<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1997
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CALENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2213782
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST III
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST IV
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST V
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
(402) 341-4500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
(402) 341-4500
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------
Copy to:
PETER J. HANLON, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NY 10022-4669
(212) 821-8000
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<PAGE>
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]__________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(1)(2) PRICE (2) FEE(2)
---------------- ------------- -------------- --------- ------------
<S> <C> <C> <C> <C>
Senior Debt Securities and Senior Subordinated
Debt Securities (collectively, "Debt
Securities") of CalEnergy Company, Inc.(3)..... - - - -
Preferred Stock of CalEnergy Company, Inc.
("Preferred Stock")(4)......................... - - - -
Common Stock of CalEnergy Company, Inc.
("Common Stock")(5)............................ - - - -
- - - -
Convertible Junior Subordinated Debentures of
CalEnergy Company, Inc. for issuance
directly or to CalEnergy Capital Trust III,
CalEnergy Capital Trust IV and CalEnergy
Capital Trust V ("Junior Subordinated
Debentures")(6)................................ - - - -
Convertible Preferred Securities of CalEnergy
Capital Trust III, CalEnergy Capital Trust IV
and CalEnergy Capital Trust V ("Convertible
Preferred Securities")(6)...................... - - - -
Guarantees of Convertible Preferred Securities of
CalEnergy Capital Trust III, CalEnergy
Capital Trust IV and CalEnergy Capital Trust
V by CalEnergy Company, Inc.(7)................ - - - -
Total ......................................... $1,500,000,000 100% - $454,545
</TABLE>
(1) In no event will the aggregate maximum offering price of all securities
issued, from time to time, pursuant to this Registration Statement exceed
$1,500,000,000. The proposed maximum offering price per unit will be
determined, from time to time, by the Registrants in connection with the
issuance by the Registrants of the securities registered hereunder. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder. The securities may be sold in U.S.
dollars or the equivalent thereof denominated in one or more foreign
currencies or currency units or composite securities.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
Pursuant to Rule 457(o), which permits the registration fee to be
calculated on the basis of the maximum offering price of all the
securities listed, the table does not specify by each class information
as to the amount to be registered, proposed maximum offering price per
unit or proposed maximum aggregate offering price. The proposed maximum
offering price may be omitted pursuant to General Instruction II-D of
Form S-3 under the Securities Act of 1933, as amended.
(3) Such indeterminate amount of Debt Securities as may from time to time be
issued at indeterminate prices or issuable upon conversion of other Debt
Securities or Preferred Stock registered hereunder.
(4) Such indeterminate number of shares of Preferred Stock as may from time
to time be issued at indeterminate prices or issuable upon conversion of
Debt Securities or other class or series of Preferred Stock registered
hereunder. Shares of Preferred Stock may be issued from time to time in
one or more classes or series.
(5) Such indeterminate number of shares of Common Stock as may from time to
time be issued at indeterminate prices or issuable upon conversion of
Debt Securities, Preferred Stock or Convertible Preferred Securities
registered hereunder, as the case may be.
(6) Such indeterminate amount or number of Convertible Junior Subordinated
Debentures of CalEnergy Company, Inc. and Convertible Preferred
Securities of CalEnergy Capital Trust III, CalEnergy Capital Trust IV and
CalEnergy Capital Trust V as may from time to time be issued at
indeterminate prices. Convertible Junior Subordinated Debentures may be
issued and sold to CalEnergy Capital Trust III, CalEnergy Capital Trust
IV and CalEnergy Capital Trust V, in which event such Convertible Junior
Subordinated Debentures may later be distributed to the holders of
Convertible Preferred Securities upon a dissolution of CalEnergy Capital
Trust III, CalEnergy Capital Trust IV and CalEnergy Capital Trust V,
respectively, and the distribution of the assets thereof.
(7) Includes the rights of holders of the Convertible Preferred Securities of
CalEnergy Capital Trust III, CalEnergy Capital Trust IV and CalEnergy
Capital Trust V under the related Guarantee and back-up undertakings,
consisting of obligations by CalEnergy Company, Inc. to provide certain
indemnities in respect of, and pay and be responsible for certain
expenses, costs, liabilities, and debt of, as applicable, CalEnergy
Capital Trust III, CalEnergy Capital Trust IV and CalEnergy Capital Trust
V and such other obligations of CalEnergy Company, Inc. set forth in the
related
<PAGE>
Amended and Restated Declaration of Trust, the Convertible Junior
Subordinated Debentures Indenture and Supplemental Indentures thereto, in
each case as further described in the Registration Statement. No separate
consideration will be received for any Guarantees of any back-up
undertakings.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- -------------------------------------------------------------------------------
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses to be used
in connection with offerings of the following securities:
(1) Debt Securities (consisting of Senior Debt Securities and
Subordinated Debt Securities), Preferred Stock and Common Stock.
(2) Convertible Preferred Securities of CalEnergy Capital Trust III,
CalEnergy Capital Trust IV and CalEnergy Capital Trust V, the
Convertible Junior Subordinated Debentures of CalEnergy Company,
Inc. and Guarantees by CalEnergy Company, Inc. of Convertible
Preferred Securities issued by CalEnergy Capital Trust III,
CalEnergy Capital Trust IV and CalEnergy Capital Trust V.
Each offering of securities made under this Registration Statement will
be made pursuant to one of these Prospectuses, with the specific terms of the
securities to be offered thereby set forth in an accompanying Prospectus
Supplement.
<PAGE>
Information contained herein is subject to completion or amendment. A
registrtion statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
Subject to Completion, dated August 4, 1997
PROSPECTUS
$1,500,000,000
CALENERGY COMPANY, INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
CalEnergy Company, Inc. (the "Company") may from time to time offer,
together or separately, (i) shares of its common stock, par value $.0675 per
share ("Common Stock"), (ii) shares of its preferred stock, no par value
("Preferred Stock"), (iii) senior debt securities ("Senior Debt Securities")
and (iv) subordinated debt securities ("Subordinated Debt Securities" and
together with Senior Debt Securities, the "Debt Securities"). The Common
Stock, the Preferred Stock and the Debt Securities are collectively referred
to herein as the "Securities." The Securities in respect of which this
Prospectus is being delivered (the "Offered Securities") may be offered,
separately or together, in separate series, in amounts, at prices and on terms
to be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
By separate prospectus, the form of which is included in the Registration
Statement of which this Prospectus forms a part, three Delaware statutory
business trusts (individually, a "CalEnergy Trust" and collectively, the
"CalEnergy Trusts"), which are wholly owned subsidiaries of the Company, may
from time to time severally offer preferred securities guaranteed by the
Company to the extent set forth therein and the Company may offer from time to
time junior subordinated debt securities either directly or to a CalEnergy
Trust. The aggregate public offering price of the securities to be offered by
this Prospectus and such other prospectus shall not exceed $1,500,000,000 (or
its equivalent in one or more foreign currencies, currency units or composite
currencies).
Specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an applicable Prospectus
Supplement, that includes, where applicable, the following: (i) in the case of
Common Stock, the specific designation, number of shares, purchase price and
the rights and privileges thereof, together with any qualifications or
restrictions thereon and any listing on a securities exchange; (ii) in the
case of Preferred Stock, the specific designation, number of shares, purchase
price and the rights, preferences and privileges thereof and any
qualifications or restrictions thereon (including dividends, liquidation
value, voting rights, terms for the redemption, conversion or exchange thereof
and any other specific terms of the Preferred Stock) and any listing on a
securities exchange; and (iii) in the case of the Debt Securities, the
specific designation, aggregate principal amount, authorized denomination,
maturity, premium, or discount, if any, exchangeability, redemption,
conversion, prepayment or sinking fund provisions, if any, interest rate
(which may be fixed or variable), if any, method, if any, of calculating
interest payments and dates for payment thereof, dates on which premium, if
any, will be payable, the right of the Company, if any, to defer payment of
interest on the Debt Securities and the maximum length of such deferral
period, the initial public offering price, any listing on a securities
exchange and other specific terms of the offering. Unless otherwise indicated
in the Prospectus Supplement, the Company does not intend to list any of the
Securities other than the Common Stock on a national securities exchange. Any
Prospectus Supplement relating to any series of Offered Securities will
contain information, where applicable, concerning certain United States
federal income tax considerations for the Offered Securities.
The Common Stock and Preferred Stock and Debt Securities offered pursuant
to this Prospectus may be denominated in U.S. dollars or one or more foreign
currencies, currency units or composite securities to be determined at or
prior to the time of any offering. The Debt Securities offered pursuant to
this Prospectus may consist of bonds, debentures, notes or other evidences of
indebtedness in one or more series and in amounts, at prices and on terms to
be determined at or prior to the time of any such offering. Unless otherwise
disclosed in a Prospectus Supplement, the Company's obligations under the
Senior Debt Securities will be unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest and with all other
existing and future unsecured obligations of the Company. If security for the
Debt Securities is to be provided it will be described in an
<PAGE>
applicable Prospectus Supplement. The Company's obligations under the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Debt which aggregated approximately $953.8
million at March 31, 1997 (of which $200 million had a "Recourse Amount" to
the Company (as defined in the applicable Indenture) of zero at March 31,
1997).
The Offered Securities may be offered directly, through agents designated
from time to time, to or through dealers or to or through underwriters. Such
agents or underwriters may act alone or with other agents or underwriters. Any
such agents, dealers or underwriters will be set forth in a Prospectus
Supplement. If an agent of the Company, or a dealer or underwriter, is
involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the
Company, as the case may be, will be set forth in, or may be calculated from,
the Prospectus Supplement. Any underwriters, dealers or agents participating
in the offering may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN
ANY OF THE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement. Any statement
contained in this Prospectus will be deemed to be modified or superseded by
any inconsistent statement contained in an accompanying Prospectus Supplement.
The date of this Prospectus is , 1997.
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy and information statements and other information filed by the
Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the SEC's
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. This Web
site can be accessed at http://www.sec.gov. Such reports, proxy and
information statements and other information can also be inspected at the
offices of the New York Stock Exchange Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the SEC a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules related thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the SEC. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof. Statements contained in this
Prospectus as to the contents of any documents referred to are not necessarily
complete and, in each such instance, are qualified in all respects by
reference to the applicable documents filed with the SEC.
This Prospectus and the periodic filings of the Company under the
Exchange Act contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). These
forward-looking statements express the beliefs and expectations of management
regarding the Company's future results and performance.
Such statements are based on current expectation and involve a number
of known and unknown risks and uncertainties that could cause the actual
results, performance and/or other achievements of the Company to differ
materially from any expected future results, performance or achievements,
expressed or implied by the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements and any such
statement is qualified by reference to the following cautionary statements. In
connection with the safe harbor provisions of the Reform Act, the Company's
management has identified important factors that could cause actual results to
differ materially from management's expectations. Reference is made to the
Company's Current Report on Form 8-K dated February 25, 1997, incorporated
herein by reference. The Company is not required to publicly release any
changes to these forward-looking statements for events occurring after the
date thereof or to reflect any other unanticipated events.
-3-
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 1-9874) are
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended by the Form 10-K/A filed on
April 30, 1997);
(ii) the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997;
(iii) the Company's Current Reports on Form 8-K dated December 24,
1996 (as amended by Form 8-K/A dated February 18, 1997),
February 25, 1997, February 26, 1997, March 28, 1997, May 7,
1997, May 19, 1997, July 7, 1997, July 15, 1997 and July 22,
1997;
(iv) the description of the Company's Common Stock contained in
the Company's registration statement on Form 8-A filed under
the Exchange Act and any amendments or reports filed for the
purpose of updating such description;
(v) the Company's Tender Offer Statement pursuant to Section
14(d)(1) of the Exchange Act on Schedule 14D-1 dated July
18, 1997 (as amended by Amendment Nos. 1, 2 and 3).
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which is also incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except
as so modified or superseded.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, on the written or
oral request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated into this Prospectus
by reference, other than exhibits to such documents. Requests for such copies
should be directed to Investor Relations, CalEnergy Company, Inc., 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, telephone number (402)
341-4500.
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or a Prospectus Supplement, in connection with the offering
contemplated hereby and thereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. This Prospectus and a Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any Securities other than the Securities to which they relate and do not
constitute an offer to sell or a solicitation of an offer to buy any
Securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus or a Prospectus Supplement, nor any sale made hereunder or
thereunder, shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof or
thereof or that the information contained or incorporated by reference herein
or therein is correct as of any time subsequent to such date.
-4-
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below, in addition to the other information appearing in or incorporated
by reference in this Prospectus. This Prospectus contains or incorporates by
reference forward-looking statements which involve risks and uncertainties.
The Company's actual results in the future could differ significantly from the
results discussed or implied in the forward-looking statements. Factors that
could cause or contribute to such a difference include, but are not limited
to, the following risk factors and risk factors described in the documents
incorporated herein by reference. The term "Company" refers to CalEnergy
Company, Inc. and its operating subsidiaries and joint ventures and "Northern"
refers to Northern Electric plc and its operating subsidiaries, unless the
context otherwise requires.
ACQUISITIONS. The Company's recent growth has been achieved, in part,
through strategic acquisitions in the energy industry which complement and
diversify the Company's existing business. The Company intends to continue to
pursue an aggressive acquisition strategy for the foreseeable future. The
Company has recently completed several major acquisitions, including the
acquisition of Magma Power Company ("Magma"), Falcon Seaboard Resources, Inc.
("Falcon Seaboard") and Northern Electric plc ("Northern"). The Company has
successfully integrated Magma and Falcon Seaboard and is in the process of
integrating Northern. See "The Company." On July 15, 1997, the Company
announced its intention to commence a cash tender offer for 9.9% of the
outstanding common stock of New York State Electric & Gas Corporation
("NYSEG") and its proposal to acquire 100% of the outstanding NYSEG common
stock. See the Company's Current Reports on Form 8-K dated July 15, 1997 and
July 22, 1997, incorporated herein by reference. The Company's ability to
pursue acquisition opportunities successfully will depend on many factors,
including, among others, the Company's ability to (i) identify suitable
acquisition opportunities, (ii) consummate the acquisition, including
obtaining any necessary financing, and (iii) successfully integrate acquired
businesses. The integration of acquired businesses entails numerous risks,
including, among others, the risk of diverting management's attention from the
day-to-day operations of the Company, the risk that the acquired businesses
will require substantial capital and financial investments and the risk that
the investments will fail to perform in accordance with expectations. There
can be no assurance that acquisition opportunities, if any, can be consummated
on favorable terms or that the Company's integration efforts will be
successful.
HOLDING COMPANY STRUCTURE. As a holding company, the Company is
dependent on the earnings and cash flows of, and dividends from, its
subsidiaries and joint ventures to generate the funds necessary to meet its
obligations, including the payment of principal, interest and premium, if any,
on the Debt Securities. The availability of distributions from the Company's
subsidiaries and projects is subject to the satisfaction of various covenants
and conditions contained in the applicable subsidiaries' and joint ventures'
financing documents and to certain utility regulatory restrictions.
Furthermore, the Company is structuring Philippine and Indonesian project
financing arrangements containing, and anticipates that future project level
financings will contain, certain conditions and similar restrictions on the
distribution of cash to the Company.
The Company's subsidiaries, partnerships and joint ventures are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debt Securities or to make
any funds available therefor, whether by dividends, loans or other payments,
and do not guarantee the payment of interest on, premium, if any, or principal
of the Debt Securities. Any right of the Company to receive any assets of any
of its subsidiaries or other affiliates upon any liquidation or reorganization
of the Company (and the consequent right of the holders of the Debt Securities
to participate in the distribution of, or to realize proceeds from, those
assets) will be effectively subordinated to the claims of any such
subsidiary's or other affiliate's creditors (including trade creditors and
holders of debt issued by such subsidiary or other affiliate). At March 31,
1997 the Company had approximately $3,228.6 million of total consolidated
indebtedness, which included approximately $2,274.8 million of the Company's
proportionate share of joint venture and subsidiary debt, which would be
effectively senior to the Debt Securities, substantially all of which would
have been secured by the assets of such joint ventures and subsidiaries, and
$283.9 million of 6 1/4% Trust Convertible Preferred Securities and TIDES
Securities.
-5-
<PAGE>
LEVERAGE. The Company is substantially leveraged. At March 31, 1997,
the Company's total consolidated liabilities were $4,685.8 million (excluding
deferred income), its obligations in respect of the 6 1/4% Trust Convertible
Preferred Securities (the "Trust Convertible Preferred Securities") and the 6
1/4% Convertible Preferred Securities Term Income Deferrable Equity Securities
(TIDES)sm or TIDES sm (the "TIDES Securities") were $283.9 million, its total
consolidated assets were $6,138.1 million and its total stockholders' equity
was $876.4 million. The Company's leverage level presents the risk that the
Company might not generate sufficient cash to service the Company's
indebtedness, including the Debt Securities or Preferred Stock, or that its
leveraged capital structure could limit its ability to finance future
acquisitions, develop additional projects, compete effectively and operate
successfully under adverse economic conditions. The Company is also a holding
company which derives substantially all of its operating income from its
subsidiaries and joint ventures. Distributions from such entities are
restricted under various covenants and conditions contained in financing
documents by which they are bound and the stock or assets of substantially all
of such entities is directly or indirectly pledged, to secure various of such
financings or such entities are otherwise subject to regulatory restrictions.
See "Risk Factors--Holding Company Structure."
NORTHERN'S REGULATORY ENVIRONMENT. Northern's electricity
distribution and supply are subject to extensive regulation in the United
Kingdom.
Price Regulation of Distribution. Revenue from Northern's
distribution business is controlled by a formula (the "Distribution Price
Control Formula") which determines the maximum average price per unit of
electricity (expressed in kilowatt hours, a "unit") that a regional
electricity company (a "REC") in the United Kingdom may charge. The
Distribution Price Control Formula is expected to have a five year duration
and is subject to review by the Director General of Electricity Supply (the
"Regulator") at the end of each five-year period and at other times in the
discretion of the Regulator. At each review, the Regulator can propose
adjustments to the Distribution Price Control Formula. In July 1994, a review
resulted in a 17% reduction in allowed distribution income compared to the
original formula, before allowing for inflation, effective April 1, 1995. In
July 1995, a further review of distribution prices was concluded by the
Regulator for fiscal years 1997 to 2000. As a result of this further review,
Northern's allowed distribution from income was reduced by a further 11%,
before allowing for inflation, effective April 1, 1996. There can be no
assurance that any further price reviews by the Regulator will not have a
material adverse effect on the Company's results of operations.
Competition in Supply. Northern's supply business is also subject to
price control and is being progressively opened to competition. Northern
currently has an exclusive right, subject to price cap regulation, to supply
customers in its authorized area with a maximum demand of not more than 100 kW
("Franchise Supply Customers"). The market for customers with a maximum demand
above 1 megawatt ("MW") has been open to competition for suppliers of
electricity since privatization while the market for customers with a maximum
demand above 100 kW ("Non-Franchise Supply Customers") became competitive in
April 1994. The final stage of this process is expected to occur on March 31,
1998, when the exclusive right to supply Franchise Supply Customers is
scheduled to end. There can be no assurance that competition among suppliers
of electricity will not have a material adverse effect on the Company's
results of operations.
Pool Purchase Price Volatility. Northern's supply business to
Non-Franchise Supply Customers generally involves entering into fixed price
contracts to supply electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts primarily by
purchases from the wholesale trading market for electricity in England and
Wales (the "Pool"). Because the price of electricity purchased from the Pool
can be volatile, to the extent that Northern purchases electricity from the
Pool, Northern is exposed to risk arising from differences between the fixed
price at which it sells and the fluctuating prices at which it purchases
electricity, unless it can effectively hedge such exposure. Northern's ability
to manage such risk at acceptable levels will depend, in part, on the
specifics of the supply contracts that Northern enters into, Northern's
ability to implement and manage an appropriate hedging strategy and the
development of an adequate market for hedging instruments. There can be no
assurance that this risk will be effectively mitigated.
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<PAGE>
Change in Government Policy. In the general election held in the
United Kingdom on May 1, 1997, the Labour Party won a majority of seats in
Parliament. On July 31, 1997, the U.K. Parliament passed the windfall
tax to be levied on privatized utilities which will result in a third
quarter charge to net income of approximately $136 million. See the
Company's Current Report on Form 8-K dated July 7, 1997, incorporated herein
by reference. There can be no assurance that other possible changes in tax or
utility regulation by the United Kingdom government, by whichever party it is
controlled, would not have a material adverse effect on the Company's results
of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new energy projects, both domestically and
internationally, the completion of any of which is subject to substantial
risk. Development can require the Company to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other expenses in preparation for competitive bids which the Company may
not win or before it can be determined whether a project is feasible,
economically attractive or capable of being financed. Successful development
and construction is contingent upon, among other things, negotiation on terms
satisfactory to the Company of engineering, construction, fuel supply and
power sales contracts with other project participants, receipt of required
governmental permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is substantially
leveraged, will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional energy and the
Company's ability to obtain contracts to supply portions of this demand. There
can be no assurance that development efforts on any particular project, or the
Company's efforts generally, will be successful. In this regard, reference is
made to certain uncertainties associated with the Company's Casecnan Project
as described in the Company's Current Report on Form 8-K dated May 20, 1997,
incorporated herein by reference.
UNCERTAINTIES RELATED TO DOING BUSINESS OUTSIDE THE UNITED STATES.
The Company has various projects under construction outside the United States
and a number of projects under award outside the United States. The financing
and development of projects outside the United States entail significant
political and financial risks (including, without limitation, uncertainties
associated with privatization efforts in the countries involved, currency
exchange rate fluctuations, currency repatriation restrictions, changes in
law, political instability, civil unrest and expropriation) and other
structuring issues that have the potential to cause substantial delays in
respect of or material impairment of the value of the project being developed,
which the Company may not be capable of fully insuring against. The
uncertainty of the legal environment in certain foreign countries in which the
Company is developing and may develop or acquire projects could make it more
difficult for the Company to enforce its rights under agreements relating to
such projects. In addition, the laws and regulations of certain countries may
limit the ability of the Company to hold a majority interest in some of the
projects that it may develop or acquire. The Company's international projects
may, in certain cases, be terminated by the applicable foreign governments.
Furthermore, the central bank of any such country may have the authority in
certain circumstances to suspend, restrict or otherwise impose conditions on
foreign exchange transactions or to approve distributions to foreign
investors. Although the Company may structure certain power purchase
agreements and other project revenue agreements to provide for payments to be
made in, or indexed to, United States dollars or a currency freely convertible
into United States dollars, there can be no assurance that the Company will be
able to achieve this structure in all cases or that a power purchaser or other
customer will be able to obtain sufficient dollars or other hard currency or
that available dollars will be allocated to pay such obligations. In addition,
the Company's investment in Northern and any dividends or distributions of
earnings in respect of such investment, may be significantly affected by
fluctuations in the exchange rate between the United States dollar and the
British pound. Although the Company expects to enter into certain transactions
to hedge risks associated with exchange rate fluctuations, there can be no
assurance that such transactions will be successful in reducing such risks.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological
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complexities of geothermal reservoirs, the geographic area and sustainable
output of geothermal reservoirs can only be estimated and cannot be
definitively established. There is, accordingly, a risk of an unexpected
decline in the capacity of geothermal wells and a risk of geothermal
reservoirs not being sufficient for sustained generation of the electrical
power capacity desired. In addition, geothermal power production poses unusual
risks of seismic activity. Accordingly, there can be no assurance that
earthquake, property damage or business interruption insurance will be
adequate to cover all potential losses sustained in the event of serious
seismic disturbances or that such insurance will be available on commercially
reasonable terms. The success of a geothermal project depends on the quality
of the geothermal resource and operational factors relating to the extraction
of the geothermal fluids involved in such project. The quality of a geothermal
resource is affected by a number of factors, including the size of the
reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of resource
operating factors. Production and injection wells can require frequent
maintenance or replacement. Corrosion caused by high-temperature and
high-salinity geothermal fluids may compel the replacement or repair of
certain equipment, vessels or pipelines. New production and injection wells
may be required for the maintenance of operating levels, thereby requiring
substantial capital expenditures.
GENERAL OPERATING UNCERTAINTIES. The operation of a power plant
involves many risks, including the breakdown or failure of power generation
equipment, pipelines, transmission lines or other equipment or processes, fuel
interruption, and performance below expected levels of output or efficiency.
Each facility may depend on a single or limited number of entities to purchase
electricity or thermal energy, to supply water, to supply gas, to transport
gas, to dispose of wastes or to wheel electricity. The failure of any such
purchasing utility, steam host, water or gas supplier, gas transporter,
wheeling utility or other relevant project participant to fulfill its
contractual obligations could have a material adverse impact on the Company.
FUEL SUPPLY OPERATIONS. The primary fuel source for certain of the
Company's projects is natural gas and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining natural gas
through gas supply agreements and transporting that gas to the projects under
gas transportation agreements. Although the Company believes that it has
contracted for natural gas supply and transportation in sufficient quantities
to satisfy the needs of its projects, the gas suppliers are not required in
all cases to provide dedicated reserves in support of their contractual
obligations. Unless the gas projects were able to obtain substitute volumes of
natural gas including the requisite transportation services, for such volumes
at a price not materially higher than the sum of the contract price under the
existing gas supply agreements and any damages paid by the supplier for
failure to deliver, the sustained failure of a supplier to deliver natural gas
in accordance with its contract could have a material adverse effect on the
cash flows to the Company. In addition, under certain gas supply contracts the
Company is obligated to pay for a certain minimum quantity of natural gas even
if it cannot utilize it. The Company intends to manage its requirements for
contract volumes under the gas supply agreements so as to meet the minimum
take requirements through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-party
customers, if necessary. Finally, the state, federal and Canadian regulatory
authorities that have jurisdiction over natural gas transportation have the
right to modify aspects of the rates, terms and conditions of those contracts.
It is possible that such a modification could materially increase the fuel
transportation costs of the projects or give the transporter a right to
terminate or suspend or decrease its performance under its contract.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT UNCERTAINTIES. The
Company currently relies on long-term power purchase "Standard Offer No. 4"
contracts (each, an "SO4 Agreement") with a large customer, Southern
California Edison Company ("Edison"), to generate a substantial portion of its
operating revenues.
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<PAGE>
Any material failure by Edison to fulfill its contractual obligations under
such contracts is likely to have a material adverse effect on the Company's
results of operations. Each of the Company's SO4 Agreements provides for both
capacity payments and energy payments for a term of between 20 and 30 years.
During the first ten years after achieving firm operation, energy payments
under each SO4 Agreement are based on a pre-set schedule. Thereafter, while
the basis for the capacity payment remains the same, the required energy
payment is Edison's then-current published avoided cost of energy ("Avoided
Cost of Energy") as determined by the California Public Utility Commission
("CPUC"). The initial ten-year period expires in August 1997 for the Company's
Navy I Project, March 1999 for its BLM Project and January 2000 for its Navy
II Project, and the three joint ventures which comprise the Coso Project in
California (the "Coso Project"). Such ten-year period expired in 1996 with
respect to one of the eight geothermal plants in the Imperial Valley in
California ("Imperial Valley Projects") and expires in 1999 for three of its
Imperial Valley Projects and in 2000 for the remaining two Imperial Valley
Projects that operate under SO4 Agreements.
Estimates of Edison's future Avoided Cost of Energy vary
substantially in any given year. The Company cannot predict the likely level
of Avoided Cost of Energy prices under its SO4 Agreements with Edison at the
expiration of the fixed-price periods. Edison's Avoided Cost of Energy as
determined by the CPUC is currently substantially below the current scheduled
energy prices under the Company's respective SO4 Agreements and is currently
expected to remain so. For the year ended December 31, 1996, the time
period-weighted average of Edison's Avoided Cost of Energy was 2.5 cents per
kWh, compared to the time period-weighted average for the year ended December
31, 1996 selling prices for energy of approximately 11.3 cents per kWh for the
Company. Thus, the revenues generated by each of the Company's facilities
operating under SO4 Agreements are likely to decline significantly after the
expiration of the applicable fixed price period.
COMPETITION AND DOMESTIC DEREGULATION; INDUSTRY RESTRUCTURING. The
international power production market is characterized by numerous strong and
capable competitors, many of which have more extensive and more diversified
developmental or operating experience (including international experience) and
greater financial resources than the Company. Many of these competitors also
compete in the domestic market. Further, in recent years, the domestic power
production industry has been characterized by strong and increasing
competition with respect to the industry's efforts to obtain new power sales
agreements, which has contributed to a reduction in prices offered to
utilities. In that regard, many utilities often engage in "competitive bid"
solicitations to satisfy new capacity demands. In the domestic market,
competition is expected to increase as the electric utility industry becomes
deregulated. In addition, recent deregulation and industry restructuring
activity may cause certain utilities or other contract parties to attempt to
renegotiate contracts or otherwise fail to perform their contractual
obligations, which in turn could adversely affect the Company's results of
operations. In particular, the state of California has adopted a bill to
restructure the electric industry by providing for a phased-in competitive
power generation industry, with a power pool and an independent system
operator, and for direct access to generation for all power purchasers outside
the power exchange under certain circumstances. Although the bill contemplates
that existing qualifying facility power sales contracts will be honored, and
all of the Company's California projects are qualifying facilities, until the
new system is fully implemented, it is impossible to predict what impact, if
any, it may have on the operations of those projects.
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling and operation of new and existing wells. Such laws and
regulations generally require the Company to obtain and comply with a wide
variety of licenses, permits and other approvals. The Company also remains
subject to a number of complex and stringent laws and regulations that both
public officials and private individuals may seek to enforce. There can be no
assurance that existing regulations will not be revised or that new
regulations will not be adopted or become applicable to the Company which
could have an adverse impact on its operations. The implementation of
regulatory changes imposing more comprehensive or stringent requirements on
the Company, which would result in increased compliance costs, could have a
material adverse effect on the
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Company's results of operations. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may require major
expenditures for permitting and create the risk of expensive delays or
material impairment of project value if projects cannot function as planned
due to changing regulatory requirements or local opposition.
The Public Utility Regulatory Policies Act of 1978, as amended
("PURPA"), and the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), are two of the laws (including the regulations thereunder) that
affect the Company's operations. PURPA provides to qualifying facilities
("QFs") certain exemptions from federal and state laws and regulations,
including organizational, rate and financial regulation. PUHCA regulates
public utility holding companies and their subsidiaries. The Company is not
and will not be subject to regulation as a holding company under PUHCA as long
as the domestic power plants it owns are QFs under PURPA or are exempted as
exempt wholesale generators ("EWGs"), and so long as its foreign utility
operations are exempted as EWGs or foreign utility companies or are otherwise
exempted under PUHCA. QF status is conditioned on meeting certain criteria,
and would be jeopardized, for example, in the case of the Company's
cogeneration facilities, by the loss of a steam customer or reduction of steam
purchases below the amount required by PURPA. The Company's four cogeneration
facilities have steam sales agreements with existing industrial hosts which
agreements must be maintained in effect or replaced in order to maintain QF
status. In the event the Company were unable to avoid the loss of such status
for one of its facilities, such an event could result in termination of a
given project's power sales agreement and a default under the project
subsidiary's project financing agreements. In connection with the Company's
recently announced proposal to acquire NYSEG, the Company would be required to
seek an exemption from regulation as a holding company under PUHCA, but
nevertheless would be required to make partial dispositions of certain of the
Company's independent generating facilities in order to maintain the QF status
of such facilities. See the Company's Current Reports on Form 8-K dated July
15, 1997 and July 22, 1997, incorporated herein by reference.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the
Company's 1996 Stock Option Plan (the "1996 Plan"), as of June 30, 1997, the
Company had outstanding various options to its officers, directors and
employees for the purchase of 4,859,668 shares of Common Stock. All of the
shares of Common Stock issuable upon exercise of said options have been
registered pursuant to registration statements on Form S-8, and, when fully
vested, are available for immediate resale. Also as of June 30, 1997, there
were additional options outstanding to purchase 1,306,000 shares of Common
Stock, 1,000,000 of which were granted to Peter Kiewit Sons', Inc. ("PKS"). As
of June 30, 1997, PKS has demand and piggyback registration rights with
respect to (i) approximately 19,231,065 shares of Common Stock (and any shares
of Common Stock subsequently held by PKS) and (ii) all of its options to
purchase shares of Common Stock (and the shares issuable upon exercise of such
options). Sales of substantial amounts of Common Stock or the availability of
Common Stock for sale, could have an adverse impact on the market price of the
Common Stock and on the Company's ability to raise additional capital through
the sale of Common Stock.
LACK OF PUBLIC MARKET FOR THE DEBT SECURITIES AND THE PREFERRED
STOCK. There is no existing public trading market for the Debt Securities and
the Preferred Stock and there can be no assurance regarding the future
development of a market for either the Debt Securities or the Preferred Stock,
or the ability of holders of such securities to sell their Debt Securities
and/or Preferred Stock or the price at which such holders may be able to sell
their Securities. If such a market were to develop, the Debt Securities and/or
Preferred Stock could trade at prices that may be higher or lower than their
initial offering price depending on many factors, including prevailing
interest rates, the price of Common Stock, the Company's operating results and
the market for similar securities. Historically, the market for non-investment
grade debt has demonstrated substantial volatility in the prices of securities
similar to the Debt Securities. There can be no assurance that the future
market for the Debt Securities will not be subject to similar volatility.
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THE COMPANY
GENERAL
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 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.
Over the last three years ended December 31, 1996, the Company has
experienced significant growth. The market capitalization of the Company has
risen at a compound annual rate of 48% from approximately $656 million in 1993
to approximately $2,140 million in 1996, the revenues of the Company have
risen at a compound annual rate of 57% from approximately $149 million in 1993
to approximately $576 million in 1996 and net income available to common
stockholders has risen at a compound annual rate of 29% from approximately $43
million in 1993 to approximately $92 million in 1996. This significant growth
has been achieved through: (i) acquisitions that complement and diversify the
Company's existing business, broaden the geographic locations of its assets
and enhance its competitive capabilities; (ii) enhancement of the financial
and technical performance of existing and acquired projects; and (iii)
development and construction of new plants and facilities ("greenfield
development").
In the last two years, the Company has consummated several
significant acquisitions. In January 1995, the Company acquired Magma, a
publicly-traded United States independent power producer with 228 MW of
aggregate net operating capacity and 154 MW of aggregate net ownership
capacity, for approximately $958 million. The Magma acquisition, combined with
the Company's previously existing assets, made the Company the largest
independent geothermal power producer in the world today (based on the
Company's estimate of aggregate MW of electric generating capacity in
operation and under construction). In April 1996, the Company completed the
buy-out for approximately $70 million of its partner's interests in four
electric generating plants in Southern California, resulting in sole ownership
of the Imperial Valley Projects' 228 MW of aggregate net operating capacity.
In August 1996, the Company acquired Falcon Seaboard for approximately $226
million, thereby acquiring significant ownership in 520 MW of natural
gas-fired electric production facilities located in New York, Texas and
Pennsylvania and a related gas transmission pipeline.
In March 1997, the Company completed the acquisition of Northern
Electric plc. Northern is one of the twelve 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 1989 to
distribute and supply electricity in its authorized area located in northeast
England. 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. The electricity industry
in Great Britain is overseen by the Office of Electricity Regulation headed by
the Regulator. The regulatory framework includes price controls which limit
the maximum average prices that Northern can charge for distributing and
supplying electricity.
Through its subsidiaries and joint ventures, the Company presently
operates 20 projects with an aggregate net capacity of 1,635 MW, in which it
has a net ownership interest of 1,325 MW of electric generating capacity. This
includes an aggregate net ownership interest of 916 MW in facilities located
in the United States (which facilities have an aggregate net capacity of 1,135
MW, of which 570 MW are fueled with
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natural gas and 565 MW are geothermal-fired). The remaining 500 MW, in which
the Company has a net ownership interest of 409 MW, are supplied by three
geothermal power production facilities owned and operated by the Company in
the Philippines. Also, the Company has an equity interest representing 202 net
MW in, but does not operate, the 1,875 MW Teesside Project in England.
With respect to power generation projects that are financed and under
construction, the Company has an aggregate net ownership interest of 55 MW of
electric generating capacity in a hydroelectric project in the Philippines,
which has an aggregate net capacity of 150 MW. The Company is also currently
constructing a 52 net MW geothermal project in Indonesia, in which the Company
has an aggregate net ownership interest of 26 MW of electric generating
capacity, as the first phase of the Company's planned Indonesian geothermal
project development of approximately 1,000 MW under contract. The Company has
commenced construction of a 50 MW gas fired power project in England in which
the Company has net ownership interest of 18 MW. The Company expects that it
will operate all of these projects.
The Company is also currently developing six additional projects with
executed or awarded power sales contracts in the Philippines, Indonesia and
the United States. The Company is expected to have an approximate net
ownership interest of 573 MW in these development projects (which represent an
aggregate net capacity of 1,260 MW of additional potential electric generating
capacity). Substantial contingencies exist with respect to development
projects, including, without limitation, the need to obtain financing, permits
and licenses and the satisfactory completion of construction. The Company
expects that it will operate all of these projects.
The Common Stock is traded on the New York, Pacific and London Stock
Exchanges. As of June 30, 1997, PKS was an approximate 27% stockholder of the
Company (on a fully diluted basis). PKS is a large employee-owned
construction, mining and telecommunications company with approximately $3.0
billion in revenues in 1996. PKS is one of the largest construction companies
in North America and has been in the construction business since 1884.
STRATEGY
General. The Company's strategy remains focused upon continued growth
in its core power generation business through the development of new projects,
enhancement of existing and acquired assets' performance, and the acquisition
of companies and projects that diversify the Company's power generation
technologies and the geographic locations of its generation assets and enhance
its competitive capabilities. The Company is also pursuing strategic expansion
into other aspects of the global power business, including the distribution
and supply of electricity, in order to diversify its business and cash flows,
develop and enhance its distribution, marketing and power pool skills and
increase its competitive capabilities. The Company's acquisition of Northern
was implemented in furtherance of this aspect of its strategy. The Company
believes that its existing assets, strengths and skills, coupled with
Northern's distribution and supply skills, its experience in the largely
deregulated United Kingdom power market and the resulting diversification in
the Company's assets and geographic location will position the Company to
maximize its ability to participate successfully (by way of acquisition or
otherwise) in opportunities expected to be created in the next few years by
restructurings in the United States and other global energy markets. The
Company's pending tender offer for 9.9% of the outstanding NYSEG common stock
and its proposal to acquire 100% of the outstanding NYSEG common stock are
intended to further this aspect of its strategy. The Company also selectively
will seek opportunities to expand beyond power generation, distribution and
supply in areas related to these core businesses, such as power transmission
and gas production and supply, if such opportunities will enhance the
Company's competitive capabilities and financial position.
Power Generation. The Company presently believes that the
international independent power market holds the majority of new opportunities
for financially attractive private power development in the next several
years, in large part because the demand for new generating capacity is growing
more rapidly in emerging nations than in the United States. In developing its
international strategy, the Company pursues development opportunities in
countries that it believes have an acceptable risk profile and where the
Company's resource
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development and operating experience, project development and financing
expertise or strategic relationship with local partners are expected to
provide it with a competitive advantage. Domestically, the Company is focusing
on environmentally responsible power generation opportunities in which it
believes it has relative competitive advantages due to its technical, project
management, project financing and operating expertise. In the near term, the
Company expects that its continued domestic generation expansion will be
accomplished primarily through selected acquisitions, including acquisitions
of partially developed or existing power generating projects and contracts,
although the Company will consider appropriate domestic greenfield development
opportunities if they arise. The Company is also evaluating the potential
opportunities of direct access and power marketing through use of retail
wheeling.
Distribution, Supply and Other Related Energy Businesses. The Company
believes that the power distribution and supply businesses present significant
investment and return opportunities at the present time in selected foreign
markets, such as the United Kingdom, and that power distribution and supply
skills will comprise a significant component of the skill base required to
compete effectively in the United States and other global power markets as
those markets become deregulated and competitive. The Company believes that
the impending changes in the regulation of the United States power markets
will reflect many aspects of the United Kingdom model for competitive
generation, transmission, distribution and supply of energy. Thus, the
experience of the staff involved in Northern's operations in the United
Kingdom markets should strengthen the Company's ability to compete
successfully as other markets are also deregulated. The current effort to
introduce broader wholesale and retail competition in the United States is
expected by the Company to result both in a continuing trend toward
consolidation among domestic utilities and independent power producers and in
the disaggregation (or unbundling) of vertically integrated utilities into
separate generation, transmission and distribution businesses. While this may
result in significant increased competition in each of these businesses, the
Company believes that the acquisition of Northern and the experience of
Northern's staff in the competitive and substantially deregulated United
Kingdom market, coupled with the Company's existing development and generation
capabilities, will provide the Company with the ability to capitalize on the
opportunities and challenges of an increasingly deregulated and competitive
domestic market for the generation, transmission, distribution and supply of
energy. The Company's recently proposed acquisition of NYSEG, if consummated,
is believed by the Company to represent such an opportunity in the United
States markets. Similar opportunities also are expected to occur in other
countries as various international markets undergo similar restructuring. The
Company believes that as the wholesale and retail energy markets become more
competitive, the principal factor determining success is likely to be price,
and, to a lesser extent, reliability, availability of capacity and customer
service. Accordingly, its acquisitions of domestic utility assets in a
deregulated environment will have to meet defined criteria, including the
potential to lower costs, increase long-term efficiency and competitiveness
and provide an acceptable rate of return and benefit to the Company and its
stockholders.
--------------------
The principal executive offices of the Company are located at 302
South 36th Street, Suite 400, Omaha, Nebraska 68131 and its telephone number
is (402) 341-4500. The Company was incorporated in 1971 under the laws of the
State of Delaware.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges on a historical basis for each of the five years in the period
ended December 31, 1996 and for the three months ended March 31, 1996 and
1997.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges 3.2 2.8 1.7 1.5 1.6 1.3 1.7
</TABLE>
For purposes of computing historical ratios of earnings to fixed
charges, earnings are divided by fixed charges. "Earnings" represent the
aggregate of (a) the pre-tax income of the Company, including its
proportionate share of the pre-tax income of the Coso Project and excluding
the equity in loss of a non-consolidated subsidiary, and (b) fixed charges,
less capitalized interest. "Fixed charges" represent interest (whether
expensed or capitalized), amortization of deferred financing and bank fees,
and the portion of rentals considered to be representative of the interest
factor (one-third of lease payments) and preferred stock dividend
requirements of majority owned subsidiaries.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement
accompanying this Prospectus, proceeds from the sale of the Offered Securities
ultimately will be used by the Company to make equity investments in future
domestic and international energy projects, to fund possible project or
Company acquisitions, for the repayment of debt or for other general corporate
purposes, and initially may be temporarily invested in short-term securities.
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DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject
to, and qualified in its entirety by, the Company's Restated Certificate of
Incorporation, as amended (the "Restated Certificate of Incorporation"), and
the Company's By-Laws, as amended (the "By-Laws"), and by the provisions of
applicable law. The authorized capital stock of the Company consists of
180,000,000 shares of Common Stock, par value $0.0675 per share, and 2,000,000
shares of Preferred Stock, no par value. This summary contains a description
of certain general terms of the Common Stock and the Preferred Stock to which
any Prospectus Supplement may relate. Certain terms of any Common Stock or any
series of Preferred Stock offered by a Prospectus Supplement will be described
in the Prospectus Supplement relating thereto, including the number of shares,
offered, any initial offering price, and market price and dividend
information. If so indicated in the Prospectus Supplement, the terms of any
series may differ from the terms set forth below.
COMMON STOCK
At March 31, 1997, there were 63,529,595 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
Holders of the Common Stock vote together as a single class on all matters.
Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. The outstanding shares of Common Stock are fully
paid and nonasessable. The Common Stock will, when issued against payment
therefor, be fully paid and nonassessable.
On December 1, 1988, the Company distributed a dividend of one
Preferred Share Purchase Right (a "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 Common Stock or announces a tender or exchange offer for 30% or
more of the Common Stock. Each Right entitles the holder to purchase one
one-hundredth of a share of Series A Junior Preferred Stock, no par value
("Series A 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 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.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without any further
action by the stockholders. The issuance of shares of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of shares of
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. At March 31, 1997, there were [635,296] shares of Series A
Preferred Stock outstanding. The Company has no present plans to issue any
additional shares of Preferred Stock. See "Description of Preferred Stock."
RESTATED CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
AFFECTING CHANGE IN CONTROL
The Restated Certificate of Incorporation and the By-Laws include
certain provisions that are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and that may have
the effect of delaying, deterring or preventing a future takeover or change in
control of the Company,
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unless such takeover or change in control is approved by the Board of
Directors. Such provisions may also render the removal of the directors and
management more difficult. Such provisions include a classified Board of
Directors divided into three classes serving staggered three-year terms,
prohibit stockholders of the Company from taking action by written consent,
require the affirmative vote of at least 66-2/3% of the outstanding shares of
stock of the Company entitled to vote thereon to adopt, repeal, alter, amend
or rescind the By-Laws, and require that special meetings of stockholders be
called only by the Board of Directors or the Chief Executive Officer. In
addition to the foregoing, the Board of Directors has adopted a Stockholder
Rights Plan, which provided for a dividend of one Right for each outstanding
share of Common Stock. See "--Common Stock."
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law ("Section 203"). Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that
such stockholder became an interested stockholder, unless (i) the corporation
has elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction
in which the stockholder became an interested stockholder or the business
combination was approved by the board of directors of the corporation before
the other party to the business combination became an interested stockholder,
(iii) upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the transaction
(excluding voting stock owned by directors who are also officers or held in
employee benefit plans in which the employees do not have a confidential right
to tender or vote stock held by the plan) or (iv) the business combination was
approved by the board of directors of the corporation and ratified by
two-thirds of the voting stock which the interested stockholder did not own.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an "interested stockholder's" percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with its affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.
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DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the shares of Preferred
Stock that may be offered by the Company sets forth certain general terms and
provisions of the Preferred Stock to which any Prospectus Supplement may
relate. Certain other terms of any series of Preferred Stock and the terms of
any related option, put or right of the Company to require the holder of any
other Security offered to also acquire shares of Preferred Stock will be
specified in the applicable Prospectus Supplement. If so specified in the
applicable Prospectus Supplement, the terms of any series of Preferred Stock
may differ from the terms set forth below. The description of the terms of the
Preferred Stock set forth below and in any Prospectus Supplement is
necessarily a summary thereof and is qualified in its entirety by reference to
the Certificate of Designation relating to the applicable series of Preferred
Stock, which Certificate of Designation will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this
Prospectus forms a part.
GENERAL
Pursuant to the Restated Certificate of Incorporation and the
Delaware General Corporation Law, the Board of Directors of the Company has
the authority, without further stockholder action, to issue from time to time
up to a maximum of up to 2,000,000 shares of Preferred Stock, in one or more
series and for such consideration as may be fixed from time to time by the
Board of Directors of the Company and to fix before the issuance of any shares
of Preferred Stock of a particular series, the designation of such series, the
number of shares to comprise such series, the dividend rate or rates payable
with respect to the shares of such series, the redemption price or prices, if
any, and the terms and conditions of any redemption, the voting rights, any
sinking fund provisions for the redemption or purchase of the shares of such
series, the terms and conditions upon which the shares are convertible or
exchangeable, if they are convertible or exchangeable, and any other relative
rights, preferences and limitations pertaining to such series.
Reference is made to the Prospectus Supplement relating to the
particular series of Preferred Stock offered thereby for specific terms,
including: (i) the designation, stated value and liquidation preference of
such Preferred Stock and the number of shares offered; (ii) the initial public
offering price at which such shares will be issued; (iii) the dividend rate or
rates (or method of calculation), the dividend periods, the date or dates on
which dividends shall be payable and whether such dividends shall be
cumulative or noncumulative and, if cumulative, the dates from which dividends
shall commence to cumulate; (iv) any redemption or sinking fund provisions;
(v) any conversion or exchange provisions; (vi) the procedures for any auction
and remarketing, if any, of such Preferred Stock; (vii) whether interests in
Preferred Stock will be represented by depositary shares; and (viii) any
additional dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock will, when issued against payment therefor, be
fully paid and nonassessable. Holders of Preferred Stock will have no
preemptive rights to subscribe for any additional securities which may be
issued by the Company.
Because the Company is a holding company, its rights and the rights
of holders of its securities, including the holders of Preferred Stock, to
participate in the distribution of assets of any subsidiary of the Company
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors and preferred stockholders, except to
the extent the Company may itself be a creditor with recognized claims against
such subsidiary or a holder of preferred stock of such subsidiary.
DIVIDENDS
The holders of the Preferred Stock will be entitled to receive, when
and as declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends at such rates and on such dates as will be
specified in the
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applicable Prospectus Supplement. Such rates may be fixed or variable or both.
If variable, the formula used for determining the dividend rate for each
dividend period will be specified in the applicable Prospectus Supplement.
Dividends will be payable to the holders of record as they appear on the stock
books of the Company on such record dates as will be fixed by the Board of
Directors of the Company. Dividends may be paid in the form of cash, Preferred
Stock (of the same or a different series) or Common Stock of the Company, in
each case as specified in the applicable Prospectus Supplement.
Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
Preferred Stock for which dividends are noncumulative ("Noncumulative
Preferred Stock"), then the holders of such Preferred Stock will have no right
to receive a dividend in respect of the dividend period relating to such
dividend payment date, and the Company will have no obligation to pay the
dividend accrued for such period, whether or not dividends on such Preferred
Stock are declared or paid on any future dividend payment dates.
The Company shall not declare, pay or set apart for payment any
dividends on any series of its Preferred Stock ranking, as to dividends, on a
parity with or junior to the outstanding Preferred Stock of any series unless
(i) if such series of Preferred Stock has a cumulative dividend ("Cumulative
Preferred Stock"), full cumulative dividends have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on such Preferred Stock for all past dividend
periods and the then current dividend period, or (ii) if such series of
Preferred Stock is Noncumulative Preferred Stock, full dividends for the then
current dividend period on such Preferred Stock have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment. When dividends are not paid in full upon Preferred
Stock of any series and any other shares of Preferred Stock of the Company
ranking on a parity as to dividends with such Preferred Stock, all dividends
declared upon such Preferred Stock and any other Preferred Stock of the
Company ranking on a parity as to dividends with such Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share on such
Preferred Stock and such other shares of Preferred Stock shall in all cases
bear to each other the same ratio that the accrued dividends per share on such
Preferred Stock (which shall not, if such Preferred Stock is Noncumulative
Preferred Stock, include any accumulation in respect of unpaid dividends for
prior dividend periods) and such other shares of Preferred Stock bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on Preferred Stock of such series
which may be in arrears.
Except as set forth in the preceding sentence, unless (i) full
dividends on the outstanding Cumulative Preferred Stock of any series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period or (ii) full dividends for the
then current dividend period on the outstanding Noncumulative Preferred Stock
of any series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment, no
dividends (other than in Common Stock of the Company or other shares of the
Company ranking junior to such Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment, nor shall any
other distribution be made, on the Common Stock of the Company or on any other
shares of the Company ranking junior to or on a parity with such Preferred
Stock as to dividends or upon liquidation.
Unless (i) full dividends on the Cumulative Preferred Stock of any
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period or (ii) full dividends
for the then current dividend period on the Noncumulative Preferred Stock of
any series have been declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment, no Common Stock or any other
shares of the Company ranking junior to or on a parity with such Preferred
Stock as to dividends or upon liquidation shall be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid or made
available for a sinking fund for the redemption of any such shares) by the
Company or any subsidiary of the Company except by conversion into or exchange
for shares of the Company ranking junior to such Preferred Stock as to
dividends and upon liquidation. Any dividend payment made on shares of
Cumulative Preferred
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Stock of any series shall first be credited against the earliest accrued but
unpaid dividend due with respect to shares of such series which remains
unpaid.
REDEMPTION
Preferred Stock may be redeemable, in whole or in part, at the option
of the Company, out of funds legally available therefor, and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise, in each case
upon terms, at the times and at the redemption prices specified, in the
applicable Prospectus Supplement. Preferred Stock redeemed by the Company will
be restored to the status of authorized but unissued shares of Preferred
Stock.
The Prospectus Supplement relating to a series of Preferred Stock
that is subject to mandatory redemption will specify the number of shares of
such Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Preferred Stock is Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is
payable only from the net proceeds of the issuance of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such
capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into shares of the applicable capital stock of the Company pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) full dividends on the
Cumulative Preferred Stock of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period or (ii) full dividends for the then current dividend period on the
Noncumulative Preferred Stock of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment, no shares of Preferred Stock of such series shall be
redeemed unless all outstanding shares of Preferred Stock of such series are
simultaneously redeemed, and the Company shall not purchase or otherwise
acquire any shares of Preferred Stock of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Preferred Stock
of such series pursuant to a purchase or exchange offer provided such offer is
made on the same terms to all holders of the Preferred Stock of such series.
Notice of redemption shall be given by mailing the same to each
record holder of the Preferred Stock to be redeemed, not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, at the address of
such holder as the same shall appear on the stock books of the Company. Each
notice shall state: (i) the redemption date; (ii) the number of shares and
series of the Preferred Stock to be redeemed; (iii) the redemption price; (iv)
the place or places where certificates for such Preferred Stock are to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion or exchange rights, if any, as to
such shares shall terminate. If fewer than all the shares of Preferred Stock
of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of shares of Preferred Stock to be
redeemed from each such holder.
If fewer than all the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Board of Directors of the Company and such shares may be
redeemed pro rata from the holders of record of such shares in proportion to
the number of such shares held by such holders (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the Board
of Directors of the Company.
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If notice of redemption of any shares of Preferred Stock has been
given and if the funds necessary for such redemption have been set aside by
the Company, separate and apart from its other funds, in trust for the pro
rata benefit of holders of any shares of Preferred Stock so called for
redemption, then from and after the redemption date for such shares, dividends
on such shares shall cease to accrue and such shares shall no longer be deemed
to be outstanding, and all rights of the holders thereof as stockholders of
the Company (except the right to receive the redemption price) shall cease.
Upon surrender, in accordance with such notice, of the certificates
representing any such shares (properly endorsed or assigned for transfer, if
the Board of Directors of the Company shall so require and the notice shall so
state), the redemption price set forth above shall be paid out of the funds
provided by the Company. If fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
CONVERSION OR EXCHANGE RIGHTS
The Prospectus Supplement relating to a series of Preferred Stock
that is convertible or exchangeable will state the terms on which shares of
such series are convertible or exchangeable into Common Stock, another series
of Preferred Stock or Debt Securities.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the holders of each series of Preferred Stock
shall be entitled to receive out of the assets of the Company legally
available for distribution to stockholders, before any distribution of assets
is made to holders of Common Stock or any other class or series of capital
stock ranking junior to such Preferred Stock upon liquidation, liquidating
distributions in the amount of the liquidation preference of such Preferred
Stock plus all accrued and unpaid dividends thereon (which shall not, in the
case of Noncumulative Preferred Stock, include any accumulation in respect of
unpaid dividends for prior dividend periods). If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to Preferred Stock of any series and any other shares of
Preferred Stock of the Company ranking as to any such distribution on a parity
with such Preferred Stock are not paid in full, the holders of such Preferred
Stock and of such other shares of Preferred Stock will share ratably in any
such distribution of assets of the Company in proportion to the full
respective preferential amounts to which they are entitled. After payment of
the full amount of the liquidating distribution to which they are entitled,
the holders of Preferred Stock of any series Will not be entitled to any
further participation in any distribution of assets by the Company.
VOTING RIGHTS
Except as indicated below or in the applicable Prospectus Supplement,
or except as expressly required by applicable law, the holders of Preferred
Stock will not be entitled to vote.
If the Company fails to pay dividends on any shares of Preferred
Stock for six consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Company at a special meeting called by the holders of record
of at least 10% of such Preferred Stock or the next annual meeting of
stockholders and at each subsequent meeting until (i) all dividends
accumulated on shares of Cumulative Preferred Stock for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment or
(ii) four consecutive quarterly dividends on shares of Noncumulative Preferred
Stock shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment. In such case, the entire Board of
Directors of the Company will be increased by two directors.
So long as any shares of Preferred Stock remain outstanding, the
Company shall not, without the affirmative vote of the holders of at least
two-thirds of each series of Preferred Stock outstanding at the time,
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given in person or by proxy, at a meeting (voting separately as a class): (i)
authorize, create or issue, or increase the authorized or issued amount of,
any class or series of capital stock ranking prior to such series of Preferred
Stock with respect to payment of dividends or distribution of assets upon
liquidation, dissolution or winding up, or reclassify any capital stock into
any such shares, or authorize, create or issue any obligation or security
convertible into, exchangeable for or evidencing the right to purchase any
such shares or (ii) amend, alter or repeal the provisions of the Restated
Certificate of Incorporation, including the Certificate of Designation
relating to such series of Preferred Stock, whether by merger, consolidation,
or otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of the authorized
Preferred Stock or any outstanding series of Preferred Stock or any other
capital stock of the Company, or the creation and issuance of any other series
of Preferred Stock or of any other capital stock of the Company, in each case
ranking on a parity with or junior to the Preferred Stock of such series with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of such series of Preferred Stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities may consist of Senior Debt Securities or
Subordinated Debt Securities. The Senior Debt Securities will be issued under
an indenture (the "Senior Debt Indenture") between the Company, as issuer, and
one or more trustees (each a "Trustee") meeting the requirements of a trustee
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Subordinated Debt Securities will be issued under an indenture (the
"Subordinated Debt Indenture") between the Company, as issuer, and a Trustee.
Forms of the Indentures have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. The Indentures are
subject to and governed by the Trust Indenture Act. The following summaries of
certain provisions of the Indentures do not purport to be complete, and where
reference is made to particular provisions of the Indentures, such provisions,
including definitions of certain terms, are incorporated by reference as a
part of such summaries or terms, which are qualified in their entirety by such
reference. The Indentures are substantially identical except for provisions
relating to subordination.
The Debt Securities may be issued in one or more series. The
particular terms of each series of Debt Securities, as well as any
modifications of or additions to the general terms of the Debt Securities as
described herein that may be applicable in the case of a particular series of
Debt Securities, will be described in the Prospectus Supplement relating to
such series of Debt Securities. Accordingly, for a description of the terms of
a particular series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of Debt Securities
set forth in this Prospectus.
GENERAL
Neither of the Indentures limits the amount of Debt Securities that
may be issued thereunder. Each Indenture provides that Debt Securities
issuable thereunder may be issued up to the aggregate principal amount which
may be authorized from time to time by the Company. Reference is made to the
Prospectus Supplement for the following terms of the Debt Securities (to the
extent such terms are applicable to such Debt Securities) in respect of which
this Prospectus is being delivered (the "Offered Debt Securities"):
(i) the title of the Offered Debt Securities and whether the Offered
Debt Securities are Senior Debt Securities or Subordinated Debt Securities;
(ii) the aggregate principal amount of the Offered Debt Securities
and any limit on such aggregate principal amount;
(iii) the percentage of the principal amount at which such Offered Debt
Securities will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of the Offered Debt Securities which is convertible into
Common Stock or Preferred Stock, or the method by which any such portion shall
be determined;
(iv) the date or dates, or the method for determining such date or
dates, on which the principal of the Offered Debt Securities will be payable;
(v) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which the Offered Debt
Securities will bear interest, if any;
(vi) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the basis
upon which interest shall be calculated if other than that of a 360-day year
of twelve 30-day months;
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(vii) the place or places where the principal of (and premium, if
any) and interest, if any, on such Offered Debt Securities will be payable,
whether such Offered Debt Securities may be surrendered for conversion or
registration of transfer or exchange and notices or demands to or upon the
Company in respect of such Offered Debt Securities and the applicable
Indenture may be served;
(viii) the period or periods within which, the price or prices at
which and the terms and conditions upon which the Offered Debt Securities may
be redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(ix) the obligation, if any, of the Company to redeem, repay or
purchase the Offered Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Offered Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(x)if other than U.S. dollars, the currency or currencies in which
the Offered Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(xi) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the Offered Debt Securities may be determined
with reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit or
units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(xii) any additions to, modifications of or deletions from the terms
of the Offered Debt Securities with respect to the Events of Default or
covenants set forth in the applicable Indenture;
(xiii) any provisions for collateral security for repayment of the
Offered Debt Securities;
(xiv) whether the Offered Debt Securities will be issued in
certificated and/or book-entry form;
(xv) whether the Offered Debt Securities will be in registered or
bearer form ("Bearer Securities") and, if in registered form, the
denominations thereof if other than $1,000 and any integral multiple thereof
and, if in bearer form, the denominations thereof and terms and conditions
relating thereto including any restrictions to the exchange of one form for
another and the offer, sale and delivery of Bearer Securities;
(xvi) the applicability, if any, of defeasance and covenant
defeasance provisions of the applicable Indenture;
(xvii) the terms, if any, upon which the Offered Debt Securities may
be convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected, including,
without limitation, the initial conversion price or rate and the conversion
period as well as any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock into which the Offered
Debt Securities are convertible;
(xviii) any applicable United States federal income tax consequences,
including whether and under what circumstances the Company will pay additional
amounts on Debt Securities held by a person who is not a U.S. person (as
defined in each Prospectus Supplement relating to any particular series of
Debt Securities offered thereby) in respect of any tax, assessment or
governmental change withheld or deducted and, if so, whether the Company will
have the option to redeem such Debt Securities rather than pay such additional
amounts;
(xix) the dates on which premium, if any, will be payable;
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(xx) the right of the Company, if any, to defer payment of interest
and the maximum length of such deferral period;
(xxi) any listing on a securities exchange;
(xxii) the initial public offering price;
(xxiii) other specific terms, including additional events of default
or covenants provided with respect to the Debt Securities; and
(xxiv) any other terms of such Debt Securities not inconsistent with
the provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Securities"). Special federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
As described in each Prospectus Supplement relating to any particular
series of Debt Securities offered thereby, the Indenture under which such Debt
Securities are issued may contain covenants limiting: (i) the incurrence of
debt by the Company; (ii) the incurrence of debt by subsidiaries of the
Company; (iii) the making of certain payments by the Company and its
subsidiaries; (iv) business activities of the Company and its subsidiaries;
(v) the issuance of preferred stock of subsidiaries; (vi) asset dispositions;
(vii) transactions with affiliates; (viii) liens; and (ix) mergers and
consolidations involving the Company.
SENIOR DEBT SECURITIES
The payment of principal of, premium, if any, and interest on the
Senior Debt Securities will, to the extent and in the manner set forth in the
Senior Debt Indenture, rank pari passu in right of payment with all other
existing and future unsecured and unsubordinated obligations of the Company.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The Subordinated Debt Indenture provides that the Subordinated Debt
Securities are subordinate and junior in right of payment to all Senior
Indebtedness of the Company as provided in the Subordinated Debt Indenture. No
payment of principal of (including redemption payments), or interest on, the
Subordinated Debt Securities may be made (i) if any Senior Indebtedness is not
paid when due, any applicable grace period with respect to a default
thereunder has ended and such default has not been cured or waived, or (ii) if
the maturity of any Senior Indebtedness has been accelerated because of a
default. Upon any distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all principal of, and premium, if any, and interest due or to become due on,
all Senior Indebtedness must be paid in full before the holders of the
Subordinated Debt Securities are entitled to receive or retain any payment. In
the event that, notwithstanding the foregoing, any payment or distribution of
cash, property or securities shall be received or collected by a holder of the
Subordinated Debt Securities in contravention of the foregoing provisions,
such payment or distribution shall be held for the benefit of and shall be
paid over to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under which
any instrument evidencing Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay in full all
Senior Indebtedness then due, after giving effect to any concurrent payment to
the holders of Senior Indebtedness. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Subordinated Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Subordinated Debt Securities are
paid in full.
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The term "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, 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 and other similar obligations 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 Subordinated
Debt Securities that is by its terms subordinated to or pari passu with the
Subordinated Debt 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 Convertible Preferred Securities or other
similar securities. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior
Indebtedness the Company may issue. At March 31, 1997, Senior Indebtedness
consisting of borrowed money of the Company aggregated approximately $953.8
million.
CERTAIN COVENANTS
Unless otherwise provided in a Prospectus Supplements with respect to
a particular series of Offered Debt Securities, each of the Indentures will
contain certain covenants, including the ones summarized below, which
covenants will be applicable (unless they are waived or amended or unless the
Debt Securities are defeased, see "Defeasance" below) so long as any of the
Debt Securities are outstanding.
Limitation on Debt
The Company will not Incur any Debt, including Acquisition Debt,
unless, after giving effect to the incurrence of such Debt and the receipt and
application of the proceeds therefrom, the Fixed Charge Ratio (as defined in
the Indenture) of the Company would be equal to or greater than 2.0 to 1.
Notwithstanding the foregoing, the Company may Incur each and all of
the following: (i) Company Refinancing Debt, (ii) Debt of the Company to any
of its Restricted Subsidiaries or any Eligible Joint Venture that is expressly
subordinated in right of payment to the Senior Debt Securities, in the case of
the Senior Debt Indenture or the Subordinated Debt Securities in the case of
the Subordinated Debt Indenture, provided that any transfer of such Debt by a
Restricted Subsidiary or an Eligible Joint Venture (other than to another
Restricted Subsidiary or another Eligible Joint Venture), or any transfer of
the Company's ownership interest, or a portion thereof, in such Restricted
Subsidiary or such Eligible Joint Venture or the interest, or a portion
thereof, of Kiewit in a Permitted Joint Venture or an Eligible Joint Venture
(which transfer has the effect of causing such Restricted Subsidiary or such
Eligible Joint Venture to cease to be a Restricted Subsidiary or an Eligible
Joint Venture, as the case may be), will be deemed to be an Incurrence of Debt
that is subject to the provisions of this covenant other than this clause
(ii), (iii) Debt in an aggregate principal amount not to exceed $100 million
outstanding at any one time may be issued under or in respect of Permitted
Working Capital Facilities, (iv) Non-Recourse Debt Incurred in respect of one
or more Permitted Facilities in which the Company has a direct or indirect
interest, (v) Debt in respect of Currency Protection Agreements or Interest
Rate Protection Agreements, (vi) Purchase Money Debt, provided that the amount
of such Debt (net of any original issue discount) does not
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exceed 90% of the fair market value of the Property acquired, (vii) the Debt
Securities and other Debt outstanding as of the date of original issuance of
any series of the Debt Securities (other than Debt to the extent that it is
extinguished, retired, defeased or repaid in connection with the original
issuance of any series of the Debt Securities), including Debt that is
Incurred in respect of interest or discount on such Debt (or Redeemable Stock
issued as dividends in respect of Redeemable Stock) pursuant to the terms of
the agreement or instrument that governs such Debt (or such Redeemable Stock)
as in effect on the date of original issuance of any series of the Debt
Securities and (viii) Debt in an aggregate principal amount not to exceed $75
million outstanding at any one time.
Limitation on Subsidiary Debt
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture, to Incur any Debt.
Notwithstanding the foregoing, each and all of the following Debt may
be Incurred by a Restricted Subsidiary or an Eligible Joint Venture: (i) Debt
outstanding as of the date of original issuance of any series of the Debt
Securities, (ii) Debt owed by a Restricted Subsidiary or an Eligible Joint
Venture to the Company or another Restricted Subsidiary of the Company or
another Eligible Joint Venture that either directly or indirectly owns all or
a portion of the Company's interest in, or directly or indirectly is owned by,
such Restricted Subsidiary, or such Eligible Joint Venture, as the case may
be, (iii) Non-Recourse Debt Incurred in respect of one or more Permitted
Facilities, provided that such Restricted Subsidiary or such Eligible Joint
Venture has a direct or an indirect interest (which may include Construction
Financing provided by the Company to the extent permitted under the covenant
described under "Limitation on Restricted Payments" below as a "Permitted
Investment") in one or more of such Permitted Facilities in respect of which
one or more Restricted Subsidiaries or Eligible Joint Ventures shall have a
direct or indirect interest, (iv) Subsidiary Refinancing Debt, (v) Acquired
Debt, (vi) Debt in respect of Currency Protection Agreements or Interest Rate
Protection Agreements, (vii) Permitted Funding Company Loans and (viii)
Permitted Facilities Debt, provided that at the time of Incurrence thereof and
after giving effect to the application of the proceeds thereof, the aggregate
principal amount of Permitted Facilities Debt shall not exceed 15% of total
consolidated Debt of the Company computed in accordance with GAAP.
Limitation on Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, make
any Restricted Payment unless at the time of such Restricted Payment and after
giving effect thereto (a) no Event of Default and no event that, after the
giving of notice or lapse of time or both, would become an Event of Default,
has occurred and is continuing, (b) the Company could Incur at least $1 of
Debt under the provision described in the first paragraph of "Limitation on
Debt" above and (c) the aggregate amount of all Restricted Payments made by
the Company, its Restricted Subsidiaries and the Eligible Joint Ventures (the
amount so made, if other than in cash, to be determined in good faith by the
Chief Financial Officer, as evidenced by an Officers' Certificate, or, if more
than $30 million, by the Board of Directors, as evidenced by a Board
resolution) after March 24, 1994, is less than the sum (without duplication)
of (i) 50% of the Adjusted Consolidated Net Income of the Company for the
period (taken as one accounting period) beginning on the first day of the
first fiscal quarter that begins after March 24, 1994 and ending on the last
day of the fiscal quarter immediately prior to the date of such calculation,
provided that if throughout any fiscal quarter within such period the Ratings
Categories applicable to the Debt Securities are rated Investment Grade by
Standard & Poor's Corporation and Moody's Investors Service, Inc. (or if both
do not make a rating of the Debt Securities publicly available, an equivalent
Rating Category is made publicly available by another Rating Agency), then
100% (instead of 50%) of the Adjusted Consolidated Net Income (if more than
zero) with respect to such fiscal quarter will be included pursuant to this
clause (i), and provided further that if Adjusted Consolidated Net Income for
such period is less than zero, then minus 100% of the amount of such net loss,
plus (ii) 100% of the aggregate net cash proceeds received by the Company from
and after March 24, 1994 from (A) the issuance and sale (other than to a
Restricted Subsidiary or an Eligible Joint Venture) of its Capital Stock
(excluding Redeemable Stock, but including Capital Stock other than Redeemable
Stock issued upon conversion
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of, or in exchange for Redeemable Stock or securities other than its Capital
Stock), (B) the issuance and sale or the exercise of warrants, options and
rights to purchase its Capital Stock (other than Redeemable Stock) and (C) the
issuance and sale of convertible Debt upon the conversion of such convertible
Debt into Capital Stock (other than Redeemable Stock), but excluding the net
proceeds from the issuance, sale, exchange, conversion or other disposition of
its Capital Stock (I) that is convertible (whether at the option of the
Company or the holder thereof or upon the happening of any event) into (x) any
security other than its Capital Stock or (y) its Redeemable Stock or (II) that
is Capital Stock referred to in clauses (ii) and (iii) of the definition of
"Permitted Payment", plus (iii) the net reduction in Investments of the types
specified in clauses (iv) and (v) of the definition of "Restricted Payment"
that result from payments of interest on Debt, dividends, or repayment of
loans or advances, the proceeds of the sale or disposition of the Investment
or other return of the amount of the original Investment to the Company, the
Restricted Subsidiary or the Eligible Joint Venture that made the original
Investment from the Person in which such Investment was made, provided that
(x) the aggregate amount of such payments will not exceed the amount of the
original Investment by the Company or such Restricted Subsidiary that reduced
the amount available pursuant to this clause (c) for making Restricted
Payments and (y) such payments may be added pursuant to this clause (iii) only
to the extent such payments are not included in the calculation of Adjusted
Consolidated Net Income, provided further that if Investments of the types
specified in clauses (iv) and (v) of the Definition of "Restricted Payment"
have been made in any Person and such Person thereafter becomes a Restricted
Subsidiary or an Eligible Joint Venture, then the aggregate amount of such
Investment (to the extent that it has reduced the amount available pursuant to
this clause (c) for making Restricted Payments), net of the amounts previously
added pursuant to this clause (iii), may be added to the amount available for
making Restricted Payments, plus (iv) an amount equal to the principal amount
of Debt of the Company extinguished in connection with the conversion into
Common Stock of the Company of the Company's 5% Convertible Subordinated
Debentures due 2000 and its 9.5% Convertible Subordinated Debenture due 2003.
The foregoing clause (c) will not prevent the payment of any dividend within
60 days after the date of its declaration if such dividend could have been
made on the date of its declaration without violation of the provisions of
this covenant.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Venture will be deemed to have made an Investment at the time
that a Person that is a Restricted Subsidiary of the Company or an Eligible
Joint Venture ceases to be a Restricted Subsidiary or an Eligible Joint
Venture (other than as a result of being designated as an Unrestricted
Subsidiary), although any subsequent Investment made by the Company, its
Restricted Subsidiaries and Eligible Joint Ventures in such Person will be
Investments that will be subject to the foregoing paragraph unless and until
such time as such Person becomes a Restricted Subsidiary or an Eligible Joint
Venture. Notwithstanding the foregoing, (i) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, in the manner provided in the
definition of "Unrestricted Subsidiary," will be an Investment that will be
subject to the foregoing paragraph and (ii) the transfer of the Company's
interest (or any portion thereof) in an entity that has been deemed to be an
Eligible Joint Venture, directly or indirectly, to an Unrestricted Subsidiary
will be an Investment (to the extent of the interest transferred) that will be
subject to the foregoing paragraph.
Restricted Payments are defined in the Indentures to exclude
Permitted Payments, which include Permitted Investments. See "Certain
Definitions" below.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, create or cause to become, or
as a result of the acquisition of any Person or Property, or upon any Person
becoming a Restricted Subsidiary or an Eligible Joint Venture, remain subject
to, any consensual encumbrance or consensual restriction of any kind on the
ability of any Restricted Subsidiary or any Eligible Joint Venture to (a) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary or such Eligible Joint Venture
owned by the Company, any other Restricted Subsidiary or any other Eligible
Joint Venture, (b) make payments in respect of any Debt owed to the Company,
any other Restricted Subsidiary of the Company or any Eligible Joint Venture,
(c) make loans or advances to the Company or to any other Restricted
Subsidiary of the Company or any other Eligible Joint Venture that is
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directly or indirectly owned by such Restricted Subsidiary or such Eligible
Joint Venture or (d) transfer any of its Property to the Company or to any
other Restricted Subsidiary or any other Eligible Joint Venture that directly
or indirectly owns or is owned by such Restricted Subsidiary or such Eligible
Joint Venture, other than those encumbrances and restrictions created or
existing (i) on the date of the original issuance of any series of Debt
Securities, (ii) pursuant to the Indenture, (iii) in connection with the
Incurrence of any Debt permitted under the provisions described in clause
(iii) of the second paragraph of "Limitation on Subsidiary Debt" above,
provided that, in the case of Debt owed to Persons other than the Company, its
Restricted Subsidiaries and any Eligible Joint Venture, the Chief Executive
Officer or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions are required to effect such financing and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary or the applicable Eligible Joint Venture to make the payments,
distributions, loans, advances or transfers referred to in clauses (a) through
(d) above than encumbrances and restrictions, taken as a whole, customarily
accepted (or, in the absence of any industry custom, reasonably acceptable) in
comparable financings or comparable transactions in the applicable
jurisdiction, (iv) in connection with the execution and delivery of an
electric power or thermal energy purchase contract, or other contract related
to the output or product of, or services rendered by one or more Permitted
Facilities to which such Restricted Subsidiary or such Eligible Joint Venture
is a supplying party or other contracts with customers, suppliers and
contractors to which such Restricted Subsidiary or such Eligible Joint Venture
is a party and where such Restricted Subsidiary or such Eligible Joint Venture
is engaged, directly or indirectly, in the development, design, engineering,
procurement, construction, acquisition, ownership, management or operation of
one or more of such Permitted Facilities, provided that the Chief Executive
Officer or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions are required to effect such contracts and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary or the applicable Eligible Joint Venture to make the payments,
distributions, loans, advances or transfers referred to in clauses (a) through
(d) above than encumbrances and restrictions, taken as a whole, customarily
accepted (or, in the absence of any industry custom, reasonably acceptable) in
comparable financings or comparable transactions in the applicable
jurisdiction, (v) in connection with any Acquired Debt, provided that such
encumbrance or restriction was not incurred in contemplation of such Person
becoming a Restricted Subsidiary or an Eligible Joint Venture and provided
further that such encumbrance or restriction does not extend to any other
Property of such Person at the time it became a Restricted Subsidiary or an
Eligible Joint Venture, (vi) in connection with the Incurrence of any Debt
permitted under clause (iv) of the provision described in the second paragraph
of "Limitation on Subsidiary Debt" above, provided that, in the case of Debt
owed to Persons other than the Company and its Restricted Subsidiaries, the
Chief Executive Officer or the Chief Financial Officer of the Company
determines in good faith, as evidenced by an Officers' Certificate, that such
encumbrances or restrictions taken as a whole are not materially more
restrictive than the encumbrances and restrictions applicable to the Debt
and/or equity being exchanged or refinanced, (vii) customary non-assignment
provisions in leases or other contracts entered into in the ordinary course of
business of the Company, any Restricted Subsidiary or any Eligible Joint
Venture, (viii) any restrictions imposed pursuant to an agreement entered into
for the sale or disposition of all or substantially all of the Capital Stock
or Property of any Restricted Subsidiary or Joint Venture that apply pending
the closing of such sale or disposition, (ix) in connection with Liens on the
Property of such Restricted Subsidiary or such Eligible Joint Venture that are
permitted by the covenant described under "Limitation on Liens" below but only
with respect to transfers referred to in clause (d) above, (x) in connection
with the Incurrence of any Debt permitted under clause (ii) of the provisions
described in the second paragraph of "Limitation on Subsidiary Debt" above or
(xi) in connection with the Incurrence of any Permitted Facilities Debt
permitted under clause (viii) of the provisions described in the second
paragraph of "Limitation on Subsidiary Debt" above, provided that any such
encumbrance or restriction relates only to those Restricted Subsidiaries or
Eligible Joint Ventures having a direct or indirect interest in the Permitted
Facilities in respect of which such Permitted Facilities Debt was Incurred.
Limitation on Dispositions
Subject to the covenant described under "Mergers, Consolidations and
Sales of Assets" below, the Company will not make, and will not permit any of
its Restricted Subsidiaries or any Eligible Joint Venture to make, any Asset
Disposition unless (i) the Company, the Restricted Subsidiary or the Eligible
Joint Venture, as
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the case may be, receives consideration at the time of each such Asset
Disposition at least equal to the fair market value of the Property or
securities sold or otherwise disposed of (to be determined in good faith by
the Chief Financial Officer, as evidenced by an Officers' Certificate, or, if
more than $30 million, by the Board of Directors, as evidenced by a Board
resolution), (ii) at least 85% of such consideration is received in cash or
Cash Equivalents or if less than 85%, the remainder of such consideration
consists of Property related to the business of the Company as described in
the first sentence of the covenant described under "Limitation on Business"
below, and (ii) unless otherwise required under the terms of Senior Debt, at
the Company's election, the Net Cash Proceeds are either (A) invested in the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (B) applied to the payment of any Debt of the Company or any
of its Restricted Subsidiaries or any Eligible Joint Venture (or as otherwise
required under the terms of such Debt), provided that, no such payment of Debt
(x) under Permitted Working Capital Facilities or any other revolving credit
agreement will count for this purpose unless the related loan commitment,
standby facility or the like will be permanently reduced by an amount equal to
the principal amount so repaid or (y) owed to the Company, a Restricted
Subsidiary thereof or an Eligible Joint Venture will count for this purpose,
provided further that such investment or such payment, as the case may be,
must be made within 365 days from the later of the date of such Asset
Disposition or the receipt by the Company, such Restricted Subsidiary or such
Eligible Joint Venture of the Net Cash Proceeds related thereto. Any Net Cash
Proceeds from Asset Dispositions that are not applied as provided in clause
(A) or (B) of the preceding sentence will constitute "Excess Proceeds." Excess
Proceeds will be applied, as described below, to make an offer (an "Offer") to
purchase any series of Debt Securities at a purchase price equal to 100% of
the principal thereof, plus accrued interest, if any, to the date of purchase.
Notwithstanding anything in the foregoing to the contrary, the
Company, its Restricted Subsidiaries and the Eligible Joint Ventures may
exchange with other Persons (i) Property that constitutes a Restricted
Subsidiary or an Eligible Joint Venture for Property that constitutes a
Restricted Subsidiary or an Eligible Joint Venture, (ii) Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture for Property
that does not constitute a Restricted Subsidiary or an Eligible Joint Venture,
(iii) Property that does not constitute a Restricted Subsidiary or an Eligible
Joint Venture for Property that does not constitute a Restricted Subsidiary or
an Eligible Joint Venture and (iv) Property that does not constitute a
Restricted Subsidiary or an Eligible Joint Venture for Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture, provided
that in each case the fair market value of the Property received is at least
equal to the fair market value of the Property exchanged as determined in good
faith by the Chief Financial Officer, as evidenced by an Officers'
Certificate, or, if more than $25 million, by the Board of Directors, as
evidenced by a Board resolution, provided that the Investment in the Property
received in the exchanges described in clauses (ii) and (iii) of the prior
sentence will be subject to the covenant described under "Limitation on
Restricted Payments" above. Notwithstanding anything in the foregoing to the
contrary, the Company may not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, make an Asset Disposition of
any of their interest in, or Property of, any of the Coso Project other than
for consideration consisting solely of cash.
To the extent that any or all of the Net Cash Proceeds of any Foreign
Asset Disposition are prohibited from (or delayed in) being repatriated to the
United States by applicable local law, the portion of such Net Cash Proceeds
so affected will not be required to be applied at the time provided above but
may be retained by any Restricted Subsidiary or any Eligible Joint Venture so
long, but only so long, as the applicable local law does not permit (or
delays) repatriation to the United States. If such Net Cash Proceeds are
transferred by the Restricted Subsidiary or Eligible Joint Venture that
conducted the Foreign Asset Disposition to another Restricted Subsidiary or
Eligible Joint Venture, the Restricted Subsidiary or Eligible Joint Venture
receiving such Net Cash Proceeds must not be directly or indirectly obligated
on any Debt owed to any Person other than the Company. The Company will take
or cause such Restricted Subsidiary or such Eligible Joint Venture to take all
actions required by the applicable local law to permit such repatriation
promptly. Once repatriation of any of such Net Cash Proceeds is permitted
under the applicable local law, repatriation will be effected immediately and
the repatriated Net Cash Proceeds will be applied in the manner set forth in
this covenant as if such Asset Disposition had occurred on the date of such
repatriation. In addition, if the Chief Financial Officer determines, in good
faith, as evidenced by an Officers' Certificate, that repatriation of any or
all of the Net Cash Proceeds of any Foreign Asset Disposition would have a
material adverse tax consequence to the Company, the Net Cash Proceeds so
affected may be retained outside of the United States by the applicable
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Restricted Subsidiary or the applicable Eligible Joint Venture for so long as
such material adverse tax consequence would continue. Notwithstanding the
foregoing provisions of this paragraph to the contrary, if applicable local
law prohibits (or delays) the repatriation of Net Cash Proceeds of a Foreign
Asset Disposition but such local law does not prohibit the application of such
Net Cash Proceeds pursuant to the first sentence of the first paragraph of
this covenant, the Company may apply such Net Cash Proceeds pursuant to such
provision.
If the series of Debt Securities tendered pursuant to an Offer have
an aggregate purchase price that is less than the Excess Proceeds available
for the purchase of such Debt Securities, the Company may use the remaining
Excess Proceeds for general corporate purposes without regard to the
provisions of this covenant. The Company will not be required to make an Offer
pursuant to this covenant if the Excess Proceeds available therefor are less
than $10 million, provided that the lesser amounts of such Excess Proceeds
will be carried forward and cumulated for each 36 consecutive month period for
purposes of determining whether an Offer is required with respect to any
Excess Proceeds of any subsequent Asset Dispositions. Any such lesser amounts
so carried forward and cumulated need not be segregated or reserved and may be
used for general corporate purposes, provided that such use will not reduce
the amount of cumulated Excess Proceeds or relieve the Company of its
obligation hereunder to make an Offer with respect thereto.
The Company will make an Offer by mailing to each Holder, with a copy
to the Trustee, within 30 days after the receipt of Excess Proceeds that cause
the cumulated Excess Proceeds to exceed $10 million, a written notice that
will specify the purchase date, which will not be less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date"), that will
contain certain information concerning the business of the Company that the
Company believes in good faith will enable the Holders to make an informed
decision and that will contain information concerning the procedures
applicable to the Offer (including, without limitation, the right of
withdrawal) and the effect of such Offer on the Debt Securities tendered.
Holders that elect to have their Debt Securities purchased will be required to
surrender such Debt Securities at least one Business Day prior to the Purchase
Date. If at the expiration of the Offer period the aggregate purchase price of
the series of Debt Securities properly tendered by Holders pursuant to the
Offer exceeds the amount of such Excess Proceeds, such Debt Securities or
portions of Debt Securities to be accepted for purchase will be selected by
the Trustee in such manner as the Trustee deems to be fair and appropriate in
the circumstances.
If the Company is prohibited by applicable law from making the Offer
or purchasing Debt Securities thereunder, the Company need not make an Offer
pursuant to this covenant for so long as such prohibition is in effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with an Offer.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, conduct
any business or enter into or permit to exist any transaction or series of
related transactions (including, but not limited to, the purchase, sale or
exchange of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with any Affiliate of the Company,
such Restricted Subsidiary or such Eligible Joint Venture, as the case may be,
unless (i) such business, transaction or series of related transactions is in
the best interest of the Company, such Restricted Subsidiary or such Eligible
Joint Venture, (ii) such business, transaction or series of related
transactions is on terms no less favorable to the Company, such Restricted
Subsidiary or such Eligible Joint Venture than those that could be obtained in
a comparable arm's length transaction with a Person that is not such an
Affiliate and (iii) with respect to such business, transaction or series of
related transactions that has a fair market value or involves aggregate
payments equal to, or in excess of, $10 million, such business, transaction or
series of transactions is approved by a majority of the Board of Directors
(including a majority of the disinterested directors), which approval is set
forth in a Board resolution delivered to the Trustee certifying that, in good
faith, the Board of
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Directors believes that such business, transaction or series of transactions
complies with clauses (i) and (ii) above.
Limitation on Liens
The Company may not Incur any Debt that is secured, directly or
indirectly, with, and the Company will not, and will not permit any of its
Restricted Subsidiaries or an Eligible Joint Venture to, grant a Lien on the
Property of the Company, its Restricted Subsidiaries or any Eligible Joint
Venture now owned or hereafter acquired unless contemporaneous therewith or
prior thereto the Debt Securities are equally and ratably secured except for
(i) any such Debt secured by Liens existing on the Property of any entity at
the time such Property is acquired by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture, whether by merger, consolidation,
purchase of such Property or otherwise, provided that such Liens (x) are not
created, incurred or assumed in contemplation of such Property being acquired
by the Company, any of its Restricted Subsidiaries or any Eligible Joint
Venture and (y) do not extend to any other Property of the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture, (ii) any other Debt
that is required by the terms thereof to be equally and ratably secured as a
result of the Incurrence of Debt that is permitted to be secured pursuant to
another clause of this covenant, (iii) Liens that are granted in good faith to
secure Debt (A) contemplated by clause (iv) of the covenant described under
"Limitation on Debt" above or (B) contemplated by clauses (ii), (iii), (vi)
and (viii) of the covenant described under "Limitation on Subsidiary Debt"
above, provided that, in the case of Debt owed to a Person other than the
Company or a Restricted Subsidiary, the Chief Executive Officer or Chief
Financial Officer of the Company determines in good faith, as evidenced by an
Officers' Certificate, that such Liens are required in order to effect such
financing and are not materially more restrictive, taken as a whole, than
Liens, taken as a whole, customarily accepted (or in the absence of industry
custom, reasonably acceptable) in comparable financings or comparable
transactions in the applicable jurisdiction, (iv) Liens existing on the date
of the original issuance of any series of the Debt Securities, (v) Liens
incurred to secure Debt incurred by the Company as permitted by clause (vi) of
the covenant described under "Limitation on Debt" above, provided that such
Liens may not cover any Property other than that being purchased and
improvements and additions thereto, (vi) Liens on any Property of the Company
securing Permitted Working Capital Facilities, Guarantees thereof and any
Interest Rate Protection Agreements or Currency Protection Agreements,
provided that such Liens may not extend to the Capital Stock owned by the
Company in any Restricted Subsidiary of the Company or any Eligible Joint
Venture, (vii) Liens in respect of extensions, renewals, refundings or
refinancings of any Debt secured by the Liens referred to in the foregoing
clauses, provided that the Liens in connection with such renewal, extension,
refunding or refinancing will be limited to all or part of the specific
property that was subject to the original Lien, (viii) Liens incurred to
secure obligations in respect of letters of credit, bankers' acceptances,
surety, bid, operating and performance bonds, performance guarantees or other
similar instruments or obligations (or reimbursement obligations with respect
thereto) (in each case, to the extent incurred in the ordinary course of
business), (ix) any Lien arising by reason of (A) any judgment, decree or
order of any court, so long as such Lien is being contested in good faith and
is appropriately bonded, and any appropriate legal proceedings that may have
been duly initiated for the review of such judgment, decree or order have not
been finally terminated or the period within which such proceedings may be
initiated has not expired, (B) taxes, duties, assessments, imposts or other
governmental charges that are not yet delinquent or are being contested in
good faith, (C) security for payment of worker's compensation or other
insurance, (D) security for the performance of tenders, contracts (other than
contracts for the payment of money) or leases, (E) deposits to secure public
or statutory obligations, or to secure permitted contracts for the purchase or
sale of any currency entered into in the ordinary course of business, (F) the
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums that are not yet delinquent or are being contested in
good faith by negotiations or by appropriate proceedings that suspend the
collection thereof, (G) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects that do not
in the aggregate materially interfere with the ordinary conduct of the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (H) leases and subleases of real property that do not
interfere with the ordinary conduct of the business of the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture and that are made on
customary and usual terms applicable to similar properties, or (x) Liens, in
addition to the foregoing, that secure obligations not in excess of $5 million
in the aggregate.
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Purchase of Debt Securities Upon a Change of Control
Upon the occurrence of a Change of Control, each Holder of the Debt
Securities will have the right to require that the Company repurchase such
Holder's Debt Securities at a purchase price in cash equal to 101% of the
principal thereof on the date of purchase plus accrued interest, if any, to
the date of purchase.
The Change of Control provisions may not be waived by the Trustee or
by the Board of Directors, and any modification thereof must be approved by
each Holder. Nevertheless, the Change of Control provisions will not
necessarily afford protection to Holders, including protection against an
adverse effect on the value of the Debt Securities, in the event that the
Company or its Subsidiaries Incur additional Debt, whether through
recapitalizations or otherwise.
Within 30 days following a Change of Control, the Company will mail a
notice to each Holder, with a copy to the Trustee, stating (1) that a Change
of Control has occurred and that such Holder has the right to require the
Company to purchase such Holder's Debt Securities at the purchase price
described above (the "Change of Control Offer"), (2) the circumstances and
relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control), (3) the purchase date (which will be
not earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Purchase Date"), (4) and thereafter interest on and such Debt
Security will continue to accrue, (5) any Debt Security properly tendered
pursuant to the Change of Control Offer will cease to accrue interest after
the Purchase Date (assuming sufficient moneys for the purchase thereof are
deposited with the Trustee), (6) that Holders electing to have a Debt Security
purchased pursuant to a Change of Control Offer will be required to surrender
the Debt Security, with the form entitled "Option of Holder To Elect Purchase"
on the reverse of the Debt Security completed, to the paying agent at the
address specified in the notice prior to the close of business on the fifth
Business Day prior to the Purchase Date, (7) that a Holder will be entitled to
withdraw such Holder's election if the paying agent receives, not later than
the close of business on the third Business Day (or such shorter periods as
may be required by applicable law) preceding the Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Debt Securities the Holder delivered for purchase, and
a statement that such Holder is withdrawing his election to have such Debt
Securities purchased and (8) that Holders that elect to have their Debt
Securities purchased only in part will be issued new Debt Securities having a
principal amount equal to the portion of the Debt Securities that were
surrendered but not tendered and purchased.
On the Purchase Date, the Company will (i) accept for payment all
Debt Securities or portions thereof tendered pursuant to the Change of Control
Offer, (ii) deposit with the Trustee money sufficient to pay the purchase
price of all Debt Securities or portions thereof so tendered for purchase and
(iii) deliver or cause to be delivered to the Trustee the Debt Securities
properly tendered together with an Officers' Certificate identifying the Debt
Securities or portions thereof tendered to the Company for purchase. The
Trustee will promptly mail, to the Holders of the Debt Securities properly
tendered and purchased, payment in an amount equal to the purchase price, and
promptly authenticate and mail to each Holder a new Debt Security having a
principal amount equal to any portion of such Holder's Debt Securities that
were surrendered but not tendered and purchased, the Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Purchase Date.
If the Company is prohibited by applicable law from making the Change
of Control Offer or purchasing Debt Securities thereunder, the Company need
not make a Change of Control Offer pursuant to this covenant for so long as
such prohibition is in effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with a Change of Control Offer.
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Limitation on Business
The Company will, and will cause its Restricted Subsidiaries and the
Eligible Joint Ventures to, engage only in (i) the ownership, design,
engineering, procurement, construction, development, acquisition, operation,
servicing, management or disposition of Permitted Facilities, (ii) the
ownership, creation, development, acquisition, servicing, management or
disposition of Restricted Subsidiaries and Joint Ventures that own, construct,
develop, design, engineer, procure, acquire, operate, service, manage or
dispose of Permitted Facilities, (iii) obtaining, arranging or providing
financing incident to any of the foregoing and (iv) other related activities
incident to any of the foregoing. The Company will not, and will not permit
any of its Restricted Subsidiaries or any Eligible Joint Venture to, make any
Investment or otherwise acquire any Property that is not directly related to
the business of the Company as described in the preceding sentence
(collectively, the "Ineligible Investments") other than as a part of an
Investment or an acquisition of Property that is predominantly and directly
related to the business of the Company as described above, and if the
aggregate fair market value of such Ineligible Investments in the aggregate
exceeds 20% (the "Percentage Limit") of the total assets of the Company and
its consolidated Restricted Subsidiaries (as determined in accordance with
GAAP) as determined in good faith by the Chief Financial Officer, as evidenced
by an Officers' Certificate, the Company, its Restricted Subsidiaries and the
Eligible Joint Ventures must cease acquiring any additional Ineligible
Investments and, within 18 months of the acquisition that caused the
Ineligible Assets to exceed the Percentage Limit, must return to compliance
with the Percentage Limit by disposing of Ineligible Assets or otherwise,
provided that such 18-month period may be extended up to an additional six
months if, despite the Company's active efforts during such 18-month period to
dispose of such Ineligible Investments or to otherwise come into compliance
with such Percentage Limit, the Company is unable to do so because of
regulatory restrictions or delays or adverse market conditions.
Limitation on Certain Sale-Leasebacks
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, Incur or otherwise become
obligated with respect to any sale-leaseback (other than a sale-leaseback with
respect to a Permitted Facility that is Non-Recourse) unless, (i) (a) if
effected by the Company, the Company would be permitted to Incur such
obligation under the covenant described under "Limitation on Debt" above or,
(b) if effected by a Restricted Subsidiary or an Eligible Joint Venture, such
Restricted Subsidiary or such Eligible Joint Venture would be permitted to
Incur such obligation under the covenant described under "Limitation on
Subsidiary Debt" above, assuming for the purpose of this covenant and the
covenants described under "Limitation on Debt" and "Limitation on Subsidiary
Debt" that (x) the obligation created by such sale-leaseback is a Capitalized
Lease and (y) the Capitalized Lease Obligation with respect thereto is the
Attributable Value thereof, (ii) the Company, such Restricted Subsidiary or
such Eligible Joint Venture is permitted to grant a Lien with respect to the
property that is the subject of such sale-leaseback under the covenant
described under "Limitation on Liens" above, (iii) the proceeds of such
sale-leaseback are at least equal to the fair market value of the property
sold (determined in good faith as evidenced by an Officers' Certificate
delivered to the Trustee in respect of a transaction involving less than $25
million, or, if equal to or in excess of $25 million, by the Board of
Directors, as evidenced by a Board resolution) and (iv) the Net Cash Proceeds
of the sale-leaseback are applied pursuant to the covenants described under
"Limitation on Dispositions" above.
Limitation on Sale of Subsidiary Preferred Stock
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture to create, assume or otherwise cause or suffer to exist
any Preferred Stock except: (i) Preferred Stock outstanding on the date of the
Indentures, including Preferred Stock issued as dividends in respect of such
Preferred Stock pursuant to the terms of the agreement or instrument that
governs such Preferred Stock as in effect on the date of original issuance of
the Debt Securities, (ii) Preferred Stock held by the Company, a Restricted
Subsidiary of the Company or an Eligible Joint Venture, (iii) Preferred Stock
issued by a Person prior to the time (a) such Person becomes a Restricted
Subsidiary or an Eligible Joint Venture, (b) such Person merges with or into
another Restricted Subsidiary or another Eligible Joint Venture or (c) a
Restricted Subsidiary, or an Eligible Joint Venture merges with or into such
Person (in a transaction in which such Person becomes a Restricted Subsidiary
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or an Eligible Joint Venture), provided that such Preferred Stock was not
issued in anticipation of such Person becoming a Restricted Subsidiary or an
Eligible Joint Venture or of such merger, (iv) Preferred Stock issued or
agreed to be issued by a Restricted Subsidiary or an Eligible Joint Venture in
connection with the financing of the construction, design, engineering,
procurement, equipping, developing, operation, ownership, management,
servicing or acquisition of one or more Permitted Facilities in which the
Company or one or more Restricted Subsidiaries or Eligible Joint Ventures has
a direct or indirect interest or the retirement of Debt or Preferred Stock
secured by any such Permitted Facility or in order to enhance the repatriation
of equity, advances or income or the increase of after-tax funds available for
distribution to the owners of any such Permitted Facility, (v) Preferred Stock
issued or agreed to be issued by a Restricted Subsidiary or an Eligible Joint
Venture in satisfaction of legal requirements applicable to a Permitted
Facility or to maintain the ordinary course of conduct of such Restricted
Subsidiary's or such Eligible Joint Venture's business in the applicable
jurisdiction and (vi) Preferred Stock that is exchanged for, or the proceeds
of which are used to refinance, any Preferred Stock permitted to be
outstanding pursuant to clauses (i) through (v) hereof (or any extension,
renewal or refinancing thereof), having a liquidation preference not to exceed
the liquidation preference of the Preferred Stock so exchanged or refinanced
and having a redemption period no shorter than the redemption period of the
Preferred Stock so exchanged or refinanced.
EVENTS OF DEFAULT
An Event of Default, as defined in each of the Indentures and
applicable to Debt Securities issued under such Indenture is defined as being:
(i) default as to the payment of principal, or premium, if any, on any Debt
Security or as to any payment required in connection with a Change of Control
or an Asset Disposition, (ii) default as to the payment of interest on any
Debt Security for 30 days after payment is due, (iii) failure to make an offer
required under either of the covenants described under "Limitation on
Dispositions" or "Purchase of Debt Securities Upon a Change of Control" above
or a failure to purchase Debt Securities tendered in respect of such offer,
(iv) default in the performance, or breach, of any covenant, agreement or
warranty contained in the Indentures and the Debt Securities and such failure
continues for 30 days after written notice is given to the Company by the
Trustee or the Holders of at least 25% in principal amount outstanding of all
series issued under such Indenture, as provided in such Indenture, (v) default
on any other Debt of the Company or any Significant Subsidiary (other than
Non-Recourse Debt of Significant Subsidiaries) if either (x) such default
results from failure to pay principal of such Debt in excess of $25 million
when due after any applicable grace period or (y) as a result of such default,
the maturity of such Debt has been accelerated prior to its scheduled maturity
and such default has not been cured within the applicable grace period, and
such acceleration has not been rescinded, and the principal amount of such
Debt, together with the principal amount of any other Debt of the Company and
its Significant Subsidiaries (not including Non-Recourse Debt of the
Significant Subsidiaries) that is in default as to principal, or the maturity
of which has been accelerated, aggregates $25 million or more, (vi) the entry
by a court of one or more judgments or orders against the Company or any
Significant Subsidiary for the payment of money that in the aggregate exceeds
$25 million (excluding the amount thereof covered by insurance or by a bond
written by a Person other than an Affiliate of the Company), which judgments
or orders have not been vacated, discharged or satisfied or stayed pending
appeal within 60 days from the entry thereof, provided that such a judgment or
order will not be an Event of Default if such judgment or order does not
require any payment by the Company or any Significant Subsidiary, except to
the extent that such judgment is only against Property that secures
Non-Recourse Debt that was permitted under the Indentures, and the Company
could, at the expiration of the applicable 60 day period, after giving effect
to such judgment or order and the consequences thereof, Incur at least $1 of
Debt under the provisions described in the first paragraph of "Limited on
Debt" above, and (vii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any of its Significant Subsidiaries.
The Indentures provide that the Trustee may withhold notice to the
Holders of any default (except in payment of principal of, premium, if any, or
interest on any series of Debt Securities and any payment required in
connection with a Change of Control or an Asset Disposition) if the Trustee
considers it in the interest of Holders to do so.
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The Indentures provide that if an Event of Default (other than an
event of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary) has occurred and is continuing, either the Trustee or
the Holders of not less than 25% in principal amount of the Debt Securities of
all series issued under such Indenture then outstanding may declare the
Default Amount of all Debt Securities to be due and payable immediately, but
upon certain conditions such declaration may be annulled and past defaults
(except, unless theretofore cured, a default in payment of principal of,
premium, if any, or interest on the Debt Securities or any payment required in
connection with a Change of Control or an Asset Disposition, as the case may
be) may be waived by the Holders of a majority in principal amount of the Debt
Securities then outstanding. If an Event of Default due to the bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary
occurs, the Indenture provides that the Default Amount of all Debt Securities
will become immediately due and payable.
The Holders of a majority in principal amount of the Debt Securities
of all series issued under such Indenture then outstanding will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture, subject to certain
limitations specified in the Indenture, provided that the Holders of Debt
Securities must have offered to the Trustee reasonable indemnity against
expenses and liabilities. Each Indenture requires the annual filing by the
Company with the Trustee of a written statement as to compliance with the
principal covenants contained in the Indentures.
MODIFICATION
Each of the Indentures contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Debt Securities at the time outstanding, to modify
such Indenture or any supplemental indenture or the rights of the Holders of
the series of Debt Securities issued under such Indenture, except that no such
modification may (i) extend the final maturity of any of the Debt Securities,
reduce the principal amount thereof, reduce any amount payable on redemption
or purchase thereof or impair the right of any Holder to institute suit for
the payment thereof or make any change in the covenants regarding a Change of
Control or an Asset Disposition or the related definitions without the consent
of the Holder of each of the series of Debt Securities so affected or (ii)
reduce the percentage of any series of Debt Securities, the consent of the
Holders of which is required for any such modification, without the consent of
the Holders of all series of Debt Securities issued under such Indenture then
outstanding.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
The Company may not consolidate with, merge with or into, or transfer
all or substantially all its Property (as an entirety or substantially an
entirety in one transaction or a series of related transactions), to any
Person unless: (i) the Company will be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the Property of the Company is transferred will
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and will expressly assume in
writing all the obligations of the Company, under the Indenture and the Debt
Securities, (ii) immediately after giving effect to such transaction, no Event
of Default and no event or condition that through the giving of notice or
lapse of time or both would become an Event of Default will have occurred and
be continuing, (iii) immediately after giving effect to such transaction on a
pro forma basis, the Company or the surviving entity would be able to Incur at
least $1 of Debt under the provision described in the first paragraph of
"Limitation on Debt" above and (iv) the Net Worth of the Company or the
surviving entity, as the case may be, on a pro forma basis after giving effect
to such transaction (without giving effect to the fees and expenses incurred
in respect of such transaction), is not less than the Net Worth of the Company
immediately prior to such transaction.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Ventures may merge with or into, or be consolidated with, an
Unrestricted Subsidiary of the Company, except to the extent that such
Unrestricted Subsidiary has been designated a Restricted Subsidiary as
provided in the Indenture in advance of or in connection with such merger.
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DEFEASANCE AND DISCHARGE
Legal Defeasance
Each of the Indentures provides that the Company will be deemed to
have paid and will be discharged from any and all obligations in respect of
the Debt Securities, on the 123rd day after the deposit referred to below has
been made (or immediately if an Opinion of Counsel is delivered to the effect
described in clause (B)(iii)(y) below), and the provisions of such Indenture
will cease to be applicable with respect to the Debt Securities (except for,
among other matters, certain obligations to register the transfer or exchange
of the Debt Securities of such series, to replace stolen, lost or mutilated
Debt Securities of such series, to maintain paying agencies and to hold monies
for payment in trust) if, among other things, (A) the Company has deposited
with the Trustee, in trust, money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the
principal of, premium, if any, and accrued interest on the applicable Debt
Securities, on the respective Stated Maturities of the Debt Securities or, if
the Company makes arrangements satisfactory to the Trustee for the redemption
of the Debt Securities prior to their Stated Maturity, on any earlier
redemption date in accordance with the terms of such Indenture and the
applicable Debt Securities, (B) the Company has delivered to the Trustee (i)
either (x) an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred and
the Company had paid or redeemed such Debt Securities on the applicable dates,
which Opinion of Counsel must be based upon a ruling of the Internal Revenue
Service to the same effect or a change in applicable federal income tax law or
related Treasury regulations after the date of the Indentures or (y) a ruling
directed to the Trustee or the Company received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel, (ii) an
Opinion of Counsel to the effect that the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (iii) an Opinion of
Counsel to the effect that either (x) after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547
or 548 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law or (y) based upon existing precedents, if the matter were
properly briefed, a court should hold that the deposit of moneys and/or U.S.
Government Obligations as provided in clause (A) would not constitute a
preference voidable under Section 547 or 548 of the U.S. Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, (C) immediately after
giving effect to such deposit on a pro forma basis, no Event of Default, or
event that after the giving of notice or lapse of time or both would become an
Event of Default, will have occurred and be continuing on the date of such
deposit or (unless an Opinion of Counsel is delivered to the effect described
in clause (B)(iii)(y) above) during the period ending on the 123rd day after
the date of such deposit and the deposit will not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound and (D) if at
such time the Debt Securities are listed on a national securities exchange,
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that the Debt Securities will not be delisted as a result of such deposit,
defeasance and discharge.
Covenant Defeasance
The Indentures further provide that the provisions of clause (iii)
under "Mergers, Consolidations and Sales of Assets" and all the covenants
described herein under "Certain Covenants," clause (iv) under "Events of
Default" with respect to such covenants and with respect to clause (iii) under
"Mergers, Consolidations and Sales of Assets," clauses (i) and (iii) with
respect to certain offers for any series of Debt Securities required by
certain covenants and clauses (v) and (vi) under "Events of Default" will
cease to be applicable to the Company, its Restricted Subsidiaries and its
Eligible Joint Ventures upon the satisfaction of the provisions described in
clauses (A), (B)(ii) and (iii), (C) and (D) of the preceding paragraph and the
delivery by the Company to the Trustee of an Opinion of Counsel to the effect
that, among other things, the Holders of such Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and the defeasance of certain covenants and Events of Default and
will be subject to federal income tax on the same amount and in
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the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and the Company had paid or redeemed
such Debt Securities on the applicable dates.
Defeasance and Certain Other Events of Default
If the Company exercises its option to omit compliance with certain
covenants and provisions of the Indentures with respect to the Debt Securities
as described in the immediately preceding paragraph and any series of Debt
Securities are declared due and payable because of the occurrence of an Event
of Default that remains applicable, the amount of money and/or U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity or scheduled
redemption, but may not be sufficient to pay amounts due on the Debt
Securities at the time of acceleration resulting from such Event of Default.
The Company will remain liable for such payments.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and
construed in accordance with, the law of the State of New York, including
Section 5-1401 of the New York General Obligations Law, but otherwise without
regard to conflict of laws rules.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of each of the Indentures. Reference is
made to the Indentures for the full definitions of all such terms as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" is defined to mean Debt Incurred by a Person prior to
the time (i) such Person becomes a Restricted Subsidiary of the Company or an
Eligible Joint Venture, (ii) such Person merges with or into a Restricted
Subsidiary of the Company or an Eligible Joint Venture, or (iii) a Restricted
Subsidiary of the Company or an Eligible Joint Venture merges with or into
such Person (in a transaction in which such Person becomes a Restricted
Subsidiary of the Company or an Eligible Joint Venture), provided that, after
giving effect to such transaction, any Non-Recourse Debt of such Person could
have been Incurred pursuant to clause (iii) of the provision described under
"Limitation on Subsidiary Debt", any Permitted Facilities Debt of such Person
could have been Incurred pursuant to clause (viii) of the provision described
under "Limitation on Subsidiary Debt" and would not otherwise violate any
other provision of the applicable Indenture, and all the other Debt of such
Person could have been Incurred by the Company at the time of such merger or
acquisition pursuant to the provision described in the first paragraph of
"Limitation on Debt" above, and provided further that such Debt was not
Incurred in connection with, or in contemplation of, such merger or such
Person becoming a Restricted Subsidiary of the Company or an Eligible Joint
Venture.
"Acquisition Debt" is defined to mean Debt of any Person existing at
the time such Person is merged into the Company or assumed in connection with
the acquisition of Property from any such Person (other than Property acquired
in the ordinary course of business), including Debt Incurred in connection
with, or in contemplation of, such Person being merged into the Company (but
excluding Debt of such Person that is extinguished, retired or repaid in
connection with such merger or acquisition).
"Adjusted Consolidated Net Income" is defined to mean for any period,
for any Person (the "Referenced Person") the aggregate Net Income (or loss) of
the Referenced Person and its consolidated Subsidiaries for such period
determined in conformity with GAAP, provided that the following items will be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the Net Income (or loss) of any other Person (other than a Subsidiary of
the Referenced Person) in which any third Person has an interest, except to
the extent of the amount of dividends or other distributions actually paid in
cash to the Referenced Person during such period, or after such period and on
or before the date of determination, by such Person in which the interest is
held, which dividends and distributions will be included in such computation,
(ii) solely for
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the purposes of calculating the amount of Restricted Payments that may be made
pursuant to the provision described in clause (c) of the first paragraph of
"Limitation on Restricted Payments" above (and in such case, except to the
extent includable pursuant to clause (i) above), the Net Income (if positive)
of any other Person accrued prior to the date it becomes a Subsidiary of the
Referenced Person or is merged into or consolidated with the Referenced Person
or any of its Subsidiaries or all or substantially all the Property of such
other Person are acquired by the Referenced Person or any of its Subsidiaries,
(iii) the Net Income (if positive) of any Subsidiary of the Referenced Person
to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary to such Person or to any other Subsidiary of
such Net Income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary, (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales (except, solely for
the purposes of calculating the amount of Restricted Payments that may be made
pursuant to the provision described in clause (c) of the first paragraph of
"Limitation on Restricted Payments" above, any gains or losses of the Company
and any of its Restricted Subsidiaries from Asset Sales of Capital Stock of
Unrestricted Subsidiaries), (v) the cumulative effect of a change in
accounting principles and (vi) any amounts paid or accrued as dividends on
Preferred Stock of any Subsidiary of the Referenced Person that is not held by
the Referenced Person or another Subsidiary thereof. When the "Referenced
Person" is the Company, the foregoing references to "Subsidiaries" will be
deemed to refer to "Restricted Subsidiaries."
"Affiliate" of any Person is defined to mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") when used with respect to any
Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. For the
purpose of the covenant described under "Limitation on Transactions with
Affiliates" above, the term "Affiliate" will be deemed to include only Kiewit,
any entity owning beneficially 10% or more of the Voting Stock of the Company
and their respective Affiliates other than the Restricted Subsidiaries and the
Eligible Joint Ventures and the other equity investors in the Restricted
Subsidiaries and the Eligible Joint Ventures (solely on account of their
investments in the Restricted Subsidiaries and the Eligible Joint Ventures),
and for such purpose such term also will be deemed to include the Unrestricted
Subsidiaries.
"Asset Acquisition" is defined to mean (i) an investment by the
Company, any of its Subsidiaries or any Joint Venture in any other Person
pursuant to which such Person will become a direct or indirect Subsidiary of
the Company or a Joint Venture or will be merged into or consolidated with the
Company, any of its Subsidiaries or any Joint Venture or (ii) an acquisition
by the Company, any of its Subsidiaries or any Joint Venture of the Property
of any Person other than the Company, any of its Subsidiaries or any Joint
Venture that constitutes substantially all of an operating unit or business of
such Person.
"Asset Disposition" is defined to mean any sale, transfer,
conveyance, lease or other disposition (including by way of merger,
consolidation or sale-leaseback) by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture to any Person (other than to the
Company, a Restricted Subsidiary of the Company or an Eligible Joint Venture
and other than in the ordinary course of business) of any Property of the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture
other than any shares of Capital Stock of the Unrestricted Subsidiaries.
Notwithstanding the foregoing to the contrary, the term "Asset Disposition"
will include the sale, transfer, conveyance or other disposition of any shares
of Capital Stock of any Unrestricted Subsidiary to the extent that the Company
or any of its Restricted Subsidiaries or Eligible Joint Ventures made an
Investment in such Unrestricted Subsidiary pursuant to clause (vii) of the
definition of "Permitted Payment," and the Company will, and will cause each
of its Restricted Subsidiaries and Eligible Joint Ventures to, apply pursuant
to the covenant described under "Limitation on Dispositions" that portion of
the Net Cash Proceeds from the sale, transfer, conveyance or other disposition
of such Unrestricted Subsidiary that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment." For purposes of this definition, any disposition in
connection with directors' qualifying shares or investments by foreign
nationals
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mandated by applicable law will not constitute an Asset Disposition. In
addition, the term "Asset Disposition" will not include (i) any sale,
transfer, conveyance, lease or other disposition of the Capital Stock or
Property of Restricted Subsidiaries or Eligible Joint Ventures pursuant to the
terms of any power sales agreements or steam sales agreements to which such
Restricted Subsidiaries or such Eligible Joint Ventures are parties on the
date of the original issuance of any series of the Debt Securities or pursuant
to the terms of any power sales agreements or steam sales agreements, or other
agreements or contracts that are related to the output or product of, or
services rendered by, a Permitted Facility as to which such Restricted
Subsidiary or such Eligible Joint Venture is the supplying party, to which
such Restricted Subsidiaries or such Eligible Joint Ventures become a party
after such date if the Chief Executive Officer or Chief Financial Officer of
the Company determines in good faith (evidenced by an Officers' Certificate)
that such provisions are customary (or, in the absence of any industry custom,
reasonably necessary) in order to effect such agreements and are reasonable in
light of comparable transactions in the applicable jurisdiction, (ii) any
sale, transfer, conveyance, lease or other disposition of Property governed by
the covenant described under "Mergers, Consolidations and Sales of Assets"
above, (iii) any sale, transfer, conveyance, lease or other disposition of any
Cash Equivalents, (iv) any transaction or series of related transactions
consisting of the sale, transfer, conveyance, lease or other disposition of
Capital Stock or Property with a fair market value aggregating less than $5
million and (v) any Permitted Payment or any Restricted Payment that is
permitted to be made pursuant to the covenant described under "Limitation on
Restricted Payments" above. The term "Asset Disposition" also will not include
(i) the grant of or realization upon a Lien permitted under the covenant
described under "Limitation on Liens" above or the exercise of remedies
thereunder, (ii) a sale-leaseback transaction involving substantially all the
Property constituting a Permitted Facility pursuant to which a Restricted
Subsidiary of the Company or an Eligible Joint Venture sells the Permitted
Facility to a Person in exchange for the assumption by that Person of the Debt
financing the Permitted Facility and the Restricted Subsidiary or the Eligible
Joint Venture leases the Permitted Facility from such Person, (iii)
dispositions of Capital Stock, contract rights, development rights and
resource data made in connection with the initial development of Permitted
Facilities, or the formation or capitalization of Restricted Subsidiaries or
Eligible Joint Ventures in respect of the initial development of Permitted
Facilities, in respect of which only an insubstantial portion of the
prospective Construction Financing that would be required to commence
commercial operation has been funded or (iv) transactions determined in good
faith by the Chief Financial Officer, as evidenced by an Officers'
Certificate, made in order to enhance the repatriation of Net Cash Proceeds
for a Foreign Asset Disposition or in order to increase the after-tax proceeds
thereof available for immediate distribution to the Company. Any Asset
Disposition that results from the bona fide exercise by any governmental
authority of its claimed or actual power of eminent domain need not comply
with the provisions of clauses (i) and (ii) of the covenant described under
"Limitation on Dispositions" above. Any Asset Disposition that results from a
casualty loss need not comply with the provisions of clause (i) of the
covenant described under "Limitation on Dispositions" above.
"Asset Sale" is defined to mean the sale or other disposition by the
Company, any of its Subsidiaries or any Joint Venture (other than to the
Company, another Subsidiary of the Company or another Joint Venture) of (i)
all or substantially all of the Capital Stock of any Subsidiary of the Company
or any Joint Venture or (ii) all or substantially all of the Property that
constitutes an operating unit or business of the Company, any of its
Subsidiaries or any Joint Venture.
"Attributable Value" means, as to a Capitalized Lease Obligation
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the capitalized amount thereof that would
appear on the face of a balance sheet of such Person in accordance with GAAP.
"Average Life" is defined to mean, at any date of determination with
respect to any Debt security or Preferred Stock, the quotient obtained by
dividing (i) the sum of the product of (A) the number of years from such date
of determination to the dates of each successive scheduled principal or
involuntary liquidation value payment of such Debt security or Preferred
Stock, respectively, multiplied by (B) the amount of such principal or
involuntary liquidation value payment by (ii) the sum of all such principal or
involuntary liquidation value payments.
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"Board of Directors" is defined to mean either the Board of Directors
of the Company or any duly authorized committee of such Board.
"Business Day" is defined to mean a day that, in the city (or in any
of the cities, if more than one) where amounts are payable in respect of the
Debt Securities, is neither a legal holiday nor a day on which banking
institutions are authorized or required by law, regulation or executive order
to close.
"Capital Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) in, or interests (however
designated) in, the equity of such Person that is outstanding or issued on or
after the date of Indenture, including, without limitation, all Common Stock
and Preferred Stock and partnership and joint venture interests in such
Person.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any Property of which the discounted present value of the rental
obligations of such Person as lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of such Person, and "Capitalized Lease
Obligation" means the rental obligations, as aforesaid, under such lease.
"Cash Equivalent" is defined to mean any of the following: (i)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), (ii) time deposits and certificates of deposit of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws of any other
country having total assets in excess of $500,000,000 with a maturity date not
more than two years from the date of acquisition, (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clauses (i) or (v) that was entered into with any bank meeting
the qualifications set forth in clause (ii) or another financial institution
of national reputation, (iv) direct obligations issued by any state or other
jurisdiction of the United States of America or any other country or any
political subdivision or public instrumentality thereof maturing, or subject
to tender at the option of the holder thereof, within 90 days after the date
of acquisition thereof and, at the time of acquisition, having a rating of A
from Standard & Poor's Corporation ("S&P") or A-2 from Moody's Investors
Service, Inc. ("Moody's") (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee), (v) commercial paper issued by (a) the
parent corporation of any commercial bank organized in the United States
having capital and surplus in excess of $500,000,000 or any commercial bank
organized under the laws of any other country having total assets in excess of
$500,000,000, and (b) others having one of the two highest ratings obtainable
from either S&P or Moody's (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee) and in each case maturing within one year
after the date of acquisition, (vi) overnight bank deposits and bankers'
acceptances at any commercial bank organized in the United States having
capital and surplus in excess of $500,000,000 or any commercial bank organized
under the laws of any other country having total assets in excess of
$500,000,000, (vii) deposits available for withdrawal on demand with any
commercial bank organized in the United States having capital and surplus in
excess of $500,000,000 or any commercial bank organized under the laws of any
other country having total assets in excess of $500,000,000, (viii)
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (vi) and (ix), and
(ix) auction rate securities or money market preferred stock having one of the
two highest ratings obtainable from either S&P or Moody's (or, if at any time
neither S&P nor Moody's may be rating such obligations, then from another
nationally recognized rating service acceptable to the Trustee).
"Change of Control" is defined to mean the occurrence of one or more
of the following events:
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than Kiewit, is or becomes the
beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company (for the purposes of this clause (ii), any
person will be deemed to beneficially own any Voting Stock of any
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corporation (the "specified corporation") held by any other
corporation (the "parent corporation"), if such person "beneficially
owns" (as so defined), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such parent corporation) and
Kiewit "beneficially owns" (as so defined), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the
Voting Stock of the Company and does not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company;
(ii) during any one-year period, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors elected by such Board of
Directors or nominated for election by the shareholders of the
Company by a vote of at least a majority of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office, unless a majority
of such new directors were elected or appointed by Kiewit; or
(iii) the Company or its Restricted Subsidiaries sell,
convey, assign, transfer, lease or otherwise dispose of all or
substantially all the Property of the Company and the Restricted
Subsidiaries taken as a whole;
provided that with respect to the foregoing subparagraphs (ii), (iii) and
(iv), a Change of Control will not be deemed to have occurred unless and until
a Rating Decline has occurred as well.
"Common Stock" is defined to mean with respect to any Person, Capital
Stock of such Person that does not rank prior, as to the payment of dividends
or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Company Refinancing Debt" is defined to mean Debt issued in exchange
for, or the proceeds of which are used to refinance (including to purchase),
outstanding Debt Securities or other Debt of the Company Incurred pursuant to
clauses (i), (iv), and (vii) of "Limitation on Debt" and Debt Incurred
pursuant to the first paragraph under "Limitation on Debt" in an amount (or,
if such new Debt provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or refinanced
(plus accrued interest and all fees, premiums (in excess of the accreted
value) and expenses related to such exchange or refinancing), for which
purpose the amount so exchanged or refinanced will be deemed to equal the
lesser of (x) the principal amount of the Debt so exchanged or refinanced and
(y) if the Debt being exchanged or refinanced was issued with an original
issue discount, the accreted value thereof (as determined in accordance with
GAAP) at the time of such exchange or refinancing, provided that (A) such Debt
will be subordinated in right of payment to the Senior Debt Securities in the
case of the Senior Debt Indenture and the Subordinated Debt Securities in the
case of the Subordinated Debt Indenture at least to the same extent, if any,
as the Debt so exchanged or refinanced is subordinated to the Senior Debt
Securities in the case of the Senior Debt Indenture and the Subordinated Debt
Securities in the case of the Subordinated Debt Indenture, (B) such Debt win
be Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse, (C)
the Average Life of the new Debt will be equal to or greater than the Average
Life of the Debt to be exchanged or refinanced and (D) the final Stated
Maturity of the new Debt will not be sooner than the earlier of the final
Stated Maturity of the Debt to be exchanged or refinanced or six months after
the final Stated Maturity of the Debt Securities, provided that if such new
Debt refinances any series of the Debt Securities in part only, the final
Stated Maturity of such new Debt must be at least six months after the final
Stated Maturity of such series of Debt Securities.
"Consolidated EBITDA" of any Person for any period is defined to mean
the Adjusted Consolidated Net Income of such Person, plus, only to the extent
deducted in computing Adjusted Consolidated Net Income and without
duplication, (i) income taxes, excluding income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
Asset Sales, all determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, (ii) Consolidated Fixed
Charges, (iii)
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depreciation and amortization expense, all determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP and
(iv) all other non-cash items reducing Adjusted Consolidated Net Income for
such period, all determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, and less all non-cash items
increasing Adjusted Consolidated Net Income during such period, provided that
depreciation and amortization expense of any Subsidiary of such Person and any
other non-cash item of any Subsidiary of such Person that reduces Adjusted
Consolidated Net Income will be excluded (without duplication) in computing
Consolidated EBITDA, except to the extent that the positive cash flow
associated with such depreciation and amortization expense and other non-cash
items is actually distributed in cash to such Person during such period,
provided further that as applied to the Company, cash in respect of
depreciation and amortization and other non-cash items of Restricted
Subsidiaries and Eligible Joint Ventures may be deemed to have been
distributed or paid to the Company to the extent that such cash (I) is or was
under the exclusive dominion and control of such Restricted Subsidiary or such
Eligible Joint Venture and is or was free and clear of the Lien of any other
Person, (II) is or was immediately available for distribution and (III) could
be or could have been repatriated to the United States by means that are both
lawful and commercially reasonable, provided that the amount of the cash
deemed by this sentence to have been distributed or paid will be reduced by
the amount of tax that would have been payable with respect to the
repatriation thereof, provided further that any cash that enables the
recognition of depreciation and amortization and other non-cash items pursuant
to this sentence may not be used to enable the recognition of depreciation and
amortization and other non-cash items with respect to any prior or subsequent
period, regardless of whether such cash is distributed to the Company, and
provided further that the recognition of any depreciation and amortization and
other non-cash items as a result of this sentence will be determined in good
faith by the Chief Financial Officer, as evidenced by an Officers' Certificate
that will set forth in reasonable detail the relevant facts and assumptions
supporting such recognition. When the "Person" referred to above is the
Company, the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
"Consolidated Fixed Charges" of any Person is defined to mean, for
any period, the aggregate of (i) Consolidated Interest Expense, (ii) the
interest component of Capitalized Leases, determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP,
excluding any interest component of Capitalized Leases in respect of that
portion of a Capitalized Lease Obligation of a Subsidiary that is Non-Recourse
to such Person, and (iii) cash and non-cash dividends due (whether or not
declared) on the Preferred Stock of any Subsidiary of such Person held by any
Person other than such Person and any Redeemable Stock of such Person or any
Subsidiary of such Person. When the "Person" referred to above is the Company,
the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
"Consolidated Interest Expense" of any Person is defined to mean, for
any period, the aggregate interest expense in respect of Debt (including
amortization of original issue discount and non-cash interest payments or
accruals) of such Person and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, including all commissions,
discounts, other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs associated with Interest Rate
Protection Agreements and Currency Protection Agreements and any amounts paid
during such period in respect of such interest expense, commissions,
discounts, other fees and charges that have been capitalized, provided that
Consolidated Interest Expense of the Company will not include any interest
expense (including all commissions, discounts, other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs associated with Interest Rate Protection Agreements or Currency
Protection Agreements) in respect of that portion of any Debt that is
Non-Recourse, and provided further that Consolidated Interest Expense of the
Company in respect of a Guarantee by the Company of Debt of another Person
will be equal to the commissions, discounts, other fees and charges that would
be due with respect to a hypothetical letter of credit issued under a bank
credit agreement that can be drawn by the beneficiary thereof in the amount of
the Debt so guaranteed if (i) the Company is not actually making directly or
indirectly interest payments on such Debt and (ii) GAAP does not require the
Company on an unconsolidated basis to record such Debt as a liability of the
Company. When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
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"Construction Financing" is defined to mean the debt and/or equity
financing provided (over and above the owners' equity investment) to permit
the acquisition, development, design, engineering, procurement, construction
and equipping of a Permitted Facility and to enable it to commence commercial
operations, provided that Construction Financing may remain outstanding after
the commencement of commercial operations of a Permitted Facility, without any
increase in the amount of such financing, and such Construction Financing will
not cease to be Construction Financing.
"Currency Protection Agreement" is defined to mean, with respect to
any Person, any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement intended to protect such Person against
fluctuations in currency values to or under which such Person is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Debt" is defined to mean, with respect to any Person, at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bankers' acceptances, surety, bid,
operating and performance bonds, performance guarantees or other similar
instruments or obligations (or reimbursement obligations with respect thereto)
(except, in each case, to the extent incurred in the ordinary course of
business), (iv) all obligations of such Person to pay the deferred purchase
price of property or services, except Trade Payables, (v) the Attributable
Value of all obligations of such Person as lessee under Capitalized Leases,
(vi) all Debt of others secured by a Lien on any Property of such Person,
whether or not such Debt is assumed by such Person, provided that, for
purposes of determining the amount of any Debt of the type described in this
clause, if recourse with respect to such Debt is limited to such Property, the
amount of such Debt will be limited to the lesser of the fair market value of
such Property or the amount of such Debt, (vii) all Debt of others Guaranteed
by such Person to the extent such Debt is Guaranteed by such Person, (viii)
all Redeemable Stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends and (ix) to the
extent not otherwise included in this definition, all net obligations of such
Person under Currency Protection Agreements and Interest Rate Protection
Agreements.
For purposes of determining any particular amount of Debt that is or
would be outstanding, Guarantees of, or obligations with respect to letters of
credit or similar instruments supporting (to the extent the foregoing
constitutes Debt), Debt otherwise included in the determination of such
particular amount will not be included. For purposes of determining compliance
with the Indenture, in the event that an item of Debt meets the criteria of
more than one of the types of Debt described in the above clauses, the
Company, in its sole discretion, will classify such item of Debt and only be
required to include the amount and type of such Debt in one of such clauses.
"Default Amount" is defined to mean the principal amount plus accrued
interest.
"Eligible Joint Venture" is defined to mean a Joint Venture (other
than a Subsidiary) (i) that is or will be formed with respect to the
construction, development, acquisition, servicing, ownership, operation or
management of one or more Permitted Facilities and (ii) in which the Company
and Kiewit together, directly or indirectly, own at least 50% of the Capital
Stock therein (of which the Company must own at least half (in any event not
less than 25% of the total outstanding Capital Stock)) and (iii) in respect of
which the Company alone or in combination with Kiewit, directly or indirectly,
(a) controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitation, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is an Eligible Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be
an Eligible Joint Venture if (x) Kiewit disposes of any securities issued by
the Company and, as a result of such disposition, Kiewit becomes the
beneficial owner (as such term is defined under Rule 13d-3 or
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any successor rule or regulation promulgated under the Exchange Act) of less
than 25% of the outstanding shares of Voting Stock of the Company or (y) (I)
as a result of any action other than a disposition of securities by Kiewit,
Kiewit becomes the beneficial owner of less than 25% of the outstanding shares
of Voting Stock of the Company and (II) thereafter Kiewit disposes of any
securities issued by the Company as a result of which the beneficial ownership
by Kiewit of the outstanding Voting Stock of the Company is further reduced,
provided that thereafter such Joint Venture may become an Eligible Joint
Venture if Kiewit becomes the beneficial owner of at least 25% of the
outstanding shares of Voting Stock of the Company and the other conditions set
forth in this definition are fulfilled.
"Fixed Charge Ratio" is defined to mean the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of any Person for
the Reference Period immediately prior to the date of the transaction giving
rise to the need to calculate the Fixed Charge Ratio (the "Transaction Date")
to (ii) the aggregate Consolidated Fixed Charges of such Person during such
Reference Period, provided that for purposes of such computation, in
calculating Consolidated EBITDA and Consolidated Fixed Charges, (1) the
Incurrence of the Debt giving rise to the need to calculate the Fixed Charge
Ratio and the application of the proceeds therefrom (including the retirement
or defeasance of Debt) will be assumed to have occurred on the first day of
the Reference Period, (2) Asset Sales and Asset Acquisitions that occur during
the Reference Period or subsequent to the Reference Period and prior to the
Transaction Date (but including any Asset Acquisition to be made with the Debt
Incurred pursuant to (1) above) and related retirement of Debt pursuant to an
Offer (in the amount of the Excess Proceeds with respect to which such Offer
has been made or would be made on the Transaction Date if the purchase of Debt
Securities pursuant to such Offer has not occurred on or before the
Transaction Date) will be assumed to have occurred on the first day of the
Reference Period, (3) the Incurrence of any Debt during the Reference Period
or subsequent to the Reference Period and prior to the Transaction Date and
the application of the proceeds therefrom (including the retirement or
defeasance of other Debt) will be assumed to have occurred on the first day of
such Reference Period, (4) Consolidated Interest Expense attributable to any
Debt (whether existing or being Incurred) computed on a pro forma basis and
bearing a floating interest rate will be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period
unless the obligor on such Debt is a party to an Interest Rate Protection
Agreement (that will remain in effect for the twelve month period after the
Transaction Date) that has the effect of fixing the interest rate on the date
of computation, in which case such rate (whether higher or lower) will be used
and (5) there will be excluded from Consolidated Fixed Charges any
Consolidated Fixed Charges related to any amount of Debt that was outstanding
during or subsequent to the Reference Period but is not outstanding on the
Transaction Date, except for Consolidated Fixed Charges actually incurred with
respect to Debt borrowed (as adjusted pursuant to clause (4)) (x) under a
revolving credit or similar arrangement to the extent the commitment
thereunder remains in effect on the Transaction Date or (y) pursuant to the
provision described in clause (iii) in the second paragraph of "Limitation on
Debt" above. For the purpose of making this computation, Asset Sales and Asset
Acquisitions that have been made by any Person that has become a Restricted
Subsidiary of the Company or an Eligible Joint Venture or been merged with or
into the Company or any Restricted Subsidiary of the Company or an Eligible
Joint Venture during the Reference Period, or subsequent to the Reference
Period and prior to the Transaction Date, will be calculated on a pro forma
basis, as will be all the transactions contemplated by the calculations
referred to in clauses (1) through (5) above with respect to the Persons or
businesses that were the subject of such Asset Sales and Asset Dispositions,
assuming such Asset Sales or Asset Acquisitions occurred on the first day of
the Reference Period.
"Foreign Asset Disposition" means an Asset Disposition in respect of
the Capital Stock or Property of a Restricted Subsidiary of the Company or an
Eligible Joint Venture to the extent that the proceeds of such Asset
Disposition are received by a Person subject in respect of such proceeds to
the tax laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" is defined to mean generally accepted accounting principles in
the U.S. as in effect as of the date of the Indenture, applied on a basis
consistent with the principles, methods, procedures and practices employed in
the preparation of the Company's audited financial statements, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board
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or in such other statements by such other entity as approved by a significant
segment of the accounting profession.
"Guarantee" is defined to mean any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any Debt
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt of such other Person (whether arising by virtue of partnership
arrangements (other than solely by reason of being a general partner of a
partnership), or by agreement to keep-well, to purchase assets, goods,
securities or services or to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Debt of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part), provided
that the term "Guarantee" will not include endorsements for collection or
deposit in the ordinary course of business or the grant of a Lien in
connection with any Non-Recourse Debt. The term "Guarantee" used as a verb has
a corresponding meaning.
"Holder", "holder of Debt Securities" and other similar terms are
defined to mean the registered holder of any Debt Security.
"Incur" is defined to mean with respect to any Debt, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Debt, provided that neither the accrual of interest (whether
such interest is payable in cash or kind) nor the accretion of original issue
discount will be considered an Incurrence of Debt. The term "Incurrence" has a
corresponding meaning.
"Interest Rate Protection Agreement" is defined to mean, with respect
to any Person, any interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
hedge agreement or other similar agreement or arrangement intended to protect
such Person against fluctuations in interest rates to or under which such
Person or any of its Subsidiaries is a party or a beneficiary on the date of
the Indenture or becomes a party or a beneficiary thereafter.
"Investment" in a Person is defined to mean any investment in, loan
or advance to, Guarantee on behalf of, directly or indirectly, or other
transfer of assets to such Person (other than sales of products and services
in the ordinary course of business).
"Investment Grade" is defined to mean with respect to the Debt
Securities, (i) in the case of S&P, a rating of at least BBB-, (ii) in the
case of Moody's, a rating of at least Baa3, and (iii) in the case of a Rating
Agency other than S&P or Moody's, the equivalent rating, or in each case, any
successor, replacement or equivalent definition as promulgated by S&P, Moody's
or other Rating Agency as the case may be.
"Joint Venture" is defined to mean a joint venture, partnership or
other similar arrangement, whether in corporate, partnership or other legal
form.
"Kiewit" is defined to mean and include Kiewit Energy Company and any
other Subsidiary of Peter Kiewit Sons', Inc., Kiewit Construction Group Inc.
or Kiewit Diversified Group, Inc.
"Lien" is defined to mean, with respect to any Property, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such Property, but will not include any partnership, joint
venture, shareholder, voting trust or other similar governance agreement with
respect to Capital Stock in a Subsidiary or Joint Venture. For purposes of the
Indentures, the Company will be deemed to own subject to a Lien any Property
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such Property.
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"Net Cash Proceeds" from an Asset Disposition is defined to mean cash
payments received (including any cash payments received by way of a payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received (including any cash received upon sale or disposition of
any such note or receivable), excluding any other consideration received in
the form of assumption by the acquiring Person of Debt or other obligations
relating to the Property disposed of in such Asset Disposition or received in
any form other than cash) therefrom, in each case, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses of any
kind (including consent and waiver fees and any applicable premiums, earn-out
or working interest payments or payments in lieu or in termination thereof)
incurred, (ii) all federal, state, provincial, foreign and local taxes and
other governmental charges required to be accrued as a liability under GAAP
(a) as a consequence of such Asset Disposition, (b) as a result of the
repayment of any Debt in any jurisdiction other than the jurisdiction where
the Property disposed of was located or (c) as a result of any repatriation of
any proceeds of such Asset Disposition, (iii) a reasonable reserve for the
after-tax cost of any indemnification payments (fixed and contingent)
attributable to seller's indemnities to the purchaser undertaken by the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture in
connection with such Asset Disposition (but excluding any payments that by the
terms of the indemnities will not, under any circumstances, be made during the
term of the Debt Securities), (iv) all payments made on any Debt that is
secured by such Property, in accordance with the terms of any Lien upon or
with respect to such Property, or that must by its terms or by applicable law
or in order to obtain a required consent or waiver be repaid out of the
proceeds from or in connection with such Asset Disposition, and (v) all
distributions and other payments made to holders of Capital Stock of
Restricted Subsidiaries or Eligible Joint Ventures (other than the Company or
its Restricted Subsidiaries) as a result of such Asset Disposition.
"Net Income" of any Person for any period is defined to mean the net
income (loss) of such Person for such period, determined in accordance with
GAAP, except that extraordinary and non-recurring gains and losses as
determined in accordance with GAAP will be excluded.
"Net Worth" of any Person is defined to mean, as of any date, the
aggregate of capital, surplus and retained earnings (including any cumulative
currency translation adjustment) of such Person and its consolidated
Subsidiaries as would be shown on a consolidated balance sheet of such Person
and its consolidated Subsidiaries prepared as of such date in accordance with
GAAP When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
"Non-Recourse", as applied to any Debt or any sale-leaseback, is
defined to mean any project financing that is or was Incurred with respect to
the development, acquisition, design, engineering, procurement, construction,
operation, ownership, servicing or management of one or more Permitted
Facilities in respect of which the Company or one or more Restricted
Subsidiaries or Eligible Joint Ventures has a direct or indirect interest,
provided that such financing is without recourse to the Company, any
Restricted Subsidiary or any Eligible Joint Venture other than any Restricted
Subsidiary or any Eligible Joint Venture that does not own any Property other
than one or more of such Permitted Facilities or a direct or indirect interest
therein, provided further that such financing may be secured by a Lien on only
(i) the Property that constitutes such Permitted Facilities, (ii) the income
from and proceeds of such Permitted Facilities, (iii) the Capital Stock of,
and other Investments in, any Restricted Subsidiary or Eligible Joint Venture
that owns the Property that constitutes any such Permitted Facility, and (iv)
the Capital Stock of, and other Investments in, any Restricted Subsidiary or
Eligible Joint Venture obligated with respect to such financing and of any
Subsidiary or Joint Venture (that is a Restricted Subsidiary or an Eligible
Joint Venture) of such Person that owns a direct or indirect interest in any
such Permitted Facility, and provided further that an increase in the amount
of Debt with respect to one or more Permitted Facilities pursuant to the
financing provided pursuant to the terms of this definition (except for the
first refinancing of Construction Financing) may not be Incurred to fund or
enable the funding of any dividend or other distribution in respect of Capital
Stock. The fact that a portion of financing with respect to a Permitted
Facility is not Non-Recourse will not prevent other portions of the financing
with respect to such Permitted Facility from constituting Non-Recourse Debt if
the foregoing requirements of this definition are fulfilled with respect to
such other portions.
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"Officers' Certificate" is defined to mean a certificate signed by
the Chairman of the Board of Directors, the Chief Executive Officer or any
Vice President and by the Chief Financial Officer, the Treasurer, an Assistant
Treasurer, the Controller, the Assistant Controller, the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee. Each such
certificate will comply with Section 314 of the Trust Indenture Act and
include the statements provided for in the Indenture if and to the extent
required thereby.
"Opinion of Counsel" is defined to mean an opinion in writing signed
by legal counsel who may be an employee of or counsel to the Company or who
may be other counsel satisfactory to the Trustee. Each such opinion will
comply with Section 314 of the Trust Indenture Act and include the statements
provided for in the Indenture, if and to the extent required thereby.
"Permitted Facility" is defined to mean (i) an electric power or
thermal energy generation or cogeneration facility or related facilities
(including residual waste management and facilities that use thermal energy
from a cogeneration facility), and its or their related electric power
transmission, fuel supply and fuel transportation facilities, together with
its or their related power supply, thermal energy and fuel contracts and other
facilities, services or goods that are ancillary, incidental, necessary or
reasonably related to the marketing, development, construction, management,
servicing, ownership or operation of the foregoing, owned by a utility or
otherwise, as well as other contractual arrangements with customers, suppliers
and contractors or (ii) any infrastructure facilities related to (A) the
treatment of water for municipal and other uses, (B) the treatment and/or
management of waste water, (C) the treatment, management and/or remediation of
waste, pollution and/or potential pollutants and (D) any other process or
environmental purpose.
"Permitted Facilities Debt" is defined to mean any Debt that is or
was Incurred with respect to the direct or indirect development, acquisition,
design, engineering, procurement, construction, operation, ownership,
servicing or management of one or more Permitted Facilities (x) currently in
development by the Company (directly or indirectly) or which are hereafter
acquired or developed by the Company (directly or indirectly) and (y) in which
the Company or one or more Restricted Subsidiaries or Eligible Joint Ventures
has a direct or indirect interest.
"Permitted Funding Company Loans" is defined to mean (a) Debt of a
Restricted Subsidiary, all the Capital Stock of which is owned, directly or
indirectly, by the Company and that (x) does not own any direct or indirect
interest in a Permitted Facility and (y) is not directly or indirectly
obligated on any Debt owed to any Person other than the Company, a Restricted
Subsidiary or an Eligible Joint Venture (a "Funding Company"), owed to a
Restricted Subsidiary or an Eligible Joint Venture that is not directly or
indirectly obligated on any Debt owed to any Person other than the Company, a
Restricted Subsidiary or an Eligible Joint Venture (except to the extent that
it has pledged the Capital Stock of its Subsidiaries and Joint Ventures to
secure Non-Recourse Debt) (a "Holding Company"), provided that such Debt (i)
does not require that interest be paid in cash at any time sooner than six
months after the final Stated Maturity of any series of Debt Securities, (ii)
does not require any payment of principal at any time sooner than six months
after the final Stated Maturity of any series of Debt Securities, (iii) is
subordinated in right of payment to all other Debt of such Restricted
Subsidiary other than Debt Incurred pursuant to clause (vii) of the covenant
described under "Limitation on Subsidiary Debt," all of which will be pari
passu and (iv) is evidenced by a subordinated note in the form attached to the
Indenture, and (b) Debt of a Holding Company to a Funding Company.
"Permitted Investment" is defined to mean any Investment that is made
directly or indirectly by the Company and its Restricted Subsidiaries in (i) a
Restricted Subsidiary or Eligible Joint Venture (excluding for the purpose of
this clause (i) any Construction Financing) that, directly or indirectly, is
or will be engaged in the construction, development, acquisition, operation,
servicing, ownership or management of a Permitted Facility or in any other
Person as a result of which such other Person becomes such a Restricted
Subsidiary or an Eligible Joint Venture, provided that at the time that any of
the foregoing Investments is proposed to be made, no Event of Default or event
that, after giving notice or lapse of time or both, would become an Event of
Default, will have occurred and be continuing, (ii) Construction Financing
provided by the Company (A) to any of its Restricted Subsidiaries (other than
an Eligible Joint Venture) up to 100% of the Construction Financing required
by such Restricted Subsidiary and (B) to any Eligible Joint Venture a portion
of the Construction
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Financing required by such Eligible Joint Venture that does not exceed the
ratio of the Capital Stock in such Eligible Joint Venture that is owned
directly or indirectly by the Company to the total amount of the Capital Stock
in such Eligible Joint Venture that is owned directly and indirectly by the
Company and Kiewit together (provided that the Company may provide such
Construction Financing to such Eligible Joint Venture only if Kiewit provides
the balance of such Construction Financing or otherwise causes it to be
provided), if, in either case, (x) the aggregate proceeds of all the
Construction Financing provided is not more than 85% of the sum of the
aggregate proceeds of all the Construction Financing and the aggregate owners'
equity investment in such Restricted Subsidiary or such Eligible Joint
Venture, as the case may be, (y) the Company receives a pledge or assignment
of all the Capital Stock of such Restricted Subsidiary or such Eligible Joint
Venture, as the case may be, that is owned by a non-governmental Person (other
than the Company, its Subsidiaries or the Eligible Joint Ventures) that is
permitted to be pledged for such purpose under applicable law and (z) neither
the Company nor Kiewit reduces its beneficial ownership in such Restricted
Subsidiary or such Eligible Joint Venture, as the case may be, prior to the
repayment in full of the Company's portion of the Construction Financing,
(iii) any Cash Equivalents, (iv) prepaid expenses, negotiable instruments held
for collection and lease, utility and workers' compensation, performance and
other similar deposits in the ordinary course of business consistent with past
practice, (v) loans and advances to employees made in the ordinary course of
business and consistent with past practice, (vi) Debt incurred pursuant to
Currency Protection Agreements and Interest Rate Protection Agreements as
otherwise permitted by the Indenture, (vii) bonds, notes, debentures or other
debt securities and instruments received as a result of Asset Dispositions to
the extent permitted by the covenants described under "Limitation on
Dispositions" above and "Limitation on Business" above, (viii) any Lien
permitted under the provisions described under "Limitation on Liens" above,
(ix) bank deposits and other Investments (to the extent they do not constitute
Cash Equivalents) required by lenders in connection with any Non-Recourse
Debt, provided that the Chief Executive Officer or the Chief Financial Officer
of the Company determines in good faith, as evidenced by an Officers'
Certificate, that such bank deposits or Investments are required to effect
such financings and are not materially more restrictive, taken as a whole,
than comparable requirements, if any, in comparable financings in the
applicable jurisdiction or (x) any Person to the extent made with Capital
Stock (other than Redeemable Stock) of the Company (whether by way of
purchase, merger, consolidation or otherwise) to the extent permitted by the
covenants described under "Limitation on Business" above.
"Permitted Joint Venture" is defined to mean a Joint Venture (i) that
is or will be formed with respect to the construction, development,
acquisition, servicing, ownership, operation or management of one or more
Permitted Facilities and (ii) in which (A) the Company or (B) the Company and
Kiewit together, directly or indirectly, own at least 70% of the Capital Stock
therein (of which the Company must own at least half (in any event not less
than 35% of the total outstanding Capital Stock)), provided that if applicable
non-U.S. law restricts the amount of Capital Stock that the Company may own,
the Company must own at least 70% of the amount of Capital Stock that it may
own pursuant to such law, which in any event must be not less than 35% of the
total outstanding Capital Stock therein and (iii) in respect of which the
Company alone or in combination with Kiewit, directly or indirectly, (a)
controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitations, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is a Permitted Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be a
Permitted Joint Venture if (x) Kiewit disposes of any securities issued by the
Company and, as a result of such disposition, Kiewit becomes the beneficial
owner (as such term is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of less than 25% of the
outstanding shares of Voting Stock of the Company or (y) (I) as a result of
any action other than a disposition of securities by Kiewit, Kiewit becomes
the beneficial owner of less than 25% of the outstanding shares of Voting
Stock of the Company and (II) thereafter Kiewit disposes of any securities
issued by the Company as a result of which the beneficial ownership by Kiewit
of the outstanding Voting Stock of the Company is further reduced, provided
that thereafter such Joint Venture may become a Permitted Joint Venture if
Kiewit becomes the beneficial owner of
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at least 25% of the outstanding shares of Voting Stock of the Company and the
other conditions set forth in this definition are fulfilled.
"Permitted Payments" is defined to mean, with respect to the Company,
any of its Restricted Subsidiaries or any Eligible Joint Venture, (i) any
dividend on shares of Capital Stock of the Company payable (or to the extent
paid) solely in Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Redeemable
Stock) of the Company and any distribution of Capital Stock (other than
Redeemable Capital Stock) of the Company in respect of the exercise of any
right to convert or exchange any instrument (whether Debt or equity and
including Redeemable Capital Stock) into Capital Stock (other than Redeemable
Capital Stock) of the Company, (ii) the purchase or other acquisition or
retirement for value of any shares of the Company's Capital Stock, or any
option, warrant or other right to purchase shares of the Company's Capital
Stock with additional shares of, or out of the proceeds of a substantially
contemporaneous issuance of, Capital Stock other than Redeemable Stock, (iii)
any defeasance, redemption, purchase or other acquisition for value of any
Debt that by its terms ranks subordinate in right of payment to the Debt
Securities with the proceeds from the issuance of (x) Debt that is subordinate
to the Debt Securities at least to the extent and in the manner as the Debt to
be defeased, redeemed, purchased or otherwise acquired is subordinate in right
of payment to the Debt Securities, provided that such subordinated Debt
provides for no mandatory payments of principal by way of sinking fund,
mandatory redemption or otherwise (including defeasance) by the Company
(including, without limitation at the option of the holder thereof other than
an option given to a holder pursuant to a "change of control" or an "asset
disposition" covenant that is no more favorable to the holders of such Debt
than comparable covenants for the Debt being defeased, redeemed, purchased or
acquired or, if none, the covenants described under "Limitation on
Dispositions" and "Purchase of Debt Securities Upon a Change of Control" above
and such Debt is not in an amount (net of any original issue discount) greater
than, any Stated Maturity of the Debt being replaced and the proceeds of such
subordinated Debt are utilized for such purpose within 45 days of issuance or
(y) Capital Stock (other than Redeemable Stock), (iv) Restricted Payments in
an amount not to exceed $75 million in the aggregate provided that no payment
may be made pursuant to this clause (iv) if an Event of Default, or an event
that, after giving notice or lapse of time or both, would become an Event of
Default, has occurred and is continuing, (v) any payment or Investment
required by applicable law in order to conduct business operations in the
ordinary course, (vi) a Permitted Investment and (vii) Investments in
Unrestricted Subsidiaries and other Persons that are not Restricted
Subsidiaries or Eligible Joint Ventures in an amount not to exceed $100
million in the aggregate, provided that no payment or Investment may be made
pursuant to this clause (vii) if an Event of Default, or an event that, after
giving notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing. Notwithstanding the foregoing, the amount of
Investments that may be made pursuant to clauses (iv) or (vii), as the case
may be, may be increased by the net reduction in Investments of the type made
previously pursuant to clauses (iv) or (vii), as the case may be, that result
from payments of interest on Debt, dividends, or repayment of loans or
advances, the proceeds of the sale or disposition of the Investment or other
return of the amount of the original Investment to the Company, the Restricted
Subsidiary or the Eligible Joint Venture that made the original Investment
from the Person in which such Investment was made or any distribution or
payment of such Investment to the extent that such distribution or payment
constituted either a Restricted Payment or a Permitted Payment, provided that
(x) the aggregate amount of such payments will not exceed the amount of the
original Investment by the Company, such Restricted Subsidiary or Eligible
Joint Venture that reduced the amount available pursuant to clause (iv) or
clause (vii), as the case may be, for making Restricted Payments and (y) such
payments may be added pursuant to this proviso only to the extent such
payments are not included in the calculation of Adjusted Consolidated Net
Income.
"Permitted Working Capital Facilities" is defined to mean one or more
loan or credit agreements providing for the extension of credit to the Company
for the Company's working capital purposes, which credit agreements will be
ranked pari passu with or subordinate to the Debt Securities in right of
payment and may be secured or unsecured.
"Person" is defined to mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
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"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) or preferred or preference stock of
such Person that is outstanding or issued on or after the date of original
issuance of any series of Debt Securities.
"Property" of any Person is defined to mean all types of real,
personal, tangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
GAAP.
"Purchase Money Debt" means Debt representing, or Incurred to
finance, the cost of acquiring any Property, provided that (i) any Lien
securing such Debt does not extend to or cover any other Property other than
the Property being acquired and (ii) such Debt is Incurred, and any Lien with
respect thereto is granted, within 18 months of the acquisition of such
Property.
"Rating Agencies" is defined to mean (i) S&P and (ii) Moody's or
(iii) if S&P or Moody's or both do not make a rating of the Debt Securities
publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which will be
substituted for S&P, Moody's or both, as the case may be.
"Rating Category" is defined to mean (i) with respect to S&P, any of
the following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories), (ii) with respect to Moody's, any of the following categories:
Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the
equivalent of any such category of S&P or Moody's used by another Rating
Agency. In determining whether the rating of the Debt Securities has decreased
by one or more gradations, gradations within Rating Categories (+ and - for
S&P, 1, 2 and 3 for Moody's or the equivalent gradations for another Rating
Agency) will be taken into account (e.g., with respect to S&P, a decline in a
rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease
of one gradation).
"Rating Decline" is defined to mean the occurrence of the following
on, or within 90 days after, the earlier of (i) the occurrence of a Change of
Control and (ii) the date of public notice of the occurrence of a Change of
Control or of the public notice of the intention of the Company to effect a
Change of Control (the "Rating Date") which period will be extended so long as
the rating of the Debt Securities is under publicly announced consideration
for possible downgrading by any of the Rating Agencies: (a) in the event that
any series of the Debt Securities are rated by either Rating Agency on the
Rating Date as Investment Grade, the rating of such Debt Securities by both
such Rating Agencies will be reduced below Investment Grade, or (b) in the
event the Debt Securities are rated below Investment Grade by both such Rating
Agencies on the Rating Date, the rating of such Debt Securities by either
Rating Agency will be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of any series of the Debt Securities,
(ii) redeemable at the option of the holder of such class or series of Capital
Stock at any time prior to the Stated Maturity of any series of Debt
Securities or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Debt having a scheduled maturity
prior to the Stated Maturity of any series of Debt Securities, provided that
any Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require the Company to
purchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or a "change of control" occurring prior to the Stated Maturity of any series
of Debt Securities will not constitute Redeemable Stock if the "asset sale" or
"change of control" provision applicable to such Capital Stock is no more
favorable to the holders of such Capital Stock than the provisions contained
in the covenants described under "Limitation on Dispositions" and "Purchase of
Debt Securities Upon a Change of Control" above and such Capital Stock
specifically provides that the Company will not purchase or redeem any such
Capital Stock pursuant to such covenants prior to the Company's purchase of
Debt Securities required to be purchased by the Company under the covenants
described under "Limitation on Dispositions" and "Purchase of Debt Securities
Upon a Change of Control" above.
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"Reference Period" is defined to mean the four most recently
completed fiscal quarters for which financial information is available
preceding the date of a transaction giving rise to the need to make a
financial calculation.
"Restricted Payment" is defined to mean (i) any dividend or other
distribution on any shares of the Company's Capital Stock, provided that a
dividend or other distribution consisting of the Capital Stock of an
Unrestricted Subsidiary will not constitute a Restricted Payment except to the
extent of the portion thereof that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment," (ii) any payment on account of the purchase, redemption,
retirement or acquisition for value of the Company's Capital Stock, (iii) any
defeasance, redemption, purchase or other acquisition or retirement for value
prior to the scheduled maturity of any Debt ranked subordinate in right of
payment to the Senior Debt Securities in the case of the Senior Debt Indenture
and the Subordinated Debt Securities other than repayment of Debt of the
Company to a Restricted Subsidiary or an Eligible Joint Venture, (iv) any
Investment made in a Person (other than the Company or any Restricted
Subsidiary or any Eligible Joint Venture) and (v) designating a Restricted
Subsidiary as an Unrestricted Subsidiary (the Restricted Payment made upon
such a designation to be determined as the fair market value of the Capital
Stock of such Restricted Subsidiary owned directly or indirectly by the
Company at the time of the designation). Notwithstanding the foregoing,
"Restricted Payment" will not include any Permitted Payment, except that any
payment made pursuant to clauses (iv) and (v) of the definition of "Permitted
Payment" will be counted in the calculation set forth in clause (c) of the
covenant described under "Limitation on Restricted Payments."
"Restricted Subsidiary" is defined to mean any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"Senior Debt" is defined to mean the principal of and interest on all
Debt of the Company whether created, Incurred or assumed before, on or after
the date of original issuance of any series of Debt Securities (other than the
Debt Securities), provided that Senior Debt will not include (i) Debt that,
when Incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, was without recourse to the Company, (ii) Debt
of the Company to any Affiliate and (iii) any Debt of the Company that, by the
terms of the instrument creating or evidencing the same, is specifically
designated as being junior in right of payment to the Debt Securities or any
other Debt of the Company.
"Significant Subsidiary" is defined to mean a Restricted Subsidiary
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act and the Exchange Act.
"Stated Maturity" is defined to mean, with respect to any debt
security or any installment of interest thereon, the date specified in such
debt security as the fixed date on which any principal of such debt security
or any such installment of interest is due and payable.
"Subsidiary" is defined to mean, with respect to any Person
including, without limitation, the Company and its Subsidiaries, (i) any
corporation or other entity of which such Person owns, directly or indirectly,
a majority of the Capital Stock or other ownership interests and has ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, and (ii) with respect to the Company and, as
appropriate, its Subsidiaries, any Permitted Joint Venture, including, without
limitation, Coso Land Company Joint Venture, Coso Finance Partners, Coso
Energy Developers and Coso Power Developers, provided that in respect of any
Subsidiary that is not a Permitted Joint Venture, the Company must exercise
control over such Subsidiary and its Property to the same extent as a
Permitted Joint Venture.
"Subsidiary Refinancing Debt" is defined to mean Debt issued in
exchange for, or the proceeds of which are used to refinance (including to
purchase), outstanding Debt of a Restricted Subsidiary or an Eligible Joint
Venture, including, without limitation, Construction Financing, in amount (or,
if such new Debt provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or refinanced
(plus accrued interest
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or dividends and all fees, premiums (in excess of accreted value) and expenses
related to such exchange or refinancing), for which purpose the amount so
exchanged or refinanced will not exceed, in the case of Debt, the lesser of
(x) the principal amount of the Debt so exchanged or refinanced and (y) if the
Debt being exchanged or refinanced was issued with an original issue discount,
the accreted value thereof (as determined in accordance with GAAP) at the time
of such exchange or refinancing, and, in the case of an equity investment made
in lieu of or as part of Construction Financing, Debt, in an amount not to
exceed the capital and surplus shown on the balance sheet of such Restricted
Subsidiary or Eligible Joint Venture, provided that (A) such Debt will be
Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse and (B)
the Average Life of the new Debt will be equal to or greater than the Average
Life of the Debt to be exchanged or refinanced, provided further that upon the
first refinancing of any Construction Financing of a Restricted Subsidiary or
an Eligible Joint Venture, (i) the amount of the Subsidiary Refinancing Debt
issued in exchange for or to refinance such Construction Financing will not be
limited by this provision and (ii) the Subsidiary Refinancing Debt issued in
exchange for or to refinance such Construction Financing will not be subject
to the provisions of the foregoing clause (B) of this provision.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors Incurred, created, assumed or Guaranteed by such Person or any of
its Subsidiaries or Joint Ventures arising in the ordinary course of business.
"Unrestricted Subsidiary" is defined to mean any Subsidiary of the
Company that becomes an Unrestricted Subsidiary in accordance with the
requirements set forth in the next sentence. The Company may designate any
Restricted Subsidiary as an Unrestricted Subsidiary if (a) such designation is
in compliance with the first paragraph of the covenant described under
"Limitation on Restricted Payments" above and (b) after giving effect to such
designation, such Subsidiary does not own, directly or indirectly, a majority
of the Capital Stock or the Voting Stock of any other Restricted Subsidiary
unless such other Restricted Subsidiary is designated as an Unrestricted
Subsidiary at the same time. Any such designation will be effected by filing
with the Trustee an Officers' Certificate certifying that such designation
complies with the requirements of the immediately preceding sentence. No Debt
or other obligation of an Unrestricted Subsidiary may be with recourse to the
Company, any of its Restricted Subsidiaries, any Eligible Joint Venture or any
of their respective Property except to the extent otherwise permitted by the
provisions of the Indenture. An Unrestricted Subsidiary may be designated as a
Restricted Subsidiary if (i) all the Debt of such Unrestricted Subsidiary
could be Incurred under the provision described under "Limitation on
Subsidiary Debt" above or (ii) any portion of such Debt could not be Incurred
under such provision, if the Company could borrow all such remaining Debt
under the provision described in the first paragraph under "Limitation on
Debt" above.
"U.S. Government Obligations" is defined to mean securities that are
(i) direct obligations of the U.S. for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the U.S., the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
U.S., that, in either case are not callable or redeemable at the option of the
issuer thereof, and will also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government
Obligations or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of
a depository receipt, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest
on or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" is defined to mean, with respect to any Person,
Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors (or persons fulfilling similar responsibilities) of such
Person.
As more fully described in the Prospectus Supplement, each of the
Indentures also provides for defeasance of certain covenants.
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CERTIFICATED SECURITIES
Except as may be set forth in a Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt
Securities are to be issued in certificated form, no service charge will be
made for any transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
BOOK-ENTRY SYSTEM
If so specified in any accompanying Prospectus Supplement relating to
Debt Securities, Debt Securities of any series may be issued under a
book-entry system in the form of one or more global securities (each, a
"Global Security"). Each Global Security will be deposited with, or on behalf
of, a depositary, which, unless otherwise specified in the accompanying
Prospectus Supplement, will be The Depository Trust Company, New York, New
York (the "Depositary"). The Global Securities will be registered in the name
of the Depositary or its nominee.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. The Depositary is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the Depositary system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to the Depositary
and its Participants are on file with the SEC.
Purchases of the Offered Securities under the Depositary system must
be made by or through Direct Participants, which will receive a credit for the
Securities on the Depositary's records. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Securities, except in
the event that use of the book-entry system for the Securities is
discontinued.
To facilitate subsequent transfers, all Securities deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Securities with
the Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Securities; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners
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<PAGE>
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Securities. Under its usual procedures, the Depositary mails an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Securities will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payable date in accordance with their respective holdings
shown on the Depositary's records unless the Depositary has reason to believe
that it will not receive payment on the payable date. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of the Depositary, agent, or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to the Depositary is the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Securities at any time by giving reasonable
notice to the Company. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered. The Company may decide to discontinue use of the
system of book-entry transfers through the Depositary (or a success securities
depository). In that event, Security certificates will be printed and
delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security
representing all but not part of an offering of Offered Debt Securities hereby
is exchangeable for Debt Securities in definitive form of like tenor and terms
if (i) the Depositary notified the Company that it is unwilling or unable to
continue as depositary for such Global Security or if at any time the
Depositary is no longer eligible to be or in good standing as a clearing
agency registered under the Exchange Act, and in either case, a successor
depositary is not appointed by the Company within 90 days of receipt by the
Company of such notice or of the Company becoming aware of such ineligibility,
or (ii) the Company in its sole discretion at any time determines not to have
all of the Debt Securities represented in an offering of Offered Debt
Securities by a Global Security and notifies the Trustee thereof. A Global
Security exchangeable pursuant to the preceding sentence shall be exchangeable
for Debt Securities registered in such names and in such authorized
denominations as the Depositary of such Global Security shall direct. The Debt
Securities of a series may also be issued in the form of one or more bearer
global Debt Securities (a "Bearer Global Security") that will be deposited
with a common depositary for Euro-clear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series.
The specific terms and procedures, including the specific terms of the
depositary arrangement, with respect to any portion of a series of Debt
Securities to be represented by a Bearer Global Security will be described in
the Prospectus Supplement relating to such series.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in any of the following ways
(or in any combination thereof): (i) through underwriters or dealers; (ii)
directly to a limited number of purchasers or to a single purchaser; or (iii)
through agents. The Prospectus Supplement with respect to any Offered
Securities will set forth the terms of the offering of such Offered
Securities, including the name or names of any underwriters, dealers or agents
and the respective amounts of such Offered Securities underwritten or
purchased by each of them, the initial public offering price of such Offered
Securities and the proceeds to the Company from such sale, any discounts,
commissions or other items constituting compensation from the Company and any
discounts, commissions or concessions allowed or reallowed or paid to dealers
and any securities exchanges on which such Offered Securities may be listed.
If underwriters are used in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Such Offered Securities may be either offered
to the public through underwriting syndicates represented by managing
underwriters, or directly by underwriters.
Offered Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof.
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<PAGE>
LEGAL MATTERS
Certain legal matters (including the validity of the Securities) will
be passed upon for the Company by Steven A. McArthur, Senior Vice President
and General Counsel of the Company and by Willkie Farr & Gallagher. As of
March 17, 1997, Mr. McArthur beneficially owned 104,437 shares of Common
Stock.
EXPERTS
The consolidated financial statements and financial statement
schedules of the Company and its subsidiaries incorporated by reference in
this Registration Statement by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
With respect to the Company's unaudited interim financial information
for the three month periods ended March 31, 1997 and 1996, incorporated herein
by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997, and incorporated by
reference herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not subject
to the liability provisions of Section 11 of the Securities Act for their
reports on the unaudited interim financial information because those reports
are not "reports" or a "part" of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements of Northern Electric plc as of
March 31, 1996 and 1995, and for each of the three years in the period ended
March 31, 1996, appearing in the Company's Report on Form 8-K/A dated February
18, 1997, have been audited by Ernst & Young, chartered accountants, as stated
in their report which is included therein and incorporated herein by
reference. Such financial statements have been incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
With respect to Northern's unaudited condensed consolidated financial
statements at September 30, 1996, and for the six months ended September 30,
1996 and 1995, incorporated by reference in this Prospectus, Ernst & Young,
chartered accountants, have reported that they have applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report, included in the Company's Current Report on
Form 8-K/A dated February 18, 1997, and incorporated herein by reference,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. Ernst & Young are not subject to the
liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated statements of operations, changes in stockholders'
equity, and cash flows of Magma Power Company, and subsidiaries for the year
ended December 31, 1994, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
A PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF ITS AGENTS. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY OR THEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------------
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4
RISK FACTORS........................................5
THE COMPANY........................................11
RATIO OF EARNINGS TO FIXED CHARGES.................14
USE OF PROCEEDS....................................14
DESCRIPTION OF CAPITAL STOCK.......................15
DESCRIPTION OF PREFERRED STOCK.....................17
DESCRIPTION OF DEBT SECURITIES.....................22
PLAN OF DISTRIBUTION...............................55
LEGAL MATTERS......................................56
EXPERTS............................................56
Common Stock
Preferred Stock
Senior Debt Securities
Subordinated Debt Securities
CALENERGY COMPANY, INC.
[LOGO]
----------------
PROSPECTUS
----------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registrtion statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
Subject to Completion, dated August 4, 1997
Convertible Preferred Securities
CALENERGY CAPITAL TRUST III
CALENERGY CAPITAL TRUST IV
CALENERGY CAPITAL TRUST V
Guaranteed to the extent set forth herein by
and convertible into the Common Stock of
CALENERGY COMPANY, INC.
--------------------
CalEnergy Capital Trust III, CalEnergy Capital Trust IV and CalEnergy
Capital Trust V (each "CalEnergy Trust" or an "Issuer" and collectively, the
"CalEnergy Trusts" or the "Issuers"), each a statutory business trust formed
under the laws of the State of Delaware, may offer and sell, from time to
time, Convertible Preferred Securities (the "Convertible Preferred
Securities"), which represent undivided beneficial ownership interests in the
assets of the respective CalEnergy Trusts. The Convertible Preferred
Securities are convertible into shares of the common stock, par value $.0675
per share ("Common Stock"), of CalEnergy Company, Inc., a Delaware corporation
("CalEnergy" or the "Company"). The Company directly or indirectly owns all of
the common securities issued by each of the CalEnergy Trusts (the "Common
Securities" and together with the Convertible Preferred Securities, the "Trust
Securities"). The CalEnergy Trusts were formed for the sole purpose of issuing
the Trust Securities and using the proceeds thereof to purchase from the
Company Convertible Junior Subordinated Debentures (the "Convertible Junior
Subordinated Debentures," and together with the Convertible Preferred
Securities, the "Offered Securities"). The holders of Convertible Preferred
Securities will have a preference with respect to cash distributions and
amounts payable upon liquidation, redemption or otherwise over the holders of
the Common Securities of the respective CalEnergy Trusts. The Offered
Securities may be offered, in separate series, in amounts, at prices and on
terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
Specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an applicable Prospectus
Supplement, that will include, where applicable, the following: the specific
designation, aggregate principal amount, authorized denomination, maturity,
redemption, conversion, interest rate, method of calculating interest payments
and dates for payment thereof, the right of the Company to defer payment of
interest on the Convertible Preferred Securities or the Convertible Junior
Subordinated Debentures and the maximum length of such deferral period, the
public offering price, voting rights and other specific terms of the offering.
Unless otherwise indicated in a Prospectus Supplement, the Company does not
intend to list any of the Offered Securities on a national securities
exchange.
Holders of the Convertible Preferred Securities are entitled to
receive cumulative cash distributions as set forth in a Prospectus Supplement.
The payment of distributions and payments on liquidation of a CalEnergy Trust
or the redemption of Convertible Preferred Securities, as described below (but
only to the extent of funds of the applicable CalEnergy Trust available
therefor), are guaranteed by the Company to the extent described herein (the
"Guarantees"). The Company's obligations under the Guarantees are subordinate
and junior to all other liabilities of the Company, except any liabilities
that may be made pari passu expressly by their terms and certain other
guarantees, but are pari passu with the most senior preferred stock issued,
from time to time, if any, by the Company. If the Company fails to make
interest payments on the Convertible Junior Subordinated Debentures, the
respective CalEnergy Trust will have insufficient funds to pay distributions
on the Convertible Preferred Securities. The Guarantee does not cover payment
of distributions when a CalEnergy Trust does not have sufficient funds to pay
such distributions. The Guarantees, when taken together with the Company's
obligations under the Convertible Junior Subordinated Debentures and the
Indenture (as defined herein) and its obligations under the Declaration (as
defined herein), including its obligation to pay costs, expenses, debts and
other obligations of the respective CalEnergy Trust (other than with respect
to the Trust Securities), provide a full and unconditional guarantee of
amounts due on the Convertible Preferred Securities. The obligations of the
Company under the Convertible Junior Subordinated Debentures are subordinate
and junior in right of payment to Senior Indebtedness (as defined herein) of
the Company which aggregated approximately $953.8 million at March 31, 1997
(of which $200 million had a "Recourse Amount" to the Company (as designated
in the Indenture) of zero at March 31, 1997).
<PAGE>
The Company has the right under the Indenture to defer the interest
payments due from time to time on the Convertible Junior Subordinated
Debentures for successive periods not exceeding 20 consecutive quarters for
each such period, and, as a consequence, quarterly distributions on the
Convertible Preferred Securities would be deferred by the respective CalEnergy
Trusts (but would continue to accumulate quarterly and accrue interest) until
the end of any such interest deferral period.
In the event of the liquidation of a CalEnergy Trust, the holders of
the Convertible Preferred Securities will be entitled to receive for each of
the Convertible Preferred Securities a liquidation preference set forth in a
Prospectus Supplement plus accrued and unpaid distributions thereon to the
date of payment, unless, in connection with such liquidation, Convertible
Junior Subordinated Debentures are distributed to the holders of the
Convertible Preferred Securities.
Any Prospectus Supplement relating to the Offered Securities will
contain information concerning certain United States federal income tax
considerations applicable to the Offered Securities. By separate prospectus,
the form of which is included in the Registration Statement of which this
Prospectus is a part, the Company may offer from time to time Common Stock,
Preferred Stock or Senior or Subordinated Debt Securities. The aggregate
initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $1,500,000,000.
The Offered Securities may be offered directly, through agents
designated from time to time, to or through dealers or to or through
underwriters. Such agents or underwriters may act alone or with other agents
or underwriters. Any such agents, dealers or underwriters will be set forth in
a Prospectus Supplement. If an agent of the Company, or a dealer or
underwriter, is involved in the offering of the Offered Securities, the
agent's commission, dealer's purchase price, underwriter's discount and net
proceeds to the Company, as the case may be, will be set forth in, or may be
calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN
THE OFFERED SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement. Any statement
contained in this Prospectus will be deemed to be modified or superseded by
any inconsistent statement contained in an accompanying Prospectus Supplement.
The date of this Prospectus is _______, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy and information statements and other information filed by the
Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the SEC's
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. This Web
site can be accessed at http://www.sec.gov. Such reports, proxy and
information statements and other information can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the SEC a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules related thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the SEC. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof. Statements contained in this
Prospectus as to the contents of any documents referred to are not necessarily
complete and, in each such instance, are qualified in all respects by
reference to the applicable documents filed with the SEC.
No separate financial statements of the CalEnergy Trusts have been
included herein. The Company does not consider that such financial statements
would be material to holders of the Convertible Preferred Securities because
(i) all of the voting securities of the CalEnergy Trusts will be owned,
directly or indirectly, by the Company, a reporting company under the Exchange
Act, (ii) the CalEnergy Trusts have no independent operations but exist for
the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the applicable CalEnergy Trust and investing the
proceeds thereof in Convertible Junior Subordinated Debentures issued by the
Company and (iii) the obligations of the applicable CalEnergy Trust under the
Trust Securities are fully and unconditionally guaranteed by the Company to
the extent that the applicable CalEnergy Trust has funds available to meet
such obligations. See "Description of the Convertible Junior Subordinated
Debentures" and "Description of the Guarantee."
This Prospectus and the periodic filings of the Company under the
Exchange Act contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). These
forward-looking statements express the beliefs and expectations of management
regarding the Company's future results and performance.
Such statements are based on current expectation and involve a number
of known and unknown risks and uncertainties that could cause the actual
results, performance and/or other achievements of the Company to differ
materially from any expected future results, performance or achievements,
expressed or implied by the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements and any such
statement is qualified by reference to the following cautionary statements. In
connection with the safe harbor provisions of the Reform Act, the Company's
management has identified important factors that could cause actual results to
differ materially from management's expectations. Reference is made to the
Company's Current Report on Form 8-K dated February 25, 1997, incorporated
herein by reference. The Company is not required to publicly release any
changes to these forward-looking statements for events occurring after the
date thereof or to reflect any other unanticipated events.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 1-9874) are
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended by the Form 10-K/A filed on
April 30, 1997);
(ii) the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997;
(iii) the Company's Current Reports on Form 8-K dated December 24,
1996 (as amended by Form 8-K/A filed on February 18, 1997),
February 25, 1997, February 26, 1997, March 28, 1997, May 7,
1997, May 19, 1997, July 7, 1997, July 15, 1997 and July 22,
1997;
(iv) the description of the Company's Common Stock contained in
the Company's registration statement on Form 8-A filed under
the Exchange Act and any amendments or reports filed for the
purpose of updating such description; and
(v) the Company's Tender Offer Statement pursuant to Section
14(d)(1) of the Exchange Act on Schedule 14D-1 dated July
18, 1997 (as amended by Amendment Nos. 1, 2 and 3).
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which is also incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except
as so modified or superseded.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, on the written or
oral request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated into this Prospectus
by reference, other than exhibits to such documents. Requests for such copies
should be directed to Investor Relations, CalEnergy Company, Inc., 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, telephone number (402)
341-4500.
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or a Prospectus Supplement, in connection with the offering
contemplated hereby and thereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. This Prospectus and a Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities to which they relate and do not
constitute an offer to sell or a solicitation of an offer to buy any
securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus or a Prospectus Supplement, nor any sale made hereunder or
thereunder, shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof or
thereof or that the information contained or incorporated by reference herein
or therein is correct as of any time subsequent to such date.
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RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below, in addition to the other information appearing in or incorporated
by reference in this Prospectus. This Prospectus contains or incorporates by
reference forward-looking statements which involve risks and uncertainties.
The Company's actual results in the future could differ significantly from the
results discussed or implied in the forward-looking statements. Factors that
could cause or contribute to such a difference include, but are not limited
to, the following risk factors. The term "Company" refers to CalEnergy
Company, Inc. and its operating subsidiaries and joint ventures and "Northern"
refers to Northern Electric plc and its operating subsidiaries, unless the
context otherwise requires.
ACQUISITIONS. The Company's recent growth has been achieved, in part,
through strategic acquisitions in the energy industry which complement and
diversify the Company's existing business. The Company intends to continue to
pursue an aggressive acquisition strategy for the foreseeable future. The
Company has recently completed several major acquisitions, including the
acquisition of Magma Power Company ("Magma"), Falcon Seaboard Resources, Inc.
("Falcon Seaboard") and Northern Electric plc ("Northern"). The Company has
successfully integrated Magma and Falcon Seaboard and is in the process of
integrating Northern. See "The Company". On July 15, 1997, the Company
announced its intention to commence a cash tender offer for 9.9% of the
outstanding common stock of New York State Electric & Gas Corporation
("NYSEG") and its proposal to acquire 100% of the outstanding NYSEG common
stock. See the Company's Current Reports on Form 8-K dated July 15, 1997 and
July 22, 1997, incorporated herein by reference. The Company's ability to
pursue acquisition opportunities successfully will depend on many factors,
including, among others, the Company's ability to (i) identify suitable
acquisition opportunities, (ii) consummate the acquisition, including
obtaining any necessary financing, and (iii) successfully integrate acquired
businesses. The integration of acquired businesses entails numerous risks,
including, among others, the risk of diverting management's attention from the
day-to-day operations of the Company, the risk that the acquired businesses
will require substantial capital and financial investments and the risk that
the investments will fail to perform in accordance with expectations. There
can be no assurance that acquisition opportunities, if any, can be consummated
on favorable terms or that the Company's integration efforts will be
successful.
HOLDING COMPANY STRUCTURE. As a holding company, the Company is
dependent on the earnings and cash flows of, and dividends from, its
subsidiaries and joint ventures to generate the funds necessary to meet its
obligations, including the payment of principal, interest and premium, if any,
on the Convertible Junior Subordinated Debentures. The availability of
distributions from the Company's subsidiaries and projects is subject to the
satisfaction of various covenants and conditions contained in the applicable
subsidiaries' and joint ventures' financing documents and to certain utility
regulatory restrictions. Furthermore, the Company is structuring Philippine
and Indonesian project financing arrangements containing, and anticipates that
future project level financings will contain, certain conditions and similar
restrictions on the distribution of cash to the Company.
The Company's subsidiaries, partnerships and joint ventures are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Convertible Junior
Subordinated Debentures or to make any funds available therefor, whether by
dividends, loans or other payments, and do not guarantee the payment of
interest on, premium, if any, or principal of the Convertible Junior
Subordinated Debentures. Any right of the Company to receive any assets of any
of its subsidiaries or other affiliates upon any liquidation or reorganization
of the Company (and the consequent right of the holders of the Convertible
Junior Subordinated Debentures to participate in the distribution of, or to
realize proceeds from, those assets) will be effectively subordinated to the
claims of any such subsidiary's or other affiliate's creditors (including
trade creditors and holders of debt issued by such subsidiary or other
affiliate). At March 31, 1997 the Company had approximately $3,228.6 million
of total consolidated indebtedness, which included approximately $2,274.8
million of the Company's proportionate share of joint venture and subsidiary
debt, which would be effectively senior to the Convertible Junior Subordinated
Debentures, substantially all of which is secured by the assets of such joint
ventures and subsidiaries, and $283.9 million of 6 1/4% Trust Convertible
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Preferred Securities and TIDES Securities. See "Description of the Convertible
Junior Subordinated Debentures--Subordination."
DEPENDENCE ON CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES PAYMENTS;
LEVERAGE. The ability of a CalEnergy Trust to pay amounts due on the
Convertible Preferred Securities is wholly dependent upon the Company making
payments on the Convertible Junior Subordinated Debentures. The Company is
substantially leveraged. At March 31, 1997, the Company's total consolidated
liabilities were $4,685.8 million (excluding deferred income), its obligations
in respect of the 6 1/4% Trust Convertible Preferred Securities (the "6 1/4%
Trust Convertible Preferred Securities") and the 6 1/4% Convertible Preferred
Securities Term Income Deferrable Equity Securities ("TIDES") sm or TIDES sm
(the "TIDES Securities") were $283.9 million, its total consolidated assets
were $6,138.1 million and its total stockholders' equity was $876.4 million.
The Company's leverage level presents the risk that the Company might not
generate sufficient cash to service the Company's indebtedness, including the
Convertible Junior Subordinated Debentures, or that its leveraged capital
structure could limit its ability to finance future acquisitions, develop
additional projects, compete effectively and operate successfully under
adverse economic conditions. If the Company were unable to make payments on
the Convertible Junior Subordinated Debentures or the Guarantees, the
CalEnergy Trusts would be unable to make payments on the Convertible Preferred
Securities as and when required. The Company is also a holding company which
derives substantially all of its operating income from its subsidiaries and
joint ventures. Distributions from such entities are restricted under various
covenants and conditions contained in financing documents by which they are
bound and the stock or assets of substantially all of such entities is
directly or indirectly pledged, to secure various of such financings or such
entities are otherwise subject to regulatory restrictions. See "--Holding
Company Structure."
NORTHERN'S REGULATORY ENVIRONMENT. Northern's electricity
distribution and supply are subject to extensive regulation in the United
Kingdom.
Price Regulation of Distribution. Revenue from Northern's
distribution business is controlled by a formula (the "Distribution Price
Control Formula") which determines the maximum average price per unit of
electricity (expressed in kilowatt hours, a "unit") that a regional
electricity company (a "REC") in the United Kingdom may charge. The
Distribution Price Control Formula is expected to have a five year duration
and is subject to review by the Director General of Electricity Supply (the
"Regulator") at the end of each five-year period and at other times in the
discretion of the Regulator. At each review, the Regulator can propose
adjustments to the Distribution Price Control Formula. In July 1994, a review
resulted in a 17% reduction in allowed distribution income compared to the
original formula, before allowing for inflation, effective April 1, 1995. In
July 1995, a further review of distribution prices was concluded by the
Regulator for fiscal years 1997 to 2000. As a result of this further review,
Northern's allowed distribution from income was reduced by a further 11%,
before allowing for inflation, effective April 1, 1996. There can be no
assurance that any further price reviews by the Regulator will not have a
material adverse effect on the Company's results of operations.
Competition in Supply. Northern's supply business is also subject to
price control and is being progressively opened to competition. Northern
currently has an exclusive right, subject to price cap regulation, to supply
customers in its authorized area with a maximum demand of not more than 100 kW
("Franchise Supply Customers"). The market for customers with a maximum demand
above 1 megawatt ("MW") has been open to competition for suppliers of
electricity since privatization while the market for customers with a maximum
demand above 100 kW ("Non-Franchise Supply Customers") became competitive in
April 1994. The final stage of this process is expected to occur on March 31,
1998, when the exclusive right to supply Franchise Supply Customers is
scheduled to end. There can be no assurance that competition among suppliers
of electricity will not have a material adverse effect on the Company's
results of operations.
Pool Purchase Price Volatility. Northern's supply business to
Non-Franchise Supply Customers generally involves entering into fixed price
contracts to supply electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts primarily by
purchases from the wholesale trading market for electricity in England and
Wales (the "Pool"). Because the price of electricity purchased from the
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Pool can be volatile, to the extent that Northern purchases electricity from
the Pool, Northern is exposed to risk arising from differences between the
fixed price at which it sells and the fluctuating prices at which it purchases
electricity, unless it can effectively hedge such exposure. Northern's ability
to manage such risk at acceptable levels will depend, in part, on the
specifics of the supply contracts that Northern enters into, Northern's
ability to implement and manage an appropriate hedging strategy and the
development of an adequate market for hedging instruments. There can be no
assurance that this risk will be effectively mitigated.
Change in Government Policy. In the general election held in the
United Kingdom on May 1, 1997, the Labour Party won a majority of seats in
Parliament. On July 31, 1997, the U.K. Parliament passed the windfall
tax to be levied on privatized utilities which will result in a third
quarter charge to net income of approximately $136 million. See the
Company's Current Report on Form 8-K dated July 7, 1997 incorporated herein by
reference. There can be no assurance that other possible changes in tax or
utility regulation by the United Kingdom government, by whichever party it is
controlled, would not have a material adverse effect on the Company's results
of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new energy projects, both domestically and
internationally, the completion of any of which is subject to substantial
risk. Development can require the Company to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other expenses in preparation for competitive bids which the Company may
not win or before it can be determined whether a project is feasible,
economically attractive or capable of being financed. Successful development
and construction is contingent upon, among other things, negotiation on terms
satisfactory to the Company of engineering, construction, fuel supply and
power sales contracts with other project participants, receipt of required
governmental permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is substantially
leveraged, will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional energy and its
ability to obtain contracts to supply portions of this demand. There can be no
assurance that development efforts on any particular project, or the Company's
efforts generally, will be successful. In this regard, reference is made to
certain uncertainties associated with the Company's Casecnan project, as
described in the Company's Current Report on Form 8-K dated May 20, 1997,
incorporated herein by reference.
UNCERTAINTIES RELATED TO DOING BUSINESS OUTSIDE THE UNITED STATES.
The Company has various projects under construction outside the United States
and a number of projects under award outside the United States. The financing
and development of projects outside the United States entail significant
political and financial risks (including, without limitation, uncertainties
associated with privatization efforts in the countries involved, currency
exchange rate fluctuations, currency repatriation restrictions, changes in
law, political instability, civil unrest and expropriation) and other
structuring issues that have the potential to cause substantial delays in
respect of or material impairment of the value of the project being developed,
which the Company may not be capable of fully insuring against. The
uncertainty of the legal environment in certain foreign countries in which the
Company is developing and may develop or acquire projects could make it more
difficult for the Company to enforce its rights under agreements relating to
such projects. In addition, the laws and regulations of certain countries may
limit the ability of the Company to hold a majority interest in some of the
projects that it may develop or acquire. The Company's international projects
may, in certain cases, be terminated by the applicable foreign governments.
Furthermore, the central bank of any such country may have the authority in
certain circumstances to suspend, restrict or otherwise impose conditions on
foreign exchange transactions or to approve distributions to foreign
investors. Although the Company may structure certain power purchase
agreements and other project revenue agreements to provide for payments to be
made in, or indexed to, United States dollars or a currency freely convertible
into United States dollars, there can be no assurance that the Company will be
able to achieve this structure in all cases or that a power purchaser or other
customer will be able to obtain sufficient dollars or other hard currency or
that available dollars will be allocated to pay such obligations. In addition,
the Company's investment in Northern and any dividends or distributions of
earnings in respect of such investment, may be significantly affected by
fluctuations in the
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exchange rate between the United States dollar and the British pound. Although
the Company expects to enter into certain transactions to hedge risks
associated with exchange rate fluctuations, there can be no assurance that
such transactions will be successful in reducing such risks.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the
geographic area and sustainable output of geothermal reservoirs can only be
estimated and cannot be definitively established. There is, accordingly, a
risk of an unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, geothermal power production
poses unusual risks of seismic activity. Accordingly, there can be no
assurance that earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the event of
serious seismic disturbances or that such insurance will be available on
commercially reasonable terms. The success of a geothermal project depends on
the quality of the geothermal resource and operational factors relating to the
extraction of the geothermal fluids involved in such project. The quality of a
geothermal resource is affected by a number of factors, including the size of
the reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of resource
operating factors. Production and injection wells can require frequent
maintenance or replacement. Corrosion caused by high-temperature and
high-salinity geothermal fluids may compel the replacement or repair of
certain equipment, vessels or pipelines. New production and injection wells
may be required for the maintenance of operating levels, thereby requiring
substantial capital expenditures.
GENERAL OPERATING UNCERTAINTIES. The operation of a power plant
involves many risks, including the breakdown or failure of power generation
equipment, pipelines, transmission lines or other equipment or processes, fuel
interruption, and performance below expected levels of output or efficiency.
Each facility may depend on a single or limited number of entities to purchase
electricity or thermal energy, to supply water, to supply gas, to transport
gas, to dispose of wastes or to wheel electricity. The failure of any such
purchasing utility, steam host, water or gas supplier, gas transporter,
wheeling utility or other relevant project participant to fulfill its
contractual obligations could have a material adverse impact on the Company.
FUEL SUPPLY OPERATIONS. The primary fuel source for certain of the
Company's projects is natural gas and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining natural gas
through gas supply agreements and transporting that gas to the projects under
gas transportation agreements. Although the Company believes that it has
contracted for natural gas supply and transportation in sufficient quantities
to satisfy the needs of its projects, the gas suppliers are not required in
all cases to provide dedicated reserves in support of their contractual
obligations. Unless the gas projects were able to obtain substitute volumes of
natural gas, including the requisite transportation services, for such volumes
at a price not materially higher than the sum of the contract price under the
existing gas supply agreements and any damages paid by the supplier for
failure to deliver, the sustained failure of a supplier to deliver natural gas
in accordance with its contract could have a material adverse effect on the
cash flows to the Company. In addition, under certain gas supply contracts the
Company is obligated to pay for a certain minimum quantity of natural gas even
if it cannot utilize it. The Company intends to manage its requirements for
contract volumes under the gas supply agreements so as to meet the minimum
take requirements through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-party
customers, if necessary. Finally, the state, federal and Canadian regulatory
authorities that have jurisdiction over natural gas
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transportation have the right to modify aspects of the rates, terms and
conditions of those contracts. It is possible that such a modification could
materially increase the fuel transportation costs of the projects or give the
transporter a right to terminate or suspend or decrease its performance under
its contract.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT UNCERTAINTIES. The
Company currently relies on long-term power purchase "Standard Offer No. 4"
contracts (each, an "SO4 Agreement") with a large customer, Southern
California Edison Company ("Edison"), to generate a substantial portion of its
operating revenues. Any material failure by Edison to fulfill its contractual
obligations under such contracts is likely to have a material adverse effect
on the Company's results of operations. Each of the Company's SO4 Agreements
provides for both capacity payments and energy payments for a term of between
20 and 30 years. During the first ten years after achieving firm operation,
energy payments under each SO4 Agreement are based on a pre-set schedule.
Thereafter, while the basis for the capacity payment remains the same, the
required energy payment is Edison's then-current published avoided cost of
energy ("Avoided Cost of Energy") as determined by the California Public
Utility Commission ("CPUC"). The initial ten-year period expires in August
1997 for the Company's Navy I Project, March 1999 for its BLM Project and
January 2000 for its Navy II Project, and the three joint ventures which
comprise the Coso Project in California (the "Coso Project"). Such ten-year
period expired in 1996 with respect to one of the eight geothermal plants in
the Imperial Valley in California ("Imperial Valley Projects") and expires in
1999 for three of its Imperial Valley Projects and in 2000 for the remaining
two Imperial Valley Projects that operate under SO4 Agreements.
Estimates of Edison's future Avoided Cost of Energy vary
substantially in any given year. The Company cannot predict the likely level
of Avoided Cost of Energy prices under its SO4 Agreements with Edison at the
expiration of the fixed-price periods. Edison's Avoided Cost of Energy as
determined by the CPUC is currently substantially below the current scheduled
energy prices under the Company's respective SO4 Agreements and is currently
expected to remain so. For the year ended December 31, 1996, the time
period-weighted average of Edison's Avoided Cost of Energy was 2.5 cents per
kWh, compared to the time period-weighted average for the year ended December
31, 1996 selling prices for energy of approximately 11.3 cents per kWh for the
Company. Thus, the revenues generated by each of the Company's facilities
operating under SO4 Agreements are likely to decline significantly after the
expiration of the applicable fixed price period.
COMPETITION AND DOMESTIC DEREGULATION; INDUSTRY RESTRUCTURING. The
international power production market is characterized by numerous strong and
capable competitors, many of which have more extensive and more diversified
developmental or operating experience (including international experience) and
greater financial resources than the Company. Many of these competitors also
compete in the domestic market. Further, in recent years, the domestic power
production industry has been characterized by strong and increasing
competition with respect to the industry's efforts to obtain new power sales
agreements, which has contributed to a reduction in prices offered to
utilities. In that regard, many utilities often engage in "competitive bid"
solicitations to satisfy new capacity demands. In the domestic market,
competition is expected to increase as the electric utility industry becomes
deregulated. In addition, recent deregulation and industry restructuring
activity may cause certain utilities or other contract parties to attempt to
renegotiate contracts or otherwise fail to perform their contractual
obligations, which in turn could adversely affect the Company's results of
operations. In particular, the state of California has adopted a bill to
restructure the electric industry by providing for a phased-in competitive
power generation industry, with a power pool and an independent system
operator, and for direct access to generation for all power purchasers outside
the power exchange under certain circumstances. Although the bill contemplates
that existing qualifying facility power sales contracts will be honored, and
all of the Company's California projects are qualifying facilities, until the
new system is fully implemented, it is impossible to predict what impact, if
any, it may have on the operations of those projects.
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling
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and operation of new and existing wells. Such laws and regulations generally
require the Company to obtain and comply with a wide variety of licenses,
permits and other approvals. The Company also remains subject to a number of
complex and stringent laws and regulations that both public officials and
private individuals may seek to enforce. There can be no assurance that
existing regulations will not be revised or that new regulations will not be
adopted or become applicable to the Company which could have an adverse impact
on its operations. The implementation of regulatory changes imposing more
comprehensive or stringent requirements on the Company, which would result in
increased compliance costs, could have a material adverse effect on the
Company's results of operations. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may require major
expenditures for permitting and create the risk of expensive delays or
material impairment of project value if projects cannot function as planned
due to changing regulatory requirements or local opposition.
The Public Utility Regulatory Policies Act of 1978, as amended
("PURPA"), and the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), are two of the laws (including the regulations thereunder) that
affect the Company's operations. PURPA provides to qualifying facilities
("QFs") certain exemptions from federal and state laws and regulations,
including organizational, rate and financial regulation. PUHCA regulates
public utility holding companies and their subsidiaries. The Company is not
and will not be subject to regulation as a holding company under PUHCA as long
as the domestic power plants it owns are QFs under PURPA or are exempted as
exempt wholesale generators ("EWGs"), and so long as its foreign utility
operations are exempted as EWGs or foreign utility companies or are otherwise
exempted under PUHCA. QF status is conditioned on meeting certain criteria,
and would be jeopardized, for example, in the case of the Company's
cogeneration facilities, by the loss of a steam customer or reduction of steam
purchases below the amount required by PURPA. The Company's four cogeneration
facilities have steam sales agreements with existing industrial hosts which
agreements must be maintained in effect or replaced in order to maintain QF
status. In the event the Company were unable to avoid the loss of such status
for one of its facilities, such an event could result in termination of a
given project's power sales agreement and a default under the project
subsidiary's project financing agreements. In connection with the Company's
recently announced proposal to acquire NYSEG, the Company would be required to
seek an exemption from regulation as a holding company under PUHCA, but
nevertheless would be required to make partial dispositions of certain of the
Company's independent generating facilities in order to maintain the QF status
of such facilities. See the Company's Current Reports on Form 8-K dated July
15, 1997 and July 22, 1997 incorporated herein by reference.
SUBORDINATION OF GUARANTEE AND CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES. The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all other liabilities of the Company, with
certain limited exceptions. The obligations of the Company under the
Convertible Junior Subordinated Debentures are subordinate and junior in right
of payment to Senior Indebtedness (as defined herein) of the Company. No
payment of principal (including redemption payments, if any), premium, if any,
or interest on the Convertible Junior Subordinated Debentures may be made if
(i) any Senior Indebtedness is not paid when due and any applicable grace
period with respect to such default has ended with such default not having
been cured or waived or ceasing to exist, or (ii) the maturity of any Senior
Indebtedness has been accelerated because of a default. At March 31, 1997, the
Company had approximately $953.8 million principal amount of borrowed money
included in Senior Indebtedness. Neither the Convertible Preferred Securities,
the Convertible Junior Subordinated Debentures nor the Guarantees limit the
Company's ability to incur additional indebtedness or liabilities, including
indebtedness or liabilities that would rank senior to the Convertible Junior
Subordinated Debentures and the Guarantees. See "Description of the
Guarantee--Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures--Subordination." The Convertible
Junior Subordinated Debentures are also effectively subordinate to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, joint ventures and affiliates. See "--Holding Company
Structure."
RIGHTS UNDER THE GUARANTEE. Each Guarantee Trustee (as defined
herein) holds the respective Guarantees for the benefit of the holders of the
Convertible Preferred Securities. Each Guarantee guarantees to the applicable
holders of the Convertible Preferred Securities the payment (but not the
collection) of (i) any
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accrued and unpaid distributions on the Convertible Preferred Securities to
the extent the applicable CalEnergy Trust has funds available therefor, (ii)
the amount payable upon redemption, including all accrued and unpaid
distributions, of the Convertible Preferred Securities called for redemption
by a CalEnergy Trust, to the extent such CalEnergy Trust has funds available
therefor, and (iii) upon a voluntary or involuntary dissolution, winding up or
termination of a CalEnergy Trust (other than in connection with a redemption
of all of the Convertible Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on the Convertible Preferred Securities to the date of payment to the extent a
CalEnergy Trust has funds available therefor and (b) the amount of assets of a
CalEnergy Trust remaining available for distribution to holders of the
Convertible Preferred Securities upon the liquidation of a CalEnergy Trust.
The holders of a majority in liquidation amount of the Convertible Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee or to direct
the exercise of any trust or power conferred upon the Guarantee Trustee under
the Guarantee. In the event of a payment default on the Convertible Preferred
Securities, any holder of Convertible Preferred Securities may institute a
legal proceeding directly against the Company to enforce such holder's rights
in respect thereof under the Guarantee without first instituting a legal
proceeding against the respective CalEnergy Trust, the Guarantee Trustee, or
any other person or entity. If the Company were to default on its obligations
under the Convertible Junior Subordinated Debentures, the CalEnergy Trusts
would lack available funds for the payment of distributions or amounts payable
on redemption of the Convertible Preferred Securities or otherwise, and in
such event, the holders of the Convertible Preferred Securities would not be
able to rely upon the Guarantees for payment of such amounts. Instead, holders
of the Convertible Preferred Securities would rely on the enforcement (1) by
the Trustee (as defined herein) of its rights, as registered holder of the
Convertible Junior Subordinated Debentures, against the Company pursuant to
the terms of the Convertible Junior Subordinated Debentures or (2) by such
holder of its right of direct action against the Company to enforce payments
on the Convertible Junior Subordinated Debentures. See "Description of the
Guarantee--Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures--Subordination" herein and any
accompanying Prospectus Supplement relating to Convertible Preferred
Securities. The Declaration provides that each holder of Convertible Preferred
Securities by acceptance thereof agrees to the provisions of the Guarantee
(including the subordination provisions thereof) and the Indenture.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. The
Company has the right under the Indenture to defer interest payments from time
to time on the Convertible Junior Subordinated Debentures for successive
periods not exceeding 20 consecutive quarters for each such period. Upon the
termination of any Deferral Period and the payment of all amounts then due,
the Company may select a new Deferral Period, subject to the requirements
described herein. As a consequence, during any such Deferral Period, quarterly
distributions on the Convertible Preferred Securities would be deferred (but
would continue to accrue with interest thereon) by the applicable CalEnergy
Trust. In the event that the Company exercises this right, during such period
the Company (i) shall not declare or pay dividends on, make 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) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company after the date of initial issuance of the Convertible Junior
Subordinated Debentures that rank pari passu with or junior to the Convertible
Junior Subordinated Debentures, and (iii) shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee).
Prior to the termination of any such Deferral Period, the Company may further
extend the Deferral Period; provided that such Deferral Period, together with
all previous and further extensions thereof, may not exceed 20 consecutive
quarters and that such Deferral Period may not extend beyond the maturity date
of the Convertible Junior Subordinated Debentures or any earlier redemption
date. The Company has no current intention of exercising its right to defer
payments of interest by extending
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the interest payment period on the Convertible Junior Subordinated Debentures.
However, if the Company should determine to exercise its deferral right in the
future, the market price of the Convertible Preferred Securities is likely to
be adversely affected. See "Description of the Convertible Preferred
Securities--Distributions" and "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
Should a Deferral Period occur, a holder of Convertible Preferred
Securities will continue to accrue interest income for United States federal
income tax purposes. As a result, such a holder will be required to include
such interest in gross income for United States federal income tax purposes in
advance of the receipt of cash, and such holder will not receive the cash from
the Issuer related to such income if such holder disposes of or converts its
Convertible Preferred Securities prior to the record date for payment of
distributions.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION.
Upon the occurrence of a Tax Event or Investment Company Event (both as
defined herein), the Company will, except in certain limited circumstances,
cause the Company Trustees (as defined herein) to liquidate the applicable
CalEnergy Trust and cause Convertible Junior Subordinated Debentures to be
distributed pro rata to the holders of Convertible Preferred Securities. In
certain circumstances, the Company will have the right to redeem the
Convertible Junior Subordinated Debentures, in whole (but not in part), at
100% of the principal amount plus accrued and unpaid interest, in lieu of a
distribution of the Convertible Junior Subordinated Debentures, in which event
the Convertible Preferred Securities will be redeemed in whole at the
liquidation preference set forth in the applicable Prospectus Supplement per
each of the Convertible Preferred Securities plus accrued and unpaid
distributions. In the case of a Tax Event, the Company may also elect to cause
the Convertible Preferred Securities to remain outstanding and pay Additional
Interest (as defined herein) on the Convertible Junior Subordinated
Debentures. See "Description of the Convertible Preferred Securities--Tax
Event or Investment Company Event Redemption or Distribution," "Description of
the Convertible Junior Subordinated Debentures--General" and any accompanying
Prospectus Supplement relating to Convertible Preferred Securities.
Under current United States federal income tax law, a distribution of
the Convertible Junior Subordinated Debentures would not be a taxable event to
holders of the Convertible Preferred Securities. However, if the relevant
Special Event (as defined herein) is a Tax Event which results in the Issuer
being treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to holders of the Convertible
Preferred Securities.
LIMITED VOTING RIGHTS. Except in the limited circumstances described
herein, holders of Convertible Preferred Securities will have no voting
rights. See "Description of the Convertible Preferred Securities--Voting
Rights" and any accompanying Prospectus Supplement relating to Convertible
Preferred Securities.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the
Company's 1996 Stock Option Plan (the "1996 Plan"), as of June 30, 1997, the
Company had outstanding various options to its officers, directors and
employees for the purchase of 4,859,668 shares of Common Stock. All of the
shares of Common Stock issuable upon exercise of said options have been
registered pursuant to registration statements on Form S-8, and, when fully
vested, are available for immediate resale. Also as of June 30, 1997, there
were additional options outstanding to purchase 1,306,000 shares of Common
Stock, 1,000,000 of which were granted to Peter Kiewit Sons', Inc. ("PKS"). As
of June 30, 1997, PKS has demand and piggyback registration rights with
respect to (i) approximately 19,231,065 shares of Common Stock (and any shares
of Common Stock subsequently held by PKS) and (ii) all of its options to
purchase shares of Common Stock (and the shares issuable upon exercise of such
options). Sales of substantial amounts of Common Stock or the availability of
Common Stock for sale, could have an adverse impact on the market price of the
Common Stock and on the Company's ability to raise additional capital through
the sale of Common Stock.
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TRADING CHARACTERISTICS OF THE CONVERTIBLE PREFERRED SECURITIES. The
Convertible Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid distributions. A holder who disposes
of its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Convertible Junior Subordinated Debentures through the date of
disposition in income as ordinary income (i.e., original issue discount), and
to add such amount to its adjusted tax basis in its pro rata share of the
underlying Convertible Junior Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of original issue discount, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See any accompanying Prospectus
Summary relating to Convertible Preferred Securities.
LACK OF PUBLIC MARKET FOR THE CONVERTIBLE PREFERRED SECURITIES. There
is no existing public trading market for the Convertible Preferred Securities,
and there can be no assurance regarding the future development of a market for
the Convertible Preferred Securities, or the ability of holders of the
Convertible Preferred Securities to sell their Convertible Preferred
Securities or the price at which such holders may be able to sell their
Convertible Preferred Securities. If such a market were to develop, the
Convertible Preferred Securities could trade at prices that may be higher or
lower than their initial offering price depending on many factors, including
prevailing interest rates, the price of the Common Stock, the Company's
operating results and the market for similar securities.
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THE CALENERGY TRUSTS
Each of CalEnergy Capital Trust III, CalEnergy Capital Trust IV and
CalEnergy Capital Trust V (each, an "Issuer" or a "CalEnergy Trust" and
collectively, the "Issuers" of the "CalEnergy Trusts") is a statutory business
trust formed under Delaware law pursuant to (i) a declaration of trust (the
"Declaration") executed by the Company, as sponsor of such CalEnergy Trust,
and the trustees of each CalEnergy Trust (the "Issuer Trustees") and (ii) the
filing of a certificate of trust with the Secretary of State of the State of
Delaware. For each CalEnergy Trust, the Company will own, directly or
indirectly, Common Securities in an aggregate liquidation amount equal to 3%
of the total capital of such CalEnergy Trust. The Common Securities will rank
pari passu, and payment will be made thereon pro rata, with the Convertible
Preferred Securities, except that, upon the occurrence and during the
continuance of an event of default under the Declaration, the rights of the
holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the Convertible Preferred Securities. The assets
of each CalEnergy Trust will consist principally of the Convertible Junior
Subordinated Debentures. Each CalEnergy Trust exists for the exclusive purpose
of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of such CalEnergy Trust, (ii) investing the gross
proceeds of the Trust Securities in the Convertible Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to each Declaration, there are initially five Issuer
Trustees for each CalEnergy Trust. Three of the Issuer Trustees (the "Company
Trustees") are individuals who are employees or officers of or who are
affiliated with the Company. The fourth trustee is a financial institution
that is unaffiliated with the Company (the "Trustee"). The fifth trustee is an
entity which maintains its principal place of business in the State of
Delaware (the "Delaware Trustee"). Initially, The Bank of New York, a New York
banking corporation, acts as Trustee and its affiliate, The Bank of New York
(Delaware), a Delaware banking corporation,) acts as Delaware Trustee until,
in each case, removed or replaced by the holder of the Common Securities. The
Bank of New York also acts as indenture trustee under the Guarantee (the
"Guarantee Trustee") and under the Indenture (the "Indenture Trustee"). See
"Description of the Guarantee" and "Description of the Convertible Preferred
Securities."
Each Trustee will hold title to the Convertible Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities of such
CalEnergy Trust and the Trustee has the power to exercise all rights, powers
and privileges under the Indenture (as defined herein) as the holder of the
Convertible Junior Subordinated Debentures. In addition, each Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the
Convertible Junior Subordinated Debentures for the benefit of the applicable
holders of the Trust Securities. For each CalEnergy Trust, the Company, as the
direct or indirect holder of all the Common Securities, will have the right to
appoint, remove or replace any of the Issuer Trustees and to increase or
decrease the number of trustees, provided that the number of trustees shall be
at least three, a majority of which shall be Company Trustees. The Company
will pay all fees and expenses related to each CalEnergy Trust and the
offering of the Convertible Preferred Securities. See "Description of the
Convertible Junior Subordinated Debentures."
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, if any,
are as set forth in the Declaration and the Delaware Business Trust Act, as
amended (the "Trust Act"). See "Description of the Convertible Preferred
Securities." The Declaration, the Indenture and the Guarantee also incorporate
by reference the terms of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Declaration, the Indenture and the Guarantee will
be qualified under the Trust Indenture Act. The place of business and the
telephone number of the Trust are the principal executive offices and
telephone number of the Company. See "The Company."
This description summarizes the material terms of the Declarations
and is qualified in its entirety by reference to the form of Declaration which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act.
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THE COMPANY
GENERAL
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 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.
Over the last three years ended December 31, 1996, the Company has
experienced significant growth. The market capitalization of the Company has
risen at a compound annual rate of 48% from approximately $656 million in 1993
to approximately $2,140 million in 1996, the revenues of the Company have
risen at a compound annual rate of 57% from approximately $149 million in 1993
to approximately $576 million in 1996 and net income available to common
stockholders has risen at a compound annual rate of 29% from approximately $43
million in 1993 to approximately $92 million in 1996. This significant growth
has been achieved through: (i) acquisitions that complement and diversify the
Company's existing business, broaden the geographic locations of its assets
and enhance its competitive capabilities, (ii) enhancement of the financial
and technical performance of existing and acquired projects, and (iii)
development and construction of new plants and facilities ("greenfield
development").
In the last two years, the Company has consummated several
significant acquisitions. In January 1995, the Company acquired Magma, a
publicly-traded United States independent power producer with 228 MW of
aggregate net operating capacity and 154 MW of aggregate net ownership
capacity, for approximately $958 million. The Magma acquisition, combined with
the Company's previously existing assets, made the Company the largest
independent geothermal power producer in the world today (based on the
Company's estimate of aggregate MW of electric generating capacity in
operation and under construction). In April 1996, the Company completed the
buy-out for approximately $70 million of its partner's interests in four
electric generating plants in Southern California, resulting in sole ownership
of the Imperial Valley Projects' 228 MW of aggregate net operating capacity.
In August 1996, the Company acquired Falcon Seaboard for approximately $226
million, thereby acquiring significant ownership in 520 MW of natural
gas-fired electric production facilities located in New York, Texas and
Pennsylvania and a related gas transmission pipeline.
In March 1997, the Company completed the acquisition of Northern
Electric plc. Northern is one of the twelve 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 1989 to
distribute and supply electricity in its authorized area located in northeast
England. 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. The electricity industry
in Great Britain is overseen by the Office of Electricity Regulation headed by
the Regulator. The regulatory framework includes price controls which limit
the maximum average prices that Northern can charge for distributing and
supplying electricity.
Through its subsidiaries and joint ventures, the Company presently
operates 20 projects with an aggregate net capacity of 1,635 MW, in which it
has a net ownership interest of 1,325 MW of electric generating capacity. This
includes an aggregate net ownership interest of 916 MW in facilities located
in the United States (which facilities have an aggregate net capacity of 1,135
MW, of which 570 MW are fueled with
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natural gas and 565 MW are geothermal-fired). The remaining 500 MW, in which
the Company has a net ownership interest of 409 MW, are supplied by two
geothermal power production facilities owned and operated by the Company in
the Philippines. Also, the Company has an equity interest representing 202 net
MW in, but does not operate, the 1,875 MW Teesside Project in England.
With respect to power generation projects that are financed and under
construction, the Company has an aggregate net ownership interest of 55 MW of
electric generating capacity in a hydroelectric project in the Philippines,
which has an aggregate net capacity of 150 MW. The Company is also currently
constructing a 52 net MW geothermal project in Indonesia, in which the Company
has an aggregate net ownership interest of 26 MW of electric generating
capacity, as the first phase of the Company's planned Indonesian geothermal
project development of approximately 1,000 MW under contract. The Company has
commenced construction of a 50 MW gas fired power project in England in which
the Company has net ownership interest of 18 MW. The Company expects that it
will operate all of these projects.
The Company is also currently developing six additional projects with
executed or awarded power sales contracts in the Philippines, Indonesia and
the United States. The Company is expected to have an approximate net
ownership interest of 573 MW in these development projects (which represent an
aggregate net capacity of 1,260 MW of additional potential electric generating
capacity). Substantial contingencies exist with respect to development
projects, including, without limitation, the need to obtain financing, permits
and licenses and the satisfactory completion of construction. The Company
expects that it will operate all of these projects.
The Common Stock is traded on the New York, Pacific and London Stock
Exchanges. As of June 30, 1997, PKS was an approximate 27% stockholder of the
Company (on a fully diluted basis). PKS is a large employee-owned
construction, mining and telecommunications company with approximately $3.0
billion in revenues in 1996. PKS is one of the largest construction companies
in North America and has been in the construction business since 1884.
STRATEGY
General. The Company's strategy remains focused upon continued growth
in its core power generation business through the development of new projects,
enhancement of existing and acquired assets' performance, and the acquisition
of companies and projects that diversify the Company's power generation
technologies and the geographic locations of its generation assets and enhance
its competitive capabilities. The Company is also pursuing strategic expansion
into other aspects of the global power business, including the distribution
and supply of electricity, in order to diversify its business and cash flows,
develop and enhance its distribution, marketing and power pool skills and
increase its competitive capabilities. The Company's acquisition of Northern
was implemented in furtherance of this aspect of its strategy. The Company
believes that its existing assets, strengths and skills, coupled with
Northern's distribution and supply skills, its experience in the largely
deregulated United Kingdom power market and the resulting diversification in
the Company's assets and geographic location will position the Company to
maximize its ability to participate successfully (by way of acquisition or
otherwise) in opportunities expected to be created in the next few years by
restructurings in the United States and other global energy markets. The
Company's pending tender offer for 9.9% of the outstanding NYSEG common stock
and its proposal to acquire 100% of the outstanding NYSEG common stock are
intended to further this aspect of its strategy. The Company also selectively
will seek opportunities to expand beyond power generation, distribution and
supply in areas related to these core businesses, such as power transmission
and gas production and supply, if such opportunities will enhance the
Company's competitive capabilities and financial position.
Power Generation. The Company presently believes that the
international independent power market holds the majority of new opportunities
for financially attractive private power development in the next several
years, in large part because the demand for new generating capacity is growing
more rapidly in emerging nations than in the United States. In developing its
international strategy, the Company pursues development opportunities in
countries that it believes have an acceptable risk profile and where the
Company's resource
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development and operating experience, project development and financing
expertise or strategic relationship with PKS or local partners are expected to
provide it with a competitive advantage. Domestically, the Company is focusing
on environmentally responsible power generation opportunities in which it
believes it has relative competitive advantages due to its technical, project
management, project financing and operating expertise. In the near term, the
Company expects that its continued domestic generation expansion will be
accomplished primarily through selected acquisitions, including acquisitions
of partially developed or existing power generating projects and contracts,
although the Company will consider appropriate domestic greenfield development
opportunities if they arise. The Company is also evaluating the potential
opportunities of direct access and power marketing through use of retail
wheeling.
Distribution, Supply and Other Related Energy Businesses. The Company
believes that the power distribution and supply businesses present significant
investment and return opportunities at the present time in selected foreign
markets, such as the United Kingdom, and that power distribution and supply
skills will comprise a significant component of the skill base required to
compete effectively in the United States and other global power markets as
those markets become deregulated and competitive. The Company believes that
the impending changes in the regulation of the United States power markets
will reflect many aspects of the United Kingdom model for competitive
generation, transmission, distribution and supply of energy. Thus, the
experience of the staff involved in Northern's operations in the United
Kingdom markets should strengthen the Company's ability to compete
successfully as other markets are also deregulated. The current effort to
introduce broader wholesale and retail competition in the United States is
expected by the Company to result both in a continuing trend toward
consolidation among domestic utilities and independent power producers and in
the disaggregation (or unbundling) of vertically integrated utilities into
separate generation, transmission and distribution businesses. While this may
result in significant increased competition in each of these businesses, the
Company believes that the acquisition of Northern and the experience of
Northern's staff in the competitive and substantially deregulated United
Kingdom market, coupled with the Company's existing development and generation
capabilities, will provide the Company with the ability to capitalize on the
opportunities and challenges of an increasingly deregulated and competitive
domestic market for the generation, transmission, distribution and supply of
energy. The Company's recently proposed acquisition of NYSEG, if consummated,
is believed by the Company to represent such an opportunity in the United
States markets. Similar opportunities also are expected to occur in other
countries as various international markets undergo similar restructuring. The
Company believes that as the wholesale and retail energy markets become more
competitive, the principal factor determining success is likely to be price,
and, to a lesser extent, reliability, availability of capacity and customer
service. Accordingly, its acquisitions of domestic utility assets in a
deregulated environment will have to meet defined criteria, including the
potential to lower costs, increase long-term efficiency and competitiveness
and provide an acceptable rate of return and benefit to the Company and its
stockholders.
-------------------------
The principal executive offices of the Company are located at 302
South 36th Street, Suite 400, Omaha, Nebraska 68131 and its telephone number
is (402) 341-4500. The Company was incorporated in 1971 under the laws of the
State of Delaware.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges on a historical basis for each of the five years in the period
ended December 31, 1996 and for the three months ended March 31, 1996 and
1997.
Three Months Ended
YEAR ENDED DECEMBER 31, March 31,
----------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to
Fixed Charges.......... 3.2 2.8 1.7 1.5 1.6 1.3 1.7
For purposes of computing historical ratios of earnings to fixed
charges, earnings are divided by fixed charges. "Earnings" represent the
aggregate of (a) the pre-tax income of the Company, including its
proportionate share of the pre-tax income of the Coso Project and excluding
the equity in loss of a non-consolidated subsidiary, and (b) fixed charges,
less capitalized interest. "Fixed charges" represent interest (whether
expensed or capitalized), amortization of deferred financing and bank fees,
the portion of rentals considered to be representative of the interest factor
(one-third of lease payments) and preferred stock dividend requirements of
majority owned subsidiaries.
ACCOUNTING TREATMENT
The financial statements of the CalEnergy Trusts will be reflected in
the Company's consolidated financial statements with the Convertible Preferred
Securities shown as Company-obligated mandatorily redeemable convertible
preferred securities of subsidiary trusts holding Convertible Junior
Subordinated Debentures of the Company.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement
accompanying this Prospectus, proceeds from the sale of the Offered Securities
ultimately will be used by the Company to make equity investments in future
domestic and international energy projects, to fund possible project or
Company acquisitions, for the repayment of debt or for other general corporate
purposes, and initially may be temporarily invested in short-term securities.
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DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The following summary of the material terms and provisions of the
Convertible Preferred Securities are subject to, and qualified in their
entirety by reference to, the Declaration for each of the CalEnergy Trusts,
which has been filed as an exhibit to this Registration Statement of which
this Prospectus is a part, and the Trust Indenture Act. Capitalized terms not
otherwise defined herein have the meanings assigned to them in the form of
Declaration.
GENERAL
Upon issuance of any Convertible Preferred Securities by a CalEnergy
Trust, the Convertible Preferred Securities will be issued in fully registered
form without interest coupons. Bearer Convertible Preferred Securities will
not be issued.
Upon issuance, the Convertible Preferred Securities will represent
undivided beneficial ownership interests in the assets of each Issuer and
entitle the holders thereof to a preference in certain circumstances with
respect to distributions and amounts payable on redemption or liquidation over
the Common Securities, as well as other benefits as described in the
Declaration.
Upon issuance, all of the Common Securities will be owned, directly
or indirectly, by the Company. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Convertible Preferred
Securities except as described under "--Subordination of Common Securities."
When issued, the Convertible Junior Subordinated Debentures will be owned by
the Trustee and held for the benefit of the holders of the Trust Securities.
The Declaration does not permit the issuance by a CalEnergy Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by such CalEnergy Trust.
The Convertible Preferred Securities may be issued in one or more
series. The particular terms of each series of Convertible Preferred
Securities, as well as any modifications of or additions to the general terms
of the Convertible Preferred Securities as described herein that may be
applicable in the case of a particular series of Convertible Preferred
Securities, will be described in the Prospectus Supplement relating to such
series of Convertible Preferred Securities. Accordingly, for a description of
the terms of a particular series of Convertible Preferred Securities,
reference must be made to both the Prospectus Supplement relating thereto and
the description of Convertible Preferred Securities set forth in this
Prospectus.
DISTRIBUTIONS
Pursuant to each Declaration, the distributions payable on each of
the Convertible Preferred Securities will be fixed at a rate per annum set
forth in a Prospectus Supplement. Deferred distributions (and interest
thereon) will accrue interest (compounded quarterly) at the same rate. The
term "distributions" as used herein includes any such distributions payable
unless otherwise stated. The amount of distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Convertible Preferred Securities will be
cumulative, accrue from the date of initial issuance and will be payable
quarterly in arrears as set for in an applicable Prospectus Supplement, when,
as and if available. The Company will have the right under each Indenture to
defer interest payments from time to time on the Convertible Junior
Subordinated Debentures for successive periods not exceeding 20 consecutive
quarters for each such period, and, as a consequence, quarterly distributions
on the Convertible Preferred Securities would be deferred by the Issuer (but
would continue to accrue with interest) during any such Deferral Period. In
the event that the Company exercises this right, during such period the
Company (i) shall not declare or pay dividends on, make 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
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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) shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company after the date
of original issuance of the Convertible Junior Subordinated Debentures that
rank pari passu with or junior to the Convertible Junior Subordinated
Debentures, and (iii) shall not make any guarantee payments with respect to
the foregoing (other than pursuant to the Guarantees). Prior to the
termination of any Deferral Period, the Company may further extend such
Deferral Period; provided that such Deferral Period together with all previous
and further deferrals thereof may not exceed 20 consecutive quarters. Upon the
termination of any Deferral Period, the Company will be required to pay all
amounts then due and, upon such payment, the Company may select a new Deferral
Period, subject to the above requirements. In no event shall any Deferral
Period extend beyond the maturity of the Convertible Junior Subordinated
Debentures or any earlier Redemption Date. See "Description of the Convertible
Junior Subordinated Debentures--Interest" and "--Option to Extend Interest
Payment Period."
Pursuant to each Declaration, distributions on the Convertible
Preferred Securities must be paid quarterly on the dates payable to the extent
of funds of each CalEnergy Trust available for the payment of such
distributions. Amounts available to each CalEnergy Trust for distribution to
the holders of the Convertible Preferred Securities will be limited to
payments under the Convertible Junior Subordinated Debentures in which the
Issuer will invest the proceeds from the issuance and sale of the Trust
Securities. See "Description of the Convertible Junior Subordinated
Debentures." The payment of distributions, to the extent of funds of each
CalEnergy Trust available therefor, are guaranteed by the Company, as set
forth under "Description of the Guarantee."
Pursuant to each Declaration, distributions on the Convertible
Preferred Securities will be payable to the holders thereof as they appear on
the books and records of each Issuer on the relevant record dates, which will
be fifteen days prior to the relevant payment dates. Subject to any applicable
laws and regulations and the provisions of each CalEnergy Trust's Declaration,
each such payment will be made as described under "--Payment and Paying
Agency" below. In the event that any date on which distributions are payable
on the Convertible Preferred Securities is not a Business Day, payment of the
distribution payable on such date will be made on the next succeeding day
which is a Business Day (without any distribution 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. A "Business Day" shall mean any day other than a day on which banking
institutions in The City of New York or Wilmington, Delaware are authorized or
required by law to close.
CONVERSION RIGHTS
General. Upon issuance, Convertible Preferred Securities will be
convertible at any time beginning 60 days following their date of original
issuance. Each Issuer will covenant in its Declaration not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. A holder of Convertible Preferred Securities
wishing to exercise its conversion right will have to deliver an irrevocable
conversion notice, together, if such Convertible Preferred Securities is a
Certificated Security (as defined herein), with such Certificated Security, to
the Conversion Agent which shall, on behalf of such holder, exchange such of
the Convertible Preferred Securities for a portion of the Convertible Junior
Subordinated Debentures and immediately convert such Convertible Junior
Subordinated Debentures into Common Stock. Holders may obtain copies of the
required form of the conversion notice from the Conversion Agent.
Holders of Convertible Preferred Securities at the close of business
on a distribution record date will be entitled to receive the distribution
payable on such Convertible Preferred Securities on the corresponding
distribution payment date notwithstanding the conversion of such Convertible
Preferred Securities following
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such distribution record date but prior to such distribution payment date.
Except as provided in the immediately preceding sentence, neither the Issuer
nor the Company will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid distributions, whether or not in
arrears, on converted Convertible Preferred Securities. The Company will make
no payment or allowance for distributions on the shares of Common Stock issued
upon such conversion, except to the extent that such shares of Common Stock
are held of record on the record date for any such distributions, except in
certain limited circumstances. Each conversion will be deemed to have been
effected immediately prior to the close of business on the day on which the
related conversion notice was received by the applicable Issuer.
No fractional shares of the Common Stock will be issued as a result
of conversion, but in lieu thereof such fractional interest will be paid by
the Company in cash.
Conversion Price Adjustments--General. The conversion price will be
subject to adjustment in certain events including, without duplication: (a)
the issuance of shares of Common Stock as a dividend or a distribution with
respect to Common Stock, (b) subdivisions, combinations and reclassification
of Common Stock, (c) the issuance to all holders of Common Stock of rights or
warrants entitling them (for a period not exceeding 45 days) to subscribe for
shares of Common Stock at less than the current market price, (d) the
distribution to holders of Common Stock of evidences of indebtedness of the
Company, securities or capital stock, cash or assets (including securities,
but excluding those rights, warrants, dividends and distributions referred to
above and dividends paid exclusively in cash), (e) declaration and payment of
a cash dividend on the Common Stock in a per share amount which exceeds the
greater of (A) the per share amount of the immediately preceding quarterly
cash dividend on its Common Stock and (B) 15% of the current market price of
the Common Stock as of the trading day immediately preceding the date of
declaration of such dividend, and (f) payment to holders of Common Stock in
respect of a tender or exchange offer by the Company or any subsidiary for
Common Stock (other than an odd lot tender offer) at a price in excess of 110%
of the current market price of Common Stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer.
The Company from time to time may reduce the conversion price of the
Convertible Junior Subordinated Debentures (and thus the conversion price of
the Convertible Preferred Securities) by any amount selected by the Company
for any period of at least 20 days, in which case the Company shall give at
least 15 days' notice of such reduction. The Company may, at its option, make
such reductions in the conversion price, in addition to those set forth above,
as the Company's Board of Directors deems advisable to avoid or diminish any
income tax to holders of 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.
No adjustment of the conversion price will be made upon the issuance
of any shares of Common Stock pursuant to any present or future 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. No adjustment in the conversion price will be
required unless such adjustment would require a change of at least one percent
(1%) in the price then in effect; provided, however, that any adjustment that
would not be required to be made shall be carried forward and taken into
account in any subsequent adjustment. 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
Convertible Preferred Securities.
Conversion price adjustments or omissions in making such adjustments
may, under certain circumstances, be deemed to be distributions that could be
taxable as dividends to holders of the Convertible Preferred Securities or to
the holders of Common Stock.
Conversion Adjustments--Merger, Consolidation or Sale of Assets of
the Company. In the event that the Company shall be a party to any transaction
(including, without limitation, and with certain exceptions), (a)
recapitalization or reclassification of the Common Stock, (b) consolidation of
the Company with, or merger of the Company into, any other person, or any
merger of another person into the Company, (c) any sale, transfer
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or lease 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 (each of
the foregoing being referred to as a "Transaction"), then the holders of the
Convertible Preferred Securities then outstanding shall have the right to
convert the Convertible Preferred Securities into the kind and amount of
securities, cash or other property receivable upon the consummation of such
Transaction by a holder of the number of shares of Common Stock issuable upon
conversion of such Convertible Preferred Securities immediately prior to such
Transaction.
In the case of a Transaction, each of the Convertible Preferred
Securities then outstanding would become convertible into the securities, cash
or property receivable by a holder of the number of shares of the Common Stock
into which such Convertible Preferred Securities was convertible immediately
prior to such Transaction. This change could substantially lessen or eliminate
the value of the conversion privilege associated with the Convertible
Preferred Securities in the future. For example, if the Company were acquired
in a cash merger, each of the Convertible Preferred Securities would become
convertible solely into cash and would no longer be convertible into
securities whose value would vary depending on the future prospects of the
Company and other factors.
OPTIONAL REDEMPTION
The Company will be permitted to redeem the Convertible Junior
Subordinated Debentures as described herein under "Description of the
Convertible Junior Subordinated Debentures--Optional Redemption," in whole or
in part, from time to time, on terms described in each supplemental Indenture.
Upon any redemption in whole or in part of the Convertible Junior Subordinated
Debentures at the option of the Company, the applicable Issuer will, to the
extent of the proceeds of such redemption, redeem Convertible Preferred
Securities and Common Securities at the Redemption Price. In the event that
fewer than all the outstanding Convertible Preferred Securities are to be so
redeemed, the Convertible Preferred Securities to be redeemed will be selected
as described under "--Form, Denomination and Registration--Global Certificate;
Book-Entry Form" below.
In the event of any redemption in part, a CalEnergy Trust shall not
be required to (i) issue, register the transfer of or exchange any of the
Convertible Preferred Securities during a period beginning at the opening of
business 15 days before any selection for redemption of Convertible Preferred
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 Convertible Preferred Securities to be so redeemed and (ii) register the
transfer of or exchange any Convertible Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Convertible Preferred Securities being redeemed in part. See "--Redemption
Procedures."
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event (as defined herein) shall occur and be continuing, the
Company shall cause the Company Trustees to dissolve and liquidate the
applicable Issuer and cause the applicable Convertible Junior Subordinated
Debentures, subject to the rights of creditors under applicable law, to be
distributed to the holders of the Convertible Preferred Securities in
liquidation of such Issuer within 90 days following the occurrence of such Tax
Event; provided, however, that such liquidation and distribution shall be
conditioned on (i) the Company Trustees' receipt of an opinion of nationally
recognized independent tax counsel (reasonably acceptable to the Company
Trustees) experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on published revenue rulings of the Internal Revenue Service,
to the effect that the holders of such Convertible Preferred Securities will
not recognize any income, gain or loss for United States federal income tax
purposes as a result of such liquidation and distribution of the Convertible
Junior Subordinated Debentures, and (ii) the Company being unable to avoid
such Tax Event within such 90-day period by taking some ministerial action or
pursuing some other reasonable measure that, in the sole judgment of the
Company, will have no adverse effect on such Issuer, the Company or the
holders of the Convertible Preferred Securities and will involve no material
cost. Furthermore, if (i) the Company has received an opinion (a "Redemption
Tax Opinion") of nationally
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recognized independent tax counsel (reasonably acceptable to the Company
Trustees) experienced in such matters that, as a result of a Tax Event, there
is more than an insubstantial risk that the Company would be precluded from
deducting the interest on the Convertible Junior Subordinated Debentures for
United States federal income tax purposes, even after the Convertible Junior
Subordinated Debentures were distributed to the holders of the Convertible
Preferred Securities upon liquidation of the Issuer as described above, or
(ii) the Company Trustees shall have been informed by such tax counsel that it
cannot deliver a No Recognition Opinion, the Company shall have the right,
upon not less than 30 nor more than 60 days' notice and within 90 days
following the occurrence of the Tax Event, to redeem the Convertible Junior
Subordinated Debentures, in whole (but not in part) for cash, at 100% of
principal amount thereof plus accrued and unpaid interest and, following such
redemption, all the Convertible Preferred Securities will be redeemed by such
Issuer at the liquidation preference of each of the Convertible Preferred
Securities plus accrued and unpaid distributions; provided, however, that, if
at the time there is available to the Company or such Issuer the opportunity
to eliminate, within such 90-day period, the Tax Event by taking some
ministerial action or pursuing some other reasonable measure that, in the sole
judgment of the Company, will have no adverse effect on such Issuer, the
Company or the holders of the Convertible Preferred Securities and will
involve no material cost, such Issuer or the Company will pursue such measure
in lieu of redemption. See "--Mandatory Redemption." In lieu of the foregoing
options, the Company will also have the option of causing the Convertible
Preferred Securities to remain outstanding and pay Additional Interest (as
defined herein) on the Convertible Junior Subordinated Debentures. See
"Description of the Convertible Junior Subordinated Debentures--Additional
Interest."
"Tax Event" means that the Company shall have obtained an opinion of
nationally recognized independent tax counsel (reasonably acceptable to the
Company Trustees) experienced in such matters to the effect that, as a result
of (a) any amendment to or change (including any announced prospective change)
in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination on or after the date of the
applicable Prospectus Supplement), which amendment or change is effective, is
enacted or which interpretation or pronouncement is announced on or after the
date of the applicable Prospectus Supplement (collectively, a "Change In Tax
Law"), there is more than an insubstantial risk that (i) an Issuer is or will
be subject to United States federal income tax with respect to interest
received on the Convertible Junior Subordinated Debentures, (ii) interest
payable to such Issuer on the Convertible Junior Subordinated Debentures is
not or will not be deductible for United States federal income tax purposes or
(iii) such Issuer is or will be subject to more than a de minimis amount of
other taxes, duties, assessments or other governmental charges of whatever
nature imposed by the United States, or any other taxing authority.
Notwithstanding anything in the previous sentence to the contrary, a Tax Event
shall not include any Change in Tax Law that requires the Company for United
States federal income tax purposes to defer taking a deduction for any
original issue discount ("OID") that accrues with respect to the Convertible
Junior Subordinated Debentures until the interest payment related to such OID
is paid by the Company in money provided that such Change in Tax Law does not
create more than an insubstantial risk that the Company will be prevented from
taking a deduction for OID accruing with respect to the Convertible Junior
Subordinated Debentures at a date that is no later than the date the interest
payment related to such OID is actually paid by the Company in money.
If an Investment Company Event (as defined herein) shall occur and be
continuing, the Company shall cause the Company Trustees to dissolve and
liquidate each Issuer involved and cause the Convertible Junior Subordinated
Debentures, subject to the rights of creditors under applicable law, to be
distributed to the holders of the Convertible Preferred Securities in
liquidation of such Issuer within 90 days following the occurrence of such
Investment Company Event.
The distribution by the Company of the Convertible Junior
Subordinated Debentures will effectively result in the cancellation of the
Convertible Preferred Securities.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency
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or regulatory authority (a "Change in 1940 Act Law") to the effect that an
Issuer is or will be considered an "investment company" which is required to
be registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 1940 Act Law becomes effective on or after the date of
the applicable Prospectus Supplement.
A "Special Event" means either an Investment Company Event or a Tax
Event.
After the date fixed for any distribution of Convertible Junior
Subordinated Debentures (i) the Convertible Preferred Securities will no
longer be deemed to be outstanding, (ii) The Depository Trust Company ("DTC")
or its nominee, as the record holder of the Global Certificates, will receive
a registered global certificate or certificates representing the Convertible
Junior Subordinated Debentures to be delivered upon such distribution and
(iii) any certificates representing Convertible Preferred Securities not held
by DTC or its nominee will be deemed to represent Convertible Junior
Subordinated Debentures having a principal amount equal to the aggregate of
the stated liquidation preference of such Convertible Preferred Securities,
with accrued and unpaid interest equal to the amount of accrued and unpaid
distributions on such Convertible Preferred Securities, until such
certificates are presented to the Company or its agent for transfer or
reissuance.
MANDATORY REDEMPTION
The Convertible Junior Subordinated Debentures will mature on or may
be redeemed, in whole or in part, on the dates set forth in each supplemental
Indenture or at any time in certain circumstances upon the occurrence of a Tax
Event. Upon the repayment or payment of the Convertible Junior Subordinated
Debentures, whether at maturity or upon redemption or otherwise, the proceeds
from such repayment or redemption shall simultaneously be applied to redeem
Trust Securities having an aggregate liquidation amount equal to the
Convertible Junior Subordinated Debentures so repaid or redeemed at the
applicable redemption price together with accrued and unpaid distributions
through the date of redemptions provided that holders of the Trust Securities
shall be given not less than 30 nor more than 60 days' notice of such
redemption. See "--Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Junior Subordinated
Debentures--General" and "--Optional Redemption." Upon the repayment of the
Convertible Junior Subordinated Debentures at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds from such
repayment will be applied to redeem the Convertible Preferred Securities and
Common Securities, in whole, upon not less than 30 nor more than 60 days'
notice.
REDEMPTION PROCEDURES
The Convertible Preferred Securities will not be redeemed unless all
accrued and unpaid distributions have been paid on all Convertible Preferred
Securities for all quarterly distribution periods terminating on or prior to
the date of redemption.
If an Issuer gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, such Issuer will irrevocably deposit
with DTC funds sufficient to pay the amount payable on redemption and will
give DTC irrevocable instructions and authority to pay such amount in respect
of Convertible Preferred Securities represented by the Global Certificates and
will irrevocably deposit with the paying agent for the Convertible Preferred
Securities funds sufficient to pay such amount in respect of any Certificated
Securities and will give such paying agent irrevocable instructions and
authority to pay such amount to the holders of Certificated Securities upon
surrender of their certificates. Notwithstanding the foregoing, distributions
payable on or prior to the redemption date for any Convertible Preferred
Securities called for redemption shall be payable to the holders of such
Convertible Preferred Securities on the relevant record dates for the related
distribution dates. If notice of redemption shall have been given and funds
are deposited as required, then upon the date of such deposit, all rights of
holders of such Convertible Preferred Securities so called for redemption will
cease, except the right of the holders of such Convertible Preferred
Securities to receive the redemption price, but without interest on such
redemption price. In the event that any date fixed for redemption of
Convertible Preferred Securities is not
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a Business Day, then payment of the amount payable on such date will be made
on the next succeeding day which is a Business Day (without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the redemption price in
respect of Convertible Preferred Securities is improperly withheld or refused,
and not paid either by such Issuer or by the Company pursuant to the Guarantee
described under "Description of the Guarantee," distributions on such
Convertible Preferred Securities will continue to accrue at the then
applicable rate, from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the amount payable upon redemption
(other than for purposes of calculating any premium).
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Company or its
subsidiaries may at any time and from time to time purchase outstanding
Convertible Preferred Securities by tender, in the open market or by private
agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption
of, the Trust Securities, as applicable, shall be made pro rata based on the
liquidation preference of the Trust Securities; provided, however, that, if on
any distribution date or redemption date a Declaration Event of Default (as
defined below under "--Declaration Events of Default") under the applicable
Declaration shall have occurred and be continuing, no payment of any
distribution on, or amount payable upon redemption of, any Common Security,
and no other payment on account of the redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment in full in cash
of accumulated and unpaid distributions on all outstanding Convertible
Preferred Securities for all distribution periods terminating on or prior
thereto, or in the case of payment of the amount payable upon redemption of
the Convertible Preferred Securities, the full amount of such amount in
respect of all outstanding Convertible Preferred Securities, shall have been
made or provided for, and all funds available to the Trustee shall first be
applied to the payment in full in cash of all distributions on, or the amount
payable upon redemption of, Convertible Preferred Securities then due and
payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Convertible
Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Declaration Events of Default with respect to the Convertible
Preferred Securities have been so cured, waived or otherwise eliminated, the
Trustee shall act solely on behalf of the holders of the Convertible Preferred
Securities and not the holder of the Common Securities, and only the holders
of the Convertible Preferred Securities will have the right to direct the
Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation,
dissolution, winding up or termination of an Issuer, the holders of the
Convertible Preferred Securities at the time will be entitled to receive out
of the assets of the Issuer available for distribution to holders of Trust
Securities after satisfaction of liabilities of creditors of the applicable
CalEnergy Trust, before any distribution of assets is made to the holders of
the Common Securities, an amount equal to the aggregate of the stated
liquidation preference of each of the Convertible Preferred Securities and
accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such liquidation,
dissolution, winding up or termination, Convertible Junior Subordinated
Debentures in an aggregate principal amount equal to the Liquidation
Distribution have been distributed on a pro rata basis to the holders of the
Trust Securities.
Pursuant to each Declaration, each Issuer shall be dissolved and its
affairs shall be wound up upon the earliest to occur of the following: (i) the
expiration of the term of an Issuer, (ii) the bankruptcy of the Company, (iii)
the filing of a certificate of dissolution or its equivalent with respect to
the Company or the approval of the filing of a certificate of cancellation
with respect to an Issuer, by the holders of at least a majority in
liquidation
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amount of the outstanding Convertible Preferred Securities as described under
"--Modification of the Declaration," or the revocation of the Company's
charter and the expiration of 90 days after the date of notice to the Company
of such revocation without a reinstatement of its charter, (iv) the
distribution of all the assets of an Issuer, (v) the entry of a decree of a
judicial dissolution of the Company, (vi) the redemption of all of a CalEnergy
Trust's Trust Securities or (vii) the conversion of all outstanding
Convertible Preferred Securities into Common Stock.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE ISSUER
An Issuer may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity or person,
except as described below. An Issuer may, without the consent of the holders
of the Convertible Preferred Securities, consolidate, amalgamate, merge with
or into, or be replaced by, a trust organized as such under the laws of any
state of the United States of America; provided that (i) if such Issuer is not
the survivor, such successor entity either (x) expressly assumes all of the
obligations of the Issuer under the Convertible Preferred Securities or (y)
substitutes for the Convertible Preferred Securities other securities having
substantially the same terms as the Convertible Preferred Securities (the
"Successor Securities") as long as the Successor Securities rank the same as
the Convertible Preferred Securities with respect to distributions, assets and
payments upon liquidation, redemption and otherwise, (ii) the Company
expressly acknowledges a trustee of the successor entity that possesses the
same powers and duties as the Trustee as the holder of the Convertible Junior
Subordinated Debentures, (iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which the Convertible Preferred Securities are then listed,
(iv) such merger, consolidation, amalgamation or replacement does not cause
the Convertible Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization,
(v) such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the
Convertible Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of the Issuer, (vii) the Company has provided a guarantee to
the holders of the Successor Securities with respect to such Successor entity
having substantially the same terms as the applicable Guarantee, and (viii)
prior to such merger, consolidation, amalgamation or replacement, the Company
has received an opinion of nationally recognized independent counsel
(reasonably acceptable to the Trustee) to the Issuer experienced in such
matters to the effect that (x) such successor entity will be treated as a
grantor trust for United States federal income tax purposes, (y) following
such merger, consolidation, amalgamation or replacement, neither the Company
nor such successor entity will be required to register as an investment
company under the 1940 Act and (z) such merger, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences and privileges
of the holders of the Convertible Preferred Securities in any material
respect. Notwithstanding the foregoing, an Issuer shall not, except with the
consent of holders of 100% in liquidation amount of the Common Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause such Issuer or the Successor Entity to be classified
as other than a grantor trust for United States federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Event of Default") or a
default by the Company under a Guarantee will constitute an event of default
under the applicable Declaration with respect to the Trust Securities (a
"Declaration Event of Default"); provided that, pursuant to each Declaration,
the holder of the Common Securities will be deemed to have waived any
Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Convertible Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Trustee
will be deemed to be acting solely on behalf of the holders of the Convertible
Preferred Securities and only the holders
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of the Convertible Preferred Securities will have the right to direct the
Trustee with respect to certain matters under the applicable Declaration and,
therefore, the Indenture.
If a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Convertible Preferred Securities may
directly institute a proceeding (a "Direct Action") for enforcement of payment
to such holder of the principal of or interest on the Convertible Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Convertible Preferred Securities of such holder on
or after the respective due date specified in the Convertible Junior
Subordinated Debentures. In addition, if the Trustee fails to enforce its
rights under the Convertible Junior Subordinated Debentures (other than rights
arising from a Declaration Event of Default described in the immediately
preceding sentence) after any holder of Preferred Securities shall have made a
written request to the Trustee to enforce such rights, such holder of
Convertible Preferred Securities may, to the fullest extent permitted by law,
thereafter institute a Direct Action to enforce the Trustee's rights as holder
of the Convertible Junior Subordinated Debentures, without first instituting
any legal proceeding against the Trustee or any other person. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Convertible Preferred Securities under the Declaration to the extent
of any payment made by the Company to such holder of Convertible Preferred
Securities in such Direct Action. The holders of Convertible Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Convertible Junior Subordinated Debentures.
Upon the occurrence of a Declaration Event of Default, the Trustee as
the sole holder of the Convertible Junior Subordinated Debentures will have
the right under the Indenture to declare the principal of and interest on the
Convertible Junior Subordinated Debentures to be immediately due and payable.
The Company and the Trust are each required to file annually with the Property
Trustee an officer's certificate as to its compliance with all conditions and
covenants under each Declaration.
VOTING RIGHTS
Except as described herein, any Prospectus Supplement, under the
Trust Act, the Trust Indenture Act and under "Description of the
Guarantees--Amendments and Assignments," and as otherwise required by law and
each Declaration, the holders of the Convertible Preferred Securities will
have no voting rights.
Subject to the requirement of the Trustee obtaining a tax opinion in
certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or direct
the exercise of any trust or power conferred upon the Trustee under each
Declaration, including the right to direct the Trustee, as holder of the
Convertible Junior Subordinated Debentures, to (i) exercise the remedies
available under the Indenture with respect to the Convertible Junior
Subordinated Debentures, (ii) waive any past Event of Default that is
waiveable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification, or termination of the Indenture or the Convertible Junior
Subordinated Debentures where such consent shall be required; provided,
however, that, where a consent or action under the Indenture would require the
consent or act of the holders of more than a majority of the aggregate
principal amount of Convertible Junior Subordinated Debentures affected
thereby, only the holders of the percentage of the aggregate stated
liquidation preference of the Convertible Preferred Securities which is at
least equal to the percentage required under the Indenture may direct the
Trustee to give such consent or take such action. If a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible Junior
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Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption on the redemption date), then a holder
of Convertible Preferred Securities may institute a Direct Action for
enforcement of payment to such holder of the principal of or interest on the
Convertible Junior Subordinated Debentures having a principal amount equal to
the aggregate liquidation amount of the Convertible Preferred Securities of
such holder on or after the respective due date specified in the Convertible
Junior Subordinated Debentures. In addition, if the Trustee fails to enforce
its rights under the Convertible Junior Subordinated Debentures (other than
rights arising from a Declaration Event of Default described in the
immediately preceding sentence) after any holder of Convertible Preferred
Securities shall have made a written request to the Trustee to enforce such
rights, such holder of Convertible Preferred Securities may, to the fullest
extent permitted by law, thereafter institute a Direct Action to enforce the
Trustee's rights as holder of the Convertible Junior Subordinated Debentures,
without first instituting any legal proceeding against the Trustee or any
other person. The Trustee shall notify all holders of the Convertible
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Convertible Junior Subordinated Debentures. Such
notice shall state that such Event of Default also constitutes a Declaration
Event of Default. Except with respect to directing the time, method and place
of conducting a proceeding for a remedy, the Trustee shall not take any of the
actions described in clause (i), (ii) or (iii) above unless the Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, the applicable Issuer will not fail to be classified as a grantor
trust for United States federal income tax purposes.
In the event the consent of the Trustee, as the holder of the
Convertible Junior Subordinated Debentures, is required under the Indenture
with respect to any amendment, modification or termination of the Indenture,
the Trustee shall request the direction of the holders of the affected Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that, where a consent under the
Indenture would require the consent of the holders of more than a majority of
the aggregate principal amount of the Convertible Junior Subordinated
Debentures, the Trustee may only give such consent at the direction of the
holders of at least the same proportion in aggregate stated liquidation
preference of the Trust Securities. The Trustee shall not take any such action
in accordance with the directions of the holders of the Trust Securities
unless the Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the applicable Issuer
will not be classified as other than a grantor trust.
A waiver of an Event of Default under the Indenture will constitute a
waiver of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Convertible
Preferred Securities may be given at a separate meeting of holders of
Convertible Preferred Securities convened for such purpose, at a meeting of
all of the holders of Trust Securities of such CalEnergy Trust or pursuant to
written consent. The Company Trustees will cause a notice of any meeting at
which holders of Convertible Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Convertible Preferred
Securities. Each such notice will include a statement setting forth the
following information: (i) the date of such meeting or the date by which such
action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of
Convertible Preferred Securities will be required for an Issuer to redeem and
cancel Convertible Preferred Securities or distribute Convertible Junior
Subordinated Debentures in accordance with its Declaration.
Notwithstanding that holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above,
any of the Convertible Preferred Securities that are owned at such time by the
Company or any entity directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the Company, shall not be
entitled to vote or consent and shall, for purposes of such vote or consent,
be treated as if such Convertible Preferred Securities were not outstanding.
The procedures by which holders of Convertible Preferred Securities
may exercise their voting rights are described below. See "--Form,
Denomination and Registration--Global Certificate; Book-entry Form" below.
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Holders of the Convertible Preferred Securities will have no rights
to appoint or remove the Issuer Trustees, who may be appointed, removed or
replaced solely by the Company as the indirect or direct holder of all of the
Common Securities.
MODIFICATION OF THE DECLARATION
Each Declaration may be modified and amended if approved by the
Company Trustees (and in certain circumstances the Trustee and the Delaware
Trustee), provided, that if any proposed amendment provides for, or the
Company Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities issued pursuant to such Declaration whether by way of amendment to
the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of the CalEnergy Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected
thereby; provided, that if any amendment or proposal referred to in clause (i)
above would adversely affect only the Convertible Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation
amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be
made to a Declaration if such amendment or modification would (i) cause such
CalEnergy Trust to be classified for purposes of United States federal income
taxation as other than a grantor trust, (ii) reduce or otherwise adversely
affect the powers of the Trustee or (iii) cause such CalEnergy Trust to be
deemed an "investment company" which is required to be registered under the
1940 Act.
FORM, DENOMINATION AND REGISTRATION
The Convertible Preferred Securities are issued in fully registered
form, without coupons.
Global Certificate; Book-entry Form. Except as provided below,
Convertible Preferred Securities are evidenced by one or more global
certificates representing Convertible Preferred Securities (collectively, the
"Global Certificates" or each individually, a "Global Certificate"), which
have been deposited with the Property Trustee as custodian for DTC and
registered in the name of Cede & Co. ("Cede") as DTC's nominee. Except as set
forth below, record ownership of a Global Certificate may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or
its nominee.
Except as provided below, owners of beneficial interests in a Global
Certificate will not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form, and will not be considered holders thereof.
Conveyance of notices and other communications by DTC to
organizations who are participants in DTC ("Participants"), by Participants to
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a Participant either
directly or indirectly ("Indirect Participants"), and by Participants and
Indirect Participants to owners of beneficial interests in the Global
Certificate held by DTC will be governed by arrangements among them, subject
to any statutory or regulatory requirements that may be in effect from time to
time. Redemption notices shall be sent to Cede. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will reduce the
amount of the interest of each Participant in such Convertible Preferred
Securities in accordance with its procedures.
Although voting with respect to the Convertible Preferred Securities
is limited, in those cases where a vote is required, neither DTC nor Cede will
itself consent or vote with respect to Convertible Preferred Securities. Under
its usual procedures, DTC would mail an Omnibus Proxy to the applicable
CalEnergy Trust as soon as possible after the record date. The Omnibus Proxy
assigns Cede's consenting or voting rights to
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those Participants to whose accounts the Convertible Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy). The Company and the CalEnergy Trusts believe that the arrangements
among DTC, Participants and Indirect Participants, and owners of beneficial
interests in the Global Certificate held by DTC will enable such beneficial
owners to exercise rights equivalent in substance to the rights that can be
directly exercised by a holder of a beneficial interest in the respective
CalEnergy Trusts.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and the CalEnergy
Trusts believe to be reliable, but neither the Company nor the CalEnergy
Trusts take responsibility for the accuracy thereof.
Distribution payments on the Global Certificates will be made to
Cede, the nominee for DTC, as the registered owner of the Global Certificates
by wire transfer of immediately available funds. Neither the Company, the
Property Trustee nor any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Certificates or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company has been informed by DTC that, with respect to any
distribution payments on the Global Certificates, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests in the Convertible
Preferred Securities represented by a Global Certificate, as shown on the
records of DTC, unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to owners of beneficial
interests in Convertible Preferred Securities represented by a Global
Certificate held through such Participants will be the responsibility of such
Participants, as is not the case with securities held for the accounts of
customers registered in "street name."
Holders who desire to convert their Convertible Preferred Securities
into Common Stock pursuant to the terms of the Convertible Preferred
Securities should contact their brokers or other Participants or Indirect
Participants to obtain information on procedures, including proper forms and
cut-off times, for submitting such requests.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Convertible Preferred Securities represented
by a Global Certificate to pledge such interest to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect to
such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company nor the Property Trustee (or any registrar,
paying agent or conversion agent under the applicable Declaration) will have
any responsibility for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised the Company that it will take any
action permitted to be taken by a holder of Convertible Preferred Securities
(including, without limitation, the presentation of Convertible Preferred
Securities for exchange as described below) only at the direction of one or
more Participants to whose account with DTC interests in the Global
Certificate are credited and only in respect of the number of Convertible
Preferred Securities represented by the Global Certificates as to which such
Participant or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds securities that
its Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Participants in DTC include securities brokers and
dealers, banks, trust
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companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. The rules
applicable to DTC and its Participants are on file with the SEC.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Certificates among
Participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the
Company will cause the Convertible Preferred Securities to be issued in
definitive form in exchange for the Global Certificates. None of the Company,
the Property Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, their Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing
the records relating to, or payments made on account of, beneficial ownership
interests in the Global Certificate.
Certificated Convertible Preferred Securities. Holders may request
that their Convertible Preferred Securities be issued in certificated form,
and may request at any time that their interest in a Global Certificate be
exchanged for Convertible Preferred Securities in certificated form, upon
compliance with certain procedures set forth in each Declaration. Finally,
certificated securities may be issued in exchange for Convertible Preferred
Securities represented by the Global Certificate if no successor depositary is
appointed by the Company as set forth above under "--Global Certificate;
Book-Entry Form" or in certain other circumstances set forth in each
Declaration, including the occurrence of a Declaration Event of Default.
PAYMENT AND PAYING AGENCY
Payments in respect of the Convertible Preferred Securities shall be
made to DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of certificated securities, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The Paying Agent shall initially be
The Bank of New York. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Issuer Trustees. In the event that
The Bank of New York shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).
REGISTRAR, TRANSFER AGENT AND CONVERSION AGENT
Upon their issuance The Bank of New York will act as registrar,
transfer agent and Conversion Agent for the Convertible Preferred Securities.
Registration of transfers of Convertible Preferred Securities will be effected
without charge by or on behalf of an Issuer, but upon payment (with the giving
of such indemnity as the Issuer or the Company may require) in respect of any
tax or other government charges which may be imposed in relation to it. An
Issuer will not be required to register or cause to be registered the transfer
of Convertible Preferred Securities after such Convertible Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE TRUSTEE
The Company and certain of its subsidiaries maintain deposit accounts
and conduct other banking transactions with the Trustee in the ordinary course
of their businesses.
MISCELLANEOUS
Each group of Issuer Trustees are authorized and directed to conduct
the affairs of and to operate the respective Issuer in such a way that such
Issuer will not be deemed to be an "investment company" required to
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be registered under the 1940 Act or characterized as other than a grantor
trust for federal income tax purposes and so that the Convertible Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Issuer
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust or the Declaration that such Issuer Trustees
determine in their discretion to be necessary or desirable for such purposes
as long as such action does not adversely affect the interests of the holders
of the Convertible Preferred Securities.
Holders of the Convertible Preferred Securities have no preemptive
rights.
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DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees
that will be executed and delivered by the Company for the benefit of the
holders from time to time of Convertible Preferred Securities. Each Guarantee
will be separately qualified under the Trust Indenture Act and will be held by
The Bank of New York, acting in its capacity as indenture trustee with respect
thereto, for the benefit of holders of the Convertible Preferred Securities of
the applicable CalEnergy Trust. The terms of each Guarantee will be those set
forth in such Guarantee and those made part of such Guarantee by the Trust
Indenture Act. This description summarizes the material terms of the
Guarantees and is qualified in its entirety by reference to the form of
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, any prospectus supplement and the Trust
Indenture Act.
GENERAL
The particular terms of each Guarantee, as well as any modifications
of or additions to the general terms of the Guarantees as described herein
that may be applicable to a particular series of Trust Securities, will be
described in the Prospectus Supplement relating to such Trust Securities.
Accordingly, for a description of the terms of the Guarantee relating to a
particular series of Trust Securities reference must be made to both the
Prospectus Supplement relating thereto and the description of the Guarantees
set forth in this Prospectus.
Pursuant to each Guarantee, the Company irrevocably and
unconditionally agrees, to the extent set forth herein or in any Prospectus
Supplement, to pay in full, to the holders of the Convertible Preferred
Securities, the Guarantee Payments (as defined below), as and when due,
regardless of any defense, right of set off or counterclaim which the Issuer
may have or assert. The following payments with respect to the Convertible
Preferred Securities, to the extent not paid by an Issuer (the "Guarantee
Payments"), are subject to each Guarantee (without duplication): (i) any
accrued and unpaid distributions which are required to be paid on the
Convertible Preferred Securities to the extent of funds of the applicable
CalEnergy Trust available therefor, (ii) the amount payable upon redemption of
the Convertible Preferred Securities, payable out of funds of the applicable
CalEnergy Trust available therefor with respect to any Convertible Preferred
Securities called for redemption by the Issuer and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Issuer, other than
in connection with the distribution of Convertible Junior Subordinated
Debentures, the lesser of (a) the aggregate of the liquidation preference and
all accrued and unpaid dividends on the Convertible Preferred Securities to
the date of payment and (b) the amount of assets of the Issuer remaining
available for distribution to holders of Convertible Preferred Securities upon
the liquidation of the Issuer. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Convertible Preferred Securities or by causing the
Issuer to pay such amounts to such holders.
If the Company fails to make interest payments on the Convertible
Junior Subordinated Debentures or pay amounts payable upon the redemption,
acceleration or maturity of the Convertible Junior Subordinated Debentures,
the applicable Issuer will have insufficient funds to pay distributions on or
to pay amounts payable upon the redemption or repayment of the Convertible
Preferred Securities. The Guarantee does not cover payment of distributions or
the amount payable upon redemption or repayment in respect of the Convertible
Preferred Securities when an Issuer does not have sufficient funds to pay such
distributions or such amount.
In taking any action to enforce a Guarantee, holders of the
Convertible Preferred Securities may proceed directly against the Company as
guarantor, rather than having to proceed against the Issuer before attempting
to collect from the Company, and the Company waives any right or remedy to
require that any action be brought against the Issuer or any other person or
entity before proceeding against the Company. Such obligations will not be
discharged except by payment of the Guarantee Payments in full.
Each Guarantee, when taken together with the Company's obligations
under the Convertible Junior Subordinated Debentures, and the Indenture and
the applicable Declaration, including its obligations to pay
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costs, expenses, debts and liabilities of the CalEnergy Trust (other than with
respect to the Trust Securities) will provide a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the
Convertible Preferred Securities to be issued by each CalEnergy Trust.
The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of each Trust with respect to the
Common Securities (the "Common Securities Guarantee") to the same extent as
the Guarantee, except that upon the occurrence and during the continuation of
a Declaration Event of Default, holders of Convertible Preferred Securities
shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption, or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Guarantee, the Company will covenant that, so long as any
Convertible Preferred Securities remain outstanding, if at such time (a) the
Company has exercised its option to defer interest payments on the Convertible
Junior Subordinated Debentures and such deferral is continuing, (b) the
Company shall be in default with respect to its payment or other obligations
under a Guarantee or (c) there shall have occurred and be continuing any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default under the Indenture, then the Company (i) shall not
declare or pay dividends on, make 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 the
stock of the same class as that on which the dividend is being paid), (ii)
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company after
the date of original issuance of the Convertible Junior Subordinated
Debentures that rank pari passu with or junior to the Convertible Junior
Subordinated Debentures, and (iii) shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee).
As part of each Guarantee, the Company will agree that it will honor
all obligations described therein relating to the conversion of the
Convertible Preferred Securities into Common Stock as described in
"Description of the Convertible Preferred Securities--Conversion Rights."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of Convertible Preferred Securities (in which
case no consent of holders will be required), each Guarantee may be changed
only with the prior approval of the holders of not less than a majority in
aggregate stated liquidation preference of the outstanding Convertible
Preferred Securities issued by the applicable CalEnergy Trust. The manner of
obtaining any such approval of holders of the Convertible Preferred Securities
will be as set forth under "Description of the Convertible Preferred
Securities--Voting Rights." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders
of the Convertible Preferred Securities then outstanding. Except in connection
with any permitted merger or consolidation of the Company with or into another
entity or any permitted sale, transfer or lease of the Company's assets to
another entity as described below under "Description of the Convertible Junior
Subordinated Debentures--Restrictions," the Company may not assign its rights
or delegate its obligations under any Guarantee without the prior approval of
the holders of at least a majority of the aggregate stated liquidation
preference of the Convertible Preferred Securities issued by the applicable
CalEnergy Trust.
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TERMINATION OF THE GUARANTEE
Each Guarantee will terminate as to each holder of Convertible
Preferred Securities and be of no further force and effect upon (a) full
payment of the applicable redemption price of such holder's Convertible
Preferred Securities, (b) the distribution of Common Stock to such holder in
respect of the conversion of such holder's Convertible Preferred Securities
into Common Stock or (c) the distribution of the Convertible Junior
Subordinated Debentures to the holders of all the Convertible Preferred
Securities and will terminate completely upon full payment of the amounts
payable upon liquidation of the Issuer. Notwithstanding the foregoing, each
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Convertible Preferred Securities must restore
payment of any sums paid under such Convertible Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
Each Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, except any liabilities that may be made pari passu
expressly by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the Company and
(iii) senior to Common Stock. Each Declaration will provide that each holder
of Convertible Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the applicable Guarantee. Upon the
bankruptcy, liquidation or winding up of the Company, its obligations under
the applicable Guarantee will rank junior to all its other liabilities (except
as aforesaid) and, therefore, funds may not be available for payment under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default,
undertakes to perform only such duties as are specifically set forth in the
applicable Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of Convertible Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with,
the laws of the State of New York.
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DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
Convertible Junior Subordinated Debentures may be issued from time to
time in one or more series under an Indenture (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Indenture Trustee"). The
form of Convertible Junior Subordinated Debentures Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. The following description summarizes the material terms of the
Indenture, and is qualified in its entirety by reference to the Indenture, any
Prospectus Supplement and the Trust Indenture Act. Whenever particular
provisions or defined terms in the Indenture are referred to herein, such
provisions or defined terms are incorporated by reference herein. Section and
article references used herein are references to provisions of the Indenture.
The Junior Subordinated Debentures may be issued in one or more
series. The particular terms of each series of Junior Subordinated Debentures,
as well as any modifications of or additions to the general terms of the
Junior Subordinated Debentures, will be described in the Prospectus Supplement
relating to such series of Trust Securities. Accordingly, for a description of
the terms of a particular series of Junior Subordinated Debentures, reference
must be made to both the Prospectus Supplement relating to the Trust
Securities and the description of the Junior Subordinated Debentures set forth
in this Prospectus.
GENERAL
The Convertible Junior Subordinated Debentures will be unsecured,
convertible junior subordinated obligations of the Company. The Indenture will
not limit the amount of additional indebtedness the Company or any of its
subsidiaries may incur. Since the Company is a holding company, the Company's
rights and the rights of its creditors, including the holders of Convertible
Junior Subordinated Debentures, to participate in the assets of any subsidiary
upon the latter's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors, except to the extent that the Company
may itself be a creditor with recognized claims against the subsidiary.
The Indenture will not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that Convertible
Junior Subordinated Debentures may be issued thereunder from time to time in
one or more series. The Convertible Junior Subordinated Debentures are
issuable in one or more series pursuant to an indenture supplemental to the
Indenture.
In the event Convertible Junior Subordinated Debentures are issued to
a CalEnergy Trust or a Trustee of such CalEnergy Trust in connection with the
issuance of Trust Securities by such CalEnergy Trust, such Convertible Junior
Subordinated Debentures subsequently may be distributed pro rata to the
holders of such Trust Securities in connection with the dissolution of such
CalEnergy Trust upon the occurrence of certain events described in the
Prospectus Supplement relating to such Trust Securities. Only one series of
Convertible Junior Subordinated Debentures will be issued to a CalEnergy Trust
or a trustee of such CalEnergy Trust in connection with the issuance of Trust
Securities by such CalEnergy Trust.
Reference is made to the Prospectus Supplement which will accompany
this Prospectus for the following terms of the series of Convertible Junior
Subordinated Debentures being offered thereby (to the extent such terms are
applicable to the Convertible Junior Subordinated Debentures): (i) the
specific designation of such Convertible Junior Subordinated Debentures,
aggregate principal amount, purchase price and premium, if any; (ii) any limit
on the aggregate principal amount of such Convertible Junior Subordinated
Debentures; (iii) the date or dates on which the principal of such Convertible
Junior Subordinated Debentures is payable and the right, to extend or defer
such date or dates; (iv) the rate or rates at which such Convertible Junior
Subordinated Debentures will bear interest or the method of calculating such
rate or rates, if any; (v) the date or dates from which such interest shall
accrue, the interest payment dates on which such interest will be payable or
the manner of determination of such interest payment dates and the record
dates for the determination of holders to whom interest is payable on any such
interest payment dates; (vi) the right, if any, to extend the interest payment
periods and the duration of such extension; (vii) the period or periods within
which, the price or prices at which,
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and the terms and conditions upon which, such Convertible Junior Subordinated
Debentures may be redeemed, in whole or in part, at the option of the Company;
(viii) the obligation, if any, of the Company to redeem or purchase such
Convertible Junior Subordinated Debentures pursuant to any sinking fund or
analogous provisions or at the option of the holder thereof and the period or
periods for which, the price or prices at which, and the terms and conditions
upon which, such Convertible Junior Subordinated Debentures shall be redeemed
or purchased, in whole or part, pursuant to such obligation; (ix) any
exchangeability, conversion or prepayment provisions of the Convertible Junior
Subordinated Debentures; (x) any applicable United States federal income tax
consequences, including whether and under what circumstances the Company will
pay additional amounts on the Convertible Junior Subordinated Debentures held
by a person who is not a U.S. person in respect of any tax, assessment or
governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem such Convertible Junior Subordinated Debentures
rather than pay such additional amounts; (xi) the form of such Convertible
Junior Subordinated Debentures; (xii) if other than denominations of $50 or
any integral multiple thereof, the denominations in which such Convertible
Junior Subordinated Debentures shall be issuable; (xiii) any and all other
terms with respect to such series, including any modification of or additions
to the events of default or covenants provided for with respect to such
series, including any modification of or additions to the events of default or
covenants provided for with respect to the Convertible Junior Subordinated
Debentures, and any terms which may be required by or advisable under
applicable laws or regulations not inconsistent with the Indenture; and (xiv)
whether such Convertible Junior Subordinated Debentures are issuable as a
global security, and in such case, the identity of the depositary.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Convertible Junior Subordinated Debentures will be issued as a
global security to the extent of any Global Certificates at the time
representing any Convertible Preferred Securities and otherwise in fully
registered, certificated form. In the event that Convertible Junior
Subordinated Debentures are issued in certificated form, such Convertible
Junior Subordinated Debentures will be denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Payments on Convertible Junior Subordinated Debentures issued as a
global security will be made in immediately available funds to DTC, as the
depository for the Convertible Junior Subordinated Debentures. In the event
Convertible Junior Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Convertible Junior
Subordinated Debentures will be registrable and Convertible Junior
Subordinated Debentures will be exchangeable for Convertible Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount at the corporate trust office of the Indenture Trustee in The City of
New York; provided that, unless the Convertible Junior Subordinated Debentures
are held by the Issuer or any successor permissible under "Description of the
Convertible Preferred Securities -- Merger, Consolidation or Amalgamation of
the Issuer," payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto.
The Indenture does not contain any provisions that afford holders of
Convertible Junior Subordinated Debentures protection in the event of a highly
leveraged transaction involving the Company. The Convertible Junior
Subordinated Debentures are not entitled to the benefit of any sinking fund.
Convertible Junior Subordinated Debentures may bear interest at a
fixed rate or a floating rate. Convertible Junior Subordinated Debentures
bearing no interest or interest at a rate that at the time of issuance is
below the prevailing market rate will be sold at a discount below their stated
principal amount. Special United States federal income tax considerations
applicable to any such discounted Convertible Junior Subordinated Debentures
or to certain Convertible Junior Subordinated Debentures issued at par which
are treated as having been issued at a discount for United States federal
income tax purposes will be described in the relevant Prospectus Supplement.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Convertible Junior Subordinated Debentures is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (without any interest
or other payment in respect of any
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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.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company will have the right at any time during the term of the
Convertible Junior Subordinated Debentures to defer interest payments from
time to time for successive periods not exceeding 20 consecutive quarters for
each such period. At the end of each Deferral Period (subject to extensions as
provided below), the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Convertible
Junior Subordinated Debentures to the extent permitted by applicable law). In
no event shall any Deferral Period extend beyond the maturity of the
Convertible Junior Subordinated Debentures or any earlier Redemption Date.
During any Deferral Period, the Company (i) shall not declare or pay dividends
on, make 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 the stock of the same class as that on
which the dividend is being paid), (ii) shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to
the Convertible Junior Subordinated Debentures, and (iii) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the expiration of any such Deferral Period, the Company
may further extend such Deferral Period; provided that such Deferral Period
together with all previous and further extensions thereof may not exceed 20
consecutive quarters. Upon the expiration of any Deferral Period and the
payment of all amounts then due, the Company may select a new Deferral Period,
subject to the above requirements. No interest during a Deferral Period,
except at the end thereof, shall be due and payable. If the Issuer shall be
the sole holder of the Convertible Junior Subordinated Debentures, the Company
shall give the Issuer notice of its selection of such Deferral Period at least
one Business Day prior to the earlier of (i) the date the distributions on the
Convertible Preferred Securities are payable or (ii) the date the Issuer is
required to give notice to any applicable self-regulatory organization or to
holders of the Convertible Preferred Securities of the record date or the date
such distribution is payable, but in any event not less than ten Business Days
prior to such record date. The Company shall cause the Issuer to give notice
of the Company's selection of such Deferral Period to the holders of the
Convertible Preferred Securities. If the Issuer shall not be the sole holder
of the Convertible Junior Subordinated Debentures, the Company shall give the
holders of the Convertible Junior Subordinated Debentures notice of its
selection of such Deferral Period at least ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) the date the Company is
required to give notice to any applicable self-regulatory organization or to
holders of the Convertible Junior Subordinated Debentures of the record or
payment date of such related interest payment, but in any event not less than
two Business Days prior to such record date.
ADDITIONAL INTEREST
If an Issuer would be 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 such case, the Company will pay as additional interest
("Additional Interest") such amounts as shall be required so that the net
amounts received and retained by the Issuer after paying any such taxes,
duties, assessments or governmental charges will be not less than the amounts
the Issuer would have received had no such taxes, duties, assessments or
governmental charges been imposed.
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CONVERSION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures to be issued pursuant
to the Indenture are convertible into Common Stock at the option of the
holders of the Convertible Junior Subordinated Debentures at any time
beginning 60 days following the first date of original issuance of the
Convertible Junior Subordinated Debentures prior to maturity (except in the
case of Convertible Preferred Securities called for redemption which shall be
convertible at any time prior to the close of business on the Business Day
prior to the redemption date) at the initial conversion price set forth in the
applicable Prospectus Supplement subject to the conversion price adjustments
described under "Description of the Convertible Preferred
Securities--Conversion Rights." The Issuer will covenant not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. Upon surrender of each $50, of liquidation
preference of Convertible Preferred Securities to the Conversion Agent for
conversion, the Issuer will distribute $50 principal amount of the Convertible
Junior Subordinated Debentures to the Conversion Agent on behalf of the holder
of the Convertible Preferred Securities so converted, whereupon the Conversion
Agent will convert such Convertible Junior Subordinated Debentures to Common
Stock on behalf of such holder. The Company's delivery to the holders of the
Convertible Junior Subordinated Debentures (through the Conversion Agent) of
the fixed number of shares of Common Stock into which the Convertible Junior
Subordinated Debentures are convertible (together with the cash payment, if
any, in lieu of fractional shares) will be deemed to satisfy the Company's
obligation to pay the principal amount of the Convertible Junior Subordinated
Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid
or duly provided for; provided, however, that if any Convertible Junior
Subordinated Debenture is converted after a record date for payment of
interest, the interest payable on the related interest payment date with
respect to such Convertible Junior Subordinated Debenture shall be paid to the
Issuer (which will distribute such interest to the converting holder) or other
holder of Convertible Junior Subordinated Debentures, as the case may be,
despite such conversion.
OPTIONAL REDEMPTION
Pursuant to the Indenture, the Company shall have the right to redeem
the Convertible Junior Subordinated Debentures, in whole or in part, on terms
described in each supplemental Indenture.
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Convertible
Junior Subordinated Debenture during a period beginning at the opening of
business 15 days before any selection for redemption of Convertible Junior
Subordinated Debentures and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have been given
to all holders of Convertible Junior Subordinated Debentures to be so redeemed
and (ii) register the transfer of or exchange any Convertible Junior
Subordinated Debentures so selected for redemption, in whole or in part,
except the unredeemed portion of any Convertible Junior Subordinated Debenture
being redeemed in part.
SUBORDINATION
The Indenture provides that the Convertible Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness of the Company as provided in the Indenture. No payment of
principal of (including redemption payments), or interest on, the Convertible
Junior Subordinated Debentures may be made (i) if any Senior Indebtedness is
not paid when due, any applicable grace period with respect to such default
has ended and such default has not been cured or waived, or (ii) if the
maturity of any Senior Indebtedness has been accelerated because of a default.
Upon any distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all principal of, and premium, if any, and interest due or to become due on,
all Senior Indebtedness must be paid in full before the holders of the
Convertible Junior Subordinated Debentures are entitled to receive or retain
any payment. In the event that, notwithstanding the foregoing, any payment or
distribution of cash, property or securities shall be received or collected by
a
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holder of the Convertible Junior Subordinated Debentures in contravention of
the foregoing provisions, such payment or distribution shall be held for the
benefit of and shall be paid over to the holders of Senior Indebtedness or
their representative or representatives or to the trustee or trustees under
any indenture under which any instrument evidencing Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay in full all Senior Indebtedness then due, after giving effect
to any concurrent payment to the holders of Senior Indebtedness. Subject to
the payment in full of all Senior Indebtedness, the rights of the holders of
the Convertible Junior Subordinated Debentures will be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Convertible Junior Subordinated Debentures are paid in full.
The term "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, convertible preferred securities, 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
Convertible Junior Subordinated Debentures that is by its terms subordinated
to or pari passu with the Convertible Junior Subordinated Debentures 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 similar securities. Such Senior Indebtedness
shall continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior
Indebtedness the Company may issue. At March 31, 1997, Senior Indebtedness
consisting of borrowed money of CalEnergy Company, aggregated approximately
$953.8 million.
CERTAIN COVENANTS
If Convertible Junior Subordinated Debentures are issued to a
CalEnergy Trust in connection with the issuance of Trust Securities by such
Trust, the Company will covenant in the Indenture that if (a) there shall have
occurred any event that would constitute an Event of Default, (b) the Company
shall be in default with respect to its payment of any obligations under the
applicable Guarantee, or (c) the Company shall have given notice of its
election to defer payments of interest on the Convertible Junior Subordinated
Debentures by extending the interest payment period as provided in the
Indenture and such period, or any extension thereof, shall be continuing, then
the Company (i) shall not declare or pay dividends on, make 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) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company
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after the date of original issuance of the Convertible Junior Subordinated
Debentures for each CalEnergy Trust that rank pari passu with or junior to the
Convertible Junior Subordinated Debentures, and (iii) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee).
The Company will also covenant (a) to directly or indirectly maintain
100% ownership of the Common Securities of each CalEnergy Trust; provided,
however, that any permitted successor of the Company under the Indenture may
succeed to the Company's ownership of such Common Securities and (b) to use
its reasonable efforts to cause each CalEnergy Trust (x) to remain a statutory
business trust, except in connection with the distribution of Convertible
Junior Subordinated Debentures 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, 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.
RESTRICTIONS
The Indenture provides that the Company shall not consolidate with or
merge with or into any other corporation, or, directly or indirectly, convey,
sell, transfer or lease all or substantially all of the properties and assets
of the Company on a consolidated basis to any person, unless either the
Company is the continuing corporation or such corporation or person assumes by
supplemental indenture all the obligations of the Company under the Indenture
and the Convertible Junior Subordinated Debentures, no default or Event of
Default shall exist immediately after the transaction, and the surviving
corporation or such person is a corporation, partnership or trust organized
and validly existing under the laws of the United States of America, any state
thereof or the District of Columbia.
EVENTS OF DEFAULT
The Indenture also provides that any one or more of the following
described events, which has occurred and is continuing, constitutes an "Event
of Default" with respect to the applicable Convertible Junior Subordinated
Debentures: (i) failure for 30 days to pay interest on the Convertible Junior
Subordinated Debentures, including any Additional Interest in respect thereof,
when due; or (ii) failure to pay principal of or premium, if any, on the
Convertible Junior Subordinated Debentures when due whether at maturity, upon
redemption, by declaration or otherwise; or (iii) failure by the Company to
deliver shares of Common Stock upon an election by a holder of Convertible
Preferred Securities to convert such Convertible Preferred Securities; or (iv)
failure to observe or perform any other covenant contained in the Indenture
for 90 days after notice; or (v) the dissolution, winding up or termination of
the Issuer, except in connection with the distribution of Convertible Junior
Subordinated Debentures to the holders of Convertible Preferred Securities in
liquidation of the Issuer and in connection with certain mergers,
consolidations or amalgamations permitted by the Declaration; or (vi) certain
events in bankruptcy, insolvency or reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of a series of the Convertible Junior
Subordinated Debentures may declare the principal of and interest (including
any Additional Interest) on such Convertible Junior Subordinated Debentures
due and payable immediately on the occurrence of an Event of Default;
provided, however, that, after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal
amount of outstanding Convertible Junior Subordinated Debentures may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the nonpayment of accelerated principal, have been cured
or waived as provided in the Indenture. For information as to waiver of
defaults, see "--Modification of the Indenture."
Notwithstanding the foregoing, if an Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the affected Convertible Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of any redemption, the redemption date), a holder of Convertible
Preferred Securities may institute a Direct Action for
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payment on or after the respective due date (or redemption date) specified in
the Convertible Junior Subordinated Debentures. The Company may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of all the holders of Convertible Preferred Securities.
Notwithstanding any payment made to such holder of Convertible 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 Convertible
Junior Subordinated Debentures held by the Issuer or the Trustee of the Issuer
and the Company shall be subrogated to the rights of the holder of such
Convertible Preferred Securities with respect to payments on the Convertible
Preferred Securities to the extent of any payments made by the Company to such
holder in any Direct Action. The holders of Convertible Preferred Securities
will not be able to exercise directly any other remedy available to the
holders of the affected Convertible Junior Subordinated Debentures.
The Trustee will be the initial holder of the Convertible Junior
Subordinated Debentures. However, whenever Convertible Preferred Securities
are outstanding, the Trustee has agreed not to waive an Event of Default with
respect to the Convertible Junior Subordinated Debentures without the consent
of holders of a majority in aggregate liquidation preference of the affected
Convertible Preferred Securities then outstanding.
A default under any other indebtedness of the Company or any of its
subsidiaries or joint ventures or an Issuer would not constitute an Event of
Default under the Convertible Junior Subordinated Debentures.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee in case an Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of any
holders of affected Convertible Junior Subordinated Debentures, unless such
holders shall have offered to the Indenture Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Indenture Trustee,
the holders of a majority in aggregate principal amount of the Convertible
Junior Subordinated Debentures then outstanding will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee, or exercising any trust or power conferred
on the Indenture Trustee.
No holder of any Convertible Junior Subordinated Debenture will have
any right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such holder shall have previously given to the
Indenture Trustee written notice of a continuing Event of Default and, if the
Issuer is not the sole holder of Convertible Junior Subordinated Debentures,
unless the holders of at least 25% in aggregate principal amount of the
affected Convertible Junior Subordinated Debentures then outstanding shall
also have made written request, and offered reasonable indemnity, to the
Indenture Trustee to institute such proceeding as Indenture Trustee, and the
Indenture Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Convertible Junior Subordinated
Debentures a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not
apply to a suit instituted by a holder of a Convertible Junior Subordinated
Debenture for enforcement of payment of the principal of or interest on such
Convertible Junior Subordinated Debenture on or after the respective due dates
expressed in such Convertible Junior Subordinated Debenture.
The holders of a majority in aggregate outstanding principal amount
of all series of the Convertible Junior Subordinated Debentures affected
thereby may, on behalf of the holders of all the Convertible Junior
Subordinated Debentures of such series, waive any past default, except a
default in the payment of principal, premium, if any, or interest. The Company
is required to file annually with the Indenture Trustee and the Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants under the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the affected Convertible Junior Subordinated
Debentures, to modify the Indenture or any supplemental indenture, provided
that no such modification may,
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without the consent of the holder of each outstanding Convertible Junior
Subordinated Debenture affected thereby, (i) extend the fixed maturity of any
Convertible Junior Subordinated Debentures of any series, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof,
or adversely affect the right to convert Convertible Junior Subordinated
Debentures, without the consent of the holder of each Convertible Junior
Subordinated Debenture so affected, or (ii) reduce the percentage of
Convertible Junior Subordinated Debentures, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of each Convertible Junior Subordinated Debenture then outstanding and
affected thereby.
In addition, the Company and the Indenture Trustee may execute,
without the consent of any holder of Convertible Junior Subordinated
Debentures, any supplemental indenture to cure any ambiguities, comply with
the Trust Indenture Act and for certain other customary purposes.
SETOFF
Notwithstanding anything contained to the contrary in the Indenture,
the Company will have the right to set off any payment with respect to the
Convertible Junior Subordinated Debentures it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under an applicable
Guarantee.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures will
be governed by, and construed in accordance with, the laws of the State of New
York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, has undertaken to perform
only such duties as are specifically set forth in the Indenture and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such
provision, the Indenture Trustee is under no obligation to exercise any of the
powers vested in it by the Indenture at the request of any holder of
Convertible Junior Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Indenture Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
43
<PAGE>
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
As set forth in each Declaration, the sole purpose of each Issuer is
to issue the Trust Securities and use the proceeds thereof to purchase from
the Company the Convertible Junior Subordinated Debentures.
As long as payments of interest and other payments are made when due
on the Convertible Junior Subordinated Debentures, such payments will be
sufficient to cover distributions and payments due on the Convertible
Preferred Securities primarily because (i) the aggregate principal amount of
Convertible Junior Subordinated Debentures will be equal to the sum of the
aggregate stated liquidation preference of the Convertible Preferred
Securities and the Common Securities; (ii) the interest rate and interest and
other payment dates on the Convertible Junior Subordinated Debentures will
match the distribution rate and distribution and other payment dates for the
Convertible Preferred Securities; (iii) the Indenture provides that the
Company, as originator, shall pay for all, and each Issuer shall not be
obligated to pay, directly or indirectly, for any costs and expenses of such
Issuer; and (iv) each Declaration provides that the holders of Common
Securities and the Issuer Trustees shall not cause or permit each Issuer to,
among other things, engage, in any activity that is not consistent with the
purposes of such Issuer.
If an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Convertible Junior Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Convertible Preferred Securities may
institute a Direct Action against the Company for payment on or after the
respective due date for payment (or redemption date). In addition, if the
Trustee fails to enforce its rights under the Convertible Junior Subordinated
Debentures (other than rights arising from a Declaration Event of Default
described in the immediately preceding sentence) after any holder of Preferred
Securities shall have made a written request to the Trustee to enforce such
rights, such holder of Convertible Preferred Securities may, to the fullest
extent permitted by law, thereafter institute a Direct Action to enforce the
Trustee's rights as holder of the Convertible Junior Subordinated Debentures,
without first instituting any legal proceeding against the Trustee or any
other person.
Payments of distributions and other payments due on the Convertible
Preferred Securities out of moneys held by each Issuer are guaranteed by the
Company to the extent set forth under "Description of the Guarantees." If the
Company fails to make payments under a Guarantee, a holder of any of the
applicable Convertible Preferred Securities may institute a Direct Action
against the Company to enforce its rights under the Guarantee.
44
<PAGE>
PLAN OF DISTRIBUTION
The Company and the CalEnergy Trusts may sell the Offered Securities in
any of the following ways (or in any combination thereof): (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to
a single purchaser; or (iii) through agents. The Prospectus Supplement with
respect to any Offered Securities will set forth the terms of the offering of
such Offered Securities, including the name or names of any underwriters,
dealers or agents and the respective amounts of such Offered Securities
underwritten or purchased by each of them, the initial public offering price
of such Offered Securities and the proceeds to the Company from such sale, any
discounts, commissions or other items constituting compensation from the
Company and any discounts, commissions or concessions allowed or reallowed or
paid to dealers and any securities exchanges on which such Offered Securities
may be listed.
If underwriters are used in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Such Offered Securities may be either offered
to the public through underwriting syndicates represented by managing
underwriters, or directly by underwriters.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof.
LEGAL MATTERS
Unless otherwise indicated in an applicable Prospectus Supplement,
certain matters of Delaware law relating to the validity of the Convertible
Preferred Securities will be passed upon for the CalEnergy Trusts by Morris,
Nichols, Arsht & Tunnell. The validity of the Convertible Junior Subordinated
Debentures, the Guarantee and any Common Stock issuable upon conversion of
such Convertible Junior Subordinated Debentures will be passed upon for the
Company and the applicable CalEnergy Trusts by Steven A. McArthur, Senior Vice
President and General Counsel of the Company, and by Willkie Farr & Gallagher.
As of March 17, 1997, Mr. McArthur beneficially owned 104,437 shares of Common
Stock.
EXPERTS
The consolidated financial statements and financial statement
schedules of the Company and its subsidiaries incorporated by reference in
this Registration Statement by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
45
<PAGE>
With respect to the Company's unaudited interim financial information
for the three month periods ended March 31, 1997 and 1996, incorporated herein
by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997, and incorporated by
reference herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not subject
to the liability provisions of Section 11 of the Securities Act for their
reports on the unaudited interim financial information because those reports
are not "reports" or a "part" of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements of Northern Electric plc as of
March 31, 1996 and 1995, and for each of the three years in the period ended
March 31, 1996, appearing in the Company's Report on Form 8-K/A dated February
18, 1997, have been audited by Ernst & Young, chartered accountants, as stated
in their report which is included therein and incorporated herein by
reference. Such financial statements have been incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
With respect to Northern's unaudited condensed consolidated financial
statements at September 30, 1996, and for the six months ended September 30,
1996 and 1995, incorporated by reference in this Prospectus, Ernst & Young
chartered accountants have reported that they have applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report, included in the Company's Current Report on
Form 8-K/A dated February 18, 1997, and incorporated herein by reference,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. Ernst & Young are not subject to the
liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated statements of operations, changes in stockholders'
equity, and cash flows of Magma Power Company, and subsidiaries for the year
ended December 31, 1994, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
46
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
A PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY CALENERGY TRUST OR ANY OF THEIR AGENTS. NEITHER THIS PROSPECTUS
NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREUNDER IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY
CALENERGY TRUST SINCE SUCH DATE.
--------------------
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4
RISK FACTORS........................................5
THE CALENERGY TRUSTS...............................14
THE COMPANY........................................15
RATIO OF EARNINGS TO FIXED CHARGES.................18
ACCOUNTING TREATMENT...............................18
USE OF PROCEEDS....................................18
DESCRIPTION OF THE CONVERTIBLE PREFERRED
SECURITIES........................................19
DESCRIPTION OF THE GUARANTEES......................33
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES........................................36
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEES........44
PLAN OF DISTRIBUTION...............................45
LEGAL MATTERS......................................45
EXPERTS............................................45
CONVERTIBLE
PREFERRED SECURITIES
CALENERGY CAPITAL TRUST III
CALENERGY CAPITAL TRUST IV
CALENERGY CAPITAL TRUST V
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
AND CONVERTIBLE INTO
COMMON STOCK OF
[LOGO]
CALENERGY COMPANY, INC.
--------------------
PROSPECTUS
--------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the
distribution of the securities being registered hereunder, other than
underwriting discounts and commissions.
AMOUNT
SEC registration fee................................................ $454,545
Printing, shipping and engraving expenses........................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Transfer Agent, Registrar and trustee fees and expenses............. *
Miscellaneous expenses.............................................. *
--------
Total.......................................................... $454,545
========
- ----------
*To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
THE COMPANY
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder, such as the
Company, the power to indemnify its directors and officers against liabilities
for certain of their acts. Article EIGHTH of the Company's Restated
Certificate of Incorporation and Article V of the Company's By-Laws provides
for indemnification of directors and officers of the Company to the extent
permitted by the DGCL. Article V of the Company's By-Laws further provides
that the Registrant may enter into contracts providing indemnification to the
full extent authorized or permitted by the DGCL and that the Company may
create a trust fund, grant a security interest and/or use other means to
ensure the payment of such amounts as may become necessary to effect
indemnification pursuant to such contracts or otherwise.
Section 102(b)(7) of the DGCL permits a provision in the certificate
of incorporation of each corporation organized thereunder, such as the
Company, eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its stockholders for monetary
damages for certain breaches of fiduciary duty as a director. Article EIGHTH
of the Company's Restated Certificate of Incorporation eliminates the personal
liability of directors to the full extent permitted by the DGCL.
The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of the Company's
Restated Certificate of Incorporation and Article V of the Company's By-Laws.
Section 145 of the DGCL empowers a Delaware corporation to indemnify
any persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided that such officer or director acted in
good faith and in a manner reasonably believed to be in or not
II-1
<PAGE>
opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
duty. Where an officer or director is successful on the merits or otherwise in
the defense of any action referred to above, the corporation must indemnify
him against the expenses which such officer or director actually and
reasonably incurred.
THE TRUSTS
The Declaration of Trust for each of the CalEnergy Trusts (the
"Declaration") provides that no Trustee, affiliate of any Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives or agent of the relevant CalEnergy Trust, or any employee or
agent of the CalEnergy Trust or its affiliates (each an "Indemnified Person")
shall be liable, responsible or accountable in damages or otherwise to a
CalEnergy Trust or any employee or agent of the trust or its affiliates for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by the such Indemnified Person in good faith on behalf of a
CalEnergy Trust and in a manner such Indemnified Person reasonably believed to
be within the scope of the authority conferred on such Indemnified Person by
the Declaration or by law, except that an Indemnified Person shall be liable
for any such loss, damage or claim incurred by reason of such Indemnified
Person's gross negligence (or, in the case of the Trustee, negligence) or
willful misconduct with respect to such act or omissions. The Declaration also
provides that to the fullest extent permitted by applicable law, the Company
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of a CalEnergy Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of authority conferred on such Indemnified
Person by the Declaration, except that no Indemnified Person shall be entitled
to be indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
Trustee, negligence) or willful misconduct with respect to such acts or
omissions. The Declaration further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
or an undertaking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not entitled
to be indemnified for the underlying cause of action as authorized by the
Declaration. The directors and officers of the Company and the Trustees are
covered by insurance policies indemnifying them against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended, which might be incurred by them in such capacities and against which
they cannot be indemnified by the Company or a CalEnergy Trust.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
The following exhibits are filed as part of this Registration
Statement:
Exhibit No. Description
- --------------- -----------------------------------------------------------
1.1 Form of Underwriting Agreement (Debt Securities)*
1.2 Form of Underwriting Agreement (Common Stock and Preferred
Stock)*
1.3 Form of Underwriting Agreement (Preferred Securities)*
4.1 Form of Senior Debt Securities Indenture*
4.2 Form of Subordinated Debt Securities Indenture*
4.3 Form of Convertible Junior Subordinated Debentures Indenture*
4.4 Declaration of Trust of CalEnergy Capital Trust III*
4.5 Certificate of Trust of CalEnergy Capital Trust III
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<PAGE>
4.6 Declaration of Trust of CalEnergy Capital Trust IV*
4.7 Certificate of Trust of CalEnergy Capital Trust IV
4.8 Declaration of Trust of CalEnergy Capital Trust V*
4.9 Certificate of Trust of CalEnergy Capital Trust V
4.10 Form of Amended and Restated Declaration of Trust for each of
CalEnergy Capital Trust III, CalEnergy Capital Trust IV and
CalEnergy Capital Trust V
4.11 Form of Convertible Preferred Securities
4.12 Form of Common Securities Certificate*
4.13 Form of Junior Subordinated Debentures*
4.14 Form of Convertible Preferred Securities Guarantee Agreement
with respect to Convertible Preferred Securities
4.15 Form of Common Securities Guarantee*
4.16 Form of CalEnergy Company, Inc. Common Stock Certificate**
5.1 Opinion of Willkie Farr & Gallagher*
5.2 Opinion of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc.*
5.3 Opinion of Morris, Nichols, Arsht & Tunnell*
8.1 Opinion of Willkie Farr & Gallagher as to certain tax matters*
12.1 Statement re: Computation of ratio of earnings to fixed charges*
15.1 Letter of Deloitte & Touche LLP, regarding unaudited financial
information.
15.2 Letter of Ernst & Young, chartered accountants, regarding
unaudited financial information.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of Willkie Farr & Gallagher (included as part of
Exhibits 5.1 and 8.1)*
23.5 Consent of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc. (included as part of Exhibit 5.2)*
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included as part of
Exhibit 5.3)*
24.1 Powers of Attorney for the Company (included on the signature
page of this Registration Statement)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee under the Senior
Debt Securities Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Subordinated Debt Securities Indenture
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Junior Subordinated Debentures Indenture
25.4 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, with respect to
the Amended and Restated Declaration of Trust*
25.5 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Preferred Securities Guarantee of the Company with
respect to the Convertible Preferred Securities of CalEnergy
Capital Trust III
25.6 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, with respect to
the Convertible Preferred Securities Guarantee of the Company
with respect to the Preferred Securities of CalEnergy Capital
Trust IV
25.7 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Preferred Securities Guarantee of the Company with
respect to the Convertible Preferred Securities of CalEnergy
Capital Trust V
- --------------------------
*To be filed by amendment.
**Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
II-3
<PAGE>
B. Financial Statements and Schedules
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements and schedules of CalEnergy Company, Inc.
included in its Annual Report on Form 10-K for the year ended December 31,
1996.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act").
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Securities and
Exchange Commission ("SEC") by such registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described in Item 15 or
otherwise, the Registrant has been advised that in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
II-4
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the SEC under Section
305(b)(2) of the Trust Indenture Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CalEnergy
Company, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of Nebraska, on August
4, 1997.
CALENERGY COMPANY, INC.
By: /s/ David L. Sokol
-------------------------------------
David L. Sokol
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of CalEnergy Company,
Inc. hereby severally constitutes and appoints Steven A. McArthur as the
attorney-in-fact for the undersigned, in any and all capacities, with full
power of substitution, to sign any and all pre- or post-effective amendments
to this Registration Statement, any subsequent Registration Statement for the
same offering which may be filed pursuant to Rule 462(b) under the Securities
Act of 1933 and any and all pre- or post- effective amendments thereto, and to
file the same with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- -------------------------------------------------------------------------------
/s/ David L. Sokol Chairman of the Board and August 4, 1997
- ----------------------------
David L. Sokol Chief Executive Officer
(principal executive officer)
/s/ Craig Hammett Vice President and August 4, 1997
- ----------------------------
Craig M. Hammett Chief Financial Officer
(principal financial officer)
/s/ Gregory E. Abel Chief Accounting Officer August 4, 1997
- ----------------------------
Gregory E. Abel
Edgar D. Aronson
- ---------------------------- Director August 4, 1997
Edgar D. Aronson
/s/ Judith E. Ayres
- ---------------------------- Director August 4, 1997
Judith E. Ayres
James Q. Crowe
- ---------------------------- Director August 4, 1997
James Q. Crowe
Richard K. Davidson
- ---------------------------- Director August 4, 1997
Richard K. Davidson
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<PAGE>
- ---------------------------- Director August __, 1997
David H. Dewhurst
/s/ Richard R. Jaros
- ----------------------------- Director August 4, 1997
Richard R. Jaros
- ----------------------------- Director August __, 1997
David R. Morris
- ----------------------------- Director August __, 1997
Bernard W. Reznick
/s/ Walter Scott, Jr.
- ----------------------------- Director August 4, 1997
Walter Scott, Jr.
/s/ John R. Shiner
- ----------------------------- Director August 4, 1997
John R. Shiner
- ----------------------------- Director August __, 1997
Neville G. Trotter
/s/ David E. Witt
- ----------------------------- Director August 4, 1997
David E. Witt
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended. CalEnergy Capital Trust III certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on August 4, 1997.
CALENERGY CAPITAL TRUST III
By: /s/ Steven A. McArthur
-----------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
-----------------------------------
Craig M. Hammett
Trustee
By: /s/ Gregory E. Abel
-----------------------------------
Gregory E. Abel
Trustee
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, CalEnergy Capital Trust IV certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on August 4, 1997.
CALENERGY CAPITAL TRUST IV
By: /s/ Steven A. McArthur
-----------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
-----------------------------------
Craig M. Hammett
Trustee
By: /s/ Gregory E. Abel
-----------------------------------
Gregory E. Abel
Trustee
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, CalEnergy Capital Trust V certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on August 4, 1997.
CALENERGY CAPITAL TRUST V
By: /s/ Steven A. McArthur
-----------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
-----------------------------------
Craig M. Hammett
Trustee
By: /s/ Gregory E. Abel
-----------------------------------
Gregory E. Abel
Trustee
II-10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- --------------- -----------------------------------------------------------
1.1 Form of Underwriting Agreement (Debt Securities)*
1.2 Form of Underwriting Agreement (Common Stock and Preferred
Stock)*
1.3 Form of Underwriting Agreement (Preferred Securities)*
4.1 Form of Senior Debt Securities Indenture*
4.2 Form of Subordinated Debt Securities Indenture*
4.3 Form of Convertible Junior Subordinated Debentures Indenture*
4.4 Declaration of Trust of CalEnergy Capital Trust III*
4.5 Certificate of Trust of CalEnergy Capital Trust III
4.6 Declaration of Trust of CalEnergy Capital Trust IV*
4.7 Certificate of Trust of CalEnergy Capital Trust IV
4.8 Declaration of Trust of CalEnergy Capital Trust V*
4.9 Certificate of Trust of CalEnergy Capital Trust V
4.10 Form of Amended and Restated Declaration of Trust for each of
CalEnergy Capital Trust III, CalEnergy Capital Trust IV and
CalEnergy Capital Trust V
4.11 Form of Convertible Preferred Securities
4.12 Form of Common Securities Certificate*
4.13 Form of Junior Subordinated Debentures*
4.14 Form of Convertible Preferred Securities Guarantee Agreement
with respect to Convertible Preferred Securities
4.15 Form of Common Securities Guarantee*
4.16 Form of CalEnergy Company, Inc. Common Stock Certificate**
5.1 Opinion of Willkie Farr & Gallagher*
5.2 Opinion of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc.*
5.3 Opinion of Morris, Nichols, Arsht & Tunnell*
8.1 Opinion of Willkie Farr & Gallagher as to certain tax matters*
12.1 Statement re: Computation of ratio of earnings to fixed charges*
15.1 Letter of Deloitte & Touche LLP, regarding unaudited financial
information.
15.2 Letter of Ernst & Young, chartered accountants, regarding
unaudited financial information.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of Willkie Farr & Gallagher (included as part of
Exhibits 5.1 and 8.1)*
23.5 Consent of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc. (included as part of Exhibit 5.2)*
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included as part of
Exhibit 5.3)*
24.1 Powers of Attorney for the Company (included on the signature
page of this Registration Statement)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee under the Senior
Debt Securities Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Subordinated Debt Securities Indenture
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Junior Subordinated Debentures Indenture
25.4 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, with respect to
the Amended and Restated Declaration of Trust*
25.5 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Preferred Securities Guarantee of the Company with
respect to the Convertible Preferred Securities of CalEnergy
Capital Trust III
25.6 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, with respect to
the Convertible Preferred Securities Guarantee of the Company
with respect to the Preferred Securities of CalEnergy Capital
Trust IV
25.7 Statement of Eligibility under The Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee, under the
Convertible Preferred Securities Guarantee of the Company with
respect to the Convertible Preferred Securities of CalEnergy
Capital Trust V
- --------------------------
*To be filed by amendment.
**Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
<PAGE>
CERTIFICATE OF TRUST
The undersigned, the trustees of CalEnergy Capital
Trust III, desiring to form a business trust pursuant to Delaware
Business Trust Act, 12 Del. C. ss. 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is "CalEnergy Capital Trust III".
2. The name and business address of the trustee of
the Trust which has its principal place of busi-
ness in the State of Delaware is as follows:
The Bank of New York, Delaware
23 White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: August 4, 1997
/s/ Steven A. McArthur
-----------------------
Name: Steven A. McArthur
Title: Regular Trustee
/s/ Craig Hammett
-----------------------
Name: Craig Hammett
Title: Regular Trustee
/s/ Gregory Abel
-----------------------
Name: Gregory Abel
Title: Regular Trustee
THE BANK OF NEW YORK, DELAWARE, as
Delaware Trustee
By: /s/ Walter N. Gitlin
------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
<PAGE>
CERTIFICATE OF TRUST
The undersigned, the trustees of CalEnergy Capital
Trust IV, desiring to form a business trust pursuant to Delaware
Business Trust Act, 12 Del. C. ss. 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is "CalEnergy Capital Trust IV".
2. The name and business address of the trustee of
the Trust which has its principal place of busi-
ness in the State of Delaware is as follows:
The Bank of New York, Delaware
23 White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: August 4, 1997
/s/ Steven A. McArthur
-----------------------
Name: Steven A. McArthur
Title: Regular Trustee
/s/ Craig Hammett
-----------------------
Name: Craig Hammett
Title: Regular Trustee
/s/ Gregory Abel
-----------------------
Name: Gregory Abel
Title: Regular Trustee
THE BANK OF NEW YORK, DELAWARE, as
Delaware Trustee
By: /s/ Walter N. Gitlin
-----------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
<PAGE>
CERTIFICATE OF TRUST
The undersigned, the trustees of CalEnergy Capital
Trust V, desiring to form a business trust pursuant to Delaware
Business Trust Act, 12 Del. C. ss. 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is "CalEnergy Capital Trust V".
2. The name and business address of the trustee of
the Trust which has its principal place of busi-
ness in the State of Delaware is as follows:
The Bank of New York, Delaware
23 White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: August 4, 1997
/s/ Steven A. McArthur
-----------------------
Name: Steven A. McArthur
Title: Regular Trustee
/s/ Craig Hammett
-----------------------
Name: Craig Hammett
Title: Regular Trustee
/s/ Gregory Abel
-----------------------
Name: Gregory Abel
Title: Regular Trustee
THE BANK OF NEW YORK, DELAWARE, as
Delaware Trustee
By: /s/ Walter N. Gitlin
-----------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
<PAGE>
FORM OF
AMENDED AND RESTATED DECLARATION
OF TRUST
CALENERGY CAPITAL TRUST ___
Dated as of ________ __, 1997
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALENERGY CAPITAL TRUST ___
________ __, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of ________ __, 1997, by the undersigned trustees
(together with all other Persons from time to time duly appointed and serving
as trustees in accordance with the provisions of this Declaration, the
"Trustees"), CalEnergy Company, Inc., a Delaware corporation, as trust sponsor
(the "Sponsor"), and by the holders, from time to time, of undivided
beneficial interests in the Trust issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established CalEnergy
Capital Trust ___ (the "Trust"), a trust under the Business Trust Act (as
defined herein) pursuant to a Declaration of Trust dated as of August 4, 1997,
(the "Original Declaration") and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on August 4, 1997, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain Debentures (as defined herein) of the Debenture Issuer (as
defined herein);
WHEREAS, as of the date hereof, no interests in
the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the
Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and
that this Declaration constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) a term defined anywhere in this Declaration has the
same meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or amended
from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections and Annexes
and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Additional Interest" means if the Trust is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
taxing authority, such amounts as shall be required so that the net amounts
received and retained by the Trust after paying such taxes, duties,
assessments and governmental charges will not be less than the amounts the
Trust would have received had no such taxes, duties, assessments or
governmental charges been imposed.
"Affiliate" has the same meaning as given to that term in
Rule 405 of the Securities Act or any successor rule thereunder.
2
<PAGE>
"Agent" means any Registrar, Paying Agent,
Conversion Agent or co-registrar.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person provided, however that the Authorized Officer
signing an Officer's Certificate given pursuant to section 314(a)(4) of the
Trust Indenture Act shall be the principal executive, financial or accounting
officer of such Person.
"Book Entry Interest" means a beneficial interest in a
Global Preferred Security, ownership and transfers of which shall be
maintained and made through book entries by a Depositary as described in
Section 9.4.
"Business Day" means any day other than a day on which
banking institutions in the City of New York or in Wilmington, Delaware are
authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.3801 et seq., as it may be amended from time to
time, or any successor legislation.
"Certificate" means a certificate in global or definitive
form representing a Common Security or a Preferred Security.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act.
"Closing Date" means ________ __, 1997.
"Code" means the Internal Revenue Code of 1986 as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange
Commission.
"Common Securities" has the meaning set forth in
Section 7.1(a).
"Company Indemnified Person" means (a) any Regular Trustee;
(b) any Affiliate of any Regular Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Regular Trustee;
3
<PAGE>
or (d) any officer, employee or agent of the Trust or its
Affiliates.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or
agent of (i) the Trust or (ii) the Trust's Affiliates; and
(b) any Holder of Securities.
"Conversion Agent" has the meaning set forth in
Section 7.4.
"Debenture Issuer" means the Sponsor in its
capacity as issuer of the Debentures.
"Debenture Trustee" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by
the Debenture Issuer under the Indenture to be held by the Property Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"Definitive Preferred Securities" means any Preferred
Securities in definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in
Section 5.2.
"Depositary" means The Depository Trust Company,
the initial Clearing Agency or any Clearing Agency appointed
as successor to The Depository Trust Company pursuant to
Section 9.4.
"Direct Action" has the meaning set forth in
Section 3.8(c).
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"Event of Default" in respect of the Securities means an
Event of Default (as defined in the Indenture) has occurred and is continuing
in respect of the Debentures.
4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set
forth in Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section
11.1.
"Global Preferred Security" has the meaning set
forth in Section 9.4.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified
Person or a Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of ________ __,
1997, between the Debenture Issuer and the Debenture Trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be
issued.
"Investment Company" means an investment company
as defined in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in the
terms of the Securities as set forth in Annex I hereto.
"Legal Action" has the meaning set forth in
Section 3.6(g).
"Liquidated Damages" has the meaning set forth in
Section 9.5.
"List of Holders" has the meaning set forth in
Section 2.2(a).
5
<PAGE>
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms
of the Securities as set forth in Annex I hereto.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that the officer signing the
Certificate has read the covenant or
condition and the definitions relating
thereto;
(b) a brief statement of the nature and
scope of the examination or
investigation undertaken upon which the
statements or opinions contained in such
Certificate are based;
(c) a statement that, in such officer's
opinion, such officer has made or caused
to be made such examination or
investigation as is necessary to enable
such officer to express an informed
opinion as to whether or not such
covenant or condition has been complied
with; and
(d) a statement as to whether, in the
opinion of such officer, such condition
or covenant has been complied with.
6
<PAGE>
"Participants" has the meaning set forth in
Section 7.3(c).
"Paying Agent" has the meaning set forth in
Section 7.4.
"Payment Amount" has the meaning set forth in
Section 6.1.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning set forth
in Section 7.1(a).
"Preferred Securities Guarantee" means the guarantee
agreement dated as of ________ __, 1997, of the Sponsor in respect of the
Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to
a Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant
or as an indirect participant, in each case in accordance with the rules of
such Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set
forth in Section 3.8(c).
"Quorum" means a majority of the Regular Trustees or, if
there are only two Regular Trustees, both of them.
"Registration Statement" has the meaning set forth
in Section 3.6(b).
"Registrar" has the meaning set forth in Section
7.4.
7
<PAGE>
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any
direct or indirect wholly owned subsidiary of the Sponsor or any other Person
that owns, directly or indirectly, 100% of the outstanding voting securities
of the Sponsor.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property 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 that officer's
knowledge of and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment
Company Act.
"Securities" means the Common Securities and the
Preferred Securities.
"Securities Act" means the Securities Act of 1933, as
amended from time to time or any successor legislation.
"Securities Custodian" means the custodian with respect to
the Global Preferred Security and any other Preferred Security in global form.
"Special Event" has the meaning set forth in
Annex I hereto.
"Sponsor" means CalEnergy Company, Inc., a Delaware
corporation, or any successor entity in a merger, consolidation or
amalgamation, in its capacity as sponsor of the Trust.
"Successor Entity" has the meaning set forth in
Section 3.15(b)(i).
"Successor Property Trustee" has the meaning set
forth in Section 5.6.
8
<PAGE>
"Successor Securities" has the meaning set forth
in Section 3.15(b)(i)(B).
"Super Majority" has the meaning set forth in
Section 2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I
hereto.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by
the United States Treasury, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Trust" means CalEnergy Capital Trust ___, a trust created
under the Business Trust Act.
"Trustee" or "Trustees" means each Person who has signed
this Declaration as a trustee, so long as such Person shall continue in office
in accordance with the terms hereof, and all other Persons who may from time
to time be duly appointed, qualified and serving as Trustees in accordance
with the provisions hereof, and references herein to a Trustee or the Trustees
shall refer to such Person or Persons solely in their capacity as trustees
hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Underwriting Agreement" shall have the meaning
set forth in Section 7.3.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the
Trust Indenture Act that are required to be part of this Declaration, which
are incorporated by reference in and made part of this Declaration and shall,
to the extent applicable, be governed by such provisions.
9
<PAGE>
(b) The Property Trustee shall be the only Trustee which is
a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by ss.ss.
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf
of the Trust shall provide the Property Trustee (i) within 14 days after each
record date for payment of Distributions, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the Holders of
the Securities ("List of Holders") as of such record date, provided that
neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Property Trustee
by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at
any other time, within 30 days of receipt by the Trust of a written request
from the Property Trustee for a List of Holders as of a date no more than 14
days before such List of Holders is given to the Property Trustee. The
Property Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if acting in such capacity)
provided that the Property Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations
under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, the Property
Trustee shall provide to the Holders of the
10
<PAGE>
Preferred Securities such reports as are required by ss. 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by ss. 313 of
the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of ss. 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide to the Property Trustee such documents, reports and
information as required by ss. 314 of the Trust Indenture Act (if any) and the
compliance certificate required by ss. 314 of the Trust Indenture Act in the
form, in the manner and at the times required by ss. 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.
Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Declaration that
relate to any of the matters set forth in ss. 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
ss. 314(c)(1) may be given in the form of an Officer's Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the
Event of Default under the Declaration shall also not
be waivable; or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation
11
<PAGE>
amount of the Preferred Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in
lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act. Upon such waiver,
any such default shall cease to exist, and any Event of Default with respect
to the Preferred Securities arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend
to any subsequent or other default or an Event of Default with respect to the
Preferred Securities or impair any right consequent thereon. Any waiver by the
Holders of the Preferred Securities of an Event of Default with respect to the
Preferred Securities shall also be deemed to constitute a waiver by the
Holders of the Common Securities of any such Event of Default with respect to
the Common Securities for all purposes of this Declaration without any further
act, vote, or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except
where the Holders of the Common Securities are deemed to have waived
such Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super
Majority to be waived, except where the Holders of the Common
Securities are deemed to have waived such Event of Default under the
Declaration as provided below in this Section 2.6(b), the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation amount of the
Common Securities that the relevant Super
12
<PAGE>
Majority represents of the aggregate principal amount
of the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely
on behalf of the Holders of the Preferred Securities and only the Holders of
the Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other
default or Event of Default with respect to the Common Securities or impair
any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by
the Property Trustee at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with
respect to the Securities actually known to a Responsible Officer of the
Property Trustee, unless such defaults have been cured before the giving of
such notice (the term "defaults" for the
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purposes of this Section 2.7(a) being hereby defined to be an Event of Default
as defined in the Indenture, not including any periods of grace provided for
therein and irrespective of the giving of any notice provided therein);
provided that, except for a default in the payment of principal of (or
premium, if any) or interest on any of the Debentures or in the payment of any
sinking fund installment established for the Debentures, the Property Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers of the Property Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the
Securities.
(b) The Property Trustee shall not be deemed to
have knowledge of any default except:
(i) a default under Sections 501(1) and
501(2) of the Indenture; or
(ii) any default as to which the Property Trustee
shall have received written notice or of which a Responsible Officer
of the Property Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "CalEnergy Capital Trust ___," as such
name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by
the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust
is c/o CalEnergy Company, Inc., 302 South 36th Street, Suite
400, Omaha, Nebraska 68131, Attention: Chief Financial
Officer, with a copy to: General Counsel. On 10 Business
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Days written notice to the Holders of Securities, the Regular Trustees may
designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only
those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets, or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
(a) Subject to the limitations provided in this Declaration
and to the specific duties of the Property Trustee, the Regular Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any
matter over which the Regular Trustees have power to act, any power of the
Regular Trustees may be exercised by, or with the consent of, any one such
Regular Trustee.
(c) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6, provided, that the registration statement
referred to in
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Section 3.6, including any amendments thereto, shall be signed by a majority of
the Regular Trustees; and
(d) a Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purposes of signing any documents which the Regular
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Debentures and the Property Trustee Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty
and authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the
Common Securities in accordance with this Declaration; provided, however, that
the Trust may issue no more than one series of Preferred Securities and no
more than one series of Common Securities, and, provided further, that there
shall be no interests in the Trust other than the Securities, and the issuance
of Securities shall be limited to simultaneous issuance of both Preferred
Securities and Common Securities on the Closing Date and any other date
Preferred Securities and Common Securities are sold pursuant to the
over-allotment option granted in the Underwriting Agreement;
(b) in connection with the issue and sale of the
Preferred Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission a
registration statement filed on Form S-3 (the "Registration
Statement") prepared by the Sponsor, including any amendments thereto
in relation to the Preferred Securities;
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(ii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary in order to qualify or register all or part of the
Preferred Securities in any State or foreign jurisdiction in which
the Sponsor has determined to qualify or register such Preferred
Securities for sale;
(iii) execute and file an application, prepared by
the Sponsor, to the New York Stock Exchange or any other national
stock exchange or the Nasdaq Stock Market's National Market for
listing or quotation of the Preferred Securities;
(iv) to execute and deliver letters,
documents, or instruments with the Depositary relating
to the Preferred Securities;
(v) execute and file with the Commission, at such
time as determined by the Sponsor, a registration statement on Form
8-A, including any amendments thereto, prepared by the Sponsor
relating to the registration of the Preferred Securities under
Section 12(b) of the Exchange Act; and
(vi) execute and enter into the Underwriting
Agreement and other related agreements providing for
the sale of the Preferred Securities;
(c) to acquire the Debentures with the proceeds of the sale
of the Preferred Securities and the Common Securities; provided, however, that
the Regular Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of
the Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Property Trustee before taking
or refraining from taking any Ministerial Action in relation to a Special
Event;
(e) to establish a record date with respect to
all actions to be taken hereunder that require a record date
be established, including and with respect to, for the
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purposes of ss.316(c) of the Trust Indenture Act, Distributions, voting
rights, redemptions and exchanges, and to issue relevant notices to the
Holders of Preferred Securities and Holders of Common Securities as to such
actions and applicable record dates;
(f) to take all actions and perform such duties
as may be required of the Regular Trustees pursuant to the
terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against
the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors,
advisors, and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the
Trust Indenture Act to the Property Trustee, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
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(o) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect the purposes for which
the Trust was created;
(p) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine in
their discretion to be necessary or desirable in carrying out the activities
of the Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be
an Investment Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to
ensure that the Debentures will be treated as indebtedness of the
Debenture Issuer for United States federal income tax purposes;
provided that such action does not materially adversely affect the interests
of Holders; and
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust.
The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Regular Trustees shall
not take any action that is inconsistent with the purposes and functions of
the Trust set forth in Section 3.3.
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Subject to this Section 3.6, the Regular Trustees shall have
none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees.
(a) The Trust shall not, and the Trustees (including the
Property Trustee) on behalf of the Trust shall not, engage in any activity
other than as required or authorized by this Declaration. In particular, the
Trust shall not and the Trustees (including the Property Trustee) shall cause
the Trust not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders of Securities pursuant to the terms of this Declaration and
of the Securities;
(ii) acquire any assets other than as
expressly provided herein;
(iii) possess Trust property for other than a
Trust purpose;
(iv) make any loans or incur any indebtedness
other than loans represented by the Debentures;
(v) possess any power or otherwise act in
such a way as to vary the Trust assets or the terms of
the Securities in any way whatsoever;
(vi) issue any securities or other evidences
of beneficial ownership of, or beneficial interest in, the Trust
other than the Securities; or
(vii) other than as provided in this Declaration or
Annex I hereto, (A) direct the time, method and place of exercising
any trust or power conferred upon the Debenture Trustee with respect
to the Debentures, (B) waive any past default that is waivable under
the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of
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all the Debentures shall be due and payable, or (D) consent to any
amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required unless, in the case
of each action described in Clause (A), (B), (C) or (D) the Trust
shall have received an opinion of counsel to the effect that such
modification will not cause more than an insubstantial risk that for
United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated
non-interest bearing trust account (the "Property Trustee Account")
in the name of and under the exclusive control of the Property
Trustee on behalf of the Holders of the Securities and, upon the
receipt of payments of funds made in respect of the Debentures held
by the Property Trustee, deposit such funds into the Property Trustee
Account and make payments to the Holders of the Preferred Securities
and Holders of the Common Securities from the Property Trustee
Account in accordance with Section 6.1. Funds in the Property Trustee
Account shall be held uninvested until disbursed in accordance with
this Declaration. The Property Trustee Account shall be an account
that is maintained with a banking institution the rating on whose
long-term unsecured indebtedness is at least
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equal to the rating assigned to the Preferred Securities by a
"nationally recognized statistical rating organization", as that term
is defined for purposes of Rule 436(g)(2) under the Securities Act.
(ii) engage in such ministerial activities as so
directed and as shall be necessary or appropriate to effect the
redemption of the Preferred Securities and the Common Securities to
the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by
the Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as so directed as shall be
necessary or appropriate to effect the distribution of the Debentures
to Holders of Securities upon the occurrence of certain special
events (as may be defined in the terms of the Securities) arising
from a change in law or a change in legal interpretation or other
specified circumstances pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant
to the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default of which a Responsible
Officer of the Property Trustee has actual knowledge or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided, however, that if an Event of Default has occurred and is continuing
and such event is attributable to the failure of the Sponsor to pay interest
or principal on the Securities on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a Holder of Preferred Securities may directly institute a proceeding 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 (a "Direct Action") on or after the
respective due date specified in the Securities. In connection with such
Direct Action, the rights of the Holders of the Common Securities will be
subrogated to the rights of such Holder of Preferred Securities to the extent
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of any payment made by the Sponsor to such Holder of Preferred Securities in
such Direct Action. In addition, if the Property Trustee fails to enforce its
rights under the Securities (other than rights arising from an Event of
Default described in the immediately preceding sentence) after any Holder of
Preferred Securities shall have made a written request to the Property 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
Property Trustee's rights as holder of the Debentures, without first
instituting any legal proceeding against the Property Trustee or any other
Person. Except as provided in the preceding sentences, the Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a
Trustee unless either:
(i) the Trust has been completely liquidated
and the proceeds of the liquidation distributed to the
Holders of Securities pursuant to the terms of the
Securities; or
(ii) a Successor Property Trustee has been
appointed and has accepted that appointment in
accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a
Responsible Officer of the Property Trustee occurs and is continuing, the
Property Trustee shall, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of such Securities. In no event, however, shall the
Property Trustee, in its capacity as holder of the Debentures, have the power
to convert the Debentures.
(h) The Property Trustee will act as Paying Agent and
Registrar in New York to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all securities and any such
Paying Agent shall comply with ss. 317(b) of the Trust Indenture Act. Any
Paying Agent may be removed by the Property Trustee at any time and
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a successor Paying Agent or additional Paying Agents may be appointed at any
time by the Property Trustee.
(i) Subject to this Section 3.8, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the Regular
Trustees set forth in Section 3.6.
The Property Trustee must exercise the powers set forth in
this Section 3.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Property Trustee shall
not take any action that is inconsistent with the purposes and functions of
the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which
a Responsible Officer of the Property Trustee has actual knowledge, the
Property Trustee shall exercise such of the rights and powers vested in it by
this Declaration, and use the same degree of care and skill in their exercise,
as a prudent individual would exercise or use under the circumstances in the
conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of
Default and after the curing or waiving of all such
Events of Default that may have occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the
express provisions of this Declaration and the
Property Trustee shall not be liable except for the
performance of such duties and
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obligations as are specifically set forth in this
Declaration, and no implied covenants or
obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the
part of the Property Trustee, the Property Trustee
may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or
opinions furnished to the Property Trustee and
conforming to the requirements of this Declaration;
but in the case of any such certificates or
opinions that by any provision hereof are
specifically required to be furnished to the
Property Trustee, the Property Trustee shall be
under a duty to examine the same to determine
whether or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in liquidation amount of the Securities relating to
the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require
the Property Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Declaration or indemnity reasonably satisfactory to the Property
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Trustee against such risk or liability is not
reasonably assured to it;
(v) the Property Trustee's sole duty with respect
to the custody, safe keeping and physical preservation of the
Debentures and the Property Trustee Account shall be to deal with
such property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except as it may otherwise
agree in writing with the Sponsor. Money held by the Property Trustee
need not be segregated from other funds held by it except in relation
to the Property Trustee Account maintained by the Property Trustee
pursuant to Section 3.8(c)(i) and except to the extent otherwise
required by law; and
(viii) the Property Trustee shall not be
responsible for monitoring the compliance by the Regular Trustees or
the Sponsor with their respective duties under this Declaration, nor
shall the Property Trustee be liable for any default or misconduct of
the Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be
fully 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, sent or presented by the
proper party or parties;
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(ii) any direction or act of the Sponsor or
the Regular Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officer's Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting
any action hereunder, the Property Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officer's Certificate which, upon
receipt of such request, shall be promptly delivered by the Sponsor
or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration
thereof;
(v) the Property Trustee may consult with counsel
of its choice or other experts and the advice or opinion of such
counsel and experts with respect to legal matters or advice within
the scope of such experts' area of expertise 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 accordance
with such advice or opinion, such counsel may be counsel to the
Sponsor or any of its Affiliates, and may include any of its
employees. The Property Trustee shall have the right at any time to
seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Property Trustee adequate
security and indemnity, reasonably satisfactory to the Property
Trustee, against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Property Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in
complying
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with such request or direction, including such reasonable advances as
may be requested by the Property Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve the
Property Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) the Property 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, security, bond,
debenture, note, other evidence of indebtedness or other paper or
document, but the Property Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit;
(viii) the Property 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 Property
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;
(ix) any action taken by the Property Trustee or
its agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or its agents
alone shall be sufficient and effective to perform any such action
and no third party shall be required to inquire as to the authority
of the Property Trustee to so act or as to its compliance with any of
the terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's
taking such action;
(x) whenever in the administration of this
Declaration the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder the Property Trustee (i) may request
instructions from the Holders of the Securities which instructions
may only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to direct
the Property Trustee
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under the terms of the Securities in respect of such remedy, right or
action, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and
(iii) shall be protected in acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation
to take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration
other than Section 5.2, the Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of ss. 3807 of the Business Trust Act.
SECTION 3.12 Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the
Securities shall be taken as the statements of the Sponsor, and the Trustees
do not assume any responsibility for their
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correctness. The Trustees make no representations as to the value or condition
of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Securities.
SECTION 3.13 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall exist until ________ __, 2022.
SECTION 3.14 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other entity or
body, except as described in Section 3.14(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees
or, if there are more than two, a majority of the Regular Trustees and without
the consent of the Holders of the Securities, the Delaware Trustee or the
Property Trustee, consolidate, amalgamate, merge with or into, or be replaced
by a trust organized as such under the laws of any State of the United States;
provided, that:
(i) if the Trust is not the survivor, such
successor entity (the "Successor Entity") either:
(A) expressly assumes all of the
obligations of the Trust under the Securities; or
(B) substitutes for the Preferred
Securities other securities having substantially
the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor
Securities rank the same as the Preferred
Securities with respect to Distributions, assets
and payments upon liquidation, redemption and
otherwise;
(ii) the Debenture Issuer expressly acknowledges a
trustee of the Successor Entity that
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possesses the same powers and duties as the Property
Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or
with any other organization on which the Preferred Securities are
then listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect;
(vi) such Successor Entity has a purpose
substantially identical to that of the Trust;
(vii) the Sponsor guarantees the obligations of
such Successor Entity under the Successor Securities at least to the
extent provided by the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust reasonably
acceptable to the Property Trustee experienced in such matters to the
effect that:
(A) such merger, consolidation,
amalgamation or replacement will not adversely affect the
rights, preferences and privileges of the Holders of the
Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of
the Holders' interest in the new entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the
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Trust nor the Successor Entity will be required to
register as an Investment Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will be treated as a grantor trust for United States
federal income tax purposes.
(c) Notwithstanding Section 3.14(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the Common
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date and on any other date Preferred
Securities are sold pursuant to the over-allotment option granted in the
Underwriting Agreement, the Sponsor will purchase all of the Common Securities
issued by the Trust, in an amount at least equal to 3% of the capital of the
Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities, as applicable:
(a) to prepare for filing by the Trust with the Commission
the Registration Statement, including any amendments thereto;
(b) to determine the States and foreign jurisdictions in
which to take appropriate action to qualify or
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register for sale all or part of the Preferred Securities and to do any and
all such acts, other than actions that must be taken by the Trust, and advise
the Trust of actions it must take, and prepare for execution and filing any
documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to the
New York Stock Exchange or any other national stock exchange or the Nasdaq
National Market for listing or quotation of the Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) of the Exchange Act, including any
amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and
other related agreements providing for the sale of the Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall be five (5), and:
(a) at any time before the issuance of any Securities, the
Sponsor may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a Majority in
liquidation amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities;
provided, however, that the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee, the Delaware Trustee, in the
case of a natural person, shall be a person who is a resident of the State of
Delaware or that, if not a natural person, is an entity
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which has its principal place of business in the State of Delaware; (2) there
shall be at least one Regular Trustee who is an employee or officer of, or is
affiliated with the Sponsor; and (3) one Trustee shall be the Property Trustee
for so long as this Declaration is required to qualify as an indenture under
the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is resident of the State
of Delaware; or
(b) if not a natural person, an entity which has
its principal place of business in the State of Delaware,
and otherwise meets the requirements of applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which
shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements
of the supervising or examining
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authority referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published; and
(iii) if the Trust is excluded from the definition
of an Investment Company solely by means of Rule 3a-5 and to the
extent Rule 3a-5 requires a trustee having certain qualifications to
hold title to the "eligible assets" of the trust, the Property
Trustee shall possess those qualifications.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.6(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture
Act, the Property Trustee and the Holder of the Common Securities (as if it
were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of ss. 310(b) of the Trust
Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be set
forth in Section 5.5 hereof.
SECTION 5.4 Qualifications of Regular Trustees and Dela-
ware Trustee Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act
through one or more Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
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Steven A. McArthur
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
John G. Sylvia
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Craig Hammett
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
Corporate Trust Trustee Administration
Floor 21 West
New York, New York 10286
SECTION 5.6 Appointment, Removal and Resignation of
Trustees.
(a) Subject to Section 5.6(b), Trustees may be appointed or
removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote
of the Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders of the
Common Securities.
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(b) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a Successor Property Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Property Trustee and delivered to the Regular
Trustees and the Sponsor.
(c) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor.
(d) A Trustee appointed to office shall hold office until
his successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Trustee and
delivered to the Sponsor and the Trust, which resignation shall take effect
upon such delivery or upon such later date as is specified therein; provided,
however, that:
(i) No such resignation of the Trustee that
acts as the Property Trustee shall be effective:
(A) until a Successor Property Trustee has
been appointed and has accepted such appointment by
instrument executed by such Successor Property
Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(B) until the assets of the Trust have
been completely liquidated and the proceeds thereof
distributed to the holders of the Securities.
(ii) no such resignation of the Trustee that acts
as the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and delivered
to the Trust, the Sponsor and the resigning Delaware Trustee.
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(e) The Holders of the Common Securities shall use their
best efforts to promptly appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be, if the Property Trustee or the Delaware
Trustee delivers an instrument of resignation in accordance with this Section
5.6.
(f) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation or removal, the Property Trustee or Delaware Trustee
resigning or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees
or, if there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of
a Trustee shall not operate to annul the Trust. Whenever a vacancy in the
number of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 5.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
granted to the
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Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any meetings of
the Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile or overnight courier) not less than 24 hours before
such meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Regular Trustee attends a meeting for
the express purpose of objecting to the transaction of any activity on the
ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees. In the event there is only
one Regular Trustee, any and all action of such Regular Trustee shall be
evidenced by a written consent of such Regular Trustee.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 3.6, including any registration statement or amendment thereto filed
with the Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular
Trustees may deem expedient, to the extent such
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delegation is not prohibited by applicable law or contrary to the provisions
of the Trust, as set forth herein.
SECTION 5.11 Merger, Conversion, Consolidation or
Succession to Business.
Any Person into which the Property Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or
substantially all the corporate trust business of the Property Trustee or the
Delaware Trustee, as the case may be, shall be the successor of the Property
Trustee or the Delaware Trustee, as the case may be, hereunder, provided such
Person 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.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined herein) in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Preferred Securities and the Common
Securities in accordance with the preferences set forth in their respective
terms. If and to the extent that the Debenture Issuer makes a payment of
interest (including Compounded Interest (as defined in the Indenture), and
Additional Interest), premium and/or principal on the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"),
the Property Trustee shall and is directed, to the extent funds are available
for that purpose, to make a distribution (a "Distribution") of the Payment
Amount to Holders.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue
one class of convertible preferred securities, representing undivided
beneficial interests in the assets of the Trust (the "Preferred Securities"),
having such terms (the "Terms") as are set forth in Annex I and one class of
convertible common securities, representing undivided beneficial interests in
the assets of the Trust (the "Common Securities"), having such terms as are
set forth in Annex I. The Trust shall issue no securities or other interests
in the assets of the Trust other than the Preferred Securities and the Common
Securities. The Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and nonassessable.
(d) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the
terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by
a Regular Trustee. In case any Regular Trustee of the Trust who shall have
signed any of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Regular Trustee; and any Securities may be signed on
behalf of the Trust by such persons who, at the actual date of execution of
such Security, shall be the Regular Trustees of the Trust, although at the
date of the execution and delivery of
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the Declaration any such person was not such a Regular Trustee.
(b) One Regular Trustee shall sign the Preferred Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Preferred Security shall not be valid until authenticated
by the manual signature of an authorized signatory of the Property Trustee.
The signature shall be conclusive evidence that the Preferred Security has
been authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular
Trustee, the Property Trustee shall authenticate the Preferred Securities for
original issue in paragraph 5 of the Securities. The aggregate number of
Preferred Securities outstanding at any time shall not exceed the number set
forth in the Terms in Annex I hereto except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Preferred Securities. An
authenticating agent may authenticate Preferred Securities whenever the
Property Trustee may do so. Each reference in this Declaration to
authentication by the Property Trustee includes authentication by such agent.
An authenticating agent has the same rights as the Property Trustee to deal
with the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
The Preferred Securities and the Property Trustee's
certificate of authentication shall be substantially in the form of Exhibit
A-1 and the Common Securities shall be substantially in the form of Exhibit A-
2, each of which is hereby incorporated in and expressly made a part of this
Declaration. Securities may be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof. The Securities may have
letters, numbers, notations or other marks of identification or designation
and such legends or endorsements required by law, stock exchange rule,
agreements to which the Trust is subject, if any, or usage (provided that
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any such notation, legend or endorsement is in a form acceptable to the
Trust). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Property Trustee in writing. Each
Preferred Security shall be dated the date of its authentication. The terms
and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Property Trustee and the
Sponsor, by their execution and delivery of this Declaration, expressly agree
to such terms and provisions and to be bound thereby.
The Preferred Securities are being offered and sold by the
Trust pursuant to an Underwriting Agreement relating to the Preferred
Securities, dated ________ __, 1997, among the Trust, the Sponsor and the
underwriters named therein (the "Underwriting Agreement").
SECTION 7.4 Registrar, Paying Agent and Conversion Agent.
The Trust shall maintain in the Borough of Manhattan, City
of New York, State of New York or in the city of London, England, as the case
may be, (i) an office or agency where Preferred Securities may be presented
for registration of transfer or from exchange ("Registrar"), (ii) an office or
agency where Preferred Securities may be presented for payment ("Paying
Agent") and an office or agency where Securities may be presented for
conversion ("Conversion Agent"). The Registrar shall keep a register of the
Preferred Securities and of their transfer and exchange. The Trust may appoint
the Registrar, the Paying Agent and the Conversion Agent and may appoint one
or more co-registrars, one or more additional paying agents and one or more
additional conversion agents in such other locations as it shall determine.
The term "Paying Agent" includes any additional paying agent and the term
"Conversion Agent" includes any additional conversion agent. The Trust may
change any Paying Agent, Registrar, co-registrar or Conversion Agent without
prior notice to any Holder. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Regular Trustees. The Trust
shall notify the Property Trustee of the name and address of any Agent not a
party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee
shall act as such. The Trust or any of its
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Affiliates may act as Paying Agent, Registrar, or Conversion Agent. The Trust
shall act as Paying Agent, Registrar, co-registrar, and Conversion Agent for
the Common Securities.
The Trust initially appoints the Property Trustee
as Registrar, Paying Agent, and Conversion Agent for the
Preferred Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the
Property Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Property Trustee all money held by the
Paying Agent for the payment of principal or distribution on the Securities,
and will notify the Property Trustee if there are insufficient funds. While
any such insufficiency continues, the Property Trustee may require a Paying
Agent to pay all money held by it to the Property Trustee. The Trust at any
time may require a Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it. Upon payment over to the
Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of
the Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the
Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If the holder of a Security claims that the Security has
been lost, destroyed or wrongfully taken or if such Security is mutilated and
is surrendered to the Trust or in the case of the Preferred Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. If required by the Property Trustee
or the Trust, an indemnity bond must be sufficient in the judgment of both to
protect the Trustees, the Property Trustee, the Sponsor or any authenticating
agent from any loss which any of them may suffer if a Security is replaced.
The Sponsor may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due and
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payable, or is about to be purchased by the Sponsor pursuant to Article III
hereof, the Sponsor in its discretion may, instead of issuing a new Security,
pay or purchase such Security, as the case may be.
Every replacement Security is an additional obligation of
the Trust.
SECTION 7.7 Outstanding Preferred Securities.
The Preferred Securities outstanding at any time are all the
Preferred Securities authenticated by the Property Trustee except for those
cancelled by it, those delivered to it for cancellation, and those described
in this Section as not outstanding.
If a Preferred Security is replaced, paid or purchased
pursuant to Section 7.6 hereof, it ceases to be outstanding unless the
Property Trustee receives proof satisfactory to it that the replaced, paid or
purchased Preferred Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in accordance
with the terms of this Declaration, they cease to be outstanding and interest
on them ceases to accrue.
A Preferred Security does not cease to be outstanding
because one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the
Security.
SECTION 7.8 Preferred Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Securities which the Property Trustee knows are so owned shall be so
disregarded.
SECTION 7.9 Temporary Securities.
(a) Until definitive Securities are ready for delivery, the
Trust may prepare and, in the case of the Preferred Securities, the Property
Trustee shall
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authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Trust
considers appropriate for temporary Securities. Without unreasonable delay,
the Trust shall prepare and deliver to the Property Trustee Preferred
Securities in certificated form (other than in the case of Preferred
Securities in global form) and thereupon any or all temporary Preferred
Securities (other than any such Preferred Securities in global form) may be
surrendered in exchange therefor, at the office of the Registrar, and the
Property Trustee shall authenticate and deliver an equal aggregate liquidation
amount of definitive Preferred Securities in certificated form in exchange for
temporary Preferred Securities (other than any such Preferred Securities in
global form). Such exchange shall be made by the Trust at its own expense and
without any charge therefor. Until so exchanged, temporary Securities shall in
all respects be entitled to the same benefits and subject to the same
limitations under this Declaration as Securities in definitive certificated
form authenticated (in the case of Preferred Securities) and delivered
hereunder.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Preferred Securities to
the Property Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Property Trustee any Preferred
Securities surrendered to them for registration of transfer, redemption,
conversion, exchange or payment. The Property Trustee shall promptly cancel
all Preferred Securities, surrendered for registration of transfer,
redemption, conversion, exchange, payment, replacement or cancellation and
shall dispose of cancelled Preferred Securities as the Trust directs. The
Trust may not issue new Preferred Securities to replace Preferred Securities
that it has paid or that have been delivered to the Property Trustee for
cancellation or that any holder has converted.
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ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of
dissolution or its equivalent with respect to the Sponsor, upon the
consent of at least a Majority in liquidation amount of the
Securities, voting together as a single class, to file a certificate
of cancellation with respect to the Trust, or the revocation of the
charter of the Sponsor and the expiration of 90 days after the date
of revocation without a reinstatement thereof, except, in each case,
to the extent permitted by Article Eight of the Indenture;
(iii) upon the entry of a decree of judicial
dissolution of the Sponsor or the Trust;
(iv) when all of the Securities shall have been
called for redemption and the amounts necessary for redemption
thereof shall have been paid to the Holders in accordance with the
terms of the Securities;
(v) upon the occurrence and continuation of a Tax
Event or an Investment Company Event pursuant to which the Sponsor
causes the Regular Trustees to dissolve the Trust in accordance with
the terms of the Securities;
(vi) upon the distribution of the common
stock of the Sponsor to Holders of all outstanding
Securities upon conversion of all such Securities;
(vii) the expiration of the term of the Trust
on ________ __, 2012; or
(viii) before the issuance of any Securities,
with the consent of all the Regular Trustees and the
Sponsor.
(b) As soon as is practicable after the occurrence of an
event referred to in Section 8.1(a), and upon
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the completion of the winding up of the Trust, one of the Trustees (each of
whom is hereby authorized to take such action) shall file a certificate of
cancellation with the Secretary of State of the State of Delaware thereby
terminating the Trust.
(c) The provisions of Section 3.9 and Article X shall survive
the termination of the Trust.
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General.
(a) When Preferred Securities are presented to the Registrar
or a co-registrar with a request to register a transfer or to exchange them
for an equal number of Preferred Securities represented by different
certificates, the Registrar shall register the transfer or make the exchange
if its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Trust shall issue and the Property Trustee shall
authenticate Preferred Securities at the Registrar's request.
(b) Subject to this Article IX, Preferred
Securities shall be freely transferable.
(c) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and
in the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(d) Subject to this Article IX, the Sponsor and any Related
Party may only transfer Common Securities to the Sponsor or a Related Party of
the Sponsor; provided that, any such transfer is subject to the condition
precedent that the transferor obtain the written opinion of nationally
recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
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(i) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company
or the transferee would become an Investment Company.
SECTION 9.2 Transfer of Securities.
(a) The Regular Trustees shall provide for the registration
of Securities and of transfers of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Securities, the Regular Trustees shall cause one or more new Securities to be
issued in the name of the designated transferee or transferees. Every Security
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the Regular Trustees duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Security surrendered for registration of transfer shall be canceled in
accordance with Section 7.10. A transferee of a Security shall be entitled to
the rights and subject to the obligations of a Holder hereunder upon the
receipt by such transferee of a Security. By acceptance of a Security, each
transferee shall be deemed to have agreed to be bound by this Declaration.
(b) The Trust shall not be required (i) to issue, register
the transfer of, or exchange, Preferred Securities during a period beginning
at the opening of business 15 days before the day of any selection of
Preferred Securities for redemption set forth in the terms of the Securities
as set forth in Annex I hereto and ending at the close of business on the day
of selection, or (ii) to register the transfer or exchange of any Preferred
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Preferred Security being redeemed in part.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any
Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Security represented by such
Certificate for purposes of
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receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Preferred
Securities, the Preferred Securities, on original issuance, will be issued in
the form of one or more, fully registered, global Preferred Security
certificates (each a "Global Preferred Security"), to be delivered to the
Depositary, the initial Clearing Agency, by, or on behalf of, the Trust. Such
Global Preferred Securities shall initially be registered on the books and
records of the Trust in the name of Cede & Co., the nominee of the Depositary,
and no Preferred Security Beneficial Owner will receive a definitive Preferred
Security Certificate representing such Preferred Security Beneficial Owner's
interests in such Global Preferred Securities, except as provided in Section
9.7. Unless and until definitive, fully registered Preferred Securities
Certificates have been issued to the Preferred Security Beneficial Owners
pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be
in full force and effect;
(b) the Trust and the Trustees shall be entitled to deal
with the Depositary for all purposes of this Declaration (including the
payment of Distributions on the Global Preferred Securities and receiving
approvals, votes or consents hereunder) as the Holder of the Preferred
Securities and the sole holder of the Global Preferred Securities and shall
have no obligation to the Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions of this
Section 9.4 shall control; and
(d) the rights of the Preferred Security Bene-
ficial Owners shall be exercised only through the Depositary
and shall be limited to those established by law and agree-
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ments between such Preferred Security Beneficial Owners and the Depositary
and/or the Participants and receive and transmit payments of Distributions on
the Global Certificates to such Participants. The Depositary will make book
entry transfers among the Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred
Security Holders is required under this Declaration, the Regular Trustees
shall, in the case of any Global Preferred Security, give all such notices and
communications specified herein to be given to the Preferred Security Holders
to the Depositary, and shall have no notice obligations to the Preferred
Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If the Depository elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Preferred Securities.
SECTION 9.7 Definitive Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its services as
securities depositary with respect to the Preferred Securities and a
successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with the
Sponsor to terminate the book entry system through the Clearing
Agency with respect to the Preferred Securities,
then:
(c) Definitive Preferred Security Certificates
shall be prepared by the Regular Trustees on behalf of
the Trust with respect to such Preferred Securities;
and
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(d) upon surrender of the Global Securities by the Clearing
Agency, accompanied by registration instructions, the Regular
Trustees shall cause Definitive Certificates to be delivered to
Preferred Security Beneficial Owners in accordance with the
instructions of the Clearing Agency. Neither the Trustees nor the
Trust shall be liable for any delay in delivery of such instructions
and each of them may conclusively rely on and shall be protected in
relying on, said instructions of the Clearing Agency. The Definitive
Preferred Security Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by their execution
thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Regular Trustees may deem appropriate, or as may be required to
comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which
Preferred Securities may be listed, or to conform to usage.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Decla-
ration, the Securities Guarantees and the terms of the
Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion
of the capital contributions (or any return thereon) of the Holders
of the Securities which shall be made solely from assets of the
Trust; or
(ii) be required to pay to the Trust or to
any Holder of Securities any deficit upon dissolution
of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable as
principal obligor, jointly and severally with the Trust, for all of the debts
and obligations of the Trust (other than with respect to the Securities).
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(c) Pursuant to ss. 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation
of personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be
paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating
thereto to the Trust or to any other Covered Person, an Indemnified Person
acting under this Declaration shall not be liable to the Trust or to any other
Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and
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liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists
or arises between an Indemnified Person and any Covered
Person; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein provides that an Indemnified
Person shall act in a manner that is, or provides terms that are,
fair and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified
Person is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another
express standard, the Indemnified Person shall act
under such express standard and shall not be subject to
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any other or different standard imposed by this Declaration or by
applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that
he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the Company Indemnified Person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Trust
to procure a judgment in its favor by reason of the fact that he is
or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust and except
that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person shall
have been adjudged to be liable to the Trust unless and only
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to the extent that the Court of Chancery of Delaware or the court in
which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
(iii) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person
is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority
vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the Common Security Holder of the Trust.
(iv) Expenses (including attorneys' fees and expenses)
incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall
be paid by the Debenture Issuer in advance of the final disposition
of such action, suit or proceeding. Notwithstanding the foregoing, no
advance shall be made by the Debenture Issuer if a determination is
reasonably and promptly made (i) by the Regular Trustees by a
majority vote of a quorum of disinterested Regular Trustees, (ii) if
such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion or (iii) the Common Security Holder of
the Trust, that, based upon the facts known to the Regular Trustees,
counsel or the Common Security Holder at the time such determination
is made, such Company Indemnified Person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to
the best interests of the Trust, or, with respect to any criminal
proceeding, that such Company
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Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful.
(v) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section
10.4(a) shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Preferred Security Holders of
the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All
rights to indemnification under this Section 10.4(a) shall be deemed
to be provided by a contract between the Debenture Issuer and each
Company Indemnified Person who serves in such capacity at any time
while this Section 10.4(a) is in effect. Any repeal or modification
of this Section 10.4(a) shall require the consent of the Regular
Trustees and not affect any rights or obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.4(a).
(vii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any
person who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
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(viii) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a Company Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee and the Delaware Trustee (each of
the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability or expense including taxes (other than taxes based
on the income of such Fiduciary Indemnified Person) incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration or the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 10.4(b) shall survive the
satisfaction and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and
the Property Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar
or dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to
present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person,
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the Sponsor, the Delaware Trustee and the Property Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary)
or to recommend to others any such particular investment or other opportunity.
Any Covered Person, the Delaware Trustee and the Property Trustee may engage
or be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, books of account, records
and supporting documents, which shall reflect in reasonable detail, each
material transaction of the Trust. The books of account shall be maintained in
accordance with generally accepted accounting principles consistently applied.
(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end
of each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss, which shall be examined by and
reported upon as of the end of each Fiscal Year by a firm of independent
certified public accountants selected by the Regular Trustees.
(c) The Regular Trustees shall cause to be duly
prepared and delivered to each of the Holders of Securities,
any annual United States federal income tax information
statement, required by the Code, containing such information
with regard to the Securities held by each Holder as is re-
quired by the Code and the Treasury Regulations. Not-
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withstanding any right under the Code to deliver any such statement at a later
date, the Regular Trustees shall endeavor to deliver all such statements
within 30 days after the end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Regular Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the
name and for the sole benefit of the Trust; provided, however, that all
payments of funds in respect of the Debentures held by the Property Trustee
shall be made directly to the Property Trustee Account and no other funds of
the Trust shall be deposited in the Property Trustee Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Property Trustee shall designate the signatories
for the Property Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited
to an
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action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by
any applicable terms of the Securities, this Declaration may only be amended
by a written instrument approved and executed by:
(i) the Regular Trustees (or, if there are
more than two Regular Trustees a majority of the Regul-
ar Trustees);
(ii) if the amendment affects the rights,
powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee; and
(iii) if the amendment affects the rights,
powers, duties, obligations or immunities of the
Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such pur-
ported amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment,
the Property Trustee shall have first received an Officer's
Certificate from each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or immunities
of the Property Trustee, the Property Trustee shall have first
received:
(A)an Officer's Certificate from each
of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of
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this Declaration (including the terms of the
Securities); and
(B) an opinion of counsel (who may be
counsel to the Sponsor or the Trust) that such amendment is
permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities); and
(iii) to the extent the result of such
amendment would be to:
(A) cause the Trust to fail to continue
to be classified for purposes of United States
federal income taxation as a grantor trust;
(B) reduce or otherwise adversely
affect the powers of the Property Trustee in
contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be
an Investment Company which is required to be
registered under the Investment Company Act;
(c) at such time after the Trust has issued any Securities
that remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder of Securities may be effected only
with such additional requirements as may be set forth in the terms of such
Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of
the Holders of a majority in liquidation amount of the Common Securities and;
(f) the rights of the holders of the Common Securities under
Article V to increase or decrease the number of, and appoint and remove
Trustees shall not be amended without the consent of the Holders of a Majority
in liquidation amount of the Common Securities; and
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(g) notwithstanding Section 12.1(c), this Declaration may be
amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in
this Declaration that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor; and
(iv) conform to any change in Rule 3a-5 or written
change in interpretation or application of Rule 3a-5 by any
legislative body, court, government agency or regulatory authority
which amendment does not have a material adverse effect on the
rights, preferences or privileges of the Holders.
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SECTION 12.2 Meetings of the Holders of Securities; Action
by Written Consent.
(a) Meetings of the Holders of any class of Securities may
be called at any time by the Regular Trustees (or as provided in the terms of
the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration,
the terms of the Securities or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading. The Regular Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least a Majority in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the Regular
Trustees one or more calls in a writing stating that the signing Holders of
Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of Securities
calling a meeting shall specify in writing the Certificates held by the
Holders of Securities exercising the right to call a meeting and only those
Securities represented by the Certificates so specified shall be counted for
purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of
the Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to
all the Holders of Securities having a right to vote thereat at least
7 days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration or the rules of any
stock exchange or over the counter market on which the Preferred
Securities are listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders of Securities. Any
action that may be taken at a meeting of the Holders of Securities
may be taken without a meeting if a consent in writing setting forth
the action so taken is signed by the Holders of Securities owning not
less than the minimum amount of Securities in liquidation amount that
would be necessary to authorize or take such action at a meeting at
which all Holders of Secu-
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rities having a right to vote thereon were present and voting, but in
no event less than a Majority in liquidation amount of the
outstanding Securities. Prompt notice of the taking of action without
a meeting shall be given to the Holders of Securities entitled to
vote who have not consented in writing. The Regular Trustees may
specify that any written ballot submitted to the Security Holders for
the purpose of taking any action without a meeting shall be returned
to the Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize
any Person to act for it by proxy on all matters in which a Holder of
Securities is entitled to participate, including waiving notice of
any meeting, or voting or participating at a meeting. No proxy shall
be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder of Securities executing it.
Except as otherwise provided herein, all matters relating to the
giving, voting or validity of proxies shall be governed by the
General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities
shall be conducted by the Regular Trustees or by such other Person
that the Regular Trustees may designate; and
(iv) unless the Business Trust Act, this
Declaration, the terms of the Securities, the Trust Indenture Act or
the listing rules of any stock exchange on which the Preferred
Securities are then listed or trading provide otherwise, the Regular
Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders of Securities, including
notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders of Securities, waiver of any
such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy
or any other matter with respect to the exercise of any such right to
vote.
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<PAGE>
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration
and at the Closing Date, and each Successor Property Trustee represents and
warrants to the Trust and the Sponsor at the time of the Successor Property
Trustee's acceptance of its appointment as Property Trustee that:
(a) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws
of the State of New York, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Declaration.
(b) The execution, delivery and performance by the Property
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee, and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the
Declaration by the Property Trustee does not conflict with or constitute a
breach of the certificate of incorporation or by-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee will be the
record holder of the Debentures and the Property Trustee has not knowingly
created any liens or encumbrances on such Debentures.
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(e) No consent, approval or authorization of, or
registration with or notice to, any New York State or Federal banking
authority is required for the execution, delivery or performance by the
Property Trustee, of the Declaration.
SECTION 13.2 Representations and Warranties of Delaware
Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration
and at the Closing Date, and each Successor Delaware Trustee represents and
warrants to the Trust and the Sponsor at the time of the Successor Delaware
Trustee's acceptance of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly existing
and in good standing under the laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration.
(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. The Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the
Declaration by the Delaware Trustee does not conflict with or constitute a
breach of the certificate of incorporation or By-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or
registration with or notice to, any Delaware or Federal banking authority is
required for the execution, delivery or performance by the Delaware Trustee,
of this Declaration.
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(e) The Delaware Trustee is a natural person who is a
resident of the State of Delaware, or, if not a natural person, an entity
which has its principal place of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees
at the Trust's mailing address set forth below (or such other address as the
Trust may give notice of to the Holders of the Securities):
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give notice
of to the Holders of the Securities):
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
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<PAGE>
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(e) if given to any other Holder, at the address set forth
on the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first
class mail, postage prepaid except that if a notice or other document is
refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have
been delivered on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State
of Delaware and all rights and remedies shall be governed by such laws without
regard to the principles of conflict of laws of the State of Delaware or any
other jurisdiction that would call for the application of the law of any
jurisdiction other than the State of Delaware; provided, however, that there
shall not be applicable to the Trust, the Trustees or this Declaration any
provision of the laws (statutory or common) of the State of Delaware
pertaining to trusts that relate to or regulate, in a manner inconsistent with
the terms hereof (i) the filing with any court or governmental body or agency
of trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the
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necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding or investing trust assets, or (vii) the establishment of
fiduciary or other standards of responsibility or limitations on the acts or
powers of trustees that are inconsistent with the limitations or liabilities
or authorities and powers of the Trustees as set forth or referenced in this
Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to
the Trust.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or cir-
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cumstances other than those to which it is held invalid, shall not be affected
thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of
the signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these
presents to be executed as of the day and year first above written.
Steven A. McArthur
as Trustee
-----------------------
Craig Hammett
as Trustee
-----------------------
Gregory Abel
as Trustee
-----------------------
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:_____________________________
Name:
Title:
CALENERGY COMPANY, INC.
as Sponsor
By:_____________________________
Name:
Title:
<PAGE>
ANNEX I
TERMS OF SECURITIES
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
<PAGE>
EXHIBIT C
UNDERWRITING AGREEMENT
<PAGE>
Certificate Number of Preferred
Number: Securities:
CUSIP No.:
Form of Convertible Preferred Securities
of
CalEnergy Capital Trust ___
_____ % Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred
Security)
CalEnergy Capital Trust ___, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), hereby certifies
that ___________ (the "Holder") is the registered owner of preferred securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the ____% Convertible Preferred Securities (liquidation
preference $50 per Convertible Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities represented hereby are issued and
shall in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of __________ ___, 1997, as the same
may be amended from time to time (the "Declaration"), including the designation
of the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits
of the Preferred Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Preferred Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Reference is hereby made to select provisions of the
Preferred Securities set forth on the reverse hereof, which select provisions
shall for all purposes have the same effect as if set forth at this place.
<PAGE>
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
Unless the Property Trustee's Certificate of Authentication
hereon has been properly executed, these Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this _____ day of _________, 1997.
CALENERGY CAPITAL TRUST
By:
Name: Steven A. McArthur
Title: Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated: _________ __, 1997
THE BANK OF NEW YORK,
as Property Trustee
By: __________________________
Authorized Signatory
<PAGE>
REVERSE OF SECURITY
Distributions payable on each Preferred Security will be
fixed at a rate per annum of _____% (the "Coupon Rate") of the stated
liquidation preference of $50 per Preferred Security, such rate being the rate
of interest payable on the Debentures to be held by the Property Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the
Preferred Securities will be cumulative, will accrue from the date of original
issuance or from the most recent distribution date to which interest has been
paid or duly provided for and will be payable quarterly in arrears, on March 1,
June 1, September 1 and December 1 of each year, commencing on _____ __, 199__,
to Holders of record fifteen (15) days prior to such payment dates, which
payment dates shall correspond to the interest payment dates on the Debentures.
The Debenture Issuer has the right under the Indenture to defer payments of
interest on the Debentures by extending the interest payment period from time
to time on the Debentures for successive periods not exceeding 20 consecutive
quarters (each an "Extension Period") during which Extension Periods no
interest shall be due and payable on the Debentures; provided, that no
Extension Period shall extend beyond the date of maturity of the Debentures or
any earlier redemption date. As a consequence of such extension, Distributions
will also be deferred. Despite such extension, quarterly Distributions will
continue to accrue with interest thereon (to the extent permitted by applicable
law) at the Coupon Rate compounded quarterly during the Extension Periods.
Prior to the termination of any Extension Period, the Debenture Issuer may
elect to continue to defer payments of interest for another consecutive
Extension Period; provided, that any such continued Extension Period, together
with all such previ-
4
<PAGE>
ous and consecutive Extension Periods, may not exceed 20 consecutive quarters.
Payments of accrued Distributions will be payable to Holders as they appear on
the books and records of the Trust on the first record date after the end of
the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
The Preferred Securities shall be redeemable as provided in
the Declaration.
The Preferred Securities shall be convertible into shares of
Common Stock of CalEnergy Company, Inc., through (i) the exchange of Preferred
Securities for a portion of the Debentures and (ii) the immediate conversion of
such Debentures into Common Stock of CalEnergy Company, Inc., in the manner and
according to the terms set forth in the Declaration.
5
<PAGE>
CONVERSION REQUEST
To: THE BANK OF NEW YORK,
as Property Trustee of
CalEnergy Capital Trust ___
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Preferred Securities, or the
portion below designated, into Common Stock of CALENERGY COMPANY, INC. (the
"CalEnergy Common Stock") in accordance with the terms of the Amended and
Restated Declaration of Trust (the "Declaration"), dated as of ________ ___,
1997, by Steven A. McArthur, Craig Hammett and Gregory Abel as Regular
Trustees, The Bank of New York (Delaware), as Delaware Trustee, The Bank of New
York, as Property Trustee, CalEnergy Company, Inc., as Sponsor, and by the
Holders, from time to time, of undivided beneficial interests in the Trust to
be issued pursuant to the Declaration. Pursuant to the aforementioned exercise
of the option to convert these Preferred Securities, the undersigned hereby
directs the Conversion Agent (as that term is defined in the Declaration) to
(i) exchange such Preferred Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Preferred Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures on behalf of the
undersigned, into CalEnergy Common Stock (at the conversion rate specified in
the terms of the Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent
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.
6
<PAGE>
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Declaration and the Preferred Securities,
agrees to be bound by the terms of the Registration Rights Agreement relating
to the CalEnergy Common Stock issuable upon conversion of the Preferred
Securities.
Dated: ______________
in whole __ in part __
Number of Preferred
Securities to be
converted:
-------------------
If a name or names other
than the undersigned,
please indicate in the
spaces below the name or
names in which the shares
of CalEnergy Common Stock
are to be issued, along
with the address or
addresses of such person
or persons
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Signature (for conversion only)
Please Print or Typewrite
Name and Address, Including
Zip Code, and Social Secu-
rity or Other Identifying
Number
--------------------------------------
--------------------------------------
--------------------------------------
Signature Guarantee:*
-----------------
- --------
* (Signature must be guaranteed by an "eligible guarantor insti-
tution" that is, a bank, stockbroker, savings and loan associ-
(continued...)
7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Dated: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee:**
---------------------------------------------------------
- --------
* (...continued)
ation or credit union meeting the requirements of the Registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program" as
may be determined by the Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
8
<PAGE>
CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of ____________ ___, 1997
<PAGE>
CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT
This CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT
(the "Preferred Securities Guarantee"), dated as of __________ ___, 1997, is
executed and delivered by CalEnergy Company, Inc., a Delaware corporation
(the "Guarantor"), and The Bank of New York, a New York banking corporation,
as trustee (the "Preferred Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of CalEnergy Capital Trust III, a Delaware statutory business
trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of __________ ___, 1997, among the trustees
of the Issuer named therein, the Guarantor, as sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof ____________ Preferred Securities, having
an aggregate stated liquidation preference of $____________, designated the
_____% Trust Convertible Preferred Securities (plus up to an additional
____________ Trust Convertible Preferred Securities, having an aggregate
liquidation preference of $____________, to cover over-allotments) (the
"Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Preferred Securities Guarantee, to pay
to the Holders of the Preferred Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set
forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Preferred Securities Guarantee for the benefit of the
holders of the Common Securities (as defined herein) except that if an Event of
Default (as defined in the Indenture (as defined herein)), has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated to the rights
of
<PAGE>
Holders of Preferred Securities to receive Guarantee Payments under this
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Preferred Securities
Guarantee but not defined in the preamble above have
the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Preferred
Securities Guarantee has the same meaning
throughout;
(c) all references to "the Preferred Securities
Guarantee" or "this Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or
amended from time to time;
(d) all references in this Preferred Securities
Guarantee to Articles and Sections are to Articles
and Sections of this Preferred Securities Guarantee
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the
same meaning when used in this Preferred Securities
Guarantee unless otherwise defined in this Preferred
Securities Guarantee or unless the context otherwise
requires; and
2
<PAGE>
(f) a reference to the singular includes the
plural and vice versa.
"Affiliate" has the same meaning as given to that term in
Rule 405 of the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Authorized Person" of a Person means any Person that is
authorized to bind such Person provided, however that the Authorized Officer
signing an Officer's Certificate given pursuant to Section 314(a)(4) of the
Trust Indenture Act shall be the principal executive, financial or accounting
officer of such Person.
"Common Securities" means the convertible common securities
representing common undivided beneficial interests in the assets of the Issuer.
"Covered Person" means any Holder or beneficial
owner of Preferred Securities.
"Debentures" means the series of convertible junior
subordinated debt securities of the Guarantor designated the ______%
Convertible Junior Subordinated Debentures Due 2012 held by the Property
Trustee of the
Issuer.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities,
to the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Preferred Securities to the extent the Issuer shall have funds available
therefore, (ii) the amount payable upon redemption to the extent the Issuer has
funds available therefor, with respect to any Preferred Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation preference and all accrued and unpaid
3
<PAGE>
Distributions on the Preferred Securities to the date of payment, to the extent
the Issuer shall have funds available therefor, and (b) the amount of assets of
the Issuer remaining available for distribution to Holders upon liquidation of
the Issuer (in either case, the "Liquidation Distribution"). If an event of
default under the Indenture has occurred and is continuing, the rights of
holders of the Common Securities to receive payments under the Common
Securities Guarantee are subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books
and records of the Issuer of any Preferred Securities; provided, however, that,
in determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee,
any Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of __________ ___,
1997, among the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the Property Trustee of the Issuer.
"Majority in liquidation preference of the Securities" means,
except as provided by the Trust Indenture Act, Holder(s) of Preferred
Securities, voting separately as a class, representing more than 50% of the
stated liquidation preference (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all Preferred
Securities then outstanding.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
pro-
4
<PAGE>
vided for in this Preferred Securities Guarantee shall
include:
(a) a statement that the officer signing the Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken upon which the statements or opinions
contained in such Certificate are based;
(c) a statement that, in such officer's opinion, such officer
has made or caused to be made such examination or investigation as is necessary
to enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York
until a Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Preferred Securities
Guarantee and thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, the chairman of the board of directors, the president, any
vice president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Preferred Guarantee 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
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officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a
successor Preferred Guarantee Trustee possessing the qualifications to act as
Preferred Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee, which are incorporated by reference hereto, and
shall, to the extent applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control;
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee
Trustee (i) within 14 days after January 1 and June 30 of each year, a list, in
such form as the Preferred Guarantee Trustee may reasonably require, of the
names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, and (ii) at any other time, within 30 days of
receipt by the Guarantor of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is given to the Preferred
Guarantee Trustee, provided that the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee
by the Guarantor or the
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Preferred Securities are represented by one or more Global Securities (as
defined in the Indenture). The Preferred Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture
Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred
Guarantee Trustee shall provide to the Holders of the Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Preferred Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee
Trustee such evidence of compliance with any conditions precedent, if any,
provided for in this Preferred Securities Guarantee which relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
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SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in liquidation preference of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default and its consequences.
Upon such waiver, any such Event of Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Preferred Securities Guarantee, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.7 Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Preferred Securities, notices of all
Events of Default known to the Preferred Guarantee Trustee, unless such
defaults have been cured before the giving of such notice, provided, that, the
Preferred Guarantee Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee, or a trust
committee of directors and/or Responsible Officers of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default except any Event of Default as to which
the Preferred Guarantee Trustee shall have received written notice or a
Responsible Officer charged with the administration of the Declaration shall
have obtained actual knowledge.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described
in this Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Holder of Preferred Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor
Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee
Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The
right, title and interest of the Preferred Guarantee Trustee shall
automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing,
the Preferred Guarantee Trustee shall enforce this Preferred Securities
Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of
any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants
shall be read into this Preferred Securities Guarantee against the Preferred
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6), the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
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(d) No provision of this Preferred Securities Guarantee shall
be construed to relieve the Preferred Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the
Preferred Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the Preferred
Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part
of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred Securities Guarantee;
but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be proved
that the Preferred Guarantee
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Trustee was negligent in ascertaining the per-
tinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders of not
less than a Majority in liquidation preference of the Preferred
Securities at the time outstanding, relating to the time, method and
place of conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred
Securities Guarantee; and
(iv) no provision of this Preferred Securities
Guarantee shall require the Preferred Guarantee Trustee to expend or
risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or adequate indemnity against such risk
or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may rely and
shall be fully 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, sent or presented by the
proper party or parties;
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(ii) any direction or act of the Preferred
Securities Guarantor contemplated by this Preferred Securities
Guarantee shall be sufficiently evidenced by an Officers' Certifi-
cate;
(iii) whenever, in the administration of this
Preferred Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Preferred
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult
with counsel of its selection, and the advice or opinion of such
counsel with respect to legal matters 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 accordance with such
advice or opinion. Such counsel may be counsel to the Guarantor or any
of its Affiliates and may include any of the Guarantor's employees.
The Preferred Guarantee Trustee shall have the right at any time to
seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee
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Trustee such adequate security and indemnity reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Preferred
Guarantee Trustee; provided that nothing contained in this Section
3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Preferred
Securities Guarantee;
(vii) the Preferred Guarantee 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
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Preferred Guarantee 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
Preferred Guarantee 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;
(ix) any action taken by the Preferred Guarantee
Trustee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire
as to the authority of the Preferred Guarantee Trustee to so act or as
to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of
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which shall be conclusively evidenced by the Preferred Guarantee
Trustee's or its agent's taking such action; and
(x) whenever in the administration of this
Preferred Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the
Preferred Guarantee Trustee (i) may request instructions from the
Holders of the Preferred Securities or the Guarantor, (ii) may refrain
from enforcing such remedy or right or taking such other action until
such instructions are received, and (iii) shall be protected in acting
in accordance with such instructions.
(b) No provision of this Preferred Securities Guarantee shall
be deemed to impose any duty or obligation on the Preferred Guarantee Trustee
to perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it, in any jurisdiction in which it shall be illegal,
or in which the Preferred Guarantee Trustee shall be unqualified or incompetent
in accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation. No permissive power or
authority available to the Preferred Guarantee Trustee shall be construed to be
a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Preferred Securities Guarantee
shall be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representations as to the validity or sufficiency of
this Preferred Securities Guarantee.
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ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to act as
an institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred
to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
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SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustee.
(a) Subject to ss. 4.2(b), the Preferred Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with ss. 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall
hold office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of removal or resignation, the
Preferred Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee
or removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee
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all amounts accrued and payable to the Preferred Guarantee Trustee to the date
of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay
in full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Subordination
If an Event of Default (as defined in the Indenture), has
occurred and is continuing, the rights of Holders of the Common Securities to
receive Guarantee Payments under the Common Securities Guarantee are
subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments under this Preferred Securities Guarantee.
SECTION 5.3 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.4 Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Preferred Securities Guarantee shall in no way be affected
or impaired by
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reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities to
be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions, the amount payable upon redemption,
Liquidation Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions, the
amount payable upon redemption, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the
Debentures or any extension of the maturity date of the Debentures permitted by
the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer or
any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in the
Preferred Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.4 that the obligations of the Guarantor hereun-
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der shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other
Person to give notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 5.5 Rights of Holders.
(a) The Holders of a Majority in liquidation preference of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce this
Preferred Securities Guarantee, any Holder of Preferred Securities may directly
institute a legal proceeding against the Guarantor to enforce the Preferred
Guarantee Trustee's rights under this Preferred Securities Guarantee without
first instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee or any other Person.
(c) If an Event of Default with respect to the Debentures (an
"Indenture Event of Default"), constituting the failure to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable (or in the case of any redemption, the redemption date) has occurred
and is continuing, then a Holder of Preferred Securities may directly, at any
time, institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the Debentures having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of such Holder on
or after the respective due date (or redemption date) specified in the
Debentures.
SECTION 5.6 Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.
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SECTION 5.7 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Preferred Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.8 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.4 hereof.
SECTION 5.9 Conversion
The Guarantor acknowledges its obligation to issue and
deliver common stock upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if at
such time (i) the Guarantor has exercised its option to defer interest payments
on the Debentures and such deferral is continuing, (ii) the Guarantor
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shall be in default with respect to its payment or other obligations under this
Preferred Securities Guarantee or (iii) there shall have occurred and be
continuing any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Indenture, then the
Guarantor shall not (a) 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 (1) purchases or
acquisitions of shares of Common Stock in connection with the satisfaction by
the Guarantor of its obligations under any employee benefit plans, (2) as a
result of a reclassification of capital stock of the Guarantor or the exchange
or conversion of one class or series of the Guarantor's capital stock for
another class or series of capital stock of the Guarantor, (3) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock of the Guarantor or the
security being converted or exchanged or (4) stock dividends paid by the
Guarantor which consist of stock of the same class as that on which the
dividend is being paid), (b) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Guarantor after the date hereof that ranks pari passu with or junior to
the Debentures and (c) make any guarantee payments with respect to the
foregoing (other than pursuant to this Preferred Securities Guarantee).
SECTION 6.2 Ranking.
This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, except any
liabilities that may be made pari passu expressly by their terms, (ii) pari
passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock or Preferred
Security of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's
common stock.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee shall terminate upon (i)
full payment of the amount payable upon redemption of all Preferred Securities,
(ii) the distribution of the Guarantor's common stock to the Holders in respect
of the conversion of the Preferred Securities into the Guarantor's common stock
or the distribution of the Debentures to the Holders of all of the Preferred
Securities or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except
that an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably
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believes are within such other Person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Guarantor,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Preferred Securities might properly be paid.
SECTION 8.2 Indemnification.
(a) The Guarantor agrees to indemnify each Indemnified Person
for, and to hold each Indemnified Person harmless against, any and all loss,
liability or expense including taxes (other than taxes based on the income of
such Indemnified Person) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration or the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of
this Preferred Securities Guarantee.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees and expenses) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if
it shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).
23
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Preferred Securities then outstanding. Except in connection with
any merger or consolidation of the Guarantor with or into another entity or any
sale, transfer or lease of all or substantially all of the Guarantor's assets
to another entity as permitted under Article Eight of the Indenture, the
Guarantor may not assign its rights or delegate its obligations under the
Preferred Securities Guarantee without the prior approval of the Holders of a
Majority in liquidation preference of the Preferred Securities then
outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of Holders
will be required), this Preferred Securities Guarantee may only be amended with
the prior approval of the Holders of at least a Majority in liquidation
preference (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all the outstanding
Preferred Securities. The provisions of Section 12.2 of the Declaration with
respect to meetings of Holders of the Securities apply to the giving of such
approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred
24
<PAGE>
Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
The Bank of New York
101 Barclay Street
21 West
Attention: Corporate Trust
Trustee Administration
New York, New York 10286
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Preferred Securities):
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: Chief Financial Officer
with a copy to: General Counsel
(c) If given to any Holder of Preferred Secu- rities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
25
<PAGE>
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.
CALENERGY COMPANY, INC.,
as Guarantor
By:
------------------------------------
Name: Steven A. McArthur
Title: Senior Vice Presi-
dent and General
Counsel
THE BANK OF NEW YORK, as
Preferred Guarantee Trustee
By:
------------------------------------
Name:
Title:
<PAGE>
August 4, 1997
CalEnergy Company, Inc.
302 South 36th Street - Suite 400
Omaha, Nebraska 68131
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of CalEnergy Company, Inc. and subsidiaries for the periods ended
March 31, 1997 and 1996, as indicated in our report dated April 29, 1997;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, is being
used in this Registration Statement.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
<PAGE>
[ERNST & YOUNG LOGO]
4 August 1997
The Board of Directors
Northern Electric plc
Carliol House
Market Street
Newcastle upon Tyne
NE1 6NE
Dear Sirs
We are aware of the incorporation by reference in the Registration Statement
(Form S-3) of CalEnergy Company, Inc. for the registration of its Senior
Debt Securities and Subordinated Debt Securities, Preferred Stock and
Common Stock and CalEnergy Capital Trust III, CalEnergy Capital Trust IV and
CalEnergy Capital Trust V for the registration of their Convertible Preferred
Securities, in aggregate amount of $1,500,000,000 of our report dated
November 29, 1996 relating to the unaudited condensed interim financial
statements of Northern Electric plc that are included in the Current Report
on Form 8-K/A dated February 18, 1997 of CalEnergy Company, Inc.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not part
of the registration statement prepared or certified by accountants within
the meaning of Sections 7 or 11 of the Securities Act of 1933.
Yours faithfully
Ernst & Young
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
CalEnergy Company, Inc., CalEnergy Capital Trust III, CalEnergy Capital Trust
IV and CalEnergy Capital Trust V on Form S-3 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, and
to the reference to us under the heading "Experts" in the Prospectus, which is
a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
August 4, 1977
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm, under the caption "Experts" in the
Registration Statement (Form S-3) of CalEnergy Company, Inc., CalEnergy Capital
Trust III, CalEnergy Capital Trust IV and CalEnergy Capital Trust V for the
registration of its Senior Debt Securities and Subordinated Debt Securities,
Preferred Stock and Common Stock and Convertible Preferred Securities and
Junior Subordinated Debentures in the aggregate amount of $1,500,000,000 of
CalEnergy Company, Inc. and to the incorporation by reference therein of our
report dated June 20, 1996 with respect to the consolidated financial
statements of Northern Electric plc included in the Current Report on Form
8-K/A dated February 18, 1997 of CalEnergy Company, Inc. filed with the
Securities and Exchange Commission.
Ernst & Young
Chartered Accountants
Newcastle Upon Tyne
England
August 4, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
CalEnergy Company, Inc. (the "Company"), CalEnergy Capital Trust III, CalEnergy
Capital Trust IV and CalEnergy Capital Trust V on Form S-3 of our report dated
March 10, 1995 on our audit of the consolidated financial statements of Magma
Power Company and subsidiaries for the year ended December 31, 1994 which
report is included in the Company's Form 10-K for the year ended December 31,
1996. We also consent to the reference to our Firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
San Diego, California
August 4, 1997
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Senior Debt Securities
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
-------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
<PAGE>
THIS CONFORMAING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Subordinated Debt Securities
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
-----------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
<PAGE>
THIS CONFORMAING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Convertible Junior Subordinated Debentures
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
<PAGE>
THIS CONFORMAING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Convertible Preferred Securities of
CalEnergy Capital Trust III
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
---------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
<PAGE>
THIS CONFORMAING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Convertible Preferred Securities of
CalEnergy Capital Trust IV
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
--------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
<PAGE>
THIS CONFORMAING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901 (d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
---------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------------
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Convertible Preferred Securities of
CalEnergy Capital Trust V
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 1st day of August, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
---------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
---------------------------------------
Consolidated Report of Condition of EXHIBIT 7
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
March 31, 1997, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
<PAGE>
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
