March 18, 1997
The Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Filing Desk, Stop 1-4
Re: CalEnergy Company, Inc. Form 10-K
Gentlemen:
Submitted herewith via electronic transmission pursuant to
EDGAR is the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 of CalEnergy Company, Inc. (the "Company").
The Form 10-K (including exhibits) is also being filed with
the New York Stock Exchange and the Pacific Stock Exchange
concurrently herewith.
Sincerely,
Douglas L. Anderson
Assistant Secretary and
General Counsel CalEnergy Americas
Legal/Board.96/ByLaws.4
BY-LAWS AS AMENDED THROUGH AUGUST 7,
1996
B Y - L A W S
OF
CALENERGY COMPANY,
INC.
a Delaware
corporation
ARTICLE I
MEETINGS OF
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of
the
stockholders of California Energy Company, Inc.
(hereinafter called the "Corporation") shall be held at 10:00
a.m. on such day in the month of May in each year as shall
be selected by the Chairman of the Board, or, failing such
selection, by the Board of Directors. At the annual
meeting, the stockholders shall elect by a plurality vote
a board of directors (hereinafter referred to as "Board"),
and transact such other business as may properly be brought
before the meeting. If the annual meeting shall not be held
on the day hereinabove provided for, the Board shall cause
the meeting to be held as soon thereafter as convenient.
Section 2. Special Meetings. Special meetings of
the
stockholders may be called for any purpose or purposes at
any time only by the Board, or the President, upon not less
than ten nor more than fifty days written notice. Special
meetings may not be called by the stockholders.
Section 3. Notice of Meetings. Notice of the place,
date and time of the holding of each annual and special meeting
of the stockholders and, in the case of a special meeting, the
purpose or purposes thereof, shall be given personally or by
mail in a
postage prepaid envelope to each stockholder entitled to vote
at such meeting, not less than ten nor more than fifty days
before the date of such meeting, and, if mailed, it shall be
directed to such stockholder at his address as it appears on
the records of the Corporation, unless he shall have filed
with the Secretary of the Corporation a written request that
notices to him be mailed to some other address, in which case
it shall be directed to him at such other address. Notice
of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in
person or by proxy and shall not, at the beginning of such
meeting, object to the transaction of any business because
the meeting is not lawfully called or convened, or who shall,
either before or after the meeting, sign a waiver. Notice of an
adjourned meeting need not be given if the time and place to
which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 4. Place of Meetings. Meetings of the
stockholders may be held at such place, within or without
the State of Delaware, as the Board or the officer calling
the same shall specify in the notice of such meeting, or
in a duly executed waiver of notice thereof.
Section 5. Quorum. (a) At all meetings of
the
stockholders, the holders of a majority of the shares of stock
of the Corporation issued and outstanding and entitled to vote
shall be present in person or by proxy to constitute a quorum
for the
transaction of any business (except business referred to
in subsection (b) below), except when stockholders are
required to vote by class, in which event a majority of
the issued and outstanding shares of the appropriate class
shall be present in person or by proxy, or except as
otherwise provided by statute. (b) At all meetings of the
stockholders in which the action to be taken requires the
approval of sixty-six and two-thirds percent (66 2/3%) of
the issued and outstanding shares of stock entitled to vote,
the holders of sixty- six and two-thirds percent (66
2/3%) of the shares of stock of the Corporation issued and
outstanding and entitled to vote shall be present in person
or by proxy in order to constitute a quorum for the
transaction of any such business, except when stockholders
are required to vote by class, in which event, sixty-
six and two-thirds percent (66 2/3%) of the issued and
outstanding shares of the appropriate class shall be present
in person or by proxy, or except as otherwise provided by
statute. (c) In the absence of a quorum, the holders of a
majority of the shares of stock present in person or by
proxy and entitled to vote, or if no stockholder entitled to
vote is present, then any officer of the Corporation, may
adjourn the meeting from time to time. At any such
adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted
at the meeting as originally called.
Section 6. Organization. At each meeting of
the
stockholders the Chairman of the Board, or in his absence
or inability to act, the President, or in the absence or
inability to act of the Chairman of the Board or
President, a Vice President, or in the absence of all of the
foregoing, any person chosen by a majority of those
stockholders present, shall act as chairman of the meeting.
The Secretary, or in his absence or inability to act, the
Assistant Secretary or any person appointed
by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at
all
meetings of the stockholders shall be as determined by
the chairman of the meeting.
Section 8. Voting. Except as otherwise required by
statute
or by the Certificate of Incorporation, each holder of record
of shares of stock of the Corporation having voting power
shall be entitled at each meeting of the stockholders to
one vote for every share of such stock standing in his name
on the record of stockholders of the Corporation on the date
fixed by the Board as the record date for the determination
of the stockholders who shall
be entitled to notice of and to vote at such meeting; or at
the close of business on the day next preceding the day
on which
notice thereof shall be given, or if notice is waived, at
the close of business on the day next preceding the day on
which the meeting is held; or each stockholder entitled to
vote at any meeting of stockholders may authorize another
person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. Any such proxy shall
be delivered to the secretary of
such meeting at or prior to the time designated in
the order of business for so delivering such proxies. No
proxy shall be valid after the expiration of three years from
the date thereof, unless otherwise provided in the proxy.
Every proxy shall be
revocable at the pleasure of the stockholder executing
it, except in those cases where an irrevocable proxy is
permitted by law. Except as otherwise provided by statute,
these By-Laws, or the Certificate of Incorporation, any
corporate action to be taken by
vote of the stockholders shall be authorized by a
majority of the total votes, or when stockholders are required
to
vote by class by a majority of the votes of the
appropriate class, cast at a meeting of stockholders by the
holders of shares present in person or represented by proxy and
entitled to vote on such action. Unless required to be
advisable, the vote on any question need not be by written
ballot. On a vote by written ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.
Section 9. List of Stockholders. The officer who
has
charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled
to vote at that meeting,
arranged in alphabetical order, and showing the
addresses of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for
a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who
is present.
Section 10. Consent of Stockholders in Lieu of
Meeting. Whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in
connection with any corporate action, the meeting and vote
of stockholders can be dispensed with: (1) if all of the
stockholders who would have been entitled to vote upon the
action if such meeting were held shall consent in writing to
such corporate action being taken; or
(2) unless the Certificate of Incorporation provides
otherwise, with the written consent of the holders of not
less than the minimum percentage of the total vote required
by statue for the proposed corporate action, and provided
that prompt notice must be given to all stockholders of the
taking of corporate action without a meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of
the Corporation shall be managed by the Board. The
Board may exercise all such authority and powers of the
Corporation and do all such lawful acts and things as are
not by statute or the Certificate of Incorporation directed
or required to be exercised or done by the stockholders.
Section 2. (a) Number, Qualifications, Election and
Term of Office. The business and affairs of the Corporation
shall be managed and controlled by a Board of Directors
consisting of twelve persons. At the 1989 Annual Meeting of
Stockholders, the directors were divided into three classes,
as nearly equal in number as possible, with the term of
office of the first class to expire at the 1990 Annual Meeting
of Stockholders, the term of office of the second class to
expire at the 1991 Annual Meeting of Stockholders and the
term of office of the third class to expire at the 1992
Annual Meeting of Stockholders. At each
Annual Meeting of Stockholders following such
initial
classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual
Meeting of Stockholders after their election. All directors
shall be the age of majority and need not be stockholders.
Each director
shall hold office until the end of his term and until
his
successor shall have been duly elected and qualified, or
until his death, or until he shall have resigned, or have been
removed for cause, as hereinafter provided in these By-
Laws or as otherwise
provided by statute or the Certificate of
Incorporation.
(b) Filling of Vacancies. Except as otherwise provided
in Article II, Section 11, any vacancies on the Board resulting
from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by a
majority vote of the directors then in office, and
directors so chosen shall hold office for a term expiring at
the Annual Meeting of Stockholders at which the term of the
class to which they have been elected expires. No decrease in
the number of directors constituting the Board shall shorten
the term of any incumbent director.
(c) Removal. Any director, or the entire Board, may
be
removed from office at any time, but only for cause and only
by the affirmative vote of a majority of the Board or the
holders of at least sixty six and two thirds percent (66 2/3%)
of the voting power of all of the shares of the Corporation
entitled to vote for the election of directors. For
the purposes of this Paragraph (c), "cause" shall mean
the willful and continuous failure of a director
substantially to perform such director's duties to the
Corporation (other than such failure resulting from incapacity
due to physical or mental illness) or the willful engaging
by a director in gross misconduct materially and
demonstrably injurious to the Corporation.
Section 3. Place of Meetings. Meetings of the Board may
be held at such place, within or without the State of
Delaware, as the Board may from time to time determine
or as shall be specified in the notice or waiver of notice
of such meeting.
Section 4. First Meeting. The Board shall meet for
the purpose of organization, the election of officers,
and the transaction of other business, as soon as practicable
after each Annual
Meeting of Stockholders, on the same day and at the same
place where such annual meeting shall be held. Notice of
such
meeting need not be given. Such meeting may be held at any
other time or place (within or without the State of
Delaware) which shall
be specified in a notice thereof given as hereinafter
provided in Article II, Section 7.
Section 5. Regular Meetings. Regular meetings of the
Board shall
be held at such time and place as the Board may from time
to time determine. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to
be held, then the meeting which would otherwise be held on
that day shall be held at the same hour on the next
succeeding business day. Notice
of regular meetings of the Board need not be given except
as otherwise required by statute or these By-Laws.
Section 6. Special Meetings. Special meetings of the
Board may be called by two or more directors of the
Corporation or by the Chairman of the Board or the President.
Section 7. Notice of Meetings. Notice of each
special meeting of the Board (and of each regular meeting
for which notice
shall be required) shall be given by the Secretary as
hereinafter provided in this Section 7, in which notice shall
be stated
the time and place (within or without the State of
Delaware) of the meeting. Notice of each such meeting shall
be delivered to each director either personally or by
telephone, facsimile, telegraph, cable or wireless, at least
twenty-four hours
before the time at which such meeting is to be held or by
first-class mail, postage pre-paid, addressed to him at
his residence, or usual place of business, at least three days
before the day on which such meeting is to be held. Notice of
any such meeting need not be given to any director who
shall, either before or after the meeting, submit a signed
waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of
notice to him. Except as otherwise specifically required by
these By-Laws, a notice or waiver of notice of any
regular or special meeting need not state the purposes of
such meeting.
Section 8. Quorum and Manner of Acting. Three directors
or one-third of the entire Board, whichever is greater,
shall be present in person at any meeting of the Board
in order to constitute a quorum for the transaction of
business at such meeting, and, except as otherwise expressly
required by statute or the Certificate of Incorporation, the
act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board. In
the absence of a quorum at any meeting of the Board, a
majority of the directors present thereat, or if no director
be present, the Secretary may adjourn such meeting to another
time and place, or such meeting, unless it be the first
meeting of the Board, need not be held. At any adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called. Except as provided in Article III of
these By-Laws, the directors shall act only as a Board
and the individual directors shall have no power as such.
Section 9. Organization. At each meeting of the Board,
the Chairman of the Board (or, in his absence or inability to
act, the President, or in his absence or inability to act,
another director chosen by a majority of the directors present)
shall act
as chairman of the meeting and preside thereat. The
Secretary (or, in his absence or inability to act, any person
appointed by the chairman) shall act as secretary of the
meeting and keep the minutes thereof.
Section 10. Resignation. Any director of the
Corporation may resign at
any time by giving written notice of his
resignation to the Board or Chairman of the Board or
the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time
when it shall become
effective shall not be specified therein,
immediately upon its acceptance. Unless otherwise
specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 11. Certain Vacancies. Vacancies and newly
created
directorships resulting from any increase in the
authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall
hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner
displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall
constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total
number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the
directors then in office. When one
or more directors shall resign from the Board, effective at
a future date, a majority of the directors then in
office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as
provided in this action in the filling of other vacancies.
Section 12. Compensation. The Board shall have
authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity, provided no such payment shall
preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 13. Action Without Meeting. Any action required
or
permitted to be taken at any meeting of the Board or of
any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 14. Telephonic Meetings. Unless
otherwise restricted by the Certificate of Incorporation
or by these By-Laws, members of the Board of Directors may
participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other and
such participation in a meeting shall constitute
presence in person at the meeting.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive and Other Committees. The Board may,
by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of
two or more of the directors of the Corporation. The
Executive Committee shall consist of the Chairman of the
Board and such of the other members of the Board as shall
be appointed pursuant to the immediately preceding sentence.
The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the
resolution creating the committee, shall have and may
exercise the powers of the Board in the management of the
business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers
which may require it; provided, however, that in the absence
or disqualification of any member of such committee or
committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he,
she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Each
committee shall keep written minutes of its proceedings and
shall report such minutes to the Board when required. All
such proceedings shall be subject to revision or alteration
by the Board; provided, however, that third parties
shall not be prejudiced by such revision or alteration.
Section 2. General. A majority of any committee
may
determine its action and fix the time and place of its
meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the
committee in the manner provided for in Article II, Section
7. The Board shall have any power at any time to fill
vacancies in, to change the
membership of, or to dissolve any such committee. Nothing
herein shall be deemed to prevent the Board from appointing one
or more committees consisting in whole or in part of persons
who are not
directors of the Corporation; provided, however, that no
such committee shall have or may exercise any authority of the
Board.
ARTICLE IV
OFFICERS
Section 1. Number and Qualifications. The officers of
the
Corporation shall include the Chairman of the Board, the
ViceChairman of the Board, the President, one or more Vice-
Presidents (any of whom may be designated as Executive Vice-
President), the
Chief Financial Officer, the Treasurer, the Controller and
the
Secretary. Any two or more offices may be held by the
same person. Such officers shall be elected from time to time
by the
Board or by the Chairman of the Board, each to hold office
until his successor shall have been duly elected or appointed
and shall have qualified, or until his death, or until he
shall have resigned, or have been removed, as hereinafter
provided in these By-Laws. The Board may from time to time
elect, or the Chairman
of the Board may appoint, such other officers (including one
or
more Assistant Vice-Presidents, Assistant Secretaries
and
Assistant Treasurers), and such agents as may be necessary
or
desirable for the business of the Corporation. Such
other
officers and agents shall have duties and shall hold
their offices for such terms as may be prescribed by the Board
or by
the appointing authority.
Section 2. Resignations. Any officer of the
Corporation may resign at any time by giving written
notice of his
resignation to the Board, the Chairman of the Board,
the
President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time
when it
shall become effective shall not be specified
therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3. Removal. Any officer or agent of
the
Corporation may be removed, either with or without cause, at
any time, by the Chairman of the Board or by the vote of the
majority of the entire Board at any meeting of the Board .
Such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office,
whether arising from death, resignation, removal or any other
cause, may be filled for the unexpired portion of the term
of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular elections or
appointment to such office.
Section 5. The Chairman of the Board. The Chairman of
the Board shall be the Chief Executive Officer and shall have
general and active supervision and direction over the
management of the Corporation's business and over the
President and Chief Operating Officer and all of the
Corporation's other officers, agents and employees. The
Chairman of the Board shall, if present, preside at each
meeting of the stockholders and of the Board and shall be an
ex officio member of all committees of the Board. The
Chairman of the Board shall perform all duties incident to
the office of Chairman of the Board and such other duties as
may from time to time be assigned to him by the Board.
Section 6. Vice-Chairman of the Board. The Vice-
Chairman of the Board shall be responsible for assisting the
Chairman of the Board and shall perform all such duties as
may from time to
time be assigned to him by the Board.
Section 7. The President. Unless the President's
duties
are otherwise modified by the Chairman of the Board,
the President shall, in consultation with and subject to
the
direction of the Chairman of the Board, have general and
active management of the operations and business of the
Corporation and general and active supervision and direction
over the affairs of the Corporation and over all of its other
officers, agents and employees (except the Chairman of the
Board and Chief Executive Officer). The President shall
be the Corporation's Chief Operating Officer and shall see
that all duties of subordinate officers are properly
performed and that their responsibilities are
properly discharged. In performing such duties, the
President shall report directly to the Chairman of the Board
and shall consult with the Chairman of the Board and be
subject to
the direction of the Chairman of the Board regarding
significant decisions and strategic options for the Company.
At the request of the Chairman of the Board, or in the case
of his absence or inability to act, the President shall
perform the duties of the Chairman of the Board and when
so acting shall have all the powers of, and be subject
to, all the restrictions upon, the Chairman of the Board.
He shall perform all duties incident to the office of
President and such other duties as from time to time may be
assigned to him by the Chairman of the Board and by these By-
Laws.
Section 8. Vice Presidents. The Executive Vice-
President
and each Vice-President shall have such powers and perform
all such duties as from time to time may be assigned to him
by the Board or by the Chairman of the Board.
Section 9. The Chief Financial Officer. The
Chief
Financial Officer shall:
(a) have charge and custody of, and be responsible for,
all the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts
and
disbursements in books belonging to the Corporation and
have control of all books of account of the Corporation;
(c) cause all moneys and other valuables to be deposited
to the credit of the Corporation in such depositaries as
may be designated by the Board;
(d) receive, and give receipts for, moneys due and
payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise
the investment of
its funds as ordered or authorized by the Board,
taking proper vouchers therefor;
(f) render the Chairman of the Board, the President and
the Board, whenever the Board or the Chairman of the
Board may require,
an account of the financial condition of the
Corporation; and
(g) in general, perform all the duties incident to
the
office of treasurer and such other duties as from time to
time may be assigned to him by the Board or by the Chairman
of the Board.
Section 10. The Secretary. The secretary shall:
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings of the
Board, the committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of
the
Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal
of the
Corporation on such certificates shall be a facsimile,
as
hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation
under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law
to be kept and filed are properly kept and filed; and
(e) in general, perform all the duties incident to
the office of Secretary and such other duties as from time to
time may be assigned to him by the Board or by the Chairman
of the Board.
Section 11. Officers' Bonds or Other Security. If
required by the Board, any officer of the Corporation shall
give a bond or other security for the faithful performance of
his duties, in such amount and with such surety or sureties
as the Board may require.
Section 12. Compensation. The compensation of the
officers of the Corporation for their services as such
officers shall be fixed from time to time by the Board;
provided, however, that the Board may delegate to the Chairman
of the Board the power to fix the
compensation of officers and agents appointed by the
Chairman of the Board. An officer of the Corporation shall
not be prevented from receiving compensation by reason of the
fact that he is also a director of the Corporation, but
any such officer who shall also be a director shall not have
any vote in the determination of the amount of compensation
paid to him.
ARTICLE V
INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation
shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as it presently exists or
may hereafter be
amended, any person who was or is made or is threatened to
be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal,
administrative or
investigative (a "proceeding"), by reason of the fact that he,
or a person for whom he is the legal representative, is or
was a
director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer,
employee, fiduciary
or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans,
against all liability
and loss suffered and expenses reasonably incurred by
such person. The Corporation shall indemnify a person
in
connection with a proceeding initiated by such person only if
the proceeding was authorized by the Board.
Section 2. Prepayment of Expenses. The Corporation
shall
pay the expenses incurred in defending any proceeding in
advance of its final disposition; provided, however, that the
payment of expenses incurred by a director or officer in his
capacity as a director or officer in advance of the final
disposition of the proceeding shall be made only upon
receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be determined to be
indemnified under this Article V or otherwise.
Section 3. Claims. If a claim for indemnification
or payment of expenses under this Article V is not paid in
full within ninety days after a written claim therefor
has been received by the Corporation, the claimant may
file suit to recover the unpaid amount of such claim and,
if successful in whole or
in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action, the
Corporation shall have the burden of proving that the
claimant was not
entitled to the requested indemnification or payment of
expenses under applicable law.
Section 4. Nonexclusivity of Rights. The rights
conferred on any person by this Article V shall not be
exclusive of any other rights which such person may have
or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Contracts and Arrangements. The Corporation
may enter into contracts providing indemnification to the full
extent authorized or permitted by the Delaware General
Corporation Law and may create a trust fund, grant a security
interest and/or use other means (including, without
limitation, letters of credit, surety bonds and other
similar arrangements) to ensure the payment of such
amounts as may become necessary to effect indemnification
pursuant to such contracts or otherwise.
Section 6. Amendment or Repeal. Any repeal or
modification of the foregoing provisions of this Article V
shall not adversely affect any right or protection of any
person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1. Execution of Contracts. Except as
otherwise required by statute, the Certificate of
Incorporation or these By-Laws, any contracts or other
instruments may be executed and delivered in the name and on
behalf of the Corporation by such
officer or officers (including any assistant officer) of
the Corporation as the Board may from time to time direct.
Such authority may be general or confined to specific instances
as the Board may determine. Unless authorized by the Board or
expressly permitted by these By-Laws, an officer or agent or
employee shall not have any power or authority to bind the
Corporation by any contract or engagement or to pledge its
credit or to render it pecuniarily liable for any purpose or
to any amount.
Section 2. Loans. Unless the Board shall
otherwise determine, either (a) the President or the Chairman
of the Board, or (b) any Vice President, the Chief
Financial Officer, the Treasurer or the Secretary, together
with the President or the Chairman of the Board, may effect
loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any
firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds
or other certificates or evidence of indebtedness of the
Corporation, but no officer or officers shall mortgage,
pledge, hypothecate or transfer any securities or other
property of the Corporation, except when authorized by the
Board.
Section 3. Checks, Drafts, etc. All checks, drafts,
bills of exchange or other orders for the payment of money out
of the funds of the Corporation, and all notes or other
evidences of indebtedness of the Corporation, shall be signed
in the name and on behalf of the Corporation by such persons
and in such manner as shall from time to time be authorized by
the Board.
Section 4. Deposits. All funds of the Corporation
not otherwise employed shall be deposited from time to time
to the credit of the Corporation in such banks, trust
companies or other depositories as the Board may from time to
time designate or as
may be designated by any officer or officers of the
Corporation to whom such power of designation may from time
to time be delegated by the Board. For the purpose of
deposit and for the purpose of collection for the account of
the Corporation, checks, drafts and other orders for the
payment of money which are payable to the order of the
Corporation may be endorsed, assigned and delivered by any
officer or agent of the Corporation, or in such manner as the
Board may determine by resolution.
Section 5. General and Special Bank Accounts. The
Board
may from time to time authorize the opening and keeping
of general and special bank accounts with such banks,
trust
companies or other depositories as the Board may designate or
as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time
to time be delegated by the Board. The Board may make such
special rules and
regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-Laws, as it may
deem expedient.
Section 6. Proxies in Respect of Securities of
Other
Corporations. Unless otherwise provided by resolution adopted
by the Board, Chairman of the Board, the President or a
Vice President may from time to time appoint an attorney or
attorneys or agent or agents, of the Corporation, in the name
and on behalf of the Corporation to cast the votes which the
Corporation may be entitled to cast as the holder of stock or
other securities in any other corporation, any of the stock
or other securities of which may be held by the Corporation,
at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing, in the
name of the Corporation as such holder, to any action by
such other corporation, and may instruct the person or
persons so appointed as to the manner of casting
such votes or giving such consent, and may execute or cause to
be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or
proper.
ARTICLE VII
SHARES, ETC.
Section 1. Stock Certificates. Each holder of stock of
the Corporation shall be entitled to have a certificate, in
such form as shall be approved by the Board, certifying the
number of shares of stock of the Corporation owned by
him. The
certificates representing shares of stock shall be signed in
the name of the Corporation by the Chairman of the Board
or the President or a Vice-President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer and sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or
printed); provided, however, that where any such certificate
is countersigned by a transfer agent other than the
Corporation or its employee, or is registered by a
registrar other than the Corporation or one of its employees,
the signature of the officers of the
Corporation upon such
certificates may be facsimiles, engraved or printed. In case
any officer who shall have signed or whose facsimile
signature has been placed upon such certificates shall have
ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the
Corporation with the same effect as if such officer were still
in office at the date of their issue.
Section 2. Books of Account and Record of
Stockholders.
The books and records of the Corporation may be kept at
such places within or without the State of Delaware, as the
Board may from time to time determine. The stock record
books and the blank stock certificate books shall be kept by
the Secretary or
by any other officer or agent designated by the Board.
Section 3. Transfers of Shares. Transfers of shares
of stock of the Corporation shall be made on the stock
records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed
with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by a duly
executed stock transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person
in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to
receive dividends or other distributions, and to vote as
such owner, and the Corporation may hold any such
stockholder of record liable for calls and assessments and the
Corporation shall not be bound to recognize any equitable or
legal claim to or interest in any such share or shares on
the part of any other person whether or not it shall have
express or other notice thereof. Whenever any transfers
of shares shall be made for collateral security and not
absolutely, and both the transferor and transferee request
the Corporation to do so, such fact shall be stated in the
entry of the transfer.
Section 4. Regulations. The Board may make such
additional rules and regulations, not inconsistent with these
By-Laws, as it may deem
expedient concerning the issue, transfer and
registration of certificates for shares of stock of
the
Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or
more transfer clerks and one or more registrars and may
require all
certificates for shares of stock to bear the signature
or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates.
The
holder of any certificate representing shares of stock of
the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of such certificate,
and the
Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it which the owner
thereof shall
allege to have been lost, stolen or destroyed, or which
shall have been mutilated, and the Board may, in its
discretion,
require such owner or his legal representative to give to
the Corporation a bond in such sum, limited or unlimited, and
in such form and with such surety or sureties as the
Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or
destruction of any such certificate, or the issuance of a
new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
Section 6. Stockholder's Right of Inspection. Any
person
who shall have been a stockholder of record of the
Corporation for at least six months immediately preceding his
demand, or any person holding, or thereunto authorized by the
holders of, at least
five percent of the outstanding shares of stock of the
Corporation, shall, in person or by attorney or other agent,
upon written demand under oath stating the purpose thereof,
have the right
during the ordinary business hours to inspect for any
proper purpose the Corporation's stock ledger, a list of
its stockholders and its other books and records, and to make
copies or extracts therefrom. A proper purpose shall mean a
purpose
reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney
or other agent to so act on behalf of the stockholder. The
demand under oath shall be directed to the Corporation at its
registered office in this State or at its principal place of
business.
Section 7. Fixing of Record Date. In order that
the Corporation may determine the stockholders entitled to
notice of or to vote at the meeting of stockholders or any
adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of
any rights or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more
than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action.
A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE VIII
OFFICES
Section 1. Registered Office. The registered office of
the
Corporation in the State of Delaware shall be at 1209
Orange Street, Wilmington, County of New Castle, Delaware. The
name of the resident agent in charge thereof shall be the
Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have
an office or offices other than said principal office at such
place or places, either within or without the Sate of
Delaware, as the Board shall from time to time determine or
the business of the Corporation may require.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be January 1
to December 31 of each year.
ARTICLE X
SEAL
The Board shall provide a corporate seal, which shall be
in the form of two concentric circles and bear the name of
the Corporation and the words and figures "Corporate Seal
1971 Delaware."
ARTICLE XI
AMENDMENTS
The Board shall have the power to amend these By-Laws by
a majority vote. Notwithstanding anything contained in
these
By-Laws to the contrary, the stockholders may amend
these By-Laws, but only by an affirmative vote of sixty-
six and two-thirds percent (66 2/3%) of the voting power of
all shares of the Corporation entitled to vote, except when
stockholders are required to vote by class, in which
event sixty-six and two-thirds percent (66 2/3%) of the
voting power of that class shall be required.
-7-
Execution Copy
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
CALENERGY COMPANY, INC.
(formerly known as "CALIFORNIA ENERGY COMPANY, INC.")
AND
DAVID L. SOKOL
This Amendment No. 1 (the "Amendment") to the Amended and
Restated Employment Agreement dated August 21, 1995 (the
"Employment Agreement") by and between CalEnergy Company, Inc., a
Delaware Corporation (the "Company"), and David L. Sokol (the
"Executive"), is entered into as of August 28, 1996.
WHEREAS, the Company and the Executive are presently parties
to the Employment Agreement; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement as set forth herein;
NOW, THEREFORE, the Employment Agreement is hereby amended
as follows:
(1) By deleting from the first sentence of Section 3(b) of
the Employment Agreement the words "except pursuant to Section
7".
(2) By deleting from the first sentence of Section 4(e) of
the Employment Agreement from parenthetical "(i)".
(3) By deleting Section 4(g) of the Employment Agreement in
its entirety, and redesignating Section 4(h) as Section 4(g).
(4) By amending and restating Section 8 of the Employment
Agreement to read in its entirety as follows:
"Section 8. Payment Upon Termination.
(a) If the employment of the Executive is terminated
pursuant to subsections (i) or (iii) of Section 7(a), the
Company will pay to the Executive, within 30 calendar days,
(x) any salary pursuant to Section 4(a) which is accrued but
unpaid through the Termination Date, and (y) a bonus
payment, in an amount determined by the Board by reference
to the performance of the Executive for a portion of the
fiscal year of the Company before the Termination Date,
which is not less than a pro rata share (determined by
reference to the portion of the fiscal year before the
Termination Date) of the Minimum Bonus.
(b) If the employment of the Executive is terminated
pursuant to subsections (ii), (iv), (v) or (vi) of Section
7(a), the Company will pay the Executive, on or before the
related Termination Date, an amount equal to three times the
sum of the annual salary and Minimum Bonus then in effect
pursuant to Section 4. In addition, (x) any portion of the
options granted to the Executive which would become vested
within the next 36 months (beginning with the month
following the month in which the Termination Date occurs)
will vest immediately and may be exercised within the
remaining term of the options as provided in the applicable
option agreements, and (y) the Company shall continue in
effect for Executive and his dependents, for a period of 36
months after the Termination Date, the life insurance,
medical benefits, dental benefits and disability plan
available to the Executive and his dependents immediately
prior to the Termination Date, subject to such employee
contributions and other terms and conditions as are
applicable to active employees generally and subject to
subsequent modification or termination of such plans to the
extent such subsequent actions are also applicable to active
employees generally; provided that such plan benefits shall
terminate earlier on the date, if any, that comparable
benefits are made available to the Executive by any new
employer."
(5) By inserting immediately following Section 8 new
Section 8A, which shall read in its entirety as follows:
"Section 8A. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment, distribution, waiver of Company rights,
acceleration of vesting of any stock options or restricted
stock, or any other payment or benefit in the nature of
compensation to or for the benefit of the Executive, alone
or in combination (whether such payment, distribution,
waiver, acceleration or other benefit is made pursuant to
the terms of this Agreement or any other agreement, plan or
arrangement providing payments or benefits in the nature of
compensation to or for the benefit of the Executive, but
determined without regard to any additional payments
required under this Section 8A) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986 (the "Code") (or any successor
provision) or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes with
respect to the Gross-Up Payment (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8A(c), all
determinations required to be made under this Section 8A,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by Deloitte and Touche LLP, or such other nationally
recognized accounting firm then auditing the accounts of the
Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event
that the Accounting Firm is unwilling or unable to perform
its obligations pursuant to this Section 8A, the Executive
shall appoint another nationally recognized accounting firm
to make the determinations required hereunder (which
accounting firm shall then be referred to hereunder as the
Accounting Firm). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up
Payment, determined pursuant to this Section 8A, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon
the Company and the Executive. The parties hereto
acknowledge that, as a result of the potential uncertainty
in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that the Company will not have made Gross-Up
Payments which should have been made consistent with the
calculations required to be made hereunder (an
"Underpayment"). In the event that the Company exhausts its
remedies pursuant to Section 8A(c) and the Executive
thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit
of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-
day period following the date on which he gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 8A(c), the Company shall control
all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and
shall indemnify and hold the Executive harmless, on an after-
tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed
income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore,
the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 8A(c),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8A(c))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 8A(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required
to be paid."
Except as provided herein and to the extent necessary to
give full effect to the provisions of this Amendment, the terms
of the Employment Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have entered into
this Amendment as of August 28, 1996.
CALENERGY COMPANY, INC.
By: /S/__________________________
Name: Steven A. McArthur
Title: Senior Vice President
EXECUTIVE
/S/_________________________________
David L. Sokol
-4-
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of August 6,
1996, by and between CalEnergy Company, Inc. a Delaware
corporation (the "Company"), and Gregory E. Abel (the
"Executive").
RECITALS
The Company desires to employ the Executive as its Senior
Vice President, Chief Accounting Officer and Controller on the
terms set forth in this Agreement, and the Executive desires to
accept such employment.
Accordingly, the Company and the Executive agree as follows:
AGREEMENT
Section Defined Terms. Terms used but not defined in this
Agreement will have the meanings ascribed to them in Exhibit A to
this Agreement.
Section Employment.
The Company will employ the Executive as, and the
Executive will act as, the Senior Vice President, Chief
Accounting Officer and Controller of the Company, subject to and
upon the terms set forth in this Agreement, for the Term of
Employment.
The Executive's primary place of employment will
be Omaha, Nebraska or such other place as is determined, prior to
a Change in Control, in good faith by the Chairman of the Board
and Chief Executive Officer of the Company (hereinafter referred
to as the "Chairman of the Board") to be in the best interests of
the Company.
Section Duties.
The Executive (i) will perform and discharge the
duties incident to and consistent with his title of Senior Vice
President, Chief Accounting Officer and Controller, and (ii) will
perform and discharge such other duties, and will have such other
authority, as are delegated to him by the Chairman of the Board.
In performing such duties, the Executive will report directly to
, and be subject to the direction of, the Chairman of the Board.
Prior to a Change in Control, the Executive's title and duties
may in good faith be modified by the Chairman of the Board.
The Executive will act, without any compensation
in addition to the compensation payable pursuant to this
Agreement, as an officer or member of the board of directors of
any subsidiary of the Company, if so appointed or elected.
During the Term of Employment, the Executive (i)
will devote his entire time, attention and energies during normal
business hours to the business of the Company and its
subsidiaries and (ii) will not, without the written consent of
the Chairman of the Board, perform any services for any other
Person or engage in any other business or professional activity,
whether or not performed or engaged in for profit.
Notwithstanding subsection 3 (c), the Executive,
without the consent of the Chairman of the Board, may (i)
purchase securities issued by, or otherwise passively invest his
personal or family assets in, any other company or business
within the constraints imposed by the Policy of Business Conduct
referred to below, and (ii) engage in governmental, political,
educational or charitable activities, but only to the extent that
those activities (A) are not inconsistent with any direction of
the Chairman of the Board or any duties under this Agreement, and
(B) do not interfere with the devotion by the Executive of his
entire time, attention and energies during normal business hours
to the business of the Company.
Section Compensation.
During the Term of Employment, the Company will
pay the Executive a base salary at an annual rate of $150,000, in
substantially equal periodic payments in accordance with the
Company's practices for executive employees, as determined from
time to time by the Chairman of the Board.
The Chairman of the Board will review the salary
payable to the Executive at least annually beginning in the
fourth fiscal quarter of 1996. The Chairman of the Board, in his
discretion, may increase the salary of the Executive from time to
time, but may not reduce the salary of the Executive below the
amount set forth in subsection 4(a) above.
During the Term of Employment, the Executive shall
be eligible for consideration for an annual incentive merit
bonus, for the Executive's performance during the preceding
fiscal year of the Company in an amount determined by the
Chairman of the Board in his discretion, by reference to the
accomplishment by the Executive of goals established by the
Chairman of the Board for the related fiscal year
The Company will reimburse the Executive, subject
to compliance by the Executive with the Company's customary
reimbursement practices, for all reasonable and necessary out-of-
pocket expenses incurred by the Executive on behalf of the
Company in the course of its business.
The Company may reduce any payments made to the
Executive under this Agreement by any required federal, state or
local government withholdings or deductions for taxes or similar
charges, or otherwise pursuant to law, regulation or order.
Any base salary payable to the Executive for any
period of employment of less than one year during the Term of
Employment will be reduced to reflect the actual number of days
of employment during the period except as provided in Sections
8(b) and 8(c).
Section Other Benefits.
During the Term of Employment, the Executive and
his dependents may participate in and receive benefits under any
employee benefit plan which the Company makes generally available
to its employees and their families, including any pension, life
insurance, medical benefits, dental benefits or disability plan,
but only to the extent that the Executive or his dependents
otherwise satisfies the standards established for participation
in the plan. The terms of Executive's existing option
agreements, as amended, remain unaffected hereby, except as set
forth in Sections 8(b) and 8(c) hereof.
The Executive may take up to three weeks of
vacation during each full calendar year during the Term of
Employment at a time mutually convenient to the Executive and the
Company, without loss of compensation or other benefits under
this Agreement.
Section Confidentiality and Post-Employment Restrictions.
The Executive acknowledges that the Company and
its Affiliates have confidential information and trade secrets,
whether written or unwritten, with respect to carrying on their
business, including sensitive marketing, bidding, technological
and engineering information and data, names of past, present and
prospective customers or partners of and vendors or suppliers to
the Company and its Affiliates, working relationships with
governmental agencies and officials, methods of pricing contracts
and income and expenses associated therewith, the international
business strategy and relative ranking of opportunities in
various countries, negotiated prices and offers outstanding,
credit terms and status of accounts and the terms or
circumstances of any current or prospective business arrangements
between the Company and its Affiliates and any third parties
("Confidential Information and Trade Secrets"). As used in this
Agreement, the term Confidential Information and Trade Secrets
does not include (i) information which becomes generally
available to the public other than as a result of a disclosure by
the Executive, (ii) information which becomes available to the
Executive on a nonconfidential basis from a source other than the
Company or its Affiliates, or (iii) information known to the
Executive prior to any disclosure to him by the Company or its
Affiliates. The Executive further acknowledges that the
Executive possesses a high degree of knowledge of the independent
energy industry and, in particular, has committed to a long-
standing relationship with the Company and its Affiliates as an
employee and officer, which has allowed, and will continue to
allow, him access to the Company's Confidential Information and
Trade Secrets. Accordingly, any employment by the Executive with
another employer in the independent energy industry or
participation by him as a substantial investor in any such
industry may necessarily involve disclosure of the Company's
Confidential Information and Trade Secrets. Consequently, the
Executive agrees that, if he voluntarily resigns his employment
with the Company for any reason other than (i) a breach of this
Agreement by the Company, or (ii) for Good Reason, he shall not
at any time during the two-year period after such resignation,
directly or indirectly accept employment by or invest in (except
as a passive investor in a public corporation or in a publicly
issued partnership interest which, in either event, would not
exceed an ownership interest of 2% of the outstanding equity or
partnership interest) in any person, firm, corporation,
partnership, joint venture or business which is primarily engaged
in the production or marketing of steam or electrical energy or
which otherwise directly competes with the business of the
Company or its controlled Affiliates and, further, the Executive
agrees that, to avoid the risk of disclosing or improperly using
Confidential Information or Trade Secrets, he shall not directly,
or indirectly, provide consulting or advisory services to any of
such independent energy businesses.
Without the written consent of the Chairman of the
Board, the Executive will not, during and for three years after
the Term of Employment, (i) disclose any Confidential Information
and Trade Secrets of the Company or any Affiliate of the Company
to any Person (other than the Company, directors, officers or
employees of the Company, its Affiliates or duly authorized
agents, attorneys or other representatives thereof), or (ii)
otherwise make use of any Confidential Information and Trade
Secrets other than in connection with authorized dealings with or
by the Company and its Affiliates.
For a period of three years after the Term of
Employment, the Executive shall neither directly nor indirectly
solicit, on behalf of another employer, the employment of, or
hire or cause another employer to hire, any person who is then
currently employed by the Company or an Affiliate thereof, or
otherwise induce, on behalf of another employer, such person to
leave the employment of the Company or an Affiliate thereof
without the prior written approval of the Chairman of the Board.
The Executive will hold, on behalf of the Company
and its Affiliates and as the property of the Company and its
Affiliates, all memoranda, manuals, books, papers, letters,
documents, computer discs, data and software and other similar
property obtained during the course of his employment by the
Company or its Affiliates and relating to the Company's or its
Affiliates business, and will return such property to the Company
or its Affiliates at any time upon demand by the Chairman of the
Board and, in any event, within five calendar days after the end
of the Term of Employment.
During the Term of Employment, Executive agrees to
comply in all material respects with the Company's Policy of
Business Conduct attached hereto as Exhibit A and to deliver with
the execution of this Agreement an executed Certificate of
Compliance with respect thereto.
If any of the provisions of, or covenants
contained in, this Section 6 are hereafter construed to be
invalid or unenforceable in any jurisdiction, the same shall not
affect the remainder of the provisions or the enforceability
thereof in any other jurisdiction, which shall be given full
effect, without regard to the invalidity or unenforceability in
such other jurisdiction. If any of the provisions of, or
covenants contained in, this Section 6 are held to be
unenforceable in any jurisdiction because of the duration or
geographical scope thereof, the parties agree that the court
making such determination shall have the power to reduce the
duration or geographical scope of such provision or covenant and,
in its reduced form, such provision or covenant shall be
enforceable; provided, however, that the determination of such
court shall not affect the enforceability of this Section 6 in
any other jurisdiction.
Section Termination of Employment.
The employment of the Executive under this
Agreement will terminate on the earliest of: (i) written notice
by the Executive of his resignation other than for Good Reason;
(ii) the day the Company gives to the Executive written notice of
termination without Cause; (iii) the day the Company gives to the
Executive written notice of termination for Cause; (iv) the
Permanent Disability of the Executive; (v) the death of the
Executive; or (vi) written notice by the Executive of his
resignation for Good Reason.
If the employment of the Executive is terminated
under this Agreement for any reason whatsoever, the obligations
of the Executive under Section 6 will remain in full force and
effect to the extent provided therein, and the termination will
not abrogate any rights or remedies of the Company or the
Executive with respect to any breach of the Agreement, except as
expressly provided in Section 8.
Section Payment Upon Termination.
If the employment of the Executive is terminated
pursuant to subsections (i) or (iii) of Section 7(a), the Company
will pay to the Executive, within 30 calendar days, any base
salary and reimbursable expenses pursuant to Section 4(a) and
Section 4(d) which are accrued but unpaid through the Termination
Date.
If the employment of the Executive is terminated pursuant to
subsections (ii), (iv) or (v) of Section 7(a) prior to a Change
in Control, the Company will pay the Executive, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, (i) within 30 calendar
days, any base salary and reimbursable expenses which are accrued
and unpaid through such date, (ii) commencing one month after the
month of his Termination Date, 24 monthly payments each equal to
1/24 of a sum equal to twice his annual base salary then in
effect pursuant to Section 4 and (iii) commencing one month after
the month of his Termination Date, 24 monthly payments each equal
to 1/24 of a sum equal to twice the average of his prior three
years incentive bonuses (with any such year in which no bonus was
paid included in such three year average as a zero). In
addition, in the event of any such termination, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, the Company agrees that
(x) the Company stock options previously granted to Executive
will continue to vest according to their terms within such next
24 months (beginning with the month following the month in which
the Termination Date occurs, after which time the unvested
remainder will lapse) and such vested options may be exercised
within the remaining term of such options as provided in the
respective option agreements, and (y) the Company shall continue
in effect for Executive, for a period of twelve months after the
date of any such termination, the life insurance, medical
benefits, dental benefits and disability plan available to the
Executive and his dependents on the date of such termination,
subject to such employee contributions and other terms and
conditions as are applicable to active employees generally and
subject to subsequent modification or termination of such plans
to the extent such subsequent actions are also applicable to
active employees generally; provided that such plan benefits
shall terminate earlier on the date, if any, that comparable
benefits are made available to the Executive by any new employer.
If the employment of the Executive is terminated
on or after a Change in Control pursuant to subsections (ii),
(iv), (v) or (vi) of Section 7(a), the Executive shall receive
the same payments, additional option vesting and benefits
continuation described in Section 8(b) hereof, except that the
monthly payments described in clauses (ii) and (iii) of the first
sentence of Section 8(b) shall be aggregated and paid to
Executive in a single lump sum without any discount to reflect
present value.
Sections 8(b) and 8(c) hereof notwithstanding, in
the event that the payments due to the Executive under this
Agreement, whether alone or together with payments due under any
plan, program, or arrangement maintained by the Company
(collectively, "Payments"), constitute an "excess parachute
payment" (within the meaning of Section 280G(b)(1) of the Code),
the Payments shall be reduced by the minimum possible amount so
that their aggregate present value equals $1.00 less than three
times the Executive's "base amount" (within the meaning of
Section 280G(b)(3)(A) of the Code). The Company's independent
auditors shall determine whether a reduction in Payments shall be
required pursuant to this Section 8(d), and shall determine the
optimal method and order for reduction of Payments so as to
maximize the economic benefits accruing to the Executive in
respect of the Payments.
Section Remedies.
The Company will be entitled, if it elects, to
enjoin any breach or threatened breach of, or enforce the
specific performance of, the obligations of the Executive under
Sections 3 or 6, without showing any actual damage or that
monetary damages would be inadequate. Any such equitable remedy
will not be the sole and exclusive remedy for any such breach,
and the Company may pursue other remedies for such a breach.
Any court proceeding to enforce this Agreement may
be commenced in federal courts, or in the absence of federal
jurisdiction the state courts, located in Omaha, Nebraska. The
parties submit to the jurisdiction of such courts and waive any
objection which they may have to pursuit of any such proceeding
in any such court.
Except to the extent that the Company elects to
seek injunctive relief in accordance with subsection 9 (a), any
controversy or claim arising out of or relating to this Agreement
or the validity, interpretation, enforceability or breach of this
Agreement will be submitted to arbitration in Omaha, Nebraska, in
accordance with the then existing rules of the American
Arbitration Association, and judgment upon the award rendered in
any such arbitration may be entered in any court having
jurisdiction.
Section Assignment. Neither the Company nor the Executive
may sell, transfer or otherwise assign their rights, or delegate
their obligations, under this Agreement, provided that the
Company shall require any successor to all or substantially all
of the business, stock or assets of the Company to expressly
assume the Company's rights and obligations hereunder.
Section Unfunded Benefits. All compensation and other
benefits payable to the Executive under this Agreement will be
unfunded, and neither the Company nor any Affiliate of the
Company will segregate any assets to satisfy any obligation of
the Company under this Agreement. The obligations of the Company
to the Executive are not the subject of any guarantee or other
assurance of any Person other than the Company.
Section Severability. Should any provision, paragraph,
clause or portion thereof of this Agreement be declared or be
determined by any court or arbitrator of competent jurisdiction
to be illegal, unenforceable or invalid, the validity or
enforceability of the remaining parts, terms or provisions shall
not be affected thereby and said illegal or invalid part, term or
provision shall be deemed not to be a part of this Agreement.
Alternatively, the court or arbitrator having jurisdiction shall
have the power to modify such illegal, unenforceable or invalid
provision so that it will be valid and enforceable, and, in any
case, the remaining provisions of this Agreement shall remain in
full force and effect.
Section Miscellaneous.
This Agreement may be amended or modified only by
a writing executed by the Executive and the Company.
This Agreement will be governed by and construed
in accordance with the internal laws of the State of Nebraska.
This Agreement constitutes the entire agreement of
the Company and the Executive with respect to the matters set
forth in this Agreement and supersedes any and all other
agreements between the Company and the Executive relating to
those matters.
Any notice required to be given pursuant to this
Agreement will be deemed given (i) when delivered in person or by
courier or (ii) on the third calendar day after it is sent by
facsimile, with written confirmation of receipt, if to the
Company, to: Chairman of the Board, CalEnergy Company, Inc. at
302 South 36th Street, Suite 400, Omaha, Nebraska 68131, fax
number (402) 231-1658, and, if to the Executive, at 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, fax number (402)
231-1658 or to such other address as may be subsequently
designated by the Company or the Executive in writing to the
other party.
A waiver by a party of a breach of this Agreement
will not constitute a waiver of any other breach, prior or
subsequent, of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
entered into this Agreement as of August 6, 1996.
CALENERGY COMPANY, INC.
By:/S/____________________________
David L. Sokol
Chairman of the Board
EXECUTIVE:
By:/S/____________________________
Gregory E. Abel
EXHIBIT A
Defined Terms
"Affiliate" means, with respect to a Person, (a) any Person
directly or indirectly owning, controlling, or holding power to
vote 10% or more of the outstanding voting securities of the
Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by the Person; (c) any Person directly or
indirectly controlling, controlled by or under common control
with, the Person; and (d) any officer or director of the Person,
or of any Person directly or indirectly controlling the Person,
controlled by the Person or under common control with the Person.
As used in this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person.
"Agreement" means this Employment Agreement dated as of
August 6, 1996, by and between the Company and the Executive, as
it may be amended from time to time in accordance with its terms.
"Board" means the Board of Directors of the Company.
"Cause" means any or all of the following:
(a) the willful and continued failure by the Executive to
perform substantially the services and duties contemplated by
this Agreement (other than any such failure resulting from the
Executive's incapacity due to disability);
(b) the willful engaging by the Executive in gross misconduct
which is injurious to the business or reputation of the Company
in any material respect;
(c) the gross negligence of the Executive in performing the
services contemplated by this Agreement which is injurious to the
business or reputation of the Company in any material respect; or
(d) Executive's conviction of, or pleading guilty or no contest
to, a felony involving moral turpitude.
"Change in Control" means (i) approval by the Company's
stockholders of (A) the dissolution of the Company, (B) a merger
or consolidation of the Company where the Company is not the
surviving corporation, except for a transaction the principal
purpose of which is to change the state in which the Company is
incorporated, (C) a reverse merger in which the Company survives
as an entity but in which securities possessing more than 50
percent of the total combined voting power of the Company's
securities are transferred to a person or persons different from
those who hold such securities immediately prior to the merger or
(D) the sale or other disposition of all or substantially all of
the Company's assets; (ii) the direct or indirect acquisition by
any Person or related group of Persons (other than an acquisition
from or by the Company or by a Company-sponsored employee benefit
plan or by a Person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities
possessing more than 50 percent of the total combined voting
power of the Company's outstanding voting securities; or (iii) a
change in the composition of the Board over a period of thirty-
six (36) months or less such that a majority of the Board members
cease, by reason of one or more contested elections for Board
membership or by one or more actions by written consent of
stockholders, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means CalEnergy Company, Inc., a Delaware
corporation, and any successor or assign permitted under the
Agreement.
"Disability" means, with respect to the Executive, that the
Executive has become physically or mentally incapacitated or
disabled so that, in the reasonable judgment of majority of the
Chairman of the Board, he is unable to perform his duties under
this Agreement and such other services as he performed on behalf
of the Company before incurring such incapacity or disability.
"Good Reason" means any of the following events, but only if
such event(s) occur on, after or in connection with a Change in
Control: (i) the failure by the Company to pay to the Executive,
for a material period of time and in a material amount,
compensation due and payable by the Company under Section 4(a) of
this Agreement; (ii) any reduction by the Company of the title,
office, duties or authority of the Executive in any material
respect; or (iii) any relocation of the Executive's primary place
of employment to a location more than 25 miles from Omaha,
Nebraska.
"Permanent Disability" means a Disability which has
continued for at least six consecutive calendar months.
"Person" means any natural person, general partnership,
limited partnership, corporation, joint venture, trust, business
trust, or other entity.
"Term of Employment" means the period of time beginning on
August 6, 1996, and ending on the fifth anniversary of such date,
unless earlier terminated pursuant to Section 7(a) or
automatically extended pursuant to the following sentence. The
Term of Employment will be automatically extended for one year on
each anniversary of the date of this Agreement beginning on the
fifth anniversary unless the Executive has given the Company, or
the Company has given the Executive, a notice declining automatic
extension at least 365 calendar days before the anniversary.
"Termination Date" means the date of termination of
employment of the Executive pursuant to Section 7 of this
Agreement.
4-015674.01
-3-
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of August 6,
1996, by and between CalEnergy Company, Inc. a Delaware
corporation (the "Company"), and John G. Sylvia (the
"Executive").
RECITALS
The Company desires to employ the Executive as its Senior
Vice President, Chief Financial Officer and Treasurer on the
terms set forth in this Agreement, and the Executive desires to
accept such employment.
Accordingly, the Company and the Executive agree as follows:
AGREEMENT
Section Defined Terms. Terms used but not defined in this
Agreement will have the meanings ascribed to them in Exhibit A to
this Agreement.
Section Employment.
The Company will employ the Executive as, and the
Executive will act as, the Senior Vice President, Chief Financial
Officer and Treasurer of the Company, subject to and upon the
terms set forth in this Agreement, for the Term of Employment.
The Executive's primary place of employment will
be Omaha, Nebraska or such other place as is determined, prior to
a Change in Control, in good faith by the Chairman of the Board
and Chief Executive Officer of the Company (hereinafter referred
to as the "Chairman of the Board") to be in the best interests of
the Company.
Section Duties.
The Executive (i) will perform and discharge the
duties incident to and consistent with his title of Senior Vice
President, Chief Financial Officer and Treasurer, and (ii) will
perform and discharge such other duties, and will have such other
authority, as are delegated to him by the Chairman of the Board.
In performing such duties, the Executive will report directly to
, and be subject to the direction of, the Chairman of the Board.
Prior to a Change in Control, the Executive's title and duties
may in good faith be modified by the Chairman of the Board.
The Executive will act, without any compensation
in addition to the compensation payable pursuant to this
Agreement, as an officer or member of the board of directors of
any subsidiary of the Company, if so appointed or elected.
During the Term of Employment, the Executive (i)
will devote his entire time, attention and energies during normal
business hours to the business of the Company and its
subsidiaries and (ii) will not, without the written consent of
the Chairman of the Board, perform any services for any other
Person or engage in any other business or professional activity,
whether or not performed or engaged in for profit.
Notwithstanding subsection 3 (c), the Executive,
without the consent of the Chairman of the Board, may (i)
purchase securities issued by, or otherwise passively invest his
personal or family assets in, any other company or business
within the constraints imposed by the Policy of Business Conduct
referred to below, and (ii) engage in governmental, political,
educational or charitable activities, but only to the extent that
those activities (A) are not inconsistent with any direction of
the Chairman of the Board or any duties under this Agreement, and
(B) do not interfere with the devotion by the Executive of his
entire time, attention and energies during normal business hours
to the business of the Company.
Section Compensation.
During the Term of Employment, the Company will
pay the Executive a base salary at an annual rate of $160,000, in
substantially equal periodic payments in accordance with the
Company's practices for executive employees, as determined from
time to time by the Chairman of the Board.
The Chairman of the Board will review the salary
payable to the Executive at least annually beginning in the
fourth fiscal quarter of 1996. The Chairman of the Board, in his
discretion, may increase the salary of the Executive from time to
time, but may not reduce the salary of the Executive below the
amount set forth in subsection 4(a) above.
During the Term of Employment, the Executive shall
be eligible for consideration for an annual incentive merit
bonus, for the Executive's performance during the preceding
fiscal year of the Company in an amount determined by the
Chairman of the Board in his discretion, by reference to the
accomplishment by the Executive of goals established by the
Chairman of the Board for the related fiscal year
The Company will reimburse the Executive, subject
to compliance by the Executive with the Company's customary
reimbursement practices, for all reasonable and necessary out-of-
pocket expenses incurred by the Executive on behalf of the
Company in the course of its business.
The Company may reduce any payments made to the
Executive under this Agreement by any required federal, state or
local government withholdings or deductions for taxes or similar
charges, or otherwise pursuant to law, regulation or order.
Any base salary payable to the Executive for any
period of employment of less than one year during the Term of
Employment will be reduced to reflect the actual number of days
of employment during the period except as provided in Sections
8(b) and 8(c).
Section Other Benefits.
During the Term of Employment, the Executive and
his dependents may participate in and receive benefits under any
employee benefit plan which the Company makes generally available
to its employees and their families, including any pension, life
insurance, medical benefits, dental benefits or disability plan,
but only to the extent that the Executive or his dependents
otherwise satisfies the standards established for participation
in the plan. The terms of Executive's existing option
agreements, as amended, remain unaffected hereby, except as set
forth in Sections 8(b) and 8(c) hereof.
The Executive may take up to three weeks of
vacation during each full calendar year during the Term of
Employment at a time mutually convenient to the Executive and the
Company, without loss of compensation or other benefits under
this Agreement.
Section Confidentiality and Post-Employment Restrictions.
The Executive acknowledges that the Company and
its Affiliates have confidential information and trade secrets,
whether written or unwritten, with respect to carrying on their
business, including sensitive marketing, bidding, technological
and engineering information and data, names of past, present and
prospective customers or partners of and vendors or suppliers to
the Company and its Affiliates, working relationships with
governmental agencies and officials, methods of pricing contracts
and income and expenses associated therewith, the international
business strategy and relative ranking of opportunities in
various countries, negotiated prices and offers outstanding,
credit terms and status of accounts and the terms or
circumstances of any current or prospective business arrangements
between the Company and its Affiliates and any third parties
("Confidential Information and Trade Secrets"). As used in this
Agreement, the term Confidential Information and Trade Secrets
does not include (i) information which becomes generally
available to the public other than as a result of a disclosure by
the Executive, (ii) information which becomes available to the
Executive on a nonconfidential basis from a source other than the
Company or its Affiliates, or (iii) information known to the
Executive prior to any disclosure to him by the Company or its
Affiliates. The Executive further acknowledges that the
Executive possesses a high degree of knowledge of the independent
energy industry and, in particular, has committed to a long-
standing relationship with the Company and its Affiliates as an
employee and officer, which has allowed, and will continue to
allow, him access to the Company's Confidential Information and
Trade Secrets. Accordingly, any employment by the Executive with
another employer in the independent energy industry or
participation by him as a substantial investor in any such
industry may necessarily involve disclosure of the Company's
Confidential Information and Trade Secrets. Consequently, the
Executive agrees that, if he voluntarily resigns his employment
with the Company for any reason other than (i) a breach of this
Agreement by the Company, or (ii) for Good Reason, he shall not
at any time during the two-year period after such resignation,
directly or indirectly accept employment by or invest in (except
as a passive investor in a public corporation or in a publicly
issued partnership interest which, in either event, would not
exceed an ownership interest of 2% of the outstanding equity or
partnership interest) in any person, firm, corporation,
partnership, joint venture or business which is primarily engaged
in the production or marketing of steam or electrical energy or
which otherwise directly competes with the business of the
Company or its controlled Affiliates and, further, the Executive
agrees that, to avoid the risk of disclosing or improperly using
Confidential Information or Trade Secrets, he shall not directly,
or indirectly, provide consulting or advisory services to any of
such independent energy businesses.
Without the written consent of the Chairman of the
Board, the Executive will not, during and for three years after
the Term of Employment, (i) disclose any Confidential Information
and Trade Secrets of the Company or any Affiliate of the Company
to any Person (other than the Company, directors, officers or
employees of the Company, its Affiliates or duly authorized
agents, attorneys or other representatives thereof), or (ii)
otherwise make use of any Confidential Information and Trade
Secrets other than in connection with authorized dealings with or
by the Company and its Affiliates.
For a period of three years after the Term of
Employment, the Executive shall neither directly nor indirectly
solicit, on behalf of another employer, the employment of, or
hire or cause another employer to hire, any person who is then
currently employed by the Company or an Affiliate thereof, or
otherwise induce, on behalf of another employer, such person to
leave the employment of the Company or an Affiliate thereof
without the prior written approval of the Chairman of the Board.
The Executive will hold, on behalf of the Company
and its Affiliates and as the property of the Company and its
Affiliates, all memoranda, manuals, books, papers, letters,
documents, computer discs, data and software and other similar
property obtained during the course of his employment by the
Company or its Affiliates and relating to the Company's or its
Affiliates business, and will return such property to the Company
or its Affiliates at any time upon demand by the Chairman of the
Board and, in any event, within five calendar days after the end
of the Term of Employment.
During the Term of Employment, Executive agrees to
comply in all material respects with the Company's Policy of
Business Conduct attached hereto as Exhibit A and to deliver with
the execution of this Agreement an executed Certificate of
Compliance with respect thereto.
If any of the provisions of, or covenants
contained in, this Section 6 are hereafter construed to be
invalid or unenforceable in any jurisdiction, the same shall not
affect the remainder of the provisions or the enforceability
thereof in any other jurisdiction, which shall be given full
effect, without regard to the invalidity or unenforceability in
such other jurisdiction. If any of the provisions of, or
covenants contained in, this Section 6 are held to be
unenforceable in any jurisdiction because of the duration or
geographical scope thereof, the parties agree that the court
making such determination shall have the power to reduce the
duration or geographical scope of such provision or covenant and,
in its reduced form, such provision or covenant shall be
enforceable; provided, however, that the determination of such
court shall not affect the enforceability of this Section 6 in
any other jurisdiction.
Section Termination of Employment.
The employment of the Executive under this
Agreement will terminate on the earliest of: (i) written notice
by the Executive of his resignation other than for Good Reason;
(ii) the day the Company gives to the Executive written notice of
termination without Cause; (iii) the day the Company gives to the
Executive written notice of termination for Cause; (iv) the
Permanent Disability of the Executive; (v) the death of the
Executive; or (vi) written notice by the Executive of his
resignation for Good Reason.
If the employment of the Executive is terminated
under this Agreement for any reason whatsoever, the obligations
of the Executive under Section 6 will remain in full force and
effect to the extent provided therein, and the termination will
not abrogate any rights or remedies of the Company or the
Executive with respect to any breach of the Agreement, except as
expressly provided in Section 8.
Section Payment Upon Termination.
If the employment of the Executive is terminated
pursuant to subsections (i) or (iii) of Section 7(a), the Company
will pay to the Executive, within 30 calendar days, any base
salary and reimbursable expenses pursuant to Section 4(a) and
Section 4(d) which are accrued but unpaid through the Termination
Date.
If the employment of the Executive is terminated pursuant to
subsections (ii), (iv) or (v) of Section 7(a) prior to a Change
in Control, the Company will pay the Executive, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, (i) within 30 calendar
days, any base salary and reimbursable expenses which are accrued
and unpaid through such date, (ii) commencing one month after the
month of his Termination Date, 24 monthly payments each equal to
1/24 of a sum equal to twice his annual base salary then in
effect pursuant to Section 4 and (iii) commencing one month after
the month of his Termination Date, 24 monthly payments each equal
to 1/24 of a sum equal to twice the average of his prior three
years incentive bonuses (with any such year in which no bonus was
paid included in such three year average as a zero). In
addition, in the event of any such termination, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, the Company agrees that
(x) the Company stock options previously granted to Executive
will continue to vest according to their terms within such next
24 months (beginning with the month following the month in which
the Termination Date occurs, after which time the unvested
remainder will lapse) and such vested options may be exercised
within the remaining term of such options as provided in the
respective option agreements, and (y) the Company shall continue
in effect for Executive, for a period of twelve months after the
date of any such termination, the life insurance, medical
benefits, dental benefits and disability plan available to the
Executive and his dependents on the date of such termination,
subject to such employee contributions and other terms and
conditions as are applicable to active employees generally and
subject to subsequent modification or termination of such plans
to the extent such subsequent actions are also applicable to
active employees generally; provided that such plan benefits
shall terminate earlier on the date, if any, that comparable
benefits are made available to the Executive by any new employer.
If the employment of the Executive is terminated
on or after a Change in Control pursuant to subsections (ii),
(iv), (v) or (vi) of Section 7(a), the Executive shall receive
the same payments, additional option vesting and benefits
continuation described in Section 8(b) hereof, except that the
monthly payments described in clauses (ii) and (iii) of the first
sentence of Section 8(b) shall be aggregated and paid to
Executive in a single lump sum without any discount to reflect
present value.
Sections 8(b) and 8(c) hereof notwithstanding, in
the event that the payments due to the Executive under this
Agreement, whether alone or together with payments due under any
plan, program, or arrangement maintained by the Company
(collectively, "Payments"), constitute an "excess parachute
payment" (within the meaning of Section 280G(b)(1) of the Code),
the Payments shall be reduced by the minimum possible amount so
that their aggregate present value equals $1.00 less than three
times the Executive's "base amount" (within the meaning of
Section 280G(b)(3)(A) of the Code). The Company's independent
auditors shall determine whether a reduction in Payments shall be
required pursuant to this Section 8(d), and shall determine the
optimal method and order for reduction of Payments so as to
maximize the economic benefits accruing to the Executive in
respect of the Payments.
Section Remedies.
The Company will be entitled, if it elects, to
enjoin any breach or threatened breach of, or enforce the
specific performance of, the obligations of the Executive under
Sections 3 or 6, without showing any actual damage or that
monetary damages would be inadequate. Any such equitable remedy
will not be the sole and exclusive remedy for any such breach,
and the Company may pursue other remedies for such a breach.
Any court proceeding to enforce this Agreement may
be commenced in federal courts, or in the absence of federal
jurisdiction the state courts, located in Omaha, Nebraska. The
parties submit to the jurisdiction of such courts and waive any
objection which they may have to pursuit of any such proceeding
in any such court.
Except to the extent that the Company elects to
seek injunctive relief in accordance with subsection 9 (a), any
controversy or claim arising out of or relating to this Agreement
or the validity, interpretation, enforceability or breach of this
Agreement will be submitted to arbitration in Omaha, Nebraska, in
accordance with the then existing rules of the American
Arbitration Association, and judgment upon the award rendered in
any such arbitration may be entered in any court having
jurisdiction.
Section Assignment. Neither the Company nor the Executive
may sell, transfer or otherwise assign their rights, or delegate
their obligations, under this Agreement, provided that the
Company shall require any successor to all or substantially all
of the business, stock or assets of the Company to expressly
assume the Company's rights and obligations hereunder.
Section Unfunded Benefits. All compensation and other
benefits payable to the Executive under this Agreement will be
unfunded, and neither the Company nor any Affiliate of the
Company will segregate any assets to satisfy any obligation of
the Company under this Agreement. The obligations of the Company
to the Executive are not the subject of any guarantee or other
assurance of any Person other than the Company.
Section Severability. Should any provision, paragraph,
clause or portion thereof of this Agreement be declared or be
determined by any court or arbitrator of competent jurisdiction
to be illegal, unenforceable or invalid, the validity or
enforceability of the remaining parts, terms or provisions shall
not be affected thereby and said illegal or invalid part, term or
provision shall be deemed not to be a part of this Agreement.
Alternatively, the court or arbitrator having jurisdiction shall
have the power to modify such illegal, unenforceable or invalid
provision so that it will be valid and enforceable, and, in any
case, the remaining provisions of this Agreement shall remain in
full force and effect.
Section Miscellaneous.
This Agreement may be amended or modified only by
a writing executed by the Executive and the Company.
This Agreement will be governed by and construed
in accordance with the internal laws of the State of Nebraska.
This Agreement constitutes the entire agreement of
the Company and the Executive with respect to the matters set
forth in this Agreement and supersedes any and all other
agreements between the Company and the Executive relating to
those matters.
Any notice required to be given pursuant to this
Agreement will be deemed given (i) when delivered in person or by
courier or (ii) on the third calendar day after it is sent by
facsimile, with written confirmation of receipt, if to the
Company, to: Chairman of the Board, CalEnergy Company, Inc. at
302 South 36th Street, Suite 400, Omaha, Nebraska 68131, fax
number (402) 231-1658, and, if to the Executive, at 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, fax number (402)
231-1658 or to such other address as may be subsequently
designated by the Company or the Executive in writing to the
other party.
A waiver by a party of a breach of this Agreement
will not constitute a waiver of any other breach, prior or
subsequent, of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
entered into this Agreement as of August 6, 1996.
CALENERGY COMPANY, INC.
By:/S/____________________________
David L. Sokol
Chairman of the Board
EXECUTIVE:
By:/S/____________________________
John G. Sylvia
EXHIBIT A
Defined Terms
"Affiliate" means, with respect to a Person, (a) any Person
directly or indirectly owning, controlling, or holding power to
vote 10% or more of the outstanding voting securities of the
Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by the Person; (c) any Person directly or
indirectly controlling, controlled by or under common control
with, the Person; and (d) any officer or director of the Person,
or of any Person directly or indirectly controlling the Person,
controlled by the Person or under common control with the Person.
As used in this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person.
"Agreement" means this Employment Agreement dated as of
August 6, 1996, by and between the Company and the Executive, as
it may be amended from time to time in accordance with its terms.
"Board" means the Board of Directors of the Company.
"Cause" means any or all of the following:
(a) the willful and continued failure by the Executive to
perform substantially the services and duties contemplated by
this Agreement (other than any such failure resulting from the
Executive's incapacity due to disability);
(b) the willful engaging by the Executive in gross misconduct
which is injurious to the business or reputation of the Company
in any material respect;
(c) the gross negligence of the Executive in performing the
services contemplated by this Agreement which is injurious to the
business or reputation of the Company in any material respect; or
(d) Executive's conviction of, or pleading guilty or no contest
to, a felony involving moral turpitude.
"Change in Control" means (i) approval by the Company's
stockholders of (A) the dissolution of the Company, (B) a merger
or consolidation of the Company where the Company is not the
surviving corporation, except for a transaction the principal
purpose of which is to change the state in which the Company is
incorporated, (C) a reverse merger in which the Company survives
as an entity but in which securities possessing more than 50
percent of the total combined voting power of the Company's
securities are transferred to a person or persons different from
those who hold such securities immediately prior to the merger or
(D) the sale or other disposition of all or substantially all of
the Company's assets; (ii) the direct or indirect acquisition by
any Person or related group of Persons (other than an acquisition
from or by the Company or by a Company-sponsored employee benefit
plan or by a Person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities
possessing more than 50 percent of the total combined voting
power of the Company's outstanding voting securities; or (iii) a
change in the composition of the Board over a period of thirty-
six (36) months or less such that a majority of the Board members
cease, by reason of one or more contested elections for Board
membership or by one or more actions by written consent of
stockholders, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means CalEnergy Company, Inc., a Delaware
corporation, and any successor or assign permitted under the
Agreement.
"Disability" means, with respect to the Executive, that the
Executive has become physically or mentally incapacitated or
disabled so that, in the reasonable judgment of majority of the
Chairman of the Board, he is unable to perform his duties under
this Agreement and such other services as he performed on behalf
of the Company before incurring such incapacity or disability.
"Good Reason" means any of the following events, but only if
such event(s) occur on, after or in connection with a Change in
Control: (i) the failure by the Company to pay to the Executive,
for a material period of time and in a material amount,
compensation due and payable by the Company under Section 4(a) of
this Agreement; (ii) any reduction by the Company of the title,
office, duties or authority of the Executive in any material
respect; or (iii) any relocation of the Executive's primary place
of employment to a location more than 25 miles from Omaha,
Nebraska.
"Permanent Disability" means a Disability which has
continued for at least six consecutive calendar months.
"Person" means any natural person, general partnership,
limited partnership, corporation, joint venture, trust, business
trust, or other entity.
"Term of Employment" means the period of time beginning on
August 6, 1996, and ending on the fifth anniversary of such date,
unless earlier terminated pursuant to Section 7(a) or
automatically extended pursuant to the following sentence. The
Term of Employment will be automatically extended for one year on
each anniversary of the date of this Agreement beginning on the
fifth anniversary unless the Executive has given the Company, or
the Company has given the Executive, a notice declining automatic
extension at least 365 calendar days before the anniversary.
"Termination Date" means the date of termination of
employment of the Executive pursuant to Section 7 of this
Agreement.
-8-
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of August 6,
1996, by and between CalEnergy Company, Inc. a Delaware
corporation (the "Company"), and Steven A. McArthur (the
"Executive").
RECITALS
The Company desires to employ the Executive as its Senior
Vice President, General Counsel and Secretary on the terms set
forth in this Agreement, and the Executive desires to accept such
employment.
Accordingly, the Company and the Executive agree as follows:
AGREEMENT
Section Defined Terms. Terms used but not defined in this
Agreement will have the meanings ascribed to them in Exhibit A to
this Agreement.
Section Employment.
The Company will employ the Executive as, and the
Executive will act as, the Senior Vice President, General Counsel
and Secretary of the Company, subject to and upon the terms set
forth in this Agreement, for the Term of Employment.
The Executive's primary place of employment will
be Omaha, Nebraska or such other place as is determined, prior to
a Change in Control, in good faith by the Chairman of the Board
and Chief Executive Officer of the Company (hereinafter referred
to as the "Chairman of the Board") to be in the best interests of
the Company.
Section Duties.
The Executive (i) will perform and discharge the
duties incident to and consistent with his title of Senior Vice
President, General Counsel and Secretary, and (ii) will perform
and discharge such other duties, and will have such other
authority, as are delegated to him by the Chairman of the Board.
In performing such duties, the Executive will report directly to
, and be subject to the direction of, the Chairman of the Board.
Prior to a Change in Control, the Executive's title and duties
may in good faith be modified by the Chairman of the Board.
The Executive will act, without any compensation
in addition to the compensation payable pursuant to this
Agreement, as an officer or member of the board of directors of
any subsidiary of the Company, if so appointed or elected.
During the Term of Employment, the Executive (i)
will devote his entire time, attention and energies during normal
business hours to the business of the Company and its
subsidiaries and (ii) will not, without the written consent of
the Chairman of the Board, perform any services for any other
Person or engage in any other business or professional activity,
whether or not performed or engaged in for profit.
Notwithstanding subsection 3 (c), the Executive,
without the consent of the Chairman of the Board, may (i)
purchase securities issued by, or otherwise passively invest his
personal or family assets in, any other company or business
within the constraints imposed by the Policy of Business Conduct
referred to below, and (ii) engage in governmental, political,
educational or charitable activities, but only to the extent that
those activities (A) are not inconsistent with any direction of
the Chairman of the Board or any duties under this Agreement, and
(B) do not interfere with the devotion by the Executive of his
entire time, attention and energies during normal business hours
to the business of the Company.
Section Compensation.
During the Term of Employment, the Company will
pay the Executive a base salary at an annual rate of $164,000, in
substantially equal periodic payments in accordance with the
Company's practices for executive employees, as determined from
time to time by the Chairman of the Board.
The Chairman of the Board will review the salary
payable to the Executive at least annually beginning in the
fourth fiscal quarter of 1996. The Chairman of the Board, in his
discretion, may increase the salary of the Executive from time to
time, but may not reduce the salary of the Executive below the
amount set forth in subsection 4(a) above.
During the Term of Employment, the Executive shall
be eligible for consideration for an annual incentive merit
bonus, for the Executive's performance during the preceding
fiscal year of the Company in an amount determined by the
Chairman of the Board in his discretion, by reference to the
accomplishment by the Executive of goals established by the
Chairman of the Board for the related fiscal year
The Company will reimburse the Executive, subject
to compliance by the Executive with the Company's customary
reimbursement practices, for all reasonable and necessary out-of-
pocket expenses incurred by the Executive on behalf of the
Company in the course of its business.
The Company may reduce any payments made to the
Executive under this Agreement by any required federal, state or
local government withholdings or deductions for taxes or similar
charges, or otherwise pursuant to law, regulation or order.
Any base salary payable to the Executive for any
period of employment of less than one year during the Term of
Employment will be reduced to reflect the actual number of days
of employment during the period except as provided in Sections
8(b) and 8(c).
Section Other Benefits.
During the Term of Employment, the Executive and
his dependents may participate in and receive benefits under any
employee benefit plan which the Company makes generally available
to its employees and their families, including any pension, life
insurance, medical benefits, dental benefits or disability plan,
but only to the extent that the Executive or his dependents
otherwise satisfies the standards established for participation
in the plan. The terms of Executive's existing option
agreements, as amended, remain unaffected hereby, except as set
forth in Sections 8(b) and 8(c) hereof.
The Executive may take up to three weeks of
vacation during each full calendar year during the Term of
Employment at a time mutually convenient to the Executive and the
Company, without loss of compensation or other benefits under
this Agreement.
Section Confidentiality and Post-Employment Restrictions.
The Executive acknowledges that the Company and
its Affiliates have confidential information and trade secrets,
whether written or unwritten, with respect to carrying on their
business, including sensitive marketing, bidding, technological
and engineering information and data, names of past, present and
prospective customers or partners of and vendors or suppliers to
the Company and its Affiliates, working relationships with
governmental agencies and officials, methods of pricing contracts
and income and expenses associated therewith, the international
business strategy and relative ranking of opportunities in
various countries, negotiated prices and offers outstanding,
credit terms and status of accounts and the terms or
circumstances of any current or prospective business arrangements
between the Company and its Affiliates and any third parties
("Confidential Information and Trade Secrets"). As used in this
Agreement, the term Confidential Information and Trade Secrets
does not include (i) information which becomes generally
available to the public other than as a result of a disclosure by
the Executive, (ii) information which becomes available to the
Executive on a nonconfidential basis from a source other than the
Company or its Affiliates, or (iii) information known to the
Executive prior to any disclosure to him by the Company or its
Affiliates. The Executive further acknowledges that the
Executive possesses a high degree of knowledge of the independent
energy industry and, in particular, has committed to a long-
standing relationship with the Company and its Affiliates as an
employee and officer, which has allowed, and will continue to
allow, him access to the Company's Confidential Information and
Trade Secrets. Accordingly, any employment by the Executive with
another employer in the independent energy industry or
participation by him as a substantial investor in any such
industry may necessarily involve disclosure of the Company's
Confidential Information and Trade Secrets. Consequently, the
Executive agrees that, if he voluntarily resigns his employment
with the Company for any reason other than (i) a breach of this
Agreement by the Company, or (ii) for Good Reason, he shall not
at any time during the two-year period after such resignation,
directly or indirectly accept employment by or invest in (except
as a passive investor in a public corporation or in a publicly
issued partnership interest which, in either event, would not
exceed an ownership interest of 2% of the outstanding equity or
partnership interest) in any person, firm, corporation,
partnership, joint venture or business which is primarily engaged
in the production or marketing of steam or electrical energy or
which otherwise directly competes with the business of the
Company or its controlled Affiliates and, further, the Executive
agrees that, to avoid the risk of disclosing or improperly using
Confidential Information or Trade Secrets, he shall not directly,
or indirectly, provide consulting or advisory services to any of
such independent energy businesses.
Without the written consent of the Chairman of the
Board, the Executive will not, during and for three years after
the Term of Employment, (i) disclose any Confidential Information
and Trade Secrets of the Company or any Affiliate of the Company
to any Person (other than the Company, directors, officers or
employees of the Company, its Affiliates or duly authorized
agents, attorneys or other representatives thereof), or (ii)
otherwise make use of any Confidential Information and Trade
Secrets other than in connection with authorized dealings with or
by the Company and its Affiliates.
For a period of three years after the Term of
Employment, the Executive shall neither directly nor indirectly
solicit, on behalf of another employer, the employment of, or
hire or cause another employer to hire, any person who is then
currently employed by the Company or an Affiliate thereof, or
otherwise induce, on behalf of another employer, such person to
leave the employment of the Company or an Affiliate thereof
without the prior written approval of the Chairman of the Board.
The Executive will hold, on behalf of the Company
and its Affiliates and as the property of the Company and its
Affiliates, all memoranda, manuals, books, papers, letters,
documents, computer discs, data and software and other similar
property obtained during the course of his employment by the
Company or its Affiliates and relating to the Company's or its
Affiliates business, and will return such property to the Company
or its Affiliates at any time upon demand by the Chairman of the
Board and, in any event, within five calendar days after the end
of the Term of Employment.
During the Term of Employment, Executive agrees to
comply in all material respects with the Company's Policy of
Business Conduct attached hereto as Exhibit A and to deliver with
the execution of this Agreement an executed Certificate of
Compliance with respect thereto.
If any of the provisions of, or covenants
contained in, this Section 6 are hereafter construed to be
invalid or unenforceable in any jurisdiction, the same shall not
affect the remainder of the provisions or the enforceability
thereof in any other jurisdiction, which shall be given full
effect, without regard to the invalidity or unenforceability in
such other jurisdiction. If any of the provisions of, or
covenants contained in, this Section 6 are held to be
unenforceable in any jurisdiction because of the duration or
geographical scope thereof, the parties agree that the court
making such determination shall have the power to reduce the
duration or geographical scope of such provision or covenant and,
in its reduced form, such provision or covenant shall be
enforceable; provided, however, that the determination of such
court shall not affect the enforceability of this Section 6 in
any other jurisdiction.
Section Termination of Employment.
The employment of the Executive under this
Agreement will terminate on the earliest of: (i) written notice
by the Executive of his resignation other than for Good Reason;
(ii) the day the Company gives to the Executive written notice of
termination without Cause; (iii) the day the Company gives to the
Executive written notice of termination for Cause; (iv) the
Permanent Disability of the Executive; (v) the death of the
Executive; or (vi) written notice by the Executive of his
resignation for Good Reason.
If the employment of the Executive is terminated
under this Agreement for any reason whatsoever, the obligations
of the Executive under Section 6 will remain in full force and
effect to the extent provided therein, and the termination will
not abrogate any rights or remedies of the Company or the
Executive with respect to any breach of the Agreement, except as
expressly provided in Section 8.
Section Payment Upon Termination.
If the employment of the Executive is terminated
pursuant to subsections (i) or (iii) of Section 7(a), the Company
will pay to the Executive, within 30 calendar days, any base
salary and reimbursable expenses pursuant to Section 4(a) and
Section 4(d) which are accrued but unpaid through the Termination
Date.
If the employment of the Executive is terminated pursuant to
subsections (ii), (iv) or (v) of Section 7(a) prior to a Change
in Control, the Company will pay the Executive, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, (i) within 30 calendar
days, any base salary and reimbursable expenses which are accrued
and unpaid through such date, (ii) commencing one month after the
month of his Termination Date, 24 monthly payments each equal to
1/24 of a sum equal to twice his annual base salary then in
effect pursuant to Section 4 and (iii) commencing one month after
the month of his Termination Date, 24 monthly payments each equal
to 1/24 of a sum equal to twice the average of his prior three
years incentive bonuses (with any such year in which no bonus was
paid included in such three year average as a zero). In
addition, in the event of any such termination, subject to the
Executive's compliance in all material respects with his post-
termination obligations under Section 6, the Company agrees that
(x) the Company stock options previously granted to Executive
will continue to vest according to their terms within such next
24 months (beginning with the month following the month in which
the Termination Date occurs, after which time the unvested
remainder will lapse) and such vested options may be exercised
within the remaining term of such options as provided in the
respective option agreements, and (y) the Company shall continue
in effect for Executive, for a period of twelve months after the
date of any such termination, the life insurance, medical
benefits, dental benefits and disability plan available to the
Executive and his dependents on the date of such termination,
subject to such employee contributions and other terms and
conditions as are applicable to active employees generally and
subject to subsequent modification or termination of such plans
to the extent such subsequent actions are also applicable to
active employees generally; provided that such plan benefits
shall terminate earlier on the date, if any, that comparable
benefits are made available to the Executive by any new employer.
If the employment of the Executive is terminated
on or after a Change in Control pursuant to subsections (ii),
(iv), (v) or (vi) of Section 7(a), the Executive shall receive
the same payments, additional option vesting and benefits
continuation described in Section 8(b) hereof, except that the
monthly payments described in clauses (ii) and (iii) of the first
sentence of Section 8(b) shall be aggregated and paid to
Executive in a single lump sum without any discount to reflect
present value.
Sections 8(b) and 8(c) hereof notwithstanding, in
the event that the payments due to the Executive under this
Agreement, whether alone or together with payments due under any
plan, program, or arrangement maintained by the Company
(collectively, "Payments"), constitute an "excess parachute
payment" (within the meaning of Section 280G(b)(1) of the Code),
the Payments shall be reduced by the minimum possible amount so
that their aggregate present value equals $1.00 less than three
times the Executive's "base amount" (within the meaning of
Section 280G(b)(3)(A) of the Code). The Company's independent
auditors shall determine whether a reduction in Payments shall be
required pursuant to this Section 8(d), and shall determine the
optimal method and order for reduction of Payments so as to
maximize the economic benefits accruing to the Executive in
respect of the Payments.
Section Remedies.
The Company will be entitled, if it elects, to
enjoin any breach or threatened breach of, or enforce the
specific performance of, the obligations of the Executive under
Sections 3 or 6, without showing any actual damage or that
monetary damages would be inadequate. Any such equitable remedy
will not be the sole and exclusive remedy for any such breach,
and the Company may pursue other remedies for such a breach.
Any court proceeding to enforce this Agreement may
be commenced in federal courts, or in the absence of federal
jurisdiction the state courts, located in Omaha, Nebraska. The
parties submit to the jurisdiction of such courts and waive any
objection which they may have to pursuit of any such proceeding
in any such court.
Except to the extent that the Company elects to
seek injunctive relief in accordance with subsection 9 (a), any
controversy or claim arising out of or relating to this Agreement
or the validity, interpretation, enforceability or breach of this
Agreement will be submitted to arbitration in Omaha, Nebraska, in
accordance with the then existing rules of the American
Arbitration Association, and judgment upon the award rendered in
any such arbitration may be entered in any court having
jurisdiction..
Section Assignment. Neither the Company nor the Executive
may sell, transfer or otherwise assign their rights, or delegate
their obligations, under this Agreement, provided that the
Company shall require any successor to all or substantially all
of the business, stock or assets of the Company to expressly
assume the Company's rights and obligations hereunder.
Section Unfunded Benefits. All compensation and other
benefits payable to the Executive under this Agreement will be
unfunded, and neither the Company nor any Affiliate of the
Company will segregate any assets to satisfy any obligation of
the Company under this Agreement. The obligations of the Company
to the Executive are not the subject of any guarantee or other
assurance of any Person other than the Company.
Section Severability. Should any provision, paragraph,
clause or portion thereof of this Agreement be declared or be
determined by any court or arbitrator of competent jurisdiction
to be illegal, unenforceable or invalid, the validity or
enforceability of the remaining parts, terms or provisions shall
not be affected thereby and said illegal or invalid part, term or
provision shall be deemed not to be a part of this Agreement.
Alternatively, the court or arbitrator having jurisdiction shall
have the power to modify such illegal, unenforceable or invalid
provision so that it will be valid and enforceable, and, in any
case, the remaining provisions of this Agreement shall remain in
full force and effect.
Section Miscellaneous.
This Agreement may be amended or modified only by
a writing executed by the Executive and the Company.
This Agreement will be governed by and construed
in accordance with the internal laws of the State of Nebraska.
This Agreement constitutes the entire agreement of
the Company and the Executive with respect to the matters set
forth in this Agreement and supersedes any and all other
agreements between the Company and the Executive relating to
those matters.
Any notice required to be given pursuant to this
Agreement will be deemed given (i) when delivered in person or by
courier or (ii) on the third calendar day after it is sent by
facsimile, with written confirmation of receipt, if to the
Company, to: Chairman of the Board, CalEnergy Company, Inc. at
302 South 36th Street, Suite 400, Omaha, Nebraska 68131, fax
number (402) 231-1658, and, if to the Executive, at 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, fax number (402)
231-1658 or to such other address as may be subsequently
designated by the Company or the Executive in writing to the
other party.
A waiver by a party of a breach of this Agreement
will not constitute a waiver of any other breach, prior or
subsequent, of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
entered into this Agreement as of August 6, 1996.
CALENERGY COMPANY, INC.
By:/S/____________________________
David L. Sokol
Chairman of the Board
EXECUTIVE:
By:/S/____________________________
Steven A. McArthur
EXHIBIT A
Defined Terms
"Affiliate" means, with respect to a Person, (a) any Person
directly or indirectly owning, controlling, or holding power to
vote 10% or more of the outstanding voting securities of the
Person; (b) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by the Person; (c) any Person directly or
indirectly controlling, controlled by or under common control
with, the Person; and (d) any officer or director of the Person,
or of any Person directly or indirectly controlling the Person,
controlled by the Person or under common control with the Person.
As used in this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person.
"Agreement" means this Employment Agreement dated as of
August 6, 1996, by and between the Company and the Executive, as
it may be amended from time to time in accordance with its terms.
"Board" means the Board of Directors of the Company.
"Cause" means any or all of the following:
(a) the willful and continued failure by the Executive to
perform substantially the services and duties contemplated by
this Agreement (other than any such failure resulting from the
Executive's incapacity due to disability);
(b) the willful engaging by the Executive in gross misconduct
which is injurious to the business or reputation of the Company
in any material respect;
(c) the gross negligence of the Executive in performing the
services contemplated by this Agreement which is injurious to the
business or reputation of the Company in any material respect; or
(d) Executive's conviction of, or pleading guilty or no contest
to, a felony involving moral turpitude.
"Change in Control" means (i) approval by the Company's
stockholders of (A) the dissolution of the Company, (B) a merger
or consolidation of the Company where the Company is not the
surviving corporation, except for a transaction the principal
purpose of which is to change the state in which the Company is
incorporated, (C) a reverse merger in which the Company survives
as an entity but in which securities possessing more than 50
percent of the total combined voting power of the Company's
securities are transferred to a person or persons different from
those who hold such securities immediately prior to the merger or
(D) the sale or other disposition of all or substantially all of
the Company's assets; (ii) the direct or indirect acquisition by
any Person or related group of Persons (other than an acquisition
from or by the Company or by a Company-sponsored employee benefit
plan or by a Person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities
possessing more than 50 percent of the total combined voting
power of the Company's outstanding voting securities; or (iii) a
change in the composition of the Board over a period of thirty-
six (36) months or less such that a majority of the Board members
cease, by reason of one or more contested elections for Board
membership or by one or more actions by written consent of
stockholders, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means CalEnergy Company, Inc., a Delaware
corporation, and any successor or assign permitted under the
Agreement.
"Disability" means, with respect to the Executive, that the
Executive has become physically or mentally incapacitated or
disabled so that, in the reasonable judgment of majority of the
Chairman of the Board, he is unable to perform his duties under
this Agreement and such other services as he performed on behalf
of the Company before incurring such incapacity or disability.
"Good Reason" means any of the following events, but only if
such event(s) occur on, after or in connection with a Change in
Control: (i) the failure by the Company to pay to the Executive,
for a material period of time and in a material amount,
compensation due and payable by the Company under Section 4(a) of
this Agreement; (ii) any reduction by the Company of the title,
office, duties or authority of the Executive in any material
respect; or (iii) any relocation of the Executive's primary place
of employment to a location more than 25 miles from Omaha,
Nebraska.
"Permanent Disability" means a Disability which has
continued for at least six consecutive calendar months.
"Person" means any natural person, general partnership,
limited partnership, corporation, joint venture, trust, business
trust, or other entity.
"Term of Employment" means the period of time beginning on
August 6, 1996, and ending on the fifth anniversary of such date,
unless earlier terminated pursuant to Section 7(a) or
automatically extended pursuant to the following sentence. The
Term of Employment will be automatically extended for one year on
each anniversary of the date of this Agreement beginning on the
fifth anniversary unless the Executive has given the Company, or
the Company has given the Executive, a notice declining automatic
extension at least 365 calendar days before the anniversary.
"Termination Date" means the date of termination of
employment of the Executive pursuant to Section 7 of this
Agreement.
JOINT VENTURE AGREEMENT
CalEnergy Company, Inc. ("CE") and Kiewit Diversified Group
Inc. ("Kiewit") each recognize the unique strengths of the other
Party and hereby form a Joint Venture to develop, construct, own
and operate power projects internationally as follows:
Strengths: CE brings power project development
expertise, power project
financing expertise, financial wherewithal,
power project operational expertise, broad
knowledge of the international power markets
and knowledge of the specific international
power project opportunities available.
Kiewit brings infrastructure
development expertise, financial wherewithal,
coal mining expertise, and a broad knowledge
of the power markets internationally.
Power Projects: Each Party has the right of first
refusal to pursue through this Joint Venture,
all build, own and operate or build, own,
operate and transfer power projects
identified by the other Party or its
affiliates outside of the United States
except those in which (i) the Joint Venture
could not acquire a controlling interest in
the equity, (ii) bid constraints would
effectively prevent Kiewit's or CE's
participation, or (iii) participant,
contractor or partner constraints would
effectively prevent Kiewit's or CE's
participation. The right of first refusal
covers all international power project
development and bid opportunities, but does
not cover (i) any projects in the
construction or operating stages or (ii)
direct or indirect acquisitions of
development stage projects (subject to the
following sentence), or (iii) acquisitions of
entities owning projects in the construction
or operating stages which also own
development stage projects. Notwithstanding
clause (ii) of the foregoing sentence, if the
acquisition is an acquisition solely (i) of a
project or projects in the development stage
or (ii) of an entity or entities owning a
project or projects in the development stage;
and in either case (i) or (ii) the aggregate
costs incurred on such development stage
project or projects does not exceed $250,000
at the date of the acquisition, then the
right of first refusal shall cover any such
acquisition.
Each Party shall notify the
other Party of any power project subject to
the right of refusal as soon as such Party
believes that such project may be subject to
the right of refusal. If the Joint Venture
does not promptly elect to pursue the
identified power project, either Party may
pursue the power project separately.
Development Manager
& Development Costs: The Parties shall share all project
development costs equally. Development costs
shall only be incurred by, or at the
direction of, CE as the Joint Venture
Development Manager and shall include all
development costs incurred after a power
project has been identified and offered to
the Joint Venture until a Party declines to
participate in such project or a Party or the
Joint Venture or a Project Entity abandons or
transfers its interest in a project or a
Party is otherwise required to discontinue
its participation in a project. Development
costs include out-of-pocket, third party
expenses incurred by the Parties in
furtherance of development of a power project
as well as the actual cost associated with
employees of the Parties who perform work to
develop a power project, in each case at the
direction of the Development Manager.
In no event shall the
reimbursable costs for employees be credited
in excess of the actual fully burdened cost
(as mutually agreed by the Parties) for the
actual time period involved by such staff in
Joint Venture development activities. It is
anticipated that CE employees will perform a
majority of the development activities.
Kiewit shall have the ability, however, to
dedicate up to one full-time equivalent
employee to Joint Venture activities, subject
to agreement by the Parties as to appropriate
time commitment and cost reimbursement
arrangements with respect thereto.
Each Party shall submit bills
(and provide all reasonably requested
supporting documentation) for such
development costs on a monthly basis and each
Party's share of such costs shall be payable
within 30 days of submission of such bills.
Semiannually, the Parties shall review and
reconcile any development costs incurred
hereunder. Verified development costs shall
be recovered at project financial closing
unless converted to equity or subordinated
debt in the projects.
Development Fee: CE shall be entitled to a Development Fee
from the applicable Project Entity equal to
1% of the combined debt and equity necessary
to finance any project, exclusive of amounts
to finance or reimburse the costs of
exploratory drilling. This fee shall be
payable (subject to prior reimbursement of or
credit for all development expenses for the
applicable project and to any Development Fee
deferral or payout conditions required by
applicable project financing entities) at the
full release closing and funding of the
project debt and commitment of the project
equity contributions. This fee will be
payable for all projects closed after January
1, 1997, except for any further units at
Dieng, Indonesia and provided that the fee
payable for any units at Patuha or Bali,
Indonesia shall be limited to .5%.
Management
Committee: The Parties shall establish a
management committee to be comprised of two
representatives of each of CE and Kiewit, who
shall act as agents of the parties appointing
them, to oversee and direct Joint Venture
management level decisions. Management
committee decisions shall be made by majority
vote. In the event of a deadlock regarding a
particular project under development which
cannot be resolved by the good faith
negotiations of the Parties, (including the
failure to reach agreement on a turnkey
construction contract) either Party shall
have the right by 15 days prior written
notice to trigger a mandatory discontinuance
of both Parties with respect to the
particular project, in which case the
discontinuance provision below shall apply
and CE shall have the exclusive right to
pursue such project independently; provided
however, that the Parties shall negotiate
mutually acceptable deadlock resolution and
buyout provisions, which may vary from the
foregoing provision as part of the
organizational documents for each Project
Entity. Each management committee shall have
meetings not less often than quarterly. The
Development Manager shall prepare, and the
management committee shall approve, and
review as necessary, annual budgets for Joint
Venture activities. Day to day operational
decisions relating to the Joint Venture, as
well as individual projects and Project
Entities shall be made by the Development
Manager.
Project Entity: After a power project has reached an
appropriate stage of development, CE shall
endeavor to create a Project Entity (e.g.,
corporation, limited liability company,
partnership), which shall be reasonably
acceptable to both Parties, to undertake the
financing of such power project. The Project
Entity organizational documents shall reflect
the equity participation of the Parties and
the fact that CE shall act as the managing
general partner or in an analogous operating
or managing role for such Project Entity,
subject to mutually acceptable management or
shareholder approval rights in favor of
Kiewit. The provisions set forth in this
Joint Venture Agreement relating to the terms
and conditions of each Project Entity may be
varied by mutual agreement of the Parties; in
the event of any conflict between this
Agreement and any agreement relating to a
Project Entity, the agreement relating to the
Project Entity shall control.
Capital Contributions: Unless otherwise negotiated by the
Parties, CE and Kiewit shall each provide 50%
of the equity or other sponsor-provided
funding required from the Parties for
financing a power project developed by the
Joint Venture or a Project Entity. If agreed
by the Parties and acceptable to project
lenders, equity contributions may be made in
the form of construction or engineering or
other services performed. Development costs
may be considered equity contributions of the
Parties to the extent agreed by the Parties
and permitted by the applicable project
lender. The Parties acknowledge that any
commitment by either Party to invest equity
will be conditioned upon obtaining acceptable
rates of return and other acceptable
provisions.
Profit/Loss/
Distributions: All profits, losses and other
distributions (including fees and other
similar compensation) arising from Joint
Venture or Project Entity activities after
repayment of development costs (other than
profits and losses arising under separate
construction and operation and maintenance
contracts) shall be allocated 50/50 to CE and
Kiewit or otherwise in accordance with each
Party's equity contribution.
Operations &
Maintenance: CE shall serve as operator of all power
projects developed by the Joint Venture or a
Project Entity under an agreement acceptable
to the Parties and project lenders which
provides reasonable oversight to the Parties
over operational expenses and activities. CE
shall provide appropriate security (e.g.
letter of credit, guarantee, bond) reasonably
required by lenders or other third parties to
secure performance of its contractual
obligations as operator. CE will be entitled
to reasonable cost recovery, overhead and
profit under such operating agreement.
Accounting: As Development Manager, CE shall
maintain, on behalf of the Joint Venture,
records of development costs and such other
matters as are reasonably required in
connection with Joint Venture activities.
The records of the Development Manager and
each Project Entity shall be accurate in all
material respects and shall fairly present
the position and results of the Joint Venture
and each Project Entity and shall be
prepared on an accrual basis in accordance
with U.S.A. generally accepted accounting
principles consistently applied.
Discontinuance: Except for binding obligations under
executed contracts including construction or
operation and maintenance agreements, with
respect to any project, either Party may
elect to discontinue its participation in the
Joint Venture or any project or Project
Entity by delivering written notice to the
other 15 days in advance of its
discontinuance provided that the
discontinuing party shall use all reasonable
efforts to ensure that such discontinuance
shall not be made in a manner which would
disrupt any near term pending proposals
and/or negotiations such that the remaining
Party is injured and cannot continue with the
proposal/negotiations. Upon delivery of such
notice, the Parties shall for no additional
consideration, execute appropriate
assignment, assumption, indemnity and release
documents which transfer, as of the date of
the date of discontinuance, to the remaining
Party (or an affiliate thereof as designated
by such remaining Party) all obligations and
rights in the respective project or Project
Entity or in all power projects previously
identified in writing to the Joint Venture,
but not yet transferred to a Project Entity,
whichever is applicable. Such
discontinuance by a Party shall be
immediately effective as an assignment of its
interest in any power project; however, the
discontinuing Party shall pay its share of
development costs incurred by the Joint
Venture or Project Entity on or before the
date of discontinuance, although such
expenses may come due later. The
discontinuing Party shall be entitled to be
repaid its share of the development costs
with respect to any discontinued project out
of the construction or project financing
therefor, but only after repayment to the
remaining party (and any new equity
participants) of all development costs
incurred with respect to the Project.
Right of First Refusal: Notwithstanding any provision of this
Agreement to the contrary, either Party
("Selling Party") may sell or transfer its
interest in , any project or Project Entity
(but not the Joint Venture) to a third party,
provided it first notifies the other Party
("Offeree Party") of the identity of the
prospective purchaser, assignee or transferee
and sends to the Offeree Party a copy of the
written offer, and provided further that the
Selling Party shall first offer to sell all
its interest in, any project or Project
Entity to the Offeree Party for the same
price, and on the same terms as those being
offered to the Selling Party. The Offeree
Party shall have 90 days after receiving such
offer to accept it. If the Offeree Party
does not agree to purchase the Selling
Party's interest in, any project or Project
Entity with the 90 day period set forth
above, the Selling Party may sell its
interest in , any project or Project Entity
on the terms first proposed in the written
offer sent to the Offeree Party; provided,
however, that no Party may transfer its
interest in, any project or Project Entity to
another unless the transferee agrees in
writing to be bound by the same terms and
conditions of this Agreement (as it applies
to such project or Project Entity) and
becomes a party hereto.
Compliance with Law: In performing their respective
activities hereunder, each Party agrees to
comply with all applicable United States, and
other applicable laws. In this regard, each
Party agrees that neither it nor its
employees, agents or subcontractors shall
make any payment or give anything of value to
any government official to influence a
government decision, or to gain any other
governmental advantage for the Parties, the
Joint Venture, any project or a Project
Entity in connection with the activities
performed hereunder.
Assignment: Except for assignments to affiliates
and assignments to lenders and others (which
each Party agrees to make as reasonably
required for project financing) and
assignments pursuant to the Right of First
Refusal set forth above, neither Party may
sell, transfer, assign or otherwise encumber
any portion of its interest in the Joint
Venture any project, or any Project Entity
without the other Party's prior written
consent. For purposes of this Agreement
"Affiliate" of a Party shall mean a person or
entity controlling, controlled by or under
common control with the Party.
Nature of Joint Venture: The Joint Venture shall not be
considered, and this Agreement shall not be
considered to have formed, a partnership or
other legal entity. Except for CE's rights
to incur project development expenses and act
on behalf of the Joint Venture as Development
Manager within the scope of this agreement,
unless otherwise agreed, neither Party shall
be the agent or representative of, or have
the power to legally bind, the other Party in
connection with the activities of the Joint
Venture, and each Party shall be severally
liable for any obligations to third parties
incurred in connection with Joint Venture
activities.
Term: The term of the Joint Venture shall
be 5 years; but the term may be extended by
mutual agreement of the Parties. The Joint
Venture shall extend automatically successive
terms of one year at the end of its term but
only for the sole purpose of considering
identified power projects not yet rejected or
pursuing power projects for which a Project
Entity has not yet been formed. The term of
each Project Entity shall be as set forth in
its organizational documents which shall
establish a term at least as long as is
required to complete the development,
construction and operation of its respective
power project. The term of the Right of
First Refusal for any identified project or
Project Entity shall extend for a term equal
to the applicable Party's right to an equity
participation in such project or Project
Entity. Notwithstanding the foregoing, the
term of this Joint Venture shall terminate
upon the bankruptcy or dissolution of either
Party.
Cooperation: Since this Joint Venture Agreement is
expected to continue for some time and both
Parties recognize that international power
projects can present unique challenges or
require special arrangements, the Parties
will attempt in good faith to negotiate
additional terms or modifications to this
Agreement in response to any such unique
circumstances which are encountered,
consistent with the intent of the Parties in
forming this Joint Venture.
This Joint Venture Agreement has been duly authorized and
executed by each Party and is intended to be a legally binding
and enforceable agreement under, and governed by, the laws of the
state of New York, U.S.A.
Dated as of: December 4, 1996
Kiewit Diversified Group Inc. CalEnergy Company,
Inc.
/S/ /S/
By: Richard R. Jaros By: David L. Sokol
President Chairman of the Board and
Chief Executive Officer
(Kiewit5.fin)
CALENERGY COMPANY, INC.,
As Issuer
TO
THE BANK OF NEW YORK,
As Trustee
________________
Indenture
Dated as of February 26, 1997
________________
$154,639,200
(subject to increase to up to $185,567,050 in
the event an over-allotment option is exercised)
6-1/4% Convertible Junior Subordinated
Debentures Due 2012
CalEnergy Company, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
310 (a)(1) 609
(a)(2) 609
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 608, 610
311 (a) 613
(b) 613
312 (a) 701
702(a)
(b) 702(b)
(c) 702(c)
313 (a) 703(a)
(a)(4) 101, 1004
(b) 703(a)
(c) 703(a)
(d) 703(b)
314 (a) 704
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
315 (a) 601
(b) 602
(c) 601
(d) 601
(e) 514
316 (a) 101
(a)(1)(A) 502
512
(a)(1)(B) 513
(a)(2) Not Applicable
(b) 508
(c) 104(c)
317 (a)(1) 503
(a)(2) 504
(b) 1003
318 (a) 107
______________
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
Parties 1
Recitals of the Company 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions 2
Act 3
Additional Interest 3
Additional Payments 3
Affiliate 3
Agent 3
Board of Directors 3
Board Resolution 3
Business Day 3
Closing Price 4
Commission 4
Common Securities 4
Common Stock 4
Company 4
Company Request 4
Compounded Interest 5
Conversion Agent 5
Conversion Date 5
Corporate Trust Office 5
Declaration 5
Defaulted Interest 5
Delaware Trustee 5
Dissolution Tax Opinion 5
Event of Default 5
Extended Interest Payment Period 6
Guarantee 6
Holder 6
Indenture 6
Initial Purchasers 6
Interest Payment Date 6
Investment Company Event 6
Maturity 6
Ministerial Action 6
90 Day Period 7
No Recognition Opinion 7
Notice of Conversion 7
Officer's Certificate 7
Opinion of Counsel 7
Outstanding 7
Paying Agent 8
Person 8
Predecessor Security 8
Preferred Securities 8
Property Trustee 8
Purchase Agreement 8
Redemption Date 8
Redemption Price 8
Redemption Tax Opinion 9
Reference Date 9
Registration Default 9
Registration Rights Agreement 9
Regular Record Date 9
Responsible Officer 9
Restricted Securities Legend 9
Securities 9
Security Register 9
Senior Indebtedness 9
Shelf Registration Statement 10
Special Event 10
Special Record Date 10
Stated Maturity 10
Subsidiary 10
Tax Event 10
Trading Day 11
Trust 11
Trustee 11
Trust Indenture Act 11
Trust Securities 11
Vice President 11
Voting Stock 11
SECTION 102. Compliance Certificates and Opinions 11
SECTION 103. Form of Documents Delivered to Trustee 12
SECTION 104. Acts of Holders; Record Dates 13
SECTION 105. Notices, Etc., to Trustee and the
Company 15
SECTION 106. Notice to Holders; Waiver 15
SECTION 107. Conflict with Trust Indenture Act 16
SECTION 108. Effect of Headings and Table of
Contents 16
SECTION 109. Successors and Assigns 16
SECTION 110. Separability Clause 16
SECTION 111. Benefits of Indenture 16
SECTION 112. Governing Law 16
SECTION 113. Legal Holidays 17
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally 17
SECTION 202. Initial Issuance to Property Trustee 18
ARTICLE THREE
The Securities
SECTION 301. Title and Terms 19
SECTION 302. Denominations 21
SECTION 303. Execution, Authentication, Delivery and
Dating 21
SECTION 304. Temporary Securities 21
SECTION 305. Registration, Registration of Transfer and
Exchange 22
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities 24
SECTION 307. Payment of Interest; Interest Rights
Preserved 24
SECTION 308. Persons Deemed Owners 26
SECTION 309. Cancellation 27
SECTION 310. Right of Set Off 27
SECTION 311. CUSIP Numbers 27
SECTION 312. Extension of Interest Payment Period; Notice
of Extension 27
SECTION 313. Paying Agent, Security Registrar and
Conversion Agent 29
SECTION 314. Global Security 29
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture 31
SECTION 402. Application of Trust Money 32
ARTICLE FIVE
Remedies
SECTION 501. Events of Default 33
SECTION 502. Acceleration of Maturity; Rescission and
Annulment 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee 36
SECTION 504. Trustee May File Proofs of Claim 36
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities 37
SECTION 506. Application of Money Collected 37
SECTION 507. Limitation on Suits 38
SECTION 508. Unconditional Right of Holders to Receive
Principal and Interest and Convert 39
SECTION 509. Restoration of Rights and Remedies 39
SECTION 510. Rights and Remedies Cumulative 39
SECTION 511. Delay or Omission Not Waiver 39
SECTION 512. Control by Holders 40
SECTION 513. Waiver of Past Defaults 40
SECTION 514. Undertaking for Costs 41
SECTION 515. Waiver of Stay or Extension Laws 41
SECTION 516. Enforcement by Holders of Preferred
Securities 41
ARTICLE SIX
The Trustee
SECTION 602. Notice of Defaults 43
SECTION 603. Certain Rights of Trustee 43
SECTION 604. Not Responsible for Recitals or Issuance of
Securities 44
SECTION 605. May Hold Securities 45
SECTION 606. Money Held in Trust 45
SECTION 607. Compensation and Reimbursement 45
SECTION 608. Disqualification; Conflicting Interests 46
SECTION 609. Corporate Trustee Required; Eligibility 46
SECTION 610. Resignation and Removal; Appointment of
Successor 46
SECTION 611. Acceptance of Appointment by Successor 48
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business 48
SECTION 613. Preferential Collection of Claims Against
Company 49
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders 49
SECTION 702. Preservation of Information; Communications
to Holders 50
SECTION 703. Reports by Trustee 50
SECTION 704. Reports by Company 50
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms 51
SECTION 802. Successor Substituted 52
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders 52
SECTION 902. Supplemental Indentures with Consent of
Holders 53
SECTION 903. Execution of Supplemental Indentures 55
SECTION 904. Effect of Supplemental Indentures 55
SECTION 905. Conformity with Trust Indenture Act 56
SECTION 906. Reference in Securities to Supplemental
Indentures 56
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest 56
SECTION 1002. Maintenance of Office or Agency 56
SECTION 1003. Money for Security Payments to Be Held in
Trust 57
SECTION 1004. Statement by Officers as to Default 58
SECTION 1005. Limitation on Dividends; Covenants as to the
Trust 58
SECTION 1006. Payment of Expenses of the Trust 59
SECTION 1007. Registration Rights 60
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption 62
SECTION 1102. Applicability of Article 63
SECTION 1103. Election to Redeem; Notice to Trustee 63
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed 63
SECTION 1105. Notice of Redemption 64
SECTION 1106. Deposit of Redemption Price 65
SECTION 1107. Securities Payable on Redemption Date 65
SECTION 1108. Securities Redeemed in Part 65
SECTION 1109. Optional Redemption 66
SECTION 1110. Tax Event Redemption 67
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate 68
SECTION 1202. Default on Senior Indebtedness 68
SECTION 1203. Liquidation; Dissolution; Bankruptcy 69
SECTION 1204. Subrogation 70
SECTION 1205. Trustee to Effectuate Subordination 72
SECTION 1206. Notice by the Company 72
SECTION 1207. Rights of the Trustee; Holders of Senior
Indebtedness 73
SECTION 1208. Subordination May Not Be Impaired 73
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1302. Conversion Procedures 75
SECTION 1303. Conversion Price Adjustments 77
SECTION 1304. Reclassification, Consolidation, Merger or
Sale of Assets 83
SECTION 1305. Notice of Adjustments of Conversion Price 83
SECTION 1306. Prior Notice of Certain Events 84
SECTION 1307. Certain Defined Terms 85
SECTION 1308. Dividend or Interest Reinvestment Plans 86
SECTION 1309. Certain Additional Rights 86
SECTION 1310. Restrictions on Common Stock Issuable Upon
Conversion. 87
SECTION 1311. Trustee Not Responsible for Determining
Conversion Price or Adjustments 87
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. No Recourse 88
EXHIBIT A Form of the Security
ANNEX I Form of Amended and Restated Declaration of
Trust among the Company, as Sponsor, The Bank of
New York, The Bank Of New York (Delaware), and
Steven A. McArthur, John G. Sylvia and Gregory
Abel, as trustees, dated as of February 26, 1997.
______________
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
INDENTURE, dated as of February 26, 1997, 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 36th
Street, Suite 400, Omaha, Nebraska 68131, and The Bank of New
York, a New York banking corporation, as Trustee (herein called
the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, CalEnergy Capital Trust II, a Delaware
business trust (the "Trust"), formed under the Amended and
Restated Declaration of Trust among the Company, as Sponsor, The
Bank of New York, as property trustee (the "Property Trustee")
and The Bank of New York (Delaware) (the "Delaware Trustee") and
Steven A. McArthur, John G. Sylvia and Gregory Abel, as trustees,
dated as of February 26, 1997 (the "Declaration"), pursuant to
the Purchase Agreement (the "Purchase Agreement") dated February
20, 1997, among the Company, the Trust and the Initial Purchasers
named therein, will issue and sell up to 3,000,000 (or 3,600,000
if the over-allotment option is exercised in full) aggregate
liquidation preference of its 6-1/4% Trust Convertible Preferred
Securities (the "Preferred Securities") with a liquidation
preference of $50 per Preferred Security, having an aggregate
liquidation amount with respect to the assets of the Trust of
$150,000,000 (or $180,000,000 if the over-allotment option is
exercised in full);
WHEREAS, the trustees of the Trust, on behalf of the
Trust, will execute and deliver to the Company Common Securities
evidencing an ownership interest in the Trust, registered in the
name of the Company, in an aggregate amount equal to three
percent of the capitalization of the Trust, equivalent to 92,784
Common Securities (or 111,341 Common Securities if the over-
allotment option is exercised in full), with a liquidation
preference of $50 per Common Security, having an aggregate
liquidation amount with respect to the assets of the Trust of
$4,639,200 (or $5,567,050 if the over-allotment option is
exercised in full) (the "Common Securities");
WHEREAS, the Trust will use the proceeds from the sale
of the Preferred Securities and the Common Securities to purchase
from the Company Securities (as defined below) in an aggregate
principal amount of $154,639,200 (or $185,567,050 if the over-
allotment option is exercised in full);
WHEREAS, the Company is guaranteeing the payment of
distributions on the Preferred Securities, and payment of the
Redemption Price and payments on liquidation with respect to the
Preferred Securities, to the extent provided in the Preferred
Securities Guarantee Agreement (the "Guarantee") between the
Company and The Bank of New York, as guarantee trustee, for the
benefit of the holders of the Preferred Securities from time to
time;
WHEREAS, the Company has duly authorized the creation
of an issue of its 6-1/4% Convertible Junior Subordinated
Debentures Due 2012 (the "Securities"), of substantially the
tenor and amount hereinafter set forth and to provide therefor
the Company has duly authorized the execution and delivery of
this Indenture;
WHEREAS, so long as the Trust is a Holder of
Securities, and any Preferred Securities are outstanding, the
Declaration provides that the holders of Preferred Securities may
cause the Conversion Agent to (a) exchange such Preferred
Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock; and
WHEREAS, 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
agreed, for the equal and proportionate benefit of all Holders of
the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
I
I01. Definitions.
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;
(2) all other terms used herein which 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 generally
accepted accounting principles; and
(4) 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.
"Act", when used with respect to any Holder, has the
meaning specified in Section 104.
"Additional Interest" has the meaning specified in
Section 301.
"Additional Payments" means Compounded Interest and
Additional Interest, if any.
"Affiliate" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct
the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion
Agent or co-registrar.
"Board of Directors" means either the board of
directors of the Company or any duly authorized committee of that
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 and
to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New
York are authorized or required by any applicable law or
executive order to remain closed.
"Closing Price" has the meaning specified in Section
1307.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Securities Exchange Act of 1934, or, if at any time after the
execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Securities" has the meaning specified in the
recitals to this Instrument.
"Common Securities Guarantee" means any guarantee that
the Company may enter into for the benefit of holders of Common
Securities of the Trust.
"Common Stock" includes any stock of any class of the
Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which
is not subject to redemption by the Company. However, subject to
the provisions of Article Thirteen, shares issuable on conversion
of Securities shall include only shares of the class designated
as Common Stock of the Company at the date of this instrument or
shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption
by the Company; provided, that if at any time there shall be more
than one such resulting class, the shares of each such class then
so issuable on conversion shall be substantially in the
proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total
number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in
the first paragraph of this instrument 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 Request" or "Company Order" means a written
request or order signed in the name of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its
President, a Vice President, its Treasurer or its Secretary, and
delivered to the Trustee.
"Compounded Interest" has the meaning specified in
Section 312.
"Conversion Agent" means the Person appointed to act on
behalf of the holders of Preferred Securities in effecting the
conversion of Preferred Securities as and in the manner set forth
in the Declaration and Section 1302 hereof.
"Conversion Date" has the meaning specified in Section
1302.
"Corporate Trust Office" means the principal office of
the Trustee in New York, New York, at which at any particular
time its corporate trust business shall be administered and which
at the date of this Indenture is 101 Barclay Street, Floor 21
West, New York, New York 10286.
"Declaration" has the meaning specified in the Recitals
of this instrument.
"Defaulted Interest" has the meaning specified in
Section 307.
"Delaware Trustee" has the meaning given it in the
Recitals of this instrument.
"Depositary" means, with respect to any Securities
issued in the form of one or more Global Security, a clearing
agency registered under the Exchange Act that is dedicated to act
as Depositary for the Securities.
"Direct Action" means a proceeding instituted by a
holder of Preferred Securities directly against the Company to
enforce rights under the Securities in certain circumstances, as
specified in Section 516.
"Dissolution Event" means that, as a result of the
occurrence and continuation of a Special Event, the Trust is to
be dissolved in accordance with the Declaration and the
Securities held by the Property Trustee are to be distributed to
the holders of Trust Securities issued by The Trust pro rata in
accordance with the Declaration.
"Dissolution Tax Opinion" has the meaning specified in
the Declaration.
"Event of Default" has the meaning specified in
Section 501.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor legislation.
"Extended Interest Payment Period" has the meaning
specified in Section 312.
"Global Security" has the meaning specified in Section
314.
"Guarantee" has the meaning specified in the Recitals
to this instrument.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"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 and shall include the terms
of the Securities.
"Initial Purchasers," with respect to the Preferred
Securities, means Lehman Brothers Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation.
"Interest Payment Date" has the meaning specified in
Section 301.
"Investment Company Event" has the meaning specified in
the Declaration.
"Maturity", when used with respect to any Security,
means the date on which the principal of such Security becomes
due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Maturity Date" means the date on which the Securities
mature and on which the principal shall be due and payable
together with all accrued and unpaid interest thereon including
Compounded Interest and Additional Interest, if any.
"Ministerial Action" has the meaning specified in
Section 1110.
"90 Day Period" has the meaning specified in Section
1110.
"No Recognition Opinion" has the meaning specified in
the Declaration.
"non Book-Entry Preferred Securities" has the meaning
specified in Section 314.
"Notice of Conversion" means the notice to be given by
a holder of Preferred Securities to the Conversion Agent
directing the Conversion Agent to exchange such Preferred
Securities for Securities and to convert such Securities into
Common Stock on behalf of such holder.
"Officer's Certificate" means a certificate signed by
the Chairman of the Board, the Vice Chairman of the Board, the
President, a Vice President, the Treasurer or the Secretary of
the Company and delivered to the Trustee. The officer signing an
Officer's Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of
counsel, who may be counsel for the Company, and who shall be
acceptable to the Trustee.
"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 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) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided, that if such
Securities or portions of Securities are to be redeemed prior to
maturity, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the
Trustee has been made; and (iii) Securities which have been paid
pursuant to Section 306, converted into Common Stock pursuant to
Section 1301, 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 purchaser in
whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or
any other obligor upon the Securities or any Affiliate 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 or waiver, 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 Affiliate
of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the
Company to pay the principal of or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, company,
partnership, joint venture, trust, limited liability company,
unincorporated organization or government or any agency or
political subdivision 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 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Securities" has the meaning specified in the
Recitals to this instrument.
"Property Trustee" has the meaning specified in the
Recitals of this instrument.
"Purchase Agreement" has the meaning specified in the
Recitals to this instrument.
"Redemption Date", when used with respect to any
Security to be redeemed, means the date fixed for such 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.
"Redemption Tax Opinion" has the meaning set forth in
the Declaration.
"Reference Date" has the meaning specified in Section
1303(c).
"Registration Default" has the meaning specified in
Section 1007.
"Registration Rights Agreement" has the meaning
specified in Section 1007.
"Regular Record Date" has the meaning specified in
Section 301.
"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, the president, any vice president, any assistant vice
president, the treasurer, any assistant treasurer, any trust
officer or assistant trust officer, the controller or any
assistant controller or 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 Securities Legend" has the meaning
specified in Section 202.
"Securities" has the meaning specified in the Recitals
to this instrument.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means in respect of the Company
(i) the principal, premium, if any, and interest in respect of
(A) indebtedness of such obligor for money borrowed and
(B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations
of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such
obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit
transaction, (v) all obligations of the type referred to in
clauses (i) through (iv) above of other Persons for the payment
of which such obligor is responsible or liable as obligor,
guarantor or otherwise, and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons
secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness issued after the date of
original issuance of the Securities that is by its terms
subordinated to or pari passu with the Securities and (2) any
indebtedness (including all other debt securities and guarantees
in respect of those debt securities) initially issued to any
other trust, or a trustee of such trust, partnership, or other
entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity
of preferred securities or other securities which by their terms
rank pari passu with, or junior to, the Preferred Securities.
"Shelf Registration Statement" has the meaning
specified in Section 1007.
"Special Event" has the meaning specified in the
Declaration.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to
Section 307.
"Stated Maturity", when used with respect to any
Security or any installment of interest thereon, means the date
specified in such Security as the fixed date on which the
principal, together with any accrued and unpaid interest
(including Compounded Interest), of such Security or such
installment of interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more
than 50% of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management
and affairs thereof.
"Tax Event" has the meaning specified in the
Declaration.
"Trading Day" has the meaning specified in
Section 1307.
"Trust" has the meaning specified in the Recitals to
this instrument.
"Trustee" means the Person named as the "Trustee" in
the first paragraph of this instrument 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 instrument was
executed; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and
Preferred Securities.
"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" of any Person means capital stock of
such Person which ordinarily has voting power for the election of
directors (or Persons performing similar functions) of such
Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
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 or
reasonably requested by the Trustee in connection with such
application or request. Each such certificate or opinion shall
be given in the form of an Officer's 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 applicable
requirements of the Trust Indenture Act and any other applicable
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;
(3) a statement that, in the opinion of each such
individual, he has made or caused to be 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.
I03. Form of Documents Delivered to Trustee.
In any case where 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.
Where 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.
I04. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one
or more 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, where 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.
(b) 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. Where 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 which the Trustee or the Company, as the case
may be, deems sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the
purpose of determining the Holders of Outstanding Securities
entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be
given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect
of any such action, or, in the case of any such vote, prior to
such vote, the record date for any such action or vote shall be
the 30th day (or, if later, the date of the most recent list of
Holders required to be provided pursuant to Section 701) prior to
such first solicitation or vote, as the case may be. With regard
to any record date, only the Holders on such date (or their duly
designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
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; Nothing in this paragraph
shall be construed to prevent the Trustee 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), and nothing in this
paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding
Securities of the date such action is taken.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) 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.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action 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 different part of such
principal amount, in each case, by specifying the same in a
written notice to the Company.
I05. Notices, Etc., to Trustee and the 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,
(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 to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Trustee 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
instrument or at any other address previously furnished in
writing to the Trustee by the Company.
I06. Notice to Holders; Waiver.
Where 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. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other
Holders. Any notice when mailed to a Holder in the aforesaid
manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where
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. 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 a part of and govern this 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.
I08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
I09. Successors and Assigns.
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
I010. 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.
I011. 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, the holders of Senior
Indebtedness, the holders of Preferred Securities (to the extent
provided herein) and the Holders of Securities, any benefit or
any legal or equitable right, remedy or claim under this
Indenture.
I012. Governing Law.
THIS INDENTURE AND THE SECURITIES 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.
I013. Legal Holidays.
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security or the last date on which
a Holder has the right to convert his Securities 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) or conversion of the Securities need not be
made on such date, but may be made on the next succeeding
Business Day (except that, if such Business Day is in the next
succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the
immediately preceding Business Day) with the same force and
effect as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity or on such last day for
conversion, provided, that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be. ARTICLE TWO
Security Forms
II
II01. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this
Indenture. 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). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Security
shall be dated the date of its authentication. The terms and
provisions of the Securities set forth in Exhibit A are part of
the terms of this Indenture and to the extent applicable, the
Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be
bound thereby.
The definitive Securities shall be typewritten or
printed, lithographed or engraved or produced by any combination
of these methods on steel engraved borders or may be produced in
any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined
by the officers executing such Securities, as evidenced by their
execution of such Securities.
II02. Initial Issuance to Property Trustee.
The Securities initially issued to the Property Trustee
of the Trust shall be in the form of one or more individual
certificates in definitive, fully registered form without
distribution coupons and shall bear the following legend (the
"Restricted Securities Legend") unless the Company determines
otherwise in accordance with applicable law:
THIS SECURITY HAS AND ANY COMMON STOCK (AND RELATED
RIGHTS) ISSUED ON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER OF
THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS,
ACKNOWLEDGES, AND AGREES FOR THE BENEFIT OF CALENERGY COMPANY,
INC. (THE "COMPANY") THAT: (I) IT HAS ACQUIRED A "RESTRICTED
SECURITY" THAT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE 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 IT 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, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY
OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE
(D), (E) OR (F) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS
SECURITY AND THE TRUSTEES FOR SUCH ISSUER (i) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE,
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.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
ARTICLE THREE
The Securities
III
III01. Title and Terms.
The aggregate principal amount of Securities that may
be authenticated and delivered under this Indenture is limited to
the sum of (a) $154,639,200 and (b) such aggregate principal
amount (which may not exceed $185,567,050 aggregate principal
amount) of Securities, if any, as shall be purchased by the Trust
pursuant to an over-allotment option in accordance with the terms
and provisions of the Purchase Agreement dated February 20, 1997,
among the Company, the Trust and the Initial Purchasers named
therein, except for Securities authenticated and delivered upon
registration of, transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 304, 305, 306, 906, 1108 or
1301.
The Securities shall be known and designated as the "6-
1/4% Convertible Junior Subordinated Debentures Due 2012" of the
Company. Their Stated Maturity shall be February 25, 2012, and
they shall bear interest at the rate of 6-1/4% per annum, from
February 26, 1997 or from the most recent Interest Payment Date
(as defined below) to which interest has been paid or duly
provided for, as the case may be, payable quarterly (subject to
deferral as set forth herein), in arrears, on March 1, June 1,
September 1 and December 1 (each an "Interest Payment Date") of
each year, commencing June 1, 1997 until the principal thereof is
paid or made available for payment, and they shall be paid to the
Person in whose name the Security is registered at the close of
business on the regular record date for such interest
installment, which shall be the close of business on the date
which is 15 days prior to each Interest Payment Date (the
"Regular Record Date"). Interest will compound quarterly and
will accrue at the rate of 6-1/4% per annum on any interest
installment in arrears for more than one quarter or during an
extension of an interest payment period as set forth in Section
312 hereof.
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the following sentence, the amount of
interest payable for any period shorter than a full quarterly
period for which interest in computed, will be computed on the
basis of the actual number of days elapsed in such a 30-day
month. In the event that any date on which interest is payable
on the Securities is not a Business Day, then payment of interest
payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such
date.
If at any time while the Property Trustee is the Holder
of any Securities, the Trust or the Property Trustee is required
to pay any taxes, duties assessments or governmental charges of
whatever nature (other than withholding, transfer or stamp taxes)
imposed by the United States, or any other taxing authority,
then, in any case, the Company will pay as additional interest
("Additional Interest") on the Securities held by the Property
Trustee, such additional amounts as shall be required so that the
net amounts received and retained by the Trust and the Property
Trustee after paying such taxes, duties assessments or other
governmental charges will be equal to the amounts the Trust and
the Property Trustee would have received had no such taxes,
duties, assessments or other government charges been imposed.
The principal of and interest on the Securities shall
be payable at the office or agency of the Company in the United
States maintained for such purpose and at any other office or
agency maintained by the Company 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, however, that 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 shall appear in the Security
Register.
The Securities shall be redeemable as provided in
Article Eleven hereof.
The Securities shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Twelve
hereof.
The Securities shall be convertible as provided in
Article Thirteen hereof.
III02. Denominations.
The Securities shall be issuable only in registered
form without coupons and only in denominations of $50 and
integral multiples thereof.
III03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the
Company by its Chairman of the Board, its Vice Chairman of the
Board, its President or one of its Vice Presidents, under its
corporate seal 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 make
available for delivery such Securities as in this Indenture
provided and not otherwise.
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.
III04. Temporary Securities.
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will
cause definitive Securities to be prepared without unreasonable
delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities at any
office or agency of the Company designated pursuant to
Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company
shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal
amount of definitive Securities of authorized denominations.
Until so exchanged the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as
definitive Securities.
III05. Registration, Registration of Transfer and Exchange.
(a) General.
The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained
in such office and in any other office or agency designated
pursuant to Section 1002 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed "Security Registrar"
for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any
Security at an office or agency of the Company designated
pursuant to Section 1002 for such purpose, the Company shall
execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new
Securities of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Securities may be
exchanged for other Securities of any authorized denominations
and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and make available
for delivery, the Securities which the Holder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required by
the Company or the Trustee) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 or 1301 not
involving any transfer.
The Company shall not be required (i) in the case of a
partial redemption of the Securities, to issue, register the
transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of Securities selected for redemption
under Section 1104 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in
part.
(b) Transfer Procedures and Restrictions.
The Securities may not be transferred except in
compliance with the Restricted Securities Legend unless otherwise
determined by the Company in accordance with applicable law.
Upon any distribution of the Securities to the holders of the
Preferred Securities in accordance with the Declaration, the
Company and the Trustee shall enter into a supplemental indenture
pursuant to Section 901(6) to provide for transfer procedures and
restrictions with respect to the Securities substantially similar
to those contained in the Declaration to the extent applicable in
the circumstances existing at the time of such distribution.
III06. 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.
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 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 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 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.
III07. Payment of Interest; Interest Rights Preserved.
Interest on any Security which 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.
Any interest on any Security which 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 in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which 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 mailed, first-class
postage prepaid, to each Holder at his address as it appears in
the Security Register, 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 mailed, 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 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, if so listed, 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 (including in each such case Compounded Interest), which
were carried by such other Security.
In the case of any Security which is converted after
any Regular Record Date and on or prior to the next succeeding
Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated
Maturity is on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and
such interest (whether or not punctually paid or duly provided
for) 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 such Regular Record Date. Except as otherwise
expressly provided in the immediately preceding sentence, in the
case of any Security that is converted, interest whose Stated
Maturity is after the date of conversion of such Security shall
not be payable, and the Company shall not make nor be required to
make any other payment, adjustment or allowance with respect to
accrued but unpaid interest (including Additional Payments) on
the Securities being converted, which shall be deemed to be paid
in full.
III08. 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 307) interest (including Additional
Payments) 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.
III09. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or conversion 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 which
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, 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, however, that the Trustee
shall not be required to destroy the certificates representing
such cancelled Securities.
III010. Right of Set Off.
Notwithstanding anything to the contrary in this
Indenture, the Company shall have the right to set off any
payment it is otherwise required to make hereunder to the extent
the Company has theretofore made, or is concurrently on the date
of such payment making, a payment under the Guarantee.
III011. 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 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 and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of
such numbers.
III012. Extension of Interest Payment Period; Notice of
Extension.
(a) The Company shall have the right, at any time during the
term of this Security, from time to time to defer payments of
interest by extending the interest payment period of such
Security for up to 20 consecutive quarters (an "Extended Interest
Payment Period") during which Extended Interest Payment Period no
interest (including any Additional Payments) shall be due and
payable; provided, that no Extended Interest Payment Period may
extend beyond the Maturity Date or any earlier Redemption Date.
To the extent permitted by applicable law, interest, the payment
of which has been deferred because of the extension of the
interest payment period, will bear interest thereon at 6-1/4%
compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all
interest then accrued and unpaid on the Securities, including any
Additional Payments that shall be payable to the Holders of the
Securities in whose names the Securities are registered in the
Security Registrar on the first Regular Record Date after the end
of the Extended Interest Payment Period. Before the expiration
of any Extended Interest Payment Period, the Company may elect to
continue to defer payments of interest for another consecutive
Extended Interest Payment Period; provided, that any such
Extended Interest Payment Period, together with all such previous
and consecutive Extended Interest Payment Periods, shall not
exceed 20 consecutive quarters and shall not extend beyond the
Maturity Date. Upon the expiration of any Extended Interest
Payment Period and upon the payment of all Additional Payments,
if any, then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements.
No interest shall be due and payable during an Extended Interest
Payment Period except at the end thereof.
(b) If the Property Trustee is the sole Holder of the
Securities at the time the Company selects an Extended Interest
Payment Period, the Company shall give written notice to the
Regular Trustees, the Property Trustee and the Trustee of its
selection of such Extended Interest Payment Period at least one
Business Day prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) if the Preferred Securities are
listed on the New York Stock Exchange or other stock exchange or
quotation system, the date the Trust is required to give notice
to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Preferred Securities
of the record date or the date such distributions are payable,
but in any event not less than ten Business Days prior to such
record date.
(c) If the Property Trustee is not the sole holder of the
Securities at the time the Company selects an Extended Interest
Payment Period, the Company shall give the Holders of the
Securities and the Trustee written notice of its selection of an
Extended Interest Payment Period at least ten Business Days prior
to the earlier of (i) the next succeeding Interest Payment Date
or (ii) if the Preferred Securities are listed on the New York
Stock Exchange or other stock exchange or quotation system, the
date the Company is required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization or to
holders of the Securities of the record date or the date such
distributions are payable, but in any event not less than two
Business Days prior to such record date.
(d) The quarter in respect of which any notice is given
pursuant to paragraphs (b) and (c) hereof shall be counted as one
of the 20 quarters permitted in the maximum Extended Interest
Payment Period permitted under paragraph (a) hereof.
III013. Paying Agent, Security Registrar and Conversion Agent.
The Trustee will initially act as Paying Agent,
Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion
Agent without prior notice. The Company or any of its Affiliates
may act in any such capacity.
III014. Global Security.
(a) In connection with a Dissolution Event,
(i) the Securities in certificated form may be presented to
the Trustee by the Property Trustee in exchange for a global
Security in an aggregate principal amount equal to the aggregate
principal amount of all outstanding Securities (a "Global
Security"), to be registered in the name of the Depositary, or
its nominee, and delivered by the Trustee to the Depositary for
crediting to the accounts of its participants pursuant to the
instructions of the Regular Trustees. The Company upon any such
presentation shall execute a Global Security in such aggregate
principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with this Indenture.
Payments on the Securities issued as a Global Security will be
made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Securities in certificated form may be
presented to the Trustee by the Property Trustee and any
Preferred Security Certificate which represents Preferred
Securities, other than Preferred Securities held by the
Depositary or its nominee, ("Non Book-Entry Preferred
Securities") will be deemed to represent beneficial interests in
Securities presented to the Trustee by the Property Trustee
having an aggregate principal amount equal to the aggregate
liquidation amount of the Non Book-Entry Preferred Securities
until such Preferred Security Certificates are presented to the
Security Registrar for transfer or reissuance at which time such
Preferred Security Certificates will be cancelled and a Security,
registered in the name of the holder of the Preferred Security
Certificate or the transferee of the holder of such Preferred
Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the
Preferred Security Certificate cancelled, will be executed by the
Company and delivered to the Trustee for authentication and
delivery in accordance with this Indenture. On issue of such
Securities, Securities with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee
will be deemed to have been cancelled.
(b) A Global Security may be transferred, in whole but not
in part, only to another nominee of the Depositary, or to a
nominee of such successor Depositary.
(c) If at any time the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary or if at any
time the Depositary shall no longer be registered or in good
standing under the Exchange Act or other applicable statute or
regulation, and a successor Depositary for such series is not
appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition, as the
case may be, the Company will execute, and, subject to Article
Three of this Indenture, the Trustee, upon written notice from
the Company and receipt of a Company Order, will authenticate and
deliver the Securities in definitive registered form without
coupons, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. In addition, upon
an Event of Default or if the Company may at any time determine
that the Securities shall no longer be represented by a Global
Security. In such event the Company will execute, and subject to
Section 305 of this Indenture, the Trustee, upon receipt of an
Officer's Certificate evidencing such determination by the
Company, will authenticate and make available for delivery the
Securities in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange
for such Global Security. Upon the exchange of the Global
Security for such Securities in definitive registered form
without coupons, in authorized denominations, the Global Security
shall be cancelled by the Trustee. Such Securities in definitive
registered form issued in exchange for the Global Security 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 Depositary for
delivery to the Persons in whose names such Securities are so
registered.
ARTICLE FOUR
Satisfaction and Discharge
XLISECTION 1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect
(except as to any surviving rights of conversion, registration of
transfer or exchange of Securities herein expressly provided
for), 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) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306 and (ii) Securities for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation have become due and payable and the
Company has deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount sufficient to
pay and discharge any) and interest (including any Additional
Payments) to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(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 Officer's
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, the obligations of the Company to the Trustee under
Section 607 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of Clause (1) of this Section,
the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
XLISECTION 2. Application of Trust Money.
Subject to the provisions of the last paragraph of
S Company of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State
law, or the consent by the Company to the filing of such petition
or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of substantially all of the
property of the Company, or the making by the Company of an
assignment for the benefit of creditors, or the admission by the
Company in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company
in furtherance of any such action; or
(1) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the
distribution of Securities to holders of Preferred Securities in
liquidation or redemption of their interests in the Trust,
(ii) the redemption of all of the outstanding Preferred
Securities of the Trust or (iii) certain mergers, consolidations
or amalgamations, each as permitted by the Declaration.
ARTICLE FIVE
Remedies
LISECTION 1. Events of Default.
"Event of Default," wherever used herein, means
any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and
whether it shall be occasioned by the provisions of
Article Twelve or 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 when due whether at Maturity, upon
redemption, by declaration or otherwise; or
(2) default in the payment of any interest upon any
Security, including any Additional Payments in respect thereof,
when it becomes due and payable, and continuance of such default
for a period of 30 days; provided, that a valid extension of the
interest payment period by the Company pursuant to this Indenture
shall not constitute a default in the payment of interest
(including any Additional Payments) for this purpose; or
(3) failure by the Company to issue and deliver Common
Stock upon an election to convert the Securities into Common
Stock in accordance with Article Thirteen hereof; or
(4) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture (other than a
default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default
or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount 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) entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law
or (B) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law,
or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or
of substantially all of the property of the Company, or ordering
the winding up or liquidation of its affairs, 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
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company or to the entry of a decree or order
for relief in respect of itself in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding
against the Company, or the filing by the Company of a petition
or answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by the Company to
the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or
of substantially all of the property of the Company, or the
making by the Company of an assignment for the benefit of
creditors, or the admission by the Company in writing of its
inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any
such action; or
(7) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the
distribution of Securities to holders of Preferred Securities in
liquidation or redemption of their interests in the Trust,
(ii) the redemption of all of the outstanding Preferred
Securities of the Trust or (iii) certain mergers, consolidations
or amalgamations, each as permitted by the Declaration.
LISECTION 2. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default occurs and is continuing,
then and in every such case, the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities
may declare the principal of all the Securities and any other
amounts payable hereunder 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 principal and all
accrued interest shall become immediately due and payable.
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
provided in this Article hereinafter, the Holders of a majority
in aggregate 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 (including any Additional
Payments) on all Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities, and
(C) 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, other than the non-payment of
the principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent
default or impair any right consequent thereon.
LISECTION 3. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest
(including any Additional Payments) on any Security when such
interest becomes due and payable and such default continues for a
period of 30 days; provided that a valid extension of the
interest payment period by the Company pursuant to this Indenture
shall not constitute a default in the payment of any interest
(including Additional Payments) for this purpose, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon written 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 for principal and
interest, as applicable, (including any Additional Payments) and,
to the extent that payment thereof shall be legally enforceable,
interest on any overdue principal and on any overdue interest
(including any Additional Interest), at the rate borne 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.
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.
LISECTION 4. 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 its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee 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.
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.
LISECTION 5. 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.
LISECTION 6. Application of Money Collected.
Subject to Article Twelve, any money collected by
the Trustee pursuant to this Article 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 interest (including any Additional Payments), 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
SECOND: To the payment of the amounts then due
and unpaid for principal of and interest (including any
Additional Payments) 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 for principal and
interest (including any Compounded Interest), respectively.
LISECTION 7. 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% in aggregate 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.
LISECTION 8. Unconditional Right of Holders to Receive
Principal and Interest and Convert.
Notwithstanding any other provision in this
Indenture, the Holder of any Security shall have the right, which
is absolute and unconditional, to receive payment of the
principal of and (subject to Sections 307 and 312) interest
(including any Additional Payments) on such Security on the
respective Stated Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to convert
such Security in accordance with Article Thirteen and to
institute suit for the enforcement of any such payment and right
to convert, and such rights shall not be impaired without the
consent of such Holder.
LISECTION 9. 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.
VISECTION 10. 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 306, 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.
VISECTION 11. 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 remedy
or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this
Article 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.
VISECTION 12. 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 which is not inconsistent with such direction.
VISECTION 13. Waiver of Past Defaults.
Subject to Section 902 hereof, 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, premium, if any, or
interest (including any Additional Payments) on any Security
(unless such default has been cured and a sum sufficient to pay
all matured installments of interest and principal due otherwise
than by acceleration has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the
consent of the Holder of each Outstanding Security affected;
provided, however, that if the Securities are held by the Trust
or a trustee of the Trust, such waiver shall not be effective
until the holders of a majority in liquidation preference of
Trust Securities of the Trust shall have consented to such
waiver; provided, further, that if the consent of the Holder of
each outstanding Security is required, such waiver shall not be
effective until each holder of the Securities of the Trust shall
have consented to such waiver.
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.
VISECTION 14. 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 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; provided, that neither this
Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company or the Trustee
or in any suit for the enforcement of the right to receive the
principal of and interest (including any Additional Payments) on
any Security or to convert any Security in accordance with
Article Thirteen.
VISECTION 15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any 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 will not
hinder, delay or impede the execution pursuant to this Indenture
of any lawful power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no
such law had been enacted.
VISECTION 16. Enforcement by Holders of Preferred Securities.
(1) Notwithstanding anything to the contrary contained
herein, if the Trustee as Holder of the Securities fails to
enforce its rights under the Securities (other than rights
arising from an Event of Default described in Section 516(2))
after any holder of Preferred Securities shall have made a
written request to the Trustee to enforce such rights, such
holder of Preferred Securities may, to the fullest extent
permitted by law, institute a Direct Action to enforce the
Trustee's rights as Holder of the Securities, without first
instituting any legal proceeding against the Trustee or any other
Person.
(2) Notwithstanding anything to the contrary contained
herein, if an Event of Default has occurred and is continuing and
such Event of Default is attributable to the failure of the
Company to pay interest (including any Additional Payments)
(subject to Section 312) or principal on the Securities on the
date such interest or principal is otherwise payable, the Company
acknowledges that, in such event, a holder of Preferred
Securities may institute a Direct Action for enforcement of
payment to such Holder of the principal of or interest on the
Securities having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder, on
or after the respective due date specified in the Securities,
without first instituting any legal proceeding against the
Trustee or any other Person.
(3) Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal
of or interest on the Securities held by the Trust or the Trustee
and the Company shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the
Preferred Securities to the extent of any payments made by the
Company to such holder in any Direct Action.
ARTICLE SIX
The Trustee
VIISECTION 01. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee
shall be as provided by the Trust Indenture Act. Notwithstanding
the foregoing, 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. 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.
VIISECTION 02. Notice of Defaults.
The Trustee shall give the Holders notice of any
default hereunder as and to the extent provided by the Trust
Indenture Act; provided, however, that in the case of any default
of the character specified in Section 501(4), no such notice to
Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of
time or both would become, an Event of Default.
VIISECTION 03. 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 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 Officer's Certificate;
(d) the Trustee may consult with counsel of its choice and
the 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 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 which 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 to reasonable examination of
the books, records and premises of the Company, personally or by
agent or attorney;
(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 to be taken by it in good faith, without
negligence or willful misconduct, and reasonably believed by it
to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture.
VIISECTION 04. 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 the
Securities or the proceeds thereof.
VIISECTION 05. May Hold Securities.
The Trustee, 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 Sections 608 and 613, may otherwise deal with the
Company with the same rights it would have if it were not
Trustee, Paying Agent, Security Registrar, or such other agent.
VIISECTION 06. 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.
VIISECTION 07. 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, fees, 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 and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or
administration of this trust, 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.
The Trustee shall have a lien prior to the
Securities as to all property and funds held by it hereunder for
any amount owing it pursuant to this Section 607, except with
respect to funds held in trust for the benefit of the Holders of
the Securities.
When the Trustee incurs expenses or renders
services in connection with an Event of Default specified in
Section 501(6) or Section 501(7), 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 provisions of this Section shall survive the
termination of this Indenture.
VIISECTION 08. Disqualification; 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.
VIISECTION 09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which
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 has its Corporate Trust
Office in New York, New York. 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, 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, it shall
resign immediately in the manner and with the effect hereinafter
specified in this Article.
ISECTION 10. 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 shall
become effective until the acceptance of appointment by the
successor Trustee under 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 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. If an
instrument of acceptance by a successor Trustee 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.
(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 Company Order 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.
(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, 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 the manner hereinafter
provided, 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 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.
ISECTION 11. 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;
provided, that on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its
charges, 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. Upon request of any such successor
Trustee, the Company shall execute any and all instruments
required to more fully and certainly vest in and confirm 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.
ISECTION 12. 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 such corporation shall be otherwise
qualified and eligible under this Article, 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.
ISECTION 13. 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).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
VIIISECTION 01. Company to Furnish Trustee Names and
Addresses of Holders.
The Company will furnish or cause to be furnished
to the Trustee
(a) semiannually, not later than February 15 and August 15
in each year, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of a date
not more than 15 days prior to the delivery thereof, and
(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.
VIIISECTION 02. 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 names and addresses of Holders made pursuant to the Trust
Indenture Act.
VIIISECTION 03. Reports by Trustee.
(a) Within 60 days after May 15 of each year, commencing
May 15, 1997, the Trustee shall transmit by mail 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 will notify the
Trustee when the Securities are listed on any stock exchange.
VIIISECTION 04. 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 Securities
Exchange Act of 1934 shall be filed with the Trustee within
15 business days after the same is so required to be filed with
the Commission.
Delivery of such reports, information and
documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive
notice of any information contained therein or determinable from
information contained therein, including the Company's compliance
with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates).
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
IXSECTION 01. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with or merge
with or into any other Person or, directly or indirectly, sell,
convey, transfer or lease all or substantially all of its
properties and assets on a consolidated basis to any Person,
unless:
(1) the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by purchase,
conveyance, transfer or lease, all or substantially all of the
properties and assets of the Company on a consolidated basis
shall be a corporation, partnership or trust, shall be organized
and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form reasonably satisfactory to
the Trustee, the due and punctual payment of the principal of
(and premium, if any) and interest on all the Securities and the
performance or observance of every covenant of this Indenture on
the part of the Company to be performed or observed and shall
have provided for conversion rights in accordance with Article
Thirteen;
(2) immediately after giving effect to such
transaction and treating any indebtedness which becomes an
obligation of the Company or a Subsidiary as a result of such
transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be
continuing; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this
Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
This Section shall only apply to a merger or
consolidation in which the Company is not the surviving
corporation and to conveyances, leases and transfers by the
Company as transferor or lessor.
IXSECTION 02. Successor Substituted.
Upon any consolidation of the Company with, or
merger of the Company into, any other Person or any conveyance,
transfer or lease of all or substantially all the properties and
assets of the Company on a consolidated basis in accordance with
Section 801, the successor Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made 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 successor Person
had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of
all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
XSECTION 01. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company,
when authorized by a Company Order, and the Trustee, at any time
and from time to time, may 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 make provision with respect to the conversion rights
of Holders pursuant to the requirements of Article Thirteen; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not
be inconsistent with the provisions of this Indenture; provided,
that such action pursuant to this clause (4) shall not materially
adversely affect the interests of the Holders of the Securities
or, so long as any of the Preferred Securities shall remain
outstanding, the holders of the Preferred Securities; or
(5) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture
under the Trust Indenture Act; or
(6) to make provision for transfer procedures,
certification, book-entry provisions, the form of restricted
securities legends, if any, to be placed on Securities, and all
other matters required pursuant to Section 305(b) or otherwise
necessary, desirable or appropriate in connection with the
issuance of Securities to holders of Preferred Securities in the
event of a distribution of Securities by the Trust if a Special
Event occurs and is continuing.
XSECTION 02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a
majority in aggregate 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,
and the Trustee may enter into an indenture or indentures
supplemental hereto 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, however, that no such
supplemental indenture shall, without the consent of the Holder
of each Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal of, or
(subject to Section 312) any installment of interest (including
any Additional Payments) on, any Security, or reduce the
principal amount thereof, or reduce the rate or (subject to
Section 312) extend the time for payment of interest thereon, or
reduce any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any
Security 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, in the case of redemption,
on or after the Redemption Date), or materially adversely affect
the right to convert any Security as provided in Article Thirteen
(except as permitted by Section 901(3)), or modify the provisions
of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders,
(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 any of the provisions of this Section or
Section 513, 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;
provided that if the Securities are held by the Trust or a
trustee of the Trust, such supplemental indenture shall not be
effective until the holders of a majority in liquidation
preference of Trust Securities shall have consented to such
supplemental indenture; provided, further, that if the consent of
the Holder of each Outstanding Security is required, such
supplemental indenture shall not be effective until each holder
of the Trust Securities of the Trust shall have consented to such
supplemental indenture.
So long as any Preferred Securities are outstanding, no
supplemental indenture shall, without the consent of each holder
of Preferred Securities, amend Section 516 so as to eliminate or
materially impair the right of such holders to institute Direct
Actions in the circumstances set forth therein.
It shall not be necessary for any Act of Holders
under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
The Company may, but shall not be obligated to,
fix a record date for the purpose of determining the Persons
entitled to consent to any indenture supplemental hereto. If a
record date is fixed, the Holders on such record date, or their
duly designated proxies, and only such Persons, shall be entitled
to consent to such supplemental indenture, whether or not such
Holders remain Holders after such record date; provided, that
unless such consent shall have become effective by virtue of the
requisite percentage having been obtained prior to the date which
is 90 days after such record date, any such consent previously
given shall automatically and without further action by any
Holder be cancelled and of no further effect.
XSECTION 03. 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 which affects the Trustee's
own rights, duties or immunities under this Indenture or
otherwise.
XSECTION 04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture
under this Article, 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. No such supplemental indenture
shall directly or indirectly modify the provisions of Article
Twelve in any manner which might terminate or impair the rights
of the Senior Indebtedness pursuant to such subordination
provisions.
XSECTION 05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to
this Article shall conform to the requirements of the Trust
Indenture Act.
XSECTION 06. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article
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 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.
ARTICLE TEN
Covenants; Representations and Warranties
XISECTION 01. Payment of Principal and Interest.
The Company will duly and punctually pay the
principal of and interest on the Securities in accordance with
the terms of the Securities and this Indenture.
XISECTION 02. Maintenance of Office or Agency.
The Company will maintain in the United States an
office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration
of transfer, exchange, or conversion, and where notices and
demands to or upon the Company in respect of the Securities and
this Indenture may be served. The Company will 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.
The Company may also from time to time designate
one or more other offices or agencies (in the United States)
where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the United States
for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
XISECTION 03. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own
Paying Agent, it will, on or before each due date of the
principal of 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 or interest so becoming due
until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying
Agents, it will, prior to each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will 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, that such
Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) 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 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 or interest on any Security and remaining
unclaimed for two years after such principal 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 any 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, and all
liability of the Company as trustee thereof, shall thereupon
cease.
XISECTION 04. Statement by Officers as to Default.
The Company will deliver to the Trustee, within
120 days after the end of each fiscal year of the Company ending
after the date hereof, an Officer's Certificate, stating whether
or not to the best knowledge of the signers thereof the Company
is in default in the performance and observance of any of the
terms, provisions and conditions of this Indenture (without
regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they
may have knowledge. The Company shall file with the Trustee,
within five Business Days after becoming aware of any material
default or Event of Default an Officer's Certificate specifying
such default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
XISECTION 05. Limitation on Dividends; Covenants as to the
Trust.
(a) In the event that (i) an Event of Default shall have
occurred and be continuing, (ii) the Company shall be in default
with respect to its payment of any obligations under the
Guarantee, or (iii) the Company shall have given notice of its
election of an Extended Interest Payment Period as provided
herein and such period, or any extension thereof, shall be
continuing, then, in each case, the Company shall not
(i) declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of its capital
stock (other than (A) purchases or acquisitions of shares of
Common Stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans, (B) as a
result of a reclassification of capital stock of the Company or
the exchange or conversion of one class or series of the
Company's capital stock for another class or series of capital
stock of the Company, (C) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or
the security being converted or exchanged or (D) stock dividends
paid by the Company which consist of stock of the same class as
that on which the dividend is being paid);
(ii) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which
rank pari passu with or junior to the Securities; or
(iii) make any guarantee payments with respect to
the foregoing (other than pursuant to the Guarantee and the
Common Securities Guarantee).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common
Securities of the Trust; provided, however, that any successor of
the Company as provided in Article Eight hereunder may succeed to
the Company's ownership of such Common Securities and (ii) that
it shall use its reasonable efforts, consistent with the terms
and provisions of the Declaration, to cause the Trust (x) to
remain a statutory business trust, except in connection with the
distribution of the Securities to the holders of Trust Securities
in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or
amalgamations of the Trust, each as permitted by the Declaration,
and (y) to otherwise continue to be classified as a grantor trust
for United States Federal income tax purposes.
XISECTION 06. Payment of Expenses of the Trust.
In connection with the offering, sale and issuance
of the Securities to the Property Trustee in connection with the
sale of the Trust Securities by the Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including
commissions to the Initial Purchasers payable pursuant to the
Purchase Agreement and compensation of the Trustee under the
Indenture in accordance with the provisions of Section 607 of the
Indenture;
(b) be responsible for and pay for all debts and
obligations (other than with respect to the Trust Securities) of
the Trust, pay for all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to
the organization of the Trust, the offering, sale and issuance of
the Trust Securities (including commissions to the underwriters
in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating
to the operation of the Trust, including without limitation,
costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of
Trust assets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and
all liabilities, costs and expenses with respect to such taxes of
the Trust.
XISECTION 07. Registration Rights.
The holders of the Preferred Securities, the
Securities, the Guarantee and the shares of Common Stock of the
Company issuable upon conversion of the Securities (collectively,
the "Registrable Securities") are entitled to the benefits of a
Registration Rights Agreement, dated as of February 26, 1997,
among the Company and the Initial Purchasers (the "Registration
Rights Agreement"). Pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders
of Registrable Securities that, subject to the terms of the
Registration Rights Agreement (including, without limitation,
those provisions permitting a Suspension (as defined therein))
(i) it will, at its cost, within 180 days following the date of
issuance of the Registrable Securities (the "Issue Date"),
prepare and file a Shelf Registration Statement (as defined in
the Registration Rights Agreement) with the Commission relating
to offers and resales of the Registrable Securities, (ii) it will
use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective under the Securities Act
(subject to certain exceptions under the Registration Rights
Agreement) no later than 270 days after the Issue Date and (iii)
it will use its reasonable best efforts to maintain such Shelf
Registration Statement continuously effective under the
Securities Act until the second anniversary of the effectiveness
of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement (the "Effectiveness
Period").
The Company agrees that from and after the date on
which any Registration Default occurs, additional interest
("Liquidated Damages") will accrue on the Securities, and
accordingly, additional interest will accrue on the Preferred
Securities, in each case, from and including the day following
the day such Registration Default shall occur (or be deemed to
occur as described below) to but excluding the day on which such
Registration Default has been cured (or be deemed to be cured as
described below). Liquidated Damages will be paid quarterly in
arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following
the date on which such Liquidated Damages begin to accrue, and
will accrue at a rate per annum equal to an additional one-
quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such
Registration Default. Following the cure or deemed cure of a
Registration Default, Liquidated Damages will cease to accrue
with respect to such Registration Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the
Issue Date, a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities has not been filed with
the Commission;
(ii) on or prior to the 270th day following the
Issue Date, the Registrable Securities are not the subject of a
Shelf Registration Statement which has become effective;
(iii) the Registrable Securities are the subject
of a Shelf Registration Statement which was effective but which
has ceased to be effective for any reason (other than pursuant to
clause (iv) or (v) below) prior to the end of the Shelf
Registration Period (as defined in the Registration Rights
Agreement);
(iv) the occurrence of a Suspension (as defined
in the Registration Rights Agreement); or
(v) the occurrence of an event contemplated by
paragraph 3(c)(2)(iii) of the Registration Rights Agreement (an
"Amendment Event");
provided, however, that if the Registration Default consists
of the occurrence of any event contemplated by clause (iv) or (v)
above, then such Registration Default shall not be deemed to have
occurred until the expiration of 30 Business Days after the date
of the occurrence of such Suspension or Amendment Event, provided
that (a) the Trust and the Company thereafter reasonably promptly
comply with the requirements of paragraph 3(i) of the
Registration Rights Agreement, if applicable, and (b) in the case
of such Amendment Event resulting from an action taken by the
Company or the Trust, such action was taken in good faith; and
provided, further, that a Registration Default shall not
constitute a default or Event of Default hereunder.
A Registration Default shall be deemed to have
been cured and cease to exist on the date subsequent to the
occurrence of such Registration Default on which:
(x) in the case of a Registration Default
described in clause (i), (ii) or (iii) above, the Shelf
Registration Statement covering such Registrable Securities shall
become effective; or
(y) in the case of a Registration Default
described in clause (iv) or (v) above, upon the Company and the
Trust taking action to notify the Holders (for purposes of this
clause (y), as that term is defined in the Registration Rights
Agreement) of the Registrable Securities that such Suspension or
Amendment Event has ended. For purposes of this clause (y),
taking action to notify Holders shall be deemed sufficient when
notice is first deposited in first class mail or delivered to a
courier service or filed with the Commission or publicly
disseminated by press release or other release to a news
reporting service.
ARTICLE ELEVEN
Redemption of Securities
XIISECTION 01. Right of Redemption.
(a) The Securities may be redeemed at the election of the
Company, as a whole or in part, at any time or from time to time
after March 3, 2000, at the Redemption Prices set forth in
Section 1109 below.
(b) The Securities may be redeemed as a whole but not in
part at the election of the Company at any time within 90 days
following the occurrence of a Tax Event; provided, however, that
if, at the time there is available to the Company or the Trust
the opportunity to eliminate, within such 90-day period, the Tax
Event by taking some ministerial action, including but not
limited to filing a form or making an election, or pursuing some
other similar reasonable measure, which, in the sole judgment of
the Company, has or will cause no adverse effect on the Trust,
the holders of the Trust Securities issued by the Trust or the
Company or involves or will involve no material cost, then the
Company or the Trust shall pursue such measure in lieu of
redemption.
XIISECTION 02. Applicability of Article.
Redemption of Securities at the election of the
Company, as permitted by Section 1101, shall be made in
accordance with such provision and this Article.
XIISECTION 03. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities
pursuant to Section 1101 shall be evidenced by a Company Order.
In case of any redemption at the election of the Company, the
Company shall, at least 60 days and no more than 90 days prior to
the Redemption Date fixed by the Company, notify the Trustee in
writing of such Redemption Date and of the principal amount of
Securities to be redeemed and provide a copy of the notice of
redemption given to Holders of Securities to be redeemed pursuant
to Section 1104.
XIISECTION 04. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed
(unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption
by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions
(equal to $50 or any integral multiple thereof) of the principal
amount of the Securities.
If Securities selected for partial redemption are
converted into Common Stock in part before termination of the
conversion right with respect to the portion of the Securities so
selected, the converted portion of the Securities shall be deemed
(so far as may be) to be the portion selected for redemption.
Securities (or portions thereof) which have been converted into
Common Stock during a selection of Securities to be redeemed
shall be treated by the Trustee as Outstanding for the purpose of
such selection. In any case where more than one Security is
registered in the same name, the Trustee in its discretion may
treat the aggregate principal amount so registered as if it were
represented by one Security.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption as aforesaid
and, in case of any Securities selected for partial redemption as
aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs
shall not apply with respect to any redemption affecting only a
single Security, whether such Security is to be redeemed in whole
or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall
be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, 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 which has been
or is to be redeemed.
XIISECTION 05. Notice of Redemption.
Notice of redemption shall be given by first-class
mail, postage prepaid, mailed not less than 30 (or in the case of
a redemption at the election of the Company, not less than 20)
nor more than 60 days prior to the Redemption Date, to each
Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register.
All notices of redemption shall identify the
Securities to be redeemed (including, if relevant, CUSIP or ISIN
number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and
that interest thereon will cease to accrue on and after said
date, and
(4) 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.
XIISECTION 06. 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) accrued interest on, all
the Securities which are to be redeemed on that date.
If any Security called for redemption is converted
into Common Stock, any money deposited with the Trustee or with
any Paying Agent or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the
Holder of such Security to receive interest as provided in the
last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be
discharged from such trust.
XIISECTION 07. 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
accrued interest) such Securities shall cease to bear interest.
Upon surrender 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 accrued interest (including
Additional Payments, if any) to the Redemption Date; provided,
however, that installments 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 the terms and the provisions
of Section 307.
If any Security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal
shall, until paid, bear interest from the Redemption Date at the
rate borne by the Security.
XIISECTION 08. Securities Redeemed in Part.
In the event of any redemption in part, the
Company shall not be required to (i) issue, register the transfer
of or exchange any Security during a period beginning at the
opening of business 15 days before any selection for redemption
of Securities and ending at the close of business on the earliest
date in which the relevant notice of redemption is deemed to have
been given to all holders of Securities to be so redeemed and
(ii) register the transfer of or exchange any Securities so
selected for redemption, in whole or in part, except for the
unredeemed portion of any Securities being redeemed in part.
Any Security which is to be redeemed only in part
shall be surrendered at a place of payment therefor (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 make available
for delivery 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 of the Security so surrendered.
The Company may not redeem fewer than all of the
Outstanding Securities unless all accrued and unpaid interest
(including Additional Payments) has been paid on all of the
Outstanding Securities.
XIISECTION 09. Optional Redemption.
(a) The Company shall have the right to redeem the
Securities, in whole or in part, at any time or from time to time
on or after March 3, 2000, upon not less than 20 nor more than 60
days' notice, at a Redemption Price equal to $51.00 per $50
principal amount of the Securities to be redeemed plus any
accrued and unpaid interest, including Additional Payments, if
any, to the Redemption Date, if redeemed before March 3, 2001,
and at $50.50 per $50 principal amount of the Security, if
redeemed during the 12-month period beginning March 3, 2001 and
thereafter at $50 per $50 principal amount of the Securities
plus, in each case, accrued and unpaid interest, including
Additional Payments, if any, to the Redemption Date. Any
redemption pursuant to this Section 1109 shall be made pursuant
to the provisions of Sections 1101 through 1108 hereof.
(b) If a partial redemption of the Securities would result
in the delisting of the Preferred Securities issued by the Trust
from any national securities exchange or other organization on
which the Preferred Securities are listed, the Company shall not
be permitted to effect such partial redemption and may only
redeem the Securities in whole.
SECTION 1110. Tax Event Redemption.
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax
Opinion; or
(b) the Trustee shall have been informed by tax
counsel that a No Recognition Opinion cannot be delivered to the
Trust,
then, notwithstanding Section 1109(a) but subject to Section
1109(b), the Company shall have the right upon not less than 30
days nor more than 60 days notice to the Holders of the
Securities to redeem the Securities in whole or in part for cash
at $50 per $50 principal amount of the Securities plus accrued
and unpaid interest, including Additional Payments, if any,
within 90 days following the occurrence of such Tax Event (the
"90 Day Period"); provided, however, that if, at the time there
is available to the Company or the Trust the opportunity to
eliminate within the 90 Day Period, the Tax Event by taking some
ministerial action, including, but not limited to, filing a form
or making an election, or pursuing some other similar reasonable
measure which, in the sole judgment of the Company, will have no
adverse effect on the Company, the Trust or the holders of the
Trust Securities issued by the Trust and will involve no material
cost, then the Company or the Trust shall pursue such ministerial
action or other measure in lieu of redemption, and provided,
further, that the Company shall have no right to redeem the
Securities while the Trust is pursuing any ministerial action or
other similar measure pursuant to its obligations under the
Declaration. The redemption payment of $50 per $50 principal
amount of the Securities plus accrued and unpaid interest,
including Additional Payments, if any, shall be made prior to
12:00 noon, New York time, on the date of such redemption or such
earlier time as the Company determines provided that the Company
shall deposit with the Trustee an amount sufficient to make such
redemption payment by 10:00 a.m. on the date such redemption
payment is to be made. In lieu of the foregoing, the Company
also shall have the option of causing the Securities to remain
outstanding and pay Additional Interest on the Securities.
ARTICLE TWELVE
Subordination of Securities
XIIISECTION 01. Agreement to Subordinate.
The Company covenants and agrees, and each Holder
of Securities by such Holder's acceptance thereof likewise
covenants and agrees, that all Securities shall be issued subject
to the provisions of this Article Twelve; and each Holder of a
Security, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of,
premium, if any, and interest (including Additional Payments) on
all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right
of payment to the prior payment in full of all Senior
Indebtedness, whether outstanding at the date of this Indenture
or thereafter incurred; provided however, that no provision of
this Article Twelve shall prevent the occurrence of any default
or Event of Default hereunder.
XIIISECTION 02. Default on Senior Indebtedness.
In the event and during the continuation of any
default by the Company in the payment of principal, premium,
interest or any other payment due on any Senior Indebtedness
continuing beyond the period of grace, if any, specified in the
instrument evidencing such Senior Indebtedness, unless and until
such default shall have been cured or waived or shall have ceased
to exist, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then no
payment shall be made by the Company with respect to the
principal of (including redemption payments), premium, if any, or
interest on the Securities.
In the event that, notwithstanding the foregoing,
any payment shall be received by the Trustee when such payment is
prohibited by the preceding paragraph of this Section 1202, such
payment shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness or
their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests
may appear, but only to the extent that the holders of the Senior
Indebtedness (or their representative or representatives or a
trustee) notify the Trustee in writing within 90 days of such
payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Senior Indebtedness.
XIIISECTION 03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts (including
principal, premium, if any, and interest) due or to become due
upon all Senior Indebtedness shall first be paid in full, or
payment thereof provided for in money in accordance with its
terms, before any payment is made on account of the principal
(and premium, if any) or interest (including Additional Payments)
on the Securities; and upon any such dissolution or winding up or
liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of
the Securities or the Trustee would be entitled, except for the
provisions of this Article Twelve, shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by
the Holders of the Securities or by the Trustee under this
Indenture if received by them or it, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders,
as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior
Indebtedness in full, in money or money's worth, after giving
effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or
distribution is made to the Holders of Securities or to the
Trustee.
In the event that, notwithstanding the foregoing,
any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, prohibited
by the foregoing, shall be received by the Trustee or the Holders
of the Securities before all Senior Indebtedness is paid in full,
or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, and their respective
interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay such Senior Indebtedness in
full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders
of such Senior Indebtedness.
For purposes of this Article Twelve, the words,
"cash, property or securities" shall not be deemed to include
shares of stock of the Company as reorganized or readjusted, or
securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article
Twelve with respect to the Securities to the payment of all
Senior Indebtedness which may at the time be outstanding;
provided, that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior
Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of
the Company following the conveyance, transfer or lease of all or
substantially all its properties and assets on a consolidated
basis to another Person upon the terms and conditions provided
for in Article Eight hereof shall not be deemed a dissolution,
winding up, liquidation or reorganization for the purposes of
this Section 1203 if such other Person shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with
the conditions stated in Article Eight hereof. Nothing in
Section 1202 or in this Section 1203 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607 hereof.
XIIISECTION 04. Subrogation.
Subject to the payment in full of all Senior
Indebtedness, the rights of the Holders of the Securities shall
be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash,
property or securities of the Company, as the case may be,
applicable to such Senior Indebtedness until the principal of
(and premium, if any,) and interest on the Securities shall be
paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except
for the provisions of this Article Twelve, and no payment over
pursuant to the provisions of this Article Twelve, to or for the
benefit of the holders of such Senior Indebtedness by Holders of
the Securities or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article Twelve are and are
intended solely for the purposes of defining the relative rights
of the Holders of the Securities, on the one hand, and the
holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article Twelve or
elsewhere in this Indenture or in the Securities is intended to
or shall impair, as between the Company, its creditors other than
the holders of Senior Indebtedness, and the Holders of the
Securities, the obligation of the Company, which is absolute and
unconditional to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities
as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the
Company, as the case may be, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article
Twelve of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Company, as the case may be,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the
Company referred to in this Article Twelve, the Trustee, subject
to the provisions of Section 603, and the Holders of the
Securities, shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of
ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, as the case may be, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Article Twelve.
XIIISECTION 05. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's
acceptance thereof authorizes and directs the Trustee on such
Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this
Article Twelve and appoints the Trustee as such Holder's attorney-
in-fact for any and all such purposes.
XIIISECTION 06. Notice by the Company.
The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the
Company which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article Twelve. Notwithstanding the
provisions of this Article Twelve or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the
Securities pursuant to the provision of this Article Twelve,
unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office of
the Trustee from the Company or a holder or holders of Senior
Indebtedness or from any trustee therefor; and before the receipt
of any such written notice, the Trustee, subject to the
provisions of Section 603 hereof, shall be entitled in all
respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided
for in this Section 1206 at least two Business Days prior to the
date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any
Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for
which they were received, and shall not be affected by any notice
to the contrary which may be received by it within two Business
Days prior to such date.
The Trustee, subject to the provisions of Section
603, shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish
that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article Twelve, the
Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and
any other facts pertinent to the right of such Person under this
Article Twelve, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such
payment.
XIIISECTION 07. Rights of the Trustee; Holders of Senior
Indebtedness.
The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article Twelve in
respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
With respect to the holders of Senior Indebtedness
of the Company, the Trustee undertakes to perform or to observe
only such of its covenants and obligations as are set forth in
this Article Twelve, and no implied covenants or obligations with
respect to the holders of such Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of such Senior
Indebtedness and, subject to the provisions of Section 603, the
Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Holders of
Securities, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article Twelve or otherwise. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform
or to observe only such of its covenants or obligations as are
specifically set forth in this Article Twelve and no implied
covenants or obligations with respect to holders of Senior
Indebtedness shall be read into this Indenture against the
Trustee.
XIIISECTION 08. Subordination May Not Be Impaired.
No right of any present or future holder of any
Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act
or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice
to the Trustee or the Holders of the Securities, without
incurring responsibility to the holders of the Securities and
without impairing or releasing the subordination provided in this
Article Twelve or the obligations hereunder of the Holders of the
Securities to the holders of Senior Indebtedness, do any one or
more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the
same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing such Senior
Indebtedness; (iii) release any Person liable in any manner for
the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any
other Person.
ARTICLE THIRTEEN
Conversion of Securities
XIVSECTION 01. Conversion Rights.
Subject to and upon compliance with the provisions
of this Article, the Securities are convertible, at the option of
the Holder, at any time beginning 60 days following the first
date of original issuance of the Securities and on or before
redemption as provided below or the close of business at their
Stated Maturity, into fully paid and nonassessable shares of
Common Stock of the Company at an initial conversion rate of
1.1655 shares of Common Stock for each $50 in aggregate
principal amount of Securities (equal to a conversion price of
$42.90 per share of Common Stock), subject to adjustment as
described in this Article Thirteen. A Holder of Securities may
convert any portion of the principal amount of the Securities
into that number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of
a share) obtained by dividing the principal amount of the
Securities to be converted by such conversion price. In case a
Security or portion thereof is called for redemption, such
conversion right in respect of the Security or portion so called
shall expire at the close of business on the Business Day prior
to the corresponding Redemption Date, unless the Company defaults
in making the payment due upon redemption.
XIVSECTION 02. Conversion Procedures.
(a) In order to convert all or a portion of the Securities,
the Holder thereof shall deliver to the Conversion Agent an
irrevocable Notice of Conversion setting forth the principal
amount of Securities to be converted, together with the name or
names, if other than the Holder, in which the shares of Common
Stock should be issued upon conversion and, if such Securities
are definitive Securities, surrender to the Conversion Agent the
Securities to be converted, duly endorsed or assigned to the
Company or in blank. In addition, a holder of Preferred
Securities may exercise its right under the Declaration to
convert such Preferred Securities into Common Stock by delivering
to the Conversion Agent an irrevocable Notice of Conversion
setting forth the information called for by the preceding
sentence and directing the Conversion Agent (i) to exchange such
Preferred Security for a portion of the Securities held by the
Trust (at an exchange rate of $50 principal amount of Securities
for each Preferred Security) and (ii) to immediately convert such
Securities, on behalf of such holder, into Common Stock of the
Company pursuant to this Article Thirteen and, if such Preferred
Securities are in definitive form, surrendering such Preferred
Securities, duly endorsed or assigned to the Company or in blank.
So long as any Preferred Securities are outstanding, the Trust
shall not convert any Securities except pursuant to a Notice of
Conversion duly executed and delivered to the Conversion Agent by
a holder of Preferred Securities.
If a Notice of Conversion is delivered on or after
the Regular Record Date and prior to the subsequent Interest
Payment Date, the Holder will be entitled to receive the interest
payable on the subsequent Interest Payment Date on the portion of
Securities to be converted notwithstanding the conversion thereof
prior to such Interest Payment Date. Except as otherwise
provided in the immediately preceding sentence, in the case of
any Security which is converted, interest whose Stated Maturity
is after the date of conversion of such Security shall not be
payable, and the Company shall not make nor be required to make
any other payment, adjustment or allowance with respect to
accrued but unpaid interest on the Securities being converted,
which shall be deemed to be paid in full. Each conversion shall
be deemed to have been effected immediately prior to the close of
business on the day on which the Notice of Conversion was
received (the "Conversion Date") by the Conversion Agent from the
Holder or from a holder of the Preferred Securities effecting a
conversion thereof pursuant to its conversion rights under the
Declaration, as the case may be. The Person or Persons entitled
to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of
such Common Stock as of the Conversion Date. As promptly as
practicable on or after the Conversion Date, the Company shall
issue and deliver at the office of the Conversion Agent, unless
otherwise directed by the Holder in the Notice of Conversion, a
certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same. The Conversion
Agent shall deliver such certificate or certificates to such
Person or Persons.
(b) The Company's delivery upon conversion of the fixed
number of shares of Common Stock into which the Securities are
convertible (together with the cash payment, if any, in lieu of
fractional shares) shall be deemed to satisfy the Company's
obligation to pay the principal amount at Maturity of the portion
of Securities so converted and any unpaid interest (including
Additional Payments) accrued on such Securities at the time of
such conversion.
(c) No fractional shares of Common Stock will be issued as
a result of conversion, but in lieu thereof, the Company shall
pay to the Conversion Agent a cash adjustment in an amount equal
to the same fraction of the current market price of such
fractional interest on the date on which the Securities or
Preferred Securities, as the case may be, were duly surrendered
to the Conversion Agent for conversion, or, if such day is not a
Trading Day, on the next Trading Day, and the Conversion Agent in
turn will make such payment, if any, to the Holder of the
Securities or the holder of the Preferred Securities so
converted.
(d) In the event of the conversion of any Security in part
only, a new Security or Securities for the unconverted portion
thereof will be issued in the name of the Holder thereof upon the
cancellation thereof in accordance with Section 305.
(e) In effecting the conversion transactions described in
this Section, the Conversion Agent is acting as agent of the
holders of Preferred Securities (in the exchange of Preferred
Securities for Securities) and as agent of the Holders of
Securities (in the conversion of Securities into Common Stock),
as the case may be, directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to
exchange Securities held by the Trust from time to time for
Preferred Securities in connection with the conversion of such
Preferred Securities in accordance with this Article Thirteen and
(ii) to convert all or a portion of the Securities into Common
Stock and thereupon to deliver such shares of Common Stock in
accordance with the provisions of this Article Thirteen and to
deliver to the Trust a new Security or Securities for any
resulting unconverted principal amount.
(f) All shares of Common Stock delivered upon any conversion
of restricted securities shall bear a restrictive legend
substantially in the form of the legend required to be set forth
on such Securities and shall be subject to the restrictions on
transfer provided in such legend and in Section 305(b) hereof.
Neither the Trustee nor the Conversion Agent shall have any
responsibility for the inclusion or content of any such
restrictive legend on such Common Stock; provided, however, that
the Trustee or the Conversion Agent shall have provided to the
Company or to the Company's transfer agent for such Common Stock,
prior to or concurrently with a request to the Company to deliver
to such Conversion Agent certificates for such Common Stock,
written notice that the Securities delivered for conversion are
restricted securities.
XIVSECTION 03. Conversion Price Adjustments.
The conversion price shall be subject to
adjustment (without duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with
respect to its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of
shares or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the conversion
privilege and the conversion price in effect immediately prior to
such action shall be adjusted so that the Holder of any
Securities thereafter surrendered for conversion shall be
entitled to receive the number of shares of capital stock of the
Company which he would have owned immediately following such
action had such Securities been converted immediately prior
thereto. An adjustment made pursuant to this subsection (a)
shall become effective immediately after the record date in the
case of a dividend or other distribution and shall become
effective immediately after the effective date in case of a
subdivision, combination or reclassification (or immediately
after the record date if a record date shall have been
established for such event). If, as a result of an adjustment
made pursuant to this subsection (a), the Holder of any Security
thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes or series of capital stock
of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a Board Resolution filed
with the Trustee) shall determine the allocation of the adjusted
conversion price between or among shares of such classes or
series of capital stock.
(b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its
Common Stock entitling them (for a period expiring within 45 days
after the record date mentioned below) to subscribe for or
purchase shares of Common Stock at a price per share less than
the current market price per share of Common Stock (as determined
pursuant to subsection (f) below) on the record date mentioned
below, the conversion price for the Securities shall be adjusted
so that the same shall equal the price determined by multiplying
the conversion price in effect immediately prior to the date of
issuance of such rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of
the total number of shares so offered for subscription or
purchase would purchase at such current market price, and of
which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock
offered for subscription or purchase. Such adjustment shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not so
delivered after the expiration of such rights or warrants, the
conversion price shall be readjusted to the conversion price
which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this
subsection, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company. The Company shall not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the
Company. In case any rights or warrants referred to in this
subsection in respect of which an adjustment shall have been made
shall expire unexercised within 45 days after the same shall have
been distributed or issued by the Company, the conversion price
shall be readjusted at the time of such expiration to the
conversion price that would have been in effect if no adjustment
had been made on account of the distribution or issuance of such
expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in case
the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares
of any class or series of capital stock, cash or assets
(including securities, but excluding any rights or warrants
referred to in subparagraph (b), any dividend or distribution
paid exclusively in cash and any dividend or distribution
referred to in subparagraph (a) of this Section 1303), the
conversion price shall be reduced so that the same shall equal
the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion
price reduction contemplated by this subparagraph (c) by a
fraction of which the numerator shall be the current market price
per share (determined as provided in subparagraph (f)) of the
Common Stock on the date fixed for the payment of such
distribution (the "Reference Date") less the fair market value
(as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution
of the Board of Directors), on the Reference Date, of the portion
of the evidences of indebtedness, shares of capital stock, cash
and assets so distributed applicable to one share of Common Stock
and the denominator shall be such current market price per share
of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following
the Reference Date, provided, however, that in the event the
numerator shall be less than one, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder
of Securities shall have the right to receive upon conversion the
amount of such distribution such Holder would have received had
such Holder converted each Security immediately prior to the
Reference Date. In the event that such dividend or distribution
is not so paid or made, the conversion price shall again be
adjusted to be the conversion price which would then be in effect
if such dividend or distribution had not occurred. If the Board
of Directors determines the fair market value of any distribution
for purposes of this subparagraph (c) by reference to the actual
or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such
market over the same period used in computing the current market
price per share of Common Stock (determined as provided in
subparagraph (f)). For purposes of this subparagraph (c), any
dividend or distribution that includes shares of Common Stock or
rights or warrants to subscribe for or purchase shares of Common
Stock shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, shares of capital
stock, cash or assets other than such shares of Common Stock or
such rights or warrants (making any conversion price reduction
required by this subparagraph (c)) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such
rights or warrants (making any further conversion price reduction
required by subparagraph (a) or (b)), except (A) the Reference
Date of such dividend or distribution as defined in this
subparagraph shall be substituted as (a) "the record date in the
case of a dividend or other distribution," and (b) "the record
date for the determination of stockholders entitled to receive
such rights or warrants" and (c) "the date fixed for such
determination" within the meaning of subparagraphs (a) and (b)
and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of
computing any adjustment of the conversion price in subparagraph
(a).
(d) In case the Company shall pay or make a dividend or
other distribution on the Common Stock exclusively in cash
(excluding any cash dividend on Common Stock to the extent that
the aggregate cash dividend per share of Common Stock in any
quarter does not exceed the greater of (i) the amount per share
of Common Stock of the immediately preceding quarterly dividend
on Common Stock to the extent such preceding quarterly dividend
did not require an adjustment of the conversion price pursuant to
this subsection (d) (as adjusted, if applicable, to reflect
subdivisions or combinations of Common Stock), and (ii) 15% of
the current market price per share determined as of the trading
day immediately preceding the date of declaration of such
dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding-up of the
Company), the conversion price shall be reduced so that the same
shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subsection (d) by
a fraction of which the numerator shall be the current market
price per share (determined as of the trading day immediately
preceding the date of declaration of such dividend) of Common
Stock on the date fixed for the payment of such distribution less
the amount of cash so distributed (and not excluded as provided
above) applicable to one share of Common Stock and of which the
denominator shall be such current market price per share of the
Common Stock (determined as of the trading day immediately
preceding the date of declaration of such dividend), such
reduction to become effective immediately prior to the opening of
business on the day following the date fixed for the payment of
such distribution; provided, however, that in the event the
portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the current market price
per share (determined as of the trading day immediately preceding
the date of declaration of such dividend) of Common Stock on the
record date mentioned above, in lieu of any conversion price
adjustment pursuant to this clause (d), adequate provision shall
be made so that each Holder of Securities shall have the right to
receive upon conversion an amount of cash which equals the amount
by which such portion of cash so distributed applicable to one
share of Common Stock exceeds the greater of (A) the per share
amount of the immediately preceding quarterly cash dividend on
its Common Stock (as adjusted to reflect any of the events listed
in Sections 1303 or 1304) and (B) 15% of the current market price
per share of the Common Stock as of the Trading Day immediately
preceding the date of declaration of such dividend. If an
adjustment is required to be made pursuant to this subsection (d)
as a result of a distribution that is a quarterly dividend, such
adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend
permitted to be excluded as provided above. If an adjustment is
required to be made pursuant to this subsection (d) as a result
of a distribution that is not a quarterly dividend, such
adjustment shall be based upon the full amount of the
distribution. In the event that such dividend or distribution is
not so paid or made, the conversion price shall again be adjusted
to be the conversion price which would then be in effect if such
record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-
lot offer) made by the Company or any Subsidiary of the Company
for all or any portion of the Common Stock shall expire and such
tender or exchange offer shall involve the payment by the Company
or such Subsidiary of consideration per share of Common Stock
having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) at the last
time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been
amended) that exceeds 110% of the Closing Price of the Common
Stock on the Trading Day next succeeding the Expiration Time, the
conversion price shall be reduced so that the same shall equal
the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion
price reduction contemplated by this subsection (e) by a fraction
(which shall not be greater than one) of which the numerator
shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration
Time multiplied by the Closing Price of Common Stock on the
Trading Day next succeeding the Expiration Time and of which the
denominator shall be the sum of (i) the fair market value
(determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (ii)
the product of the number of shares of the Common Stock
outstanding (less any Purchased Shares) at the Expiration Time
and the Closing Price of Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become
retroactively effective immediately prior to the opening of
business on the day following the Expiration Time.
(f) For the purpose of any computation under subparagraphs (b)
or (c), the current market price per share of Common Stock on any
date in question shall be deemed to be the average of the daily
Closing Prices for the ten consecutive Trading Days selected by
the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and, if
applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; provided,
however, that if another event occurs that would require an
adjustment pursuant to (e), inclusive, the Board of Directors may
make such adjustments to the Closing Prices during such ten
Trading Day period as it deems appropriate to effectuate the
intent of the adjustments in this Section 1303, in which case any
such determination by the Board of Directors shall be set forth
in a Board Resolution and shall be conclusive. For purposes of
this paragraph, the term "ex" date, (1) when used with respect to
any issuance or distribution, means the first date on which the
Common Stock trades regular way on the New York Stock Exchange or
on such successor securities exchange as the Common Stock may be
listed or in the relevant market from which the Closing Prices
were obtained without the right to receive such issuance or
distribution, and (2) when used with respect to any tender or
exchange offer, means the first date on which the Common Stock
trades regular way on such securities exchange or in such market
after the Expiration Time of such offer.
(g) The Company may make such reductions in the conversion
price, in addition to those required by subparagraphs (a) through
(f), as it considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such
for income tax purposes. The Company from time to time may
reduce the conversion price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is
irrevocable during the period, and the Board of Directors of the
Company shall have made a determination that such reduction would
be in the best interest of the Company, which determination shall
be conclusive. Whenever the conversion price is reduced pursuant
to the preceding sentence, the Company shall mail to holders of
record of the Securities a notice of the reduction at least
fifteen (15) days prior to the date the reduced conversion price
takes effect, and such notice shall state the reduced conversion
price and the period it will be in effect.
(h) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of
at least 1% in the conversion price; provided, however, that any
adjustments which by reason of this subparagraph are not required
to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required.
(i) If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described
above, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute
value to the Holder of the Securities.
XIVSECTION 04. Reclassification, Consolidation, Merger or Sale of
Assets.
In the event that the Company shall be a party to
any transaction (including without limitation (a) any
recapitalization or reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision
or combination of the Common Stock), (b) any consolidation of the
Company with, or merger of the Company into, any other Person,
any merger of another Person into the Company (other than a
merger or consolidation which does not result in a
reclassification, conversion, exchange or cancellation of the
outstanding shares of Common Stock of the Company), (c) any sale
or transfer of all or substantially all of the assets of the
Company or (d) any compulsory share exchange pursuant to which
the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall
be made as part of the terms of such transaction (i) whereby the
Holder of each Security then outstanding shall have the right
thereafter to convert such Security only into the kind and amount
of securities, cash and other property receivable upon
consummation of such transaction by a holder of the number of
shares of Common Stock of the Company into which such Security
could have been converted immediately prior to such transaction
and (ii) to provide for adjustments which, for events subsequent
to the effective date of such provision, shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Article Thirteen. The above provisions shall similarly
apply to successive transactions of the foregoing type.
XIVSECTION 05. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as
herein provided:
(a) the Company shall compute the adjusted conversion price
and shall prepare a certificate signed by the Chief Financial
Officer or the Treasurer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate
shall forthwith be filed with the Trustee, the Conversion Agent
and the transfer agent for the Preferred Securities and the
Securities; and
(b) a notice stating the conversion price has been adjusted
and setting forth the adjusted conversion price shall as soon as
practicable be mailed by the Company to all record holders of
Preferred Securities and the Securities at their last addresses
as they appear upon the stock transfer books of the Company and
the Trust.
XIVSECTION 06. Prior Notice of Certain Events.
In case:
(i) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend
payable in shares of Common Stock or (B) a dividend payable in
cash that would not require an adjustment pursuant to Section
1303(c) or (ii) authorize a tender or exchange offer that would
require an adjustment pursuant to Section 1303;
(ii) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or series or of any other rights
or warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from
no par value to par value), or of any consolidation or merger to
which the Company is a party and for which approval of any
stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company
or of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall (a) if any Preferred Securities are
outstanding, cause to be filed with the transfer agent for the
Preferred Securities, and shall cause to be mailed to the holders
of record of the Preferred Securities, at their last addresses as
they shall appear upon the stock transfer books of the Trust or
(b) shall cause to be mailed to all Holders at their last
addresses as they shall appear in the Security Register, at least
fifteen days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants
are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of
the corporate action required to be specified in such notice).
XIVSECTION 07. Certain Defined Terms.
The following definitions shall apply to terms
used in this Article Thirteen:
(1) "Closing Price" of any common stock on any day shall
mean the last reported sale price regular way on such day or, in
case no such sale takes place on such day, the average of the
reported closing bid and asked prices regular way of such common
stock, in each case on the NYSE Composite Tape or, if the common
stock is not listed or admitted to trading on such exchange, on
the principal national securities exchange on which such common
stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any
New York Stock Exchange member firm selected from time to time by
the Board of Directors of the Company for that purpose or, if not
so available in such manner, as otherwise determined in good
faith by the Board of Directors.
(2) "Trading Day" shall mean a day on which any securities
are traded on the national securities exchange or quotation
system used to determine the Closing Price.
XIVSECTION 08. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the
issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable
on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan,
and the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any employee benefit
plan or program of the Company (including without limitation, the
Company's Employee Stock Option Plan, Employee Stock Purchase
Plan and 401(k) Plan) or pursuant to any option, warrant, right
or exercisable, exchangeable or convertible security outstanding
as of the date the Securities were first issued (whether or not
subsequently amended), shall not be deemed to constitute an
issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the
adjustment provisions described above applies. There shall also
be no adjustment of the conversion price in case of the issuance
of any stock (or securities convertible into or exchangeable for
stock) of the Company except as specifically described in this
Article Thirteen.
XIVSECTION 09. Certain Additional Rights.
In case the Company shall, by dividend or
otherwise, declare or make a distribution on its Common Stock
referred to in Section 1303(c) (including, without limitation,
dividends or distributions referred to in the last sentence of
Section 1303(c)), the Holder of the Securities, upon the
conversion thereof subsequent to the close of business on the
date fixed for the determination of stockholders entitled to
receive such distribution and prior to the effectiveness of the
conversion price adjustment in respect of such distribution,
shall also be entitled to receive for each share of Common Stock
into which the Securities are converted, the portion of the
shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock; provided,
however, that, at the election of the Company (whose election
shall be evidenced by a resolution of the Board of Directors)
with respect to all Holders so converting, the Company may, in
lieu of distributing to such Holder any portion of such
distribution not consisting of cash or securities of the Company,
pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of the Board of Directors). If any conversion of
Securities described in the immediately preceding sentence occurs
prior to the payment date for a distribution to holders of Common
Stock which the Holder of Securities so converted is entitled to
receive in accordance with the immediately preceding sentence,
the Company may elect (such election to be evidenced by a
resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock,
cash or assets to which such Holder is so entitled, provided,
that such due bill (i) meets any applicable requirements of the
principal national securities exchange or other market on which
the Common Stock is then traded and (ii) requires payment or
delivery of such shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or
assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
SECTION 1310. Restrictions on Common Stock Issuable Upon
Conversion.
(a) Shares of Common Stock to be issued upon
conversion of a Security in respect of Restricted Preferred
Securities (as defined in the Declaration) shall bear such
restrictive legends as the Company may provide in accordance with
applicable law.
(b) If shares of Common Stock to be issued upon
conversion of a Security in respect of Restricted Preferred
Securities are to be registered in a name other than that of the
Holder of such Preferred Security, then the Person in whose name
such shares of Common Stock are to be registered must deliver to
the Conversion Agent a certificate satisfactory to the Company
and signed by such Person, as to compliance with the restrictions
on transfer applicable to such Preferred Security. Neither the
Trustee nor any Conversion Agent or Registrar shall be required
to register in a name other than that of the Holder shares of
Common Stock or such Preferred Securities issued upon conversion
of any such Security in respect of such Preferred Securities not
so accompanied by a properly completed certificate.
SECTION 1311. Trustee Not Responsible for Determining
Conversion Price or Adjustments.
Neither the Trustee nor any Conversion Agent shall
at any time be under any duty or responsibility to any Holder of
any Security to determine whether any facts exist which may
require any adjustment of the conversion price, or with respect
to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither
the Trustee nor any Conversion Agent shall be accountable with
respect to the validity or value (or the kind of account) of any
shares of Common Stock or of any securities or property, which
may at any time be issued or delivered upon the conversion of any
Security; and neither the Trustee nor any Conversion Agent makes
any representation with respect thereto. Neither the Trustee nor
any Conversion Agent shall be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other
securities or property upon the surrender of any Security for the
purpose of conversion, or, except as expressly herein provided,
to comply with any of the covenants of the Company contained in
Article Ten or this Article Thirteen.
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
XVSECTION 01. No Recourse.
No recourse under or upon any obligation, covenant
or agreement of this Indenture, or of any Security, or for any
claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer or director, past,
present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company
or any such predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no
such personal liability whatever shall attach to, or is or shall
be incurred by, the incorporators, stockholders, officers or
directors as such, of the Company or of any predecessor or
successor corporation, or any of them, because of the creation of
the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture
or in any of the Securities or implied therefrom; and that any
and all such personal liability of every name and nature, either
at common law or in equity or by constitution or statute, of, and
any and all such rights and claims against, every such
incorporator, stockholder, officer or director as such, because
of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or
implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Securities.
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.
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed as of the day and year first
above written.
CALENERGY COMPANY, INC.
By: /s/
Name: Steven A. McArthur
Title: Senior Vice President
THE BANK OF NEW YORK,
as Trustee
By:
Name: Byron Merino
Title: Assistant Treasurer
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of February, 1997 before me
personally came Steven A. McArthur, to me known, who, being by me
duly sworn, did depose and say that he is the Senior Vice
President, Secretary and General Counsel of CalEnergy Company,
Inc., one of the corporations described in and which executed the
foregoing instrument; and that he signed his name thereto by
authority of the Board of Directors of such corporation.
Steven B. Litvack
Notary Public State of New York
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of February, 1997 before me
personally came Byron Merino, to me known, who, being by me duly
sworn, did depose and say that he is an Assistant Treasurer of
The Bank of New York, a corporation described in and which
executed the foregoing instrument; and that he signed his name
thereto by authority of the Board of Directors of such
corporation.
Steven B. Litvack
Notary Public State of New York
EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
[Include Restricted Securities Legend: THIS SECURITY HAS
AND ANY COMMON STOCK (AND RELATED RIGHTS) ISSUED ON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. THE HOLDER OF THIS SECURITY, BY ITS
ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE
BENEFIT OF CALENERGY COMPANY, INC. (THE "COMPANY") THAT: (I) IT
HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE 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 IT
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,
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING
CLAUSE (D), (E) OR (F) IS SUBJECT TO THE RIGHT OF THE ISSUER OF
THIS SECURITY AND THE TRUSTEES FOR SUCH ISSUER (i) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE,
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.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.]
CALENERGY COMPANY, INC.
6-1/4% Convertible Junior Subordinated
Debenture Due 2012
No._________ $___________
[CUSIP No. _________]
CALENERGY COMPANY, INC., a corporation duly
organized and existing under the laws of the State of Delaware
(herein called "the Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ____________________,
or registered assigns, the principal sum [indicated on Schedule A
hereof]* [of ______ Dollars]** ($_____________________) on
February 25, 2012.
Interest Payment Dates: March 1, June 1, September 1 and
December 1, commencing June 1, 1997
Regular Record Dates: the close of business on the 15th day
immediately preceding each Interest
Payment Date, commencing May 15, 1997
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 signed manually or by facsimile by its duly
authorized officers and a facsimile of its corporate seal to be
affixed hereto or imprinted hereon.
Dated: _________________
CALENERGY COMPANY, INC.
By:________________________
Name:
Title:
[Seal]
Attest:
_______________
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Dated: _____________ THE BANK OF NEW YORK,
as Trustee
By: _______________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
CALENERGY COMPANY, INC.
6-1/4% Convertible Junior Subordinated
Debenture Due 2012*
(1) Interest. CalEnergy Company, Inc., a Delaware corporation
(the "Company"), is the issuer of this 6-1/4% Convertible
Junior Subordinated Debenture Due 2012 (the "Security") limited
in aggregate principal amount to $___________ (or $___________ if
the over-allotment option is exercised in full), issued under the
Indenture hereinafter referred to. The Company promises to pay
interest on the Securities in cash from February 26, 1997 or from
the most recent interest payment date to which interest has been
paid or duly provided for, quarterly (subject to deferral for up
to 20 consecutive quarters as described in Section 3 hereof) in
arrears on March 1, June 1, September 1 and December 1 of each
year (each such date, an "Interest Payment Date"), commencing
June 1, 1997, at the rate of 6-1/4% per annum (subject to
increase as provided in Section 13 hereto) plus Additional
Interest, if any, until the principal hereof shall have become
due and payable.
The amount of interest payable for any period will
be computed on the basis of a 360-day year of twelve 30-day
months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) at the rate borne by the
Securities, compounded quarterly. Any interest paid on this
Security shall be increased to the extent necessary to pay
Additional Interest as set forth in this Security.
(2) Additional Interest. The Company shall pay to
CalEnergy Capital Trust II (and its permitted successors or
assigns under the Declaration) (the "Trust") such additional
amounts as may be necessary in order that the amount of dividends
or other distributions then due and payable by the Trust on the
Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a
result of any additional taxes, duties and other governmental
charges of whatever nature (other than withholding stamp or
transfer taxes) imposed by the United States or any other taxing
authority.
(3) Extension of Interest Payment Period. The Company
shall have the right, at any time during the term of this
Security, from time to time to defer payments of interest by
extending the interest payment period of such Security for up to
20 consecutive quarters (an "Extended Interest Payment Period")
during which Extended Interest Payment Period no interest shall
be due and payable; provided, that no Extended Interest Payment
Period may extend beyond the Maturity Date or any earlier
Redemption Date. To the extent permitted by applicable law,
interest, the payment of which has been deferred because of the
extension of the interest payment period, will bear interest
thereon at 6-1/4% compounded quarterly for each quarter of the
Extended Interest Payment Period ("Compounded Interest"). At the
end of the Extended Interest Payment Period, the Company shall
pay all interest then accrued and unpaid on the Securities,
including any Additional Payments that shall be payable to the
Holders of the Securities in whose names the Securities are
registered in the Security Registrar on the first Regular Record
Date after the end of the Extended Interest Payment Period.
Before the expiration of any Extended Interest Payment Period,
the Company may elect to continue to defer payments of interest
for another consecutive Extended Interest Payment Period;
provided, that any such Extended Interest Payment Period,
together with all such previous and consecutive Extended Interest
Payment Periods, shall not exceed 20 consecutive quarters and
shall not extend beyond the Maturity Date. Upon the expiration
of any Extended Interest Payment Period and upon the payment of
all Additional Payments, if any, then due, the Company may
commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable
during an Extended Interest Payment Period except at the end
thereof.
If the Property Trustee is the sole holder of the
Securities at the time the Company selects an Extended Interest
Payment Period, the Company shall give notice to the Regular
Trustees, the Property Trustee and the Trustee of its selection
of such Extended Interest Payment Period at least one Business
Day prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) if the Preferred Securities are listed on
the New York Stock Exchange or other stock exchange or quotation
system, the date the Trust is required to give notice to the New
York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities on the
record date or the date such distributions are payable, but in
any event not less than ten Business Days prior to such record
date.
If the Property Trustee is not the sole holder of
the Securities at the time the Company selects an Extended
Interest Payment Period, the Company shall give the Holders of
these Securities and the Trustee notice of its selection of an
Extended Interest Payment Period at least ten Business Days prior
to the earlier of (i) the next succeeding Interest Payment Date
or (ii) if the Preferred Securities are listed on the New York
Stock Exchange or other stock exchange or quotation system, the
date the Company is required to give notice to the New York Stock
Exchange or other applicable self-regulatory organization or to
holders of the Securities on the record date or the date such
distributions are payable, but in any event not less than two
Business Days prior to such record date.
The quarter in respect of which any notice is
given pursuant to the second and third paragraphs of this Section
3 shall be counted as one of the 20 quarters permitted in the
maximum Extended Interest Payment Period permitted under the
first paragraph of this Section 3.
(4) Method of Payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the 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 installment, which shall be the close of
business on the 15th day immediately preceding each Interest
Payment Date (the "Regular Record Date"), commencing May 15,
1997. 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 interest on this
Security will be made at the office or agency of the Company
maintained for that purpose in New York, New York, 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, however, that, 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 shall appear in the Security
Register.
(5) Paying Agent and Security Registrar. The Trustee will
act as Paying Agent, Security Registrar and Conversion Agent.
The Company may change any Paying Agent, Security Registrar, co-
registrar or Conversion Agent without prior notice. The Company
or any of its Affiliates may act in any such capacity.
(6) Indenture. The Company issued the Securities under an
indenture, dated as of February 26, 1997 (the "Indenture"),
between the Company and The Bank of New York, as Trustee (herein
called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders
of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered. The terms of
the Securities include those stated in the Indenture and those
made part of the Indenture by the Trust Indenture Act of 1939 (15
U.S. Code 77aaa-77bbbb) ("TIA") as in effect on the date of
the Indenture. The Securities are subject to, and qualified by,
all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and the TIA for a statement
of such terms. The Securities are unsecured general obligations
of the Company limited to $154,639,200 in aggregate principal
amount (or up to $185,567,050 if the over-allotment option is
exercised) and subordinated in right of payment to all existing
and future Senior Indebtedness of the Company. 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 interest on this Security at the times, place
and rate, and in the coin or currency, herein prescribed or to
convert this Security as provided in the Indenture.
(7) Optional Redemption. The Securities are redeemable at
the Company's option at any time and from time to time after
March 3, 2000, upon not less than 20 or more than 60 days'
notice, at a Redemption Price equal to $51.00 per $50 principal
amount of the Securities to be redeemed plus any accrued and
unpaid interest, including Additional Payments, if any, to the
Redemption Date, if redeemed before March 3, 2001, and at $50.50
per $50 principal amount of the Security, if redeemed during the
12-month period beginning March 3, 2001 and thereafter at $50 per
$50 principal amount of the Securities plus, in each case,
accrued and unpaid interest, including Additional Payments, if
any, to the Redemption Date. On or after the Redemption Date,
interest will cease to accrue on the Securities, or portion
thereof, called for redemption.
(8) Optional Redemption Upon Tax Event. The Securities are
subject to redemption in whole, but not in part, at any time
within 90 days, if a Tax Event (as defined in the Declaration)
shall occur and be continuing, at a redemption price equal to $50
per $50 principal amount thereof plus accrued but unpaid
interest, including Additional Payments, if any, to the
Redemption Date; provided, however, that if, at the time there is
available to the Company or the Trust the opportunity to
eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, including but not limited to filing a
form or making an election, or pursuing some other similar
reasonable measure, which, in the sole judgment of the Company,
has or will cause no adverse effect on the Company, the Trust or
the Holders of the Trust Securities issued by the Trust or
involves or will involve no material cost, then the Company or
the Trust shall pursue such measure in lieu of redemption. Any
redemption pursuant to this Section 8 will be made upon not less
than 30 nor more than 60 days' notice.
(9) Notice of Redemption. Notice of redemption will be
mailed at least 30 (or in the case of a redemption at the
election of the Company, at least 20) but not more than 60 days
before the Redemption Date to each Holder of the Securities to be
redeemed at his address of record. The Securities in
denominations larger than $50 may be redeemed in part but only in
integral multiples of $50. In the event of a redemption of less
than all of the Securities, the Securities will be chosen for
redemption by the Trustee in accordance with the Indenture. On
and after the Redemption Date, interest ceases to accrue on the
Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a
Regular Record Date with respect to any Interest Payment Date
specified above and on or prior to such Interest Payment Date,
then any accrued interest will be paid to the person in whose
name this Security is registered at the close of business on such
record date.
(10) Mandatory Redemption. The Securities will mature on
February 25, 2012, and may be redeemed, in whole or in part, at
any time after March 3, 2000 or at any time in certain
circumstances upon the occurrence of a Tax Event. Upon the
repayment of the Securities, whether at maturity or upon
redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount of the Securities so repaid or
redeemed at the applicable redemption price together with accrued
and unpaid distributions through the date of redemption;
provided, that holders of the Trust Securities shall be given not
less than 30 nor more than 60 days notice of such redemption.
Upon the repayment of the Securities at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds from
such repayment will be applied to redeem the Preferred
Securities, in whole, upon not less than 30 nor more than 60
days' notice. There are no sinking fund payments with respect to
the Securities.
(11) Subordination. The payment of the principal of,
interest on or any other amounts due on the Securities is
subordinated in right of payment to all existing and future
Senior Indebtedness (as defined below) of the Company, as
described in the Indenture. Each holder, by accepting a
Security, agrees to such subordination and authorizes and directs
the Trustee on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination so provided and
appoints the Trustee as its attorney-in-fact for such purpose.
Senior Indebtedness shall mean in respect of the
Company (i) the principal, premium, if any, and interest in
respect of (A) indebtedness of such obligor for money borrowed
and (B) indebtedness evidenced by securities, debentures, bonds
or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations
of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such
obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit
transaction, (v) all obligations of the type referred to in
clauses (i) through (iv) above of other Persons for the payment
of which such obligor is responsible or liable as obligor,
guarantor or otherwise, and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons
secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness issued after the date of
original issuance of the Securities that is by its terms
subordinated to or pari passu with the Securities and (2) any
indebtedness (including all other debt securities and guarantees
in respect of those debt securities) initially issued to any
other trust, or a trustee of such trust, partnership, or other
entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity
of preferred securities or other securities which by their terms
rank pari passu with, or junior to, the Preferred Securities.
The Preferred Securities shall rank pari passu with the 6 1/4% Term
Income Deferrable Equity Securities of the Company. The
Securities shall rank pari passu with the 6 1/4% Convertible Junior
Subordinated Interest Debentures Due 2016 of the Company.
(12) Conversion. The Holder of any Security has the right,
exercisable at any time beginning 60 days following the first
date of original issuance of the Securities and prior to the
close of business (New York time) on the date of the Security's
maturity, to convert the principal amount thereof (or any portion
thereof that is an integral multiple of $50) into shares of
Common Stock at an initial conversion rate of 1.1655 shares of
Common Stock for each Security (equivalent to a conversion price
of $42.90 per share of Common Stock of the Company), subject to
adjustment under certain circumstances, except that if a Security
is called for redemption, the conversion right will terminate at
the close of business on the Redemption Date.
To convert a Security, a Holder must (1) complete
and sign a conversion notice substantially in the form attached
hereto, (2) surrender the Security to a Conversion Agent, (3)
furnish appropriate endorsements or transfer documents if
required by the Security Registrar or Conversion Agent and (4)
pay any transfer or similar tax, if required. Upon conversion,
no adjustment or payment will be made for interest or dividends,
but if any Holder surrenders a Security for conversion after the
close of business on the Regular Record Date for the payment of
an installment of interest and prior to the opening of business
on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date
will be paid to the registered Holder of such Security on such
Regular Record Date. In such event, such Security, when
surrendered for conversion, need not be accompanied by payment of
an amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable
upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion
price in effect on the Conversion Date. No fractional shares
will be issued upon conversion but a cash adjustment will be made
for any fractional interest. The outstanding principal amount of
any Security shall be reduced by the portion of the principal
amount thereof converted into shares of Common Stock.
(13) Registration Rights. The holders of the Preferred
Securities, the Securities, the Guarantee and the shares of
Common Stock of the Company issuable upon conversion of the
Securities (collectively, the "Registrable Securities") are
entitled to the benefits of a Registration Rights Agreement,
dated as of February 26, 1997, among the Company and the Initial
Purchasers (the "Registration Rights Agreement"). Pursuant to
the Registration Rights Agreement, the Company has agreed for the
benefit of the holders of Registrable Securities that, subject to
the terms of the Registration Rights Agreement (including,
without limitation, those provisions permitting a Suspension (as
defined therein)) (i) it will, at its cost, within 180 days
following the date of issuance of the Registrable Securities (the
"Issue Date"), prepare and file a Shelf Registration Statement
(as defined in the Registration Rights Agreement) with the
Commission relating to offers and resales of the Registrable
Securities, (ii) it will use its reasonable best efforts to cause
such Shelf Registration Statement to be declared effective under
the Securities Act (subject to certain exceptions under the
Registration Rights Agreement) no later than 270 days after the
Issue Date and (iii) it will use its reasonable best efforts to
maintain such Shelf Registration Statement continuously effective
under the Securities Act until the second anniversary of the
effectiveness of the Shelf Registration Statement or such earlier
date as is provided in the Registration Rights Agreement (the
"Effectiveness Period").
The Company agrees that from and after the date on
which any Registration Default occurs, additional interest
("Liquidated Damages") will accrue on the Securities, and
accordingly, additional interest will accrue on the Preferred
Securities, in each case, from and including the day following
the day such Registration Default shall occur (or be deemed to
occur as described below) to but excluding the day on which such
Registration Default has been cured (or be deemed to be cured as
described below). Liquidated Damages will be paid quarterly in
arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following
the date on which such Liquidated Damages begin to accrue, and
will accrue at a rate per annum equal to an additional one-
quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such
Registration Default. Following the cure or deemed cure of a
Registration Default, Liquidated Damages will cease to accrue
with respect to such Registration Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the
Issue Date, a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities has not been filed with
the Commission;
(ii) on or prior to the 270th day following the
Issue Date, the Registrable Securities are not the subject of a
Shelf Registration Statement which has become effective;
(iii) the Registrable Securities are the subject
of a Shelf Registration Statement which was effective but which
has ceased to be effective for any reason (other than pursuant to
clause (iv) or (v) below) prior to the end of the Shelf
Registration Period (as defined in the Registration Rights
Agreement);
(iv) the occurrence of a Suspension (as defined
in the Registration Rights Agreement); or
(v) the occurrence of an event contemplated by
paragraph 3(c)(2)(iii) of the Registration Rights Agreement (an
"Amendment Event");
provided, however, that if the Registration Default consists
of the occurrence of any event contemplated by clause (iv) or (v)
above, then such Registration Default shall not be deemed to have
occurred until the expiration of 30 Business Days after the date
of the occurrence of such Suspension or Amendment Event, provided
that (a) the Trust and the Company thereafter reasonably promptly
comply with the requirements of paragraph 3(i) of the
Registration Rights Agreement, if applicable, and (b) in the case
of such Amendment Event resulting from an action taken by the
Company or the Trust, such action was taken in good faith; and
provided, further, that a Registration Default shall not
constitute a default or Event of Default hereunder.
A Registration Default shall be deemed to have
been cured and cease to exist on the date subsequent to the
occurrence of such Registration Default on which:
(x) in the case of a Registration Default
described in clause (i), (ii) or (iii) above, the Shelf
Registration Statement covering such Registrable Securities shall
become effective; or
(y) in the case of a Registration Default
described in clause (iv) or (v) above, upon the Company and the
Trust taking action to notify the Holders (for purposes of this
clause (y), as that term is defined in the Registration Rights
Agreement) of the Registrable Securities that such Suspension or
Amendment Event has ended. For purposes of this clause (y),
taking action to notify Holders shall be deemed sufficient when
notice is first deposited in first class mail or delivered to a
courier service or filed with the Commission or publicly
disseminated by press release or other release to a news
reporting service.
(14) Registration, Transfer, Exchange and Denominations. 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 New York, New York, 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, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered
form without coupons in denominations of $50 and integral
multiples thereof. 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. 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 be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or
unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
(15) Persons Deemed Owners. Except as provided in Section 4
hereof, the registered Holder of a Security may be treated as its
owner for all purposes.
(16) Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years, the Trustee and the
Paying Agent shall pay the money back to the Company at its
written request. After that, holders of Securities entitled to
the money must look to the Company for payment unless an
abandoned property law designates another Person and all
liability of the Trustee and such Paying Agent with respect to
such money shall cease.
(17) Defaults and Remedies. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture.
If an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to
the Company and the Trustee may declare all the Securities to be
due and payable immediately.
The holders of a majority in principal amount of
the Securities then outstanding by written notice to the Trustee
may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if
all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the
Indenture or the Securities except as provided in the Indenture.
Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Securities issued under
the Indenture may direct the Trustee in its exercise of any trust
or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of
Default and remedies is qualified by reference to, and subject in
its entirety by, the more complete description thereof contained
in the Indenture.
(18) Amendments, Supplements and Waivers. 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. 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.
(19) Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee
of the Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have, as if it were not
Trustee, subject to certain limitations provided for in the
Indenture and in the TIA. Any Agent may do the same with like
rights.
(20) No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have
any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each
Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of
the consideration for the issue of the Securities.
(21) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD
TO CONFLICT OF LAW PROVISIONS THEREOF.
(22) Authentication. The Securities shall not be valid
until authenticated by the manual signature of an authorized
officer of the Trustee or an authenticating agent.
(23) Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder of the
Securities upon written request and without charge a copy of the
Indenture. Request may be made to:
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention of: General Counsel
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's social security 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.
Your Signature:
(Sign exactly as your name appears on the other side of this
Security)
Date:
Signature Guarantee:*
[Include the following if the Security bears a Restricted
Securities Legend --
In connection with any transfer of any of the Securities
evidenced by this certificate, the undersigned confirms that such
Securities are being:
CHECK ONE BOX BELOW
(1) " exchanged for the undersigned's own
account without transfer; or
(2) " transferred pursuant to and in
compliance with Rule 144A under the Securities Act of 1933; or
(3) " transferred pursuant to and in
compliance with Regulation S under the Securities Act of 1933; or
(4) " transferred pursuant to another
available exemption from the registration requirements of the
Securities Act of 1933; or
(5) " transferred pursuant to an effective
Shelf Registration Statement (as defined in Section 1007 of the
Indenture).
Unless one of the boxes is checked, the Trustee 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 (3) or (4) is checked,
the Trustee may require, prior to registering any such transfer
of the Securities such legal opinions, certifications and other
information as the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements
of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act; provided, further, that after the date
that a Shelf Registration Statement becomes effective and so long
as such Shelf Registration Statement continues to be effective,
the Trustee may only permit transfers for which box (5) has been
checked.
Signature
Signature Guarantee:*
Signature must be guaranteed Signature ]
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Security for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive officer]
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global
Security shall be $__________. The following increases or
decreases in the principal amount of this Global Security have
been made:
Date Made Amount Amount Signature
of of Principal of
increase decrease Amount of authorized
in in this officer of
Principal Principal Global Trustee or
Amount of Amount of Security Securities
this this following Custodian
Global Global such
Security Security decrease
including or
upon increase
exercise
of over-
allotment
option
ELECTION TO CONVERT
To: CalEnergy Company, Inc.
The undersigned owner of this Security hereby
irrevocably exercises the option to convert this Security, or the
portion below designated, into Common Stock of CALENERGY COMPANY,
INC. in accordance with the terms of the Indenture referred to in
this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to
the undersigned, unless a different name has been indicated in
the assignment below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion
rights in accordance with the terms of the Indenture and the
Security, agrees to be bound by the terms of the Registration
Agreement relating to the Common Stock issuable upon conversion
of the Securities.
Dated: ___________
in whole _____
Portions of Security to be converted ($50 or integral multiples
thereof): $_________________
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip
Code, and Social Security or Other Identifying Number
Signature Guarantee:*
ANNEX I
AMENDED AND RESTATED DECLARATION OF TRUST
_______________________________
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
* All terms used in this Security which are defined in the
Indenture or in the Declaration attached as Annex A there
to shall have the meanings assigned to them in the
Indenture or the Declaration, as the case may be.
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
CalEnergy Company, Inc. Exhibit 11
Calculation of Earnings per share in accordance
with Interpretive Release No. 34-9083
For the three years ended December 31, 1996
(dollars in thousands, except per share amounts)
1996 1995 1994
Actual weighted average shares outstanding
for the period 54,739,097 47,248,807 33,187,971
Dilutive stock options and warrants using
average market prices 3,130,877 2,722,348 2,533,301
Primary shares outstanding 57,869,974 49,971,155 35,721,272
Additional dilutive stock options using
ending market price and assuming
conversion of convertible debt,
convertible subordinated debenture and
convertible preferred securities of
subsidiary trust* 9,293,812 7,771,195 4,444,444
Fully dilutive shares outstanding 67,163,786 57,742,350 40,165,716
Income after minority interst and before
extraordinary item 92,461 63,415 38,834
Extraordinary item - - (2,007)
Net income 92,461 63,415 36,827
Less: Series C preferred stock
dividends - (1,080) (5,010)
Net income available for common shareholders $ 92,461 $ 62,335 $ 31,817
Primary earnings per share before
extraordinary item $ 1.60 $ 1.25 $ .95
Extraordinary item per share - - (.06)
Primary earnings per share $ 1.60 $ 1.25 $ .89
Fully diluted earnings per share before
extraordinary item based on SEC
Interpretive Release No. 34-9083** $ 1.50 $ 1.18 $ .93
Extraordinary item per share share - - (.06)
Fully diluted earnings per share based on SEC Interpretive
Release No. 34-9083** $ 1.50 $ 1.18 $ .88
* The ending market price on December 31, 1994 was lower than
the average market price for the twelve months ended December 31,
1994. Accordingly, inclusion of an adjustment for stock options
would be antidilutive and, therefore, contrary to paragraph 40 of
APB Opinion 15.
**The net income available for common shareholders for the year
ended December 31, 1996 was increased by the interest expense,
net of tax effect, associated with the convertible preferred
securities of subsidiary trust, convertible debt and convertible
subordinated debentures of $7,949. Net income available for
common shareholders for the years ended December 31, 1995 was
increased by the interest expense, net of tax effect, associated
with the convertible debt and convertible subordinated debentures
of $6,038. Net income available for common shareholders for the
years ended December 31, 1994 was increased by the interest
expense, net of tax effect, associated with the convertible
subordinated debentures of $3,475.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
Dollars and Shares in Thousands Except Per Share Amounts
ASSETS 1996 1995
Cash and cash equivalents $ 424,500 $ 72,114
Joint venture cash and investments 48,083 77,590
Restricted cash 107,143 149,227
Short-term investments 4,921 34,190
Accounts receivable 342,307 57,909
Due from joint ventures 17,556 27,273
Properties, plants, contracts and
equipment, net 3,348,583 1,781,255
Excess of cost over fair value of
net assets acquired, net 790,920 302,288
Equity investments 196,535 60,815
Deferred charges and other assets 432,359 91,377
Total assets $5,712,907 $2,654,038
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $218,182 $ 6,638
Other accrued liabilities 674,842 87,892
Parent company debt 1,146,685 842,205
Subsidiary and project debt 1,754,895 921,219
Deferred income taxes 469,199 226,520
Total liabilities 4,263,803 2,084,474
Deferred income 29,067 26,032
Commitments and contingencies (Notes 3, 17, 18, 19 and 20)
Company - obligated mandatorily redeemable
convertible preferred securities of
subsidiary trust holding solely
convertible debentures 103,930 ---
Preferred securities of subsidiary 136,065 ---
Minority interest 299,252 ---
Stockholders' equity:
Preferred stock - authorized 2,000
shares, no par value --- ---
Common stock - par value $.0675 per share,
authorized 80,000 shares, issued 63,747
and 50,680 shares, outstanding 63,448
and 50,593 shares, respectively 4,303 3,421
Additional paid in capital 563,567 343,406
Retained earnings 297,520 205,059
Cumulative effect of foreign currency
translation adjustment 29,658 ---
Treasury stock - 299 and 87 common
shares at cost (8,787) (1,348)
Unearned compensation - restricted stock (5,471) (7,006)
Total stockholders' equity 880,790 543,532
Total liabilities and stockholders'
equity $5,712,907 $2,654,038
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Years Ended December 31, 1996
Dollars and Shares in Thousands Except Per Share Amounts
1996 1995 1994
Revenue:
Sales of electricity and steam $518,934 $335,630 $154,562
Income on equity investments 6,134 --- ---
Royalty income 6,846 19,482 ---
Interest and other income 44,281 43,611 31,292
Total revenues 576,195 398,723 185,854
Cost and expenses:
Operating expense 108,962 79,294 33,015
Cost of sales 31,840 --- ---
General and administration 21,451 23,376 13,012
Royalty expense 23,693 24,308 9,888
Depreciation and amortization 118,586 72,249 21,197
Loss on equity investment in Casecnan 5,221 362 ---
Interest expense 165,900 134,637 62,837
Less interest capitalized (39,862) (32,554) (9,931)
Dividends on convertible preferred
securities of subsidiary trust 4,691 --- ---
Total expenses 440,482 301,672 130,018
Income before provision for
income taxes 135,713 97,051 55,836
Provision for income taxes 41,821 30,631 17,002
Income before extraordinary item 93,892 66,420 38,834
Extraordinary item --- --- (2,007)
Income before minority interest
and preferred dividends 93,892 66,420 36,827
Minority interest 1,431 3,005 ---
Net income 92,461 63,415 36,827
Preferred dividends --- 1,080 5,010
Net income available to common
stockholders $92,461 $62,335 $31,817
Income per share before
extraordinary item $ 1.60 $ 1.25 $ .95
Extraordinary item --- --- (.06)
Net income per share - primary $1.60 $1.25 $ .89
Net income per share - fully diluted $1.50 $1.18 $ .88
Average number of shares
outstanding - primary 57,870 49,971 35,721
Fully diluted shares 67,164 57,742 40,166
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1996
Dollars and Shares in Thousands
<TABLE>
<CAPTION>
Outstanding Additional Foreign
Common Common Paid-In Retained Currency Treasury Unearned
Shares Stock Capital Earnings Adjust. Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993 35,446 $2,404 $100,965 $111,031 $ --- $(2,897) $ --- $211,503
Exercise of stock options 46 3 379 --- --- --- --- 382
Purchase of treasury stock (3,765) --- --- --- --- (65,119) --- (65,119)
Exercise of stock options
from treasury stock 96 --- (1,473) --- --- 1,772 --- 299
Employee stock purchase plan
issues from treasury stock 26 --- (122) --- --- 470 --- 348
Preferred stock dividends,
Series C, including cash
distribution of $121 --- --- --- (4,921) --- --- --- (4,921)
Tax benefit from stock plan --- --- 672 --- --- --- --- 672
Net income before preferred
dividends --- --- --- 36,827 --- --- --- 36,827
Balance December 31, 1994 31,849 2,407 100,421 142,937 --- (65,774) --- 179,991
Equity offering 18,170 1,004 240,825 --- --- 56,801 --- 298,630
Exercise of stock options 102 7 303 --- --- --- --- 310
Restricted stock 500 --- 848 --- --- 8,652 (9,500) ---
Amortization of unearned
compensation --- --- --- --- --- --- 2,494 2,494
Employee stock purchase
plan issues 41 3 559 --- --- --- --- 562
Exercise of stock options
from treasury stock 33 --- (416) --- --- 563 --- 147
Purchase of treasury stock (102) --- --- --- --- (1,590) --- (1,590)
Preferred stock dividends,
Series C, including cash
distribution of $43 --- --- --- (1,293) --- --- --- (1,293)
Tax benefit from stock plan --- --- 866 --- --- --- --- 866
Net income before preferred
dividends --- --- --- 63,415 --- --- --- 63,415
Balance December 31, 1995 50,593 3,421 343,406 205,059 --- (1,348) (7,006) 543,532
Exercise of stock options and
other equity transactions 4,971 335 57,190 --- --- 1 --- 57,526
Amortization of unearned
compensation --- --- --- --- --- --- 1,535 1,535
Employee stock purchase plan
issues 60 2 547 --- --- 588 --- 1,137
Exercise of stock options
from treasury stock 232 --- (4,707) --- --- 3,980 --- (727)
Purchase of treasury stock (472) --- --- --- --- (12,008) --- (12,008)
Conversion of debt 8,064 545 164,912 --- --- --- --- 165,457
Tax benefit from stock plan --- --- 2,219 --- --- --- --- 2,219
Foreign currency translation
adjustment --- --- --- --- 29,658 --- --- 29,658
Net income --- --- --- 92,461 --- --- --- 92,461
Balance December 31, 1996 63,448 $4,303 $563,567 $297,520 $29,658 $(8,787) $(5,471) $880,790
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended December 31, 1996
Dollars in Thousands
1996 1995 1994
Cash flows from operating activities:
Net income $92,461 $ 63,415 $ 36,827
Adjustments to reconcile net cash flow from operating activities:
Depreciation and amortization 109,447 65,244 21,197
Amortization of excess of cost over fair
value of net assets acquired 9,139 7,005 ---
Amortization of original issue discount 50,194 45,409 31,946
Amortization of deferred financing costs 9,677 8,979 1,885
Amortization of unearned compensation 1,535 2,494 ---
Provision for deferred income taxes 12,252 13,983 8,258
Loss (income) on equity investments (910) 362 ---
Income applicable to minority interest 1,431 3,005 ---
Changes in other items:
Accounts receivable (13,936) 213 (6,614)
Accounts payable and other accrued liabilities (942) 5,922 19,364
Deferred income 3,035 6,181 (437)
Net cash flows from operating activities 273,383 222,212 112,426
Cash flows from investing activities:
Purchase of Northern, Falcon Seaboard, Partnership
Interest and Magma, net of cash acquired (474,443) (907,614) (3,043)
Distributions from equity investments 8,222 --- ---
Capital expenditures relating to operating
projects (24,821) (27,120) (38,078)
Philippine construction (167,160) (289,655) (69,997)
Indonesian and other development (81,068) (8,973) (2,445)
Salton Sea IV construction (63,772) (62,430) ---
Pacific Northwest, Nevada, and Utah
exploration costs (4,885) (10,445) (8,493)
Decrease (increase) in short-term investments 33,998 80,565 (50,000)
Decrease (increase) in restricted cash 63,175 (17,452) (83,670)
Other (2,591) 11,514 1,847
Investment in Casecnan --- (61,177) ---
Net cash flows from investing activities (713,345)(1,292,787)(253,879)
Cash flows from financing activities:
Proceeds from sale of common and treasury stock
and exercise of stock options 54,935 299,649 1,580
Proceeds from convertible preferred securities
of subsidiary trust 103,930 --- ---
Proceeds from issuance of parent company debt 324,136 200,000 400,000
Net proceeds from revolver 95,000 --- ---
Proceeds from subsidiary and project debt 428,134 654,695 31,503
Repayments of subsidiary and project debt (210,892) (176,664) (13,800)
Deferred charges relating to debt financing (36,010) (34,733) (11,905)
Decrease (increase) in amounts due from
joint ventures 10,756 (29,169) 316
Purchase of treasury stock (12,008) (1,590) (65,119)
Proceeds from merger facility --- 500,000 ---
Recapitalization of merger facility --- (500,000) ---
Defeasance of 12% senior notes --- --- (35,730)
Net cash flows from financing activities 757,981 912,188 306,845
Effect of exchange rate changes 4,860 --- ---
Net increase (decrease) in cash and investments 322,879 (158,387) 165,392
Cash and cash equivalents at beginning of period 149,704 308,091 142,699
Cash and cash equivalents at end of period $472,583 $149,704 $308,091
Supplemental Disclosures:
Interest paid (net of amounts capitalized) $ 92,829 $ 50,840 $ 12,624
Income taxes paid $ 23,211 $ 14,812 $ 4,926
See note 6 regarding conversion of debt to equity.
The accompanying notes are an integral part of these financial statements.
NOTES Consolidated Financial Statements
For the Three Years Ended December 31, 1996
Dollars and Shares in Thousands, Except Per Share Amounts
1. Business
CalEnergy Company, Inc. (the "Company") is a United States-based
global power company which generates, distributes and supplies
electricity to utilities, government entities, retail customers and
other customers located throughout the world. The Company was founded
in 1971 and through its subsidiaries is primarily engaged in the
development, ownership 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. In addition, through its recently acquired
subsidiary, Northern, the Company is engaged in the distribution and
supply of electricity to approximately 1.5 million customers primarily
in northeast England as well as the generation and supply of
electricity (together with other related business activities)
throughout England and Wales.
The Company has organized several partnerships and joint ventures
(herein referred to as the "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. In 1992, the Company entered into the natural gas-fired
electrical generation market through the purchase of a development
opportunity in Yuma, Arizona which commenced commercial operation in
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 1995, the Company acquired Magma Power Company
("Magma"). Magma's operating assets included four projects referred to
as the Partnership Project in which Magma had a 50% interest, and
three projects referred to as the Salton Sea Project of which Magma
owned 100%. A fourth project included in the Salton Sea Project was
constructed after the acquisition of Magma and commenced operations in
June 1996. In addition, in April 1996, the Company acquired the
remaining 50% interest in the Partnership Project. In August 1996,
the Company acquired Falcon Seaboard Resources, Inc. ("Falcon
Seaboard") which includes significant interests in three operating gas-
fired cogeneration facilities and a related natural gas pipeline. On
December 24, 1996, CE Electric UK plc ("CE Electric"), which is 70%
owned indirectly by the Company and 30% owned indirectly by Peter
Kiewit Sons', Inc. ("PKS"), acquired majority ownership of the
outstanding ordinary share capital of Northern pursuant to a tender
offer ("Tender Offer"). The total amount expected to be paid for all
of Northern's ordinary and preference shares is approximately $1.3
billion.
Northern is one of the twelve regional electric companies ("RECs")
which came into existence as a result of the restructuring and
subsequent privatization of the electricity industry in the United
Kingdom in 1990. Northern is primarily engaged in the distribution
and supply of electricity. Northern was granted a Public Electricity
Supply ("PES") license under the Electricity Act to distribute and
supply electricity in Northern's Authorized Area ("Authorized Area").
Northern's Authorized Area covers approximately 14,400 square
kilometers with a population of approximately 3.2 million people and
includes the counties of Northumberland, Tyne and Wear, Durham,
Cleveland and North Yorkshire. Northern distributes and supplies
electricity outside its Authorized Area pursuant to second tier PES
licenses. Northern also is involved in non-regulated activities,
including the generation of electricity, electrical appliance
retailing and gas exploration and production.
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 partnerships and joint ventures in which it has an undivided
interest in the assets and is proportionally liable for its share of
liabilities. Other investments and corporate joint ventures where the
Company has the ability to exercise significant influence are
accounted for under the equity method of accounting. Investments,
where the Company's ability to influence is limited, are accounted for
under the cost method of accounting. All significant inter-enterprise
transactions and accounts have been eliminated. The results of
operations of the Company include the Company's proportionate share of
results of operations of entities acquired as of the date of each
acquisition.
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 contributions and debt service reserve requirements
relating to the projects. These funds are restricted by their
respective project debt agreements to be used only for the related
project.
At December 31, 1996, 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.
Deferred Well and Rework Costs
Well rework costs are deferred and amortized over the estimated period
between reworks. These deferred costs, net of accumulated
amortization, are $8,371 and $7,086 at December 31, 1996 and 1995,
respectively, and 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, between 10 and 30 years. 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 Northern, Falcon Seaboard, Partnership Interest and Magma
acquisitions by the Company have been accounted for as purchase
business combinations. All identifiable assets acquired and
liabilities assumed were assigned a portion of the cost of acquiring
the respective companies equal to their fair values at the date of the
acquisition and include the following:
Property and equipment of Northern is depreciated using a systematic
method, which approximates the straight line method over the estimated
useful lives of the related assets which range from 1-40 years.
Northern's investment in Teesside Power Limited is being amortized
over the remaining contract life of 11 years using a straight line
method.
Power sales agreements are amortized separately over (1) the remaining
portion of the scheduled price periods of the power sales agreements
and (2) for the Partnership Interest and Magma acquisitions 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.
Excess of Cost over Fair Value
Total acquisition costs in excess of the fair values assigned to the
net assets acquired are amortized over a 40 year period for the
Northern and Magma acquisitions and a 25 year period for the Falcon
Seaboard acquisition, both using the straight line method.
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 using the implicit interest method.
Revenue Recognition
Revenues are recorded based upon service rendered and electricity and
steam delivered to the end of the month. Royalties earned from
providing geothermal resources to power plants operated by other
geothermal power producers are recorded on an accrual basis.
Deferred Income Taxes
The Company recognizes deferred tax assets and liabilities based on
the difference between the financial statement and tax bases of assets
and liabilities using estimated tax rates in effect for the year in
which the differences are expected to reverse. The Company intends to
repatriate earnings of foreign subsidiaries in the foreseeable future.
As a result, deferred income taxes are provided for retained earnings
of international subsidiaries and corporate joint ventures which are
intended to be remitted.
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.
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 common share also assumes the
conversion at the beginning of the year of the convertible debt into
3,529 common shares at a conversion price of $18.375 per share, the
conversion at the beginning of the year of the convertible
subordinated debentures into 4,444 common shares at a conversion price
of $22.50 per share, 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 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 Equivalents
The Company considers all investment instruments purchased with an
original maturity of three months or less to be cash equivalents.
Restricted cash is not considered a cash equivalent.
Impairment of Long-Lived Assets
On January 1, 1996, the Company adopted 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" which requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption of SFAS 121 did not have a
material effect on the Company's financial statements.
Reclassification
Certain amounts in the fiscal 1995 and 1994 financial statements and
supporting footnote disclosures have been reclassified to conform to
the fiscal 1996 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. Acquisitions
Northern
On December 24, 1996, CE Electric, which is 70% owned indirectly by
the Company and 30% owned indirectly by PKS, acquired majority
ownership of the outstanding ordinary share capital of Northern
pursuant to the Tender Offer. Through January 31, 1997, CE Electric
had purchased more than 90% of Northern's ordinary shares. Under
United Kingdom statutory procedures available to compulsorily acquire
shares not purchased in the Tender Offer, CE Electric expects to
acquire the remaining Northern ordinary shares by April 30, 1997.
As of December 31, 1996, the Company and PKS had contributed to CE
Electric approximately $410,000 and $176,000 respectively, of the
approximately $1,300,000 required to acquire all of Northern's
ordinary and preference shares in connection with the Tender Offer.
The Company obtained such funds from cash on hand, short-term
borrowings, and borrowings of approximately $100,000 under a Credit
Agreement entered into with Credit Suisse on October 28, 1996 (the
"CalEnergy Credit Facility"). The remaining funds necessary to
consummate the Tender Offer will be provided from a 560,000 ($958,888)
Term Loan and Revolving Facility Agreement, dated October 28, 1996
(the "U.K. Credit Facility").
The Northern acquisition has been accounted for as a purchase business
combination. All identifiable assets acquired and liabilities assumed
were assigned a portion of the cost of acquiring Northern, equal to
their fair values at the date of the acquisition. Minority interest
is recorded at historical cost. The total cost of the acquisition
through December 31, 1996 was allocated as follows:
Cash $ 200,399
Properties, plants and equipment 1,101,860
Other assets 541,554
Northern project debt (447,119)
Accounts payable (213,710)
Accrued liabilities (606,525)
Minority interest (297,821)
Preferred securities (136,065)
Excess of cost over fair value of
net assets acquired, net of
deferred taxes of $129,493 267,648
$ 410,221
In 1993, Northern entered into a contract relating to the purchase of
400 MW of capacity from a 15.4% owned related party, Teesside Power
Limited ("Teesside"), for a period of 15 years beginning April 1,
1993. The contract sets escalating purchase prices at predetermined
levels. Currently the escalating contract prices exceed those paid by
the Company to the electricity pool (the "Pool") which is operated by
the National Grid Group. However, under current price cap regulation
expected to expire March 31, 1998 the Company is able to recover these
costs. For the period after March 31, 1998, the Company has
established a liability for the estimated loss as a result of this
contract.
Northern utilizes contracts for differences ("CFDs") to mitigate its
exposure to volatility in the prices of electricity purchased through
the Pool. Such contracts allow the Company to effectively convert the
majority of its anticipated Pool purchases from market to fixed
prices. As of December 31, 1996, CFDs were in place to hedge a
portion of electricity purchases of approximately 55,000 GWh through
the year 2008.
The Labour Party has asserted that if they are elected at the next
General Election, which must be held no later than May 22, 1997, they
will seek to introduce a "windfall" assessment to be levied on the
privatized utilities including Northern. The Company has established
a liability for such an assessment as part of its purchase accounting
reserves.
The preferred securities reflect the fair value of the outstanding
preferred stock of Northern.
Falcon Seaboard
On August 7, 1996 the Company completed the acquisition of Falcon
Seaboard for a cash price of $229,500 including acquisition costs.
Through the acquisition, the Company indirectly acquired significant
ownership interests in three operating gas-fired cogeneration
facilities and a related natural-gas pipeline. The plants are
located in Texas, Pennsylvania and New York and total 520 MW in
capacity.
The Falcon Seaboard acquisition has been accounted for as a purchase
business combination. All identifiable assets acquired and
liabilities assumed were assigned a portion of the cost of acquiring
Falcon Seaboard, equal to their fair values at the date of the
acquisition. The total cost of the acquisition was allocated as
follows:
Cash $ 22,923
Operating facilities 141,176
Power sales agreements 23,282
Equity investments 144,656
Other assets 27,229
Project loans (119,478)
Other liabilities (15,527)
Excess of cost over fair value of
net assets acquired, net of
deferred taxes of $93,279 5,239
$ 229,500
Edison Mission Energy's Partnership Interest
On April 17, 1996 the Company completed the acquisition of Edison
Mission Energy's Partnership Interests in four geothermal operating
facilities in California for a cash purchase price of $71,000
including acquisition costs. The four projects, Vulcan, Hoch (Del
Ranch), Leathers and Elmore, are located in the Imperial Valley of
California. Prior to this transaction, the Company was a 50% owner of
these facilities.
The Partnership Interest acquisition has been accounted for as a
purchase business combination. All identifiable assets acquired and
liabilities assumed were assigned a portion of the cost of acquiring
the Partnership Interest, equal to their fair values at the date of
the acquisition. The total cost of the acquisition was allocated as
follows:
Cash $ 12,956
Restricted cash 13,226
Power sales agreements 78,036
Other assets 20,254
Project loans (48,161)
Liabilities (5,311)
$ 71,000
Magma Power Company
On January 10, 1995, the Company acquired approximately 51% of the
outstanding shares of common stock of Magma (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.
The Magma acquisition has been accounted for as a purchase business
combination. 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
Unaudited pro forma combined revenue, net income and primary earnings
per share of the Company, Northern, Falcon Seaboard, the Partnership
Interest and Magma for the twelve months ended December 31, 1996 and
1995, as if the acquisitions had occurred at the beginning of 1995
after giving effect to certain pro forma adjustments related to the
acquisition were $2,162,381, $64,811 and $1.12, compared to
$2,006,496, $53,887 and $1.02, respectively.
4.Properties, Plants, Contracts and Equipment
Properties, plants, contracts and equipment comprise the following at
December 31:
1996 1995
Operating project costs:
Power plants and distribution system $2,361,089 $623,778
Wells and resource development 391,929 329,414
Power sales agreements 232,228 188,415
Licenses, equipment, wells and resource
development in progress 66,207 58,517
Total operating facilities 3,051,453 1,200,124
Less accumulated depreciation and amortization (271,216) (164,184)
Net operating facilities 2,780,237 1,035,940
Mineral reserves 207,424 212,929
Construction in progress:
Malitbog 152,411 146,735
Mahanagdong 123,567 76,560
Other international development 84,944 11,418
Upper Mahiao --- 188,904
Salton Sea IV --- 108,769
Total $3,348,583 $1,781,255
Coso Project Operating Facilities
The Coso Project operating facilities comprise the Company's
proportionate share of the assets of three of its Coso Joint Ventures:
Coso Finance Partners ("Navy I Joint Venture"), Coso Energy Developers
("BLM Joint Venture"), and Coso Power Developers ("Navy II Joint
Venture"). The Navy I power 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 Joint Venture. The BLM power 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 Joint Venture reached payout in June 1994. Under terms of the
Navy II Joint Venture, all profits, losses and capital contributions
for Navy II are divided equally by the two partners.
Imperial Valley Project Operating Facilities
The Company currently operates eight geothermal power plants in the
Imperial Valley in California. Four of these plants were developed by
Magma. The Partnership Project consists of the Vulcan, Hoch (Del
Ranch), Elmore, and Leathers Partnerships. The remaining four plants
which comprise the Salton Sea Project are indirect wholly owned
subsidiaries of the Company, three of which were purchased by Magma on
March 31, 1993 from Union Oil Company of California and the fourth
which was completed by the Company in June 1996. These geothermal
power plants consist of the Salton Sea I, Salton Sea II, Salton Sea
III and the Salton Sea IV. The Partnership Project and the Salton Sea
Project are collectively referred to as the Imperial Valley Project.
The Imperial Valley Project commencement dates and nominal capacities
are as follows:
Imperial Valley Commencement Nominal
Plants Date Capacity
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
Salton Sea IV May 24, 1996 39.6 MW
Significant Customers and Contracts
All of the Company's sales of electricity from the Coso Project and
Imperial Valley Project, which comprise approximately 77% of 1996
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 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.
Energy is sold at increasing scheduled rates for the first ten years
after firm operation and thereafter at Edison's Avoided Cost of
Energy.
The scheduled 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 Company's share of the annual capacity
payments is approximately $5,600 to $5,900 per annum for each plant.
The Company's share of bonus payments is approximately $1,000 per
annum for each plant.
The scheduled energy price periods of the Partnership Project SO4
Agreements extended until February 1996 for the Vulcan Partnership and
extend until December 1998, December 1998, and December 1999 for each
of the Hoch (Del Ranch), Elmore and Leathers Partnerships,
respectively. The annual capacity payments are approximately $24,500
and the bonus payments are approximately $4,400 in aggregate for the
four plants.
Excluding Vulcan, which is receiving Edison's Avoided Cost of Energy,
the Company's SO4 Agreements provide for energy rates ranging from
12.6 cents per kWh in 1996 to 15.6 cents per kWh in 1999. The weighted average
energy rate for all of the Company's SO4 Agreements was 11.7 cents per kWh
in 1996.
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
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 Salton Sea I was 5.1 cents per kWh during 1996.
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 capacity
payment is approximately $1,100 per annum.
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 September 30, 2004. The annual capacity and
bonus payments for Salton Sea II and Salton Sea III are approximately $3,300
and $9,700, respectively.
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 indices 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 September 30, 2017, the original termination date
of the Salton Sea I PPA.
For the year ended December 31, 1996, Edison's average Avoided Cost of
Energy was 2.5 cents per kWh which is substantially below the contract
energy prices earned for the year ended December 31, 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 payment periods.
The Upper Mahiao Project 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,
is responsible for providing operations and maintenance during the ten
year BOOT period. The electricity generated by the Upper Mahiao
geothermal power plant is sold to PNOC-Energy Development Corporation
("PNOC-EDC"), which is also responsible for supplying the facility
with the geothermal steam. After the 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.
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.
Unit I of the Malitbog Project was deemed complete in July 1996. The
Malitbog Project is being built, owned and operated by VGPC, a
Philippine general partnership that is wholly owned, indirectly, by
the Company. 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 the NPC. 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 Saranac Project sells electricity to New York State Electric & Gas
pursuant to a 15 year negotiated power purchase agreement (the
"Saranac PPA"), which provides for capacity and energy payments.
Capacity payments, which in 1996 total 2.1 cents per kWh, are received for
electricity produced during "peak hours" as defined in the Saranac PPA
and escalate at approximately 4.1% annually for the remaining term of
the contract. Energy payments, which average 6.3 cents per kWh in 1996,
escalate at approximately 4.4% annually for the remaining term of the
Saranac PPA. The Saranac PPA expires in June of 2009.
The Power Resources Project sells electricity to Texas Utilities
Electric Company ("TUEC") pursuant to a 15 year negotiated power
purchase agreement (the "Power Resources PPA"), which provides for
capacity and energy payments. Capacity payments and energy payments,
which in 1996 are $2,930 per month and 2.86 cents per kWh, respectively,
escalate at 3.5% annually for the remaining term of the Power
Resources PPA. The Power Resources PPA expires in September 2003.
The NorCon Project sells electricity to Niagara Mohawk Power
Corporation ("Niagara") pursuant to a 25 year negotiated power
purchase agreement (the "NorCon PPA") which provides for energy
payments calculated pursuant to an adjusting formula based on
Niagara's ongoing Tariff Avoided Cost and the contractual Long-Run
Avoided Cost. The NorCon PPA term extends through December 2017. The
Company and Niagara are currently engaged in discussions regarding a
potential restructuring or buyout and termination of the NorCon PPA.
The Yuma Project sells electricity to 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 contract term extends
through May 2024.
Royalty Expense
Royalty expense comprises the following for the years ended:
1996 1995 1994
Navy I, Unit 1 $ 1,620 $ 1,622 $1,641
Navy I, Units 2 and 3 3,512 3,394 3,174
BLM 2,538 3,036 2,842
Navy II 5,742 5,571 1,963
Partnership Project 6,702 6,820 ---
Salton Sea Project 3,526 3,578 ---
Desert Peak 53 287 268
Total $23,693 $24,308 $9,888
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, 1996, the balance of funds deposited approximated $5,311,
which amount is included in restricted cash.
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.
The Partnership Project pays royalties based on both energy revenues
and total electricity revenues. Hoch (Del Ranch) and Leathers pay
royalties of approximately 5% of energy revenues and 1% of total
electricity revenue. Elmore pays royalties of approximately 5% of
energy revenues. Vulcan pays royalties of 4.167% of energy revenues.
The Salton Sea Project's weighted average royalty expense in 1996 was
approximately 5.2%. The royalties are paid to numerous recipients
based on varying percentages of electrical revenue or steam production
multiplied by published indices.
Nevada and Utah Properties
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 geothermal
plant at Desert Peak, Nevada that is currently selling electricity to
Sierra Pacific Power Company ("Sierra") at Sierra's Avoided Cost.
Glass Mountain
Under a Bonneville Power Administration ("BPA") geothermal pilot
program, the Company has been developing a 30 net MW geothermal
project which was originally located in the Newberry Known Geothermal
Resource Area in Deschutes County, Oregon. Pursuant to two power
sales contracts executed in September 1994, an affiliate of the
Company 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 project under certain circumstances. These 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 (the "Glass
Mountain Project") in Northern California, where it has two successful
production wells. The Company and BPA have agreed to relocate the
project to Glass Mountain. Under the relocation agreement BPA will
purchase 30 MW from the project. The movement of the project to this
alternative location and BPA's purchase obligation are subject to
obtaining a final environmental impact statement relating to the new
site location. Discussions with EWEB are continuing.
The Glass Mountain Project is currently expected to commence
commercial operation in 2000. Completion of this project is subject
to a number of significant uncertainties and cannot be assured.
5. Equity Investments
The Company has a present indirect ownership of approximately 35% in
the Casecnan Project, a combined irrigation and 150 net MW
hydroelectric power generation project located on the island of Luzon
in the Philippines.
The Company acquired an approximate 47% economic interest in Saranac
Power Partners, L.P. and a 20% economic interest in NorCon Power
Partners, L.P. as part of the Falcon Seaboard acquisition.
Summary financial information for these equity investments follows:
Casecnan Saranac NorCon
As of and for the year ended December 31, 1996:
Assets $ 492,166 $ 325,174 $ 125,956
Liabilities 380,737 213,326 121,223
Net income (loss) (11,207) 40,005 (53)
As of December 31, 1995:
Assets 501,160 N/A N/A
Liabilities 378,524 N/A N/A
6. Parent Company Debt
Parent company debt comprises the following at December 31:
1996 1995
Senior discount notes $ 527,535 $ 477,355
Senior notes 224,150 ---
Limited recourse senior secured notes* 200,000 200,000
CalEnergy credit facility 100,000 ---
Revolving credit facility 95,000 ---
Convertible subordinated debentures --- 100,000
Convertible debt --- 64,850
$ 1,146,685 $ 842,205
*The amount of recourse obligation to the parent was $0 at December 31, 1996.
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 initially at a redemption price
of 105.125% declining to 100% on January 15, 2002 plus accrued
interest to the date of redemption. 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 unless 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.
Senior Notes
On September 20, 1996 the Company completed a private sale to
institutional investors of $225,000 aggregate principal amount of 9
1/2% Senior Notes due 2006. Interest on the Senior Notes will be
payable semiannually on March 15 and September 15 of each year. The
Senior Notes are redeemable at any time on or after September 15, 2001
initially at a redemption price of 104.75% declining to 100% on
September 15, 2004 plus accrued interest to the date of redemption.
The Senior Notes are unsecured senior obligations of the Company.
Limited Recourse Senior Secured Notes
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 ("Note Indenture"),
which was $0 at December 31, 1996.
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.
CalEnergy Credit Facility
On October 28, 1996 the Company obtained a $100,000 credit facility
(the "CalEnergy Credit Facility") of which the Company has drawn
$100,000 as of December 31,1996. Borrowings under the CalEnergy
Credit Facility are unsecured and mature on October 28, 1997, subject
to prepayment by the Company at any time. Subsequent to year end, the
Company repaid the entire balance of the CalEnergy Credit Facility.
Revolving Credit Facility
On July 8, 1996 the Company obtained a $100,000 three year revolving
credit facility. The facility is unsecured and is available to fund
general operating capital requirements and finance future business
opportunities. The Company had drawn $95,000 as of December 31, 1996.
Subsequent to year end, the Company repaid the entire balance.
Convertible Subordinated Debentures
In June of 1993, the Company issued $100,000 principal amount of 5%
convertible subordinated debentures ("debentures") due July 31, 2000.
Substantially all of the debentures were converted into 4,443 common
shares in September and October 1996 at a conversion price of $22.50
per share.
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 Inc. ("Kiewit"), a subsidiary of PKS, in a private
placement. Each share of the Series C preferred stock was convertible
at any time at $18.375 per common share into 2,721 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. On September
20, 1996, the Company converted the $64,850 convertible debt and
associated accrued interest into 3,620 common shares at a conversion
price of $18.375 per share.
The annual repayments of the parent company debt for the years
beginning January 1, 1997 are as follows:
Senior Limited
Discount Senior Recourse
Notes Notes Notes *
1997 - 2001 $ --- $ --- $ ---
Thereafter 529,640 225,000 200,000
$529,640 $225,000 $200,000
*The amount of recourse obligation to the parent was $0 at December 31, 1996.
7. Subsidiary and Project Debt:
Project loans held by subsidiaries and projects of the Company
comprise the following at December 31:
1996 1995
Salton Sea Notes and Bonds $ 538,982$ 452,088
Northern eurobonds 439,192 ---
Coso Funding Corp. project loans 148,346 203,226
U.K. Credit Facility 128,423 ---
Power Resources project debt 114,571 ---
Construction loans 377,454 211,198
Other 7,927 54,707
$ 1,754,895 $ 921,219
Pursuant to separate project financing agreements, substantially all
the assets of the Company are pledged or encumbered to support or
otherwise provide the security for the project or subsidiary debt.
Salton Sea Notes and Bonds
On June 20, 1996 and July 25, 1995, the Company through its wholly
owned subsidiary, Salton Sea Funding Corporation ("Funding
Corporation"), completed sales to institutional investors of $135,000
and $475,000, respectively, of Salton Sea Notes and Bonds (the "Notes
and Bonds"). The Salton Sea Notes and Bonds are nonrecourse to the
Company. The Funding Corporation debt securities were offered as
follows:
Senior Secured Series Due Rate Amount
July 25, 1995 A Notes May 30, 2000 6.69% $232,750
July 25, 1995 B Bonds May 30, 2005 7.37% 133,000
July 25, 1995 C Bonds May 30, 2010 7.84% 109,250
June 20, 1996 D Notes May 30, 2000 7.02% 70,000
June 20, 1996 E Bonds May 30, 2011 8.30% 65,000
The Salton Sea Notes and Bonds are secured by the Company's four
existing Salton Sea plants 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.
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.
Pursuant to the Depository Agreement, Funding Corporation established
a debt service reserve fund in the form of a letter of credit in the
amount of $70,430 from which scheduled interest and principal payments
can be made.
Northern Eurobonds
The Northern debt includes a 55,000 ($94,177) debenture due in 1999,
which bears a fixed interest rate of 12.661%. The debt also includes
bearer bonds repayable in 100,000 ($171,230) amounts in 2005 and 2020,
bearing fixed interest rates of 8.625% and 8.875%, respectively.
The balance at December 31, 1996 consists of the following:
Debenture due 1999 $ 99,924
Bearer bonds due 2005 171,130
Bearer bonds due 2020 168,138
$ 439,192
Coso Funding Corp. Project Loans
The Coso Funding Corp. project loans are from Coso Funding Corp., a
single-purpose corporation formed to issue notes for its own account
and act as an agent on behalf of the Coso Project. On December 16,
1992, pursuant to separate credit agreements executed between Coso
Funding Corp. and each Coso Joint Venture, the proceeds from Coso
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 Coso 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 Coso 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 and the Coso 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.
The Coso Funding Corp. project loans carry a fixed interest rate with
weighted average interest rates of 8.46% and 8.29% at December 31,
1996 and 1995, respectively. The loans have scheduled repayments
through December 2001.
U.K. Credit Facility
On October 28, 1996 CE Holdings obtained a 560,000 ($958,888) five
year term loan and revolving credit facility (the "U.K. Credit
Facility"). The Company has not guaranteed, nor is it otherwise
subject to recourse for, amounts borrowed under the U.K. Credit
Facility. The agreement places restrictions on distributions from CE
Electric to any of its shareholders based on certain financial ratios.
As of December 31, 1996, CE Holdings had drawn 75,000 ($128,423) under
the agreement.
Power Resources Project Financing Debt
Power Resources, an indirect wholly-owned subsidiary, has project
financing debt consisting of a term loan payable to a consortium of
banks with interest and principal due quarterly through October 2003.
The debt carries fixed interest rates of 10.385% and 10.625%. The
loan is collateralized by all of the assets of Power Resources.
The annual repayments of the subsidiary and project debt, excluding
construction loans, for the years beginning January 1, 1997 and
thereafter are as follows:
Salton Sea Coso
Notes and Funding UK Credit Power
Bonds Northern Corp. Facility Resources Other
1997 $ 90,228 $ --- $ 41,729 $ --- $ 11,228 $ 873
1998 106,938 --- 38,912 --- 12,805 1,678
1999 57,836 99,924 31,717 --- 14,268 1,421
2000 25,072 --- 4,080 --- 16,087 1,181
2001 22,376 --- 31,908 128,423 18,119 959
Thereafter 236,532 339,268 --- --- 42,064 1,815
$538,982 $439,192 $148,346 $128,423 $114,571 $7,927
Construction Loans
The Company's share of project construction loans comprise the
following at December 31:
1996 1995
Upper Mahiao $150,628 $134,619
Malitbog 137,881 36,863
Mahanagdong 76,503 39,716
Dieng Unit I 12,442 ---
$377,454 $211,198
The construction loans are scheduled to be replaced by term project
financing upon completion of construction and commencement of
commercial operations.
Upper Mahiao Construction Loan
Draws on the construction loan for the Upper Mahiao geothermal power
project at December 31, 1996 totaled $150,628. A consortium of
international banks provided 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,
1996 and 1995 is approximately 8.01% and 8.31%, respectively. The
Export-Import Bank of the U.S. ("Ex-Im Bank") is providing political
risk insurance to commercial banks on the construction loan. 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 in early 1997. The largest portion of the term
loan for the project will also be provided by Ex-Im Bank. The term
financing for the Ex-Im Bank loan will be for a ten year term at a
fixed interest rate of 5.95%.
Malitbog Construction Loan
Draws on the construction loan for the Malitbog geothermal power
project at December 31, 1996 totaled $137,881. 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
(weighted average of 8.15% and 8.42% at December 31, 1996 and 1995,
respectively). The international bank portion of the debt will be
insured by the Overseas Private Investment Corporation ("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.
Mahanagdong Construction Loan
The Company's share of draws on the construction loan for the
Mahanagdong geothermal power project at December 31, 1996 totaled
$76,503. The construction debt financing is provided by OPIC and a
consortium of international banks. The construction loan interest
rates are at LIBOR or "Prime" with interest payments due quarterly and
at LIBOR maturity. The weighted average interest rate at December 31,
1996 and 1995 is approximately 8.05% and 8.02% respectively. Political
risk insurance from Ex-Im Bank has been obtained for the commercial
lenders. 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%.
Dieng Construction Loan
On October 4, 1996 the Company closed the $120,000 project financing
for the Dieng Unit I 55 net MW geothermal project located in
Indonesia. The loan carries a variable interest rate (weighted
average of 7.19% at December 31, 1996) and has scheduled project term
repayments through 2002. Dieng Unit I is under construction and is
currently expected to begin commercial operation by late 1997. The
Company has drawn $12,442 as of December 31, 1996.
8. Income Taxes
Provision for income taxes is comprised of the following at December
31:
1996 1995 1994
Currently payable:
State $ 7,520 $ 5,510 $1,970
Federal 19,873 11,138 5,829
Foreign 2,176 --- ---
29,569 16,648 7,799
Deferred:
State 1,619 921 1,017
Federal 9,209 13,062 7,241
Foreign 1,424 --- ---
12,252 13,983 8,258
Total after benefit of
extraordinary item 41,821 30,631 16,057
Tax benefit attributable to
extraordinary item --- --- 945
Total before benefit of
extraordinary item $41,821 $30,631 $17,002
A reconciliation of the federal statutory tax rate to the effective
tax rate applicable to income before provision for income taxes
follows:
1996 1995 1994
Federal statutory rate 35.00% 35.00% 35.00%
Percentage depletion in excess
of cost depletion (6.12) (7.38) (6.85)
Investment and energy tax credits (8.34) (1.80) (3.04)
State taxes, net of federal
tax effect 4.38 4.09 4.48
Goodwill amortization 2.51 2.53 ---
Non-deductible expense .84 1.10 ---
Lease investment --- (2.18) ---
Tax effect of foreign income 2.54 --- ---
Other .01 .20 .86
30.82% 31.56% 30.45%
Deferred tax liabilities (assets) are comprised of the following at
December 31:
1996 1995
Depreciation and amortization, net $725,366 $349,079
Pensions 22,883 ---
Other 6,119 4,043
754,368 353,122
Deferred contract costs (128,745) ---
Deferred income (9,298) (7,709)
Loss carryforwards --- (3,050)
Energy and investment tax credits (55,931) (52,857)
Advance corporation tax (20,205) ---
Alternative minimum tax credits (50,819) (52,480)
Jr. SO4 royalty receivable (5,865) (5,865)
Accruals not currently deductible
for tax purposes (13,372) ---
Other (934) (4,641)
(285,169) (126,602)
Net deferred taxes $469,199 $226,520
The Company has unused investment and geothermal energy tax credit
carryforwards of approximately $55,931 expiring between 2002 and 2011.
The Company also has approximately $50,819 of alternative minimum tax
credit and 11,800 ($20,205) of surplus advance corporation tax
carryforwards which have no expiration date.
9. Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of Subsidiary Trust Holding Solely Convertible Debentures
On April 12, 1996 CalEnergy Capital Trust, a special purpose Delaware
business trust organized by the Company (the "Trust"), pursuant to
the Amended and Restated Declaration of Trust (the "Declaration")
dated as of April 4, 1996, 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 initial purchasers 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") issued pursuant to
an indenture dated as of April 1, 1996. The indenture includes an
agreement by the Company to pay expenses and obligations incurred by
the Trust. 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.
Pursuant to a Preferred Securities Guarantee Agreement, dated as of
April 10, 1996 (the "Guarantee"), between the Company and a preferred
guarantee trustee, the Company has agreed irrevocably to pay to the
holders of the TIDES, to the extent that the Trustee has funds
available to make such payments, quarterly distributions, redemption
payments and liquidation payments on the TIDES. Considered together,
the undertakings contained in the Declaration, Junior Debentures,
Indenture and Guarantee constitute a full and unconditional guarantee
by the Company of the Trust's obligations under the TIDES.
10.Preferred Stock
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
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.
11.Stock Options and Restricted Stock
The Company has issued various stock options. As of December 31, 1996,
a total of 5,088 shares are reserved for stock options, of which 4,777
shares have been granted and remain outstanding at prices of $3.00 to
$30.38 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 1996 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 1996 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 1996
Plan. The non-1996 plan options are primarily options granted to
Kiewit (see Note 12).
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 canceled 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 approximately five years. Accordingly, $1,535 and $2,494 of
unearned compensation was charged to general and administrative
expense in 1996 and 1995, respectively.
Transactions in Stock Options
<TABLE>
<CAPTION>
Options Outstanding
Shares Available
for Grant Under Option Price Weighted Avg
1996 Option Plan Shares Per Shares Option Price Total
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 439 8,514 $3.00 - $19.00 $12.32 $104,931
Options granted (954) 1,243 12.00 - 17.25 15.49 19,260
Options terminated 15 (15) 3.00 - 15.94 13.67 (205)
Options exercised --- (141) 3.00 - 15.94 5.03 (709)
Additional shares reserved
under 1996 Option Plan 586 --- --- --- ---
Balance December 31, 1994 86 9,601 3.00 - 19.00 12.84 123,277
Options granted (396) 396 15.81 - 19.00 18.15 7,188
Options terminated 571 (571) 14.88 - 19.00 18.69 (10,673)
Options exercised --- (135) 3.00 - 15.94 3.41 (460)
Balance December 31, 1995 261 9,291 3.00 - 19.00 12.84 119,332
Options granted (1,157) 1,1572 5.06 - 30.38 28.17 32,590
Options terminated 468 (468) 3.00 - 19.00 17.96 (8,406)
Options exercised --- (5,203) 3.00 - 21.68 11.13 (57,931)
Additional shares reserved
under 1996 Option Plan 739 --- --- --- ---
Balance December 31, 1996 311 4,777 $3.00 - $30.38 $17.92 $85,585
Options exercisable at:
December 31, 1994 7,897 $3.00 - $19.00 $11.87 $93,705
December 31, 1995 8,229 $3.00 - $19.00 $12.26 $100,886
December 31, 1996 3,071 $3.00 - $30.38 $14.25 $43,770
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable as of December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Average Weighted
Range of Number Average Remaining Number Average
Exercise Prices Outstanding Exercise Price Contractual Life Exercisable Exercise Price
<S> <C> <C> <C> <C> <C>
$3.00 $11.99 1,251 $ 10.70 4 years 1,251 $ 10.70
12.00 20.99 2,369 16.72 7 years 1,786 16.50
21.00 30.38 1,157 28.16 9 years 34 29.25
4,777 $ 17.92 7 years 3,071 $ 14.25
</TABLE>
In October 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation." SFAS 123 defines a fair
value based method of accounting for stock-based employee compensation
plans and encourages all entities to adopt that method of accounting.
However, it also allows an entity to continue to measure compensation cost
for those plans using the intrinsic value based method of accounting.
The Company has decided to continue to apply the intrinsic value based
method of accounting for its stock-based employee compensation plans.
If the fair value based method had been applied for 1996 and 1995, non-
cash compensation expense and the effect on net income available to
common stockholders and earnings per share would have been immaterial.
The fair value for stock options was estimated using the Black-Scholes
option pricing model with assumptions for the risk-free interest rate
of 6.00%, expected volatility of 22%, expected life of approximately
4.5 years, and no expected dividends. The weighted average fair value
of options granted during 1996 and 1995 was $8.62 per option and $5.72
per option, respectively.
12.Common Stock Sales & Related Options
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 Kiewit 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 proceeds of
$300,388 from the Offering.
The Company and Kiewit signed a Stock Purchase Agreement and related
agreements, dated as of February 18, 1991. 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 Kiewit
and its affiliates agreed not to acquire more than 34% of the
outstanding common stock (the "Standstill Percentage") for a five-year
period ending in February 1996 and Kiewit became entitled to nominate
at least three of the Company's directors.
On June 19, 1991, the board approved a number of amendments to the
Stock Purchase Agreement and the related agreements. As part of those
amendments, the Company extended the term of the $9 and $12 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 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. 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.
13. Related Party Transactions
The Company charged and recognized a management fee and interest on
advances to its Coso Joint Ventures, which aggregated approximately
$5,731, $6,075 and $5,569 in the years ended December 31, 1996, 1995
and 1994, respectively. The Company has a note receivable from the
Coso Joint Ventures included in deferred charges and other assets
which bears a fixed interest rate of 12.5% and is payable on or before
March 19, 2002. The balance of the note is $11,578 and $14,254 as of
December 31, 1996 and 1995, respectively. This note is subordinated
to the senior project loan on the project.
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 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 provides 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 has in an international joint venture agreement with PKS,
a stockholder of the Company, which the Company believes enhances its
capabilities in foreign power markets. The joint venture agreement is
limited to international power project development 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 receive
from the project a development fee (generally 1% of project capital)
and will operate and manage such project for a fee. 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, and 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.
14. Extraordinary Item
In conjunction with the Company's Senior Discount Notes offering in
1994, 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 12% Senior Notes.
15.Fair Value of Financial Instruments
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.
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 under the
indicated captions in Notes 6 and 7 except for the interest rate swaps
which are discussed in Note 16.
1996 1995
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
Financial assets:
Interest rate swap receivable $ 100 $ 222 $ 61 $ 561
Financial liabilities:
Senior discount notes 527,535 556,971 477,355 503,158
Senior notes 224,150 229,866 --- ---
Limited recourse senior secured
notes 200,000 212,560 200,000 210,500
CalEnergy credit facility 100,000 100,000 --- ---
Revolving line of credit 95,000 95,000 --- ---
Convertible subordinated debentures --- --- 100,000 100,500
Salton Sea notes and bonds 538,982 531,807 452,088 459,629
Northern Electric eurobonds 439,192 445,830 --- ---
Construction loans 377,454 377,454 211,198 211,198
Coso Funding Corp. project loans 148,346 153,650 203,226 214,917
Power Resources Inc. project
financing debt 114,571 114,571 --- ---
U.K. credit facility 128,423 128,423 --- ---
Other 7,927 7,927 54,707 54,707
Interest rate swap payable --- --- 226 672
16. 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 $27,239 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 5.5313% to 5.9375% during
1996 and was 5.5313% at December 31, 1996. The counter party to these
agreements is a large multi-national financial institution.
17. Regulatory Matters
Northern is subject to price cap regulation. The Office of
Electricity Regulation ("OFFER") controls the revenues generated by
Northern in its distribution and supply businesses by applying a price
control formula, P + RPI - X (where X is currently 3% for distribution
and 2% for supply), where P is the price level at the beginning of
each new regulatory period, RPI is the change in the Retail Price
Index and X is an adjustment factor determined by OFFER.
In the distribution business, the Distribution Price Control Formula
("DPCF") is usually set for a five-year period, subject to more
frequent adjustments as determined necessary by the Director General
of Electricity Supply (the "Regulator"). At each review, the
Regulator can require a one-time price reduction. An initial review
by the Regulator of allowable income in the distribution business led
to a reduction of the price level by 17% for Northern starting April
1, 1995, followed by efficiency factors of X=2% for each year until
March 2000. On July 6, 1995, the Regulator announced the result of a
further distribution price review which was precipitated by certain
market events in the UK electric utility industry. For Northern, such
announcement meant a further real reduction of 11% in allowable
distribution income for the twelve months from April 1, 1996, followed
by an efficiency factor X=3% for each year until March 31, 2000,
before an allowed increase for inflation.
In the supply business, which is progressively being opened to
competition, price regulation still applies to the market for
customers with demand of not more than 100kW. The calculation of the
maximum supply charge is based on a Supply Price Control Formula,
similar to the DPCF and is set for a four-year period. In 1993, OFFER
announced the supply franchise market (i.e., with demand of not more
than 100kW) income entitlement for the four-year period ending March
1998. A relatively small efficiency factor of X=2% was applied to
Northern and is being offset by an allowance for both unit and
customer growth. The nonfranchise markets (above 1 MW) were opened to
full competition during privatization in 1990; the nonfranchise
markets above 100kW were opened to full competition starting in April
1994.
18. Pension Commitments
Northern participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the
Electricity Supply Industry in the United Kingdom.
The actuarial computation assumed an interest rate of 7.75% an
expected return on plan assets of 8.25% and annual compensation
increases of 5.75% over the remaining service lives of employees
covered under the plan. Amounts funded to the pension are primarily
invested in equity and fixed income securities.
The following table details the funded status and the amount
recognized in the balance sheet of the Company as of December 31,
1996.
Actuarial present value of benefit obligations:
Vested benefits $ 797,932
Nonvested benefits ---
Accumulated benefit obligation 797,932
Effect of future increase in compensation 58,218
Projected benefit obligation 856,150
Fair value of plan assets 919,163
Prepaid pension asset $ 63,013
19. Commitments and Contingencies
There were no material outstanding lawsuits as of December 31, 1996.
Casecnan
In November 1995, CE Casecnan Water and Energy Company, Inc., a
Philippine corporation ("CE Casecnan"), closed the financing and
commenced construction of the Casecnan Project, a combined irrigation
and 150 net MW hydroelectric power generation project (the "Casecnan
Project") located in the central part of the island of Luzon in the
Republic of the Philippines. The Casecnan Project will consist
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
in 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 National Power
Corporation of the Philippines ("NPC").
CE Casecnan, which is presently indirectly owned as to approximately
35% of its equity by the Company and approximately 35% by PKS, 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 and delivering in accordance with agreed levels set forth
in the Project Agreement, 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 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 Philippines 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 CE Casecnan 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 is being constructed on a joint and several basis
by Hanbo Corporation and Hanbo Engineering & Construction Co. Ltd.
(formerly known as You One Engineering & Construction Co., Ltd., and
herein referred to as "HECC"), both of which are South Korean
corporations, pursuant to a fixed-price, date-certain, turnkey
construction contract (the "Turnkey Construction Contract"). Hanbo
Corporation and HECC (sometimes collectively referred to as the
"Contractor") are under common ownership control. Hanbo Corporation
is an international construction company. HECC, which recently
emerged from a court-administered receivership, is a contractor with
over 25 years experience in tunnel construction, using both the drill-
and-blast and tunnel boring machine ("TBM") methods.
The Contractor's obligations under the Turnkey Construction Contract
are guaranteed by Hanbo Iron & 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 $118,000. The total
cost of the Casecnan Project, including development, construction,
testing and startup, is estimated to be approximately $495,000.
In late January 1997, the Company was advised that Hanbo Corporation
and Hanbo Steel had each filed to seek court receivership protection
in Korea. At the present time, all of the construction work on the
Casecnan Project is being performed by the second contractor which is
party to the Turnkey Construction Contract, HECC. Although HECC,
Hanbo Corporation and Hanbo Steel are under common ownership control,
HECC has not filed for receivership protection and is believed to be
solvent. However, no assurances can be given that HECC will not file
for receivership due to the foregoing developments or that it will
remain solvent and able to perform fully its obligations under the
Turnkey Construction Contract.
The work on the Casecnan Project, which commenced in 1995, is
presently continuing on schedule and within the budget. CE Casecnan
is presently reviewing its rights, obligations and potential remedies
in respect of the recent developments regarding the co-Contractor and
the guarantor and is presently unable to speculate as to the ultimate
effect of such developments on CE Casecnan. However, CE Casecnan has
recently received confirmation from HECC that it intends to fully
perform its obligations under the Turnkey Construction Contract and
complete the Casecnan Project on schedule and within the budget.
Additionally, it has been reported that the South Korean government
has informed the Philippine government that the South Korean
government will take appropriate actions to support HECC's completion
of the Casecnan Project.
KFB has recently reconfirmed to CE Casecnan that it will honor its
obligations under the Casecnan Project letter of credit and also has
stated its support for the successful completion of the Casecnan
Project. However, Moody's Investors Service has recently issued a
warning for a possible ratings downgrade for KFB because of the
possible impact of the Hanbo Steel receivership on the substantial
loans KFB previously made to Hanbo Steel. In a related development,
the South Korean government has recently announced that it would
provide some funding to assist Hanbo Steel's creditor banks (including
KFB) and its subcontractors.
CE Casecnan financed a portion of the costs of the Casecnan Project
through the issuance of $125,000 of its 11.45% Senior Secured Series A
Notes due 2005 and $171,500 of its 11.95% Senior Secured Series B
Notes due 2010 pursuant to an indenture dated November 27, 1995, as
amended to date (the "Casecnan Indenture"). Although no default has
occurred under the Casecnan Indenture as a result of the announced
receivership of Hanbo Corporation, CE Casecnan will continue to
closely monitor the Hanbo group and KFB developments and project
construction status and develop appropriate contingency plans.
If HECC were to materially fail to perform its obligations under the
Turnkey Construction Contract and if KFB were to fail to honor its
obligations under the Casecnan letter of credit, such actions could
have a material adverse effect on the Casecnan Project and CE
Casecnan. However, based on the information presently available to
it, CE Casecnan does not presently expect that either such event will
occur.
Leases
Certain retail facilities, buildings and equipment are leased. The
leases expire in periods ranging from one to 75 years and some provide
for renewal options.
At December 31, 1996, the Company's future minimum rental payments
with respect to non-cancellable operating leases were as follows:
1997 $ 9,137
1998 8,897
1999 5,337
2000 5,279
2001 5,098
Thereafter 61,204
$94,952
20. Subsequent Event
On February 26, 1997, CalEnergy Capital Trust II, a special purpose
Delaware business trust organized by the Company (the "Trust II"),
pursuant to the Amended and Restated Declaration of Trust (the
"Declaration") dated as of February 26, 1997, completed a private
placement (with certain shelf registration rights) of $150,000 of
trust preferred convertible securities, referred to as Company-
obligated mandatorily redeemable convertible preferred securities of
subsidiary trust holding solely convertible debentures ("Trust
Securities"). In addition, an option to purchase an additional 600
Trust Securities, or $30,000, was exercised by the initial purchasers
to cover over-allotments.
The Trust has issued 3,600 of 6 1/4% Trust Securities with a
liquidation preference of fifty dollars each. The Company owns all of
the common securities of the Trust. The Trust Securities 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 2012 in an
outstanding aggregate principal amount of $180,000 ("Junior
Debentures") issued pursuant to an indenture dated as of February 20,
1997. The indenture includes an agreement by the Company to pay
expenses and obligations incurred by the Trust. Each Trust Security
will be convertible at the option of the holder thereof at any time
into 1.1655 shares of CalEnergy Common Stock (equivalent to a
conversion price of $42.90 per share of the Company's Common Stock),
subject to customary anti-dilution adjustments.
Until converted into the Company's Common Stock, the Trust Securities
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 Trust Securities (and
Junior Debentures) are cumulative, accrue from the date of initial
issuance and are payable quarterly in arrears, commencing June 1,
1997. 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.
Pursuant to a Preferred Securities Guarantee Agreement (the
"Guarantee"), between the Company and a preferred guarantee trustee,
the Company has agreed irrevocably to pay to the holders of the Trust
Securities, to the extent that the Trust has funds available to make
such payments, quarterly distributions, redemption payments and
liquidation payments on the Trust Securities. Considered together,
the undertaking contained in the Declaration, Junior Debentures,
Indenture and Guarantee constitute a full and unconditional guarantee
by the Company of the Trust's obligations under the Trust Securities.
A portion of the net proceeds of the Trust Securities offering were
used to repay the CalEnergy Credit Facility.
21. Geographic Information
The Company operates in one principal industry segment: the
generation, distribution and supply of electricity to customers
located throughout the world. The Company's operations by geographic
area are as follows:
1996 1995 1994
Revenue
Americas 457,032 355,112 154,562
Asia 35,691 --- ---
Europe 39,191 --- ---
531,914 355,112 154,562
Operating income (loss)
Americas 203,305 155,885 77,450
Asia 17,914 --- ---
Europe 6,163 --- ---
227,382 155,885 77,450
1996 1995
Identifiable assets
Americas $2,613,830 $2,194,873
Asia 713,570 459,165
Europe 2,385,507 ---
$5,712,907 $2,654,038
22. QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of the Company's quarterly results of
operations for the years ended December 31, 1996 and December 31,
1995.
Three Months Ended *
1996: (1) March 31 June 30 September 30 December 31
Sales of electricity $75,944 $104,735 $165,487 $172,768
and steam
Total revenue 90,356 115,794 179,048 190,997
Total costs and 69,398 87,482 123,169 160,433
expenses
Income before provision
for income 20,958 28,312 55,879 30,564
taxes and minority 6,497 9,040 18,325 7,959
interest
Provision for income
taxes
Net income before 14,461 19,272 37,554 22,605
minority interest --- --- --- 1,431
Minority interest
Net income attributable $14,461 $ 19,272 $ 37,544 $ 21,174
to common shares
Net income per share -
primary $ .27 $ .35 $ .67 $ 33
Net income per share -
fully diluted $ .26 $ .33 $ .59 $ .32
Three Months Ended *
1995: (2) March 31 June 30 September 30 December 31
Sales of electricity
and steam $72,978 $ 81,756 $102,423 $ 78,473
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
* The Company's operations are seasonal in nature with a
disproportionate percentage of income historically earned in the
second and third quarters.
(1) Reflects acquisitions of Northern, Falcon Seaboard and the
Partnership Interest.
(2) Reflects acquisition of Magma.
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, 1996
and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. 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, 1996 and
1995 and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Omaha, Nebraska
January 31, 1997
(February 27, 1997 as to Notes 6 and 20)
_______________________________
Exhibit 21
CalEnergy Company, Inc.
Subsidiaries and Joint Ventures
Corporations
Coso Hotsprings Intermountain Power, Inc.
Delaware
China Lake Operating Company Delaware
Coso Technology Corporation Delaware
Coso Funding Corp. Delaware
China Lake Geothermal Management Company Delaware
China Lake Plant Services, Inc.
California
Coso Hotsprings Overland Power, Inc.
Delaware
CE Geothermal, Inc. Delaware
Western States Geothermal Company Delaware
Intermountain Geothermal Company Delaware
CalEnergy Development Corporation Delaware
California Energy Yuma Corporation Utah
Rose Valley Properties, Inc. Delaware
CE Holt Company Delaware
CBE Engineering Co. California
The Ben Holt International Co., Inc.
Delaware
CE Exploration Company Delaware
CE Newberry, Inc. Delaware
CE Humboldt, Inc. Delaware
CalEnergy International Services, Inc.
Delaware
American Pacific Finance Company Delaware
California Energy General Corporation
Delaware
CE International Investments, Inc.
Delaware
CE Mahanagdong Ltd. Bermuda
CE Luzon Geothermal Power Company, Inc.
Philippines
CE Philippines Ltd. Bermuda
Ormoc Cebu Ltd. Bermuda
CE Cebu Geothermal Power Company, Inc.
Philippines
CE Indonesia Ltd. Bermuda
Himpurna California Energy Ltd.
Bermuda
Bali Energy Ltd. Bermuda
CE Casecnan Ltd. Bermuda
Patuha Power, Ltd. Bermuda
CE Singapore Ltd. Bermuda
CalEnergy International Ltd. Bermuda
CE Casecnan Water and Energy Company, Inc.
Philippines
CE Ijen Ltd. Bermuda
CE Asia Ltd. Bermuda
CE Overseas Ltd. Bermuda
Kiewit/Holt Indonesia L.L.C. Nebraska
Gilbert/CBE Indonesia L.L.C. Nebraska
Magma Power Company Nevada
Desert Valley Company California
Vulcan Power Company Nevada
CalEnergy Operating Company Delaware
Salton Sea Power Company Nevada
Imperial Magma Nevada
Magma Land Company I Nevada
Magma Generating Company II Nevada
Magma Generating Company I Nevada
Peak Power Corporation California
Fish Lake Power Company Delaware
Salton Sea Funding Corporation
Delaware
Salton Sea Royalty Company Delaware
Tongonan Power Investments, Inc.
Philippines
Magma Netherlands B.V. The
Netherlands
Norming Investments B.V. The
Netherlands
California Energy Retail Company, Inc.
Delaware
CalEnergy Imperial Valley Company, Inc.
Delaware
BN Geothermal Inc. Delaware
Conejo Energy Company California
Niguel Energy Company California
San Felipe Energy Company California
CE/FS Holding Company, Inc. Delaware
Falcon Seaboard Resources, Inc. Texas
Falcon Seaboard Energy Corporation Texas
Falcon Seaboard Oil Company Texas
Falcon Seaboard Pipeline Corporation Texas
Falcon Seaboard Power Corporation Texas
Falcon Seaboard Gas Company Texas
Power Resources, Inc. Texas
Big Spring Pipeline Company Texas
SECI Holdings, Inc. Delaware
Falcon Power Operating Company Texas
NorCon Holdings, Inc. Delaware
Saranac Energy Company, Inc. Delaware
Northern Consolidated Power, Inc. Delaware
North Country Gas Pipeline Corporation New
York
CE Power, Inc. Delaware
CE Electric, Inc. Delaware
CE Electric UK PLC
England/Wales
CE Electric UK Holdings
England/Wales
Northern Electric plc
England/Wales
Northern Electric Generation Limited
England/Wales
Northern Electric (Overseas Holdings) Limited
England/Wales
Northern Electric Properties Limited
England/Wales
Northern Electric Finance plc
England/Wales
Northern Tracing and Collection Services Limited
England/Wales
Gas UK Limited England/Wales
Northgas Limited
England/Wales
Northern Transport Finance Limited
England/Wales
Northern Electric Retail Limited
England/Wales
Northern Electric Distribution Limited
England/Wales
Northern Electric Supply Limited
England/Wales
Northern Metering Services Limited
England/Wales
Northern Utility Services Limited
England/Wales
Northern Electric Telecom Limited
England/Wales
Northern Electric Transport Limited
England/Wales
Northern Information Systems Limited
England/Wales
Northern Electric Training Limited
England/Wales
Northern Electric Generation (TPL) Limited
England/Wales
Northern Electric Generation (CPS) Limited
England/Wales
Northern Electric Generation (NPL) Limited
England/Wales
Northern Electric Generation (Peaking) Limited
England/Wales
Combined Power Systems (Northern) Limited
England/Wales
Northern Electric Insurance Services Limited Isle
of Man
Sovereign Exploration Limited
England/Wales
Viking Power Ltd
England/Wales
CE Indonesia Geothermal, Inc. Delaware
CalEnergy Minerals, Inc. Delaware
oint Ventures/Partnerships
Coso Energy Developers California
Coso Finance Partners California
Coso Power Developers California
Coso Transmission Line Partners
California
Coso Finance Partners II California
Coso Land Company California
China Lake Joint Venture California
Coso Geothermal Company California
Gilbert/CBE L.P. Nebraska
Kiewit/Holt Philippines, L.P.
Nebraska
Yuma Cogeneration Associates Utah
Vulcan/BN Geothermal Power Company Nevada
Leathers, L.P. California
Elmore, L.P. California
Del Ranch, L.P. California
Salton Sea Brine Processing, L.P.
California
Salton Sea Power Generation, L.P. California
Alto Peak Power Company
Philippines
Visayas Geothermal Power Company
Philippines
Saranac Power Partners, L.P. Delaware
NorCon Power Partners, L.P. Delaware
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 33-41152 and No. 33-52147 on Form S-8 and
Registration Statement No. 33-51363 on Form S-3 of CalEnergy
Company, Inc. of our reports dated January 31,1997 (February 27,
1997 as to Notes 6 and 20 to the consolidated financial statements),
appearing in and incorporated by reference in the Annual Report on Form
10-K of CalEnergy Company,Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 17, 1997
POWER OF ATTORNEY
The undersigned, a member of the Board of Directors of
CalEnergy Company, Inc., a Delaware corporation (the "Company"),
hereby constitutes and appoints Steven A. Mcarthur, John G.
Sylvia and Douglas L. Anderson and each of them, as his/her true
and lawful attorney-in-face and agent, with full power of
substitution and resubstitution, for and in his/her stead, in any
and all capacities, to sign on his/her behalf the Company's Form
10-K Annual Report for the fiscal year ending December 31, 1996
and to execute any amendments thereto and to file the same, with
all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission and
applicable stock exchanges, with the full power and authority to
do and perform each and every act and thing necessary or
advisable to all intents and purposes as he/she might or could do
in person, hereby ratifying and confirming all that said attorney-
in-fact and agent, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
POWER OF ATTORNEY
Executed as of March 11, 1997
______________________ _______________________
DAVID L. SOKOL RICHARD R. JAROS
______________________ _______________________
EDGAR D. ARONSON DAVID MORRIS
______________________ _______________________
JUDITH E. AYRES BERNARD W. REZNICEK
______________________ _______________________
JAMES Q. CROWE WALTER SCOTT, JR.
______________________ _______________________
RICHARD K. DAVIDSON JOHN R. SHINER
______________________ _______________________
DAVID H. DEWHURST DAVID E. WIT
______________________
BEN HOLT
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