon the occurrence of a Change of Control, the Company shall be
required to make an Offer to Purchase all or a specified portion of the
Securities at a Purchase Price in cash equal to 101 percent of the principal
amount thereof on any Purchase Date plus accrued and unpaid interest, if any,
to such Purchase Date. If the Company, any Restricted Subsidiary or any
Eligible Joint Venture consummates an Asset Disposition, under certain
circumstances, the Company shall be required to make an Offer to Purchase up to
all or a specified portion of the Securities at a Purchase Price in cash equal
to 100 percent of the principal amount thereof on any Purchase Date, plus
accrued and unpaid interest, if any, to such Purchase Date, in an amount equal
to any Net Cash Proceeds from such an Asset Disposition that are not used to
reinvest in the business of the Company and/or repay in a permanent reduction of
Debt of the Company or Debt of its Restricted Subsidiaries or Eligible Joint
Ventures. Holders of Securities shall receive notice of any such Offer to
Purchase from the Company prior to the related Purchase Date and may elect to
have such Securities purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing on the reverse side of the Security.
In the event of redemption, or purchase pursuant to an Offer to
Purchase, of this Security in part only, a new Security or Securities for the
portion hereof not redeemed or purchased shall be issued in the name of the
Holder hereof upon surrender of this Security to the Trustee for cancellation
thereof.
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The Indenture contains provisions for defeasance at any time of the
entire Debt of this Security or certain restrictive covenants and Events of
Default with respect to this Security, including, without limitation,
covenants relating to Offers to Purchase, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount of the Securities, in the manner
and with the effect provided in the Indenture. The Default Amount in respect
of this Security as of any particular date shall equal 100% of the principal
amount of this Security plus accrued and unpaid interest, if any, to such
date.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. In addition, without the consent of any Holder of a Security,
the Indenture and the Securities may be amended and supplemented to cure any
ambiguity or inconsistency, make other changes that shall not adversely affect
the rights of the Holders or certain other matters specified in the Indenture.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and
of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver, or trustee
or for any other remedy thereunder, unless such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities, the Holders of not less than 25 percent in principal amount
of the Securities at the time Outstanding
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shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities at the time Outstanding a
direction inconsistent with such request and shall have failed to institute any
such proceeding for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein (or, in the case
of redemption, on or after the Redemption Date or, in the case of any purchase
of this Security required to be made pursuant to an Offer to Purchase, on or
after the Purchase Date).
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place, manner and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the Borough of Manhattan,
The City of New York (which initially shall be the corporate trust office of
the Trustee), duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, shall be issued to the designated transferee
or transferees.
The Securities are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, Securities
are exchangeable for a like aggregate principal amount of Securities of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may
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require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
A director, officer, employee, stockholder or incorporator of the
Company shall not have any liability for any obligations of the Company under
this Security or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting this
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of this Security.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts
made and performed under the State of New York, without regard to principles
of conflicts of law.
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ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Your Signature:
----------------------- ----------------------------
(sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent
Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other
signature guarantee program as may be determined by the
Security Registrar in addition to, or in substitution for,
STAMP, SEMP or MSP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER RESTRICTED SECURITIES
This certificate relates to $_______ principal amount of Securities held in
(check applicable space) ____ global form or ____ certificated form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Security Registrar by written order or electronically
by DWAC to deliver in exchange for its beneficial interest in a Global
Security held by the Depositary a Security or Securities in
certificated, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
[ ] has requested the Security Registrar by the Assignment or other written
order to exchange or register the transfer of the aforementioned
principal amount of the attached Security.
The undersigned confirms that the transfer of this Security does not require
registration under the Securities Act of 1933, as amended, because, such
Security is being:
CHECK ONE BOX BELOW:
(1) [ ] acquired for the undersigned's own account, without transfer (in
satisfaction of Section 206(a)(ii)(A) or 206(d)(ii)(A) of the
Indenture); or
(2) [ ] transferred to the Company; or
(3) [ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended; or
(4) [ ] transferred pursuant to and in compliance with Rule 144 under
the Securities Act of 1933, as amended; or
(5) [ ] transferred pursuant to an effective registration statement
under the Securities Act of 1933, as amended; or
(6) [ ] transferred pursuant to another available exemption from the
registration require-
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ments of the Securities Act of 1933, as amended, and set forth
below.
Unless one of the boxes is checked, the Security Registrar will refuse to
register any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that if box
(4) or (6) is checked, the Company may require other evidence reasonably
satisfactory to it as to the compliance with the restrictions set forth in the
legend on the face of this Security.
Dated:
-------------------------------
Signature of
Transferor
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor
institution," that is, a bank, stockbroker, saving and
loan association or credit union meeting the requirements
of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect and the Trustee,
on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) no Securities remain Outstanding;
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(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, (i) the obligations of the Company to the Trustee under
Section 607, the obligations of the Company to any Authenticating Agent under
Section 614 and (ii) if the Company shall have effected a Defeasance pursuant
to Article Twelve, the provisions hereof specified in Section 1202 shall also
survive.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", whenever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of the principal of (or premium, if
any, on) any Security at its maturity (whether at final Stated Maturity or
upon repurchase, acceleration, optional redemption or otherwise); or
(2) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a period
of 30 days; or
(3) default in the purchase of Securities, on the applicable
Purchase Date, required to be purchased by the Company pursuant to an Offer to
Purchase under Section 1013 or Section 1015 as to which an offer has been
mailed to Holders or the failure to make such offer as required hereunder; or
(4) default in the performance, or breach, of any covenant,
agreement or warranty of the Company in this Indenture and the Securities
(other than a covenant,
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agreement or warranty a default in whose performance or whose breach is
elsewhere in this Section 501 specifically dealt with), and continuance of
such default or breach for a period of 30 days after there has been given to
the Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25 percent in principal amount at final Stated Maturity of the
Outstanding Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) a default or defaults under any bond, debenture, note or
other evidence of Debt by the Company or any Significant Subsidiary (or under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Debt by the Company or any
Significant Subsidiary) (other than Non-Recourse Debt of Significant
Subsidiaries) if either (x) such default results from failure to pay principal
of such Debt in excess of $25 million when due after any applicable grace
period or (y) as a result of such default, the maturity of such Debt has been
accelerated prior to its scheduled maturity and such default has not been
cured within the applicable grace period, and such acceleration has not been
rescinded, and the principal amount of such Debt, together with the principal
amount of any other Debt of the Company and its Significant Subsidiaries (not
including Non-Recourse Debt of the Significant Subsidiaries) that is in
default as to principal, or the maturity of which has been accelerated,
aggregates $25 million or more; or
(6) the entry by a court of one or more judgments or orders
against the Company or any Significant Subsidiary for the payment of money
that in aggregate exceeds $25 million (excluding the amount thereof covered by
insurance or by a bond written by a Person other than an Affiliate of the
Company), which judgments or orders have not been vacated, discharged or
satisfied or stayed pending appeal within 60 days from the entry thereof,
provided that such a judgment or order shall not be an Event of Default if
such judgment or order does not require any payment by the Company or any
Significant Subsidiary, except to the extent that such judgment is only
against Property that secures Non-Recourse Debt that is otherwise permitted
under this Indenture, and the Company could, at the expiration of the
applicable 60 day period, after giving effect to such judgement or order and
the consequences thereof, Incur at least $1 of Debt under the provisions
described in Section 1008(a); or
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(7) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal, state,
or foreign bankruptcy, insolvency, or other similar law or (B) a decree or
order adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal, State or foreign bankruptcy,
insolvency, or similar law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
any Significant Subsidiary or of any substantial part of the Property or
assets of the Company or any Significant Subsidiary, or ordering the winding
up or liquidation of the affairs of the Company or any Significant Subsidiary,
and the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive days; or
(8) (A) the commencement by the Company or any Significant
Subsidiary of a voluntary case or proceeding under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal, state,
or foreign bankruptcy, insolvency or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or (B) the consent by
the Company or any Significant Subsidiary to the entry of a decree or order
for relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal, state, or foreign
bankruptcy, insolvency, or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Significant Subsidiary, or (C) the filing by the Company or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or relief
under the Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state or foreign bankruptcy, insolvency or other
similar law, or (D) the consent by the Company or any Significant Subsidiary
to the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or any Signifi-
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cant Subsidiary or of any substantial part of the Property or assets of the
Company or any Significant Subsidiary, or the making by the Company or any
Significant Subsidiary of an assignment for the benefit of creditors, or (E)
the admission by the Company or any Significant Subsidiary in writing of its
inability to pay its debts generally as they become due, or (F) the taking of
corporate action by the Company or any Significant Subsidiary in furtherance
of any such action.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(7) or (8)) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25 percent in principal amount at
Stated Maturity of the Outstanding Securities may declare the Default Amount
of all the Securities to be due and payable immediately by a notice in writing
to the Company (and to the Trustee if given by Holders), and upon any such
declaration such Default Amount shall become immediately due and payable. If
an Event of Default specified in Section 501(7) or (8) occurs, the Default
Amount of the Securities then Outstanding shall ipso facto become immediately
due and payable without any declaration or other Act on the part of the
Trustee or any Holder.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article Five provided, the Holders of a
majority in principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities (without duplication
of any amount thereof paid or deposited pursuant to clause (B) or (C) below),
(B) the Default Amount of (and premium, if any, on) any
Securities that have become due otherwise than by such declaration of
acceleration (including any Securities required to have been purchased on any
Purchase Date pursuant to an Offer to Purchase made by the Company) and, to
the extent that payment of such interest is lawful, interest thereon at the
rate provided by the Securities (without duplication of any amount thereof
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paid or deposited pursuant to clause (A) above or clause (C) below),
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate provided by the Securities (without
duplication of any amount thereof paid or deposited pursuant to clause (A) or
(B) above), and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel;
and
(2) all Events of Default have been cured or waived as provided
in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the final Stated Maturity thereof or,
with respect to any Security required to have been purchased pursuant to an
Offer to Purchase made by the Company, at the Purchase Date thereof,
the Company shall, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities' principal, premium, if any, and interest, and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal, premium, if any, and overdue interest, at the rate provided by the
Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the Property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its Property or assets or its creditors,
the Trustee (irrespective of whether the principal, (premium, if any) or
interest of the Securities then shall be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee has
made any demand on the Company for the payment of overdue principal, (premium,
if any) or interest shall be entitled and empowered, by intervention in such
proceeding or otherwise, to file such proofs of claim and other papers or
documents and to take any and all actions authorized under the Trust Indenture
Act in order to have claims of the Holders and the Trustee (including any
claim for reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents or counsel) allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
607. To the extent that
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payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any amounts due the Trustee under Section
607 hereof out of the estate in any such proceeding shall be denied for any
reason, payment of the same shall be secured by a Lien and shall be paid out
of any and all distributions, dividends, money, securities and other
properties that the Holders of the Securities may be entitled to receive in
such proceedings whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding; provided
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors or
other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article Five
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
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SECOND: To the payment of the amounts then due and unpaid on the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to
the amounts due and payable on such Securities in respect of principal (and
premium, if any) and interest; and
THIRD: To whosoever may be lawfully entitled thereto, the
remainder, if any.
Section 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25 percent in principal amount
of the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive full payment of the principal, of (and premium, if any) and (subject
to Section 209) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption on the Redemption
Date or in the case of an Offer to Purchase made by the Company and accepted
as to such Security, on the Purchase Date) in accordance with the terms of
this Indenture and the Securities and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
Section 509.Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 207, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder or otherwise shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or
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remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article Five or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security that is required to have been
purchased pursuant to an Offer to Purchase that has been made by the Company),
or
(2) in respect of a covenant or provision hereof that under
Article Nine cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered
or omitted by it
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as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any
such party litigant, in the manner and to the extent provided in the Trust
Indenture Act.
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage
of any such law and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 601.
(b) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case
of any such certificates or opinions that by any provision hereof are
specifically re-
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quired to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform to
the requirements of this Indenture but need not confirm the accuracy of any
calculations contained therein.
(c) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(d) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this subsection (d) shall not be construed to limit the
effect of subsections (b) or (c) of this Section 601;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 602. Notice of Defaults; Notice of Acceleration.
Within 90 days after the occurrence of any Default or Event of
Default, the Trustee shall transmit by mail to all Holders, as their names and
addresses appear in the Security Register, notice of such Default or Event of
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Default known to the Trustee, unless such Default or Event of Default shall
have been cured or waived; provided that, except in the case of a default in
any payment of the principal of (or premium, if any) or interest on any
Security and any payment required in connection with a Change of Control or an
Asset Disposition, the Trustee shall be protected in with holding such notice
if and so long as the board of directors, the executive committee or the trust
committee corporate or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default or Event of
Default of the character specified in Section 501(5), no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request, order, demand or direction of the Company
mentioned herein shall be sufficiently evidenced by a Company Request or
Company Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by
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this Indenture at the request or direction of any of the Holders pursuant to
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled (subject to reasonable confidentiality arrangements as may
be proposed by the Company) to examine the books, records and premises of the
Company, personally or by agent or attorneys;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
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Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel) except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee in its individual capacity and each
of its officers, directors, agents and counsel for, and to hold it harmless
against, any loss, damage, claim, liability or expense incurred without
negligence or bad faith on such Person's part, arising out of or in connection
with the acceptance or administration of this Indenture or the performance of
any of its powers and duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder and complying
with any process served upon the Trustee or any such other Person hereunder.
The Trustee shall have a Lien prior to the Securities with respect to
all Property and funds held or collected by the Trustee hereunder for any
amount owing to it pursuant to this Section 607, except with respect
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to funds held in trust for the benefit of the Holders of particular
Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(7) or Section 501(8), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The Company's obligations under this Section 607 and any Lien arising
hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article Twelve, any
rejection or termination of the Indenture under any Federal or state
bankruptcy, insolvency or other similar law or any other termination of this
Indenture.
Section 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York and shall be
subject to supervision or examination by Federal or State authority. If such
Person publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section 609 and to the extent permitted by the Trust
Indenture Act, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 609, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article Six.
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Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article Six shall become effective
until the acceptance of appointment by the successor Trustee in accordance
with the applicable requirements of Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
in accordance with the applicable requirements of Section 611 shall not have
been delivered to the Trustee within 30 days after the giving of such notice
of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Securities, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Trustee shall be appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment
in accordance with the applicable requirements of Section 611, become the
successor Trustee and supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by the Company
or the Holders and accepted appointment in accordance with the applicable
requirements of Section 611, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give written notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of any amounts then due under Section 607, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder, subject, nevertheless, to its Lien, if any, provided for in Section
607. Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and
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confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be otherwise qualified and eligible
under this Article Six, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
The Trustee may from time to time appoint an Authenticating Agent or
Agents that shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption or partial purchase or pursuant
to Section 207, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. Wherever reference is made in
this Indenture to the authentication and delivery of Securities by the Trustee
or the Trustee's certificate of authentication, such
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reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of
said supervising or examining authority, then for the purposes of this Section
614, the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section 614,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section 614.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency
or corporate trust business of an Authenticating Agent, shall continue to be
an Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent. In case
any Securities shall have been authenticated, but not delivered, by the
Authenticating Agent then in office, any successor by merger, conversion or
consolidation to such authenticating Authenticating Agent may adopt such
authentication and deliver the Securities so authenticated with the same
effect as if such successor Authenticating Agent had itself authenticated such
Securities.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 614, the Trust-
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ee may appoint a successor Authenticating Agent that shall be acceptable to
the Company and shall give notice of such appointment in the manner provided
in Section 106, to all Holders as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 614.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section 614, the
Securities may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: IBJ SCHRODER BANK & TRUST
COMPANY
as Trustee
By
---------------------------
as Authenticating Agent
By
---------------------------
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company shall furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, and
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(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to the names and addresses of Holders made
pursuant to the Trust Indenture Act.
Section 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the May
15 following the Issue Date, the Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company shall notify the Trustee in writing when the Securities are listed on
any stock exchange.
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Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc. Only on Certain Terms.
The Company shall not, in any transaction or series of transactions,
consolidate with or merge into any other Person, or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the
Property and assets of the Company to any other Person, unless:
(i) either (a) the Company shall be the continuing corporation or (b)
the corporation (if other than the Company) formed by such consolidation or
into which the Company is merged, or the Person that acquires, by sale,
assignment, conveyance, transfer, lease or disposition, all or substantially
all of the Property and assets of the Company (such corporation or Person, the
"Surviving Entity"), shall be a corporation organized and validly existing
under the laws of the United States of America, any political subdivision
thereof or any state thereof or the District of Columbia, and shall expressly
assume, by a supplemental indenture, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities and the
performance of the Company's covenants and obligations under this Indenture;
(ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Debt Incurred or anticipated to be Incurred in connection with
or in respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;
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(iii) immediately after giving effect to any such transaction or
series of transactions on a pro forma basis (including, without limitation,
any Debt Incurred or anticipated to be Incurred in connection with or in
respect of such transaction or series of transactions) as if such transaction
or series of transactions had occurred on the first day of the determination
period, the Company (or the Surviving Entity if the Company is not continuing)
would be permitted to Incur $1.00 of additional Debt pursuant to Section
1008(a); and
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any Debt
Incurred or anticipated to be Incurred in connection with or in respect of
such transaction or series of transactions) (without giving effect to the fees
and expenses incurred in respect of such transaction), the Company (or the
Surviving Entity if the Company is not continuing) shall have a Net Worth
equal to or greater than the Net Worth of the Company immediately prior to
such transaction.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition contemplated by the
foregoing provisions of this Section 801, the Company shall deliver, or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, conveyance, assignment,
transfer, lease or other disposition and the indenture supplemental hereto in
respect thereof (to the extent required under clause (i) of this Section 801)
comply with the requirements of this Indenture. Each such Officers'
Certificate shall set forth the ability to Incur Debt in accordance with
clause (iii) of Section 801.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Ventures may merge with or into, or be consolidated with, an
Unrestricted Subsidiary of the Company, except to the extent that such
Unrestricted Subsidiary has been designated a Restricted Subsidiary as
provided in this Indenture in advance of or in connection with such merger.
For all purposes of this Indenture and the Securities (including this
Section 801 and Sections 1008, 1009 and 1012), Subsidiaries of any Surviving
Entity shall, upon such transaction or series of transactions, become
Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to
this Indenture and all Debt, and all
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Liens on Property or assets, of the Surviving Entity and its Subsidiaries
that was not Debt, or were not Liens on Property or assets, of the Company and
its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
Section 802. Successor Substituted.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, Section 801, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
Surviving Entity had been named as the Company herein; and when a Surviving
Person duly assumes all of the obligations and covenants of the Company
pursuant to this Indenture and the Securities, except in the case of a lease,
the predecessor Person shall be relieved of all such obligations.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, may, and subject to Section 903, the Trustee, at any time
and from time to time, shall, enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Securities in addition to or in
place of the certificated Securities; or
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(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is not Outstanding any Security created prior to the execution of such
supplemental indenture that is entitled to the benefit of such provision; or
(6) to evidence and provide for the acceptance of appointment under
this Indenture by a successor Trustee; or
(7) to secure the Securities pursuant to the requirements of Section
1012 or otherwise; or
(8) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture (8), provided that such actions pursuant to this clause
shall not adversely affect the interests of the Holders; or
(9) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, may, and (subject to Section 903) the Trustee shall, enter
into an indenture or indentures supplemental hereto, in form satisfactory to
the Trustee, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying
in any manner the rights of the Holders under this Indenture; provided that no
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of or any installment
of interest on, any Security, or reduce the principal amount thereof at or the
rate of interest thereon or any premium payable thereon, reduce any amount
payable on redemption or purchase thereof, or reduce the Default Amount that
would be due and payable on acceleration of the Stated Maturity thereof
pursuant to Section 502, or change the place of payment where, or the coin or
currency in which, any Security or any pre-
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mium or interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof,
or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(3) modify the obligations of the Company to make Offers to Purchase
from the Excess Proceeds of Asset Dispositions or upon a Change of Control or
to modify the definitions related thereto, or
(4) subordinate a right of payment, or otherwise subordinate, the
Securities to any other indebtedness, or
(5) modify any of the provisions of this Section 902, Section 513 or
Section 1020, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this Section
902 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
After a supplemental indenture under this Section becomes effective,
the Company shall mail to the Holders affected thereby a notice briefly
describing the supplemental indenture. Any failure of the Company to mail such
notice, or any default therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
In connection with any supplemental indenture or waiver under this
Article Nine, the Company may, but shall not be obligated to, offer to any
Holder who consents to such supplemental indenture, or to all Holders,
consideration for such Holder's consent to such supplemental indenture.
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Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article
Nine, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby, unless it makes a change described
in any of clauses (1) through (6) of Section 902, in which case, the
supplemental indenture shall bind only each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same Debt as the consenting Holder's Security;
provided that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal and premium of and interest on a
Security, on or after the respective dates set for such amounts to become due
and payable, or to bring suit for the enforcement of any such payment on or
after such respective dates.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act.
Section 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company
shall so determine, new Securities so modified as to conform, in the opinion
of the Trustee and the
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Company, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities. Any failure to make the appropriate notation on a new
Security shall not affect the validity of such Security.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms
of the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands. In the event any such notice
or demands are so made or served on the Trustee, the Trustee shall promptly
forward copies thereof to the Company.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York, for such purposes. The Company shall give prompt written
notice to the
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Trustee of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby initially
designates the Corporate Trust Office of the Trustee as such office of the
Company.
Section 1003. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and shall promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it shall,
prior to each due date of the principal of (and premium, if any) or interest
on any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company shall promptly notify the Trustee of its action or
failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 1003,
that such Paying Agent shall (i) comply with the provisions of the Trust
Indenture Act applicable to it as Paying Agent, (ii) give the Trustee notice
of any default by the Company (or other obligor upon the Securities) in the
making of any payment of principal of (and premium, if any) or interest in
respect of the Securities and (iii) during the continuance of any default by
the Company (or any other obligor upon the Securities) in the making of any
payment in respect of the Securities, upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent as
such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such
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sums to be held by the Trustee upon the same trusts as those upon which such
sums were held by the Company or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due
and payable shall be paid to the Company on Company Request, or (if then held
by the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, or mail to
such Holder, or both, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date
of such publication, any unclaimed balance of such money then remaining shall
be repaid to the Company.
Section 1004. Existence.
Subject to Article Eight, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and material franchises;
provided that the Company shall not be required to preserve any such right or
franchise if the Board of Directors in good faith shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof does not materially adversely affect the
Holders.
Section 1005. Maintenance of Properties.
The Company shall cause all material properties used or useful in the
conduct of its business or the business of any Restricted Subsidiary and any
Eligible Joint Venture to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improve-
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ments thereof, all as in the judgment of the Company may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this Section
1005 shall prevent the Company from discontinuing the operation or maintenance
of any of such material or properties or, subject to the provisions of Section
1015, disposing of any of them if such discontinuance or disposal is, as
determined by the Company in good faith, desirable in the conduct of its
business or the business of any Restricted Subsidiary and does not materially
adversely affect the Holders, provided that the Restricted Subsidiaries and
the Eligible Joint Ventures of the Company shall not be required to comply
with the forgoing provisions of this Section 1005 if they are prevented or
restricted in doing so by the terms of any loan or financing agreement, any
charter document, partnership or joint venture agreement or any other
agreement or instrument, all of which are expressly acknowledged to take
precedence over the terms hereof.
Section 1006. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Restricted Subsidiaries or upon the income, profits or property of the Company
or any of its Restricted Subsidiaries, and (2) all lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien upon the
property of the Company or any of its Restricted Subsidiaries; provided that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves have been accrued
to the extent required by GAAP.
Section 1007. Maintenance of Insurance.
The Company shall, and shall cause its Restricted Subsidiaries and
the Eligible Joint Ventures to, keep at all times all of their Properties that
are of an insurable nature insured against loss or damage with insurers
believed by the Company to be responsible to the extent that Property of
similar character is usually so insured by Persons similarly situated and
owning like Properties in accordance with good business practice. The Company
shall, and shall cause its Restricted Subsidiaries and the Eligible Joint
Ventures to, use the proceeds from any
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such insurance policy to repair, replace or otherwise restore all material
Properties to which such proceeds relate, provided that the Company shall not
be required to repair, replace or otherwise restore any such material Property
if the Company in good faith determines that such inaction is desirable in the
conduct of the business of the Company or any Restricted Subsidiary and does
not materially adversely affect the Holders, and provided further that the
Company (only in respect of agreements governing its Non-Recourse Debt), the
Restricted Subsidiaries and the Eligible Joint Ventures of the Company shall
not be required to apply insurance proceeds to repair, replace or restore any
material Property if they are prevented or restricted in doing so by the terms
of any loan or financing agreement, any charter document, partnership or joint
venture agreement or any other agreement or instrument, all of which are
expressly acknowledged to take precedence over the terms hereof.
The Company may, and may permit its Restricted Subsidiaries and
Eligible Joint Ventures to, adopt such other plan or method of protection, in
lieu of or supplemental to insurance with insurers, whether by the
establishment of an insurance fund or reserve to be held and applied to make
good losses from casualties, or otherwise, conforming to the system of
self-insurance maintained by Persons similarly situated and owning like
Properties and which does not materially adversely affect the Holders, as may
be determined by the Company in good faith.
Section 1008. Limitation on Debt.
(a) The Company shall not Incur any Debt, including Acquisition Debt,
unless, after giving effect to the Incurrence of such Debt and the receipt and
application of the proceeds therefrom, the Fixed Charge Ratio of the Company
would be equal to or greater than 2.0 to 1.
(b) Notwithstanding the provisions of Section 1008(a), the Company
may Incur each and all of the following: (i) Company Refinancing
Debt, (ii) Debt of the Company to any of its Restricted Subsidiaries or any
Eligible Joint Venture that is expressly subordinated in right of payment to
the Securities, provided that any transfer of such Debt by a Restricted
Subsidiary or an Eligible Joint Venture (other than to another Restricted
Subsidiary or another Eligible Joint Venture), or any transfer of the Company's
ownership interest, or a portion thereof, in such Restricted Subsidiary or such
Eligible Joint Venture or the interest, or a portion thereof, of Kiewit in a
Permitted Joint Venture or an
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Eligible Joint Venture (which transfer has the effect of causing such
Restricted Subsidiary or such Eligible Joint Venture to cease to be a
Restricted Subsidiary or an Eligible Joint Venture, as the case may be), shall
be deemed to be an Incurrence of Debt that is subject to the provisions of
this Section 1008 other than this clause (ii), (iii) Debt in an aggregate
principal amount not to exceed $100 million outstanding at any one time may be
issued under or in respect of Permitted Working Capital Facilities, (iv)
Non-Recourse Debt Incurred in respect of one or more Permitted Facilities in
which the Company has a direct or indirect interest, (v) Debt in respect of
Currency Protection Agreements or Interest Rate Protection Agreements, (vi)
Purchase Money Debt, provided that the amount of such Debt (net of any
original issue discount) does not exceed 90% of the fair market value of the
Property acquired, (vii) the Securities and other Debt outstanding as of the
Issue Date of the Securities (other than Debt to the extent that it is
extinguished, retired, defeased or repaid in connection with the original
issuance of the Securities), including Debt that is Incurred in respect of
interest or discount on such Debt (or Redeemable Stock issued as dividends in
respect of Redeemable Stock) pursuant to the terms of the agreement or
instrument that governs such Debt (or such Redeemable Stock) as in effect on
the Issue Date of the Securities and (viii) Debt in an aggregate principal
amount not to exceed $75 million outstanding at any one time.
Section 1009. Limitation on Subsidiary Debt.
(a) The Company shall not permit any of its Restricted Subsidiaries
or any Eligible Joint Venture, to Incur any Debt.
(b) Notwithstanding the provisions of Section 1009(a), each and all
of the following Debt may be Incurred by a Restricted Subsidiary or an
Eligible Joint Venture: (i) Debt outstanding as of the Issue Date of the
Securities, (ii) Debt owed by a Restricted Subsidiary or an Eligible Joint
Venture to the Company or another Restricted Subsidiary of the Company or
another Eligible Joint Venture that either directly or indirectly owns all or
a portion of the Company's interest in, or directly or indirectly is owned by,
such Restricted Subsidiary or such Eligible Joint Venture, as the case may be,
and that does not own any Permitted Facility or a direct or indirect interest
therein, other than the Permitted Facility or any other Permitted Facility
that is located on the same localized geothermal reservoir or a direct or
indirect interest therein owned by such Restricted Subsidiary or Eligible
Joint Venture, (iii) Non-Recourse Debt In-
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curred in respect of one or more Permitted Facilities, provided that such
Restricted Subsidiary or such Eligible Joint Venture has a direct or indirect
interest (which may include Construction Financing provided by the Company to
the extent permitted under Section 1010 as a "Permitted Investment") in one or
more of such Permitted Facilities in respect of which one or more Restricted
Subsidiaries or Eligible Joint Ventures shall have a direct or indirect
interest, (iv) Subsidiary Refinancing Debt, (v) Acquired Debt, (vi) Debt in
respect of Currency Protection Agreements or Interest Rate Protection
Agreements, (vii) Permitted Funding Company Loans and (viii) Permitted
Facilities Debt, provided that at the time of Incurrence thereof and after
giving effect to the application of the proceeds thereof, the aggregate
principal amount of Permitted Facilities Debt shall not exceed 15% of total
consolidated Debt of the Company computed in accordance with GAAP.
Section 1010. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, make
any Restricted Payment unless at the time of such Restricted Payment and after
giving effect thereto (a) no Event of Default and no event that, after the
giving of notice or lapse of time or both, would become an Event of Default,
has occurred and is continuing, (b) the Company could Incur at least $1 of
Debt under Section 1008(a) and (c) the aggregate amount of all Restricted
Payments made by the Company, its Restricted Subsidiaries and the Eligible
Joint Ventures (the amount so made, if other than in cash, to be determined in
good faith by the Chief Financial Officer, as evidenced by an Officers'
Certificate, or, if more than $30 million, by the Board of Directors, as
evidenced by a Board resolution) after March 24, 1994, is less than the sum
(without duplication) of (i) 50% of the Adjusted Consolidated Net Income of
the Company for the period (taken as one accounting period) beginning on the
first day of the first fiscal quarter that begins after March 24, 1994 and
ending on the last day of the fiscal quarter immediately prior to the date of
such calculation, provided that if throughout any fiscal quarter within such
period the Ratings Categories applicable to the Securities are rated
Investment Grade by S&P and Moody's (or if both do not make a rating of the
Securities publicly available, an equivalent Rating Category is made publicly
available by another Rating Agency), then 100% (instead of 50%) of the
Adjusted Consolidated Net Income (if more than zero) with respect to such
fiscal quarter shall be included pursuant to this clause (i),
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and provided further that if Adjusted Consolidated Net Income for such period
is less than zero, then minus 100% of the amount of such net loss, plus (ii)
100% of the aggregate net cash proceeds received by the Company from and after
March 24, 1994 from (A) the issuance and sale (other than to a Restricted
Subsidiary or an Eligible Joint Venture) of its Capital Stock (excluding
Redeemable Stock, but including Capital Stock other than Redeemable Stock
issued upon conversion of, or in exchange for Redeemable Stock or securities
other than its Capital Stock), (B) the issuance and sale or the exercise of
warrants, options and rights to purchase its Capital Stock (other than
Redeemable Stock) and (C) the issuance and sale of convertible Debt upon the
conversion of such convertible Debt into Capital Stock (other than Redeemable
Stock), but excluding the net proceeds from the issuance, sale, exchange,
conversion or other disposition of its Capital Stock (I) that is convertible
(whether at the option of the Company or the holder thereof or upon the
happening of any event) into (x) any security other than its Capital Stock or
(y) its Redeemable Stock or (II) that is Capital Stock referred to in clauses
(ii) and (iii) of the definition of "Permitted Payment", plus (iii) the net
reduction in Investments of the types specified in clauses (iv) and (v) of the
definition of "Restricted Payment" that result from payments of interest on
Debt, dividends, or repayment of loans or advances, the proceeds of the sale
or disposition of the Investment or other return of the amount of the original
Investment to the Company, the Restricted Subsidiary or the Eligible Joint
Venture that made the original Investment from the Person in which such
Investment was made, provided that (x) the aggregate amount of such payments
shall not exceed the amount of the original Investment by the Company or such
Restricted Subsidiary that reduced the amount available pursuant to this
clause (c) for making Restricted Payments and (y) such payments may be added
pursuant to this clause (iii) only to the extent such payments are not
included in the calculation of Adjusted Consolidated Net Income, provided
further that if Investments of the types specified in clauses (iv) and (v) of
the Definition of "Restricted Payment" have been made in any Person and such
Person thereafter becomes a Restricted Subsidiary or an Eligible Joint
Venture, then the aggregate amount of such Investment (to the extent that they
have reduced the amount available pursuant to this clause (c) for making
Restricted Payments), net of the amounts previously added pursuant to this
clause (iii), may be added to the amount available for making Restricted
Payments, plus (iv) an amount equal to the principal amount of Debt of the
Company extinguished in connection with the conversion into Common Stock of
the
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Company of the Company's 5% Convertible Subordinated Debentures due 2000 and
its 9.5% Convertible Subordinated Debenture due 2003. The foregoing clause (c)
shall not prevent the payment of any dividend within 60 days after the date
of its declaration if such dividend could have been made on the date of its
declaration without violation of the provisions of this Section 1010(a).
(b) None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Venture shall be deemed to have made an Investment at the time
that a Person that is a Restricted Subsidiary of the Company or an Eligible
Joint Venture ceases to be a Restricted Subsidiary or an Eligible Joint
Venture (other than as a result of a Restricted Subsidiary being designated as
an Unrestricted Subsidiary), although any subsequent Investment made by the
Company, its Restricted Subsidiaries and Eligible Joint Ventures in such
Person shall be Investments that shall be subject to the foregoing paragraph
unless and until such time as such Person becomes a Restricted Subsidiary or
an Eligible Joint Venture. Notwithstanding the foregoing, (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary, in the manner
provided in the definition of "Unrestricted Subsidiary," shall be an
Investment that shall be subject to the foregoing paragraph and (ii) the
transfer of the Company's interest (or portion thereof) in an entity that has
been deemed to be an Eligible Joint Venture directly or indirectly to an
Unrestricted Subsidiary shall be an Investment (to the extent of the interest
transferred) that shall be subject to the foregoing paragraph.
Section 1011. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, conduct
any business or enter into or permit to exist any transaction or series of
related transactions (including, but not limited to, the purchase, sale or
exchange of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with any Affiliate of the Company,
such Restricted Subsidiary or such Eligible Joint Venture, as the case may be,
unless (i) such business, transaction or series of related transactions is in
the best interest of the Company, such Restricted Subsidiary or such Eligible
Joint Venture, (ii) such business, transaction or series of related
transactions is on terms no less favorable to the Company, such Restricted
Subsidiary or such Eligible Joint Venture than those that could be obtained in
a comparable arm's length transaction with a Person that is
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not such an Affiliate and (iii) with respect to such business, transaction or
series of related transactions that has a fair market value or involves
aggregate payments equal to, or in excess of, $10 million, such business,
transaction or series of transactions is approved by a majority of the Board
of Directors (including a majority of the Disinterested Directors), which
approval is set forth in a Board Resolution delivered to the Trustee
certifying that, in good faith, the Board of Directors believes that such
business, transaction or series of transactions complies with clauses (i) and
(ii) above.
Section 1012. Limitation on Liens.
The Company may not Incur any Debt that is secured, directly or
indirectly, with, and the Company shall not, and shall not permit any of its
Restricted Subsidiaries or any Eligible Joint Venture to, grant a Lien on the
Property of the Company, its Restricted Subsidiaries or any Eligible Joint
Venture now owned or hereafter acquired unless contemporaneous therewith or
prior thereto the Securities are equally and ratably secured except for (i)
any such Debt secured by Liens existing on the Property of any entity at the
time such Property is acquired by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture, whether by merger, consolidation,
purchase of such Property or otherwise, provided that such Liens (x) are not
created, incurred or assumed in contemplation of such Property being acquired
by the Company, any of its Restricted Subsidiaries or any Eligible Joint
Venture and (y) do not extend to any other Property of the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture, (ii) any other Debt
that is required by the terms thereof to be equally and ratably secured as a
result of the Incurrence of Debt that is permitted to be secured pursuant to
another clause of this Section 1012, (iii) Liens that are granted in good
faith to secure Debt (A) contemplated by clause (iv) of Section 1008(b) or (B)
contemplated by clauses (ii), (iii), (vi) and (viii) of Section 1009(b),
provided that, in the case of Debt owed to a Person other than the Company or
a Restricted Subsidiary, the President or Chief Financial Officer of the
Company determines in good faith, as evidenced by an Officers' Certificate,
that such Liens are required in order to effect such financing and are not
materially more restrictive, taken as a whole, than Liens, taken as a whole,
customarily accepted (or in the absence of industry custom, reasonably
acceptable) in comparable financings or comparable transactions in the
applicable jurisdiction, (iv) Liens existing on the Issue Date of the
Securities, (v) Liens incurred to
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secure Debt incurred by the Company as permitted by clause (vi) of Section
1008(b), provided that such Liens may not cover any Property other than that
being purchased and improvements and additions thereto, (vi) Liens on any
Property of the Company securing Permitted Working Capital Facilities,
Guarantees thereof and any Interest Rate Protection Agreements or Currency
Protection Agreements, provided that such Liens may not extend to the Capital
Stock owned by the Company in any Restricted Subsidiary of the Company or any
Eligible Joint Venture, (vii) Liens in respect of extensions, renewals,
refundings or refinancings of any Debt secured by the Liens referred to in the
foregoing clauses, provided that the Liens in connection with such renewal,
extension, refunding or refinancing shall be limited to all or part of the
specific property that was subject to the original Lien, (viii) Liens incurred
to secure obligations in respect of letters of credit, bankers' acceptances,
surety, bid, operating and performance bonds, performance guarantees or other
similar instruments or obligations (or reimbursement obligations with respect
thereto) (in each case, to the extent incurred in the ordinary course of
business), (ix) any Lien arising by reason of (A) any judgment, decree or
order of any court, so long as such Lien is being contested in good faith and
is appropriately bonded, and any appropriate legal proceedings that may have
been duly initiated for the review of such judgment, decree or order have not
been finally terminated or the period within which such proceedings may be
initiated has not expired, (B) taxes, duties, assessments, imposts or other
governmental charges that are not yet delinquent or are being contested in
good faith, (C) security for payment of worker's compensation or other
insurance, (D) security for the performance of tenders, contracts (other than
contracts for the payment of money) or leases, (E) deposits to secure public
or statutory obligations, or to secure permitted contracts for the purchase or
sale of any currency entered into in the ordinary course of business, (F) the
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums that are not yet delinquent or are being contested in
good faith by negotiations or by appropriate proceedings that suspend the
collection thereof, (G) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects that do not
in the aggregate materially interfere with the ordinary conduct of the
business of the Company, any of its Re-
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stricted Subsidiaries or any Eligible Joint Venture or (H) leases and
subleases of real property that do not interfere with the ordinary conduct of
the business of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Venture and that are made on customary and usual terms
applicable to similar properties, or (x) Liens, in addition to the foregoing,
that secure obligations not in excess of $5 million in the aggregate.
Section 1013. Purchase of Securities Upon a Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of the
Securities shall have the right to require that the Company repurchase such
Holder's Securities at a purchase price in cash equal to 101% of the principal
thereof on the date of purchase plus accrued interest, if any, to the date of
purchase.
(b) Within 30 days following a Change of Control, the Company shall
mail a notice to each Holder, with a copy to the Trustee, stating (1) that a
Change of Control has occurred and that such Holder has the right to require
the Company to purchase such Holder's Securities at the purchase price
described in Section 1013(a) (the "Change of Control Offer"), (2) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control), (3) the
purchase date (which shall be not earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Change of Control Purchase Date"),
(4) that interest on any such Security shall continue to accrue, (5) any
Security properly tendered pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Purchase Date (assuming
sufficient moneys for the purchase thereof are deposited with the Trustee),
(6) that Holders electing to have a Security purchased pursuant to a Change
of Control Offer shall be required to surrender the Security, with the form
entitled "Option of Holder To Elect Purchase" on the reverse of the Security
completed, to the paying agent at the address specified in the notice prior
to the close of business on the fifth Business Day prior to the Change of
Control Purchase Date, (7) that a Holder shall be entitled to withdraw such
Holder's election if the Paying Agent receives, not later than the close of
business on the third Business Day (or such shorter periods as may be required
by applicable law) preceding the Change of Control Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Securities the Holder delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Securities
purchased and (8) that
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Holders that elect to have their Securities purchased only in part shall be
issued new Securities having a principal amount equal to the portion of the
Securities that were surrendered but not tendered and purchased.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment all Securities or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Trustee money sufficient to pay the
purchase price of all Securities or portions thereof so tendered for purchase
and (iii) deliver or cause to be delivered to the Trustee the Securities
properly tendered together with an Officers' Certificate identifying the
Securities or portions thereof tendered to the Company for purchase. The
Trustee shall promptly mail, to the Holders of the Securities properly
tendered and purchased, payment in an amount equal to the purchase price, and
promptly authenticate and mail to each Holder a new Security having a
principal amount equal to any portion of such Holder's Securities that were
surrendered but not tendered and purchased. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.
If the Company is prohibited by applicable law from making the Change
of Control Offer or purchasing Securities thereunder, the Company need not
make a Change of Control Offer pursuant to this Section 1013 for so long as
such prohibition is in effect.
The Company shall comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with a Change of Control Offer.
Section 1014. Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, create or cause to become, or
as a result of the acquisition of any Person or Property, or upon any Person
becoming a Restricted Subsidiary or an Eligible Joint Venture, remain subject
to, any consensual encumbrance or consensual restriction of any kind on the
ability of any Restricted Subsidiary or any Eligible Joint Venture to (a) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary or such Eligible Joint Venture
owned by the Company, any other Restricted Subsidiary or any other Eligible
Joint Venture, (b) make payments in re-
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spect of any Debt owed to the Company, any other Restricted Subsidiary of the
Company or any Eligible Joint Venture, (c) make loans or advances to the
Company or to any other Restricted Subsidiary of the Company or any other
Eligible Joint Venture that is directly or indirectly owned by such Restricted
Subsidiary or such Eligible Joint Venture or (d) transfer any of its Property
to the Company or to any other Restricted Subsidiary or any other Eligible
Joint Venture that directly or indirectly owns or is owned by such Restricted
Subsidiary or such Eligible Joint Venture, other than those encumbrances and
restrictions created or existing (i) on the Issue Date of the Securities, (ii)
pursuant to this Indenture, (iii) in connection with the Incurrence of any
Debt permitted under the provisions described in clause (iii) of Section
1009(b), provided that, in the case of Debt owed to Persons other than the
Company, its Restricted Subsidiaries and any Eligible Joint Venture, the
President or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions are required to effect such financing and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary or the applicable Eligible Joint Venture to make the payments,
distributions, loans, advances or transfers referred to in clauses (a) through
(d) of this Section 1014 than encumbrances and restrictions, taken as a whole,
customarily accepted (or, in the absence of any industry custom, reasonably
acceptable) in comparable financings or comparable transactions in the
applicable jurisdiction, (iv) in connection with the execution and delivery of
an electric power or thermal energy purchase contract, or other contract
related to the output or product of, or services rendered by one or more
Permitted Facilities to which such Restricted Subsidiary or such Eligible
Joint Venture is a supplying party or other contracts with customers,
suppliers and contractors to which such Restricted Subsidiary or such Eligible
Joint Venture is a party and where such Restricted Subsidiary or such Eligible
Joint Venture is engaged, directly or indirectly, in the development, design,
engineering, procurement, construction, acquisition, ownership, management or
operation of one or more of such Permitted Facilities, provided that the
President or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions are required to effect such contracts and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary or the applicable Eligible Joint Venture to make the payments,
distributions, loans, advances or transfers referred to in clauses (a)
through
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(d) of this Section 1014 than encumbrances and restrictions, taken as
a whole, customarily accepted (or, in the absence of any industry custom,
reasonably acceptable) in comparable financings or comparable transactions in
the applicable jurisdiction, (v) in connection with any Acquired Debt,
provided that such encumbrance or restriction was not incurred in
contemplation of such Person becoming a Restricted Subsidiary or an Eligible
Joint Venture and provided further that such encumbrance or restriction does
not extend to any other Property of such Person at the time it became a
Restricted Subsidiary or an Eligible Joint Venture, (vi) in connection with
the Incurrence of any Debt permitted under clause (iv) of Section 1009(b),
provided that, in the case of Debt owed to Persons other than the Company and
its Restricted Subsidiaries, the President or the Chief Financial Officer of
the Company determines in good faith, as evidenced by an Officers'
Certificate, that such encumbrances or restrictions taken as a whole are not
materially more restrictive than the encumbrances and restrictions applicable
to the Debt and/or equity being exchanged or refinanced, (vii) customary
non-assignment provisions in leases or other contracts entered into in the
ordinary course of business of the Company, any Restricted Subsidiary or any
Eligible Joint Venture, (viii) any restrictions imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or Property of any Restricted Subsidiary or Joint Venture
that apply pending the closing of such sale or disposition, (ix) in
connection with Liens on the Property of such Restricted Subsidiary or such
Eligible Joint Venture that are permitted by Section 1012 but only with
respect to transfers referred to in clause (d) of this Section 1014, (x) in
connection with the Incurrence of any Debt permitted under clause (ii) of
Section 1009(b) or (xi) in connection with the Incurrence of any Permitted
Facilities Debt permitted under clause (viii) of Section 1009(b), provided
that any such encumbrance or restriction relates only to those Restricted
Subsidiaries or Eligible Joint Ventures having a direct or indirect interest
in the Permitted Facilities in respect of which such Permitted Facilities Debt
was Incurred.
Section 1015. Limitation on Dispositions.
(a) Subject to the provisions of Article Eight, the Company shall not
make and shall not permit any of its Restricted Subsidiaries or any Eligible
Joint Venture to make, any Asset Disposition unless (i) the Company, the
Restricted Subsidiary or the Eligible Joint Venture, as the case may be,
receives consideration at
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the time of each such Asset Disposition at least equal to the fair market
value of the Property or securities sold or otherwise disposed of (to be
determined in good faith by the Chief Financial Officer, as evidenced by an
Officers' Certificate, or, if more than $30 million, by the Board of
Directors, as evidenced by a Board resolution), (ii) at least 85% of such
consideration is received in cash or Cash Equivalents or, if less than 85%,
the remainder of such consideration consists of Property related to the
business of the Company as described in the first sentence of Section 1021,
and (iii) unless otherwise required under the terms of Senior Debt, at the
Company's election, the Net Cash Proceeds are either (A) invested in the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (B) applied to the payment of any Debt of the Company or of
any of its Restricted Subsidiaries or any Eligible Joint Venture (or as
otherwise required under the terms of such Debt), provided that, no such
payment of Debt (x) under Permitted Working Capital Facilities or any other
revolving credit agreement shall count for this purpose unless the related
loan commitment, standby facility or the like shall be permanently reduced by
an amount equal to the principal amount so repaid and (y) owed to the Company,
a Restricted Subsidiary thereof or an Eligible Joint Venture shall count for
this purpose, provided further that such investment or such payment, as the
case may be, must be made within 365 days from the later of the date of such
Asset Disposition or the receipt by the Company, such Restricted Subsidiary or
such Eligible Joint Venture of the Net Cash Proceeds related thereto. Any Net
Cash Proceeds from Asset Dispositions that are not applied as provided in
clause (A) or (B) of the preceding sentence shall constitute "Excess
Proceeds." Excess Proceeds shall be applied, as described below, to make
an offer (an "Excess Proceeds Offer") to purchase Securities at a purchase price
equal to 100% of the principal thereof, plus accrued interest, if any, to the
date of purchase.
(b) Notwithstanding the provisions of Section 1015(a), the Company,
its Restricted Subsidiaries and the Eligible Joint Ventures may exchange with
other Persons (i) Property that constitutes a Restricted Subsidiary or an
Eligible Joint Venture for Property that constitutes a Restricted Subsidiary
or an Eligible Joint Venture, (ii) Property that constitutes a Restricted
Subsidiary or an Eligible Joint Venture for Property that does not constitute
a Restricted Subsidiary or an Eligible Joint Venture, (iii) Property that
does not constitute a Restricted Subsidiary or an Eligible Joint Venture for
Property that does not constitute a Restricted Subsidiary or an Eligible Joint
Venture and (iv) Property that does not constitute a Restricted Subsidiary or
an
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Eligible Joint Venture for Property that constitutes a Restricted Subsidiary
or an Eligible Joint Venture, provided that in each case the fair market value
of the Property received is at least equal to the fair market value of the
Property exchanged as determined in good faith by the Chief Financial Officer,
as evidenced by an Officers' Certificate, or, if more than $25 million, by the
Board of Directors, as evidenced by a Board resolution, provided that the
Investment in the Property received in the exchanges described in clauses (ii)
and (iii) of the prior sentence shall be subject to Section 1010.
Notwithstanding anything in the foregoing to the contrary, the Company may
not, and shall not permit any of its Restricted Subsidiaries or any Eligible
Joint Venture to, make an Asset Disposition of any of their interest in, or
Property of, any of the three geothermal facilities located together at the
Naval Weapons Center at China Lake, California, sometimes referred to as the
"Coso Project," other than for consideration consisting solely of cash.
(c) To the extent that any or all of the Net Cash Proceeds of any
Foreign Asset Disposition are prohibited from (or delayed in) being
repatriated to the United States by applicable local law, the portion of such
Net Cash Proceeds so affected shall not be required to be applied at the time
provided above but may be retained by any Restricted Subsidiary or any
Eligible Joint Venture so long, but only so long, as the applicable local law
does not permit (or delays) repatriation to the United States. If such Net
Cash Proceeds are transferred by the Restricted Subsidiary or Eligible Joint
Venture that conducted the Foreign Asset Dispo-
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sition to another Restricted Subsidiary or Eligible Joint Venture, the
Restricted Subsidiary or Eligible Joint Venture receiving such Net Cash
Proceeds must not be directly or indirectly obligated on any Debt owed to any
Person other than the Company. The Company shall take or cause such
Restricted Subsidiary or such Eligible Joint Venture to take all actions
required by the applicable local law to permit such repatriation promptly.
Once repatriation of any of such Net Cash Proceeds is permitted under the
applicable local law, repatriation shall be effected immediately and the
repatriated Net Cash Proceeds shall be applied in the manner set forth in this
Section 1015(c) as if such Asset Disposition had occurred on the date of such
repatriation. In addition, if the Chief Financial Officer determines, in good
faith, as evidenced by an Officers' Certificate, that repatriation of any or
all of the Net Cash Proceeds of any Foreign Asset Disposition would have a
material adverse tax consequence to the Company, the Net Cash Proceeds so
affected may be retained outside of the United States by the applicable
Restricted Subsidiary or the applicable Eligible Joint Venture for so long as
such material adverse tax consequence would continue. Notwithstanding the
foregoing provisions of this paragraph to the contrary, if applicable local
law prohibits (or delays) the repatriation of Net Cash Proceeds of a Foreign
Asset Disposition but such local law does not prohibit the application of such
Net Cash Proceeds pursuant to the first sentence of this Section 1015(a), the
Company may apply such Net Cash Proceeds pursuant to such provision.
(d) If the Securities tendered pursuant to an Excess Proceeds Offer
have an aggregate purchase price that is less than the Excess Proceeds
available for the purchase of the Securities, the Company may use the
remaining Excess Proceeds for general corporate purposes without regard to the
provisions of this Section 1015(d). The Company shall not be required to make
an Excess Proceeds Offer pursuant to this Section 1015 if the Excess Proceeds
available therefor are less than $10 million, provided that the lesser amounts
of such Excess Proceeds shall be carried forward and cumulated for each 36
consecutive month period for purposes of determining whether an Excess
Proceeds Offer is re quired with respect to any Excess Proceeds of any
subsequent Asset Dispositions. Any such lesser amounts so carried forward and
cumulated need not be segregated or reserved and may be used for general
corporate purposes, provided that such use shall not reduce the amount of
cumulated Excess Proceeds or relieve the Company of its obligation hereunder
to make an Excess Proceeds Offer with respect thereto.
(e) The Company shall make an Excess Proceeds Offer by mailing to
each Holder, with a copy to the Trustee, within 30 days after the receipt of
Excess Proceeds that cause the cumulated Excess Proceeds to exceed $10
million, a written notice that shall specify the purchase date, which shall
not be less than 30 days nor more than 60 days after the date of such notice
(the "Excess Proceeds Purchase Date"), that shall contain certain information
concerning the business of the Company that the Company believes in good faith
shall enable the Holders to make an informed decision and that shall contain
information concerning the procedures applicable to the Excess Proceeds Offer
(including, without limitation, the right of withdrawal) and the effect of
such offer on the Securities tendered. Holders that elect to have their
Securities purchased shall be required to surrender such Securities at least
one Business Day prior
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to the Excess Proceeds Purchase Date. If at the expiration of the Excess
Proceeds Offer period the aggregate purchase price of the Securities properly
tendered by Holders pursuant to the Excess Proceeds Offer exceeds the amount
of such Excess Proceeds, the Securities or portions of Securities to be
accepted for purchase shall be selected by the Trustee in such manner as the
Trustee deems to be fair and appropriate in the circumstances.
On the Excess Proceeds Purchase Date, the Company shall (i) accept
for payment on a pro rata basis Securities or portions thereof tendered
pursuant to the Excess Proceeds Offer, (ii) deposit with the Paying Agent
money in immediately available funds sufficient to pay the aggregate purchase
price of all the Securities or portions thereof so accepted and (iii) deliver
to the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof tendered to the Company. The Paying
Agent shall promptly mail to the Holders of each Security so accepted payment
in an amount equal to the aggregate purchase price, and the Trustee shall
promptly authenticate and mail to the Holders of each Security so accepted
payment in an amount equal to the purchase price thereof, and the Trustee
shall promptly authenticate and mail to such Holders new Securities equal in
principal amount to any portion of the Security surrendered that was not
purchased. The Company shall make a public announcement of the results of the
Excess Proceeds Offer as soon as practicable after the Excess Proceeds
Purchase Date. For the purposes of this Section 1015, the Trustee shall act as
the Paying Agent.
If the Company is prohibited by applicable law from making the Excess
Proceeds Offer or purchasing Securities thereunder, the Company need not make
an Excess Proceeds Offer pursuant to this Section 1015 for so long as such
prohibition is in effect.
The Company shall comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with an Excess Proceeds Offer.
Section 1016. Limitation on Certain Sale-Leasebacks.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, Incur or otherwise become
obligated with respect to any sale-leaseback (other than a sale-leaseback with
respect to a Permitted Facility that is Non-Recourse) unless, (i) (a) if
effected by the Company, the Company
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would be permitted to Incur such obligation under Section 1008 or, (b) if
effected by a Restricted Subsidiary or an Eligible Joint Venture, such
Restricted Subsidiary or such Eligible Joint Venture would be permitted to
Incur such obliga tion under Section 1009(b), assuming for the purpose of this
Section 1016 and Section 1008 and 1009 that (x) the obligation created by such
sale-leaseback is a Capitalized Lease and (y) the Capitalized Lease Obligation
with respect thereto is the Attributable Value thereof, (ii) the Company, such
Restricted Subsidiary or such Eligible Joint Venture is permitted to grant a
Lien with respect to the property that is the subject of such sale-leaseback
under Section 1012 of this Indenture, (iii) the proceeds of such
sale-leaseback are at least equal to the fair market value of the property
sold (determined in good faith as evidenced by an Officers' Certificate
delivered to the Trustee in respect of a transaction involving less than $25
million, or, if equal to or in excess of $25 million, by the Board of
Directors, as evidenced by a Board Resolution) and (iv) the Net Cash Proceeds
of the sale-leaseback are applied pursuant to Section 1015.
Section 1017. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, or any successor provision thereto, the Company shall file
with the Commission the annual reports, quarterly reports and other documents
that the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) or any successor provision thereto if the
Company were subject thereto, such documents to be filed with the Commission
on or prior to the respective dates by which the Company would have been
required to file them. The Company shall also in any event (a) within 15 days
of each such date (i) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
other documents (without exhibits) which the Company would have been required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act or any successor provisions thereto if the Company were subject thereto
and (b) if filing such documents by the Company with the Commission is not
permitted under the Exchange Act, promptly upon written request, supply copies
of such documents (without exhibits) to any prospective Holder.
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Section 1018. Limitation on Sale of Subsidiary Preferred Stock.
The Company shall not permit any of its Restricted Subsidiaries or
any Eligible Joint Venture to create, assume or other wise cause or suffer to
exist any Preferred Stock except: (i) Preferred Stock outstanding on the date
of this Indenture, including Preferred Stock issued as dividends in respect of
such Preferred Stock pursuant to the terms of the agreement or instrument
that governs such Preferred Stock as in effect on the Issue Date of the
Securities, (ii) Preferred Stock held by the Company, a Restricted Subsidiary
of the Company or an Eligible Joint Venture, (iii) Preferred Stock issued by
a Person prior to the time (a) such Person becomes a Restricted Subsidiary or
an Eligible Joint Venture, (b) such Person merges with or into another
Restricted Subsidiary or another Eligible Joint Venture or (c) a Restricted
Subsidiary or an Eligible Joint Venture merges with or into such Person (in a
transaction in which such Person becomes a Restricted Subsidiary or an
Eligible Joint Venture), provided that such Preferred Stock was not issued in
anticipation of such Person becoming a Restricted Subsidiary or an Eligible
Joint Venture or of such merger and (iv) Preferred Stock issued or agreed to
be issued by a Restricted Subsidiary or an Eligible Joint Venture in
connection with the financing of the construction, design, engineering,
procurement, equipping, developing, operation, ownership, management,
servicing or acquisition of one or more Permitted Facilities in which the
Company or one or more Restricted Subsidiaries or Eligible Joint Ventures has
a direct or indirect interest or the retirement of Debt or Preferred Stock
secured by any such Permitted Facility or in order to enhance the repatriation
of equity, advances or income or the increase of after-tax funds available for
distribution to the owners of such Permitted Facility, (v) Preferred Stock
issued or agreed to be issued by a Restricted Subsidiary or an Eligible Joint
Venture in satisfaction of legal requirements applicable to a Permitted
Facility or to maintain the ordinary course of conduct of such Restricted
Subsidiary's or such Eligible Joint Venture's business in the applicable
jurisdiction and (vi) Preferred Stock that is exchanged for, or the proceeds
of which are used to refinance, any Preferred Stock permitted to be
outstanding pursuant to clauses (i) through (v) hereof (or any extension,
renewal or refinancing thereof), having a liquidation preference not to exceed
the liquidation preference of the Preferred Stock so ex changed or refinanced
and having a redemption period no shorter than the redemption period of the
Preferred Stock so exchanged or refinanced.
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Section 1019. Statement by Officers as to Default; Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company, its Restricted Subsidiaries and the Eligible
Joint Ventures (signed by a signatory prescribed under the Trust Indenture
Act) during the preceding fiscal year has been made under the supervision of
the signing officers with a view to deter mining whether the Company has kept,
observed, performed and ful filled its obligations under this Indenture and
whether the Restricted Subsidiaries and the Eligible Joint Ventures are in
compliance with all covenants of this Indenture applicable to them and
further stating, as to each such officer signing such certificate, that to
the best of his knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions, and conditions
hereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he may have knowledge and what
action each is taking or proposes to take with respect thereto).
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any officer becoming aware
of (i) any Default or Event of Default or (ii) any event of default under any
other mortgage, indenture or instrument referred to in Section 501(6), an
Officers' Certificate specifying such Default, Event of Default or other event
of default and what action the Company is taking or proposes to take with
respect thereto.
Section 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 801, provided pursuant to Section
901(2) and set forth in Sections 1004 to 1012, inclusive, Section 1014 and
Sections 1016 through 1018, inclusive, and Section 1021 if before the time for
such compliance the Holders of at least a majority in principal amount at
Stated Maturity of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condi tion except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and
the duties
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of the Trustee in respect of any such covenant or condition shall remain in
full force and effect.
Section 1021. Limitation on Business.
The Company shall, and shall cause its Restricted Subsidiaries and
the Eligible Joint Ventures to, engage only in (i) the ownership, design,
engineering, procurement, construction, development, acquisition, operation,
servicing, management or disposition of Permitted Facilities, (ii) the
ownership, creation, development, acquisition, servicing, management or
disposition of Restricted Subsidiaries and Joint Ventures that own, construct,
develop, design, engineer, procure, acquire, operate, service, manage or
dispose of Permitted Facilities, (iii) obtaining, arranging or providing
financing incident to any of the foregoing and (iv) other related activities
incident to any of the foregoing. The Company shall not, and shall not permit
any of its Restricted Subsidiaries or any Eligible Joint Venture to, make any
Investment or otherwise acquire any Property that is not directly related to
the business of the Company as described in the preceding sentence
(collectively, the "Ineligible Investments") other than as a part of an
Investment or an acquisition of Property that is predominantly and directly
related to the business of the Company as described above, and if the
aggregate fair market value of such Ineligible Investments in the aggregate
exceeds 20% (the "Percentage Limit") of the total assets of the Company and
its consolidated Restricted Subsidiaries (as determined in accordance with
GAAP) as determined in good faith by the Chief Financial Officer, as evidenced
by an Officers' Certificate, the Company, its Restricted Subsidiaries and the
Eligible Joint Ventures must cease acquiring any additional Ineligible
Investments and, within 18 months of the acquisition that caused the
Ineligible Assets to exceed the Percentage Limit, must return to compliance
with the Percentage Limit by disposing of Ineligible Assets or otherwise,
provided that such 18-month period may be extended up to an additional six
months if, despite the Company's active efforts during such 18-month period to
dispose of such Ineligible Investments or to otherwise come into compliance
with such Percentage Limit, the Company is unable to do so because of
regulatory restrictions or delays or adverse market conditions.
Section 1022. Notice to the Trustee of Certain Events.
The Company shall promptly notify the Trustee, in writing, of the
following events and any changes thereto:
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(a) The commencement of any period of effectiveness of any Shelf
Registration Statement with respect to any Initial Securities or any Private
Exchange Securities;
(b) The end or suspension of any period of effectiveness of any Shelf
Registration Statement with respect to any Initial Securities or any Private
Exchange Securities;
(c) The commencement of any Registered Exchange Offer with respect to
any Initial Securities;
(d) The commencement of any Private Exchange with respect to any
Initial Securities;
(e) The occurrence of any Illiquidity Event with respect to any
Security and a description of the nature thereof;
(f) The Cure Date relating to any Illiquidity Event with respect to
any Security and a description of the nature of such cure; and
(g) The receipt by the Company of any IAI purchase letter described
in Section 206(g) of this Indenture and the identification of those Securities
which may be transferred to such IAI.
The Trustee may assume that no event described above shall have
commenced or occurred unless and until it shall have received written notice
that such an event has commenced or occurred, as the case may be. After
receipt of written notice that any such event has commenced or occurred, the
Trustee may assume that such event shall be continuing unless and until it
shall have received written notice that such event has ended, been suspended,
been consummated or been cured as the case may be.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, in the
amounts, at any time on or after September 15, 2001, at the Redemption Prices
specified in the form of Security hereinbefore set forth (together with any
applicable accrued and unpaid interest to the
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Redemption Date) and subject to the conditions specified in the form of
Security hereinbefore set forth.
Section 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by this Indenture and the provisions of the Securities, shall be made in
accordance with such provisions and this Article Eleven.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company pursuant to Section 1101 of less
than all the Securities, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the outstanding Securities are to be redeemed, the
Securities or portions of Securities to be redeemed or accepted shall be
selected by the Trustee pro rata or otherwise in such manner as the Trustee
deems to be fair and appropriate in the circumstances, provided that the
Trustee shall redeem Securities only in denominations of $1,000 principal
amount and integral multiples thereof.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture and or the Securities, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such
Securities that has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given as provided in Section 106 not
less than 30 nor more than 60 days prior
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to the Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed, including CUSIP
Numbers,
(4) that on the Redemption Date the Redemption Price shall
become due and payable upon each such security to be redeemed and that, unless
the Company shall default in the payment of the Redemption Price and any
applicable accrued interest, and
(5) the name of the Paying Agent or Agents and the place or
places where such Securities are to be surrendered for payment of the
Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be
irrevocable.
Section 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) any applicable accrued and
unpaid interest on, all the Securities that are to be redeemed on that date.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any
applicable accrued and unpaid interest) such Securities shall not bear
interest. Upon sur-
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render of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with any applicable accrued and unpaid interest to the Redemption Date;
provided that install ments of interest whose Stated Maturity is on or prior
to the Redemption Date shall be payable to the Holders of such Securities, or
one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 210.
If any Security called for redemption in accordance with the election
of the Company made pursuant to Section 1101 shall not be so paid upon
surrender thereof for redemption, the unpaid Redemption Price thereof shall,
until paid, bear interest from the Redemption Date at the rate or manner
provided by the Security.
Section 1108. Securities Redeemed in Part.
Any Security that is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company
and the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal amount of the Security
so surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
Section 1201. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section
1202 or Section 1203 applied to the Outstanding Securities (as a whole and
not in part) upon compliance with the condi tions set forth below in this
Article Twelve. Any such election shall be evidenced by a Board Resolution.
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Section 1202. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section 1202
applied to the Outstanding Securities (as a whole and not in part), the
Company shall be deemed to have been discharged from its obligations with
respect to such Securities as provided in this Section 1202 on and after the
123rd day after the conditions set forth in Section 1204 are satisfied (herein
after called "Defeasance") (or immediately if an Opinion of Counsel is
delivered to the effect described in clause (C)(y) of paragraph (2) of Section
1204). For this purpose, such Defea sance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Securities and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are con cerned (and
the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of Holders of
such Securities to receive, solely from the trust fund described in Section
1204 and as more fully set forth in such Section, pay ments in respect of the
principal of and any premium and interest on such Securities when payments are
due, (2) the Company's obligations with respect to such Securities under
Sections 206, 207, 208, 1002, 1003 and 1004 (only with respect to the
corporate existence and rights of the Company), (3) the rights, powers,
trusts, duties and immunities of the Trustee under this Indenture, (4)
Article Eleven and (5) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option to have this Section 1202
applied to the Outstanding Securities (as a whole and not in part)
notwithstanding the prior exercise of its option to have Section 1203 applied
to such Securities.
Section 1203. Covenant Defeasance.
Upon the Company's exercise of its option to have this Section
applied to the Outstanding Securities (as a whole and not in part), (i) the
Company, its Restricted Subsidiaries and its Eligible Joint Ventures shall be
released from its obligations under Section 801(iii), Sections 1005 through
1018, inclusive, Section 1021, and any covenant provided pursuant to
Section 901(2) and (ii) the occurrence of any event specified in Section
501(1) (solely with respect to Offers to Purchase), Section 501(3), Section
501(4) (with respect to any of Section 801(iii) and Sections 1005 through
1018, inclusive, Section 1021, and any such covenants provided pursuant to
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Section 901(2)), Section 501(5) or Section 501(6) shall be deemed not to be or
result in an Event of Default, in each case with respect to such Securities as
provided in this Section on and after the date the conditions set forth in
Section 1204 are satisfied (hereinafter called "Covenant Defeasance"). For
this purpose, such Covenant Defeasance means that, with respect to such
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Sections 501(1) and
501(4)), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section
to any other provision herein or in any other document; but the remainder of
this Indenture and such Securities shall be unaffected thereby.
Section 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee that satisfies the requirements
contemplated by Section 609 and agrees to comply with the provisions of this
Article applicable to it) as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to the benefits of the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations that through the scheduled payment
of principal and interest in respect thereof in accordance with their terms
shall provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of, premium if any and
any installment of accrued interest on such Securities on the respective
Stated Maturities thereof or, if the Company makes ar rangements satisfactory
to the Trustee for the redemption of the Securities prior to their Stated
Maturity, on any earlier Redemption Date, in accordance with the terms of
this Indenture and such Securities.
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(2) In the event of an election to have Section 1202 apply to
the Outstanding Securities, the Company shall have delivered to the Trustee
(A) either (X) an Opinion of Counsel to the effect that Holders shall not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and shall be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred
and the Company had paid or redeemed such Securities on the applicable dates,
which Opinion of Counsel must be based upon a ruling of the Internal Revenue
Service to the same effect or a change in applicable federal income tax law or
related Treasury regulations after the date of the Indenture or (y) a ruling
directed to the Trustee or the Company received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel, (B) an
Opinion of Counsel to the effect that the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (C) an Opinion of
Counsel to the effect that either (x) after the passage of 123 days following
the deposit, the trust fund shall not be subject to the effect of Section 547
or 548 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law or (y) based upon existing precedents, if the manner were
properly briefed, a court should hold that the deposit of moneys and/or U.S.
Government Obligations as provided in Section 1204(1) would not constitute a
preference voidable under Section 547 or 548 of the U.S. Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law.
(3) In the event of an election to have Section 1203 apply to
the Outstanding Securities, the Company shall have delivered to the Trustee
(i) an Opinion of Counsel to the effect that the Holders of such Outstanding
Securities shall not recognize income, gain or loss for Federal income tax
purposes as a result of the deposit and Covenant Defeasance to be effected
with respect to such Securities and shall be subject to Federal income tax on
the same amount, in the same manner and at the same times as would be the case
if such deposit and Covenant Defeasance were not to occur and the Company had
paid or redeemed such Securities on the applicable dates, (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and (iii) an Opinion of Counsel to
the effect that either (x) after the passage of 123 days following the
deposit, the trust fund shall not be subject to the effect of Section 547 or
548 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law or (y) based upon existing precedents,
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if the manner were properly briefed, a court should hold that the deposit of
moneys and/or U.S. Government Obligations as provided in Section 1204(1) would
not constitute a preference voidable under Section 547 or 548 of the U.S.
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law.
(4) Immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default or event that after the giving of
notice or lapse of time or both would become an Event of Default, with respect
to the Outstanding Securities shall have occurred and be continuing at the
time of such deposit or (unless an Opinion of Counsel is delivered to the
effect de scribed in Section 1204(2)(C)(y) or 1204(3)(iii)(y)) during the
period ending on the 123rd day after the date of such deposit.
(5) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the meaning of
such Act).
(6) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(7) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940, as amended, unless such
trust shall be registered under such Act or exempt from registration
thereunder.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
(9) If the Securities are listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities shall not be delisted as a result of
such deposit, defeasance and discharge.
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Section 1205. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely for purposes of
this Section 1205 and Section 1206, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to Section 1204 or
otherwise in respect of the Outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any such Paying
Agent (other than the Company acting as its own Paying Agent) as the Trustee
may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge that by law is
for the account of the Holders of Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 that, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof that would then
be required to be deposited to effect the Defeasance or Covenant Defeasance,
as the case may be, with respect to the Outstanding Securities.
Section 1206. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article Twelve with respect to any Securities by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the obligations
under this Indenture and such Securities from which the Company has been
discharged or released pursuant to Section 1202 or 1203 shall be re-
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vived and reinstated as though no deposit had occurred pursuant to this
Article Twelve with respect to such Securities, until such time as the Trustee
or Paying Agent is permitted to apply all money held in trust pursuant to
Section 1205 with respect to such Securities in accordance with this Article
Twelve; provided that if the Company makes any payment of principal of or any
premium or interest on any such Security following such rein statement of its
obligations, the Company shall be subrogated to the rights (if any) of the
Holders of such Securities to receive such payment from the money so held in
trust.
----------------
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CALENERGY COMPANY, INC.
By: /s/ John G. Sylvia
Attest: /s/ Steven A. McArthur --------------------------------
--------------------------- Name: John G. Sylvia
Title:
IBJ SCHRODER BANK & TRUST
COMPANY
By: /s/ Irene Teutonico
Attest: /s/ Henry A. Monaghan --------------------------------
--------------------------- Name: Irene Teutonico
Title: Assistant Vice President
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STATE OF NEBRASKA )
ss.:
COUNTY OF DOUGLAS )
On the 19th day of September, 1996, before me personally came John G.
Sylvia, to me known, who, being by me duly sworn, did depose and say that he is
Senior Vice President of CalEnergy Company, Inc., one of the corporations
described in and that executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporations, and that he signed his name thereto by like authority.
/s/ Virginia Mortensen
-------------------------
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the 20th day of September, 1996, before me personally came Irene
Teutonico, to me known, who, being by me duly sworn, did depose and say that she
is Assistant Vice President of IBJ Schroder Bank & Trust Company, one of the
corporations described in and that executed the foregoing instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that she signed her name thereto by like
authority.
/s/ Susan J. Sutherland
-------------------------
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APPENDIX
--------
PURCHASER'S LETTER
------------------
<PAGE>
APPENDIX A
FORM OF LETTER TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS
CALENERGY COMPANY, INC.
302 South 36th Street
Suite 400
Omaha, NE 68131
Dear Sirs:
We are delivering this letter in connection with an offering of
$225,000,000 aggregate principal amount of 9 1/2% Senior Notes due 2006 (the
"Notes") by CalEnergy Company, Inc., a Delaware corporation (the "Company"),
as described in the Confidential Offering Circular (the "Offering Circular")
relating to the offering.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (an "Institutional Accredited Investor");
(ii)(A) any purchase of the Notes by us will be for our own account
or for the account of one or more other Institutional Accredited Investors
or a fiduciary for the account of one or more trusts, each of which is an
"accredited investor" within the meaning of Rule 501(a)(7) under the
Securities Act and for each of which we exercise sole investment
discretion or (B) we are a "bank," within the meaning of Section 3(a)(2)
of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act, that is
acquiring the Notes as a fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
(iii) in the event that we purchase any of the Notes, we will acquire
Notes having a minimum purchase price of not less than $500,000 for our
own account or for any separate account described above for which we are
acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing the Notes;
(v) we are not acquiring the Notes with a view to distribution
thereof or with any present intention of offering or selling the Notes,
except in accordance with Rule 144A under the Securities Act or outside
the United States in accordance with Regulation S under the Securities
Act, as provided below; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(vi) we have received a copy of the Offering Circular relating to the
offering of the Notes and acknowledge that we have had access to financial
and such other information, and have been afforded the opportunity to ask
such questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to purchase
the Notes.
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of
the Securities Act and that the Notes have not been and, except as described
in the Offering Circular, will not be registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we acquire
any Notes, that if in the future we decide to resell, pledge or otherwise
transfer any of the Notes, such Notes may be offered, resold, pledged or
otherwise transferred only (i) to the Company, (ii) pursuant to an effective
registration statement under
A-1
<PAGE>
the Securities Act, (iii) inside the United States to a person who we
reasonably believe is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in a transaction meeting the requirements of
Rule 144A or (iv) pursuant to another available exemption from the
registration requirements of the Securities Act, and (v) in each case in
accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdiction. We understand that the registrar
and transfer agent for the Notes will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the transfer agent that the foregoing
restrictions on transfer have been complied with. We further understand that
any Notes acquired by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
Date:
----------------- -----------------------------------
(Name of Purchaser)
By:
-------------------------------
Name:
Title:
Address:
A-2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
CALENERGY COMPANY, INC.
$225,000,000 9 1/2% Senior Notes
due 2006
September 20, 1996
CS FIRST BOSTON CORPORATION
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
In connection with the issue and sale of $225,000,000 principal
amount of 9 1/2% Senior Notes due 2006 (the "Securities") issued by CalEnergy
Company, Inc., a Delaware corporation (the "Company") pursuant to the terms of
the Indenture (as defined below) and as an inducement to CS First Boston
Corporation (the "Initial Purchaser") to enter into the Purchase Agreement
dated September 18, 1996 (the "Purchase Agreement") between the Company and
the Initial Purchaser, the Company hereby agrees to provide the registration
rights set forth in this Exchange and Registration Rights Agreement (this
"Agreement") for the benefit of the holders of the Securities. The execution
of this Agreement is a condition to the purchase of the Securities under the
Purchase Agreement.
Section 1. Definitions. Capitalized terms used herein without
definition shall have the respective meanings ascribed thereto, whether
expressly or by reference to another agreement or document, in the Indenture.
The definitions set forth in this Agreement shall equally apply to both the
singular and plural forms of the terms defined. As used in this Agreement, the
following terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of
Section 5 of this Agreement.
<PAGE>
"Affiliate", with respect to any Person, shall mean any other Person
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such first Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities or by contract or otherwise. For
purposes of Section 2, an "Affiliate" of the Company shall mean and include,
in addition, any Person deemed an affiliate thereof under the Securities Act
or the Exchange Act in connection with the Exchange Offer.
"Closing Date" shall mean the date of the initial issuance and sale
of the Securities.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Cure Date" shall have the meaning set forth in Section 4(a) of this
Agreement.
"Effective Date" shall mean the date which is 270 days after the
Closing Date.
"Effective Period" shall have the meaning set forth in Section 3(a)
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Offer" shall have the meaning set forth in Section 2(a) of
this Agreement.
"Exchange Offer Registration Statement" shall have the meaning set
forth in Section 2(a) of this Agreement.
"Exchange Period" shall have the meaning set forth in Section 2(a) of
this Agreement.
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"Exchange Securities" shall have the meaning set forth in Section
2(a) of this Agreement.
A "holder" of Registrable Securities shall mean the registered holder
of such securities or any beneficial owner thereof.
"Holder Indemnified Party" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Holder Information" shall have the meaning set forth in Section 8(a)
of this Agreement.
"Illiquidity Event" with respect to the Securities shall mean any of
the following events:
(a) as of the Effective Date, both (i) an Exchange Offer Registration
Statement (which, if applicable pursuant to Section 2(a), covers resales
of such Exchange Securities) has not become effective and (ii) the
Registrable Securities are not the subject of an Initial Shelf
Registration State ment which has become effective; or
(b) the Exchange Securities offered in exchange for Registrable
Securities are the subject of an Exchange Offer Registration Statement
which was effective (and which, if applicable pursuant to Section 2(a),
covered resales of such Exchange Securities) but which ceased to be
effective for any reason prior to the end of the Exchange Period; or
(b) Registrable Securities are the subject of an Initial Shelf
Registration Statement or Subsequent Shelf Registration Statement which
was effective but which has ceased to be effective for any reason prior to
the end of the Effective Period.
An Illiquidity Event shall be deemed to cease to exist on the date
subsequent to the occurrence of such Illiquidity Event on which:
(i) in the case of an Illiquidity Event described in clause (a)
above either (i) an Exchange Offer Registration Statement (which, if
applicable pursuant to Section 2(a), covers resales of the Exchange
Securities exchanged for such Registrable
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<PAGE>
Securities) shall become effective and an Exchange Offer for such
Registrable Securities shall have commenced or (ii) an Initial Shelf
Registration Statement covering such Registrable Securities shall become
effective; or
(ii) in the case of an Illiquidity Event described in clause (b)
above, either (i) an Exchange Offer Registration Statement (which, if
applicable pursuant to Section 2(a), covers resales of the Exchange
Securities offered in exchange for such Securities) shall become effective
and an Exchange Offer for such Registrable Securities shall have commenced
pursuant to an Exchange Offer Registration Statement or (ii) an Initial
Shelf Registration Statement covering such Registrable Securities shall
become effective; or
(iii) in the case of an Illiquidity Event described in clause (c)
above, a Subsequent Shelf Registration Statement covering such Registrable
Securities shall become effective.
"Indenture" shall mean the Trust Indenture dated as of September 20,
1996, and as amended or supplemented from time to time in accordance with the
terms thereof, between the Company and the Trustee, and pursuant to which the
Securities are to be issued.
"Initial Purchaser Securities" means Securities acquired by the
Initial Purchaser as part of its initial distribution, and which at the time
of the Exchange Offer, are still held by the Initial Purchaser.
"Initial Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
"Initial Shelf Registration Statement" shall have the meaning set
forth in Section 3(a) of this Agreement.
"Inspectors" shall have the meaning set forth in Section 5(m) of this
Agreement.
"Managing Underwriters" shall mean the investment banker or
investment bankers and manager or managers that shall administer an
Underwritten Offering.
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<PAGE>
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Private Exchange" shall have the meaning set forth in Section 2(a).
"Private Exchange Securities" shall have the meaning set forth in
Section 2(a).
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, and
all other amendments and supplements to the Prospectus, including
post-effective amendments and all material incorporated by refer ence into
such prospectus.
"Purchase Agreement" shall have the meaning set forth in the first
paragraph of this Agreement.
"Records" shall have the meaning set forth in Section 5(m) of this
Agreement.
"Registrable Securities" shall mean the Securities upon original
issuance thereof (including Initial Purchaser Securities), and any Private
Exchange Security at all times subsequent thereto until, in the case of any
such Security, (i) a Registration Statement covering such Security, or the
Exchange Security to be exchanged for such Security (and, in the case of any
Resale Security, any resale thereof), has been declared effective and such
Security has been disposed of or exchanged (or, in any case where such
Registration Statement covers the resale of Resale Securities, such Security
has been exchanged and the Resale Security received therefor has been resold),
as the case may be, in accordance with such effective Registration Statement,
(ii) it is sold in compliance with Rule 144 or would be permitted to be sold
pursuant to Rule 144(k), (iii) it shall have been otherwise transferred and a
new certificate for any such Security not bearing a legend restricting further
transfer shall have been delivered by or on behalf of the Company and such
Security shall be tradeable by each holder thereof without re striction under
the Securities
5
<PAGE>
Act or the Exchange Act and without material restriction under the applicable
blue sky or state securities laws or (iv) it ceases to be outstanding.
"Registration Statement" shall mean any registration statement
(including any Shelf Registration Statement) of the Company that covers any of
the Registrable Securities or the Exchange Securities, as the case may be,
pursuant to the provisions of this Agreement, including the Prospectus which
is part of such Registration Statement, amendments (including post-effective
amendments) and supplements to such Registration State ment and all exhibits
and appendices to any of the foregoing. For purposes of the foregoing, unless
the context requires otherwise, a Registration Statement for an Exchange Offer
shall not be deemed to cover Registrable Securities held by a Re stricted
Person unless such Registration Statement covers the resale of Resale
Securities to be received by such Restricted Person pursuant to such Exchange
Offer and any such Securities shall continue to be Registrable Securities.
"Resale Initial Purchaser" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Resale Securities" shall mean any Exchange Security received by a
Restricted Person pursuant to an Exchange Offer, and at all times subsequent
thereto, until, subject to the time periods set forth herein, such Exchange
Security has been resold by such Restricted Person.
"Restricted Person" shall mean (a) any Affiliate of the Company, (b)
the Initial Purchaser or (c) any Affiliate of the Initial Purchaser (other
than Affiliates of the Initial Purchaser that (i) are acquiring Exchange
Securities in the ordinary course of business and do not have an arrangement
with any Person to distribute Exchange Securities and (ii) may trade such
Exchange Securities without restriction under the Securities Act).
"Rule 144" shall mean Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
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"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Rule 415" shall mean Rule 415 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities" shall have the meaning set forth in the first paragraph
of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Shelf Notice" shall have the meaning set forth in Section 2(b) of
this Agreement.
"Shelf Registration Statement" shall have the meaning set forth in
Section 3(b) of this Agreement.
"Special Counsel" shall mean Skadden, Arps, Slate, Meagher & Flom,
special counsel to the Initial Purchaser, or any other firm acceptable to the
Company, acting as special counsel to the holders of Registrable Securities or
Exchange Securities.
"Subsequent Shelf Registration Statement" shall have the meaning set
forth in Section 3(b) of this Agreement.
"TIA" shall mean the Trust Indenture Act of 1939, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Trustee" shall mean IBJ Schroder Bank & Trust Company, its
successors and any successor trustee under the Indenture.
"Underwritten Registration" or "Underwritten Offering" shall mean a
registration in which securities are sold to an underwriter or group of
underwriters for reoffering to the public.
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<PAGE>
Section 2. Exchange Offer.
(a) Unless the Company determines in good faith that the Exchange
Offer shall not be permissible under applicable law or Commission policy, the
Company shall prepare and cause to be filed with the Commission as soon as
reasonably practicable after the Closing Date, subject to Sections 2(b) and
2(c) of this Agreement, a Registration Statement (an "Exchange Offer
Registration Statement") for an offer to exchange (an "Exchange Offer") the
Registrable Securities other than Initial Purchaser Securities (subject to
Section 2(c)) for a like aggregate princi pal amount of debt securities of the
Company that are in all material respects substantially identical to the
Securities (the "Exchange Securities") (and which are entitled to the benefits
of the Indenture, which shall be qualified under the TIA in connection with
such registration or a trust indenture which is substantially identical in all
material respects to the Inden ture), other than (i) such changes to the
Indenture or any such substantially identical indenture as the Trustee and the
Company may deem necessary in connection with the Trustee's rights and duties
or to comply with any requirements of the Commission to effect or maintain the
qualification thereof under the TIA and (ii) such changes relating to
restrictions on transfer set forth in the Indenture. The Exchange Offer shall
be registered under the Securities Act on the appropriate form of Registration
Statement and shall comply with all applicable tender offer rules and
regulations under the Exchange Act and with all other applicable laws. Subject
to the terms and limitations of Section 2(c), such Exchange Offer Registration
Statement may also cover any resales of Exchange Securities by any Restricted
Person, in the manner or manners designated by them which, in any event, is
reasonably acceptable to the Company.
If, upon consummation of the Exchange Offer, the Initial Purchaser
holds Initial Purchaser Securities, the Company, simultaneously with the
delivery of the Exchange Securities pursuant to the Exchange Offer, shall
issue and deliver to the Initial Purchaser upon the written request of the
Initial Purchaser, and the delivery of the Initial Purchaser Securities to the
Company, in exchange (the "Private Exchange") for the Initial Purchaser
Securities, a like amount of debt securities of the Company issued under the
Indenture and identical in all
8
<PAGE>
material respects (including the existence of restrictions on transfer under
the Securities Act and the secu rities law of the several states of the United
States) to the Securities (the "Private Exchange Securities").
The Company shall use its reasonable best efforts to (i) cause the
Exchange Offer Registration Statement to become effective under the Securities
Act on or prior to the Effective Date, (ii) keep the Exchange Offer open for a
period of not less than the shorter of (A) the period ending when the last
remaining Security is tendered into the Exchange Offer and (B) 30 days from
the date notice is mailed to the holders of Securities (provided that in no
event shall such period be less than the period required under applicable
Federal and state securities laws), and (iii) maintain such Exchange Offer
Registration Statement continuously effective for a period (the "Exchange
Period") of not less than the longer of (A) the period until the consummation
of the Exchange Offer and (B) 120 days after effectiveness of the Exchange
Offer Registration Statement, provided however, that in the event that all
resales of Exchange Securities (including, subject to the time periods set
forth herein, any Resale Securi ties and including, subject to the time
periods set forth herein, any resales by broker-dealers that receive Exchange
Securities for their own account pursuant to the Exchange Offer) covered by
such Exchange Offer Registration Statement have been made, the Exchange Offer
Registration Statement need not remain continuously effective for the period
set forth in clause (B) above. Upon consummation of the Exchange Offer, the
Company shall deliver to the Trustee under the Indenture for cancellation all
Securities tendered by the holders thereof pursuant to the Exchange Offer and
not withdrawn prior to the Consummation Date. Each Restricted Person shall
notify the Company promptly after reselling all Resale Securities held by such
Restricted Person which are covered by any such Registration Statement.
Each holder of Registrable Securities to be exchanged in the Exchange
Offer (other than any Restricted Person) shall be required as a condition to
participating in the Exchange Offer to represent that (i) it is not an
Affiliate of the Company, (ii) any Exchange Securities to be received by it
shall be acquired in the ordinary course of its business and (iii) that at the
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<PAGE>
time of the consummation of the Exchange Offer it shall have no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Securities. Upon consummation of an Exchange
Offer in accordance with this Section 2 and compliance with the other
provisions of this Section 2, the Company shall, subject to Sections 2(b) and
2(c), have no further obligation to register Registrable Secu rities pursuant
to Section 3(a) of this Agreement; provided that the other provisions of this
Agreement shall continue to apply as set forth in such provisions.
(b) In the event that the Company reasonably deter mines in good
faith that (i) the Exchange Securities would not, upon receipt in the Exchange
Offer by any holder of Registrable Securities (other than (x) any Restricted
Person (including the Initial Purchaser as holder of Initial Purchaser
Securities), and (y) any holder who is not acquiring such Exchange Securities
in the ordinary course of business or who has an arrangement with any person
to participate in the distribution of such Exchange Securities) be tradeable
by each holder thereof without re striction under the Securities Act and the
Exchange Act and without restriction under applicable blue sky or state
securities laws, (ii) after conferring with counsel, the Commission is un
likely to permit the Exchange Offer Registration Statement to become effective
prior to the Effective Date (except in the circumstances set forth in Section
2(c)) or (iii) the Exchange Offer may not be made in compliance with
applicable laws, then the Company shall promptly deliver notice thereof (the
"Shelf No tice") to the holders of such Registrable Securities and the Trustee
and shall thereafter file an Initial Shelf Registration Statement pursuant to,
and otherwise comply with, the provisions of Section 3(a). Following the
delivery of a Shelf Notice in accordance with this Section 2(b) and compliance
with Section 3(a), the Company shall not have any further obligation under
this Section 2.
(c) In the event that (i) at the time of the Exchange Offer there are
outstanding any Initial Purchaser Securities, or (ii) the Company reasonably
determines in good faith that (x) the Exchange Securities would not, upon
consummation of any resale thereof by a Restricted Person to any Person other
than another Restricted Person, be tradeable by each holder thereof without
restric-
10
<PAGE>
tion under the Securities Act (other than applicable prospectus requirements)
and the Exchange Act and without re striction under applicable blue sky or
state securities laws or (y) the Commission is unlikely to permit the Exchange
Offer Registration Statement to become effective prior to the Effective Date
solely because such Registration Statement covers resales of the Exchange
Securities by Restricted Persons, then the Company shall promptly deliver a
Shelf Notice to the Restricted Persons who are holders of Registrable
Securities and the Trustee, and the Company shall thereafter file an Initial
Shelf Registration Statement with respect to any such Registrable Securities
pursuant to, and otherwise comply with, the provisions of Section 3(a);
provided that such Initial Shelf Registration Statement shall only cover
resales of Registrable Securities by Restricted Persons if a Shelf Notice is
not then otherwise required to be delivered pursuant to Section 2(b) and
provided further that such Initial Shelf Registration Statement covering
Registrable Securities held by Restricted Persons shall be kept effective for
at least a period of 120 days and is not required to remain effec tive with
respect to such Registrable Securities held by Restricted Persons thereafter.
Following the delivery of a Shelf Notice in accordance with this Section 2(c)
and compliance with Section 3(a), the Company shall not have any further
obligation under this Section 2 with respect to the filing of an offer to
exchange the Registrable Securities held by the Restricted Per sons
(including, without limitation, any obligation to provide that an Exchange
Offer Registration Statement filed pursuant to Section 2(a) cover resales of
Exchange Securities by Restricted Persons); provided that the provisions of
this Section 2 shall otherwise remain in full force and effect with respect to
Registrable Securities held by any person other than a Restricted Person.
Section 3. Shelf Registration; Registrable Securities. With respect
to the Registrable Securities, if a Shelf Notice is delivered in accordance
with Section 2(b) or (c) of this Agreement, then the Company shall comply with
the following provisions of this Section 3:
(a) Initial Shelf Registration. The Company shall prepare and cause
to be filed with the Commission a Registration Statement for an offering to be
made on a continuous basis other than pursuant to an Underwritten Offer
pursuant to Rule 415 covering all of the Registra-
11
<PAGE>
ble Securities (or, if a Shelf Notice is delivered solely pursuant to Section
2(c), all of the Regis trable Securities held by any Restricted Persons) (the
"Initial Shelf Registration Statement"); provided, however, that no holder
shall be entitled to have its Registrable Securities covered by such Initial
Shelf Registration Statement unless such holder agrees in writing, within 10
Business Days after actual receipt of a request therefrom, to be bound by all
the provisions of this Agreement applicable to such a holder. No holder shall
be entitled to the benefits of Section 4 of this Agreement unless and until
such holder shall have provided all information reason ably requested by the
Company (after conferring with counsel), and such holder shall not be entitled
to such benefits with re spect to any period during which such information was
not provided. Each holder to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such holder not materially misleading. The Initial Shelf
Registration State ment shall be an appropriate form permitting registration
of such Registrable Securities for resale by the holders thereof in the manner
or manners reasonably designated by them (but excluding any Underwritten
Offerings). The Company shall use its reasonable best efforts to (A) cause
the Initial Shelf Registration Statement to be declared effective under the
Securities Act on or prior to the Effective Date and (B) keep the Initial
Shelf Registration Statement continuously effective under the Securities Act
for a period of three years after the Closing Date (subject to extension
pursuant to the last paragraph of Section 5 and subject, with respect to
Registrable Securities held by Restricted Persons, to the limitations set
forth in Section 2(c)) (such three-year period, as it may be extended, being
the "Ef fective Period"), or such shorter period ending when (1) all
Registrable Securities covered by the Initial Shelf Registration Statement
have been sold or (2) a Subsequent Shelf Registration Statement covering all
of such Registrable Securities remaining unsold has been declared effective
under the Securities Act or (3) all Registrable Securities may be sold
pursuant to subsection (k) of Rule 144.
Notwithstanding any other provision hereof, the Company may postpone
or suspend the filing or the effectiveness of a Registration Statement (or any
amendments
12
<PAGE>
or supplements thereto), if (1) such action is required by applicable law, or
(2) such action is taken by the Company in good faith and for valid business
reasons (not including avoidance of the Company's obligations hereunder),
including the acquisition or divestiture of assets, other pending corporate
developments, public filings with the Commission or other similar events, so
long as the Company promptly thereafter complies with the requirements of
Section 5(b) hereof, if applicable. Notwithstanding the occurrence of any
event referred to in the immediate preceding sentence (a "Suspension"), such
event shall not suspend, postpone or in any other manner affect the running of
the time period after which an Illiquidity Event shall be deemed to occur and,
if the filing or effectiveness of the Registration Statement is postponed or
suspended as a result of a Suspension, an Illiquidity Event shall nonetheless
exist if all other requirements set forth for the occurrence of an Illiquidity
Event shall be satisfied, and the provisions of Section 4 requiring the
accrual payment of additional interest, as set forth in such Section, on the
Registrable Securities, shall be applicable.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
Statement or any Subsequent Shelf Registration Statement ceases to be
effective for any reason at any time during the Effective Period after the
Effective Date, the Company may attempt to obtain the withdrawal of any order
suspending the effectiveness thereof, and may amend such Initial Shelf
Registration Statement or Subsequent Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
applicable to the Securities pursuant to Rule 415 covering all of such
Registrable Securities remaining unsold (a "Subsequent Shelf Registration
Statement"). If a Subsequent Shelf Registration Statement is declared
effective, the Company shall use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective for a period after the date of
such effectiveness equal in length to the length of the Effective Period plus
the aggregate number of days from the date of the order suspending the
effectiveness of the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement to the date of the effectiveness of the
Subsequent Shelf Registration Statement. As used herein, the
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<PAGE>
term "Shelf Registration Statement" means the Initial Shelf Registration
Statement and any Subsequent Shelf Registration Statement.
Section 4. Additional Interest for Illiquidity.
(a) The Company acknowledges and agrees that the Initial Purchaser
(and any subsequent holders of the Securities) in reliance on the Company's
covenant to use its reasonable best efforts to (i) cause to become effective
on or prior to the Effective Date (A) the Exchange Offer Registration
Statement or (B) an Initial Shelf Registration Statement, and (ii) maintain
the respective effectiveness of such Registration Statements as described
herein. The Company further acknowledges and agrees that the failure of the
Company to fulfill such covenants will have an adverse effect on the holders
of the Securities. There fore, the Company agrees that from and after the date
on which any Illiquidity Event occurs, additional interest (in addition to the
interest otherwise payable with respect to the Registrable Securities) shall
accrue with respect to the Securities until but not including the date on
which such Illiquidity Event shall cease to exist (and provided no other
Illiquidity Event with respect to any Securities shall then be continuing), at
the rate of one half of one percent (0.50%) per annum, which additional
interest shall be payable by the Company to the holders of all Securities at
the times, in the manner and subject to the same terms and conditions set
forth in the Indenture, as nearly as may be, as though the interest rates
provided in such Securities had been increased by one half of one percent
(0.50%) per annum. Notwithstanding that the Illiquidity Event may cease to
exist, in the event that an Exchange Offer Registration Statement or an
Initial Shelf Registration Statement has not become effective within two years
after the Closing Date, the interest rates on the Securities otherwise payable
as provided in the Indenture shall permanently remain increased by such one
half of one percent (0.50%) per annum. Subject to the provisions of this
Section 4, the Company agrees that it shall be liable to the holders of all
Securities for the payment of any and all addi tional interest on the
Securities that shall accrue pursuant to this Section 4.
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Any such additional interest accrued on any such Securities but
unpaid on the date on which such interest ceases to accrue (the "Cure Date")
shall be due and payable on the first interest payment date following the next
record date following such Cure Date (or the record date occurring on such
Cure Date, if such Cure Date is a record date) to the holders of record of
such Securities on such record date.
(b) The Company shall promptly notify the holders of the Securities
and the Trustee of the occurrence of any Illiquidity Event of which it has
knowledge.
Notwithstanding the foregoing, the Company shall not be required to
pay the additional interest described in clause (a) of this Section 4 to a
holder with respect to the Registrable Securities held by such holder if the
applicable Illiquidity Event arises by reason of the failure of such holder to
provide such information (i) the Company may reasonably request, with
reasonable prior written notice, for use in the Shelf Registration Statement
or any Prospectus included therein to the extent the Company reasonably
determines that such information is required to be included therein by
applicable law, (ii) the NASD or the Commission may request in connection with
such Shelf Registration Statement, or (iii) is required to comply with the
agreements of such holder contained in clause (a) of Section 3 to the extent
compliance thereof is necessary for the Shelf Registration Statement to be
declared effective.
Section 5. Registration Procedures. In connection with the
registration of any Registrable Securities or Exchange Securities pursuant to
Sections 2 and 3 hereof, the Company shall use its reasonable best efforts to
effect such registration to permit the sale of such Registrable Securities or
Exchange Securities in accordance with any permitted intended method or
methods of disposition thereof, and pursuant thereto the Company shall:
(a) prepare and cause to be filed with the Commission a Registration
Statement or Registration Statements as prescribed by Sections 2 and 3 of this
Agreement, and use its best efforts to cause each such Registration Statement
to become effective and remain effective for the applicable period as provided
herein;
15
<PAGE>
provided, however, that (i) during the period in which the initial
Registration Statement is open for the Restricted Persons, the Company shall
afford any Restricted Person which is a holder of Registrable Securities or
Exchange Securities and the Special Counsel, upon such holder's written
request to the Company, an opportunity to review copies of all such documents
pro posed to be filed, and (ii) if such filing is pursuant to Section 3,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto (including documents that would be incorporated therein by
reference after the initial filing of the Registration Statement), the Company
shall afford the Special Counsel for all holders of the Registrable Securities
covered by such Registration Statement an opportunity to review copies of all
such documents proposed to be filed;
(b) prepare and cause to be filed with the Commission such amendments
and post-effective amendments to each Shelf Registration Statement as may be
necessary to keep such Registration Statement continuously effective for the
applicable period as provided herein; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
in accordance with the intended methods of disposition by the sellers of
Registrable Securities covered thereby set forth therein;
(c) if a Shelf Registration Statement is filed pursuant to Section 3
hereof, notify the selling holders of Registrable Securities promptly after
the Company becomes aware thereof, and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to the Registration
Statement or the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
16
<PAGE>
of a Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus or Prospectus or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable
Securities for offer or sale in any jurisdiction, or the initiation of any
proceeding for such purpose, (v) of the existence of any fact known to the
Company which results in such Registration Statement or related Prospectus or
any document incorporated therein by reference containing any untrue statement
of a material fact or omitting to state any 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 (which notice may be
accompanied by an instruction that such notice constitutes material non-public
information and to suspend the use of the prospectus until the requisite
changes have been made, and which instruction shall require that such holders
shall not communicate such material non-public information to any third party
and shall not sell or purchase, or offer to sell or pur chase, any securities
of the Company after receipt of such notice) and (vi) if the Company
reasonably determines that the filing of a post-effective amendment to such
Registration Statement would be appropriate;
(d) if a Shelf Registration Statement is filed pursuant to Section 3,
use its reasonable efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section
3, furnish to each selling holder of Registrable Securities who so requests
(at such holder's address set forth in the Securities Register) without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and sched-
17
<PAGE>
ules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(f) if a Shelf Registration Statement is filed pursuant to Section 3,
deliver to each selling holder of Registrable Securities without charge, as
many copies of the Pro spectus (including each preliminary prospectus) and
each amendment or supplement thereto as such persons may reasonably request;
and, subject to the last paragraph of this Section 5, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Secu rities covered by such Prospectus and any amendment or
supplement thereto;
(g) prior to any public offering of Registrable Securities, register
or qualify, or cooperate with the selling holders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the selling holders reasonably request in writing (provided that, if Registrable
Securities are offered other than through an Underwritten Offering, the Company
agrees to cause its counsel to perform blue sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(g)); keep each such registration or qualification (or exemption
therefrom) effective during the period such Regis tration Statement is
required to be kept effective; and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided, however, that the Company will not be required to qualify as a
foreign corporation, or to do business, to file a general consent or take any
action which would subject it to service of process in any jurisdiction or
take any action which would subject itself to taxation in any such
jurisdiction;
(g) if a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the Trustee, and the selling holders of Registrable Securities
to facili-
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tate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company, and enable such Registrable Securities to be in such
authorized denominations and registered in such names as the holders may
reasonably request at least three business days prior to any such sale;
(i) if a Shelf Registration Statement is filed pursuant to Section 3,
upon the occurrence of any event contemplated by Section 5(c), prepare a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company so notifies the
holders to suspend the use of the Prospectus after the occurrence of such an
event, the holders shall suspend use of the Prospectus, and not communicate
such material non-public information to any third party, and not sell or
purchase, or offer to sell or purchase, any securities of the Company, until
the Company has amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to continue to be rated by
the rating agencies that initially rated the Securities during the period that
the Registration Statement is required hereunder to remain effective (it being
acknowledged, however, that the foregoing shall not be deemed to require the
Company to maintain the rating of such Registrable Securities at the rating
given the Securities);
(k) prior to the effective date of the first Registration Statement
relating to the Registrable Securities or the Exchange Securities, as the case
may be, (i) provide the Trustee with printed certificates for such securities
in definitive form or in a global form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for such Registrable
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Securities or Exchange Securities represented by such certificates;
(l) if a Shelf Registration Statement is filed pursu ant to Section
3, enter into such reasonably required agreements and take all other
appropriate actions in order to expedite or facilitate the registration or the
disposition of such Regis trable Securities;
(m) in the event of any Underwritten Offering (which shall only be
undertaken at the option of the Company), if a Shelf Registration Statement is
filed pursuant to Section 3, make available prior to the filing thereof for
inspection by a representative of the holders of a majority in aggregate
principal amount of the Registrable Securities being sold, and the Special
Counsel, on the one hand, or underwriter on the other hand (collectively, the
"Inspectors"), during reasonable business hours, all financial and other
records, pertinent corporate docu ments and properties of the Company and its
subsidiaries (collec tively, the "Records"), and cause the officers, directors
and em ployees of the Company and its subsidiaries to supply all relevant
information as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities; provided, however, that, as a
condition to supplying such information, the Company shall receive an
agreement in writing from the Special Counsel agreeing that any information
that is designated in writing by the Company, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by such
Inspector (other than as to holders of Registrable Securities) and by any
holders of Registrable Securities receiving such information, unless (i)
disclosure of such information is required pursuant to applicable law or by
court or administrative order, (ii) disclosure of such information is, in the
reasonable opinion of counsel to the Company, necessary to avoid or correct a
misstatement or omission of a material fact in the Registration Statement,
Prospectus, or any supplement or post-effective amendment thereto or
disclosure is otherwise re quired by law, (iii) such information becomes
generally available to the public other than as a result of a disclosure by
any Inspector or any such holder of Registrable Securities in violation of
this Section 5(m) or (iv) such information is approved for release by the
Company, in writing;
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<PAGE>
(n) use its best efforts to cause the Indenture or the trust
indenture provided for in Section 2, as the case may be, to be qualified under
the TIA not later than the effective date of such Registration Statement; and,
in connection therewith, cooperate with the Trustee under such Indenture and
the holders of the Registrable Securities to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use its best efforts to
cause such Trustee to execute all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
Commission to enable the Indenture to be so qualified in a timely manner;
(o) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission.
For purposes of the covenants set forth in this Section 5, references
to a Shelf Registration Statement, including a Shelf Registration Statement
filed pursuant to Section 3, shall be deemed to include any Registration
Statement, filed pursuant to Section 2, which covers, for the period set forth
therein, resales of Exchange Securities held by Restricted Persons as provided
in Section 2, and, in connection with such resales such Restricted Persons
shall be entitled to exercise all rights, receive all notices and copies of
documents, and otherwise re ceive all benefits afforded to sellers or holders
of Registrable Securities under this Section 5 in connection with a Shelf
Registration Statement. Without limiting the generality of the foregoing, the
Company agrees to fulfill its obligations set forth in Sections 5(a), (b),
(c), (d), (e), (f), (h), (i), (l), and (m) with respect to any such
Registration Statement filed pursuant to Section 2 insofar as it covers such
resales.
The Company may require each seller of Registrable Securities as to
which any registration is being effected, as a condition thereto, to furnish
to the Company such information regarding the holder and the distribution of
such Registrable Securities as the Company may, from time to time, request in
writing, including without limitation stating that (i) it is not an Affiliate
of the Company, (ii) the amount of Registrable Securities held by such holder
prior to the Exchange Offer,
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<PAGE>
(iii) the amount of Registrable Securities owned by such holder to be
exchanged in the Exchange Offer and representing that such holder is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any Person to participate in, a distribution of the Exchange Securities
to be issued, and (iv) it is acquiring the Exchange Securities in its ordinary
course of business and to covenant and agree to promptly notify the Company if
any such information so provided by such seller ceases to be true and correct
and will promptly thereafter furnish the Company with corrected information.
The Company may exclude from such registration the Registrable Securities of
any Person who fails to furnish such information within a reasonable time
after receiving such request.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(v) or 5(c)(vi) hereof, such holder shall forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until such holder is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and
has received copies of any amendments or supplements thereto and, if so
directed by the Company, such holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then
in such holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice, or certify in
writing as to the destruction thereof. In the event the Company shall give any
such notice, the length of the Effective Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(i)
or (y) the Advice.
Section 6. Delivery of Prospectus; Notification Upon Resale. The
Initial Purchaser acknowledges that it is the position of the staff of the
Commission that any broker-dealer that receives Exchange Securities for its
own account in exchange for Registrable Securi-
22
<PAGE>
ties pursuant to the Exchange Offer must deliver a prospectus in connection
with any resale of such Resale Securities. By so acknowledging, such Initial
Purchaser shall not be deemed to admit that, by delivering a prospectus, it is
an underwriter within the meaning of the Securities Act.
The Initial Purchaser shall notify the Company promptly upon the
completion of the resale of the Resale Securities received by such Initial
Purchaser pursuant to the Exchange Offer.
Section 7. Registration Expenses.
The Company shall bear all expenses incurred in connection with the
performance of its obligations under Sections 2, 3 and 4; provided, however,
that the Company shall bear or reimburse the holders for the reasonable fees
and disbursements of only one counsel, the Special Counsel, in accordance with
the terms of the Purchase Agreement; provided, further, however, that if the
Company permits an Underwritten Offering, the Company shall not be responsible
for any fees and expenses of any under writer including any underwriting
discounts and commissions or any legal fees and expenses of counsel to the
underwriters (except for the reasonable fees and disbursements of counsel in
connection with state securities or Blue Sky qualification of any of the
Registrable Securities or the Exchange Securities).
Section 8. Indemnification and Contribution.
(a) The Company agrees to (A) indemnify and hold harm less each
holder of Registrable Securities (including the Initial Purchaser which holds
Registrable Securities, including Resale Securities, for its own account)
(each, a "Resale Initial Purchaser") and each person, if any, who controls any
such person within the meaning of either the Securities Act or the Exchange
Act and each director, officer, employee or agent of each such Person (each a
"Holder Indemnified Party") against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them are subject under
the Securities Act, the Exchange Act, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof,) arise out of
or are
23
<PAGE>
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement covering Registrable Securities
held by such person or any Prospectus relating to any such Registration
Statement, or any amendment thereof or supplement thereto and all documents
incorporated by reference therein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading, and (B) reimburse each such Holder Indemnified
Party for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liabil ity or action as such expenses are incurred; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement or Prospectus, or in any amendment
thereof or sup plement thereto, in reliance upon and in conformity with
written information relating to such holder provided by such holder to the
Company by any holder specifically for use therein (collectively, the "Holder
Information"); provided, further, however, that the indemnity obligations
arising out of this Section 8 with respect to any untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
Prospectus shall not inure to the benefit of any holder or any controlling
Person of such holder if such holder failed to send or deliver to the Person
asserting any such losses a copy of the final Prospectus with or prior to the
delivery of the written confirmation of the sale of the Registrable Securities
or the Exchange Securities, as the case may be, and such final Prospectus
would have cured the untrue statement or omission giving rise to such losses.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) As a condition to the inclusion of a holder's Registrable
Securities in a Registration Statement, such holder shall agree to (i)
indemnify and hold harmless the Company and each person who controls the
Company within the meaning of either the Securities Act or the Exchange Act,
and each director, officer, employee or agent of each such person, against any
and all losses,
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<PAGE>
claims, damages or liabilities, joint or several, to which they or any of them
are subject under the Securities Act, the Exchange Act, or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in a Registration Statement covering
Registrable Securities held by such holder or any Prospectus relating to any
such Registration Statement or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact necessary in order to make the statements there in, in
light of the circumstances in which they were made, not misleading, and (ii)
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
in each and every case under clause (i) and (ii) above to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement or
Prospectus in any amendment thereof or supplement thereto, in reliance upon
and in conformity with the Holder Information provided by such holder. This
indemnity agreement will be in addition to any liability which any such
holder may otherwise have. In no event shall the liability of any selling
holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by
such holder upon the sale (or, in the case of Resale Securities, the resale)
of the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof (enclosing a copy of all papers served); but the omission to so notify
the indemnifying party (i) shall not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of such
action and such omission results in the forfeiture by the indemnifying party
or material impairment of substantial rights and defenses and (ii) shall not,
in any event, relieve the
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<PAGE>
indemnifying party from any obligations to any indemnified party other than
the indemnifi cation obligations provided in paragraph (a) or (b) above. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party. After notice from the indemnifying party to such indemnified party of
its election to so assume the defense of such claim or action, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than costs of
investigation; provided that if (i) the defendants in any such action include
both the indemnified party and the indemnifying party, the indemnified party
shall have received the written opinion of counsel reasonably acceptable to
the indemnifying party that representation of both parties by the same counsel
would be inappropriate due to actual or likely conflicts of interest between
them, or (ii) the indemnifying party shall not have employed counsel for the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action, then the indemnified party or
parties shall have the right to select one firm of separate counsel to assert
any separate legal defenses and to otherwise defend such action on behalf of
such indemnified party or parties. No indemnifying party shall be liable for
any settlement of any action or claim for monetary damages which an
indemnified party may effect without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) If the indemnification provided for in Section 8(a) or (b) hereof
is for any reason, other than as specified in such provisions, unavailable to
or insufficient to hold harmless an indemnified party, then each indemnifying
party shall contribute to the aggregate losses, claims, damages or liabilities
(or actions in respect thereof) referred to in Section 8(a) or (b) hereof in
such proportion as is appropriate to reflect the relative fault and benefits
to the Company on the one hand and such holders on the other hand in
connection
26
<PAGE>
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof) as well as any other
relevant equitable considerations. The relative fault of the Company and such
holders shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent any untrue statement or omission. The obligations of the holders in
this Section 8(d) are several in proportion to their respective obligations
hereunder and not joint. Notwithstanding the provisions of this Section 8(d),
in no event shall any holder of Registrable Securities be required to
contribute any amount which is in excess of (i) the aggregate principal amount
of Securities sold or exchanged by such holder less (ii) the amount of any
damages that such person has otherwise been required to pay by reason of such
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each Holder
Indemnified Party shall have the same rights to contribution as a holder, and
each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act and each officer, director, employee and
agent of such person, shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
Section 8(d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 8(d), notify such party or parties from whom
contribution may be sought; but the omission to so notify such party or
parties (x) shall not relieve the party or parties from whom contribution may
be sought from any liability under this paragraph (d) unless and to the extent
it did not otherwise learn of such action and such omission results in the
forfeiture by the party or parties from whom contribution may be sought or
material impairment of substantial rights and defenses and (y) shall not, in
any event, relieve such party or parties from any obligations other than under
this Section 8(d).
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<PAGE>
(e) The provisions of this Section 8 will remain in full force and
effect, regardless of any investigation made by or on behalf of any holder of
Registrable Securities, the Initial Purchaser, the Company or any of the
officers, directors or controlling persons referred to in this Section 8 and
will survive the sale (or, in the case of Resale Securities, the resale) by a
holder of Registrable Securities of such Registrable Securities.
Section 9. Underwritten Registrations (If Any). No holder may
participate in any Underwritten Registration, which Underwritten Registration
shall only be undertaken at the option of the Compa ny, unless such holder (a)
agrees to sell such holder's Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to
approve such ar rangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
Section 10. Termination. In the event that no Securities are sold to
the Initial Purchaser pursuant to the Purchase Agreement, this Agreement shall
automatically terminate, without liability on the part of any party. Upon the
fulfillment of all obligations on the part of the Company to register the
Securities as set forth herein (including maintaining the effectiveness of any
applicable Registration Statements), this Agreement shall terminate; provided,
that the provisions of Sections 7 and 8 hereof shall survive any termination
and remain in full force and effect.
Section 11. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, and shall not, on or after the date hereof, enter into,
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities herein or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and
28
<PAGE>
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of holders of at least a
majority of the then outstanding aggregate principal amount of the Registrable
Securities (or, after the consummation of any Exchange Offer in accordance
with Section 2, of Exchange Securities); provided that, with respect to any
matter that directly or indirectly affects the rights of any Restricted Person
hereunder occurring within the period in which the Initial Registration
Statement is open for the Restricted Persons, the Company shall obtain the
written consent of each such Restricted Person against which such amendment,
modification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except for the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold or exchanged pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold or
exchanged by such holders pursuant to such Registration Statement; provided,
however, that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provision of the immediately
preceding sentence. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of Resale Initial Purchasers and that does not
directly or indirectly affect the rights of holders of Registrable Securities
or Exchange Securities may be given by each of the Resale Initial Purchasers
affected thereby.
(c) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing and delivered by hand
delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a holder of Registrable Securities, at the most current
address given by such holder to the Company in accordance with the
provisions of this Section 11(c), which address initially is, with
29
<PAGE>
respect to the Initial Purchaser, at the address set forth in the Purchase
Agreement and thereafter at the address for such holders of Registrable
Securities set forth in the Security Register applicable to such
Registrable Securities; and
(ii) if to the Company, initially at the address set forth in the
Purchase Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 11(c).
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when received,
if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment or
any consent by the Company thereto, subsequent holders of Registrable
Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. Each of the parties hereto hereby submits to
the non-exclusive jurisdiction of the Federal
30
<PAGE>
and State Courts of the Borough of Manhattan in the City of New York in any
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
(h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired or
affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein. This Agreement, together with the Purchase Agreement, supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
(j) Securities Held by the Company, etc. Whenever the consent or
approval of holders of a specified percentage of principal amount of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or any of its Affiliates (other than subsequent holders of
Registrable Securities if such subsequent holders are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall not
be counted in determining whether such consent or approval was given by the
holders of such required percentage.
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Please confirm that the foregoing correctly sets forth this agreement
between the Company and you.
Very truly yours,
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
Accepted in New York, New York
September 20, 1996
CS FIRST BOSTON CORPORATION
By: /s/ J.D. Carrabino, Jr.
-------------------------------
Name: J.D. Carrabino, Jr.
Title: Director
32
[Letterhead of Willkie Farr & Gallagher]
November 5, 1996
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
CalEnergy Company, Inc., a Delaware corporation (the "Company"), has requested
our opinion in connection with various legal matters relating to the filing of a
Registration Statement on Form S-4 (the "Registration Statement"), under the
Securities Act of 1933, as amended, covering the offer to exchange its 9 1/2%
Senior Notes due 2006 (the "Exchange Notes") for an equal principal amount of
its outstanding 9 1/2% Senior Notes due 2006 (the "Old Notes"), of which
$225,000,000 aggregate principal amount is outstanding. The Old Notes were, and
the Exchange Notes are to be, issued under the Indenture, dated as of September
20, 1996, (the "Indenture") by and between the Company and IBJ Schroder Bank &
Trust Company, as trustee. The exchange will be made pursuant to an exchange
offer (the "Exchange Offer") contemplated by the Registration Statement.
We have examined copies of such records of the Company and such other
certificates and documents as we have deemed relevant and necessary for the
opinions hereinafter set forth. In such examination, we have assumed the
genuineness of all signatures, and the authenticity of all documents submitted
to us as originals and the conformity to authentic originals of all documents
submitted to us as certified or reproduced copies. We have also assumed the
legal capacity of all persons executing such documents and the truth and
correctness of any representations or warranties therein contained. As to
various questions of fact material to such opinions, we have relied upon
certificates of officers of the Company and of public officials.
Based upon the foregoing, we are of the opinion that:
1. The Company is duly formed and validly existing under
the laws of the State of Delaware.
2. The execution and delivery of the Indenture has been duly
authorized by the Company and the Indenture constitutes a
valid and binding obligation of the Company, enforceable
against the Company in accordance with the terms thereof,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance and other
similar laws affecting the enforcement of creditors' rights
generally and except as enforcement thereof is subject
to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
3. The Exchange Notes will, upon the issuance and authentication
of the Exchange Notes and exchange thereof for the Old Notes in
the manner referred to in the Registration Statement and the
Indenture, constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with
their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance
and other similar laws affecting the enforcement of creditors'
rights generally and except as enforcement therof is subject to
general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law).
This opinion is limited to the laws of the State of New York, the General
Corporation Law of the State of Delaware and the federal laws of the United
States of the type typically applicable to transactions contemplated by the
Exchange Offer, and we do not express any opinion with respect to the laws of
any other country, state or jurisdiction.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
We consent to being named in the Registration Statement and related Prospectus
as counsel who are passing upon the legality of the Exchange Notes for the
Company and to the reference to our name under the caption "Legal Matters" in
such Prospectus. We also consent to your filing copies of this opinion as an
exhibit to the Registration Statement or any amendment thereto.
Very truly yours,
/s/ Willkie Farr & Gallagher
- -----------------------------
CALENERGY COMPANY, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PRE-TAX INCOME FROM
CONTINUING OPERATIONS ..... $ 49,270 $ 38,297 $ 97,051 $ 55,836 $ 61,258 $ 50,732 $ 34,866
LOSS ON EQUITY INVESTMENT IN
UNCONSOLIDATED SUBSIDIARY 2,774 -- 362 -- -- -- --
CAPITALIZED INTEREST, NET
OF AMORTIZATION ........... (22,701) (9,479) (31,160) (9,196) (6,174) (5,202) (4,979)
-------- -------- -------- -------- -------- ------- --------
29,343 28,818 66,253 46,640 55,084 45,530 29,887
-------- -------- -------- -------- -------- ------- --------
FIXED CHARGES:
INTEREST EXPENSE AND
AMORTIZATION OF DEFERRED
FINANCE CHARGES ON ALL
INDEBTEDNESS ............. 72,947 65,295 134,637 62,837 30,205 20,459 29,814
INTEREST PORTION OF LEASE
RENTALS .................. 30 30 60 109 247 253 217
-------- -------- -------- -------- -------- ------- --------
TOTAL FIXED CHARGES ...... 72,977 63,325 134,697 62,946 30,452 20,712 30,031
-------- -------- -------- -------- -------- ------- --------
EARNINGS BEFORE INCOME TAXES,
AND FIXED CHARGES ........ $102,320 $ 94,143 $200,950 $109,586 $ 85,536 $ 66,242 $ 59,918
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED
CHARGES .................. 1.40 1.441 1.492 1.741 2.809 3.198 1.995
======== ======== ======== ======== ======== ======== ========
</TABLE>
[Letterhead of Deloitte & Touche LLP]
CalEnergy Company, Inc.
Omaha, Nebraska
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of CalEnergy Company, Inc. for the periods ended March 31, 1996 and
1995 and June 30, 1996 and 1995 as indicated in our reports dated April 18,
1996 and July 17, 1996, respectively; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June
30, 1996, are incorporated by reference in this Registration Statement on Form
S-4.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 4, 1996
[Letterhead of Deloitte & Touche LLP]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
CalEnergy Company, Inc. on Form S-4 of our reports dated January 26, 1996,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
CalEnergy Company, Inc., for the year needed December 31, 1995 and to the
reference to us under the heading "Experts" in the Prospectus, which is a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 4, 1996
<PAGE>
[Letterhead of Deloitte & Touche LLP]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
CalEnergy Company, Inc. on Form S-4 of our report dated March 29, 1996
appearing in the report on Form 8-K/A dated August 27, 1996, incorporated by
reference herein, and to the reference to us under the heading "Experts" in the
Prospectus, which is a part of such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Houston, Texas
November 4, 1996
[Arthur Andersen Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We consent to incorporation by reference in the Registration Statement of
CalEnergy Company, Inc. on Form S-4 of our reports dated June 7, 1996 on the
financial statements of BN Geothermal, Inc., Conejo Energy Company, San Felipe
Energy Company and Niguel Energy Company incorporated by reference in the
Registration Statement and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Orange County, California
November 4, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference to this Registration Statement of
CalEnergy Company, Inc. (the "Company") on Form S-4 of our report dated March
10, 1995 on our audits of the consolidated financial statements of Magma Power
Company and subsidiaries as of December 31, 1994 and for each of the two years
in the period ended December 31, 1994, which report is included in the
Company's Form 10-K for the year ended December 31, 1995. We also consent to
the reference to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
San Diego, California
November 4, 1996
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)___
--------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Thomas McCutcheon, Assistant Vice President
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------------------
9-1/2% SENIOR NOTES DUE 2006
(Title of indenture securities)
- ------------------------------------------------------------------------------
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, or is trustee
for more than one outstanding series of securities under the
indenture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
None
<PAGE>
Item 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No.
22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the Securities
and Exchange Commission, to which there have been no amendments or
changes.
<PAGE>
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base responsive answers to Item 2, the answer to said
Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment
to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee, the obligor is not
in default under any indenture under which the applicant is trustee.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
IBJ Schroder Bank & Trust Company, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 1st day
of November, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Thomas McCutcheon
------------------------
Thomas McCutcheon
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by CalEnergy Company, Inc. of
its 9-1/2% Senior Notes due 2006, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Thomas McCutcheon
------------------------
Thomas McCutcheon
Assistant Vice President
Dated: November 1, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
ASSETS
------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin .........................$ 39,834
Interest-bearing balances.....................................................$ 236,748
Securities: Held to Maturity...................................................$ 173,034
Available-for-sale...........................................$ 35,882
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold............................................................$ 36,968
Securities purchased under agreements to resell...............................$ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income.........................$1,668,191
LESS: Allowance for loan and lease losses........................$ 54,288
LESS: Allocated transfer risk reserve............................$ -0-
Loans and leases, net of unearned income, allowance, and reserve..............$1,613,903
Assets held in trading accounts...................................................$ 500
Premises and fixed assets.........................................................$ 7,413
Other real estate owned...........................................................$ 397
Investments in unconsolidated subsidiaries and associated companies...............$ -0-
Customers' liability to this bank on acceptances outstanding......................$ 223
Intangible assets.................................................................$ -0-
Other assets......................................................................$ 55,007
TOTAL ASSETS......................................................................$2,199,909
</TABLE>
<PAGE>
LIABILITIES
-----------
<TABLE>
<CAPTION>
Deposits:
<S> <C>
In domestic offices.....................................................$ 652,676
Noninterest-bearing .....................................$ 278,082
Interest-bearing ........................................$ 374,594
In foreign offices, Edge and Agreement subsidiaries, and IBFs...........$ 893,475
Noninterest-bearing .....................................$ 15,577
Interest-bearing ........................................$ 877,898
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased.................................................$ 212,000
Securities sold under agreements to repurchase..........................$ -0-
Demand notes issued to the U.S. Treasury....................................$ 48,606
Trading Liabilities.........................................................$ 293
Other borrowed money:
a) With original maturity of one year or less...........................$ 102,049
b) With original maturity of more than one year.........................$ 3,000
Mortgage indebtedness and obligations under capitalized leases..............$ -0-
Bank's liability on acceptances executed and outstanding....................$ 223
Subordinated notes and debentures...........................................$ -0-
Other liabilities...........................................................$ 74,608
TOTAL LIABILITIES...........................................................$1,986,930
Limited life preferred stock and related surplus............................$ -0-
EQUITY CAPITAL
Perpetual preferred stock...................................................$ -0-
Common Stock................................................................$ 29,649
Surplus.....................................................................$ 217,008
Undivided profits and capital reserves......................................$ (34,414)
Plus: Net unrealized gains (losses) on marketable equity securities......$ 736
Cumulative foreign currency translation adjustments.........................$ -0-
TOTAL EQUITY CAPITAL........................................................$ 212,979
TOTAL LIABILITIES AND EQUITY CAPITAL........................................$2,199,909
</TABLE>
LETTER OF TRANSMITTAL
CALENERGY COMPANY, INC.
Offer to Exchange its registered 9 1/2% Senior Notes due 2006
for any and all of its outstanding 9 1/2% Senior Notes due 2006
that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON _________, 1996.
- -------------------------------------------------------------------------------
The Exchange Agent
for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Confirm By Telephone:
(212) 858-2103
Attention: Reorganization Department
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company By Registered or Certified Mail:
One State Street IBJ Schroder Bank & Trust Company
Securities Processing Window Attention: Reorganization Department
Floor SC-1 P.O. Box 84
New York, New York 10004 Bowling Green Station
Attention: Reorganization Department New York, New York 10274-0084
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated
_________ __, 1996 (as the same may be amended or supplemented from time to
time, the "Prospectus"), of CalEnergy Company, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal, which may be amended from time
to time (this "Letter"), which together constitute the Company's offer (the
"Exchange Offer") to exchange its 9 1/2% Senior Notes due 2006 ("Exchange
Notes") for an equal principal amount of its outstanding 9 1/2% Senior Notes
due 2006 that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended (the "Securities Act") ("Old
Notes"). The Exchange Notes will be obligations of the Company evidencing the
same indebtedness as the Old Notes and will be entitled to the benefits of the
same indenture which governs both the Old Notes and the Exchange Notes. The
form and terms (including principal amount, interest rate, maturity and
ranking) of the Exchange Notes are the same as the form and terms of the Old
Notes, except that (i) the Exchange Notes have been registered under the
Securities Act, and therefore will not be subject to certain restrictions on
transfer applicable to the Old Notes and will not be entitled to registration
rights, and (ii) the Exchange Notes will not provide for any increase in the
interest rate thereon. Capitalized terms used herein but not defined herein
have the meanings ascribed to them in the Prospectus.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of Old Notes, if
available, is to be made by book-entry transfer to the account maintained by
the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility" or "DTC") pursuant to the procedures set forth in "The Exchange
Offer" section of the Prospectus. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility ("Book-Entry Confirmation")
and all other documents required by this Letter to the Exchange Agent on or
prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for
Tendering" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the
Exchange Agent.
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or to Investor Relations, CalEnergy Company, Inc., (402)
341-4500, 302 South 36th Street, Suite 400, Omaha, Nebraska 68131.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
INSTRUCTIONS TO THIS LETTER, CAREFULLY BEFORE CHECKING ANY BOX BELOW.
List in Box 1 below the Old Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Old Notes on a separate signed schedule and affix that
schedule to this Letter.
2
<PAGE>
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE NUMBER(S)* PRINCIPAL AMOUNT OF OLD PRINCIPAL
(PLEASE FILL IN IF BLANK) NOTES REPRESENTED BY AMOUNT OF OLD
CERTIFICATE(S) NOTES
TENDERED**
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Totals:
- -----------------------------------------------------------------------------------------------------------------------
*Need not be completed if Old Notes are being tendered by book-entry transfer.
- -----------------------------------------------------------------------------------------------------------------------
**Unless otherwise indicated, the entire principal amount of Old Notes represented by a certificate delivered to the
Exchange Agent will be deemed to have been tendered. See Instruction 2. Old Notes tendered hereby must be in a principal
amount of $1,000 and integral multiples thereof, provided that if any Old Notes are tendered for exchange in part, the
untendered principal amount thereof must be $500,000 or any integral multiple of $1,000 in excess thereof. See
Instruction 1.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Boxes below to be checked by Eligible Institutions only)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------
DTC Account Number
-----------------------------------------------------
Transaction Code Number
------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------
Window Ticket Number (if any)
------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------
Name of Institution which Guaranteed Delivery
--------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer
------------
Name of Tendering Institution
------------------------------------------
DTC Account Number
-----------------------------------------------------
Transaction Code Number
------------------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
3
<PAGE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES
OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
--------------------------------
Address
-----------------------------
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to and effective upon the acceptance for
exchange of all or any portion of the Old Notes tendered herewith in accordance
with the terms and conditions of the Exchange Offer (including, if the Exchange
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned exchanges, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Notes
tendered.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as his or her agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as the agent of the Company) with respect to
the tendered Old Notes, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest) subject only
to the right of withdrawal described in the Prospectus, to: (a) deliver
certificates for such Old Notes with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of the Old Notes
tendered under the Exchange Offer; (b) present certificates for such Old Notes
for transfer, and to transfer the Old Notes on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of the Old Notes, all in accordance with the terms of the Exchange
Offer.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the assignment and transfer of the Old Notes
tendered. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
The undersigned agrees that acceptance of any tendered Old Notes by
the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon the
issuance of the Exchange Notes, the Company will have no further obligations or
liabilities thereunder. By tendering Old Notes, the undersigned hereby
represents and agrees that (a) the undersigned is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act; (b) any
Exchange Notes to be received by the undersigned are being acquired in the
ordinary course of its business; and (c) the undersigned is not participating,
and has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of Exchange Notes to be
received in the Exchange Offer. By tendering Old Notes pursuant to the Exchange
Offer, a holder of Old Notes which is a broker-dealer represents and agrees,
consistent with certain interpretive letters issued by the staff of the
Division of Corporation Finance of the Securities and Exchange Commission, that
(a) such Old Notes held by the broker-dealer are held only as a nominee, or (b)
such Old Notes were acquired by such broker-dealer for its own account as a
result of market-making activities or other trading activities and it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; provided, however, that by
so acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned understands that tenders of Old Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for
Tendering" section of the Prospectus and in the instructions hereto will, upon
the Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the
5
<PAGE>
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights; Non-exchanged Old Notes" section of the Prospectus.
Unless otherwise indicated herein in the Box 3 entitled "Special
Issuance Instructions" below, the undersigned hereby directs that the Exchange
Notes be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Old Notes, that such Exchange Notes be credited to the
account indicated above maintained at the Book-Entry Transfer Facility. If
applicable, substitute certificates representing Old Notes not exchanged or not
accepted for exchange will be issued to the undersigned or, in the case of a
book-entry transfer of Old Notes, will be credited to the account indicated
above maintained at the Book-Entry Transfer Facility. Similarly, unless
otherwise indicated under "Special Delivery Instructions" below, please deliver
Exchange Notes to the undersigned at the address set forth in Box 1.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND BY SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
6
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X
-----------------------------------------------------------------------------
X
-----------------------------------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------
This box must be signed by registered holder(s) of Old Notes as their name(s)
appear(s) on certificate(s) for Old Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become registered holder(s)
by endorsement and documents transmitted with this Letter (including such
opinions of counsel, certifications and other information as may be required by
the Company or the Trustee for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-fact,
trustee, executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, such person must set forth his or her
full title below. See Instruction 3.
Name(s)
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
---------------------------------------------------------
- -------------------------------------------------------------------------------
Address
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or Social Security Number(s)
-------------------------------
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5 to determine if required)
Authorized Signature
----------------------------------------------------------
Name
--------------------------------------------------------------------------
Name of Firm
------------------------------------------------------------------
Title Address
-----------------------------------------------------------------
Area Code and Telephone Number
------------------------------------------------
Dated
-------------------------------------------------------------------------
7
<PAGE>
- -------------------------------------------------------------------------------
BOX 3
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered, or Exchange Notes, are to be issued in the name of someone other
than the person whose signature appears in Box 2.
Issue:
(check appropriate boxes)
[ ] Old Notes not tendered
[ ] Exchange Notes, to:
Name
--------------------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------------
Please complete the Substitute Form W-9 at Box 5
Tax I.D. or Social Security Number:
-------------------------------------------
- -------------------------------------------------------------------------------
BOX 4
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes in a principal amount not
exchanged, or Exchange Notes, are to be sent to someone other than the person
whose signature appears in Box 2 or to an address other than that shown in
Box 1.
Deliver:
(check appropriate boxes)
[ ] Old Notes not tendered
[ ] Exchange Notes, to:
Name
--------------------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------------
Please complete the Substitute Form W-9 at Box 5
Tax I.D. or Social Security Number:
-------------------------------------------
- -------------------------------------------------------------------------------
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY
PROCEDURES. This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in "The
Exchange Offer--Procedures for Tendering" section of the Prospectus.
Certificates for all physically tendered Old Notes, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or facsimile thereof) and any other documents required by
this Letter, must be received by the Exchange Agent at the address set forth
herein on or prior to 5:00 p.m., New York City time, on the Expiration Date,
or the tendering holder must comply with the guaranteed delivery procedures
set forth below. Holders may tender their Old Notes in whole or in part in a
principal amount of $1,000 and integral multiples thereof, provided that if
any Old Notes are tendered for exchange in part by an institutional accredited
investor, the untendered principal amount thereof must be $500,000 or any
integral multiple of $1,000 in excess thereof.
If a registered holder of Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
prior to the Expiration Date, or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures
for Tendering" section of the Prospectus. Pursuant to such procedures, if (a)
the tender is made through an Eligible Institution, (b) on or prior to the
Expiration Date, the Exchange Agent received from such Eligible Institution a
properly completed and duly executed Letter (or facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent
and (c) the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by this Letter are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL (RETURN RECEIPT REQUESTED AND PROPERLY
INSURED) OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. NO LETTERS OR OLD
NOTES SHOULD BE SENT TO THE COMPANY. To be tendered effectively, the Old
Notes, this Letter and all other required documents must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time
of receipt), acceptance and withdrawal of tendered Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders that are not
in proper form or the acceptance of which, in the opinion of the Company's
counsel, would be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Old Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Old Notes. Neither the Company, the Exchange
Agent nor any other person shall be obligated to give notice of defects or
irregularities in any tender, nor shall any of them incur any liability for
failure to give any such notice.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER); WITHDRAWALS. If less than the entire principal amount of
any Old Security evidenced by a submitted certificate is tendered, the
tendering holder must fill in the principal amount tendered in the fourth
column of Box 1 above. ALL OF THE OLD NOTES REPRESENTED BY A CERTIFICATE
DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS
OTHERWISE INDICATED. A certificate for Old Notes not tendered will be sent to
the holder, unless otherwise provided in Box 3, as soon as practicable after
the Expiration Date, in the event that less than the entire principal amount
of Old Notes represented by a submitted certificate is tendered.
9
<PAGE>
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth above or in the Prospectus. Any such
notice of withdrawal must specify the name of the person having tendered the
Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including
the principal amount of such Old Notes), and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are registered
if different from that of the withdrawing holder, accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described in "The Exchange Offer--Procedures for
Tendering" section of the Prospectus, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. If any Old Notes are tendered for exchange but are not
exchanged for any reason, or if any Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes will be returned to the holder thereof without cost to
such holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to
the book-entry transfer procedures described in "The Exchange
Offer--Procedures for Tendering" section of the Prospectus, such Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility for the Old Notes) as soon as practicable after withdrawal, rejection
of tender, termination of the Exchange Offer or submission of nonexchanged Old
Notes. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes
properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to
the Expiration Date by following any of the procedures described in "The
Exchange Offer--Procedures for Tendering" section of the Prospectus.
All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
3. SIGNATURES; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this Letter
is signed by the holder(s) of Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificate(s) for
such Old Notes, without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned by two or more
joint owners, all owners must sign this Letter.
If any tendered Old Notes are held in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are names in which certificates are
held.
Signatures on this Letter or a notice of withdrawal, as the case may
be, must be guaranteed by an Eligible Institution, unless the Old Notes
tendered pursuant thereto are tendered (a) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on this Letter or (b) for the account of an Eligible
Institution. In the event that signatures on this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by an Eligible Institution. An "Eligible Institution" is an
institution that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act.
If this Letter is signed by a person other than the registered holder
of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by bond powers and a proxy which authorizes such person to tender
the Old Notes on behalf of the registered holder, in each case as the name of
the registered holder or holders appears on the Old Notes. If this Letter or
any Old Notes bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter.
10
<PAGE>
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in Box 3 or 4, the name and address to which the Exchange
Notes or certificates for Old Notes not tendered are to be sent or issued, if
different from the name and address of the person signing this Letter. In the
case of issuance in a different name, the tax identification number of the
person named must also be indicated. A holder of Old Notes tendering Old Notes
by book-entry transfer may request that Old Notes not exchanged be credited to
such account maintained at the Book-Entry Transfer Facility as such holder of
Old Notes may designate hereon. If no such instructions are given, such Old
Notes not exchanged will be returned to the name or address of the person
signing this Letter.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Old Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to the holder of the Exchange
Notes pursuant to the Exchange Offer may be subject to back-up withholding.
(If withholding results in overpayment of taxes, a refund may be obtained.)
Exempt holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the
Company on account of Exchange Notes issued pursuant to the Exchange Offer may
be subject to back-up withholding at a rate of 31%. In order to prevent
back-up withholding, each tendering holder must provide his or her correct TIN
by completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal Revenue Service that he or
she is subject to back-up withholding as a result of failure to report all
interest or dividends; or (ii) the Internal Revenue Service has notified the
holder that he or she is no longer subject to back-up withholding; or (iii)
certify in accordance with the Guidelines that such holder is exempt from
back-up withholding. If the Old Notes are in more than one name or are not in
the name of the actual owner, consult the enclosed Guidelines for information
on which TIN to report.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not tendered are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, then the amount of
such transfer taxes (whether imposed on the record holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment
of taxes or exemption from taxes is not submitted with this Letter, the amount
of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the certificates listed in this
Letter.
7. WAIVER OF CONDITIONS; NO CONDITIONAL TENDERS. The Company reserves
the absolute right to amend or waive any of the specified conditions in the
Exchange Offer.
No alternative, conditional, irregular or contingent tenders will be
accepted.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder
whose certificates for Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
11
<PAGE>
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating
to the procedure for tendering, as well as requests for additional copies of
the Prospectus or this Letter, may be directed to the Exchange Agent at the
address and telephone number indicated above.
IMPORTANT: THIS LETTER (OR A FACSIMILE THEREOF), TOGETHER WITH
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS, MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, ON OR PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
12
<PAGE>
BOX 5
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
Form W-9 CERTIFY BY SIGNING AND DATING BELOW Social security number
Department of or Employee identification number
the Treasury
Internal Revenue ----------------------------------------
Service
- ---------------------------------------------------------------------------------------------------------------------------
PAYER'S PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
REQUEST FOR
TAXPAYER (1) The number shown on this form is my correct Taxpayer
IDENTIFICATION Identification Number (or I am waiting for a number to be
NUMBER issued to me); and
("TIN")
(2) I am not subject to backup withholding because (i) I am
exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service (the "IRS") that I
am subject to backup withholding as a result of a failure
to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) in
part 2 above if you have been notified by the IRS that you
are subject to backup withholding because of
under-reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were
subject to backup withholding you received another
notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
- ---------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE
---------------------------------- ----------------------
NAME (Please Print) PART 3
------------------------------------------------------ Awaiting TIN [ ]
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to
mail or deliver an application in the near future. I understand that if I do
not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
Signature Date
---------------------------------- -----------------------------
Name (Please Print)
-----------------------------------------------------------
- -------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
FOR
CALENERGY COMPANY, INC.
9 1/2% SENIOR NOTES DUE 2006
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) of
CalEnergy Company, Inc. (the "Company") made pursuant to the Prospectus, dated
________, 1996 (the "Prospectus"), and the related Letter of Transmittal (the
"Letter of Transmittal") if (i) certificates for the Old Notes (as defined
below) are not immediately available; (ii) the Old Notes, the Letter of
Transmittal and all other required documents cannot be delivered or
transmitted by facsimile transmission, mail or hand delivery to IBJ Schroder
Bank & Trust Company (the "Exchange Agent") on or prior to 5:00 p.m., New York
City time, on the Expiration Date (as defined in the Prospectus); or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. See "The Exchange Offer-Procedures for Tendering" section in the
Prospectus. The term "Old Notes" means the Company's outstanding 9 1/2% Senior
Notes due 2006 that were issued and sold in a transaction exempt from
registration under the Securitites Act of 1933, as amended. Capitalized terms
used herein but not defined herein have the meanings ascribed to them in the
Prospectus.
The Exchange Agent
for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Confirm By Telephone:
(212) 858-2103
Attention: Reorganization Department
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company By Registered or Certified Mail:
One State Street IBJ Schroder Bank & Trust Company
Securities Processing Window Attention: Reorganization Department
Floor SC-1 P.O. Box 84
New York, New York 10004 Bowling Green Station
Attention: Reorganization Department New York, New York 10274-0084
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the aggregate principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange Offer
- - Procedures for Tendering" section in the Prospectus and the Letter of
Transmittal.
Principal Amount of Old Notes Signature(s)
------------------------------
Tendered $
------------------------ ------------------------------------------
Certificate Nos. Please Print the Following Information:
(if available)
--------------------
Name(s) of Registered Holders
Total Principal Amount -------------
Represented by Old Notes
Certificate(s) ------------------------------------------
------------------
Address
-----------------------------------
------------------------------------------
If Old Notes will be tendered by book-
entry transfer, provide the following
information:
Area Code and Telephone Number(s)
---------
DTC Account Number
---------------- ------------------------------------------
Dated: , 1996
--------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," hereby guarantees to deliver to the Exchange Agent, at its
address set forth above, either the Old Notes tendered hereby in proper form
for transfer, or confirmation of the book-entry transfer of such Old Notes
pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange trading days after the date
of execution of this Notice of Guaranteed Delivery.
Name of Firm
--------------------------- ---------------------------------
(Authorized Signature)
Address
--------------------------------
Name
-----------------------------
Please type or print
Date
- --------------------------------------- -----------------------------
Zip Code
Area Code and
Telephone Number
-----------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
CALENERGY COMPANY, INC.
Offer to Exchange its Registered 9 1/2% Senior Notes due 2006
for any and all of its outstanding 9 1/2% Senior Notes due 2006
that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON _________, 1996.
- -------------------------------------------------------------------------------
______ __, 1996
To Our Clients:
Enclosed for your consideration is a Prospectus dated ______ , 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus")
and a related Letter of Transmittal (the "Letter of Transmittal") in
connection with the offer (the "Exchange Offer") by CalEnergy Company, Inc.
(the "Company") to exchange its 9 1/2% Senior Notes due 2006 ("Exchange
Notes") for an equal principal amount of its outstanding 9 1/2% Senior Notes
due 2006 that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended ("Old Notes"), of which
$225,000,000 aggregate principal amount is outstanding. The Exchange Notes are
being offered for exchange in order to satisfy certain obligations of the
Company under the Exchange and Registration Rights Agreement, dated September
20, 1996, between the Company and the other signatory thereto.
Holders of Old Notes whose certificates for such Old Notes are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date
(as defined below), or who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their certificates according to the
guaranteed delivery procedures set forth in "The Exchange Offer-Procedures for
Tendering" section of the Prospectus.
THE MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF OLD
NOTES CARRIED BY US FOR YOUR ACCOUNT OR BENEFIT BUT NOT REGISTERED IN YOUR
NAME. A TENDER OF ANY OLD NOTES MAY BE MADE ONLY BY US AS THE REGISTERED
HOLDER AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender
any or all Old Notes, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your Old
Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN
ORDER TO PERMIT US TO TENDER OLD NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE
PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ______ __, 1996, unless extended by the Company (the
"Expiration Date"). Any Old Notes tendered pursuant to the Exchange Offer may
be withdrawn, subject to the procedures described in the Prospectus, at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
Please note the following:
1. The Exchange Offer is for any and all Old Notes.
<PAGE>
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer-Procedures for
Tendering."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on the
Expiration Date.
If you wish to have us tender any or all of your Old Notes held by us
for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. THE ACCOMPANYING
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND
MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES HELD BY US AND REGISTERED
IN OUR NAME FOR YOUR ACCOUNT OR BENEFIT.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by CalEnergy
Company, Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated
below:
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
[ ] Please do not tender any Old -------------------------------------------
Securities held by you for
my account
Dated: , 1996
-------------
-------------------------------------------
-------------------------------------------
Signature(s)
-------------------------------------------
-------------------------------------------
-------------------------------------------
Please print name(s) here
-------------------------------------------
-------------------------------------------
Address(es)
-------------------------------------------
Area Code(s) and Telephone Number(s)
-------------------------------------------
Tax Identification or Social Security No(s).
None of the Old Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Notes held by us
for your account.
CALENERGY COMPANY, INC.
Offer to Exchange its Registered 9 1/2% Senior Notes due 2006
for any and all of its outstanding 9 1/2% Senior Notes due 2006
that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
________, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON ______ __, 1996.
- -------------------------------------------------------------------------------
______ __, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated ______ __, 1996
(as the same may be amended or supplemented from time to time, the
"Prospectus") and related Letter of Transmittal (the "Letter of Transmittal")
in connection with the offer (the "Exchange Offer") by CalEnergy Company, Inc.
(the "Company") to exchange its 9 1/2% Senior Notes due 2006 ("Exchange
Notes") for an equal principal amount of its outstanding 9 1/2% Senior Notes
due 2006 that were issued and sold in a transaction exempt from registration
under the Securitites Act of 1933, as amended ("Old Notes"), of which
$225,000,000 aggregate principal amount is outstanding. The Exchange Notes are
being offered for exchange in order to satisfy certain obligations of the
Company under the Exchange and Registration Rights Agreement, dated September
20, 1996, between the Company and the other signatory thereto.
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask
you to contact your clients who, to your knowledge, hold Old Notes registered
in their own name. The Company will not pay any fees or commissions to any
broker, dealer or other person in connection with the solicitation of tenders
pursuant to the Exchange Offer. You will, however, be reimbursed (upon
request) by the Company for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients. The
Company will pay all transfer taxes, if any, applicable to the tender of Old
Notes to it or its order, except as otherwise provided in the Prospectus and
the Letter of Transmittal.
Enclosed herewith for your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own name, are copies
of the following documents:
1. The Prospectus dated ______ __, 1996;
2. The Letter of Transmittal for your use in connection with the
tender of the Old Notes and for the information of your clients.
Facsimile copies of the Letter of Transmittal may be used to
tender Old Notes;
3. A form of letter that may be sent to your clients for whose
accounts you hold Old Notes registered in your name or the name of
your nominee, with space provided for obtaining the clients'
instructions with regard to the Exchange Offer;
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4. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available
or time will not permit all required documents to reach the
Exchange Agent (as defined below) prior to the Expiration Date (as
defined below) or if the procedures for book-entry transfer cannot
be completed on a timely basis; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON ______ __, 1996, UNLESS EXTENDED BY THE COMPANY
(THE "EXPIRATION DATE"). ANY OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER
MAY BE WITHDRAWN, SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS, AT
ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to IBJ
Schroder Bank & Trust Company (the "Exchange Agent"), and certificates
representing the Old Notes should be delivered to the Exchange Agent, all in
accordance with the instructions set forth in the Letter of Transmittal and
the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the Expiration Date or to
comply with the book-entry transfer procedures on a timely basis, a tender may
be effected by following the guaranteed delivery procedures described in "The
Exchange Offer-Procedures for Tendering" section of the Prospectus.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed
to the Exchange Agent at its address and telephone number set forth on the
back cover of the Prospectus.
Very truly yours,
CalEnergy Company, Inc.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH
RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
