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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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.)
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)
CALENERGY CAPITAL TRUST II
(Exact name of registrant as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction (I.R.S. EMPLOYER
of incorporation or organization) IDENTIFICATION NO.)
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
(212) 821-8000
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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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT PRICE FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Convertible Preferred Securities 3,600,000 $ 57.75 (1)(2) $207,900,000(1)(2) $63,000
- -------------------------------------------------------------------------------------------------------------
Convertible Junior Subordinated
Debentures of CalEnergy
Company, Inc. ......................... (3) -- -- --
- -------------------------------------------------------------------------------------------------------------
Common Stock of CalEnergy
Company, Inc. ......................... 4,195,800(4)(5) -- -- --
- -------------------------------------------------------------------------------------------------------------
Preferred Securities Guarantee(6) ...... -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Total................................... 3,600,000 100 % $207,900,000 $63,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act based upon the
average of the bid and asked price on June 26, 1997.
(2) Exclusive of accrued interest and distributions, if any.
(3) $180,000,000 in aggregate principal amount of 6 1/4% Convertible Junior
Subordinated Debentures due 2012 (the "Convertible Junior Subordinated
Debentures") of CalEnergy Company, Inc. (the "Company") were issued and
sold to CalEnergy Capital Trust II (the "Trust") in connection with the
issuance by the Trust of 3,600,000 of its 6 1/4% Trust Convertible
Preferred Securities (the "Convertible Preferred Securities"). The
Convertible Junior Subordinated Debentures may be distributed, under
certain circumstances, to the holders of the Convertible Preferred
Securities for no additional consideration.
(4) Such number of shares of Common Stock ("Common Stock") of the Company
are issuable upon conversion of the Convertible Preferred Securities or
the Convertible Junior Subordinated Debentures registered hereunder.
This Registration Statement also covers such shares as may be issuable
pursuant to anti-dilution adjustments.
(5) Includes Common Stock purchase rights. Prior to the occurrence of
certain events, the purchase rights will not be exercisable or
evidenced separately from the Common Stock. No separate consideration
will be received for the Common Stock purchase rights.
(6) Includes the rights of holders of the Convertible Preferred Securities
under the Preferred Securities Guarantee. No separate consideration
will be received for the Preferred Securities Guarantee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT 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.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall 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 JULY 1, 1997
PROSPECTUS
3,600,000 Trust Convertible Preferred Securities
CALENERGY CAPITAL TRUST II
6 1/4% Trust Convertible Preferred Securities
(Liquidation Preference $50 per Trust Convertible Preferred Security)
Guaranteed to the extent set forth herein by
and convertible into the Common Stock of
CALENERGY COMPANY, INC.
$50 per Trust Convertible Preferred Security
This Prospectus relates to the 6 1/4% Trust Convertible Preferred
Securities (the "Convertible Preferred Securities") of CalEnergy Capital
Trust II, a statutory business trust formed under the laws of the State of
Delaware (the "Issuer" or the "Trust"), which represent undivided beneficial
ownership interests in the assets of the Trust, and the shares of the common
stock, par value $.0675 per share ("Common Stock"), of CalEnergy Company,
Inc., a Delaware corporation ("CalEnergy" or the "Company"), issuable upon
conversion of the Convertible Preferred Securities. The Convertible Preferred
Securities were issued and sold (the "Original Offering") on February 26,
1997 (the "Original Offering Date") to the Initial Purchasers (as defined
herein) and were simultaneously sold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Initial Purchasers to be qualified institutional
buyers in reliance on Rule 144A under the Securities Act, to a limited number
of institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and outside the United States to persons
other than U.S. persons in reliance upon Regulation S under the Securities
Act. The Company directly or indirectly owns all of the common securities
issued by the Issuer (the "Common Securities" and together with the
Convertible Preferred Securities, the "Trust Securities"). The Issuer was
formed for the sole purpose of issuing the Trust Securities and using the
proceeds thereof to purchase from the Company its 6 1/4% Convertible Junior
Subordinated Debentures due 2012 (the "Convertible Junior Subordinated
Debentures") having the terms described herein. 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 Issuer.
The Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures and the Common Stock issuable upon conversion of the Convertible
Preferred Securities (the "Offered Securities") may be offered and sold from
time to time by the holders named herein or by their transferees, pledgees,
donees or their successors (collectively, the "Selling Holders") pursuant to
this Prospectus. The Offered Securities may be sold by the Selling Holders
from time to time directly to purchasers or, under certain circumstances,
through agents, underwriters or dealers. See "Plan of Distribution" and
"Selling Holders." If required, the names of any other Selling Holders,
agents or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (a "Prospectus Supplement"). The Selling Holders will receive all
of the proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any, applicable to any
such sale. The Company is responsible for payment of all other expenses
incident to the offer and sale of the Offered Securities. The Selling Holders
and any broker-dealers, agents or underwriters which participate in the
distribution of the Offered Securities may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission received by them
and any profit on the resale of the Offered Securities purchased by them may
be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" for a description of indemnification
arrangements.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN THE
CONVERTIBLE PREFERRED 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.
The date of this Prospectus is , 1997
<PAGE>
(continued from front cover)
Holders of the Convertible Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 6 1/4% of the liquidation
preference of $50 per each of the Convertible Preferred Securities, accruing
from the date of original issuance and payable quarterly in arrears on each
March 1, June 1, September 1 and December 1, commencing June 1, 1997. See
"Description of the Convertible Preferred Securities--Distributions." The
distribution payable on June 1, 1997, which was calculated at the above rate
and based on a period that is longer than a full quarter, was in the amount
of $0.82465 per Convertible Preferred Security. The payment of distributions
and payments on liquidation of the Issuer or the redemption of Convertible
Preferred Securities, as described below (but only to the extent of funds of
the Issuer available therefor), are guaranteed by the Company to the extent
described herein (the "Guarantee"). The Company's obligations under the
Guarantee 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. See
"Description of the Guarantee." If the Company fails to make interest
payments on the Convertible Junior Subordinated Debentures, the Issuer will
have insufficient funds to pay distributions on the Convertible Preferred
Securities. The Guarantee does not cover payment of distributions when the
Issuer does not have sufficient funds to pay such distributions. The
Guarantee, 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 Issuer (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. At March 31, 1997,
Senior Indebtedness consisting of borrowed money of the Company aggregated
approximately $953.8 million. See "Capitalization."
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 Issuer (but would
continue to accumulate quarterly and accrue interest) until the end of any
such interest deferral period. See "Risk Factors--Option to Extend Interest
Payment Period; Tax Consequences," "Description of the Convertible Preferred
Securities--Distributions" and "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
Each of the Convertible Preferred Shares is convertible in the manner
described herein at the option of the holder into shares of Common Stock at
the rate of 1.1655 shares of the Common Stock for each of the Convertible
Preferred Securities (equivalent to a conversion price of $42.90 per share of
Common Stock), subject to adjustment in certain circumstances. See
"Description of the Convertible Preferred Securities--Conversion Rights." The
last reported sale price of the Common Stock (which is listed under the
symbol "CE" on the New York Stock Exchange) on June 27, 1997, was $39.75 per
share.
The Convertible Preferred Securities are effectively redeemable at the
option of the Company, in whole or in part, from time to time, after March 3,
2000, at the prices set forth herein, plus accrued and unpaid distributions
thereon to the date fixed for redemption (the "Redemption Price"). See
"Description of the Convertible Preferred Securities--Optional Redemption."
The Company therefore will be required to make twelve interest payments
before being able to redeem any Convertible Preferred Securities, other than
under certain circumstances following a Tax Event (as defined herein). 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 the Common Securities on a pro rata basis. In addition, upon the
occurrence of certain events arising from a change in law or a change in
legal interpretation, the Company will liquidate the Issuer and cause to be
distributed to the holders of the Convertible Preferred Securities, on a pro
rata basis, Convertible Junior Subordinated Debentures or, in certain limited
circumstances, will cause the redemption of the Convertible Preferred
Securities in whole at the liquidation preference of $50 per each of the
Convertible Preferred Securities plus accrued and unpaid distributions. See
"Description of the Convertible Preferred Securities--Tax Event or Investment
Company Event Redemption or Distribution" and "Description of the Convertible
Junior Subordinated Debentures."
2
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In the event of the liquidation of the Issuer, the holders of the
Convertible Preferred Securities will be entitled to receive for each of the
Convertible Preferred Securities a liquidation preference of $50 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. See
"Description of the Convertible Preferred Securities--Liquidation
Distribution Upon Dissolution."
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 Issuer 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 Issuer will be owned, directly or indirectly,
by the Company, a reporting company under the Exchange Act, (ii) the Issuer
has no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of the
Issuer and investing the proceeds thereof in Convertible Junior Subordinated
Debentures issued by the Company and (iii) the obligations of the Issuer
under the Trust Securities are fully and unconditionally guaranteed by the
Company to the extent that the Issuer has funds available to meet such
obligations. See "Description of the Convertible Junior Subordinated
Debentures" and "Description of the Guarantee."
3
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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 and May 19, 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.
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 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 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
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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.
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. See "Capitalization." Neither
the Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures nor the Guarantee 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
Guarantee. 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 "Risk Factors--Holding Company Structure."
DEPENDENCE ON CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES PAYMENTS;
LEVERAGE. The ability of the Issuer 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 Convertible Preferred Securities and its 6 1/4% Convertible Preferred
Securities Term Income Deferrable Equity Securities ("TIDES") 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 substantial level of
debt 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. See "Capitalization." If the Company were unable to make payments
on the Convertible Junior Subordinated Debentures or the Guarantee, the
Issuer 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 "Risk
Factors--Holding Company Structure."
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
5
<PAGE>
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 Convertible
Preferred Securities and TIDES. See "Description of the Convertible Junior
Subordinated Debentures--Subordination."
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" and "Recent Developments--The
Northern Acquisition." 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 future acquisition opportunities, if any, can be
consummated on favorable terms or that the Company's integration efforts will
be successful.
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
Northern'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
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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.
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. The Labour Party has made statements regarding policies which a
Labour government might introduce, including a windfall assessment proposed
to be levied on privatized utilities (which could be significant in amount).
There can be no assurance that the proposed windfall assessement or other
possible changes in utility regulation by the United Kingdom government, by
whichever party it is controlled, would not cause a material adverse effect
on Northern's results of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new power projects utilizing geothermal and other
technologies, both domestically and internationally, the completion of any of
which is subject to substantial risk. The Company has in development or under
construction projects representing an aggregate generating capacity in excess
of the generating capacity of those currently in operation. Development can
require the Company to expend significant sums for preliminary engineering,
permitting, fuel supply, resource exploration, legal and other expenses in
preparation for competitive bids which the Company may not win or before it
can be determined whether a project is feasible, economically attractive or
capable of being financed. Successful development and construction is
contingent upon, among other things, negotiation on terms satisfactory to the
Company of engineering, construction, fuel supply and power sales contracts
with other project participants, receipt of required governmental permits and
consents and timely implementation of construction. Further, there can be no
assurance that the Company, which is substantially leveraged, will obtain
access to the substantial debt and equity capital required to continue to
develop and construct electric power projects or to refinance projects. The
future growth of the Company is dependent, in large part, upon the demand for
significant amounts of additional electrical generating capacity and its
ability to obtain contracts to supply portions of this capacity. There can be
no assurance that development efforts on any particular project, or the
Company's efforts generally, will be successful. 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.
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
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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 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.
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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 comply with
its obligation to deliver natural gas in accordance with its gas supply
agreement 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 RISKS. 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, 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
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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 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.
RIGHTS UNDER THE GUARANTEE. The Guarantee Trustee (as defined herein)
holds the Guarantee for the benefit of the holders of the Convertible
Preferred Securities. The Guarantee guarantees to the holders of the
Convertible Preferred Securities the payment (but not the collection) of (i)
any accrued and unpaid distributions on the Convertible Preferred Securities
to the extent the Issuer 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 the Issuer, to
the extent the Issuer has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding up or termination of the Issuer
(other than in connection with a redemption of all of the Convertible
Preferred Securities), the
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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 the Issuer has funds available therefor and (b) the
amount of assets of the Issuer remaining available for distribution to
holders of the Convertible Preferred Securities upon the liquidation of the
Issuer. 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 Issuer, 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 Issuer
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 Guarantee 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. 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 Issuer.
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 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."
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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. See "United States Taxation--Potential Extension of Interest
Payment Period and Original Issue Discount."
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 Issuer 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 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 of $50 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"
and "Description of the Convertible Junior Subordinated Debentures--General."
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. See "United States Taxation--Receipt of Convertible
Junior Subordinated Debentures or Cash Upon Liquidation of the Issuer."
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."
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the Company's
1996 Stock Option Plan (the "1996 Plan"), as of March 31, 1997, the Company
had outstanding various options to its officers, directors and employees for
the purchase of 3,455,976 shares of Common Stock, of which 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 March 31, 1997, there were
additional options outstanding to purchase 1,206,000 shares of Common Stock,
1,000,000 of which were granted to Peter Kiewit Sons', Inc. ("PKS"). As of
March 31, 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.
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
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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
"United States Taxation."
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 the Original 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. The Initial
Purchasers currently make a market in the Convertible Preferred Securities.
The Initial Purchasers are not obligated to do so, however, and any market
making with respect to the Convertible Preferred Securities may be
discontinued at any time without notice. Therefore, there can be no assurance
as to the liquidity of any trading market for the Convertible Preferred
Securities or that an active public market for the Convertible Preferred
Securities will develop. The Company does not intend to apply for listing or
quotation of the Convertible Preferred Securities on any securities exchange
or stock market; however, the Convertible Preferred Securities are eligible
for trading in the Private Offerings, Resale and Trading through Automated
Linkages (PORTAL) Market of the National Association of Securities Dealers,
Inc.
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CALENERGY CAPITAL TRUST II
CalEnergy Capital Trust II (the "Issuer" or the "Trust") 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 the Trust,
and the trustees of the Issuer (the "Issuer Trustees") and (ii) the filing of
a certificate of trust with the Secretary of State of the State of Delaware.
The Company owns, directly or indirectly, Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Issuer. The Common
Securities 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 the Trust will consist principally of the
Convertible Junior Subordinated Debentures. The Issuer exists for the
exclusive purpose of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the 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 the Declaration, there are initially five Issuer Trustees.
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."
The Trustee holds title to the Convertible Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities 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, the Trustee maintains 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 holders of the Trust Securities. The
Company, as the direct or indirect holder of all the Common Securities, has
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 the 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."
14
<PAGE>
THE COMPANY
CalEnergy Company, Inc. (the "Company") is a United States-based global
power company which generates, distributes and supplies electricity to
utilities, government entities, retail customers and other customers located
throughout the world. The Company was founded in 1971 and, through its
subsidiaries, is primarily engaged in the development, ownership and
operation of environmentally responsible independent power production
facilities worldwide utilizing geothermal resources, natural gas and
hydroelectric or other energy sources, such as oil and coal. In addition,
through its recently acquired subsidiary, Northern, the Company is engaged in
the distribution and supply of electricity to approximately 1.5 million
customers primarily in northeast England as well as the generation and supply
of electricity (together with other related business activities) throughout
England and Wales.
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
("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 19 projects with an aggregate net capacity of 1,326 MW, in which it
has a net ownership interest of 1,107 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 natural gas and 565 MW are
geothermal-fired). The remaining 191 MW are supplied by two geothermal power
production facilities owned and operated by the Company in the Philippines.
Finally, the Company owns, but does not operate, 202 net MW from the 1,875 MW
Teesside Project in England.
15
<PAGE>
With respect to power generation projects that are financed and under
construction, the Company has an aggregate net ownership interest of 270 MW
of electric generating capacity in two geothermal power projects and one
hydroelectric project in the Philippines, which collectively have an
aggregate net capacity of 459 MW. The Company is also currently constructing
a 55 net MW geothermal project in Indonesia, in which the Company has an
aggregate net ownership interest of 26 MW of electric generating capacity, as
the first phase of the Company's planned Indonesian geothermal project
development 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 December 31, 1996, PKS was an approximate 32% 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 primarily 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 also intends to pursue
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 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 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
16
<PAGE>
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 once those markets are substantially 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 the Company will gain
through Northern's operations in the United Kingdom markets should strengthen
its 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 to be gained by it 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
opportunity to capitalize on the opportunities and challenges of an
increasingly deregulated and competitive domestic market for the generation,
transmission, distribution and supply of energy. 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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<PAGE>
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, 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.
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<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the consolidated capitalization of the
Company at March 31, 1997. The table should be read in conjunction with the
Company's consolidated financial statements and notes thereto incorporated
herein by reference.
<TABLE>
<CAPTION>
Indebtedness:
AT MARCH 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Parent company debt:
Senior discount notes ......................................................... $ 529,640
Limited recourse senior secured notes (1) ..................................... 200,000
Senior notes................................................................... 224,164
-----------------
953,804
Subsidiary and project debt (2):
Construction loans ............................................................ 403,417
Project finance loans ......................................................... 267,415
Salton Sea notes and bonds .................................................... 538,982
UK Credit Facility ............................................................ 633,518
Northern eurobonds ............................................................ 431,483
-----------------
2,274,815
-----------------
Total consolidated indebtedness .............................................. 3,228,619
Deferred income ................................................................ 23,647
Company-obligated mandatorily redeemable convertible preferred securities of
subsidiary trusts holding solely convertible debentures(3) .................... 283,930
Preferred securities of subsidiary ............................................. 89,040
Minority interest .............................................................. 179,293
Stockholders' equity:
Preferred stock, no par value, 2,000 shares authorized ........................ --
Common stock, $.0675 par value, 80,000 shares authorized, 63,733 shares
issued, 63,530 shares outstanding ............................................ 4,303
Additional paid-in capital ..................................................... 560,482
Retained earnings .............................................................. 324,968
Treasury stock, 203 common shares at cost ...................................... (5,933)
Unearned compensation--restricted stock ........................................ (5,089)
Cumulative effect of foreign currency translation adjustments .................. (2,367)
-----------------
Total stockholders' equity ................................................... 876,364
-----------------
Total capitalization ........................................................ $4,680,893
=================
</TABLE>
- ------------
(1) The Limited Recourse Senior Secured Notes are recourse to CalEnergy
Company, Inc. only to a limited extent, which is currently $0.
(2) Represents debt for which the repayment obligation is at the project or
subsidiary level.
(3) As described herein, the sole assets of the Issuer are the 6 1/4%
Convertible Junior Subordinated Debentures with an outstanding
principal amount of approximately $185.6 million, and upon redemption
or maturity of such debt, the Convertible Preferred Securities will be
mandatorily redeemable. In addition, the sole assets of the subsidiary
trust which issued $103.9 million in aggregate of the convertible
preferred securities (also sometimes referred to as "TIDES" or as
"Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary trust holding solely convertible debentures")
outstanding on March 31, 1997 are the 6 1/4% convertible junior
subordinated debentures due 2016 of the Company with an outstanding
principal amount of approximately $107.0 million, and upon redemption
or maturity of such debt, such convertible preferred securities will be
mandatorily redeemable.
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<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Issuer are reflected in the Company's
consolidated financial statements with the Convertible Preferred Securities
shown as Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary trust holding solely approximately $185.6 million
principal amount of 6 1/4% Convertible Junior Subordinated Debentures due
2012 of the Company.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither the Company nor the Issuer will receive any
proceeds from the sale of the Offered Securities.
20
<PAGE>
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The following summary of the material terms and provisions of the
Convertible Preferred Securities is subject to, and qualified in its entirety
by reference to, the Declaration. The Convertible Preferred Securities were
issued pursuant to the terms of the Declaration. The Declaration incorporates
by reference terms of the Trust Indenture Act. The Declaration will be
qualified under the Trust Indenture Act. The Bank of New York, as Trustee,
acts as indenture trustee for the Declaration for purposes of compliance with
the Trust Indenture Act. Capitalized terms not otherwise defined herein have
the meanings assigned to them in the Declaration.
GENERAL
The Convertible Preferred Securities were issued in fully registered form
without interest coupons. Bearer Convertible Preferred Securities were not
issued.
The Convertible Preferred Securities represent undivided beneficial
ownership interests in the assets of the 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.
All of the Common Securities are owned, directly or indirectly, by the
Company. The Common Securities rank pari passu, and payments will be made
thereon pro rata, with the Convertible Preferred Securities except as
described under "--Subordination of Common Securities." The Convertible
Junior Subordinated Debentures are owned by the Trustee and held for the
benefit of the holders of the Trust Securities. The Declaration does not
permit the issuance by the Issuer of any securities other than the Trust
Securities or the incurrence of any indebtedness by the Issuer.
DISTRIBUTIONS
The distributions payable on each of the Convertible Preferred Securities
are fixed at a rate per annum of 6 1/4% of the stated liquidation preference
of $50 per each of the Convertible Preferred Securities. Deferred
distributions (and interest thereon) 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 are cumulative,
accrue from the date of initial issuance and are payable quarterly in arrears
on each March 1, June 1, September 1 and December 1, commencing June 1, 1997,
when, as and if available. The distribution payable on June 1, 1997, which
was calculated at the above rate and based on a period that is longer than a
full quarter, was in the amount of $0.82465 per Convertible Preferred
Security. 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, 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 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
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<PAGE>
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 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 is
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."
Distributions on the Convertible Preferred Securities must be paid
quarterly on the dates payable to the extent of funds of the Trust available
for the payment of such distributions. Amounts available to the Trust for
distribution to the holders of the Convertible Preferred Securities are
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 the
Trust available therefor, is guaranteed by the Company, as set forth under
"Description of the Guarantee."
Distributions on the Convertible Preferred Securities are payable to the
holders thereof as they appear on the books and records of the 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 the 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. The Convertible Preferred Securities are convertible at any time
beginning 60 days following the first date of original issuance of the
Convertible Preferred Securities through the close of business on February
25, 2012 (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 option of
the holder thereof and in the manner described below, into shares of the
Common Stock at an initial conversion rate of 1.1655 shares of Common Stock
for each of the Convertible Preferred Securities (equivalent to a conversion
price of $42.90 per share of Common Stock), subject to adjustment as
described under "Conversion Price Adjustments" below. The Issuer has
covenanted in the 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 shall 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 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,
22
<PAGE>
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 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. See "United States
Taxation--Adjustment of Conversion Price."
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 Company Common Stock. See "United States Taxation."
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 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
23
<PAGE>
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
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 is 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, after March 3, 2000, upon not less than 20 nor more than 60 days'
notice. The Company therefore will be required to make 12 interest payments
before being able to redeem any Convertible Junior Subordinated Debentures,
other than under certain circumstances following a Tax Event. See
"Description of the Convertible Junior Subordinated Debentures--Optional
Redemption." Upon any redemption in whole or in part of the Convertible
Junior Subordinated Debentures at the option of the Company, the 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, the 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 Issuer
and cause 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 the 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 the 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 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 the Issuer, the Company or the holders of the
Convertible Preferred Securities and will involve no material cost.
Furthermore, if (i) the Company has
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received an opinion (a "Redemption Tax Opinion") of nationally 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 the
Issuer at the liquidation preference of $50 per 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 the 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 the
Issuer, the Company or the holders of the Convertible Preferred Securities
and will involve no material cost, the 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
this Prospectus), which amendment or change is effective, is enacted or which
interpretation or pronouncement is announced on or after the date of this
Prospectus (collectively, a "Change In Tax Law"), there is more than an
insubstantial risk that (i) the 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 the Issuer on the
Convertible Junior Subordinated Debentures is not or will not be deductible
for United States federal income tax purposes or (iii) the 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 the Issuer 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 the 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.
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"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 or regulatory
authority (a "Change in 1940 Act Law") to the effect that the 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 this
Prospectus.
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 February 25,
2012, and may be redeemed, in whole or in part, at any time after March 3,
2000 or at any time in certain circumstances upon the occurrence of a Tax
Event. Upon the repayment 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 the 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, the 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
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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 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 the 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
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 the 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 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 $50 per 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 the Declaration, the Issuer shall be dissolved and its affairs
shall be wound up upon the earliest to occur of the following: (i) February
13, 2022, the expiration of the term of the Issuer, (ii) the bankruptcy of
the Company, (iii) the filing of a certificate of dissolution or its
equivalent with respect to
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the Company or the approval of the filing of a certificate of cancellation
with respect to the Issuer, by the holders of at least a majority in
liquidation 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 the Issuer, (v) the entry of a decree
of a judicial dissolution of the Company, (vi) the redemption of all the
Trust Securities or (vii) the conversion of all outstanding Convertible
Preferred Securities into Common Stock.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE ISSUER
The 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. The 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 the 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 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, the 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 the 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 the Guarantee constitutes an event of default
under the Declaration with respect to the Trust Securities (a "Declaration
Event of Default"); provided that, pursuant to the 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,
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the Trustee will be deemed to be acting solely on behalf of the holders of
the Convertible Preferred Securities and only the holders of the Convertible
Preferred Securities will have the right to direct the Trustee with respect
to certain matters under the 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 the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Guarantee--Amendments and Assignments," and as
otherwise required by law and the 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 the
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
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
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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. 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 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 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 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 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 the Issuer to redeem and cancel Convertible
Preferred Securities or distribute Convertible Junior Subordinated Debentures
in accordance with the 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
The 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,
whether by way of amendment to the Declaration or otherwise or (ii) the
dissolution, winding-up or termination of the 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 Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the 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 the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company entered into a
registration rights agreement dated February 26, 1997 (the "Registration
Rights Agreement") with the Initial Purchasers, for the benefit of the
holders of the Convertible Preferred Securities, pursuant to which the
Company would, at its cost, (a) file within 180 days after the Closing Date a
shelf Registration Statement on Form S-3 (a "Shelf Registration Statement")
covering resales of the Convertible Preferred Securities (together with the
Convertible Junior Subordinated Debentures, the Guarantee and the related
Common Stock, collectively, the "Registrable Securities"), under the
Securities Act, (b) use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act
within 270 days after the Closing Date and (c) use its reasonable best
efforts to keep the Shelf Registration Statement continuously effective until
two years after its effective date or such earlier date on which all
Registrable Securities held by persons that are not affiliates of the Company
and the Trust may be resold without registration pursuant to Rule 144(k)
under the Securities Act; in each case, subject to the terms and conditions
of the Registration Rights Agreement. The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to each holder
for whom such Shelf Registration Statement was filed copies of the prospectus
which is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement has become effective and take certain
other actions as are required to permit unrestricted resales of such
Securities. A holder selling such Securities pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the Registration Rights Agreement which are applicable to
such holder (including certain indemnification obligations).
If (i) within 180 days of the Closing Date the Shelf Registration
Statement has not been filed with the SEC, (ii) within 270 days of the
Closing Date the Shelf Registration Statement has not been declared effective
by the SEC, or (iii) after the Shelf Registration Statement has been declared
effective, such Registration Statement ceases to be effective or usable
(subject to certain exceptions) in connection with resales of Convertible
Preferred Securities in accordance with and during the periods specified in
the
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Registration Rights Agreement (each such event referred to in clauses (i)
through (iii) a "Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Convertible Junior Subordinated Debentures and,
accordingly, additional distributions will accrue on the Convertible
Preferred Securities, in each case from and including the day following the
Registration Default to but excluding the day on which such Registration
Default has been cured or has been deemed to have been cured. Liquidated
Damages will be paid quarterly in arrears, with the first quarterly payment
due on the first interest or distribution date, as applicable, following the
date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional 0.25% of the principal amount or
liquidation amount, as applicable, to and including the 90th day following
such Registration Default and 0.50% thereof from and after the 91st day
following such Registration Default. Following the cure of a Registration
Default, Liquidated Damages will cease to accrue with respect to such
Registration Default. At all other times, interest will accrue on the
Convertible Junior Subordinated Debentures and distributions will accrue on
the Convertible Preferred Securities at a rate of 6 1/4% per annum.
The summary herein of certain provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a copy of which is
available upon request to the Company or the Initial Purchasers.
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 originally sold to "qualified institutional buyers," as
defined in Rule 144A under the Securities Act ("QIBs"), otherwise than
reliance on Regulation S, are evidenced by one or more global certificates
representing Convertible Preferred Securities (collectively, the "Restricted
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. Convertible Preferred Securities originally sold to persons who
acquired such Convertible Preferred Securities in compliance with Regulation
S under the Securities Act ("Non-U.S. Persons") are evidenced by one or more
global certificates (collectively, the "Regulation S Global Certificate" and
together with the Restricted Global Certificate, the "Global Certificates" or
each individually, a "Global Certificate"), which have been registered in the
name of a nominee of DTC and deposited with the Property Trustee, for the
accounts of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme
("Cedel"). 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.
A QIB may hold its interests in the Restricted Global Certificate directly
through DTC if such QIB is a participant in DTC, or indirectly through
organizations which are participants in DTC (the "Participants"). Transfers
between Participants will be effected in the ordinary way in accordance with
DTC rules and will be settled in same-day funds. The laws of some states
require that certain persons take physical delivery of securities in
definitive form. Consequently, the ability to transfer beneficial interest in
the Restricted Global Certificate to such persons may be limited.
Investors may hold their interests in the Regulation S Global Certificate
through Euroclear or Cedel, if they are participants in such systems, or
indirectly through organizations that are participants in such systems. After
the expiration of the Restricted Period (but not earlier), investors also may
hold such interests through organizations other than Euroclear or Cedel that
are Participants in DTC. Euroclear and Cedel will hold interests in the
Regulation S Global Certificate on behalf of their participants through
customers' securities accounts in their respective names on the books of
their respective depositaries, which in turn, will hold such interests in the
Regulation S Global Certificate in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a Global
Certificate, including those held through Euroclear or Cedel, may be subject
to the procedures and requirements of DTC. Those interests held through
Euroclear and Cedel also may be subject to the procedures and requirements of
such systems.
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QIBs and Non-U.S. Persons who are not Participants may beneficially own
interests in a Global Certificate held by DTC only through Participants,
including Euroclear and Cedel, or 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"). So long as Cede, as the nominee of DTC, is the registered
owner of a Global Certificate, Cede for all purposes will be considered the
sole holder of such Global Certificate. 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 Participants, by
Participants to 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 Trust as
soon as possible after the record date. The Omnibus Proxy assigns Cede's
consenting or voting rights to 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 Trust
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 Trust.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but neither the Company nor the Trust takes 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.
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Neither the Company nor the Property Trustee (or any registrar, paying
agent or conversion agent under the 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 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, Euroclear and Cedel have agreed to the foregoing procedures
in order to facilitate transfers of interests in the Global Certificates
among Participants of DTC, Euroclear and Cedel, they are 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,
Euroclear and Cedel, 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 or, beneficial ownership interests
in the Global Certificate.
Certificated Convertible Preferred Securities. Convertible Preferred
Securities originally sold to investors that are neither QIBs nor Non-U.S.
Persons were issued in definitive registered form in minimum denominations of
5,000 Convertible Preferred Securities and integral amounts in excess thereof
(the "Certificated Securities" or each a "Certificated Security"), and may
not be represented by the Global Certificate. In addition, QIBs and Non-U.S.
Persons 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 the
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 the 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
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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
The Bank of New York acts 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 the 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. The 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
The Issuer Trustees are authorized and directed to conduct the affairs of
and to operate the Issuer in such a way that the Issuer will not be deemed to
be an "investment company" required to 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 the 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 GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
has been executed and delivered by the Company for the benefit of the holders
from time to time of Convertible Preferred Securities. The summary is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Guarantee. The Guarantee incorporates by reference the
terms of the Trust Indenture Act. The Guarantee will be qualified under the
Trust Indenture Act. The Bank of New York acts as trustee under the Guarantee
for purposes of the Trust Indenture Act. The Bank of New York, as the
Guarantee Trustee, holds the Guarantee for the benefit of the holders of the
Convertible Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company irrevocably and unconditionally
agrees, to the extent set forth herein, 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 the Issuer
(the "Guarantee Payments"), are subject to the 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
Trust available therefor, (ii) the amount payable upon redemption of the
Convertible Preferred Securities, payable out of funds of the 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 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 the Issuer does not have sufficient funds to pay
such distributions or such amount.
In taking any action to enforce the 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.
The Guarantee, when taken together with the Company's obligations under
the Convertible Junior Subordinated Debentures, and the Indenture and the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities)
provides a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Convertible Preferred Securities issued by the
Trust.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the 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.
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CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted 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 the 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 the Guarantee, the Company has agreed 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), the 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. 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 the
Guarantee without the prior approval of the holders of at least a majority of
the aggregate stated liquidation preference of the Convertible Preferred
Securities then outstanding.
TERMINATION OF THE GUARANTEE
The 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. The 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.
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STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of the Company and ranks
(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. The Declaration provides that each holder of
Convertible Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee. Upon the
bankruptcy, liquidation or winding up of the Company, its obligations under
the 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, has
undertaken to perform only such duties as are specifically set forth in the
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 is 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
Set forth below is a description of the specific terms of the Convertible
Junior Subordinated Debentures in which the Issuer has invested the proceeds
of the issuance and sale of (i) the Convertible Preferred Securities and (ii)
the Common Securities. The following description is qualified in its entirety
by reference to the Indenture dated as of February 26, 1997 (the "Indenture")
between the Company and The Bank of New York, as trustee (the "Indenture
Trustee"). The Indenture will be qualified under 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.
Under certain circumstances involving the dissolution of the Issuer
following the occurrence of a Tax Event or Investment Company Event,
Convertible Junior Subordinated Debentures may be distributed to the holders
of the Convertible Preferred Securities in liquidation of the Issuer. See
"Description of the Convertible Preferred Securities--Tax Event or Investment
Company Event Redemption or Distribution."
GENERAL
The Convertible Junior Subordinated Debentures were issued under the
Indenture. The Convertible Junior Subordinated Debentures were limited in
aggregate principal amount to approximately $185.6 million, such amount being
the sum of the aggregate stated liquidation preference of the Convertible
Preferred Securities and the Common Securities.
The entire principal amount of the Convertible Junior Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest, if any, on February 25,
2012.
The Convertible Junior Subordinated Debentures, if distributed to holders
of Convertible Preferred Securities in a dissolution of the Issuer, will
initially 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 in 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.
INTEREST
Each Convertible Junior Subordinated Debenture bears interest at the rate
of 6 1/4% per annum from the original date of issuance, payable quarterly in
arrears on March 1, June 1, September 1, and December 1 (each, an "Interest
Payment Date"), commencing June 1, 1997, to the person in whose name such
Convertible Junior Subordinated Debenture is registered at the close of
business on the fifteenth day immediately preceding such Interest Payment
Date. Interest compounds quarterly and accrues at the annual rate of 6 1/4%
on any interest installment not paid when due.
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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 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 has 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 the 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
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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.
CONVERSION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures 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 on the cover page of this Prospectus subject to the conversion
price adjustments described under "Description of the Convertible Preferred
Securities--Conversion Rights." The Issuer has covenanted 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
The Company shall have the right to redeem the Convertible Junior
Subordinated Debentures, in whole or in part, at any time or from time to
time on or after March 3, 2000, upon not less than 20 nor more than 60 days'
notice, at a redemption price equal to $51.00 per $50 principal amount of the
Convertible Junior Subordinated Debentures to be redeemed plus any accrued
and unpaid interest, including Additional Interest, if any, to the redemption
date, if redeemed before March 3, 2001; at a redemption price equal to $50.50
per $50 principal amount of Convertible Junior Subordinated Debentures to be
redeemed plus any accrued and unpaid interest, including Additional Interest,
if any, to the redemption date, if redeemed during the 12-month period
beginning March 3, 2001; and thereafter at $50 per $50 principal amount of
Convertible Junior Subordinated Debentures plus, in each case, accrued and
unpaid interest, including Additional Interest, if any, to the redemption
date.
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.
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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 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, Inc. aggregated approximately $953.8
million. See "Capitalization."
CERTAIN COVENANTS
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 Guarantee, or (c) the Company shall have given
notice of its election to defer payments of interest on the Convertible
Junior
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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 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).
The Company has covenanted (a) to directly or indirectly maintain 100%
ownership of the Common Securities of the 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 the 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 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 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 the Convertible Junior Subordinated
Debentures may declare the principal of and interest (including any
Additional Interest) on the Convertible Junior Subordinated Debentures due
and payable immediately on the occurrence of an Event of Default; provided,
however, that, after such acceleration, but
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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 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 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 Convertible Junior Subordinated Debentures.
The Trustee is the initial holder of the Convertible Junior Subordinated
Debentures. However, while the 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
Convertible Preferred Securities then outstanding.
A default under any other indebtedness of the Company or any of its
subsidiaries or joint ventures or the 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 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
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
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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 Convertible Junior Subordinated Debentures, to modify
the Indenture or any supplemental indenture, provided that no such
modification may, 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 has 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 the Guarantee.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures are
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.
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EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the 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 the Issuer shall not be
obligated to pay, directly or indirectly, for any, costs and expenses of the
Issuer; and (iv) the Declaration provides that the holders of Common
Securities and the Issuer Trustees shall not cause or permit the Issuer to,
among other things, engage in any activity that is not consistent with the
purposes of the 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 the Issuer are guaranteed by the
Company to the extent set forth under "Description of the Guarantee." If the
Company fails to make payments under the Guarantee, a holder of any of the
Convertible Preferred Securities may institute a direct action against the
Company to enforce its rights under the Guarantee.
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UNITED STATES TAXATION
GENERAL
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership, disposition and
conversion of Convertible Preferred Securities. Unless otherwise stated, this
summary deals only with Convertible Preferred Securities held as capital
assets by holders and does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, United States Alien Holders (as defined herein) engaged
in a trade or business within the United States, persons that will hold the
Convertible Preferred Securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," or as part of a "conversion transaction" or
other integrated investment, or persons that will hold the Convertible
Preferred Securities as other than a capital asset. This summary also does
not address the tax consequences to persons that have a functional currency
other than the U.S. Dollar or the tax consequences to shareholders, partners
or beneficiaries of a holder of Convertible Preferred Securities. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the Convertible Preferred Securities. This summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
TREATMENT BY THE COMPANY
The Company intends to treat the Convertible Junior Subordinated
Debentures as debt for United States federal income tax purposes and each
holder of Convertible Preferred Securities as the owner of an undivided
interest in the Convertible Junior Subordinated Debentures. The Company and
the Trust will therefore report any payments on the Convertible Junior
Subordinated Debentures to the Internal Revenue Service in a manner
consistent with such characterization.
The remainder of this discussion assumes that the Convertible Junior
Subordinated Debentures will be classified as debt for United States federal
income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Convertible Preferred Securities,
Willkie Farr & Gallagher, special counsel to the Company and the Trust,
rendered its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the
Convertible Junior Subordinated Debenture Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
holder of Convertible Preferred Securities generally will be considered the
owner of an undivided interest in the Convertible Junior Subordinated
Debentures, and each holder will be required to include in its gross income
any original issue discount ("OID") accrued with respect to its allocable
share of those Convertible Junior Subordinated Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Junior Subordinated Debentures, to defer payments of interest by extending
interest payment periods for up to 20 quarters, all of the stated interest
payments on the Convertible Junior Subordinated Debentures will be treated as
"OID." Holders of debt instruments issued with OID must include that discount
in income on an economic accrual basis before the receipt of cash
attributable to the interest, regardless of their method of tax accounting.
Generally, all of a holder's taxable interest income with respect to the
Convertible Junior Subordinated Debentures will be accounted for as OID.
Actual payments and distributions of stated interest will not, however, be
separately reported as taxable income. The amount of OID that
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accrues in any quarter will approximately equal the amount of the interest
that accrues on the Convertible Junior Subordinated Debentures in that
quarter at the stated interest rate. In the event that the interest payment
period is extended, holders will continue to accrue OID approximately equal
to the amount of the interest payment due at the end of the extended interest
payment period on an economic accrual basis over the length of the extended
interest payment period.
Because income on the Convertible Preferred Securities will constitute
OID, corporate holders of Convertible Preferred Securities will not be
entitled to a dividends-received deduction with respect to any income
recognized with respect to the Convertible Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Convertible Preferred Securities other than a holder who
purchased the Convertible Preferred Securities upon original issuance may be
considered to have acquired their undivided interests in the Convertible
Junior Subordinated Debentures with market discount or acquisition premium as
such phrases are defined for United States federal income tax purposes. Such
holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the Convertible
Preferred Securities.
RECEIPT OF CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES OR CASH UPON
LIQUIDATION OF THE ISSUER
Under certain circumstances, as described under the caption "Description
of the Convertible Preferred Securities--Tax Event or Investment Company
Event Redemption or Distribution," Convertible Junior Subordinated Debentures
may be distributed to holders in exchange for the Convertible Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution to holders, for United States federal income tax purposes, would
be treated as a nontaxable event to each holder, and each holder would
receive an aggregate tax basis in the Convertible Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Convertible
Preferred Securities. A holder's holding period in the Convertible Junior
Subordinated Debentures so received in liquidation of the Trust would include
the period during which the Convertible Preferred Securities were held by
such holder.
Under certain circumstances described herein (see "Description of the
Convertible Preferred Securities"), the Convertible Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Convertible Preferred
Securities. Under current law, such a redemption would, for United States
federal income tax purposes, constitute a taxable disposition of the redeemed
Convertible Preferred Securities, and a holder would recognize gain or loss
as if it sold such redeemed Convertible Preferred Securities for cash. See
"--Disposition of Convertible Preferred Securities."
DISPOSITION OF CONVERTIBLE PREFERRED SECURITIES
A holder that sells Convertible Preferred Securities will recognize gain
or loss equal to the difference between the amount realized on the sale of
the Convertible Preferred Securities and the holder's adjusted tax basis in
such Convertible Preferred Securities. A holder's adjusted tax basis in the
Convertible Preferred Securities generally will be its initial purchase price
increased by OID previously includible in such holder's gross income to the
date of disposition and decreased by payments received on the Convertible
Preferred Securities to the date of disposition. Such gain or loss will be a
capital gain or loss and will be a long-term capital gain or loss if the
Convertible Preferred Securities have been held for more than one year at the
time of sale.
The Convertible Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to
the underlying Convertible Junior Subordinated Debentures. A holder who
disposes of or converts his Convertible Preferred Securities between record
dates for payments of distributions thereon will be required to include in
income the OID on the Convertible Junior Subordinated Debentures through the
date of disposition, and to add such amount to his adjusted tax basis in his
pro rata share of the underlying Convertible Junior Subordinated Debentures
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deemed disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which basis will include, in the form of OID, 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.
CONVERSION OF CONVERTIBLE PREFERRED SECURITIES INTO COMMON STOCK
A holder of Convertible Preferred Securities will not recognize gain or
loss upon the exchange, through the Conversion Agent, of Convertible
Preferred Securities for a proportionate share of the Convertible Junior
Subordinated Debentures held by the Issuer.
A holder of Convertible Preferred Securities will not recognize income,
gain or loss upon the conversion, through the Conversion Agent, of
Convertible Junior Subordinated Debentures into the Common Stock. A holder of
Convertible Preferred Securities will, however, recognize gain upon the
receipt of cash in lieu of a fractional share of the Common Stock equal to
the amount of cash received less such holder's tax basis in such fractional
share. A holder of Convertible Preferred Securities' tax basis in the Common
Stock received upon exchange and conversion should generally be equal to such
holder's tax basis in the Convertible Preferred Securities delivered to the
Conversion Agent for exchange less the basis allocated to any fractional
share for which cash is received and a holder of Convertible Preferred
Securities' holding period in the Common Stock received upon exchange and
conversion should generally begin on the date such holder acquired the
Convertible Preferred Securities delivered to the Conversion Agent for
exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from the Company in the event the conversion ratio of the
Convertible Junior Subordinated Debentures were adjusted if (i) as a result
of such adjustment, the proportionate interest (measured by the quantum of
Common Stock into or for which the Convertible Junior Subordinated Debentures
are convertible or exchangeable) of the holders of the Convertible Preferred
Securities in the assets or earnings and profits of the Company were
increased, and (ii) the adjustment was not made pursuant to a bona fide,
reasonable antidilution formula. An adjustment in the conversion ratio would
not be considered made pursuant to such a formula if the adjustment was made
to compensate for certain taxable distributions with respect to the Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in a deemed distribution. The fair market value of
such distribution will be taxable as dividend income to holders to the extent
of the current or accumulated earnings and profits of the Company. Holders of
the Convertible Preferred Securities would be required to include their
allocable share of such deemed dividend income in gross income but will not
receive any cash related thereto.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Budget Proposal for
Fiscal Year 1998, the Treasury Department proposed legislation (the "Proposed
Legislation") which, among other things, would generally treat as equity for
United States federal income tax purposes instruments with a maximum term of
more than 15 years and that are not shown as indebtedness on the separate
balance sheet of the issuer. The Proposed Legislation would be effective
generally for instruments issued on or after the date of the first committee
action. If the Proposed Legislation were enacted in the form proposed by the
Treasury Department, such legislation would not apply to the Convertible
Junior Subordinated Debentures. Furthermore, tax legislation proposed in June
1997 by the Chairmen of the House Committee on Ways and Means and the Senate
Finance Committee do not contain provisions similar to the Proposed
Legislation. There can be no assurances, however, that either the effective
date guidance or the maximum term requirements contained in the Proposed
Legislation will be incorporated into any enacted legislation or that other
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Preferred Securities. If legislation is
enacted that adversely affects the tax treatment of the Convertible Preferred
Securities, such legislation could result in the
49
<PAGE>
distribution of the Convertible Preferred Securities to holders of the
Convertible Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Convertible Preferred Securities. See
"Description of the Convertible Preferred Securities--Tax Event or Investment
Company Event Redemption or Distribution."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a nonresident fiduciary of a foreign estate or trust.
Under present United States federal income tax law, (i) payments by the
Trust or any of its paying agents to any holder of Convertible Preferred
Securities who or which is a United States Alien Holder will not be subject
to withholding of United States federal income tax; provided that, (a) the
beneficial owner of the Convertible Preferred Securities does not actually or
constructively (including by virtue of its interest in the underlying
Convertible Junior Subordinated Debentures) own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote, (b) the beneficial owner of the Convertible Preferred Securities is not
a controlled foreign corporation that is related to the Company through stock
ownership, and (c) either (A) the beneficial owner of the Convertible
Preferred Securities certifies to the Trust or its agent, under penalties of
perjury, that it is not a United States holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution"), and holds the Convertible
Preferred Securities in such capacity, that certifies to the Trust or its
agent, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof;
and (ii) a United States Alien Holder of Convertible Preferred Securities
will not be subject to withholding of United States federal income tax on any
gain realized upon the sale or other disposition of the Convertible Preferred
Securities.
If a United States Alien Holder is treated as receiving a deemed dividend
as a result of an adjustment of the conversion price of the Convertible
Preferred Securities, as described above under "Adjustment of Conversion
Price," such deemed dividend will be subject to United States federal
withholding tax at a 30% (or lower treaty) rate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Subject to the qualifications discussed below, income on the Convertible
Preferred Securities will be reported to holders on Forms 1099, which forms
should be mailed to holders of Convertible Preferred Securities by February
28 following each calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Convertible Preferred Securities, the OID related to the
Convertible Preferred Securities that accrued during the year. The Trust
currently intends to report such information on Form 1099 prior to February
28 following each calendar year even though the Trust is not legally required
to report to record holders until April 15 following each calendar year. The
Placing Agents have indicated to the Trust that, to the extent that they hold
Convertible Preferred Securities as nominees for beneficial holders, they
currently expect to report to such beneficial holders on Forms 1099 by
February 28 following each calendar year. Under current law, holders of
Convertible Preferred Securities who hold as nominees for beneficial holders
will not have any obligation to report information regarding the beneficial
holders to the Trust. The Trust, moreover, will not have any obligation to
report to beneficial holders who are not also record holders. Thus,
beneficial holders of Convertible Preferred Securities who hold their
Convertible Preferred Securities through the Initial Purchaser will receive
Forms 1099 reflecting the income on their Convertible Preferred Securities
from such nominee holders rather than the Trust.
Payments made on, and proceeds from the sale of, the Convertible Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the
holder complies with certain identification
50
<PAGE>
requirements. Any withheld amounts will be allowed as a credit against the
holder's United States federal income tax, provided the required information
is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING
UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE PREFERRED SECURITIES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974 ("ERISA"), or Section 4975 of the Code
("Plans"), may purchase Convertible Preferred Securities, subject to the
investing fiduciary's determination that the investment in Convertible
Preferred Securities satisfies ERISA's fiduciary standards and other
requirements applicable to investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain
plans (generally, Plans maintained or sponsored by, or contributed to by, any
such persons). The acquisition and ownership of Convertible Preferred
Securities by a Plan (or by an individual retirement arrangement or other
Plans described in Section 4975(e)(i) of the Code) with respect to which the
Company or any of its affiliates is considered a party in interest or a
disqualified person, may constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code, unless such Convertible Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption.
Pursuant to an exception contained in a regulation issued by the U.S.
Department of Labor, the assets of the Trust would not be deemed to be "plan
assets" of investing Plans if, immediately after the most recent acquisition
of any equity interest in the Trust, less than 25% of the value of each class
of equity interests in the Trust were held by Plans, other employee benefit
plans not subject to ERISA or Section 4975 of the Code (such as governmental,
church and foreign plans), and entities holding assets deemed to be "plan
assets" of any Plan (collectively, "Benefit Plan Investors"). No monitoring
or other measures will be taken with respect to limiting the value of the
Convertible Preferred Securities held by Benefit Plan Investors to less than
25% of the total value of such Convertible Preferred Securities at the
completion of the Original Offering or thereafter. Thus, the conditions of
the exception may not be satisfied. All of the Common Securities will be
purchased and initially held by the Company.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Convertible Preferred Securities. Any other Plans or other entities whose
assets include Plan assets subject to ERISA proposing to acquire Convertible
Preferred Securities should consult with their own ERISA counsel.
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust
and sold by Lehman Brothers Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchasers"), in a transaction exempt from the
registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchasers to be "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act), to a limited number of
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) and outside the United States to persons
other than U.S. persons in reliance upon Regulation S under the Securities
Act. The Selling Holders may from time to time offer and sell pursuant to
this Prospectus any or all of the Convertible Preferred Securities, any
Convertible Junior Subordinated Debentures and Common Stock issued upon
conversion of the
51
<PAGE>
Convertible Preferred Securities. The term Selling Holder includes, without
duplication, the holders listed below and the beneficial owners of the
Convertible Preferred Securities and their transferees, pledgees, donees or
other successors.
The following table sets forth information with respect to the Selling
Holders of the Convertible Preferred Securities as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- ----------
<S> <C>
Cede & Co. .................................................... 3,541,200
Pondwave & Co. ................................................ 54,800
Heritage Insurance Company..................................... 4,000
-------------
Total ......................................................... 3,600,000
=============
</TABLE>
None of the Selling Holders has, or within the past three years has had,
any position, office or other material relationship with the Trust or the
Company or any of their predecessors or affiliates, except as noted above.
Because the Selling Holders may, pursuant to this Prospectus, offer all or
some portion of the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures or the Common Stock issuable upon conversion of the
Convertible Preferred Securities, no estimate can be given as to the amount
of the Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures or the Common Stock issuable upon conversion of the Convertible
Preferred Securities that will be held by the Selling Holders upon
termination of any such sales. In addition, the Selling Holders identified
above may have sold, transferred or otherwise disposed of all or a portion of
their Convertible Preferred Securities since the date on which they provided
the information regarding their Convertible Preferred Securities pursuant to
transactions exempt from the registration requirements of the Securities Act.
52
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers
directly by the Selling Holders. Alternatively, the Selling Holders may from
time to time offer the Offered Securities to or through underwriters,
broker/dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Holders
or the purchasers of such securities for whom they may act as agents. The
Selling Holders and any underwriters, broker/dealers or agents that
participate in the distribution of Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated
prices. The sale of the Offered Securities may be effected in transactions
(which may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Offered Securities may
be listed or quoted at the time of sale, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or in the
over-the-counter market or (iv) through the writing of options. At the time a
particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the
aggregate amount and type of Offered Securities being offered and the terms
of the offering, including the name or names of any underwriters,
broker/dealers or agents, any discounts, commissions and other terms
constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
Pursuant to the Registration Rights Agreement, the Company is required to
use its reasonable best efforts to keep the Registration Statement
continuously effective for a period of two years from its effective date or
such shorter period that will terminate upon the earlier of the date on which
the Offered Securities shall have been sold pursuant to the Registration
Statement or the date on which the Offered Securities are permitted to be
freely sold or distributed to the public pursuant to any exemption from the
registration requirements of the Securities Act (including in reliance on
Rule 144(k) but excluding in reliance on Rule 144A under the Securities Act).
Notwithstanding the foregoing obligations, the Company may, under certain
circumstances, postpone or suspend the filing or the effectiveness of the
Registration Statement (or any amendments or supplements thereto) or the sale
of Offered Securities thereto.
To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Securities will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Offered Securities may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is
available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by
the Selling Holders. The foregoing may affect the marketability of such
securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company,
including, without limitation, SEC filing fees and expenses of compliance
with state securities or "blue sky" laws; provided, however, that the Selling
Holders will pay all underwriting discounts and selling commissions, if any.
The Selling Holders will be indemnified by the Company and the Trust, jointly
and severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
53
<PAGE>
LEGAL MATTERS
The validity of the Convertible Preferred Securities will be passed upon
for the Issuer 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 Issuer 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 financial statements and the related financial statement schedules of
the Company and its subsidiaries incorporated in this Registration Statement
by reference to the Company's 1996 Form 10-K, 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 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 a 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 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
them 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.
54
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE ISSUER OR ANY OF THEIR
AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE 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 SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE ISSUER SINCE SUCH DATE.
- ---------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Available Information .................... 3
Incorporation of Certain Documents by
Reference ............................... 4
Risk Factors ............................. 5
CalEnergy Capital Trust II ............... 14
The Company .............................. 15
Ratio of Earnings to Fixed Charges ...... 18
Capitalization ........................... 19
Accounting Treatment ..................... 20
Use of Proceeds .......................... 20
Description of the Convertible Preferred
Securities .............................. 21
Description of the Guarantee ............. 36
Description of the Convertible Junior
Subordinated Debentures ................. 39
Effect of Obligations under the
Convertible Junior Subordinated
Debentures and the Guarantee ............ 46
United States Taxation ................... 47
ERISA Considerations ..................... 51
Selling Holders .......................... 51
Plan of Distribution ..................... 53
Legal Matters ............................ 54
Experts .................................. 54
</TABLE>
3,600,000 TRUST CONVERTIBLE
PREFERRED SECURITIES
CALENERGY CAPITAL TRUST II
6 1/4% TRUST CONVERTIBLE
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
AND CONVERTIBLE INTO
COMMON STOCK OF
[LOGO]
CALENERGY COMPANY, INC.
LIQUIDATION PREFERENCE
$50 PER
TRUST CONVERTIBLE
PREFERRED SECURITY
----------
PROSPECTUS
----------
<PAGE>
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.
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fee ................................... $ 63,000
Printing, shipping and engraving expenses .............. 75,000
Legal fees and expenses ................................ 150,000
Accounting fees and expenses ........................... 75,000
Transfer Agent, Registrar and trustee fees and expenses. 15,000
Miscellaneous expenses.................................. 22,000
---------
Total.................................................. $400,000
=========
</TABLE>
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 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.
II-1
<PAGE>
THE TRUST
The Declaration of Trust (the "Declaration") provides that no Trustee,
affiliate of any Regular Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agent of the Trust, or any
employee or agent of the trust or its affiliates (each an "Indemnified
Person") shall be liable, responsible or accountable in damages or otherwise
to the 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 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 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 the 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 Regular Trustees are covered by insurance policies indemnifying them
against certain liabilities, including certain liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), which might be
incurred by them in such capacities and against which they cannot be
indemnified by the Company or the Trust. The Selling Holders will be
indemnified by the Company and the Trust, jointly and severally, against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith. The Company
and the Trust will be indemnified by the Selling Holders severally against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>
4.1 Certificate of Trust of CalEnergy Capital Trust II.
4.2 Amended and Restated Declaration of Trust of CalEnergy Capital Trust II, dated as of February
26, 1997, among CalEnergy Company, Inc., as Sponsor, The Bank of New York, as Property Trustee,
The Bank of New York (Delaware), as Delaware Trustee and Steven A. McArthur, John G. Sylvia and
Gregory Abel, as Trustees.
4.3 Indenture for the 6 1/4% Convertible Junior Subordinated Debentures, dated as of February 26,
1997, among CalEnergy Company, Inc., as Issuer, and The Bank of New York, as Trustee.*
4.4 Form of CalEnergy Company, Inc. Common Stock Certificate.**
4.5 Form of CalEnergy Capital Trust II 6 1/4% Convertible Preferred Securities (included in Exhibit
4.2 above).
4.6 Form of CalEnergy Company, Inc. 6 1/4% Convertible Junior Subordinated Debentures (included in
Exhibit 4.3 above).
II-2
<PAGE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>
4.7 CalEnergy Company, Inc. Preferred Securities Guarantee, dated as of February 26, 1997, between
CalEnergy Company, Inc., as Guarantor, and The Bank of New York, as Preferred Guarantee Trustee.
4.8 CalEnergy Company, Inc. Common Securities Guarantee, dated as of February 26, 1997, by CalEnergy
Company, Inc., as Guarantor.
5.1 Opinion of Willkie Farr & Gallagher as to the legality of the Convertible Junior Subordinated
Debentures and Preferred Securities Guarantee being registered hereby.***
5.2 Opinion of Steven A. McArthur, General Counsel of CalEnergy Company, Inc., as to the legality of
the Common Stock of CalEnergy Company, Inc., being registered hereby.***
5.3 Opinion of Morris, Nichols, Arsht & Tunnell as to the legality of the Trust Convertible
Preferred Securities being registered hereby.***
8.1 Opinion of Willkie Farr & Gallagher as to certain tax matters.***
10.1 Registration Rights Agreement, dated February 26, 1997, by and among CalEnergy Capital Trust II,
CalEnergy Company, Inc., Lehman Brothers Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation.
12.1 Statement of Ratio of Earnings to Fixed Charges of CalEnergy Company, Inc.
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, independent auditors.
23.2 Consent of Coopers & Lybrand, L.L.P., independent accountants.
23.3 Consent of Ernst & Young, chartered accountants.
23.4 Consent of Willkie Farr & Gallagher.***
23.5 Consent of Steven A. McArthur, General Counsel of CalEnergy Company, Inc.***
23.6 Consent of Morris, Nichols, Arsht & Tunnell.***
24.1 Powers of Attorney (included on signature page to the Registration Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Trustee under the 6 1/4% Convertible Junior Subordinated Debentures Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Property Trustee under the Amended and Restated Declaration of Trust.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Preferred Guarantee Trustee under the Preferred Securities Guarantee.
</TABLE>
- ------------
* Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
** Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
*** To be filed by amendment.
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 schedule 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 Registrant hereby undertakes:
(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 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 Registrant hereby undertakes that:
II-4
<PAGE>
(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 July
1, 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
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 July 1, 1997
--------------------------- and Chief Executive Officer
David L. Sokol (principal executive officer)
/s/ Craig M. Hammett Vice President and Chief July 1, 1997
--------------------------- Financial Officer (principal
Craig M. Hammett financial officer)
/s/ Edgar D. Aronson Director July 1, 1997
---------------------------
Edgar D. Aronson
Director , 1997
---------------------------
Judith E. Ayres
/s/ James Q. Crowe Director July 1, 1997
---------------------------
James Q. Crowe
/s/ Richard K. Davidson Director July 1, 1997
---------------------------
Richard K. Davidson
/s/ David H. Dewhurst Director July 1, 1997
---------------------------
David H. Dewhurst
II-6
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard R. Jaros Director July 1, 1997
---------------------------
Richard R. Jaros
/s/ David R. Morris Director July 1, 1997
---------------------------
David R. Morris
/s/ Bernard W. Reznicek Director July 1, 1997
---------------------------
Bernard W. Reznicek
/s/ Walter Scott, Jr. Director July 1, 1997
---------------------------
Walter Scott, Jr.
/s/ John R. Shiner Director July 1, 1997
---------------------------
John R. Shiner
/s/ Neville G. Trotter Director July 1, 1997
---------------------------
Neville G. Trotter
Director , 1997
---------------------------
David E. Wit
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CalEnergy
Capital Trust II 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 July
1, 1997.
CALENERGY CAPITAL TRUST II
By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur
Trustee
By: /s/ Douglas L. Anderson
-------------------------------
Douglas L. Anderson
Trustee
By: /s/ Gregory E. Abel
-------------------------------
Gregory E. Abel
Trustee
II-8
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C> <C>
4.1 Certificate of Trust of CalEnergy Capital Trust II.
4.2 Amended and Restated Declaration of Trust of CalEnergy Capital Trust II, dated as of February
26, 1997, among CalEnergy Company, Inc., as Sponsor, The Bank of New York, as Property Trustee,
The Bank of New York (Delaware), as Delaware Trustee and Steven A. McArthur, John G. Sylvia and
Gregory Abel, as Trustees.
4.5 Form of CalEnergy Capital Trust II 6 1/4% Convertible Preferred Securities (included in Exhibit
4.2).
4.6 Form of CalEnergy Company, Inc. 6 1/4% Convertible Junior Subordinated Debentures (included in
Exhibit 4.3).
4.7 CalEnergy Company, Inc. Preferred Securities Guarantee, dated as of February 26, 1997, between
CalEnergy Company, Inc., as Guarantor, and The Bank of New York, as Preferred Guarantee Trustee.
4.8 CalEnergy Company, Inc. Common Securities Guarantee, dated as of February 26, 1997, by CalEnergy
Company, Inc., as Guarantor.
10.1 Registration Rights Agreement, dated February 26, 1997, by and among CalEnergy Capital Trust II,
CalEnergy Company, Inc., Lehman Brothers Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation.
12.1 Statement of Ratio of Earnings to Fixed Charges of CalEnergy Company, Inc.
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, independent auditors.
23.2 Consent of Coopers & Lybrand, L.L.P., independent accountants.
23.3 Consent of Ernst & Young, chartered accountants.
24.1 Powers of Attorney (included on signature page to the Registration Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Trustee under the 6 1/4% Convertible Junior Subordinated Debentures Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Property Trustee under the Amended and Restated Declaration of Trust.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Preferred Guarantee Trustee under the Preferred Securities Guarantee.
</TABLE>
<PAGE>
Exhibit 4.1
CERTIFICATE OF TRUST
The undersigned, the trustees of CalEnergy Capital Trust II,
desiring to form a business trust pursuant to Delaware Business Trust Act, 12
Del. C. Section 3810, hereby certify as follows:
(a) The name of the business trust being formed hereby (the
"Trust") is "CalEnergy Capital Trust II".
(b) The name and business address of the trustee of the Trust
which has its principal place of business in the State of
Delaware is as follows:
The Bank of New York, Delaware
23 White Clay Center
Route 273
Newark, Delaware 19711
(c) This Certificate of Trust shall be effective as of the date
of filing.
Dated: February 13, 1997
/s/ Steven A. McArthur
--------------------------------
Name: Steven A. McArthur
Title: Regular Trustee
/s/ John G. Sylvia
--------------------------------
Name: John G. Sylvia
Title: Regular Trustee
/s/ Gregory Abel
--------------------------------
Name: Gregory Abel
Title: Regular Trustee
THE BANK OF NEW YORK, DELAWARE, as
Delaware Trustee
By: /s/ Fred Clark
----------------------------
Name: Fred Clark
Title: Authorized Signatory
<PAGE>
Exhibit 4.2
AMENDED AND RESTATED DECLARATION
OF TRUST
CALENERGY CAPITAL TRUST II
Dated as of February 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions..................................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application................ 11
SECTION 2.2 Lists of Holders of Securities.................. 11
SECTION 2.3 Reports by the Property Trustee................. 12
SECTION 2.4 Periodic Reports to Property
Trustee......................................... 12
SECTION 2.5 Evidence of Compliance with
Conditions Precedent............................ 12
SECTION 2.6 Events of Default; Waiver....................... 13
SECTION 2.7 Event of Default; Notice........................ 15
ARTICLE III
ORGANIZATION
SECTION 3.1 Name............................................ 16
SECTION 3.2 Office.......................................... 16
SECTION 3.3 Purpose......................................... 16
SECTION 3.4 Authority....................................... 16
SECTION 3.5 Title to Property of the Trust.................. 17
SECTION 3.6 Powers and Duties of the Regular
Trustees........................................ 17
SECTION 3.7 Prohibition of Actions by the Trust
and the Trustees................................ 21
SECTION 3.8 Powers and Duties of the Property
Trustee......................................... 22
SECTION 3.9 Certain Duties and Responsibilities
of the Property Trustee......................... 26
SECTION 3.10 Certain Rights of Property Trustee.............. 28
SECTION 3.11 Delaware Trustee................................ 31
SECTION 3.12 Not Responsible for Recitals or
Issuance of Securities.......................... 31
SECTION 3.13 Duration of Trust............................... 31
SECTION 3.14 Mergers......................................... 32
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common
Securities...................................... 34
SECTION 4.2 Responsibilities of the Sponsor................. 34
<PAGE>
Page
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.................................. 35
SECTION 5.2 Delaware Trustee.................................... 36
SECTION 5.3 Property Trustee; Eligibility....................... 36
SECTION 5.4 Qualifications of Regular Trustees
and Delaware Trustee Generally...................... 37
SECTION 5.5 Initial Trustees.................................... 37
SECTION 5.6 Appointment, Removal and
Resignation of Trustees............................. 38
SECTION 5.7 Vacancies among Trustees............................ 40
SECTION 5.8 Effect of Vacancies................................. 40
SECTION 5.9 Meetings............................................ 40
SECTION 5.10 Delegation of Power................................. 41
SECTION 5.11 Merger, Conversion, Consolidation
or Succession to Business........................... 42
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions....................................... 42
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding
Securities.......................................... 42
SECTION 7.2 Execution and Authentication........................ 43
SECTION 7.3 Form and Dating..................................... 44
SECTION 7.4 Registrar, Paying Agent and Conver-
sion Agent.......................................... 47
SECTION 7.5 Paying Agent to Hold Money in
Trust............................................... 48
SECTION 7.6 Replacement Securities.............................. 48
SECTION 7.7 Outstanding Preferred Securities.................... 49
SECTION 7.8 Preferred Securities................................ 50
SECTION 7.9 Temporary Securities................................ 50
SECTION 7.10 Cancellation........................................ 50
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of
Trust............................................... 51
<PAGE>
Page
ARTICLE IX
TRANSFER
SECTION 9.1 General................................................. 52
SECTION 9.2 Transfer Procedures and
Restrictions............................................ 54
SECTION 9.3 Deemed Security Holders................................. 66
SECTION 9.4 Book Entry Interests.................................... 66
SECTION 9.5 Notices to Clearing Agency.............................. 67
SECTION 9.6 Appointment of Successor Clearing
Agency.................................................. 67
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability............................................... 68
SECTION 10.2 Exculpation............................................. 68
SECTION 10.3 Fiduciary Duty.......................................... 69
SECTION 10.4 Indemnification......................................... 70
SECTION 10.5 Outside Businesses...................................... 74
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year............................................. 74
SECTION 11.2 Certain Accounting Matters.............................. 75
SECTION 11.3 Banking................................................. 75
SECTION 11.4 Withholding............................................. 76
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.............................................. 76
SECTION 12.2 Meetings of the Holders of S-
ecurities; Action by Written
Consent................................................. 79
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of
Property Trustee........................................ 82
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights..................................... 83
<PAGE>
Page
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.............................................. 85
SECTION 15.2 Governing Law........................................ 87
SECTION 15.3 Intention of the Parties............................. 87
SECTION 15.4 Headings............................................. 88
SECTION 15.5 Successors and Assigns............................... 88
SECTION 15.6 Partial Enforceability............................... 88
SECTION 15.7 Counterparts......................................... 88
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
310(a).................................................... 5.3(a)
310(c).................................................... Inapplicable
311(c).................................................... Inapplicable
312(a).................................................... 2.2(a)
312(b).................................................... 2.2(b)
313....................................................... 2.3
314(a).................................................... 2.4
314(b).................................................... Inapplicable
314(c).................................................... 2.5
314(d).................................................... Inapplicable
314(f).................................................... Inapplicable
315(a).................................................... 3.9(b)
315(c).................................................... 3.9(a)
315(d).................................................... 3.9(a)
316(a).................................................... Annex I
316(c).................................................... 3.6(e)
- ---------------
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALENERGY CAPITAL TRUST II
FEBRUARY 26, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of February 26, 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 II (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a Declaration of Trust dated as of February 13, 1997, (the
"Original Declaration") and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on February 13, 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.
"Applicable Procedures" means the rules and procedures of the
Depositary, Euroclear, and CEDEL applicable to transfer or exchange of
beneficial interests in book-entry securities.
"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 February 26, 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.
3
<PAGE>
"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; 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 the Restricted
Definitive Preferred Security and any other 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).
4
<PAGE>
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Exchanged Global Preferred Security" has the meaning set
forth in Section 9.2(b).
"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" means a 144A Global Preferred
Security or a Regulation S Global Preferred Security.
"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 February 26, 1997,
between the Debenture Issuer and the Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued.
"Initial Purchasers" has the meaning set forth in the Purchase
Agreement.
"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.
5
<PAGE>
"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).
"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.
"Offering Memorandum" means the confidential offering
circular, dated as of February 20, 1997, relating to the issuance by the Trust
of Preferred Securities.
"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
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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.
"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.
"PORTAL" has the meaning set forth in section 3.6(b)(iii).
"Preferred Securities" has the meaning set forth in Section
7.1(a).
"Preferred Securities Guarantee" means the guarantee agreement
dated as of February 26, 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
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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).
"Purchase Agreement" shall have the meaning set forth in
Section 7.3(a).
"QIB" means a "qualified institutional buyer," as defined in
Rule 144A.
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both of them.
"Registrable Securities" has the meaning set forth in Section
9.5.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated February 26, 1997, among the Sponsor, the Trust, and the
Initial Purchasers named in the Purchase Agreement.
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Regulation S" has the meaning set forth in Section 7.3(b).
"Regulation S Global Preferred Security" has the meaning set
forth in Section 7.3(b).
"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
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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.
"Restricted Definitive Preferred Security" has the meaning set
forth in Section 7.3(c).
"Restricted Period" means the one-year period following the
last issue date for the Preferred Securities (including Preferred Securities
issued to cover overallotments and Common Securities issued in connection with
related capital contributions). The Sponsor shall inform the Trustee as to the
termination of the restricted period and the Trustee may rely conclusively
thereon.
"Restricted Preferred Securities" means a Restricted
Definitive Preferred Security or a Rule 144A Global Preferred Security.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(j).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Preferred Security" has the meaning set
forth in Section 7.3(d).
"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
Rule 144A Global Preferred Security and any other Preferred Security in global
form.
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"Shelf Registration Statement" has the meaning set forth in
Section 14.1.
"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.
"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 II, 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.
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"Unrestricted Definitive Preferred Security" means a Preferred
Security in definitive, fully registered form without distribution coupons, that
does not bear the Restricted Securities Legend and is free from any restriction
on transfer (other than any such restriction attributable solely to any Holder's
status).
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.
(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,
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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 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.
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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 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
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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 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.
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(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 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.
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ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "CalEnergy Capital Trust II," 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 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
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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 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
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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
Purchase Agreement;
(b) in connection with the issue and sale of the Preferred
Securities, at the direction of the Sponsor, to:
(i) prepare and execute, if necessary, an offering
memorandum (the "Offering Memorandum") in preliminary and final form
prepared by the Sponsor, in relation to the offering and sale of
Preferred Securities to qualified institutional buyers in reliance on
Rule 144A under the Securities Act, to a limited number of
institutional "accredited investors" (as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act) and outside the
United States to non-U.S. Persons in offshore transactions in reliance
on Regulation S under the Securities Act and to execute and file with
the Commission, at such time as determined by the Sponsor, a
registration statement filed on Form S-3 prepared by the Sponsor,
including any amendments thereto in relation to the Preferred
Securities;
(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 Private Offerings, Resale and Trading through Automated
Linkages ("PORTAL") Market and, at such time as determined 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;
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(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 Purchase Agreement,
Registration Rights 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 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"),
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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;
(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
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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.
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
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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 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
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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 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
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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 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.
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(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 both in London and 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 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.
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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 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
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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
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
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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;
(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;
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(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 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,
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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 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
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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 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 February 13, 2022.
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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 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
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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 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
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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 Purchase
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 the Offering Memorandum and to prepare for
filing by the Trust with the Commission the Shelf Registration Statement,
including any amendments thereto;
(b) to determine the States and foreign jurisdictions in which
to take appropriate action to qualify or 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
PORTAL and to the New York Stock Exchange or
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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 Purchase Agreement,
Registration Rights 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 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.
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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 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
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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:
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
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Gregory Abel
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.
(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
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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.
(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
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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
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
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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 delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
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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.
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,
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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 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.
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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 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
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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 a Purchase Agreement relating to the Preferred Securities,
dated February 20, 1997, among the Trust, the Sponsor and the Initial Purchasers
named therein (the "Purchase Agreement").
(a) 144A Global Preferred Securities. Preferred Securities
offered and sold in their initial distribution to Qualified Institutional Buyers
("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A") as
provided in the Purchase Agreement, shall be issued in the form of one or more,
permanent global Securities in definitive, fully registered form without
distribution coupons and with the appropriate global legend and Restricted
Securities Legend set forth in Exhibit A-1 hereto (each, a "Rule 144A Global
Preferred Security"), which shall be deposited on behalf of the purchasers of
the Preferred Securities represented thereby with the Property Trustee, at its
New York office, as custodian for the Depositary, and registered in the name of
the Depositary or a nominee of the Depositary, duly executed by the Trust and
authenticated by the Property Trustee as hereinafter provided. The number of
Preferred Securities represented by the Rule 144A Global Preferred Security may
from time to time be increased or decreased by adjustments made on the records
of the Property Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Regulation S Global Preferred Securities. Preferred
Securities offered and sold in their initial distribution in reliance on
Regulation S under the Securities Act ("Regulation S"), as provided in the
Purchase Agreement, shall be issued in the form of one or more permanent global
Securities in definitive, fully registered form without distribution coupons and
with the appropriate global legend and Restricted Securities Legend set forth in
Exhibit A-1 hereto (collectively, the "Regulation S Global Preferred Security"),
which shall be deposited on behalf of the purchasers of the Preferred Securities
represented thereby with the Property Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Trust and authenticated by the
Property Trustee as hereinafter provided, for credit to the
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respective accounts at the Depositary of the depositories for Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, or CEDEL.
Until such time as the Restricted Period shall have terminated, investors may
hold beneficial interests in such Regulation S Global Preferred Security only
through Euroclear and CEDEL, unless delivery of such beneficial interest shall
be made through the Rule 144A Global Preferred Security in accordance with the
certification requirements set forth below in Section 9.2(d). After the
Restricted Period shall have terminated, such certification requirements shall
no longer be required for such transfers. As used herein, the term "Restricted
Period" means the period up to (but not including) the 40th day following the
later of (i) the date of the commencement of the offering of the Preferred
Securities and (ii) the last original issuance date of the Preferred Securities.
The number of Preferred Securities represented by the Regulation S Global
Preferred Security may from time to time be increased or decreased by
adjustments made on the records of the Property Trustee and the Depositary or
its nominee as hereinafter provided.
(c) Book-Entry Provisions. This Section 7.3(c) shall apply
only to the Rule 144A Global Preferred Securities, the Regulation S Global
Preferred Securities and such other Preferred Securities in global form as may
be authorized by the Trust to be deposited with or on behalf of the Depositary.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.3, authenticate and make available for delivery
initially one or more Rule 144A Global Preferred Securities and one or more
Regulation S Global Preferred Securities that (a) shall be registered in the
name of Cede & Co. or other nominee of the Depositary and (b) shall be delivered
by the Property Trustee to the Depositary or pursuant to the Depositary's
written instructions or held by the Property Trustee as custodian for the
Depositary.
Neither any members of, or participants in, the Depositary
("Participants") nor any other Persons on whose behalf Participants may act
(including Euroclear and CEDEL and account holders and participants therein)
shall have any rights under this Declaration with respect to any Global
Preferred Security held on their behalf by the Depositary or
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by the Property Trustee as the custodian of the Depositary or under such Global
Preferred Security, and the Depositary may be treated by the Trust, the Property
Trustee and any agent of the Trust or the Property Trustee as the absolute owner
of such Global Preferred Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Trust, the Property Trustee or
any agent of the Trust or the Property Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Preferred Security.
(d) Certificated Securities. Preferred Securities sold other
than in reliance on Regulation S or to QIBs will be issued only in definitive
certificated form and will be issued initially in minimum denominations of 5,000
Preferred Securities. Purchasers of Preferred Securities who are QIBs acting on
behalf of institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and did not purchase Preferred
Securities in reliance on Regulation S under the Securities Act will receive
Preferred Securities in the form of individual certificates in definitive, fully
registered form without distribution coupons and with the Restricted Securities
Legend set forth in Exhibit A-1 hereto ("Restricted Definitive Preferred
Securities"). Restricted Definitive Preferred Securities will bear the
Restricted Securities Legend set forth on Exhibit A-1 unless removed in
accordance with Section 9.2.
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
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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 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
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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 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.
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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 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
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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.
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;
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(vii) the expiration of the term of the Trust on
February 13, 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 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) 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.
(c) 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
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recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
(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.
(d) 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.
(e) 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.
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SECTION 9.2 Transfer Procedures and Restrictions.
(a) Transfer and Exchange of Definitive Preferred Securities.
When Definitive Preferred Securities are presented to the Registrar or
co-Registrar
(x) to register the transfer of such Definitive Preferred
Securities; or
(y) to exchange such Definitive Preferred Securities for an
equal number of Definitive Preferred Securities of another number,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Preferred Securities surrendered for
transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the
Trust and the Registrar or co-registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(ii) in the case of Restricted Definitive Preferred
Securities shall be accompanied by the following additional information
and documents, as applicable:
(A) if such Restricted Preferred Securities
are being delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (in the form set forth on the reverse of the
Definitive Preferred Security); or
(B) if such Restricted Preferred Securities
are being transferred to a QIB in accordance with Rule
144A, a certification from such Holder to that effect
(in the form set forth on the reverse of the
Definitive Preferred Security); or
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(C) if such Restricted Preferred Securities
are being transferred (i) pursuant to an exemption
from registration in accordance with Rule 144 or
Regulation S, or (ii) pursuant to an effective
registration statement under the Securities Act, or
(iii) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3), or (7) under
the Securities Act that is acquiring the Restricted
Preferred Securities for its own account, or for the
account of such an institutional "accredited
investor," not with a view to or for offer or sale in
connection with any distribution in violation of the
Securities Act, or (iv) in reliance on another
exemption from the registration requirements of the
Securities Act, (X) a certification from such Holder
to that effect (in the form set forth on the reverse
of the Definitive Preferred Security), (Y) in the case
of clauses (i), (iii), and (iv) above, if the Trust or
the Registrar so requests, an opinion of counsel
reasonably acceptable to the Trust or the Registrar,
as the case may be, to the effect that such transfer
is in compliance with the Securities Act, and (Z) in
the case of clause (ii) above, a certificate signed by
a Regular Trustee to the effect that a registration
statement covering the sale of such Restricted
Preferred Securities is effective.
(b) Transfer After Effectiveness of Shelf Registration
Statement. After the effectiveness of a Shelf Registration Statement covering
the resale of Preferred Securities, Preferred Securities transferred pursuant to
such Shelf Registration Statement in compliance with Section 9.2(a)(ii)(C)(ii)
will no longer be required to bear the Restricted Securities Legend, and
beneficial interests in a Preferred Security in global form without legends will
be available to transferees of Preferred Securities transferred pursuant to such
Shelf Registration Statement, upon exchange of the transferring Holder's
Restricted Definitive Preferred Security or directions to transfer such Holder's
beneficial interest in the 144A Global Preferred Security, as the case may be.
No such transfer or exchange
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of a Restricted Definitive Preferred Security or of an interest in the 144A
Global Preferred Security shall be effective unless the transferor delivers to
the Trust a certification (in the applicable form set forth on the reverse of
the Definitive Preferred Security) as to compliance by such Person with the
provisions of this Declaration applicable to such transfer or exchange. After
the effectiveness of the Shelf Registration Statement, the Trust shall issue and
the Property Trustee, upon instruction from the Trust, shall authenticate a
Preferred Security in global form without the Restricted Securities Legend (the
"Exchanged Global Preferred Security") to deposit with the Depositary to
evidence (i) transfers of beneficial interests in the 144A Global Preferred
Security that are thereafter exchanged for interests in such Exchanged Global
Preferred Security, and (ii) transfers of Restricted Definitive Preferred
Securities and Unrestricted Definitive Preferred Securities with respect to
which the transferee elects to take delivery in the form of beneficial interests
in such Exchanged Global Preferred Security, in each case subject to compliance
with the applicable provisions of this Declaration.
(c) 144A Global Preferred Security to Regulation S Global
Preferred Security. If the holder of a beneficial interest in the 144A Global
Preferred Security wishes at any time to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in the
Regulation S Global Preferred Security, such transfer may be effected, subject
to the Applicable Procedures, only in accordance with this Section 9.2(c). Upon
receipt by the Registrar of (i) written instructions given in accordance with
the Applicable Procedures from a Participant directing the Registrar to credit
or cause to be credited to a specified Participant's account a beneficial
interest in the Regulation S Global Preferred Security in a number of Preferred
Securities equal to that as to which a beneficial interest in the 144A Global
Preferred Security is to be so transferred, (ii) a written order given in
accordance with the Applicable Procedures containing information regarding the
account of the Participant (and, if applicable, the Euroclear or CEDEL account,
as the case may be) to be credited with, and the account of the Participant to
be debited for, such beneficial interest, and (iii) a certificate in
substantially the form set forth in Exhibit D given by the holder of such
beneficial interest, the Registrar shall instruct the Depositary to reduce the
number
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of Preferred Securities represented by the 144A Global Preferred Security, and
to increase the number of Preferred Securities represented by the Regulation S
Global Preferred Security, by the number of Preferred Securities as to which a
beneficial interest in the 144A Global Preferred Security is to be so
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions (which during the Restricted Period shall be the
Participant for Euroclear or CEDEL or both, as the case may be) a beneficial
interest in the Regulation S Global Preferred Security in a number of Preferred
Securities equal to that by which the 144A Global Preferred Security was reduced
upon such transfer.
(d) Regulation S Global Preferred Security to 144A Global
Preferred Security. If, during the Restricted Period, the holder of a beneficial
interest in the Regulation S Global Preferred Security wishes to transfer such
interest to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the 144A Global Preferred Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance with this
Section 9.2(d). Upon receipt by the Registrar of (i) written instructions given
in accordance with the Applicable Procedures from a Participant directing the
Registrar to credit or cause to be credited to a specified Participant's account
a beneficial interest in the 144A Global Preferred Security in a number of
Preferred Securities equal to that as to which a beneficial interest in the
Regulation S Global Preferred Security is to be so transferred, (ii) a written
order given in accordance with the Applicable Procedures containing information
regarding the account of the Participant (and, if applicable, the Euroclear or
CEDEL account, as the case may be) to be credited with, and the account of the
Participant to be debited for, such beneficial interest, and (iii) a certificate
in substantially the form set forth in Exhibit E given by the holder of such
beneficial interest, the Registrar shall instruct the Depositary to reduce the
number of Preferred Securities represented by the Regulation S Global Preferred
Security, and to increase the number of Preferred Securities represented by the
144A Global Preferred Security, by the number of Preferred Securities as to
which a beneficial interest in the Regulation S Global Preferred Security is to
be so transferred, and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the 144A
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Global Preferred Security in a number of Preferred Securities equal to that by
which the Regulation S Global Preferred Security was reduced upon such transfer.
(e) Restrictions on Transfer of a Definitive Preferred
Security for a Beneficial Interest in a Global Preferred Security. A Definitive
Preferred Security may not be exchanged for a beneficial interest in a Global
Preferred Security except upon satisfaction of the requirements set forth below.
Upon receipt by the Property Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with:
(i) if such Definitive Preferred Security is a
Restricted Preferred Security, certification, in the form set forth on
the reverse of the Preferred Security, that such Definitive Preferred
Security is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Preferred
Security is a Restricted Preferred Security, written instructions
directing the Property Trustee to make, or to direct the Depositary to
make, an adjustment on its books and records with respect to such
Global Preferred Security to reflect an increase in the number of the
Preferred Securities represented by the Global Preferred Security,
then the Property Trustee shall cancel such Definitive Preferred Security and
cause, or direct the Depositary to cause, the aggregate number of Preferred
Securities represented by the Global Preferred Security to be increased
accordingly. If no Global Preferred Securities are then outstanding, the Trust
shall issue and the Property Trustee shall authenticate, upon written order of
any Regular Trustee, an appropriate number of Preferred Securities in global
form.
(f) Transfer and Exchange of Global Preferred Securities. The
transfer and exchange of Global Preferred Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Declaration (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor.
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(g) Transfer of a Beneficial Interest in a Global Preferred
Security for a Definitive Preferred Security.
(i) Any Person having a beneficial interest in a
Global Preferred Security that is being transferred or exchanged
pursuant to clause (A) or (B) below and not pursuant to an effective
Shelf Registration Statement may upon request, and if accompanied by
the information specified below, exchange such beneficial interest for
a Definitive Preferred Security representing the same number of
Preferred Securities. Upon receipt by the Property Trustee from the
Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Preferred Security of written instructions or such
other form of instructions as is customary for the Depositary or the
Person designated by the Depositary as having such a beneficial
interest in a Restricted Preferred Security and the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary
as being the owner of a beneficial interest in a
Global Preferred Security, a certification from such
Person to that effect (in the form set forth on the
reverse of the Definitive Preferred Security); or
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A, a
certification from the transferor to that effect (in
the form set forth on the reverse of the Definitive
Preferred Security); or
(C) if such beneficial interest is being
transferred (i) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation
S, or (ii) pursuant to an effective registration
statement under the Securities Act, or (iii) to an
institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3), or (7) under the
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Securities Act that is acquiring the Restricted
Preferred Securities for its own account, or for the
account of such an institutional "accredited
investor", not with a view to or for offer or sale in
connection with any distribution in violation of the
Securities Act, or (iv) in reliance on another
exemption from the registration requirements of the
Securities Act, (X) a certification from the
transferee or transferor to that effect (in the form
set forth on the reverse of the Definitive Preferred
Security), (Y) in the case of clauses (i), (iii), and
(iv) above, if the Trust or the Registrar so requests,
an opinion of counsel reasonably acceptable to the
Trust or the Registrar, as the case may be, to the
effect that such transfer is in compliance with the
Securities Act, and (Z) in the case of clause (ii)
above, a certificate signed by a Regular Trustee to
the effect that a registration statement covering the
sale of such Restricted Preferred Securities is
effective.
then the Property Trustee or the Securities Custodian, at the direction
of the Property Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of the Global
Preferred Security to be reduced on its books and records and,
following such reduction, the Trust will execute and the Property
Trustee will authenticate and deliver to the transferee a Definitive
Preferred Security.
(ii) Definitive Preferred Securities issued in 3
exchange for a beneficial interest in a Global Preferred Security
pursuant to this Section 9.2(g) shall be registered in such names and
in such authorized denominations as the Depositary, pursuant to
instructions from its Participants or indirect participants or
otherwise, shall instruct the Property Trustee. The Property Trustee
shall deliver such Preferred Securities to the persons in whose names
such Preferred Securities are so registered in accordance with the
instructions of the Depositary.
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(h) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (j) of this Section 9.2), a Global
Preferred Security may not be transferred as a whole except by the Depositary to
a nominee of the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(i) Authentication of Definitive Preferred Securities. If at
any time:
(i) the Depositary notifies the Trust that the
Depositary is unwilling or unable to continue as Depositary for the
Global Preferred Securities or has ceased to be a Clearing Agency
registered under the Act and a successor Depositary for the Global
Preferred Securities is not appointed by the Trust at the direction of
the Sponsor within 90 days after delivery of such notice; or
(ii) in the case of a Global Preferred Security held
for an account of Euroclear or CEDEL, Euroclear or CEDEL, as the case
may be, (A) is closed for business for a continuous period of 14 days
(other than by reason of statutory or other holidays) or (B) announces
an intention permanently to cease business or does in fact do so; or
(iii) the Trust, in its sole discretion, notifies the
Property Trustee in writing that it elects to cause the issuance of
Definitive Preferred Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Regular Trustee requesting the authentication
and delivery of Definitive Preferred Securities to the Persons designated by the
Trust, will authenticate and deliver Definitive Preferred Securities, in an
aggregate principal amount equal to the principal amount of Global Preferred
Securities, in exchange for such Global Preferred Securities.
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(j) Legend.
(i) Until three (3) years after the later of the
original issuance date of any Restricted Preferred Security or the last
date that any Affiliate of the Trust was the owner of such Restricted
Preferred Security, any Security evidencing such Restricted Preferred
Security (and all securities issued in exchange therefor or
substitution thereof, other than Common Stock, if any, issued upon
conversion thereof which shall bear the legend set forth in the
Indenture) shall bear a legend (the "Restricted Securities Legend") in
substantially the following form (unless such Restricted Preferred
Security has been transferred pursuant to a registration statement that
has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer) or unless
otherwise agreed by the Trust in writing, with notice thereof to the
Registrar):
THIS SECURITY (OR ITS PREDECESSOR), ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURE ISSUED IN EXCHANGE FOR THIS SECURITY, AND ANY COMMON STOCK
(AND RELATED RIGHTS) ISSUED ON CONVERSION THEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO OR FOR THE
ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE BENEFIT OF THE ISSUER
HEREOF THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH CALENERGY COMPANY, INC.
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(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF
THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR
OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES
FOR SUCH ISSUER (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN FORM
AND SUBSTANCE, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT
A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON
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THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Any Security as to which such restrictions on
transfer shall have expired in accordance with their terms or as to
which the conditions for removal of the foregoing legend as set forth
therein have been satisfied may, upon surrender of such Security for
exchange to the Registrar in accordance with the provisions of this
Section 9.2, be exchanged for a new Security or Securities, of like
tenor and aggregate number of Preferred Securities, which shall not
bear the Restricted Securities Legend.
(k) Cancellation or Adjustment of Global Preferred Security.
At such time as all beneficial interests in a Global Preferred Security have
either been exchanged for Definitive Preferred Securities to the extent
permitted by this Declaration or redeemed, repurchased or canceled in accordance
with the terms of this Declaration, such Global Preferred Security shall be
returned to the Depositary for cancellation or retained and canceled by the
Property Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Preferred Security is exchanged for Definitive Preferred
Securities, Preferred Securities represented by such Global Preferred Security
shall be reduced and an adjustment shall be made on the books and records of the
Property Trustee (if it is then the Securities Custodian for such Global
Preferred Security) with respect to such Global Preferred Security, by the
Property Trustee or the Securities Custodian, to reflect such reduction.
(l) Obligations with Respect to Transfers and Exchanges of
Preferred Securities.
(i) To permit registrations of transfers and
exchanges, the Trust shall execute and the Property Trustee shall
authenticate Definitive Preferred Securities and Global Preferred
Securities at the Registrar's or co-Registrar's request.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such indemnity as
the Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
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(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of (a) any Definitive
Preferred Security selected for redemption in whole or in part pursuant
to Article III, except the unredeemed portion of any Definitive
Preferred Security being redeemed in part, or (b) any Preferred
Security for a period beginning 15 Business Days before the mailing of
a notice of an offer to repurchase or redeem Preferred Securities or 15
Business Days before a quarterly distribution date.
(iv) Prior to the due presentation for registrations
of transfer of any Preferred Security, the Trust, the Property Trustee,
the Paying Agent, the Registrar or any co-registrar may deem and treat
the person in whose name a Preferred Security is registered as the
absolute owner of such Preferred Security for the purpose of receiving
Distributions on such Preferred Security and for all other purposes
whatsoever, and none of the Trust, the Property Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to
the contrary.
(v) All Preferred Securities issued upon any transfer
or exchange pursuant to the terms of this Declaration shall evidence
the same security and shall be entitled to the same benefits under this
Declaration as the Preferred Securities surrendered upon such transfer
or exchange.
(m) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility
or obligation to any beneficial owner of a Global Preferred Security,
any Participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Preferred Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Preferred
Securities. All notices and communications to be given to the Holders
and all payments to be made to Holders under the Preferred Securities
shall be given or made only to or upon the order of the registered
Holders
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(which shall be the Depositary or its nominee in the case of a Global
Preferred Security). The rights of beneficial owners in any Global
Preferred Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Property Trustee may conclusively rely and shall be fully protected in
relying upon information furnished by the Depositary or any agent
thereof with respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Preferred Security (including any transfers between or among
Depositary Participants or beneficial owners in any Global Preferred
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
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 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.
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
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Global Preferred Securities, except as provided in Section 9.2. Unless and until
definitive, fully registered Preferred Securities Certificates have been issued
to the Preferred Security Beneficial Owners pursuant to Section 9.2:
(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 relevant 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 Beneficial Owners
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements 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
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sole discretion, appoint a successor Clearing Agency with respect to such
Preferred Securities.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, 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).
(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
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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
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,
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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 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
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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 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 par-
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ties 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 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
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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.
(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,
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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, 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.
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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 required by
the Code and the Treasury Regulations. Notwithstanding 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
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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
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 Regular Trustees);
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(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 purported
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 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
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(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(d) 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
(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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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
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights.
The Holders of the Preferred Securities, the Debentures, the
Preferred Securities Guarantee and the shares of Common Stock of the Sponsor
issuable upon conversion of the Debentures (collectively, the "Registrable
Securities") are entitled to the benefits of a Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Sponsor and the Trust have
agreed for the benefit of the Holders of the Registrable Securities that,
subject to the terms of the Registration Rights Agreement (including, without
limitation, those provisions permitting a Suspension (as defined therein)) (i)
they will, at the Sponsor's cost, within 180 days following the date of original
issuance (the "Issue Date") of the Preferred Securities, prepare and file a
Shelf Registration Statement (as defined in the Registration Rights Agreement)
with the Commission relating to offers and resales of the Registrable
Securities, (ii) they will use their reasonable best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act
(subject to certain exceptions under the Registration Rights Agreement) no later
than 270 days after the Issue Date and (iii) they will use their reasonable best
efforts to maintain such Shelf Registration Statement continuously effective
under the Securities Act until the second anniversary of the date of the
effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement. The Sponsor and the Trust agree
that from and after the date on which any Registration Default (as defined
below) occurs, additional interest ("Liquidated Damages") will accrue on the
Debentures and the Preferred Securities from and including the day following the
day such Registration Default shall occur (or be deemed to occur as described
below) to but excluding the day on which such
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Registration Default has been cured (or be deemed to be cured as described
below). Liquidated Damages will be paid quarterly in arrears, with the first
quarterly payment due on the first interest or distribution payment date, as
applicable, following the date on which such Liquidated Damages begin to accrue,
and will accrue at a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount or liquidation amount, as applicable, to
and including the 90th day following such Registration Default and one-half of
one percent (0.50%) thereof from and after the 91st day following such
Registration Default. Following the cure or deemed cure of a Registration
Default, Liquidated Damages will cease to accrue with respect to such
Registration Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the Issue Date of
the Preferred Securities, a Shelf Registration Statement relating to
the offer and sale of the Registrable Securities has not been filed
with the Commission;
(ii) on or prior to the 270th day following the Issue Date of
the Preferred Securities, the Registrable Securities are not the
subject of a Shelf Registration Statement which has become effective;
(iii) the Registrable Securities are the subject of a Shelf
Registration Statement which was effective but which has ceased to be
effective for any reason (other than pursuant to clause (iv) of (v)
below) prior to the end of the Shelf Registration Period (as defined in
the Registration Rights Agreement);
(iv) the occurrence of a Suspension (as defined in the
Registration Rights Agreement); or
(v) the occurrence of an event contemplated by paragraph
3(c)(2)(iii) of the Registration Rights Agreement (an "Amendment
Event");
provided, however, that if the Registration Default consists of the occurrence
of any event contemplated by clause (iv) or (v) above, then such Registration
Default shall not be deemed to have occurred until the expiration of 30 Business
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Days after the date of the occurrence of such Suspension or Amendment Event,
provided that (a) the Trust and the Sponsor thereafter reasonably promptly
comply with the requirements of paragraph 3(i) of the Registration Rights
Agreement, if applicable, and (b) in the case of such Amendment Event resulting
from an action taken by the Sponsor or the Trust, such action was taken in good
faith; and provided, further, that a Registration Default shall not constitute a
default or Event of Default hereunder.
A Registration Default shall be deemed to have been cured and
cease to exist on the date subsequent to the occurrence of such Registration
Default on which:
(x) in the case of a Registration Default described in clause
(i), (ii) or (iii) above, the Shelf Registration Statement covering
such Registrable Securities shall become effective; or
(y) in the case of a Registration Default described in clause
(iv) or (v) above, upon the Sponsor and the Trust taking action to
notify the Holders (for purposes of this clause (y), as that term is
defined in the Registration Rights Agreement) of the Registrable
Securities that such Suspension or Amendment Event has ended. For
purposes of this clause (y), taking action to notify Holders shall be
deemed sufficient when notice is first deposited in first class mail or
delivered to a courier service or filed with the Commission or publicly
disseminated by press release or other release to a news reporting
service.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 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):
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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):
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
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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 15.2 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
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 15.3 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.
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SECTION 15.4 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 15.5 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 15.6 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 circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.7 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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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
/s/ Steven A. McArthur
-------------------------
John G. Sylvia
as Trustee
/s/ John G. Sylvia
-------------------------
Gregory Abel
as Trustee
/s/ Gregory Abel
-------------------------
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Mary Jane Morrissey
------------------------
Name: Mary Jane Morrissey
Title: Authorized Signatory
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Byron Merino
------------------------
Name: Byron Merino
Title: Assistant Treasurer
CALENERGY COMPANY, INC.
as Sponsor
By: /s/ Steven A. McArthur
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
THIS SECURITY (OR ITS PREDECESSOR), ANY CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURE ISSUED IN EXCHANGE FOR THIS SECURITY, AND ANY COMMON STOCK (AND
RELATED RIGHTS) ISSUED ON CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES"
OR TO OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS DEFINED IN REGULATION
S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY
ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE BENEFIT OF
THE ISSUER HEREOF THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CALENERGY
COMPANY, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR
OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS SUBJECT TO
THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH ISSUER (I) TO
REQUIRE THE
A-1
<PAGE>
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
[Include if Preferred Security is in global form and the
Depository Trust Company is the U. S. Depositary -UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[Include if Preferred Security is in global form -- TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO
BELOW.]
Certificate Number: Number of Preferred Securi-
ties:[Include if Preferred Security
is in global form -- :as increased
or decreased as set forth on Sched-
ule A attached hereto]
CUSIP No.:[12946P 20 5 -- 144A Global Preferred Security] [U1234
8105 -- Regulation S Global Preferred Security] [12946P 30 4
-- Definitive Preferred Securities]
[ISISN No.:[USU1234 81058 -- Regulation S Global Preferred
Security]
Trust Convertible Preferred Securities
of
CalEnergy Capital Trust II
6-1/4% Trust Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred Security)
A-2
<PAGE>
CalEnergy Capital Trust II, 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 6-1/4% Trust 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 February 26, 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.
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.
A-3
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this _____ day of .
CALENERGY CAPITAL TRUST II
By:
----------------------
Name:
Title:
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated: _______________
THE BANK OF NEW YORK,
as Property Trustee
By:
--------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed
at a rate per annum of 6-1/4% (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 June 1, 1997, 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 previous 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
A-5
<PAGE>
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.
A-6
<PAGE>
CONVERSION REQUEST
To: THE BANK OF NEW YORK,
as Property Trustee of
CalEnergy Capital Trust II
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 February 26,
1997, by Steven A. McArthur, John G. Sylvia 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.
A-7
<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 Security or Other Identify-
ing Number
---------------------------------------
---------------------------------------
---------------------------------------
Signature Guarantee:*
------------------
- ---------------------------
* (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
(continued...)
A-8
<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)
membership of 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 subsitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
** (Signature mst be guarunteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirments of the Registrar, which requirments 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 subsitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A-9
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF SECURITIES
RE: 6-1/4% Trust Convertible Preferred Securities of
CalEnergy Capital Trust II
This Certificate relates to the exchange or registration for transfer of
_______ (number) of Preferred Securities held in (check applicable box) _____
book-entry or ______ definitive form by ___________________ (the "Transferor"),
prior to the Resale Restriction Termination Date (as defined in the legend on
the face of this Certificate).
The Transferor (check applicable box):
has requested the Registrar by written order to deliver, in
exchange for its beneficial interest in a Global Preferred Security held by the
Depositary, Preferred Securities in definitive registered form of authorized
denominations and an aggregate number of Preferred Securities equal to its
beneficial interest in such Global Preferred Security (or portion thereof as
indicated above); or
has requested the Registrar by written order to exchange or
register the transfer of such Preferred Securities.
In connection with such request and in respect of all such Preferred
Securities, the Transferor does hereby certify that Transferor is familiar with
the Declaration relating to the above-captioned Preferred Security and, as
provided in Section 9.2 of such Declaration, the transfer of the Preferred
Securities does not require registration under the Securities Act because (check
applicable box):
Such Preferred Securities are being acquired for the
Transferor's own account (in satisfaction of Section 9.2(a)(ii)(A) or Section
9.2(g)(i)(A) of the Declaration).
Such Preferred Securities are being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in reliance on Rule 144A (in satisfaction of Section 9.2(a)(ii)(B) or
Section 9.2(g)(i)(B) of the Declaration).
Such Preferred Securities are being transferred pursuant to an
effective registration statement under the Securities Act (in satisfaction of
Section 9.2(a)(ii)(C) or Section 9.2(g)(i)(C) of the Declaration).
A-10
<PAGE>
Such Preferred Securities are being transferred in compliance
with and in reliance on Rule 144 or Regulation S under the Securities Act, or to
an institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3), or (7) under the Securities Act that is acquiring such Convertible
Preferred Securities for its own account, or for the account of such an
institutional accredited investor, not with a view to or for offer or sale in
connection with any distribution in violation of the Securities Act, or in
reliance on another exemption from the registration requirements of the
Securities Act (other than Rule 144A) and (check if applicable) _____ an opinion
of counsel to the effect that such transfer is in compliance with the Securities
Act accompanies this Certificate (in satisfaction of Section 9.2(a)(ii)(C) or
Section 9.2(g)(i)(C) of the Declaration).
---------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------
Date:
----------------------------
A-11
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The original number of Preferred Securities represented by this Global
Preferred Security shall be __________. The following increases or decreases in
the number of Preferred Securities represented by this Global Preferred Security
have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of Number of Securities Signature of
increase/ Amount of increase in decrease in number following such authorized
decrease number of Securities of Securities increase/decrease officer of Trustee
- -------- -------------------- ------------- ----------------- ------------------
</TABLE>
A-12
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
[FORM OF FACE OF SECURITY]
[THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE
REGISTRATION STATEMENT.]
[OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF CALENERGY COMPANY, INC.]
Certificate Number: Number of Common Securities:
Trust Convertible Common Securities
of
CalEnergy Capital Trust II
6-1/4% Trust Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
CalEnergy Capital Trust II, 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 common
securities of the Trust representing
A2-1
<PAGE>
undivided beneficial interests in the assets of the Trust designated the 6-1/4%
Trust Convertible Common Securities (liquidation amount $50 per Convertible
Common Security) (the "Common Securities"). The Common 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 Common 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 February 26,
1997, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common 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 Common Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Common Securities Guarantee
and the Indenture to a Holder without charge upon written request to the Sponsor
at its principal place of business.
Reference is hereby made to select provisions of the Common
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.
Upon receipt of this certificate, the Sponsor 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 Common
Securities as evidence of indirect beneficial ownership in the Debentures.
A2-2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate
this day of .
CalEnergy Capital Trust II
By:
-----------------------
Name:
Title:
A2-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of 6-1/4% (the "Coupon Rate") of the stated liquidation amount
of $50 per Common 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
Common 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 June 1, 1997, 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 last
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 previous and
consecutive Extension Periods, may not exceed 20 consecutive quarters. Payments
of accrued Distributions will be payable to Holders
A2-4
<PAGE>
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 Common Securities shall be redeemable as provided in the
Declaration.
The Common Securities shall be convertible into shares of
Common Stock of CalEnergy Company, Inc., through (i) the exchange of Common
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.
A2-5
<PAGE>
CONVERSION REQUEST
To: THE BANK OF NEW YORK
CalEnergy Capital Trust II
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common 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 February 26,
1997, by Steven A. McArthur, John G. Sylvia 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 individual beneficial interests in the Trust to
be issued pursuant to the Declaration. Pursuant to the aforementioned exercise
of the option to convert these Common Securities, the undersigned hereby directs
the Conversion Agent (as that term is defined in the Declaration) to (i)
exchange such Common 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 Common 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
Common 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.
A2-6
<PAGE>
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Declaration and the Common Securities, agrees
to be bound by the terms of the Registration Rights Agreement relating to the
CalEnergy Common Stock issuable upon conversion of the Common Securities.
Dated: ________________
in whole __ in part __
Number of Common 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)
A2-7
<PAGE>
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other Identifying
Number
--------------------------------------------
--------------------------------------------
--------------------------------------------
Signature Guarantee:*
- ---------------------------
* (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.)
A2-8
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common 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 Common
Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee**:
---------------------------------------------------------
- ---------------------------
** (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.)
A2-9
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
<PAGE>
EXHIBIT B
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
[Include Restricted Securities Legend: THIS SECURITY HAS AND ANY COMMON STOCK
(AND RELATED RIGHTS) ISSUED ON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAW. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES, AND AGREES FOR THE BENEFIT OF CALENERGY COMPANY, INC.
(THE "COMPANY") THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUB-PARAGRAPH (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
<PAGE>
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (D), (E) OR (F) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEES FOR SUCH
ISSUER (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN FORM AND SUBSTANCE, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.]
CALENERGY COMPANY, INC.
6-1/4% Convertible Junior Subordinated
Debenture Due 2012
No._________ $___________
[CUSIP No. _________]
CALENERGY COMPANY, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called "the Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum [indicated on
Schedule A hereof]1 [of ______ Dollars]2 ($_____________________) on Febuary 25,
2012.
Interest Payment Dates: March 1, June 1, September 1
and December 1, commencing
June 1, 1997
Regular Record Dates: the close of business on the
15th day immediately preced-
ing each Interest Payment
Date, commencing May 15, 1997
- ------------------------
1 Applicable to Global Securities only.
2 Applicable to certificated Securities only.
2
<PAGE>
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
Dated: _________________
CALENERGY COMPANY, INC.
By:________________________
Name:
Title:
[Seal]
Attest:
- ---------------
3
<PAGE>
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: _____________ THE BANK OF NEW YORK,
as Trustee
By: _______________________
Authorized Signatory
4
<PAGE>
[FORM OF REVERSE OF SECURITY]
CALENERGY COMPANY, INC.
6-1/4% Convertible Junior Subordinated
Debenture Due 20123
1. Interest. CalEnergy Company, Inc., a Delaware corporation
(the "Company"), is the issuer of this 6-1/4% Convertible Junior Subordinated
Debenture Due 2012 (the "Security") limited in aggregate principal amount to
$___________ (or $___________ if the over-allotment option is exercised in
full), issued under the Indenture hereinafter referred to. The Company promises
to pay interest on the Securities in cash from February 26, 1997 or from the
most recent interest payment date to which interest has been paid or duly
provided for, quarterly (subject to deferral for up to 20 consecutive quarters
as described in Section 3 hereof) in arrears on March 1, June 1, September 1 and
December 1 of each year (each such date, an "Interest Payment Date"), commencing
June 1, 1997, at the rate of 6-1/4% per annum (subject to increase as provided
in Section 13 hereto) plus Additional Interest, if any, until the principal
hereof shall have become due and payable.
The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. To the extent lawful,
the Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the rate borne by the
Securities, compounded quarterly. Any interest paid on this Security shall be
increased to the extent necessary to pay Additional Interest as set forth in
this Security.
2. Additional Interest. The Company shall pay to CalEnergy
Capital Trust II (and its permitted
- --------
3 All terms used in this Security which are defined in the Indenture or
in the Declaration attached as Annex A thereto shall have the meanings
assigned to them in the Indenture or the Declaration, as the case may
be.
5
<PAGE>
successors or assigns under the Declaration) (the "Trust") such additional
amounts as may be necessary in order that the amount of dividends or other
distributions then due and payable by the Trust on the Preferred Securities that
at any time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any additional taxes, duties and other governmental
charges of whatever nature (other than withholding stamp or transfer taxes)
imposed by the United States or any other taxing authority.
3. Extension of Interest Payment Period. The Company shall
have the right, at any time during the term of this Security, from time to time
to defer payments of interest by extending the interest payment period of such
Security for up to 20 consecutive quarters (an "Extended Interest Payment
Period") during which Extended Interest Payment Period no interest shall be due
and payable; provided, that no Extended Interest Payment Period may extend
beyond the Maturity Date or any earlier Redemption Date. To the extent
permitted by applicable law, interest, the payment of which has been deferred
because of the extension of the interest payment period, will bear interest
thereon at 6-1/4% compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended Interest
Payment Period, the Company shall pay all interest then accrued and unpaid on
the Securities, including any Additional Payments that shall be payable to the
Holders of the Securities in whose names the Securities are registered in the
Security Registrar on the first Regular Record Date after the end of the
Extended Interest Payment Period. Before the expiration of any Extended
Interest Payment Period, the Company may elect to continue to defer payments
of interest for another consecutive Extended Interest Payment Period; provided,
that any such Extended Interest Payment Period, together with all such previous
and consecutive Extended Interest Payment Periods, shall not exceed 20
consecutive quarters and shall not extend beyond the Maturity Date. Upon the
expiration of any Extended Interest Payment Period and upon the payment of all
Additional Payments, if any, then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements. No interest
shall be due and payable during an Extended Interest Payment Period except at
the end thereof.
6
<PAGE>
If the Property Trustee is the sole holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the Company
shall give notice to the Regular Trustees, the Property Trustee and the Trustee
of its selection of such Extended Interest Payment Period at least one Business
Day prior to the earlier of (i) the next succeeding Interest Payment Date or
(ii) if the Preferred Securities are listed on the New York Stock Exchange or
other stock exchange or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities on the record date or the
date such distributions are payable, but in any event not less than ten Business
Days prior to such record date.
If the Property Trustee is not the sole holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give the Holders of these Securities and the Trustee notice of
its selection of an Extended Interest Payment Period at least ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) if
the Preferred Securities are listed on the New York Stock Exchange or other
stock exchange or quotation system, the date the Company is required to give
notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Securities on the record date or the date such
distributions are payable, but in any event not less than two Business Days
prior to such record date.
The quarter in respect of which any notice is given pursuant
to the second and third paragraphs of this Section 3 shall be counted as one of
the 20 quarters permitted in the maximum Extended Interest Payment Period
permitted under the first paragraph of this Section 3.
4. Method of Payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the 15th day immediately preceding each Interest Payment Date (the "Regular
Record Date"), commencing May
7
<PAGE>
15, 1997. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
New York, New York, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
5. Paying Agent and Security Registrar. The Trustee will act
as Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such capacity.
6. Indenture. The Company issued the Securities under an
indenture, dated as of February 26, 1997 (the "Indenture"), between the Company
and The Bank of New York, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities
thereunder of the Trustee, the Company and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S.
Code
8
<PAGE>
ss.ss. 77aaa-77bbbb) ("TIA") as in effect on the date of the Indenture. The
Securities are subject to, and qualified by, all such terms, certain of which
are summarized hereon, and holders are referred to the Indenture and the TIA for
a statement of such terms. The Securities are unsecured general obligations of
the Company limited to $154,639,200 in aggregate principal amount (or up to
$185,567,050 if the over-allotment option is exercised) and subordinated in
right of payment to all existing and future Senior Indebtedness of the Company.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Security at the
times, place and rate, and in the coin or currency, herein prescribed or to
convert this Security as provided in the Indenture.
7. Optional Redemption. The Securities are redeemable at the
Company's option at any time and from time to time after March 3, 2000, upon not
less than 20 or more than 60 days' notice, at a Redemption Price equal to $51.00
per $50 principal amount of the Securities to be redeemed plus any accrued and
unpaid interest, including Additional Payments, if any, to the Redemption Date,
if redeemed before March 3, 2001, and at $50.50 per $50 principal amount of the
Security, if redeemed during the 12-month period beginning March 3, 2001 and
thereafter at $50 per $50 principal amount of the Securities plus, in each case,
accrued and unpaid interest, including Additional Payments, if any, to the
Redemption Date. On or after the Redemption Date, interest will cease to accrue
on the Securities, or portion thereof, called for redemption.
8. Optional Redemption Upon Tax Event. The Securities are
subject to redemption in whole, but not in part, at any time within 90 days, if
a Tax Event (as defined in the Declaration) shall occur and be continuing, at
a redemption price equal to $50 per $50 principal amount thereof plus accrued
but unpaid interest, including Additional Payments, if any, to the Redemption
Date; provided, however, that if, at the time there is available to the Company
or the Trust the opportunity to eliminate, within such 90-day period, the Tax
Event by taking some ministerial action, including but not limited to filing
a form or making an election, or pursuing some
9
<PAGE>
other similar reasonable measure, which, in the sole judgment of the Company,
has or will cause no adverse effect on the Company, the Trust or the Holders of
the Trust Securities issued by the Trust or involves or will involve no material
cost, then the Company or the Trust shall pursue such measure in lieu of
redemption. Any redemption pursuant to this Section 8 will be made upon not less
than 30 nor more than 60 days' notice.
9. Notice of Redemption. Notice of redemption will be mailed
at least 30 (or in the case of a redemption at the election of the Company, at
least 20) but not more than 60 days before the Redemption Date to each Holder of
the Securities to be redeemed at his address of record. The Securities in
denominations larger than $50 may be redeemed in part but only in integral
multiples of $50. In the event of a redemption of less than all of the
Securities, the Securities will be chosen for redemption by the Trustee in
accordance with the Indenture. On and after the Redemption Date, interest ceases
to accrue on the Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a Regular Record
Date with respect to any Interest Payment Date specified above and on or prior
to such Interest Payment Date, then any accrued interest will be paid to the
person in whose name this Security is registered at the close of business on
such record date.
10. Mandatory Redemption. The Securities will mature on
February 25, 2012, and may be redeemed, in whole or in part, at any time after
March 3, 2000 or at any time in certain circumstances upon the occurrence of a
Tax Event. Upon the repayment of the Securities, whether at maturity or upon
redemption, the proceeds from such repayment or payment shall simultaneously be
applied to redeem Trust Securities having an aggregate liquidation amount of the
Securities so repaid or redeemed at the applicable redemption price together
with accrued and unpaid distributions through the date of redemption; provided,
that holders of the Trust Securities shall be given not less than 30 nor more
than 60 days notice of such redemption. Upon the repayment of the Securities at
maturity or upon any acceleration, earlier redemption or otherwise, the proceeds
from such repayment will be applied to redeem the Preferred Securities, in
whole,
10
<PAGE>
upon not less than 30 nor more than 60 days' notice. There are no sinking fund
payments with respect to the Securities.
11. Subordination. The payment of the principal of, interest
on or any other amounts due on the Securities is subordinated in right of
payment to all existing and future Senior Indebtedness (as defined below) of the
Company, as described in the Indenture. Each holder, by accepting a Security,
agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.
Senior Indebtedness shall mean in respect of the Company (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other Persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness issued after the date of original issuance of the Securities
that is by its terms subordinated to or pari passu with the Securities and (2)
any indebtedness (including all other debt securities and guarantees in respect
of those debt securities) initially issued to any other trust, or a trustee of
such trust, partnership, or other entity affiliated with the Company that is,
directly or indirectly, a financing
11
<PAGE>
vehicle of the Company (a "Financing Entity") in connection with the issuance by
such Financing Entity of preferred securities or other securities which by their
terms rank pari passu with, or junior to, the Preferred Securities. The
Preferred Securities shall rank pari passu with the 6 1/4% Term Income
Deferrable Equity Securities of the Company. The Securities shall rank pari
passu with the 6 1/4% Convertible Junior Subordinated Interest Debentures Due
2016 of the Company.
12. Conversion. The Holder of any Security has the right,
exercisable at any time beginning 60 days following the first date of original
issuance of the Securities and prior to the close of business (New York time) on
the date of the Security's maturity, to convert the principal amount thereof (or
any portion thereof that is an integral multiple of $50) into shares of Common
Stock at an initial conversion rate of 1.1655 shares of Common Stock for each
Security (equivalent to a conversion price of $42.90 per share of Common Stock
of the Company), subject to adjustment under certain circumstances, except that
if a Security is called for redemption, the conversion right will terminate at
the close of business on the Redemption Date.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of
business on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date will be paid to
the registered Holder of such Security on such Regular Record Date. In such
event, such Security, when surrendered for conversion, need not be accompanied
by payment of an amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable upon conversion
of a Security is determined by dividing the principal amount of the Security
converted by the conversion price in effect on the Con-
12
<PAGE>
version Date. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest. The outstanding principal
amount of any Security shall be reduced by the portion of the principal amount
thereof converted into shares of Common Stock.
13. Registration Rights. The holders of the Preferred
Securities, the Securities, the Guarantee and the shares of Common Stock of the
Company issuable upon conversion of the Securities (collectively, the
"Registrable Securities") are entitled to the benefits of a Registration Rights
Agreement, dated as of February 26, 1997, among the Company and the Initial
Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the Company has agreed for the benefit of the holders of
Registrable Securities that, subject to the terms of the Registration Rights
Agreement (including, without limitation, those provisions permitting a
Suspension (as defined therein)) (i) it will, at its cost, within 180 days
following the date of issuance of the Registrable Securities (the "Issue Date"),
prepare and file a Shelf Registration Statement (as defined in the Registration
Rights Agreement) with the Commission relating to offers and resales of the
Registrable Securities, (ii) it will use its reasonable best efforts to cause
such Shelf Registration Statement to be declared effective under the Securities
Act (subject to certain exceptions under the Registration Rights Agreement) no
later than 270 days after the Issue Date and (iii) it will use its reasonable
best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act until the second anniversary of the
effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement (the "Effectiveness Period").
The Company agrees that from and after the date on which any
Registration Default occurs, additional interest ("Liquidated Damages") will
accrue on the Securities, and accordingly, additional interest will accrue on
the Preferred Securities, in each case, from and including the day following the
day such Registration Default shall occur (or be deemed to occur as described
below) to but excluding the day on which such Registration Default has been
cured (or be deemed to be cured as described below). Liquidated Damages will be
paid quar-
13
<PAGE>
terly in arrears, with the first quarterly payment due on the first interest or
distribution payment date, as applicable, following the date on which such
Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day following such
Registration Default and one-half of one percent (0.50%) thereof from and after
the 91st day following such Registration Default. Following the cure or deemed
cure of a Registration Default, Liquidated Damages will cease to accrue with
respect to such Registration Default.
"Registration Default" shall mean any of the following events:
(i) on or prior to the 180th day following the Issue Date, a
Shelf Registration Statement relating to the offer and sale of the
Registrable Securities has not been filed with the Commission;
(ii) on or prior to the 270th day following the Issue Date,
the Registrable Securities are not the subject of a Shelf Registration
Statement which has become effective;
(iii) the Registrable Securities are the subject of a Shelf
Registration Statement which was effective but which has ceased to be
effective for any reason (other than pursuant to clause (iv) or (v)
below) prior to the end of the Shelf Registration Period (as defined in
the Registration Rights Agreement);
(iv) the occurrence of a Suspension (as defined in the
Registration Rights Agreement); or
(v) the occurrence of an event contemplated by paragraph
3(c)(2)(iii) of the Registration Rights Agreement (an "Amendment
Event");
provided, however, that if the Registration Default consists of the occurrence
of any event contemplated by clause (iv) or (v) above, then such Registration
Default shall not be deemed to have occurred until the expiration of 30 Business
Days after the date of the occurrence of such Suspension or Amendment Event,
provided that (a) the
14
<PAGE>
Trust and the Company thereafter reasonably promptly comply with the
requirements of paragraph 3(i) of the Registration Rights Agreement, if
applicable, and (b) in the case of such Amendment Event resulting from an action
taken by the Company or the Trust, such action was taken in good faith; and
provided, further, that a Registration Default shall not constitute a default or
Event of Default hereunder.
A Registration Default shall be deemed to have been cured and
cease to exist on the date subsequent to the occurrence of such Registration
Default on which:
(x) in the case of a Registration Default described in clause
(i), (ii) or (iii) above, the Shelf Registration Statement covering
such Registrable Securities shall become effective; or
(y) in the case of a Registration Default described in clause
(iv) or (v) above, upon the Company and the Trust taking action to
notify the Holders (for purposes of this clause (y), as that term is
defined in the Registration Rights Agreement) of the Registrable
Securities that such Suspension or Amendment Event has ended. For
purposes of this clause (y), taking action to notify Holders shall be
deemed sufficient when notice is first deposited in first class mail or
delivered to a courier service or filed with the Commission or publicly
disseminated by press release or other release to a news reporting
service.
14. Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
15
<PAGE>
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment of
this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
15. Persons Deemed Owners. Except as provided in Section 4
hereof, the registered Holder of a Security may be treated as its owner for all
purposes.
16. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
17. Defaults and Remedies. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture. If an Event of
Default occurs and is continuing, the Trustee by notice to the Company or the
holders of at least 25% in aggregate principal amount of the then outstanding
Securities by notice to the Company and the Trustee may declare all the
Securities to be due and payable immediately.
The holders of a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default
16
<PAGE>
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration. Holders may not enforce the
Indenture or the Securities except as provided in the Indenture. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Securities issued under the Indenture may direct the Trustee in its
exercise of any trust or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of Default and
remedies is qualified by reference to, and subject in its entirety by, the more
complete description thereof contained in the Indenture.
18. Amendments, Supplements and Waivers. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of
the Holders of the Securities under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
19. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
20. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company
17
<PAGE>
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder of the Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
22. Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
23. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
The Company will furnish to any Holder of the Securities upon
written request and without charge a copy of the Indenture. Request may be made
to:
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention of: General Counsel
18
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:______________________________________
(Sign exactly as your name appears on
the other side of this Security)
Date:
------------------------------------
Signature Guarantee:*
-----------------------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account
without transfer; or
(2) |_| transferred pursuant to and in compliance
with Rule 144A under the Securities Act of
1933; or
- --------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
19
<PAGE>
(3) |_| transferred pursuant to and in compliance
with Regulation S under the Securities Act of
1933; or
(4) |_| transferred pursuant to another available ex-
emption from the registration requirements of
the Securities Act of 1933; or
(5) |_| transferred pursuant to an effective Shelf
Registration Statement (as defined in Section 1007
of the Indenture).
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) or (4) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act; provided, further, that after the date that
a Shelf Registration Statement becomes effective and so long as such Shelf
Registration Statement continues to be effective, the Trustee may only permit
transfers for which box (5) has been checked.
--------------------
Signature
Signature Guarantee:*
- ------------------------- --------------------
Signature must be guaranteed Signature
- -------------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is
- --------------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
20
<PAGE>
being made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
------------------------- ------------------------------------
NOTICE: To be executed by
an executive offi-
cer]
21
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be
$__________. The following increases or decreases in the principal amount of
this Global Security have been made:
<TABLE>
<CAPTION>
========================================================================================================================
<S> <C> <C> <C> <C>
Amount of in-
crease in Princi-
pal Amount of
this Global Secu- Amount of de- Principal Amount Signature of
rity including crease in Princi- of this Global authorized offi-
upon exercise of pal Amount of Security follow- cer of Trustee
over-allotment this Global Secu- ing such decrease or Securities
Date Made option rity or increase Custodian
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
========================================================================================================================
</TABLE>
22
<PAGE>
ELECTION TO CONVERT
To: CalEnergy Company, Inc.
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Common Stock of CALENERGY COMPANY, INC. in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Security, agrees to be bound
by the terms of the Registration Agreement relating to the Common Stock issuable
upon conversion of the Securities.
Dated: ___________
in whole _____
Portions of Security to be
converted ($50 or integral
multiples thereof):
$-----------------
-----------------------------------
Signature (for conversion only)
Please Print or Typewrite Name
and Address, Including Zip
Code, and Social Security or
Other Identifying Number
-----------------------------------
-----------------------------------
-----------------------------------
Signature Guarantee:*
--------------
- --------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
1
<PAGE>
EXHIBIT C
PURCHASE AGREEMENT
<PAGE>
3,000,000
CALENERGY CAPITAL TRUST II
6-1/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER TRUST CONVERTIBLE PREFERRED SECURITY)
GUARANTEED TO A LIMITED EXTENT BY, AND
CONVERTIBLE INTO COMMON STOCK OF,
CALENERGY COMPANY, INC.
PURCHASE AGREEMENT
February 20, 1997
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
CalEnergy Capital Trust II, a statutory business trust formed under the
laws of the State of Delaware (the "Trust") proposes to issue and sell to you
(the "Initial Purchasers") an aggregate of 3,000,000 (the "Firm Securities") of
its 6-1/4% Trust Convertible Preferred Securities (liquidation preference $50
per trust convertible preferred security) (the "Convertible Preferred
Securities"). In addition, the Trust proposes to grant to the Initial Purchasers
an option to purchase up to an additional 600,000 shares of the Convertible
Preferred Securities on the terms and for the purposes set forth in Section 3
(the "Optional Securities"). The Firm Securities and the Optional Securities
which the Initial Purchasers may elect to purchase pursuant to Section 3 hereof
are herein collectively called the "Offered Securities."
It is understood that the Initial Purchasers will resell the Offered
Securities only inside the United States to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended
(the "Securities Act"), and to institutional "accredited investors," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, and outside
the United States to certain persons in reliance on Regulation S under the
Securities Act ("Regulation S").
<PAGE>
The Convertible Preferred Securities represent undivided beneficial
ownership interests in the assets of the Trust, guaranteed by CalEnergy Company,
Inc. (the "Guarantor") as to the payment of distributions, and as to payments on
liquidation or redemption, to the extent set forth in a guarantee agreement (the
"Guarantee") between the Guarantor and The Bank of New York, as trustee (the
"Guarantee Trustee"). The proceeds of the sale by the Trust of the Offered
Securities and its Common Securities (liquidation preference $50 per Common
Security) (the "Common Securities") are to be invested in 6-1/4% Convertible
Junior Subordinated Debentures Due 2012 (the "Convertible Junior Subordinated
Debentures") of the Guarantor, to be issued pursuant to an Indenture (the
"Indenture") between the Guarantor and The Bank of New York, as trustee (the
"Debenture Trustee"). The Convertible Preferred Securities are convertible into
shares of Common Stock, par value $0.0675 per share (the "Common Stock"), of the
Guarantor pursuant to the Indenture. Holders (including subsequent transferees)
of the Offered Securities will have the registration rights set forth in the
Registration Rights Agreement (the "Registration Rights Agreement") to be
entered into among the Trust, the Guarantor and the Initial Purchasers. Pursuant
to the Registration Rights Agreement, the Guarantor and the Trust have agreed to
file with the Securities and Exchange Commission (the "Commission") a shelf
registration statement (the "Shelf Registration Statement") pursuant to Rule 415
under the Securities Act, to register sales of the Convertible Preferred
Securities, the Guarantee, the Convertible Junior Subordinated Debentures and
the shares of Common Stock issuable upon conversion thereof (together with the
related Rights (as defined in the Offering Document (as defined below))
(collectively, the "Securities") following the sale of the Offered Securities
contemplated hereby.
This is to confirm the agreement concerning the purchase of the Offered
Securities by the Initial Purchasers.
1. Representations and Warranties of the Trust and the Guarantor. Each
of the Trust and the Guarantor jointly and severally represents and warrants to,
and agrees with, the Initial Purchasers that:
(a) A preliminary offering circular and an offering circular relating
to the Offered Securities to be offered by the Initial Purchasers have been
prepared by the Trust and the Guarantor. Such preliminary offering circular and
offering circular, as amended or supplemented as of the date of this Agreement,
together with the documents incorporated by reference thereto are hereinafter
collectively referred to as the "Offering Document." On the date of this
Agreement, the Offering Document does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information furnished to
the Guarantor by any Initial Purchaser specifically for use therein, it being
understood and agreed that the only such information is that described as such
in Section 8(e). The documents incorporated by reference in the Offering
Document (the "Exchange Act Reports"), when they became effective or were last
amended or filed with the Commission, as the case may be, conformed in all
material respects to the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable, and the
rules and regulations (the "Rules and Regulations") of the Commission and none
of such documents contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made, and any further documents so filed and incorporated by reference in
the Offering Document, when such documents become effective or are filed with
the Commission, as the case may be, shall conform in all material respects to
the requirements of the Securities Act and the Exchange Act, as applicable, and
the Rules and Regulations and shall not contain an untrue statement of a
material fact or omit to state a material fact required to be
2
<PAGE>
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made.
(b) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Business Trust Act of the
State of Delaware (the "Delaware Business Trust Act") with the power and
authority to own property and conduct its business as described in the Offering
Document, and has conducted and will conduct no business other than the
transactions contemplated by this Agreement and the Offering Document; the Trust
is a "grantor trust" for federal income tax purposes under existing law; the
Trust is not a party to or bound by any agreement or instrument other than this
Agreement, the Amended and Restated Declaration of Trust (the "Trust Agreement")
between the Guarantor and the trustees named therein (the "Trustees") and the
agreements and instruments contemplated by the Trust Agreement and the Offering
Document; the Trust has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement and the Trust Agreement
and described in the Offering Document; and the Trust is not a party to or
subject to any action, suit or proceeding of any nature.
(c) The Guarantor, each Subsidiary (as defined below) and each Joint
Venture (as defined below) have been duly organized and are validly existing
and, if applicable, in good standing under the laws of their respective
jurisdictions of organization as a corporation, limited liability company or
partnership, as the case may be, and have the power and authority to own, lease
and operate their property and conduct their businesses as described in the
Offering Document; the Guarantor, the Subsidiaries and the Joint Ventures are
duly qualified to do business and are in good standing as foreign corporations
or foreign partnerships, as the case may be, in each jurisdiction, domestic or
foreign, in which such registration or qualification or good standing is
required (whether by reason of the ownership or leasing of property, the conduct
of business or otherwise), except where the failure to so register or qualify or
be in good standing is not reasonably likely to have a material adverse effect
on the financial condition, business or results of operations of the Guarantor,
the Subsidiaries and Joint Ventures taken as a whole. For purposes of this
Agreement, (A) the term "Subsidiary" shall mean the entities listed in Schedule
B hereto and (B) the term "Joint Venture" shall mean the entities listed in
Schedule C hereto, it being understood that such term means the general or
limited partnership or other joint venture entity and not the individual general
or limited partners or other joint venturers thereof. The Subsidiaries listed in
Schedule B are all the material direct and indirect "subsidiaries" of the
Guarantor, as such term is defined in Rule 405 of the Rules and Regulations, and
are all of the "Significant Subsidiaries" of the Guarantor, as such term is
defined in Rule 1-02 of Regulation S-X.
(d) All the outstanding shares of capital stock of the Guarantor have
been duly and validly authorized and issued and are fully-paid and
nonassessable; all the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and are fully-paid and
nonassessable; and except as otherwise set forth in Schedule B hereto or
disclosed in or contemplated by the Offering Document, all outstanding shares of
capital stock of each Subsidiary are owned beneficially by the Guarantor free
and clear of any material claims, liens, encumbrances and security interests.
All of the partnership interests in Joint Ventures beneficially owned by the
Guarantor (as reflected in Schedule C) have been duly and validly authorized and
issued and, except as otherwise set forth in Schedule C hereto or disclosed in
or contemplated by the Offering Document are owned beneficially by the Guarantor
free and clear of any material claims, liens, encumbrances and security
interests.
(e) The Offered Securities have been duly and validly authorized by the
Trust, and, when issued and delivered against payment thereof as provided
herein, will be duly and validly issued and fully-paid
3
<PAGE>
and nonassessable undivided beneficial interests in the assets of the Trust and
will conform in all material respects to the description thereof contained in
the Offering Document; the issuance of the Offered Securities is not subject to
preemptive or other similar rights which have not been waived; the Offered
Securities will have the rights set forth in the Trust Agreement, and the
Offered Securities, when issued and delivered against payment therefor as
provided herein, will be, and the Trust Agreement, when duly executed and
delivered by all parties thereto, will be, valid and binding obligations of the
Trust, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to creditors' rights
and to general equity principles; the Offered Securities will 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.
(f) The Common Securities have been duly and validly authorized by the
Trust and, upon delivery by the Trust to the Guarantor against payment therefor
as contemplated by the Offering Document, will be duly and validly issued and
fully-paid and nonassessable undivided beneficial interests in the assets of the
Trust and will conform in all material respects to the description thereof
contained in the Offering Document; the issuance of the Common Securities is not
subject to preemptive or other similar rights; and all of the issued and
outstanding Common Securities of the Trust are directly owned by the Guarantor
free and clear of any material claims, liens, encumbrances and security
interests.
(g) The Registration Rights Agreement has been duly authorized by the
Trust and the Guarantor and, when executed and delivered, will conform in all
material respects to the description thereof contained in the Offering Document.
The Registration Rights Agreement when validly executed and delivered by the
Trust and the Guarantor will constitute a valid and legally binding obligation
of the Trust and the Guarantor and will be enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles and except as the right to
indemnity and contribution under the Registration Rights Agreement may be
limited by state or federal securities laws or the public policy underlying such
laws.
(h) The Guarantee, the Convertible Junior Subordinated Debentures, the
Trust Agreement and the Indenture (the Guarantee, the Convertible Junior
Subordinated Debentures, the Trust Agreement and the Indenture being
collectively referred to as the "Guarantor Agreements") have each been duly
authorized and when validly executed and delivered by the Guarantor and, in the
case of the Guarantee, by the Guarantee Trustee, in the case of the Trust
Agreement, by the Trustees and, in the case of the Indenture, by the Debenture
Trustee, and, in the case of the Convertible Junior Subordinated Debentures,
when validly issued by the Guarantor and validly authenticated and delivered by
the Debenture Trustee and paid for by the Trust, will constitute valid and
legally binding obligations of the Guarantor, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles; the Convertible
Junior Subordinated Debentures are entitled to the benefits of the Indenture,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Guarantor Agreements
will conform in all material respects to the descriptions thereof in the
Offering Document.
(i) When the Offered Securities are delivered and paid for pursuant to
this Agreement on each Closing Date (as defined below), such Offered Securities
will be exchangeable for Convertible Junior Subordinated Debentures which will
be convertible into shares of Common Stock ("Underlying Shares")
4
<PAGE>
of the Guarantor in accordance with the Trust Agreement and the Indenture; the
Underlying Shares initially issuable upon conversion of such Offered Securities
have been duly authorized and reserved for issuance upon such conversion and,
when issued upon such conversion, will be validly issued, fully-paid and
nonassessable; the outstanding shares of Common Stock of the Guarantor conform
in all material respects to the description thereof contained in the Offering
Document; and the stockholders of the Guarantor have no preemptive rights with
respect to the Offered Securities, the Convertible Junior Subordinated
Debentures or the Underlying Shares which have not been waived.
(j) The use of the proceeds of the offering of the Offered Securities
as described in the Offering Document has been duly authorized by all necessary
action on the part of each of the Trust and the Guarantor.
(k) Other than pursuant to this Agreement, there are no contracts,
agreements or understandings between either the Trust or the Guarantor and any
person that would give rise to a valid claim against the Trust, the Guarantor or
any Initial Purchaser for a brokerage commission, finder's fee or other like
payment.
(l) The issue and sale of Offered Securities, the exchange of the
Convertible Junior Subordinated Debentures for Convertible Preferred Securities,
the execution, delivery and performance of this Agreement and the Registration
Rights Agreement, the compliance by the Trust and the Guarantor with all of the
provisions of this Agreement, the purchase of the Convertible Junior
Subordinated Debentures by the Trust and the consummation of the transactions
contemplated herein and therein will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Trust is a party or by which the Trust is bound or to which any of the
property or assets of the Trust is subject, nor will such action result in any
violation of the provisions of its certificate of trust, the Trust Agreement or
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Trust or any of its properties, except for
such conflicts, breaches, defaults or violations that would not have a material
adverse effect on the financial condition, business or results of operations of
the Trust.
(m) The issuance by the Guarantor of the Guarantee, the compliance by
the Guarantor with all of the provisions of this Agreement, the issuance upon
exchange and conversion of the Underlying Shares, the execution, delivery and
performance by the Guarantor of the Registration Rights Agreement and the
Guarantor Agreements and the consummation of the transactions contemplated
herein and therein and the use of the proceeds of the offering of the Offered
Securities as described in the Offering Document will not (A) conflict with the
corporate charter or by-laws or partnership agreement of the Guarantor, any
Subsidiary or any Joint Venture, (B) conflict with, result in the creation or
imposition of any lien, charge or other encumbrance (other than as contemplated
by the Indenture) upon any asset of the Guarantor, any Subsidiary or any Joint
Venture pursuant to the terms of, or constitute a breach of, or default under,
any agreement, indenture or other instrument to which the Guarantor, any
Subsidiary or any Joint Venture is a party or by which the Guarantor, any
Subsidiary or any Joint Venture is bound or to which any of the properties of
the Guarantor, any Subsidiary or any Joint Venture is subject, or (C) result in
a violation of any statute, any rule, regulation, order, judgment or decree of
any court or governmental agency, body or authority having jurisdiction over the
Guarantor, any Subsidiary or any Joint Venture or any of their properties where
any such conflicts, encumbrances, breaches, defaults or violations under clauses
(B) or (C), individually or in the aggregate, is reasonably likely to (i) have a
material adverse effect on the financial condition, business or results of
operations of the Guarantor, the
5
<PAGE>
Subsidiaries and Joint Ventures taken as a whole or (ii) impair the validity or
enforceability of this Agreement, the Registration Rights Agreement, the
Guarantor Agreements or the Securities.
(n) Assuming the accuracy of the representations and warranties of the
Initial Purchasers set forth in Section 2 of this Agreement, except (A) in
connection with the registration of the Securities pursuant to the Registration
Rights Agreement, (B) as to state or foreign securities laws or by the
regulations of the National Association of Securities Dealers, Inc. (the "NASD")
and (C) consents of third parties which have been obtained, no consent,
approval, authorization or order of, or filing or registration by the Trust, the
Guarantor, any Subsidiary or, to the best of the Trust's and Guarantor's
knowledge, any Joint Venture with, any court, governmental agency or third party
is required in connection with the issuance by the Guarantor of the Guarantee,
the compliance by the Guarantor with all of the provisions of this Agreement,
the issuance and sale of the Offered Securities by the Trust, the exchange of
the Convertible Junior Subordinated Debentures for the Convertible Preferred
Securities or the purchase of the Convertible Junior Subordinated Debentures by
the Trust, the issuance upon exchange and conversion of the Underlying Shares,
the execution, delivery and performance by the Guarantor and the Trust of the
Registration Rights Agreement and by the Guarantor of the Guarantor Agreements
and the consummation of the transactions herein and therein contemplated and the
use of the proceeds of the offering of the Offered Securities as described in
the Offering Document.
(o) The Trust has full power and authority to authorize, issue and sell
the Offered Securities as contemplated by this Agreement and to execute, deliver
and perform this Agreement and the Registration Rights Agreement.
(p) This Agreement has been duly authorized, executed and delivered by
the Trust and the Guarantor.
(q) Except as disclosed in the Offering Document, the Trustee (as
defined in the Offering Document) will on the Closing Date have good and valid
title to all the Convertible Junior Subordinated Debentures, free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by the Trust.
(r) Except as disclosed in or contemplated by the Offering Document,
the Guarantor, each Subsidiary and each Joint Venture holds, as applicable, good
and valid title to, or valid and enforceable leasehold or contractual interests
in, all real properties and all other properties and assets owned or leased by
or held under contract by each of them that are material to the business of the
Guarantor and the Subsidiaries and Joint Ventures taken as a whole, and free
from liens, encumbrances and defects that would materially interfere with the
use made or to be made thereof by them.
(s) Except as disclosed in or contemplated by the Offering Document,
the Guarantor, the Subsidiaries and the Joint Ventures carry, or are covered by,
insurance in such amounts and covering such risks as is customary for similarly
situated companies in the Guarantor's, such Subsidiaries' and such Joint
Ventures' industries, respectively. Each of the foregoing insurance policies is
valid and in full force and effect, and no event has occurred and is continuing
that permits, or after notice or lapse of time or both would permit,
modifications or terminations of the foregoing that, individually or in the
aggregate, is reasonably likely to have a material adverse effect on the
financial condition, business or results of operations of the Guarantor, the
Subsidiaries and Joint Ventures taken as a whole.
6
<PAGE>
(t) Except as disclosed in or contemplated by the Offering Document,
the Guarantor, each Subsidiary and each Joint Venture (i) has obtained each
license, permit, certificate, franchise or other governmental authorization
which is material to the ownership of their properties or to the conduct of
their businesses as described in or contemplated by the Offering Document and
(ii) is in compliance with all terms and conditions of such license, permit,
certificate, franchise or other governmental authorization, except (A) in either
case where the failure to do so is not reasonably likely to have, individually
or in the aggregate, a material adverse effect on the financial condition,
business or results of operations of the Guarantor, the Subsidiaries and Joint
Ventures taken as a whole, (B) permits, consents and approvals that may be
required for future drilling or operating activities which are ordinarily deemed
to be ministerial in nature and which are anticipated to be obtained in the
ordinary course and (C) permits, consents and approvals for developmental or
construction activities which have not yet been obtained but which have been or
will be applied for in the course of development or construction and which are
anticipated to be obtained in the ordinary course.
(u) There is no legal or governmental action, suit or proceeding before
any court, governmental agency, body or authority, domestic or foreign, now
pending or, to the knowledge of the Guarantor, threatened against, or, to the
knowledge of the Guarantor, involving, the Guarantor, any Subsidiary or any
Joint Venture that, if determined adversely to the Guarantor, any Subsidiary or
any Joint Venture, would be reasonably likely to have, individually or in the
aggregate, a material adverse effect on the financial condition, business or
results of operations of the Guarantor, the Subsidiaries and Joint Ventures
taken as a whole, or on the ability of the Guarantor to perform its obligations
under this Agreement, the Registration Rights Agreement, the Guarantor
Agreements or the Securities.
(v) The Guarantor, the Subsidiaries and the Joint Ventures are
currently conducting their respective businesses as described in the Offering
Document.
(w) There are no contracts or other documents that would be required to
be described in or filed as exhibits to the Offering Document if it were a
registration statement under the Securities Act and that have not been described
in the Offering Document or filed as exhibits to documents incorporated by
reference in the Offering Document.
(x) There is no relationship, direct or indirect, that exists between
or among the Guarantor on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Guarantor on the other hand, that
would be required to be described in the Offering Document if it were a
registration statement under the Securities Act and that has not been so
described in the Offering Document.
(y) There is no labor problem or disturbance with the persons employed
by the Guarantor, any Subsidiary or any Joint Venture that exists or, to the
knowledge of the Guarantor, that is threatened and that might reasonably be
expected to have a material adverse effect on the financial condition, business
or results of operations of the Guarantor, the Subsidiaries and Joint Ventures
taken as a whole.
(z) Neither the Guarantor nor any person who is a member of a group
which is under common control with the Guarantor and the Subsidiaries and Joint
Ventures, who together with the Guarantor, the Subsidiaries and the Joint
Ventures is treated as a single employer ("ERISA Affiliate") within the meaning
of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended from time to time (the "Code") or Section 4001(b) of the Employee
Retirement Income Security Act of 1974, as amended from time to time ("ERISA"),
has established, sponsored, maintained or had any obligation to contribute to
any employee benefit plans within the meaning of Section 3(3) of ERISA which are
subject to Title
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IV of ERISA or Section 412 of the Code. Except where it could not reasonably be
expected to result in a material adverse effect on the financial condition,
business or results of operations of the Guarantor, the Subsidiaries and Joint
Ventures taken as a whole, (i) all employee benefit plans within the meaning of
Section 3(3) of ERISA established, sponsored or maintained for or on behalf of
the employees, officers or directors of the Guarantor, the Subsidiaries, Joint
Ventures or any ERISA Affiliate ("Employee Benefit Plans") are in compliance
with all applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder and each such Employee Benefit Plan that is
intended to be qualified under Code Section 401(a) has been determined by the
Internal Revenue Service to be so qualified and (ii) no material liability or
obligation has been incurred or is reasonably expected to be incurred by the
Guarantor, the Subsidiaries or Joint Ventures or any ERISA Affiliate with
respect to any Employee Benefit Plan.
(aa) None of the Trust, the Guarantor, any Subsidiary or any Joint
Venture (i) is in violation of its respective declaration of trust, charter,
by-laws, partnership or operating agreements, (ii) is in default, and no event
exists and is continuing that, with notice or lapse of time or both, would
constitute such a default, in the due performance and observance of any material
term contained in any lease, license, indenture, mortgage, deed of trust, note,
bank loan or other evidence of indebtedness or any other agreement,
understanding or instrument to which the Trust, the Guarantor, any Subsidiary or
any Joint Venture is a party or by which the Trust, the Guarantor, any
Subsidiary or any Joint Venture or any property of the Trust, the Guarantor, any
Subsidiary or any Joint Venture may be bound or affected, which default,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or results of operations of
the Trust or the Guarantor, the Subsidiaries and Joint Ventures taken as a
whole, or (iii) is in violation of any law, ordinance, governmental rule or
regulation or court decree to which it may be subject, which violation,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or results of operations of
the Trust or the Guarantor, the Subsidiaries and Joint Ventures taken as a whole
or would materially interfere in any way with the execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Guarantor Agreements, the consummation of the transactions contemplated herein
and therein, the issuance and sale of the Securities and the use of the proceeds
of the offering of the Offered Securities as described in the Offering Document.
(ab) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, hazardous
wastes or hazardous substances, pollutants or contaminants by the Guarantor, any
Subsidiary or any Joint Venture (or, to the knowledge of the Guarantor, any of
their predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Guarantor, any Subsidiary or any Joint Venture
in violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit,
except for any violation or remedial action which does not have, or would not be
reasonably likely to have, individually or in the aggregate with all such
violations and remedial actions, a material adverse effect on the financial
condition, business or results of operations of the Guarantor, the Subsidiaries
and Joint Ventures taken as a whole; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of any kind
onto such property or into the environment surrounding such property of any
toxic wastes, solid wastes, hazardous wastes or hazardous substances, pollutants
or contaminants due to or caused by the Guarantor, any Subsidiary or any Joint
Venture or with respect to which the Guarantor, any Subsidiary or any Joint
Venture has knowledge, except for any such spill, discharge, leak, emission,
injection, escape, dumping or release which does not have, or would not be
reasonably likely to have, individually or in the aggregate with all such
spills, discharges, leaks, emissions, injections, escapes,
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dumpings and releases, a material adverse effect on the financial condition,
business or results of operations of the Guarantor, the Subsidiaries and Joint
Ventures taken as a whole; and the terms "hazardous wastes", "toxic wastes" and
"hazardous substances" shall have the meanings specified in any applicable
local, state, federal and foreign laws or regulations with respect to
environmental protection.
(ac) None of the Trust, the Guarantor or any Subsidiary or any Joint
Venture is an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the United States Investment Company Act of 1940, as amended (the "1940 Act"),
nor is it a closed-end investment company required to be registered, but not
registered, thereunder; and each of the Trust, the Guarantor, each Subsidiary
and each Joint Venture is not and, after giving effect to the offering and sale
of the Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be an "investment company", or, to
the best knowledge of the Guarantor after due inquiry, a company controlled by
an "investment company" within the meaning of the 1940 Act.
(ad) The Guarantor, each Subsidiary and each Joint Venture has filed
all federal, state and local income and franchise tax returns required to be
filed through the date hereof, or has filed extensions in accordance with
applicable law, and has paid all taxes required to be paid through the date
hereof thereon, except for such failures to file or pay that would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the financial condition, business or results of operations of
the Guarantor, the Subsidiaries and Joint Ventures taken as a whole, and no tax
deficiency has been determined adversely to the Guarantor, any Subsidiary or any
Joint Venture that has had (nor does the Guarantor have any knowledge of any tax
deficiency which, if determined adversely to the Guarantor, any Subsidiary or
any Joint Venture would be reasonably likely to have) a material adverse effect
on the financial condition, business or results of operations of the Guarantor,
the Subsidiaries and Joint Ventures taken as a whole.
(ae) The financial statements and the related notes and schedules
included or incorporated by reference in the Offering Document fairly present
the financial position, the results of operations and the cash flows of the
Guarantor and its consolidated subsidiaries at the respective dates and for the
respective periods to which they apply; and such financial statements and the
related notes and schedules have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified. The historical information under the
caption "Capitalization" in the Offering Document is accurately described as of
the date presented therein.
(af) Since the date of the latest financial statements included in the
Offering Document (i) there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
financial condition, business or results of operations of the Guarantor, the
Subsidiaries and Joint Ventures taken as a whole, and (ii) except as disclosed
in or contemplated by the Offering Document, there have not been any
transactions entered into by the Guarantor, the Subsidiaries or any Joint
Venture, other than those in the ordinary course of business, which are material
to the Guarantor, the Subsidiaries and Joint Ventures taken as a whole; except
as disclosed in the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Guarantor on any class of
its capital stock.
(ag) The pro forma financial information included in the Offering
Document present fairly the information shown therein, has been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial information, has been properly compiled on the pro forma bases
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<PAGE>
described therein, and, in the opinion of the Guarantor, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(ah) The Guarantor has complied with all applicable provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(ai) Deloitte & Touche LLP ("Deloitte & Touche") and Ernst & Young LLP,
who have certified certain financial statements of the Guarantor or of
businesses acquired by the Guarantor, as applicable, and whose respective
reports appear in the Offering Document and/or are incorporated by reference
therein, are and were independent public accountants as required by the
Securities Act and the Rules and Regulations during the periods covered by the
financial statements on which they reported which are contained or incorporated
in the Offering Document.
(aj) (i) Each of the operational electric generation facilities
("Plants") owned in whole or in part, directly or indirectly by (A) the
Guarantor, (B) the Subsidiaries or (C) the Joint Ventures which is located in
the United States is a "qualifying cogeneration facility" or a "qualifying small
power production facility" (either or both of which are hereinafter referred to
as a "QF"), as such terms are defined under the Federal Power Act, as amended
("FPA"), and the regulations thereunder, and has continuously been in compliance
with the requirements for being a QF since it commenced sales of electricity;
(ii) with respect to each Plant under development and located in the United
States, either (x) to the extent that the Guarantor, the Subsidiaries or the
Joint Ventures plan to act as the owner and/or operator of any one of the Plants
under development by the Guarantor, the Subsidiaries or the Joint Ventures and
located in the United States (as currently configured or as currently
anticipated to be configured), that owner and/or operator satisfies or is
currently expected to satisfy current regulatory requirements for being an
"exempt wholesale generator" ("EWG"), as such term is defined under the FPA, the
Public Utility Holding Company Act of 1935, as amended ("PUHCA") and the
regulations thereunder or (y) each of the Plants under development by the
Guarantor, the Subsidiaries or the Joint Ventures and located in the United
States (as currently configured or as currently anticipated to be configured)
will be a QF and will be in continuous compliance with the requirements for
being a QF; (iii) the owner or operator of each of the Plants under development
by the Guarantor, the Subsidiaries or Joint Ventures and located outside the
United States (as currently configured or as currently anticipated to be
configured) satisfies or is currently expected to satisfy current regulatory
requirements for being either (A) an EWG or (B) a "foreign utility company," as
such term is defined under PUHCA and the regulations thereunder; (iv) none of
the entities identified in clause (A) or (B) of subparagraph (i) above owns or
operates or will own or operate any electric distribution facilities or any
electric transmission facilities in or outside of the United States other than
electric transmission facilities that have been or will be approved by the
Federal Energy Regulatory Commission as being part of a QF, or the owner and/or
operator of which will have qualified as EWG's or as "foreign utility companies"
as such terms are defined under the FPA, PUHCA and the regulations thereunder;
and (v) none of the entities identified in clause (A), (B) or (C) of
subparagraph (i) above is, or is subject to regulation as, a "public utility
holding company" or a "subsidiary company" of a "public utility holding
company," as those terms are defined under PUHCA, or is subject to regulation
under the FPA, other than as contemplated by 18 C.F.R Section 292.601(c), or,
except as described in or contemplated by the Offering Document, subject to
regulation by any state law or foreign governmental law with respect to rates or
the financial or organizational regulation of electric utilities.
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<PAGE>
(ak) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed on any
national securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.
(al) Neither the Trust nor the Guarantor nor any of their respective
affiliates nor (assuming the accuracy of the representations of the Initial
Purchasers set forth herein) any person acting on their behalf has made offers
or sales of securities under circumstances that would require the registration
of any of the Securities under the Securities Act.
(am) The Offered Securities meet the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(an) Assuming the accuracy of the representations of the Initial
Purchasers set forth herein, the offer and sale of the Offered Securities in the
manner contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof and Rule
144A thereunder; and it is not necessary to qualify an indenture in respect of
any of the Securities under the United States Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), except as contemplated by the Registration
Rights Agreement.
(ao) Neither the Guarantor nor the Trust nor any of their respective
affiliates nor (assuming the accuracy of the representations of the Initial
Purchasers set forth herein) any person acting on behalf of any of the foregoing
(i) has, within the six-month period prior to the date hereof, offered or sold
in the United States or to any U.S. person (as such terms are defined in
Regulation S) the Offered Securities or any security of the same class or series
as the Offered Securities or (ii) has offered or will offer or sell the Offered
Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. The Guarantor and
the Trust have not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for this
Agreement and the Registration Rights Agreement.
(ap) The cash tender offer (the "Tender Offer") for all outstanding
share capital of Northern by CK Electric UK plc (the "Offeror") and the
consummation of the transactions contemplated thereby, did not (A) conflict with
the corporate charter of the Guarantor or the Offeror, (B) constitute a breach
of, or default under, any agreement, indenture or other instrument to which the
Guarantor, any Subsidiary or any Joint Venture is a party or by which the
Guarantor, any Subsidiary or any Joint Venture is bound or to which any of the
properties of the Guarantor, any Subsidiary or any Joint Venture is subject, or
(C) result in a violation of any statute, rule, regulation, order, judgment or
decree of any court or governmental agency, body or authority, including the
Companies Act 1985, the Financial Services Act 1986, the Rules and Regulations
of the London Stock Exchange and all regulations made thereunder (including the
Yellow Book) and the City Code on Takeovers and Mergers, having jurisdiction
over the Offeror or the Tender Offer; except in the case of clauses (B) and (C)
such breaches, defaults or violations which, individually or in the aggregate,
did not have a material adverse effect on the financial condition, business or
results of operations of the Guarantor, the Subsidiaries and Joint Ventures
taken as a whole.
(aq) Except as disclosed in or contemplated by the Offering Memorandum,
there are no statutes, rules, regulations, orders, judgments or decrees of any
courts or governmental agencies having jurisdiction over the Guarantor, the
Offeror or Northern, that prohibit the acquisition by the Offeror of the
outstanding ordinary and preference share capital of Northern not already owned
by it and except for
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any such shares and certain employee options and option shares which are the
subject of a buy-out offer by the Offeror, there are no shares or rights over
shares or entitlement to subscribe for or convert into shares of Northern known
to the Guarantor.
2. Representations, Warranties and Agreements of the Initial
Purchasers. Each of the Initial Purchasers represents, warrants and agrees as
follows:
(a) Each Initial Purchaser severally represents and warrants
that it is a "qualified institutional buyer" within the meaning of Rule 144A and
that it will offer the Offered Securities for resale only upon the terms and
conditions set forth in this Agreement and in the Offering Document.
(b) The Initial Purchasers severally acknowledge that they are
purchasing the Offered Securities pursuant to a private sale exemption from
registration under the Securities Act, and that the Offered Securities have not
been registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from the registration requirements of the Securities
Act. Each Initial Purchaser severally represents, warrants and agrees that it
has offered the Offered Securities, and will offer and sell the Offered
Securities, only (i) inside the United States to persons whom the Initial
Purchaser reasonably believes to be (A) "qualified institutional buyers" in
accordance with Rule 144A and (B) Institutional Accredited Investors (as defined
below) in accordance with Section 2(c) of this Agreement; or (ii) outside the
United States in accordance with Regulation S. Each Initial Purchaser severally
represents, warrants and agrees that neither it nor its affiliates nor any
person acting on its or their behalf, has engaged or will engage in any directed
selling efforts in the United States within the meaning of Regulation S with
respect to the Offered Securities, and such Initial Purchaser, its affiliates
and all persons acting on its or their behalf have complied and will comply with
the offering restrictions requirements of Regulation S, to deliver either with
the confirmation of such resale or otherwise prior to settlement of such resale
a notice substantially to the following effect:
"The 6-1/4% Trust Convertible Preferred Securities of
CalEnergy Capital Trust II covered hereby and the shares of
Common Stock, par value $0.0675 per share, of CalEnergy
Company, Inc. issuable upon conversion hereof have not been
registered under the U.S. Securities Act of 1933, as amended
(the "Securities Act") and may not be offered and sold within
the United States or to, or for the account or benefit of,
U.S. persons (i) as part of the distribution thereof at any
time or (ii) otherwise until 40 days after the later of the
date of the commencement of the offering and the latest
closing date, except in either case in accordance with
Regulation S under the Securities Act. Terms used above have
the meaning given them by Regulation S."
(c) It is understood and agreed that in addition to offering and
selling the Offered Securities to persons referred to in subclauses (i)(A) and
(ii) of Section 2(b) the Initial Purchasers have offered, or may offer and sell,
Offered Securities having minimum purchase price of $250,000 to institutions
each of which is reasonably believed by the applicable Initial Purchaser to be
an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3) or (7)
under the Securities Act or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (each an "Institutional Accredited Investor"); provided,
however, that each such Institutional Accredited Investor executes and delivers
to such Initial Purchaser and the Trust, prior to
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<PAGE>
the consummation of any sale of the Offered Securities to such institution, a
letter in substantially the form attached to the Purchase Agreement.
(d) Each Initial Purchaser severally agrees that it and each of its
affiliates have not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for any such
arrangements with the other Initial Purchasers or affiliates of the other
Initial Purchasers or with the prior written consent of the Trust and the
Guarantor.
(e) The Initial Purchasers severally represent, warrant and agree that
(i) they have not offered or sold and prior to the date six months after the
date of issue of the Offered Securities will not offer or sell, in the United
Kingdom by means of any document, any Offered Securities offered hereby, other
than to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances that have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) they have complied and
will comply with all applicable provisions of the Financial Services Act 1986
and the Public Offers of Securities Regulations 1995 with respect to anything
done by them in relation to the Offered Securities in, from or otherwise
involving the United Kingdom, and (iii) they have only issued or passed on and
will only issue or pass on to any person in the United Kingdom any document
received by them in connection with the issue of the Offered Securities if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
the document may otherwise lawfully be issued or passed on.
(f) The Initial Purchasers severally represent, warrant and agree that
they have not and will not solicit offers for, or offer to sell the Offered
Securities purchased from the Trust hereunder by means of any form of general
solicitation or general advertising (as these terms are used in Regulation D
under the Securities Act), including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. The Initial Purchasers severally agree, with respect to resales
made in reliance on Rule 144A, other than through the National Association of
Securities Dealers, Inc. Private Offerings, Resale and Trading through Automated
Linkages ("PORTAL") market, of any of the Offered Securities purchased from the
Trust hereunder, to deliver either with the confirmation of such resale or
otherwise prior to settlement of such resale a notice to the effect that the
resale of such Offered Securities has been made in reliance upon the exemption
from the registration requirements of the Securities Act provided by Rule 144A.
(g) Each Initial Purchaser further agrees that it will not offer, sell
or deliver any of the Offered Securities in any jurisdiction except under
circumstances that will result in compliance with the applicable laws thereof,
and that, except as otherwise provided in this Agreement, it will take at its
own expense whatever action is required to permit its purchase and resale of the
Offered Securities. Each Initial Purchaser understands that no action has been
taken to permit a public offering in any jurisdiction where action would be
required for such purpose. Each Initial Purchaser agrees that it is not
authorized (i) to make any offering, sale, resale or delivery of Offered
Securities or to circulate or disseminate any material relating to the
acquisition or disposal of Offered Securities except as contemplated in this
Agreement and the Offering Document or (ii) to make any representation or use
any information in connection with the issuance, subscription and sale of the
Offered Securities other than as contained in the Offering Document.
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3. Purchase of the Offered Securities. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Trust agrees to sell to the Initial
Purchasers, and each of the Initial Purchasers, severally and not jointly,
agrees to purchase the number of Firm Securities set opposite that Initial
Purchaser's name in Schedule A hereto.
In addition, the Trust grants to the Initial Purchasers an option to
purchase up to an additional 600,000 shares of the Convertible Preferred
Securities. Such option is granted solely for the purpose of covering
over-allotments in the sale of Firm Securities and is exercisable as provided in
Section 4 hereof. Optional Securities shall be purchased severally for the
account of the Initial Purchasers in proportion to the number of Firm Securities
set opposite the name of such Initial Purchaser in Schedule A hereto. The
respective purchase obligations of each Initial Purchaser with respect to the
Optional Securities shall be adjusted so that no Initial Purchaser shall be
obligated to purchase Optional Securities other than in lots of 100 Optional
Securities. The price of the Offered Securities shall be $50 per Convertible
Preferred Security, plus accrued and unpaid distributions from the First Closing
Date (as defined below).
The Trust shall not be obligated to deliver any of the Offered
Securities to be delivered on the First Closing Date or the Optional Closing
Date (as defined below), as the case may be, except upon payment for all the
Offered Securities to be purchased on such Closing Date as provided herein.
4. Delivery of and Payment for the Offered Securities. Delivery of and
payment for the Firm Securities shall be made at the office of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY, at 10:00 a.m., New
York City time, on February 26, 1997 or at such other date (not later than seven
full business days thereafter), time or place as shall be determined by
agreement between the Initial Purchasers and the Trust. This date and time are
hereinafter referred to as the "First Closing Date."
On the First Closing Date, the Trust shall deliver or cause to be
delivered certificates representing the Firm Securities to the Initial
Purchasers for the account of each Initial Purchaser against payment to or upon
the order of the Trust of the purchase price by certified or official bank check
or checks payable in immediately available funds or wire transfer to an account
in New York previously designated to the Initial Purchasers by the Trust. The
Firm Securities to be offered and sold by the Initial Purchasers to
Institutional Accredited Investors shall be delivered in definitive, fully
registered form and shall be registered in such names and in such denominations
as the Initial Purchasers shall request in writing not less than two full
business days prior to the First Closing Date. The Firm Securities to be offered
and sold by the Initial Purchasers to qualified institutional buyers in reliance
on Rule 144A shall be (i) in the form of one or more permanent global securities
in definitive form (the "Firm Global Securities"), (ii) registered in the name
of Cede & Co., as nominee for The Depository Trust Company ("DTC") and (iii)
delivered to The Bank of New York as custodian for DTC. Interests in any Firm
Global Securities will be held only in book-entry form through DTC, except in
the limited circumstances described in the Offering Document. The Firm
Securities to be offered and sold by the Initial Purchasers outside the United
States in reliance on Regulation S shall be in the form of one or more permanent
global securities in definitive form and delivered to a common depository for
Morgan Guaranty Trust Company of New York, Brussels Office ("Morgan"), as
operator of the Euroclear System, or Cedel Bank, societe anonyme ("Cedel Bank").
For the purpose of expediting the checking and packaging of the certificates for
the Firm Securities, the Trust shall make the certificates representing the Firm
Securities available for inspection by the Initial Purchasers in New York, New
York, not later than 2:00 p.m., New York City time, on the business day prior to
the First Closing Date. Time shall be of the essence, and delivery at
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the time and place specified pursuant to this Agreement is a further condition
of the obligation of each Initial Purchaser hereunder.
At any time on or before the thirtieth day after the date of
this Agreement, the option granted in Section 3 may be exercised by written
notice being given to the Trust by the Initial Purchasers. Such notice shall set
forth the aggregate number of Optional Securities as to which the option is
being exercised and the date and time, as determined by the Initial Purchasers,
when the Optional Securities are to be delivered; provided, however, that this
date and time shall not be earlier than the First Closing Date nor earlier than
the third business day after the date on which the option shall have been
exercised nor later than the seventh business day after the date on which the
option shall have been exercised. The date and time the Optional Securities are
delivered are hereinafter referred to as the "Optional Closing Date" and the
First Closing Date and the Optional Closing Date are each hereinafter referred
to as a "Closing Date".
Delivery of and payment for the Optional Securities shall be
made at the place specified in the first sentence of the first paragraph of this
Section 4 (or at such other place as shall be determined by agreement between
the Initial Purchasers and the Trust) at 10:00 a.m., New York City time, on the
Optional Closing Date. On the Optional Closing Date, the Trust shall deliver or
cause to be delivered certificates representing the Optional Securities to the
Initial Purchasers for the account of each Initial Purchaser against payment to
or upon the order of the Trust of the purchase price by certified or official
bank check or checks payable in immediately available funds or wire transfer to
an account in New York previously designated to the Initial Purchasers by the
Trust. The Optional Securities to be offered and sold by the Initial Purchasers
to Institutional Accredited Investors shall be delivered in definitive, fully
registered form and shall be registered in such names and in such denominations
as the Initial Purchasers shall request in writing not less than two full
business days prior to the Optional Closing Date. The Optional Securities to be
offered and sold by the Initial Purchasers to qualified institutional buyers in
reliance on Rule 144A shall be (i) in the form of one or more permanent global
securities in definitive form (the "Optional Global Securities"), (ii)
registered in the name of Cede & Co., as nominee for DTC and (iii) delivered to
The Bank of New York as custodian for DTC. Interests in any Optional Global
Securities will be held only in book-entry form through DTC, except in the
limited circumstances described in the Offering Document. The Optional
Securities to be offered and sold by the Initial Purchasers outside the United
States in reliance on Regulation S shall be in the form of one or more permanent
global securities in definitive form and delivered to a common depository for
Morgan or Cedel Bank, as the case may be. For the purpose of expediting the
checking and packaging of the certificates for the Optional Securities, the
Trust shall make the certificates representing the Optional Securities available
for inspection by the Initial Purchasers in New York, New York, not later than
2:00 p.m., New York City time, on the business day prior to the Optional Closing
Date. Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Initial Purchaser hereunder.
Any Offered Securities sold to Institutional Accredited Investors or to
qualified institutional buyers in reliance on Rule 144A shall bear the
appropriate legend relating thereto, as set forth under "Transfer Restrictions"
in the Offering Document.
As compensation for the Initial Purchasers' commitments, the Guarantor
will pay to the Initial Purchasers for their proportionate accounts (A) on the
First Closing Date, $1.00 per each Convertible Preferred Security purchased by
such Initial Purchaser on the First Closing Date and (B) on the Option Closing
Date, either (i) the sum of $1.25 per each Convertible Preferred Security
purchased by such
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Initial Purchaser on the Option Closing Date plus $0.25 per each Convertible
Preferred Security purchased by such Initial Purchaser on the First Closing
Date, in each case only if the over-allotment option is exercised in full, or
(ii) $1.00 per each Convertible Preferred Security purchased by such Initial
Purchaser on the Option Closing Date if the over-allotment option is not
exercised in full, as commissions for the sale of the Offered Securities under
this Agreement; provided, however, if the Optional Closing Date is the same as
the First Closing Date and the over-allotment option is exercised in full, then
the Guarantor will pay to the Initial Purchasers for their proportionate
accounts the sum of $1.25 per each Convertible Preferred Security purchased by
such Initial Purchaser on such Closing Date.
5. Further Agreements of the Trust and the Guarantor. Each of the
Trust and the Guarantor agrees that:
(a) The Trust and the Guarantor will advise the Initial Purchasers
promptly of any proposal to amend or supplement the Offering Document prior to
the resale of the Offered Securities by the Initial Purchasers and will not
effect such amendment or supplementation without the consent of the Initial
Purchasers; and will also advise the Initial Purchasers promptly of any
amendment or supplementation of the Offering Document. If, at any time prior to
the completion of the resale of the Offered Securities by the Initial
Purchasers, any event occurs as a result of which the Offering Document as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, the Trust and the Guarantor promptly will notify the Initial
Purchasers of such event and promptly will prepare, at their own expense, an
amendment or supplement which will correct such statement or omission. Neither
the consent of the Initial Purchasers to, nor the delivery by the Initial
Purchasers to offerees or investors of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 7.
(b) The Trust and the Guarantor will furnish to the Initial Purchasers
copies of any preliminary offering circular, the Offering Document and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Initial Purchasers reasonably requests. At any
time when the Guarantor is not subject to Section 13 or 15(d) of the Exchange
Act, the Guarantor will promptly furnish or cause to be furnished to the Initial
Purchasers and, upon request of holders and prospective purchasers of the
Offered Securities, to such holders and purchasers, a reasonable number of
copies of the information required to be delivered to holders and prospective
purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto) in order to permit
compliance with Rule 144A in connection with resales by such holders of the
Offered Securities. The Guarantor will pay the expenses of printing and
distributing to the Initial Purchasers all such documents.
(c) In connection with the sale of the Offered Securities to the
Initial Purchasers, if any of the Offered Securities are initially resold
pursuant to Regulation D under the Securities Act and upon written notification
thereof to the Trust by the Initial Purchasers, the Trust will file the notice
on Form D required by Rule 503 under the Securities Act within the time required
by such Rule and otherwise in compliance with such Rule.
(d) The Trust and the Guarantor will arrange, in cooperation with the
Initial Purchasers and their counsel, for the qualification of the Offered
Securities for sale and the determination of their eligibility for investment
under the laws of such jurisdictions as the Initial Purchasers designate and
will continue such qualifications in effect so long as required for the resale
of the Offered Securities by the Initial
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Purchasers; provided, however, that the Trust and the Guarantor will not be
required to qualify as a foreign corporation, to file a general consent to
service of process in any such jurisdiction or to take any other action that
would subject the Trust or the Guarantor to service of process in any suits
other than those arising out of the offering of the Securities or to taxation in
respect of doing business in any jurisdiction in which it is not otherwise
subject.
(e) During the period of three years hereafter, the Guarantor will
furnish to Lehman Brothers Inc. and, upon request, to each of the other Initial
Purchasers, as soon as practicable after the end of each fiscal year, a copy of
its annual report to stockholders for such year, and the Guarantor will furnish
to Lehman Brothers Inc. and, upon request, to each of the other Initial
Purchasers as soon as available, a copy of each report and any definitive proxy
statement of the Guarantor filed with the Commission under the Exchange Act or
mailed to stockholders.
(f) During the period of three years after the later of the First
Closing Date and the last Optional Closing Date, the Guarantor will, upon
request, furnish to the Initial Purchasers, and upon request, any holder of
Offered Securities a copy of the restrictions on transfer set forth under
"Transfer Restrictions" in the Offering Document applicable to the Offered
Securities.
(g) During the period of three years after the later of the First
Closing Date and the last Optional Closing Date, the Guarantor will not, and
will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Offered Securities that have been
reacquired by any of them, except for Offered Securities purchased by the
Guarantor or any of its affiliates and resold in a transaction registered under
the Securities Act; provided, however, that this covenant shall no longer be
applicable once all of the Offered Securities have been exchanged for Exchange
Convertible Preferred Securities (as defined in the Offering Document).
(h) During the period of three years after the later of the First
Closing Date and the last Optional Closing Date, the Guarantor and the Trust
will not be or become an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the 1940 Act and is not, and will not be or become, a closed-end
investment company required to be registered, but not registered, under the 1940
Act.
(i) In connection with the offering, until the earlier of (i) 180 days
following the last Closing Date or (ii) the date the Initial Purchasers shall
have notified the Trust and the Guarantor of the completion of the resale of the
Offered Securities, neither the Guarantor nor the Trust nor any of their
affiliates has or will, either alone or with one or more other persons, bid for
or purchase for any account in which it or any of its affiliates has a
beneficial interest, any Offered Securities or attempt to induce any person to
purchase any Offered Securities; and neither it nor any of its affiliates will
make bids or purchases for the purpose of creating actual or apparent active
trading in, or of raising the price of, the Offered Securities.
(j) For a period of 90 days after the date hereof, the Trust and the
Guarantor will not offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration statement
under the Securities Act (other than the Shelf Registration Statement or
registration statements currently on file with the Commission) relating to, (a)
any trust certificates or other securities of the Trust (other than the Trust
Securities (as defined in the Offering Document)), (b) any preferred stock or
any other securities of the Guarantor which are substantially similar to the
Convertible Preferred Securities, (c) any shares of Common Stock of the
Guarantor or any other capital stock of the Guarantor,
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or (d) any other securities which are convertible into, or exercisable or
exchangeable for, trust certificates or other securities of the Trust, or
preferred stock or such substantially similar securities of the Guarantor, or
Common Stock of the Guarantor or other capital stock of the Guarantor, without
the prior written consent of Lehman Brothers Inc., except the offer, sale,
contract to sell, or other disposition of (i) the Offered Securities, (ii)
Common Stock of the Guarantor issued or delivered upon conversion of the Offered
Securities or the Convertible Junior Subordinated Debentures, (iii) securities
issued or delivered upon conversion, exchange or exercise of any other
securities of the Guarantor or any other statutory trust (including CalEnergy
Capital Trust) affiliated or associated with the Guarantor outstanding on the
date of the Offering Document, (iv) capital stock of the Guarantor issued
pursuant to benefit or incentive plans maintained for its officers, directors or
employees (including its employee stock purchase or stock option plans), or (v)
securities issued in connection with mergers, acquisitions or similar
transactions. The Guarantor will not at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act to cease to
be applicable to the offer and sale of the Offered Securities.
(k) The Trust and the Guarantor will apply the proceeds of the offering
and sale of the Offered Securities in the manner contemplated in the Offering
Document under the caption "Use of Proceeds".
6. Expenses. The Guarantor agrees to pay all expenses incidental to the
performance of its obligations under this Agreement, the Registration Rights
Agreement and the Guarantor Agreements, including (i) the fees and expenses of
the Trustees and their professional advisers; (ii) all expenses in connection
with the execution, issue, authentication, packaging and initial delivery of the
Offered Securities, the preparation and printing of this Agreement, the
Registration Rights Agreement, the Offered Securities and the Guarantor
Agreements, the Offering Document and amendments and supplements thereto, and
any other document relating to the issuance, offer, sale and delivery of the
Offered Securities; (iii) qualifying the Offered Securities for trading in the
PORTAL market and any expenses incidental thereto; and (iv) the cost of any
advertising approved by the Guarantor in connection with the issue of the
Offered Securities. The Guarantor also agrees to pay or reimburse the Initial
Purchasers (to the extent incurred by them) for any expenses (including
reasonable fees and disbursements of counsel up to $7,500) incurred in
connection with qualification of the Offered Securities for sale under the laws
of such jurisdictions as the Initial Purchasers designate and the printing of
memoranda relating thereto, for any fees charged by investment rating agencies
for the rating of the Securities, for all travel expenses of the Guarantor's
officers and employees and any other expenses of the Guarantor in connection
with attending or hosting meetings with prospective purchasers of the Offered
Securities from the Initial Purchasers and for expenses incurred in distributing
preliminary offering circulars and the Offering Document (including any
amendments and supplements thereto) to the Initial Purchasers. Except as
otherwise provided in this Section 6 or in Section 10 of this Agreement, the
Initial Purchasers will pay all of their costs and expenses, including fees and
expenses of their counsel, transfer taxes on the resale of the Offered
Securities and any advertising and travel expenses incurred by them.
7. Conditions of the Obligations of the Initial Purchasers. The
respective obligations of the Initial Purchasers hereunder are subject to the
accuracy, when made and on each Closing Date, of the representations and
warranties of the Trust and the Guarantor contained herein, to the performance
by the Trust and the Guarantor of their respective obligations hereunder, and to
the following additional terms and conditions:
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(a) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Offered Securities, the
Offering Document, the Registration Rights Agreement and the Guarantor
Documents, and all other legal matters relating to such agreements and the
transactions contemplated thereby shall be satisfactory in all material respects
to counsel for the Initial Purchasers, and the Trust and the Guarantor shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(b) The Initial Purchasers shall have received a letter, dated the date
of this Agreement, of Deloitte & Touche (and the independent accountants of any
subsidiary of the Guarantor or of any business acquired by the Guarantor for
which financial statements and financial data are included or incorporated by
reference in the Offering Document) in agreed form.
(c) Since the date of the latest audited financial statements included
or incorporated by reference in the Offering Document (i) except as disclosed in
the Offering Document, there shall have been no material adverse change, or a
development which is reasonably likely to lead to a material adverse change, in
the financial condition, business or results of operations of the Guarantor, the
Subsidiaries and Joint Ventures taken as a whole and (ii) except as disclosed in
the Offering Document, there shall not have been any transactions entered into
by the Guarantor, any Subsidiary or any Joint Venture, other than those in the
ordinary course of business, which are material and adverse to the Guarantor,
the Subsidiaries and Joint Ventures taken as a whole, and which, in the judgment
of the Initial Purchasers, make it impracticable or inadvisable to proceed with
the offering or the delivery of the Offered Securities on the terms and in the
manner contemplated in the Offering Document.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event involving a
prospective change, in or affecting particularly the business or properties of
the Trust or the Guarantor, the Subsidiaries and Joint Ventures taken as a
whole, which is material and adverse, and which, in the judgment of the Initial
Purchasers, makes it impractical or inadvisable to proceed with completion of
the offering or the sale of and payment for the Offered Securities; (ii) any
downgrading in the rating of any debt securities or preferred stock of the
Guarantor by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act) or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities or preferred stock of the Guarantor (other than
(x) an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating, and (y) the public
announcement by Moody's Investors Service, Inc. on October 28, 1996 placing the
Guarantor's debt securities under surveillance); (iii) any suspension or
limitation of trading in securities generally on the New York Stock Exchange, or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Guarantor on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by U.S. Federal or
New York authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by the United States
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Initial Purchasers, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and payment
for the Offered Securities.
(e) The Initial Purchasers shall have received opinions, dated such
Closing Date, of:
(i) Steven A. McArthur, General Counsel to the Guarantor;
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(ii) Willkie Farr & Gallagher, special counsel to the Trust
and the Guarantor;
(iii) Morris Nichols Arsht & Tunnel, special Delaware counsel
to the Trust and the Guarantor;
(iv) Emmet, Marvin & Martin, LLP, special counsel to The Bank
of New York; and
(v) Richards, Layton & Finger, special counsel to The Bank of
New York (Delaware)
to the effect set forth in Annexes A, B, C, D and E hereto, and satisfactory in
all respects to the Initial Purchasers and its counsel.
(f) The Initial Purchasers shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Initial Purchasers, such opinion or
opinions, dated such Closing Date, with respect to the incorporation of the
Guarantor and the formation of the Trust, the validity of the Offered
Securities, the Offering Document, the exemption from registration for the offer
and sale of the Offered Securities by the Guarantor to the Initial Purchasers
and the resales by the Initial Purchasers as contemplated hereby and other
related matters as the Initial Purchasers may require, and the Trust and the
Guarantor shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(g) The Initial Purchasers shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Guarantor in which such officers, to the
best of their knowledge after reasonable investigation, shall state that (i) the
representations and warranties of the Trust and the Guarantor in this Agreement
are true and correct in all material respects, (ii) the Trust and the Guarantor
have complied with all agreements and satisfied all conditions on their part to
be performed or satisfied hereunder at or prior to such Closing Date and (iii)
subsequent to the dates of the most recent financial statements in the Offering
Document there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the financial condition,
business or results of operations of the Guarantor, the Subsidiaries and Joint
Ventures taken as a whole except as set forth in or contemplated by the Offering
Document or as described in such certificate.
(h) The Initial Purchasers shall have received a letter, dated such
Closing Date, of Deloitte & Touche and such other independent accountants for
subsidiaries and acquired businesses which meet the requirements of subsection
(b) of this Section 7, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing Date
for the purposes of this subsection.
(i) The Guarantor Agreements and the Registration Rights Agreement
shall have been duly executed and delivered by the Guarantor and the Trust and
be in form, scope and substance reasonably satisfactory to the Initial
Purchasers.
(j) The Trust and the Guarantor shall have furnished the Initial
Purchasers with such conformed copies of such opinions, certificates, letters
and documents as the Initial Purchasers reasonably requested.
(k) The Offered Securities shall have been approved by the NASD as
being eligible for trading in the PORTAL market.
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(l) The Guarantor and Kiewit Energy Company, Inc. ("Kiewit") shall have
entered into an agreement, in form and substance satisfactory to the Initial
Purchasers, whereby Kiewit shall have waived any and all preemptive rights to
which it would otherwise be entitled as a result of the execution, delivery and
performance by the Trust and/or the Guarantor of this Agreement, the
Registration Rights Agreement and the Guarantor Agreements, the consummation of
the transactions herein and therein contemplated and the use of the proceeds of
the offering as described in the Offering Document, the issuance and sale of the
Offered Securities or the Common Securities by the Trust, the exchange of the
Convertible Junior Subordinated Debentures for the Offered Securities, the
purchase of the Convertible Junior Subordinated Debentures by the Trust or the
issuance by the Guarantor of the Guarantee, the purchase by the Guarantor of the
Common Securities or the issuance of the Underlying Shares upon conversion of
the Offered Securities and the Convertible Junior Subordinated Debentures.
The Initial Purchasers may in their sole discretion waive compliance with any
conditions to the obligations of the Initial Purchasers hereunder, whether in
respect of an Optional Closing Date or otherwise. Documents described as being
"in the agreed form" are documents which are in the forms which have been
approved by Skadden, Arps, Slate, Meagher & Flom LLP, as counsel to the Initial
Purchasers, and copies of which are held by the Guarantor and the Initial
Purchasers, with such changes as the Initial Purchasers may approve.
8. Indemnification and Contribution.
(a) The Trust and the Guarantor shall jointly and severally indemnify
and hold harmless each Initial Purchaser, its officers and employees and each
person, if any, who controls any Initial Purchaser within the meaning of the
Securities Act, from and against any losses, claims, damages or liabilities,
joint or several, or any action in respect thereof (including, but not limited
to any loss, claim, damage, liability or action relating to purchases and sales
of the Offered Securities), to which that Initial Purchaser, officer, employee
or controlling person may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities or actions arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the Offering
Document, or any amendment or supplement thereto, or any related preliminary
offering circular or the Exchange Act Reports incorporated therein, or (ii) the
omission or alleged omission to state in the Offering Document, or any amendment
or supplement thereto, or any related preliminary offering circular or the
Exchange Act Reports incorporated therein, any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and shall
reimburse each Initial Purchaser and each such officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably incurred
by that Initial Purchaser, officer, employee or controlling person in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Trust and the Guarantor shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or action arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information concerning such Initial Purchaser furnished to the Trust or the
Guarantor by any Initial Purchaser specifically for inclusion therein, it being
understood and agreed that the only such information consists of the information
described as such in subsection (e) below; and provided, further, that, with
respect to any untrue statement contained in or omission from any preliminary
offering circular, this indemnity agreement shall not inure to the benefit of
any Initial Purchaser on account of any loss, claim, damage, liability or action
arising from the sale of any Offered Securities to any person in the initial
resale by that Initial Purchaser if that Initial Purchaser failed to send
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or give a copy of the offering circular, as the same may be amended or
supplemented, to that person within the time required by the Securities Act, and
the untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact in such preliminary offering
circular was corrected in the offering circular and the offering circular was
made available to that Initial Purchaser prior to the sale of the Offered
Securities. For purposes of the last proviso to the immediately preceding
sentence, the term "offering circular" shall not be deemed to include the
documents incorporated by reference therein, and no Initial Purchaser shall be
obligated to send or give any supplement or amendment to any document
incorporated by reference in any preliminary offering circular or offering
circular to any person other than a person to whom such Initial Purchaser had
delivered such incorporated document or documents in response to a written
request therefor. The foregoing indemnity agreement is in addition to any
liability which the Trust or the Guarantor may otherwise have to any Initial
Purchaser or to any officer, employee or controlling person of that Initial
Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless the Trust and the Guarantor, its officers and employees, each
of its directors, and each person, if any, who controls the Trust or the
Guarantor within the meaning of the Securities Act, from and against any losses,
claims, damages or liabilities, joint or several, or any action in respect
thereof, to which the Trust, the Guarantor or any such officer, employee or
controlling person may become subject, under the Securities Act or the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities or
actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering circular or
the Exchange Act Reports incorporated therein, or (ii) the omission or alleged
omission to state in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular or the Exchange Act
Reports incorporated therein, any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Trust and the Guarantor by such Initial Purchasers
specifically for inclusion therein, and shall reimburse the Trust or the
Guarantor and each such officer, employee, director or controlling person
promptly upon demand for any legal or other expenses reasonably incurred by the
Trust or the Guarantor or any such officer, employee, director or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Initial Purchaser may otherwise have to the Trust or the Guarantor or
any such officer, employee, director or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action (enclosing a copy of all papers
served); provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 8
except to the extent it has been materially prejudiced by such failure and,
provided, further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election
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to assume the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that the indemnified party shall have the right to employ counsel to represent
the indemnified party and their respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified party against the indemnifying
party under this Section 8 if the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action or, if in the written opinion of counsel to either the
indemnifying party or the indemnified party, representation of both parties by
the same counsel would be inappropriate due to actual or likely conflicts of
interest between them, and in that event the fees and expenses of one firm of
separate counsel (in addition to the fees and expenses of local counsel) shall
be paid by the indemnifying party. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with the consent of the indemnifying
party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Trust
and the Guarantor on the one hand and the Initial Purchasers on the other from
the offering of the Offered Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Trust and the Guarantor on the one hand
and the Initial Purchasers on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Trust and the Guarantor on the one hand and
the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Offered Securities purchased under this Agreement (before deducting
expenses) received by the Trust bear to the total discounts and commissions
received by the Initial Purchasers from the Guarantor under this Agreement. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Trust, the Guarantor or the
Initial Purchasers, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Trust, the Guarantor and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section 8 were
to be determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect
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thereof, referred to above in this Section 8 shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8(d), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the Offered Securities purchased by it were resold exceeds the amount of
any damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations in this Section 8(d) are several in proportion to their
respective purchase obligations and not joint.
(e) The Initial Purchasers severally confirm and each of the Trust and
the Guarantor acknowledges that the statements with respect to the offering of
the Offered Securities by the Initial Purchasers set forth on the cover page of,
the legend concerning over-allotments on page 6 of and the commission figures
appearing under the caption "Plan of Distribution" in the Offering Document are
correct and constitute the only information concerning such Initial Purchasers
furnished in writing to the Trust or the Guarantor by or on behalf of the
Initial Purchasers specifically for inclusion in the Offering Document.
9. Default of Initial Purchasers. If any Initial Purchaser or Initial
Purchasers default in their obligations to purchase Offered Securities hereunder
on either the First Closing Date or any Optional Closing Date and arrangements
satisfactory to the Trust and the Guarantor for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Initial Purchaser or the Trust or the Guarantor, except as
provided in Sections 6 and 10 (provided that if such default occurs with respect
to Optional Securities after the First Closing Date, this Agreement shall not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Initial Purchaser"
includes any person substituted for an Initial Purchaser under this Section 9.
Nothing herein will relieve a defaulting Initial Purchaser from liability for
its default.
10. Reimbursement of Initial Purchasers' Expenses. If this Agreement is
terminated pursuant to Section 9 or if for any reason the purchase of the
Offered Securities by the Initial Purchasers is not consummated, the Trust and
the Guarantor shall remain responsible for the expenses to be paid or reimbursed
by them pursuant to Section 6. If the purchase of the Offered Securities by the
Initial Purchasers is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 9 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 7(d), the Trust and
the Guarantor will reimburse the Initial Purchasers for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities; provided that
the Trust and the Guarantor shall not be obligated under this Section 10 to
reimburse the Initial Purchasers for any expenses (including any reasonable fees
and disbursements of counsel) in excess of $175,000.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Syndicate Department (Fax:
212-526-6588), with a copy, in the case of any notice pursuant to Section
24
<PAGE>
8(d), to the Director of Litigation, Office of the General Counsel, Lehman
Brothers Inc., 3 World Financial Center, 10th Floor, New York, NY 10285;
(b) if to the Trust or the Guarantor, shall be delivered or sent by
mail, telex or facsimile transmission to the Guarantor at 302 South 36th Street,
Suite 400, Omaha, Nebraska 68131, Attention: General Counsel (Fax:
402-231-1658);
provided, however, that any notice to an Initial Purchaser pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth in its acceptance telex to the
Initial Purchasers, which address shall be supplied to any other party hereto by
the Initial Purchasers upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Trust and the
Guarantor shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Initial Purchaser by Lehman Brothers
Inc.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8, and no other
person will have any right or obligation hereunder.
13. Survival. The respective indemnities, representations, warranties
and agreements of the Trust, the Guarantor and the Initial Purchasers contained
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall survive the delivery of and payment for the Offered
Securities and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them. If this Agreement is terminated pursuant to Section 9 or if for any
reason the purchase of the Offered Securities by the Initial Purchasers is not
consummated, the respective obligations of the Trust, the Guarantor and the
Initial Purchasers pursuant to Section 8 shall remain in effect.
14. Definition of the Term "Business Day". For purposes of this
Agreement, "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Each of the Trust and the
Guarantor hereby submits to the non-exclusive jurisdiction of the Federal and
state courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
25
<PAGE>
If the foregoing correctly sets forth the agreement among the Trust,
the Guarantor and the Initial Purchasers, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
CALENERGY CAPITAL TRUST II
By John G. Sylvia, solely in his ca-
pacity as trustee and not in his individ-
ual capacity,
-----------------------------------------
John G. Sylvia
By Steven A. McArthur, solely in his
capacity as trustee and not in his indi-
vidual capacity,
-----------------------------------------
Steven A. McArthur
CALENERGY COMPANY, INC.
By
-------------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
Accepted:.
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By LEHMAN BROTHERS INC.
By
----------------------------
Name: Joseph G. Sauvage
Title: Managing Director
<PAGE>
SCHEDULE A
Number of
Purchaser Firm Securities
Lehman Brothers Inc...........................................1,650,000
Donaldson, Lufkin & Jenrette
Securities Corporation......................................1,350,000
---------
Total................................................3,000,000
---------
<PAGE>
SCHEDULE B
Subsidiaries
Coso Funding Corp.+
Incorporated in Delaware
Coso Hotsprings Intermountain Power, Inc. (CHIP)+
Incorporated in Delaware
China Lake Operating Co. (CLOC)+
Incorporated in Delaware
Coso Technology Corporation (CTC)+
Incorporated in Delaware
China Lake Geothermal Management Company (CLGMC)+
Incorporated in Delaware
China Lake Plant Services, Inc. +
Incorporated in California
Coso Hotsprings Overland Power, Inc.+
Incorporated in Delaware
CE Geothermal, Inc.
Incorporated in Delaware
Western States Geothermal Company
Incorporated in Delaware
Intermountain Geothermal Company
Incorporated in Delaware
CalEnergy Development Corporation
Incorporated in Delaware
California Energy Yuma Corporation
Incorporated in Utah
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
California Energy General Corporation
Incorporated in Delaware
Rose Valley Properties, Inc.
Incorporated in Delaware
CE Holt Company, Inc.
Incorporated in Delaware
CBE Engineering Co.
Incorporated in California
CE Exploration Company
Incorporated in Delaware
CE Newberry, Inc.
Incorporated in Delaware
CE International Investments Inc.
Incorporated in Delaware
CE Philippines Ltd.
Incorporated in Bermuda
CE Mahanagdong Ltd.
Incorporated in Bermuda
Ormoc Cebu Ltd.
Incorporated in Bermuda
CE Cebu Geothermal Power Company, Inc.+
Incorporated in the Philippines
CE Indonesia Ltd.+
Incorporated in Bermuda
CE Casecnan Ltd.
Incorporated in Bermuda
CE Singapore Ltd.
Incorporated in Bermuda
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
CalEnergy International Ltd.
Incorporated in Bermuda
CE Bali, Ltd.
Incorporated in Bermuda
CE Casecnan Water and Energy Company, Inc.+
Incorporated in the Philippines
Capital Stock: Owned 35% by CE Casecnan Ltd.,
35% by Kiewit Energy International (Bermuda) Ltd.,
15% by La Prairie Group Contractors (International) Ltd and
15% by San Lorenzo Ruiz Builders & Developers Group, Inc.
Magma Power Company+
Incorporated in Nevada
CalEnergy Operating Company+
Incorporated in Delaware
Salton Sea Power Company+
Incorporated in Nevada
Vulcan Power Company+
Incorporated in Nevada
Imperial Magma+
Incorporated in Nevada
Magma Land Company I+
Incorporated in Nevada
Desert Valley Company+
Incorporated in California
Fish Lake Power Company+
Incorporated in Delaware
Magma Netherlands B.V.+
Formed in the Netherlands
Tongonan Power Investment, Inc.+
Incorporated in the Philippines
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
Salton Sea Funding Corporation (SSFC)+
Incorporated in Delaware
Salton Sea Royalty Company+
Incorporated in Delaware
CE Asia Ltd.+
Incorporated In Bermuda
American Pacific Finance Company
Incorporated in Delaware
The Ben Holt International Co., Inc.
Incorporated in Delaware
CalEnergy International Services, Inc.
Incorporated in Delaware
CalEnergy Imperial Valley Company, Inc.
Incorporated in Delaware
California Energy Retail Company, Inc.
Incorporated in Delaware
CE Humboldt, Inc.
Incorporated in Delaware
CE Ijen Ltd.
Incorporated in Bermuda
Magma Generating Company I
Incorporated in Nevada
Magma Generating Company II
Incorporated in Nevada
Peak Power Corporation
Incorporated in California
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
CE Luzon Geothermal Power Company, Inc.+ Incorporated in the
Philippines Capital Stock: Owned 50% by CE Mahanagdong Ltd.; 50% by
Kiewit Energy International (Bermuda) Ltd.; an industrial company has
the right to acquire 10% of the equity - 5% from CE Mahanagdong Ltd.
and 5% from Kiewit Energy International (Bermuda) Ltd.
Himpurna California Energy Ltd.+
Incorporated in Bermuda
Capital Stock: Owned 47% by CE Indonesia Ltd.; 47% by Kiewit Energy
International (Bermuda) Ltd., and 6% by P.T. Himpurna Enersindo Abadi;
("Himpurna"). Himpurna has assigned the right to certain preferred
dividends representing a 4% interest in Himpurna California Energy
Ltd., under the Joint Operating Contract, Pertamina has certain rights
to acquire up to a 25% interest in the Joint Operating Contract, but
not under the Energy Sales Contract
Patuha Power, Ltd.+
Incorporated in Bermuda
Capital Stock: Owned 50% by CE Singapore Ltd., and 50% by Kiewit
Energy International (Bermuda) Ltd.; under the Joint Operating
Contract, Pertamina has certain rights to acquire up to a 25% interest
in the Joint Operating Contract, but not under the Energy Sales
Agreement
Bali Energy Ltd.+
Incorporated in Bermuda
Capital Stock: Owned 50% by CE Bali Ltd. and
50% by Kiewit Energy International (Bermuda) Ltd.
P.T. Pandanwangi Sekartji has the right to acquire
up to 40% of the equity in Bali Energy Ltd.
Norming Investments BV+
Incorporated in the Netherlands
Capital Stock: Owned 50% by CE Asia Ltd. and
50% by Kiewit Energy International (Bermuda) Ltd.
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
BN Geothermal Inc.+
Incorporated in Delaware
Canejo Energy Company+
Incorporated in California
Niguel Energy Company+
Incorporated in California
San Felipe Energy Company+
Incorporated in California
CE/FS Holding Company, Inc.
Incorporated in Delaware
Falcon Seaboard Power Corporation
Incorporated in Texas
Falcon Seaboard Resources, Inc.
Incorporated in Texas
Falcon Seaboard Energy Corporation
Incorporated in Texas
Falcon Seaboard Gas Company
Incorporated in Texas
Falcon Seaboard Oil Company
Incorporated in Texas
Falcon Seaboard Pipeline Corporation
Incorporated in Texas
Big Spring Pipeline Company
Incorporated in Texas
Falcon Power Operating Company
Incorporated in Texas
Power Resources, Inc.+
Incorporated in Texas
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
North Country Gas Pipeline Corporation+ Incorporated in New York Owned
by Saranac Power Partners, L.P.
Saranac Energy Company, Inc. (SECI)+
Incorporated in Delaware
SECI Holdings, Inc.+
Incorporated in Delaware
Northern Consolidated Power, Inc. (NCPI)+
Incorporated in Delaware
NorCon Holdings, Inc.
Incorporated in Delaware
CE Electric, Inc.
Incorporated in Delaware
CE Power, Inc.
Incorporated in Delaware
CE Electric UK plc
Incorporated in England
Capital Stock: Owned 70% indirectly by CalEnergy Company, Inc. and
30% indirectly by Peter Kiewit Sons', Inc.
American Pacific Finance Company II
Incorporated in Delaware
Capital Stock: Owned 50% by CalEnergy Company, Inc. and
50% by Kiewit Energy Company
PT Kiewit Holt Indonesia
Incorporated in Indonesia
Owned by Kiewit/Holt Indonesia
Slupo I B.V.+
Incorporated in Netherlands
Owned 50% by CE Asia Ltd. and 50% by Kiewit
Energy International (Bermuda) Limited
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
Gilbert/CBE Indonesia L.L.C.
Organized in Nebraska
Owned 60% Gilbert Industrial Corporation and 40% CBE Engineering Co.
Northern Electric plc+
Incorporated in England and Wales
Northern Electric Generation (NPL) Ltd.
Incorporated in England and Wales
Northern Electric Supply Ltd.+
Incorporated in England and Wales
Northern Electric Share Scheme Trustee Ltd.+
Incorporated in England and Wales
Northern Transport Finance Ltd.+
Incorporated in England and Wales
Northern Electric Retail Ltd.+
Incorporated in England and Wales
Northern Electric Properties Ltd.+
Incorporated in England and Wales
Northern Electric Distribution Ltd..
Incorporated in England and Wales
Gas UK Ltd.+
Incorporated in England and Wales
Combined Power Systems (Northern) Ltd.+
Incorporated in England and Wales
Northern Electric (Overseas Holdings) Ltd.+
Incorporated in England and Wales
Northern Electric Generation (CPS) Ltd.+
Incorporated in England and Wales
Kings Road Developments Ltd.+
Incorporated in England and Wales
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
Ryhope Road Developments Ltd.+
Incorporated in England and Wales
Stamfordham Road Developments Ltd.+
Incorporated in England and Wales
Northern Electric Generation (TPL) Ltd.+
Incorporated in England and Wales
Northern Electric Generation Ltd.+
Incorporated in England and Wales
Northern Electric Insurance Services Ltd.+
Incorporated in England and Wales
Northern Metering Services Ltd.+
Incorporated in Isle of Man
Sovereign Exploration Ltd.+
Incorporated in England and Wales
Northern Electric Generation (Peaking) Ltd.+
Incorporated in England and Wales
Northern Electric Training Ltd.+
Incorporated in England and Wales
Northern Electric Transport Ltd.+
Incorporated in England and Wales
Northern information Systems Ltd.+
Incorporated in England and Wales
Northern Utility Services Ltd.+
Incorporated in England and Wales
Viking Power Ltd.+
Incorporated in England and Wales
Northern electric Finance plc.+
Incorporated in England and Wales
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
Northgas Ltd.+
Incorporated in England and Wales
Northern Tracing & Collection Services Ltd.+
Incorporated in England and Wales
Northern Electric Telecom Ltd.+
Incorporated in England and Wales
CE Electric UK Holdings
Incorporated in England
Capital Stock: Owned 70% indirectly by CalEnergy Company, Inc. and
30% indirectly by Peter Kiewit Sons', Inc.
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement or regulatory
restrictions or otherwise encumbered and subject to foreclosure or other
exercise of remedies.
<PAGE>
SCHEDULE C
Joint Ventures
Coso Energy Developers (CED)+
Formed in California
General Partnership: 48% CHIP; 52% Caithness Coso
Holdings, L.P.
Coso Finance Partners+
Formed in California
General Partnership: 46.3% owned by CLOC; 53.7%
owned by ESCA I, L.P.
Coso Power Developers (CPD)+
Formed in California
General Partnership: 50% owned by CTC; 50% by
Caithness Navy II
Coso Transmission Line Partners+
Formed in California
General Partnership: Owned 50% by CED; 50% by CPD
Vulcan/BN Geothermal Power Company+
Formed in Nevada
Partnership Interests: Vulcan Power Company 50%
General Partner; BN Geothermal, Inc. 50% General
Partner
Del Ranch, L.P.+
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; CalEnergy Operating Company 40% General Partner;
Conejo Energy
Company 10% Limited Partner and 40% General Partner
Elmore, L.P.+
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; CalEnergy Operating Company 40% General Partner;
Niguel Energy
Company 10% Limited Partner
and 40% General Partner
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement, or otherwise
encumbered and subject to foreclosure or other exercise of remedies.
<PAGE>
Leathers, L.P.+
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; CalEnergy Operating Company 40% General Partner; San
Felipe Energy
Company 10% Limited Partner and 40% General Partner
Salton Sea Brine Processing L.P.+
Limited Partnership Formed in California
Salton Sea Power Generation L.P.+
Limited Partnership Formed in California
Visayas Geothermal Power Company+
Partnership Formed in the Philippines
Yuma Cogeneration Associates (YCA)+
Formed in Utah
Alto Peak Power Company
Formed in the Philippines
China Lake Joint Venture
Formed in California
Owed 50% by CalEnergy Company and
50% by Caithness Geothermal 1980 Ltd.
Coso Finance Partners II
Formed in California
Owned 50% by China Lake Geothermal Management Co., an affiliate of
Calenergy
Company, Inc. and 50% by ESCA II, L.P.
Coso Land Company
Formed in California
Owned 50% by CalEnergy Company and 50% by Caithness Geothermal 1980
Ltd.
Gilbert/CBE L.P.
Limited partnership formed in Nebraska
Partnership Interests: 20% CBE Engineering Co. and 80% Gilbert
Industrial Corporation
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement, or otherwise
encumbered and subject to foreclosure or other exercise of remedies.
<PAGE>
Kiewit/Holt Philippines, L.P.
Limited partnership formed in Nebraska
Partnership Interests: 20% CE Holt Company and 80% Kiewit Industrial
Co.
Saranac Power Partners, L.P.+
Limited partnership formed in Delaware
Partnership Interests: 80% Saranac Energy Company, Inc. and 20%
affiliates of Tomen
Power Corporation
NorCon Power Partners, L.P.+
Limited partnership formed in Delaware
Partnership Interests: 80% Northern Consolidated Power, Inc. and 20%
affiliates of Tomen
Power Corporation
- --------------------------
+ Indicates stock or partnership interests that are and at the Closing Date
will continue to be pledged, subject to a purchase agreement, or otherwise
encumbered and subject to foreclosure or other exercise of remedies.
<PAGE>
ANNEX A
General Counsel Opinion
1. Each of the Guarantor, the Subsidiaries and Joint Ventures has been
duly organized and is validly existing and, if applicable, in good standing
under the laws of its respective jurisdiction of organization and each of the
Guarantor, the Subsidiaries and Joint Ventures has the power and authority to
own, lease and operate its respective properties and to conduct its businesses
as described in the Offering Document;
2. Each of the Guarantor, the Subsidiaries and Joint Ventures is duly
qualified to do business and (to the extent applicable) is in good standing as a
foreign corporation, a foreign partnership or foreign limited liability company,
as the case may be, in each jurisdiction, domestic or foreign, in which such
registration, qualification or good standing is required (whether by reason of
the ownership or leasing of property, the conduct of its business or otherwise),
except where the failure to so register or qualify or be in good standing is not
reasonably likely to have a material adverse effect on the financial condition,
business or results of operations of the Guarantor, the Subsidiaries and Joint
Ventures taken as a whole;
3. The Guarantor has the authorized and outstanding capitalization as
set forth under the caption "Capitalization" in the Offering Document; to the
best of my knowledge, all the outstanding shares of capital stock of each
Subsidiary owned by the Guarantor have been duly and validly authorized and
issued and are fully-paid and nonassessable; and to the best of my knowledge,
except as otherwise set forth in Schedule B attached to the Purchase Agreement
or disclosed in or contemplated by the Offering Document, all outstanding shares
of capital stock of each Subsidiary are owned beneficially by the Guarantor free
and clear of any material claims, liens, encumbrances and security interests;
and to the best of my knowledge, all of the partnership interests in Joint
Ventures beneficially owned by the Guarantor (as reflected in Schedule C to the
Purchase Agreement) have been duly and validly authorized and issued and, except
as otherwise set forth in Schedule C attached to the Purchase Agreement or
disclosed in or contemplated by the Offering Document, are owned beneficially by
the Guarantor free and clear of any material claims, liens, encumbrances and
security interests;
4. The Guarantor Agreements have each been duly authorized, executed
and delivered by the Guarantor; the Guarantee, the Trust Agreement, the
Indenture and the Convertible Junior Subordinated Debentures, when validly
authenticated and delivered by the Debenture Trustee in accordance with the
Indenture and paid for by the Trust, will constitute valid and legally binding
obligations of the Guarantor, enforceable in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by (a)
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); and the Convertible Junior
Subordinated Debentures will be entitled to the benefits of the Indenture,
subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity);
<PAGE>
5. The Purchase Agreement has been duly authorized, executed and
delivered by each of the Guarantor and the Trust;
6. The Registration Rights Agreement has been duly authorized, executed
and delivered by each of the Guarantor and the Trust and constitutes a valid and
binding obligation of the Guarantor and the Trust, enforceable against the
Guarantor and the Trust in accordance with its terms, except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity);
7. The Underlying Shares initially issuable upon conversion of the
Offered Securities and the Convertible Junior Subordinated Debentures have been
duly authorized and reserved for issuance upon conversion and, if and when
issued upon conversion of the Offered Securities and the Convertible Junior
Subordinated Debentures in accordance with the terms of the Purchase Agreement,
Indenture and Trust Agreement, such Underlying Shares will be validly issued,
fully-paid and nonassessable and conform in all material respects to the
description thereof contained in the Offering Document; and the holders of
outstanding securities of the Guarantor are not entitled to any preemptive
rights with respect to the Underlying Shares issuable upon such conversion which
have not been waived;
8. Except as disclosed in or contemplated by the Offering Document, the
Guarantor, each Subsidiary and each Joint Venture holds, as applicable, good and
valid title to, or valid and enforceable leasehold or contractual or other legal
interests in, all real properties and all other properties and assets owned or
leased by or held under contract by each of them that are material to the
business of the Guarantor, the Subsidiaries and the Joint Ventures taken as a
whole, and free from liens, encumbrances and defects that would materially
interfere with the use made or to be made thereof by them;
9. To the best of my knowledge, the Guarantor, each Subsidiary and each
Joint Venture (i) has obtained each license, permit, certificate, franchise or
other governmental authorization which is material to the ownership of their
properties or to the conduct of their businesses as described in the Offering
Document and (ii) is in compliance with all terms and conditions of such
license, permit, certificate, franchise or other governmental authorization,
except (A) in either case where the failure to do so is not reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
financial condition, business or results of operations of the Guarantor, the
Subsidiaries and Joint Ventures taken as a whole, (B) permits, consents and
approvals that may be required for future drilling or operating activities which
are ordinarily deemed to be ministerial in nature and which are anticipated to
be obtained in the ordinary course and (C) permits, consents and approvals for
developmental or construction activities which have not yet been obtained but
which have been or will be applied for in the course of development or
construction and which are anticipated to be obtained in the ordinary course;
10. To the best of my knowledge, there is no legal or governmental
action, suit or proceeding before any court, governmental agency, body or
authority, domestic or foreign, now pending, threatened against, or involving,
the Guarantor, any Subsidiary or any Joint Venture (A) of a character that would
be required to be disclosed in the Offering Document if it were a registration
statement under the Securities Act which is not adequately disclosed in the
Offering Document or (B) that, if determined adversely to the Guarantor, any
Subsidiary or any Joint Venture, would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on the financial
condition, business or results of operations of the Guarantor, the Subsidiaries
and Joint Ventures taken as a whole, or on the ability of
<PAGE>
the Guarantor to perform its obligations under the Purchase Agreement, the
Registration Rights Agreement, the Guarantor Agreements or the Securities;
11. The Guarantor has all requisite corporate power and authority to
issue the Guarantee, comply with all of the provisions of the Purchase
Agreement, issue the Underlying Shares upon conversion of the Convertible Junior
Subordinated Debentures, sell to the Trust the Convertible Junior Subordinated
Debentures, purchase the Common Securities, execute, deliver and perform each of
the Purchase Agreement, the Guarantor Agreements and the Registration Rights
Agreement, consummate the transactions therein contemplated and use the proceeds
of the offering as described in the Offering Document;
12. There are no contracts or other documents that would be required to
be described in the Offering Document if it were a registration statement under
the Securities Act which have not been described or incorporated by reference
therein (including exhibits to any such documents so incorporated by reference);
13. Except as otherwise disclosed in or contemplated by the offering
Document, there are no outstanding securities convertible into or exchangeable
for, and no outstanding options, warrants or other rights to purchase, any
shares of the capital stock of Guarantor, nor any agreements or commitments to
issue any of the same;
14. To the best of my knowledge, except pursuant to the Purchase
Agreement or otherwise disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Guarantor and any person
that would give rise to a valid claim against the Guarantor or the Initial
Purchasers for a brokerage commission, finder's fee or other like payment;
15. The issuance by the Guarantor of the Guarantee, the compliance by
the Guarantor and the Trust with all of the provisions of the Purchase Agreement
and the Registration Rights Agreement, the issuance and sale of the Offered
Securities and the Common Securities in accordance with the terms of the
Purchase Agreement, the Indenture and the Trust Agreement, the issuance of the
Underlying Shares upon conversion of the Convertible Junior Subordinated
Debentures, the sale to the Trust of the Convertible Junior Subordinated
Debentures in accordance with the terms of the Indenture and the Trust
Agreement, the purchase by the Guarantor of the Common Securities, the
execution, delivery and performance by the Guarantor and the Trust of each of
the Purchase Agreement and the Registration Rights Agreement and by the
Guarantor of the Guarantor Agreements, the consummation of the transactions
therein contemplated and the use of the proceeds of the offering as described in
the Offering Document do not and will not (A) conflict with the corporate
charter or by-laws or partnership agreement of the Guarantor, any Subsidiary or
any Joint Venture or the Trust Agreement or the Certificate of Trust of the
Trust, (B) to the best of my knowledge, conflict with, result in the creation or
imposition of any lien, charge or other encumbrance upon any asset of the Trust
or the Guarantor, any Subsidiary or Joint Venture pursuant to the terms of, or
constitute a breach of, or default under, any agreement, indenture or other
instrument to which the Trust or the Guarantor, any Subsidiary or any Joint
Venture is a party or by which the Trust or the Guarantor, any Subsidiary or any
Joint Venture is bound or to which any of the properties of the Trust or the
Guarantor, any Subsidiary or any Joint Venture is subject, or (C) to the best of
my knowledge, result in a violation of any statute, rule, regulation, order,
judgment or decree of any court or governmental agency, body or authority having
jurisdiction over the Trust or the Guarantor, any Subsidiary or any Joint
Venture or any of their properties where any such conflict, encumbrance, breach,
default or violation under clauses (B) or (C), individually or in the aggregate,
is
<PAGE>
reasonably likely to have a material adverse effect on the financial condition,
business or results of operations of the Trust or the Guarantor, the
Subsidiaries and Joint Ventures taken as a whole;
16. Assuming the accuracy of the representations and warranties of the
Initial Purchasers set forth in Section 2 of the Purchase Agreement, to the best
of my knowledge, except (A) in connection with the registration of the
Securities pursuant to the Registration Rights Agreement, and (B) in connection
with or compliance with the Trust Indenture Act and applicable state or foreign
securities laws or the regulations of the National Association of Securities
Dealers, Inc., no consent, authorization or order of, or filing or registration
by the Trust or the Guarantor, any Subsidiary or any Joint Venture with, any
court, governmental agency or third party is required in connection with the
issuance and sale of the Offered Securities, the issuance by the Guarantor of
the Guarantee, the compliance by the Trust and the Guarantor with all of the
provisions of the Purchase Agreement and the Registration Rights Agreement, the
issuance of the Underlying Shares upon conversion of the Convertible Junior
Subordinated Debentures, the sale to the Trust of the Convertible Junior
Subordinated Debentures, the purchase by the Guarantor of the Common Securities,
the execution, delivery and performance by the Trust and the Guarantor of each
of the Purchase Agreement and the Registration Rights Agreement and by the
Guarantor of the Guarantor Agreements, the consummation of the transactions
therein contemplated and the use of the proceeds of the offering as described in
the Offering Document, the failure to obtain which, individually or in the
aggregate, is reasonably likely to have a material adverse effect on the
financial condition, business or results of operations of the Trust or the
Guarantor, the Subsidiaries and Joint Ventures taken as a whole or on the
Securities or the ability of the Trust or the Guarantor to perform its
obligations under the Purchase Agreement, the Guarantor Agreements or the
Registration Rights Agreement;
17. Neither the Trust nor the Guarantor is required to be registered
under the Investment Company Act of 1940, as amended;
18. The documents incorporated by reference in the Offering Document
and any further amendments or supplements to any such incorporated document made
by the Guarantor prior to the date hereof (other than the financial statements,
related schedules and other financial and statistical information contained
therein or omitted therefrom as to which I express no opinion), when they became
effective or were filed with the Commission, as the case may be, appear on their
face to have been appropriately responsive in all material respects to the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the Rules and Regulations of the Commission thereunder;
19. To the best of my knowledge after due inquiry, the Tender Offer for
all outstanding share capital of Northern by the Offeror and the consummation of
the transactions contemplated thereby, did not (A) conflict with the corporate
charter of the Guarantor or the Offeror, (B) constitute a breach of, or default
under, any agreement, indenture or other instrument to which the Guarantor, any
Subsidiary or any Joint Venture is a party or by which the Guarantor, any
Subsidiary or any Joint Venture is bound or to which any of the properties of
the Guarantor, any Subsidiary or any Joint Venture is subject, or (C) result in
a violation of any statute, rule, regulation, order, judgment or decree of any
court or governmental agency, body or authority, including the Companies Act
1985, the Financial Services Act 1986, the Rules and Regulations of the London
Stock Exchange and all regulations made thereunder (including the Yellow Book)
and the City Code on Takeovers and Mergers, having jurisdiction over the Offeror
or the Tender Offer; except in the case of clauses (B) and (C) such breaches,
defaults or violations which, individually or in the aggregate, did not have a
material adverse effect on the financial
<PAGE>
condition, business or results of operations of the Guarantor, the Subsidiaries
and Joint Ventures taken as a whole; and
20. Except as disclosed in or contemplated by the Offering Memorandum,
to the best of my knowledge after due inquiry, there are no statutes, rules,
regulations, orders, judgments or decrees of any courts or governmental agencies
having jurisdiction over the Guarantor, the Offeror or Northern, that prohibit
the acquisition by the Offeror of the outstanding ordinary and preference share
capital of Northern not already owned by it and except for any such shares and
certain employee options and option shares which are the subject of a buy-out
offer by the Offeror, there are no shares or rights over shares or entitlement
to subscribe for or convert into shares of Northern known to the Guarantor.
I have not independently verified, and I am not passing upon and do not
assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Document. I have, however, participated in
conferences with certain representatives of the Guarantor and the Trust,
independent accountants for the Guarantor and the Trust, the Initial Purchasers
and their counsel, at which conferences the contents of the Offering Document
and related matters were discussed. Based upon and subject to the foregoing, no
facts have come to my attention which cause me to believe (i) that the Offering
Document, as amended and supplemented as of the date of the Purchase Agreement
and as of the date hereof (except for the financial statements, related
schedules and other financial and statistical information contained therein or
omitted therefrom as to all of which I do not express any belief), contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (ii) any document incorporated by reference in the
Offering Document or any further amendment or supplement to such incorporated
document made by the Guarantor prior to the date hereof when they became
effective or were filed with the Commission, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
<PAGE>
ANNEX B
Willkie Farr Opinion
1. Assuming full compliance with the terms of the Trust Agreement and
the Indenture, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of the
Convertible Preferred Securities will generally be considered the owner of an
undivided interest in the Convertible Junior Subordinated Debentures, and each
holder will be required to include in its gross income any original issue
discount accrued with respect to its allocable share of those Convertible Junior
Subordinated Debentures;
2. Although the discussion set forth in the Offering Document under the
heading "United States Taxation" does not purport to discuss all possible United
States federal income tax consequences of the purchase, ownership and
disposition of the Convertible Preferred Securities, in our opinion such
discussion constitutes, in all material respects, a fair and accurate summary of
the United States federal income tax consequences of the purchase, ownership and
disposition of the Convertible Preferred Securities under current law;
3. The Guarantor has been duly organized and is validly existing and in
good standing as a corporation under the laws of the State of Delaware and the
Guarantor has the corporate power and authority to own, lease and operate its
properties and to conduct its businesses as described in the Offering Document;
4. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware; all filings required
under the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a Delaware statutory business trust have been made;
the Trust has all requisite business trust power and authority to own property
and conduct its business as described in the Offering Document;
5. The Offered Securities have been duly authorized by the Trust for
issuance and, when issued in accordance with the Trust Agreement and delivered
and paid for in accordance with the Purchase Agreement, will be validly issued
and (subject to the terms of the Trust Agreement) fully-paid and nonassessable
undivided beneficial interests in the assets of the Trust; under the Trust
Agreement, the issuance of the Offered Securities is not subject to preemptive
or other similar rights; the Offered Securities, when issued in accordance with
the Trust Agreement and delivered against and paid for in accordance with the
Purchase Agreement, will have the rights set forth in the Trust Agreement,
subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws of general application relating to or affecting the
enforcement of creditors' rights and remedies, as from time to time in effect,
(B) application of equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (C)
considerations of public policy or the effect of applicable law relating to
fiduciary duties; the Trust Agreement is a valid and binding obligation of the
Guarantor, except to the extent that enforcement thereof may be limited by (A)
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws now or hereafter in effect relating to creditors' rights
generally, (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity and (C)
considerations of public policy or the effect of
<PAGE>
applicable law relating to fiduciary duties; and under the Delaware Business
Trust Act and the terms of the Trust Agreement, the holders of the Offered
Securities, in such capacity, will (subject to the terms of the Trust Agreement)
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; provided, however, we express no
opinion with respect to the liability of any holder of Offered Securities who
is, was or may become a named Trustee of the Trust. We note that Holders of the
Offered Securities will be subject to the withholding provisions of Section 11.4
of the Trust Agreement and may be required to make payment or provide indemnity
or security as set forth therein;
6. The Common Securities have been duly authorized by the Trust for
issuance and, when issued, delivered and paid for in accordance with the Trust
Agreement and upon delivery by the Trust to the Guarantor against payment
therefor as described in the Offering Document, will be validly issued and
(subject to the terms of the Trust Agreement) fully-paid and nonassessable
undivided beneficial interests in the assets of the Trust; we note that Holders
of the Common Securities will be subject to the withholding provisions of
Section 11.4 of the Trust Agreement and may be required to make payment or
provide indemnity or security as set forth therein; under the Trust Agreement,
the issuance of the Common Securities is not subject to preemptive or other
similar rights; and all of the issued and outstanding Common Securities of the
Trust are owned of record by the Guarantor;
7. The Registration Rights Agreement has been duly authorized, executed
and delivered by each of the Trust and the Guarantor and constitutes a valid and
binding obligation of each of the Trust and the Guarantor, enforceable against
the Trust and the Guarantor in accordance with its terms, except to the extent
that enforcement thereof may be limited by (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and (C) considerations of policy or the effect
of applicable law relating to fiduciary duties, and except to the extent that
the right to indemnity and contribution contained in the Registration Rights
Agreement may be limited by state or federal securities laws or the public
policy underlying such laws;
8. The Guarantor Agreements have each been duly authorized, executed
and delivered by the Guarantor. The Guarantee, the Trust Agreement, the
Indenture and the Convertible Junior Subordinated Debentures, when validly
authenticated and delivered by the Debenture Trustee in accordance with the
Indenture and paid for by the Trust, will constitute valid and binding
obligations of the Guarantor, enforceable against the Guarantor in accordance
with their respective terms, except to the extent that enforcement thereof may
be limited by (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity) and
(C) considerations of policy or the effect of applicable law relating to
fiduciary duties; and, subject to the terms of the Indenture, the Convertible
Junior Subordinated Debentures will be entitled to the benefits of the
Indenture;
9. The Underlying Shares initially issuable upon conversion of the
Offered Securities and the Convertible Junior Subordinated Debentures have been
duly authorized and reserved for issuance upon conversion and, if and when
issued upon conversion of the Offered Securities and the Convertible Junior
Subordinated Debentures in accordance with the terms of the Purchase Agreement,
the Indenture and the Trust Agreement, will be validly issued, fully-paid and
nonassessable and conform in all material respects to the description thereof
contained in the Offering Document; and, under the Guarantor's Certificate of
<PAGE>
Incorporation, the holders of outstanding securities of the Guarantor are not
entitled to any preemptive rights with respect to the Underlying Shares
issuable upon such conversion;
10. The Purchase Agreement has been duly authorized, executed and
delivered by each of the Trust and the Guarantor;
11. The Offered Securities, the Common Securities, the Convertible
Junior Subordinated Debentures and each of the Guarantor Agreements conform in
all material respects to the descriptions thereof contained in the Offering
Document;
12. The Trust has the requisite business trust power and authority to
authorize, issue and sell the Offered Securities and the Common Securities as
contemplated by the Purchase Agreement and the Trust Agreement and to execute,
deliver and perform the Purchase Agreement and the Registration Rights
Agreement;
13. The issuance and sale of the Offered Securities and the Common
Securities in accordance with the terms of the Purchase Agreement and the Trust
Agreement, the use of the proceeds of the offering to purchase the Convertible
Junior Subordinated Debentures as described in the Offering Document, the
execution, delivery and performance by the Trust and the Guarantor of the
Purchase Agreement and the Registration Rights Agreement, the execution,
delivery and performance by the Guarantor of the Guarantor Agreements, the
compliance by the Trust and the Guarantor with the provisions of the Purchase
Agreement and the Registration Rights Agreement, the purchase of the Convertible
Junior Subordinated Debentures by the Trust, the issuance by the Guarantor of
the Guarantee, the purchase by the Guarantor of the Common Securities and the
issuance of the Underlying Shares upon conversion of the Offered Securities and
the Convertible Junior Subordinated Debentures will not (A) to our knowledge,
constitute a violation of or a default under any indenture, mortgage, deed of
trust, loan agreement or other agreement set forth on Exhibit I hereto, (B)
violate the provisions of the Trust Agreement or the Certificate of Trust of the
Trust or violate the corporate charter or by-laws of the Guarantor or (C) result
in a violation of any Applicable Laws; for purposes of the opinion set forth in
this paragraph, the term "Applicable Laws" means those laws, rules and
regulations of the State of New York, the State of Delaware and the United
States of America that, in our experience, are normally applicable to
transactions of the type contemplated by the Purchase Agreement, as in effect on
the date hereof (other than United States, state and foreign securities or blue
sky laws and the rules and regulations of the National Association of Securities
Dealers, Inc.);
14. No consent, authorization, order of, or filing or registration by
the Guarantor or the Trust with, any United States governmental authority or
body having jurisdiction over the Guarantor or the Trust is necessary or
required for the execution, delivery and performance by the Trust or the
Guarantor of the Purchase Agreement or the Registration Rights Agreement or the
execution, delivery and performance by the Guarantor of the Guarantor Agreements
or the issuance and sale of the Offered Securities or the Common Securities by
the Trust, the exchange of the Convertible Junior Subordinated Debentures for
Offered Securities, the purchase of the Convertible Junior Subordinated
Debentures by the Trust or the issuance by the Guarantor of the Guarantee, the
purchase by the Guarantor of the Common Securities or the issuance of the
Underlying Shares upon conversion of the Offered Securities and the Convertible
Junior Subordinated Debentures, except (A) in connection with the registration
of the Securities pursuant to the Registration Rights Agreement and (B) as may
be required under applicable state or foreign securities laws or blue sky laws;
<PAGE>
15. To the best of our knowledge after due inquiry, there are no
actions, suits or proceedings pending or judgments outstanding against the
Guarantor or the Trust in any court or agency or instrumentality in the United
States of America which relates to or places or may place in question the
validity or enforceability of the Purchase Agreement or the issuance and sale of
the Offered Securities and the Common Securities by the Trust, the exchange of
the Convertible Junior Subordinated Debentures for Offered Securities or the
purchase of the Convertible Junior Subordinated Debentures by the Trust;
16. As of the date hereof, no securities of the same class (within the
meaning of Rule 144A(d) (3) under the Securities Act) as the Offered Securities
are listed on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system;
17. Neither the Trust nor the Guarantor is required to be registered
under the Investment Company Act of 1940, as amended; and
18. Assuming (A) the accuracy of the representations and warranties of
the Trust and the Guarantor set forth in Section 1 of the Purchase Agreement and
of the Initial Purchasers set forth in Section 2 of the Purchase Agreement, (B)
the due performance by the Trust and the Guarantor of the covenants and
agreements set forth in Section 5 of the Purchase Agreement and the due
performance by the Initial Purchasers of the covenants and agreements set forth
in Section 2 of the Purchase Agreement, (C) compliance by the Initial Purchasers
with the offering and transfer procedures and restrictions described in the
Offering Document, (D) the accuracy of the representations and warranties made
in accordance with the Offering Document by purchasers to whom the Initial
Purchasers initially resell the Offered Securities and (E) in the case of
resales by the Initial Purchasers pursuant to Rule 144A under the Securities
Act, that purchasers to whom the Initial Purchasers initially resell Offered
Securities receive a copy of the Offering Document or other notice that such
resales are made pursuant to Rule 144A prior to such sale, (i) the offer, sale
and delivery of the Offered Securities to the Initial Purchasers in the manner
contemplated by the Purchase Agreement and the Offering Document and the initial
resale of the Offered Securities by the Initial Purchasers in the manner
contemplated in the Offering Document and the Purchase Agreement, (ii) the
exchange of the Convertible Junior Subordinated Debentures for the Offered
Securities or the distribution of Convertible Junior Subordinated Debentures to
holders of Offered Securities in the circumstances contemplated by the Trust
Agreement, (iii) the issuance of shares of Common Stock upon conversion of the
Offered Securities or Convertible Junior Subordinated Debentures and (iv) the
purchase of the Convertible Junior Subordinated Debentures by the Trust do not
require registration under the Securities Act (it being understood that we
express no opinion as to any subsequent resale of any Offered Securities,
Convertible Junior Subordinated Debentures or Common Stock), and none of the
Trust Agreement, the Indenture or the Guarantee is required to be qualified
under the Trust Indenture Act of 1939, as amended (the "TIA"), although each is
in such form that it may be qualified under the TIA in compliance with the
provisions set forth in the Registration Rights Agreement without material
modification.
We have participated in conferences with representatives of the
Guarantor and the Trust, independent accountants for the Guarantor and the
Trust, the Initial Purchasers and their counsel at which conferences the
contents of the Offering Document, each amendment thereof and supplement thereto
and related matters were discussed, although we have not independently checked
or verified and are not passing upon and assuming no responsibility for the
factual accuracy, completeness or fairness of the statements contained in the
Offering Document, any amendment thereof or supplement thereto. Based on the
foregoing, no facts have come to our attention which cause us to believe that
(i) that the Offering
<PAGE>
Document, as amended and supplemented as of the date of the Purchase Agreement
and as of the date hereof (except for the financial statements, related
schedules and other financial and statistical information contained therein or
omitted therefrom as to all of which we do not express any belief), contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (ii) any document incorporated by reference in the
Offering Document or any further amendment or supplement to such incorporated
document made by the Guarantor prior to the date hereof when they became
effective or were filed with the Commission, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
<PAGE>
EXHIBIT I
1. Stock Purchase Agreement dated as of February 18, 1991 (re: common
stock) between CalEnergy Company, Inc. and Kiewit Energy Company.
2. Amendment #1 to February 18, 1991 Stock Purchase Agreement dated as of
June 19, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
3. Amendment #2 to February 18, 1991 Stock Purchase Agreement dated as of
January 8, 1992 between CalEnergy Company, Inc. and Kiewit Energy
Company.
4. Amendment #3 to February 18, 1991 Stock Purchase Agreement dated as of
April 2, 1993 between CalEnergy Company, Inc. and Kiewit Energy
Company.
5. Shareholder's Agreement dated as of February 18, 1991 between CalEnergy
Company, Inc. and Kiewit Energy Company.
6. Amendment #1 to February 18, 1991 Shareholder's Agreement dated as of
June 19, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
7. Amendment #2 to February 18, 1991 Shareholder's Agreement dated as of
November 20, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
8. Amendment #3 to February 18, 1991 Shareholder's Agreement dated as of
April 2, 1992 between CalEnergy Company, Inc. and Kiewit Energy
Company.
9. Amendment #4 to February 18, 1991 Shareholder's Agreement dated as of
July 20, 1993 between CalEnergy Company, Inc. and Kiewit Energy
Company.
10. Stock Option Agreement dated as of February 18, 1991 (re: $9.00 and
$12.00 options) between CalEnergy Company, Inc. and Kiewit Energy
Company.
11. Amendments #1 to February 18, 1991 Stock Option Agreement dated as of
June 19, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
12. Amendment #2 to February 18, 1991 Stock Option Agreement dated as of
May 12, 1994 between CalEnergy Company, Inc. and Kiewit Energy Company.
13. Stock Option Agreement dated as of June 19, 1991 (re: $11 5/8 options)
between CalEnergy Company, Inc. and Kiewit Energy Company.
14. Registration Rights Agreement dated as of February 18, 1991 (re: common
stock $9.00 and $12.00 options) between CalEnergy Company, Inc. and
Kiewit Energy Company.
15. Amendment #1 to February 18, 1991 Registration Rights Agreement dated
as of June 19, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
<PAGE>
16. Registration Rights Agreement dated as of June 19, 1991 (re: $11 5/8
options) between CalEnergy Company, Inc. and Kiewit Energy Company.
17. Amendment #1 to June 19, 1991 Registration Rights Agreement dated as of
November 20, 1991 between CalEnergy Company, Inc. and Kiewit Energy
Company.
18. Securities Purchase Agreement dated as of November 20, 1991 (re: Series
C Preferred Stock and 9.5% Exchange Debenture) between CalEnergy
Company, Inc. and Kiewit Energy Company.
19. Joint Venture Agreement dated as of December 14, 1993 between CalEnergy
Company, Inc. and Kiewit Construction Group and Kiewit Diversified
Group.
20. Indenture, dated as of March 24, 1994, relating to $529,640,000 10-1/4%
Senior Discount Notes due 2004 between CalEnergy Company, Inc. and IBJ
Schroder Bank and Trust Company, as Trustee.
21. Indenture, dated as of July 21, 1995, relating to $200,000,000 9-7/8%
Limited Recourse Senior Secured Notes Due 2004 between CalEnergy
Company, Inc. and The Bank of New York, as Trustee.
22. Indenture, dated as of April 10, 1996, relating to 6-1/4% Convertible
Junior Subordinated Deferrable Interest Debentures Due 2016 between
CalEnergy Company, Inc. and The Bank of New York, as Trustee.
23. Indenture, dated as of September 20, 1996, relating to $225,000,000
9-1/2% Senior Notes due September 15, 2006 CalEnergy Company, Inc. and
IBJ Schroder Bank and Trust Company, as Trustee.
24. Master Trust Deed, dated October 22, 1990, relating to(pound)55,00,000
12.661% Bonds due 1999 of Northern Electric plc.
25. Master Trust Deed, dated October 16, 1995, relating to
(pound)100,00,000 8.625% Guaranteed Bonds due 2005 and
(pound)100,00,000 8.875% Guaranteed Bonds due 2020 of Northern Electric
Finance plc.
26. 10-1/4% Senior Discount Notes due 2004 of CalEnergy Company, Inc.
27. 9-7/8% Limited Recourse Senior Secured Notes Due 2004 of CalEnergy
Company, Inc..
28. 6-1/4% Convertible Junior Subordinated Deferrable Interest Debentures
Due 2016 of CalEnergy Company, Inc.
29. 9-1/2% Senior Notes due September 15, 2006 of CalEnergy Company, Inc.
30. Credit Agreement, dated as of October 28, 1996, by and among, CalEnergy
Company, Inc. and the banks and other financial institutions parties
thereto and Credit Suisse, New York branch.
<PAGE>
31. Purchase Agreement, dated February 20, 1997, among CalEnergy Capital
Trust II, CalEnergy Company, Inc., Lehman Brothers Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.
32. Registration Rights Agreement, dated February 26, 1997, among CalEnergy
Capital Trust II, CalEnergy Company, Inc. and the Purchasers named
therein.
33. Common Securities Purchase Agreement, dated February 26, 1997, between
CalEnergy Capital Trust II and CalEnergy Company, Inc.
34. Debenture Purchase Agreement, dated February 26, 1997, between
CalEnergy Capital Trust II and CalEnergy Company, Inc.
35. Letter of Representations, dated February 26, 1997, among CalEnergy
Capital Trust II, The Bank of New York and The Depositary Trust
Company.
<PAGE>
ANNEX C
Morris Nichols Opinion
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware. All filings required
under the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a Delaware statutory business trust have been made.
The Trust has all requisite business trust power and authority to own its
property and conduct its business as described in the Offering Document;
2. The Offered Securities have been duly authorized by the Trust for
issuance and, when issued in accordance with the Trust Agreement and delivered
and paid for in accordance with the Purchase Agreement, will be validly issued
and (subject to the terms of the Trust Agreement) fully-paid and nonassessable
undivided beneficial interests in the assets of the Trust. Under the Trust
Agreement, the issuance of the Offered Securities is not subject to preemptive
or other similar rights. The Offered Securities, when issued in accordance with
the Trust Agreement and delivered against and paid for in accordance with the
Purchase Agreement, will have the rights set forth in the Trust Agreement,
subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws of general application relating to or affecting the
enforcement of creditors' rights and remedies, as from time to time in effect,
(B) application of equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (C)
considerations of public policy or the effect of applicable law relating to
fiduciary duties. The Trust Agreement is a legal, valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with its
terms, except as such enforceability may be limited by (A) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws of
general application relating to or affecting the enforcement of creditors'
rights and remedies, as from time to time in effect, (B) application of
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and (C) considerations of public policy or
the effect of applicable law relating to fiduciary duties. Under the Delaware
Business Trust Act and the terms of the Trust Agreement, the holders of the
Offered Securities, in such capacity, will (subject to the terms of the Trust
Agreement) 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; provided, however, we express no
opinion with respect to the liability of any holder of Offered Securities who
is, was or may become a named Trustee of the Trust. We note that Holders of the
Offered Securities will be subject to the withholding provisions of Section 11.4
of the Trust Agreement and may be required to make payment or provide indemnity
or security as set forth therein;
3. The Common Securities have been duly authorized by the Trust for
issuance and, when issued, delivered and paid for in accordance with the Trust
Agreement and upon delivery by the Trust to the Guarantor against payment
therefor as described in the Offering Document, will be validly issued and
(subject to the terms of the Trust Agreement) fully-paid and nonassessable
undivided beneficial interests in the assets of the Trust. We note that Holders
of the Common Securities will be subject to the withholding provisions of
Section 11.4 of the Trust Agreement and may be required to make payment or
provide indemnity or security as set forth therein. Under the Trust Agreement,
the issuance of the Common Securities is not subject to preemptive or other
similar rights. All of the issued and outstanding Common Securities of the Trust
are owned of record by the Guarantor;
<PAGE>
4. The Registration Rights Agreement and the Purchase Agreement each
has been duly authorized by the Trust;
5. The Trust has the requisite business trust power and authority to
authorize, issue and sell the Offered Securities and the Common Securities as
contemplated by the Purchase Agreement and the Trust Agreement and to execute,
deliver and perform the Purchase Agreement and the Registration Rights
Agreement;
6. No governmental approval of any Delaware governmental authority
(other than under or pursuant to any Delaware "blue sky" laws as to which we
express no opinion) is required for the issuance and sale of the Offered
Securities, the issuance by the Guarantor of the Guarantee, the compliance by
the Trust and the Guarantor with all of the provisions of the Purchase Agreement
and the Registration Rights Agreement, the issuance of the Underlying Shares
upon conversion of the Convertible Junior Subordinated Debentures, the sale to
the Trust of the Convertible Junior Subordinated Debentures, the purchase by the
Guarantor of the Common Securities, the execution, delivery and performance by
the Trust and the Guarantor of each of the Purchase Agreement and the
Registration Rights Agreement and by the Guarantor of the Guarantor Agreements,
the consummation of the transactions therein contemplated and the use of the
proceeds of the offering by the Trust to purchase the Convertible Junior
Subordinated Debentures as described in the Offering Document;
7. The issuance and sale of the Offered Securities and the Common
Securities in accordance with the terms of the Purchase Agreement and the Trust
Agreement, the use of the proceeds of the offering to purchase the Convertible
Junior Subordinated Debentures as described in the Offering Document, the
execution, delivery and performance by the Trust of the Purchase Agreement and
the Registration Rights Agreement, the compliance by the Trust with the
provisions of the Purchase Agreement and the Registration Rights Agreement, the
purchase of the Convertible Junior Subordinated Debentures by the Trust, the
purchase by the Guarantor of the Common Securities and the issuance of the
Underlying Shares upon conversion of the Offered Securities and the Convertible
Junior Subordinated Debentures will not (a) to our knowledge, constitute a
violation of or a default under any indenture, mortgage, deed of trust, loan
agreement or other agreement set forth on Exhibit I hereto (which the Trust has
certified to us are the only agreements, instruments or documents of any kind to
which the Trust is a party or by which the Trust is bound or to which any of the
property or assets of the Trust are subject), (b) violate the provisions of the
Trust Agreement or the Certificate of Trust of the Trust or (c) result in a
violation of any Applicable Laws; for purposes of the opinion set forth in this
paragraph, the term "Applicable Laws" means those laws, rules and regulations of
the State of Delaware, including the Business Trust Act, that, in our
experience, are normally applicable to transactions of the type contemplated by
the Purchase Agreement, as in effect on the date hereof; and
8. To our knowledge, there is no action, suit or proceeding pending or
judgments outstanding against the Trust in any court or agency or
instrumentality in the United States of America that relates to or places or may
place in question the validity or enforceability of the Purchase Agreement, the
Registration Rights Agreement or the issuance and sale of the Offered Securities
and the Common Securities by the Trust, the exchange of the Convertible Junior
Subordinated Debentures for Offered Securities or the purchase of the
Convertible Junior Subordinated Debentures by the Trust.
<PAGE>
EXHIBIT I
1. Purchase Agreement, dated February 20, 1997, among CalEnergy Capital
Trust II, CalEnergy Company, Inc., Lehman Brothers Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.
2. Registration Rights Agreement, dated February 26, 1997, among CalEnergy
Capital Trust II, CalEnergy Company, Inc. and the Purchasers named
therein.
3. Common Securities Purchase Agreement, dated February 26, 1997, between
CalEnergy Capital Trust II and CalEnergy Company, Inc.
4. Debenture Purchase Agreement, dated February 26, 1997, between
CalEnergy Capital Trust II and CalEnergy Company, Inc.
5. Letter of Representations, dated February 26, 1997, among CalEnergy
Capital Trust II, The Bank of New York and The Depositary Trust
Company.
<PAGE>
ANNEX D
Emmet, Marvin Opinion
1. The Bank of New York is duly incorporated and is validly existing
and in good standing as a banking corporation under the laws of the State of New
York.
2. The execution, delivery and performance by the Property Trustee of
the Declaration, the execution, delivery and performance by the Guarantee
Trustee of the Guarantee and the execution, delivery and performance by the
Debenture Trustee of the Indenture have been duly authorized by all necessary
corporate action on the part of the Property Trustee, the Guarantee Trustee and
the Debenture Trustee, respectively. The Declaration, the Guarantee and the
Indenture have been duly executed and delivered by the Property Trustee, the
Guarantee Trustee and the Debenture Trustee, respectively, and constitute the
legal, valid and binding obligations of the Property Trustee, the Guarantee
Trustee and the Debenture Trustee, respectively, enforceable against the
Property Trustee, the Guarantee Trust and the Debenture Trustee, respectively,
in accordance with their terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3. The execution, delivery and performance of the Declaration, the
Guarantee and the Indenture by the Property Trustee, the Guarantee Trustee and
the Debenture Trustee, respectively, does not conflict with or constitute a
breach of the Organization Certificate or By-laws of the Property Trustee, the
Guarantee Trustee and the Debenture Trustee, respectively or the terms of any
indenture or other agreement or instrument known to such counsel and to which
the Property Trustee, the Guarantee Trustee or the Debenture Trustee,
respectively, is a party or is bound or any judgment, order or decree known to
such counsel to be applicable to the Property Trustee, the Guarantee Trustee or
the Debenture Trustee, respectively, of any court, regulatory body, governmental
body or arbitrator having jurisdiction over the Property Trustee, the Guarantee
Trustee or the Debenture Trustee, respectively.
4. No consent, approval or authorization of, or registration with or
notice to any federal or New York State banking authority is required for the
execution, delivery or performance by the Property Trustee, the Guarantee
Trustee or the Debenture Trustee of the Declaration, the Guarantee and the
Indenture, respectively.
<PAGE>
ANNEX E
Richards, Layton Opinion
The Bank of New York (Delaware) has been duly incorporated and
is validly existing in good standing as a banking corporation under the laws of
the State of Delaware and has the corporate power to act as Trustee of a
Delaware business trust under the laws of the State of Delaware, 12 Del.C. ss.
3801, et. seq.
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM 144A GLOBAL PREFERRED SECURITY TO REGULATION S GLOBAL
PREFERRED SECURITY
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION
OF TRANSFER FROM 144A GLOBAL PREFERRED SECURITY TO
REGULATION S GLOBAL PREFERRED SECURITY
(Pursuant to Section 9.2(c) of the Declaration)
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
RE: 6-1/4% Trust Convertible
Preferred Securities of
CalEnergy Capital Trust II
Dear Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Declaration of Trust, dated as of February 26, 1997 (the "Declaration"), of
CalEnergy Capital Trust II, a Delaware business trust (the "Trust"), among
CalEnergy Company, Inc., as Sponsor, and the several trustees named therein.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Declaration.
This letter relates to _________ (number) Preferred Securities
which are evidenced by one or more 144A Global Preferred Securities and held
with the Depositary in the name of _____________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Preferred
Securities to a Person who will take delivery thereof in the form of an equal
number of Preferred Securities evidenced by one or more Regulation S Global
Preferred Securities, which amount, immediately after such transfer, is to be
held with the Depositary through Euroclear or CEDEL or both.
In connection with such request and in respect of such
Preferred Securities, the Transferor hereby certifies that such transfer has
been effected in compliance with the transfer restrictions applicable to the
Preferred Securities and pursuant to and in accordance with Rule 903 or Rule 904
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor hereby further certifies that:
D-1
<PAGE>
(1) The offer of the Preferred Securities was not made to a
person in the United States;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or the
Transferor and any person acting on its behalf
reasonably believed and believes that the transferee
was outside the United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market
and neither the Transferor nor any person acting on
its behalf knows that the transaction was prearranged
with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the
Securities Act;
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to
be held with the Depositary through Euroclear or
CEDEL or both; and
(6) with respect to transfers made in reliance on Rule
144, the Preferred Securities are being transferred
in a transaction permit- ted by Rule 144 under the
Securities Act; and with respect to transfer made in
reliance on Rule 144A, that such Preferred
Securities are being transferred in accordance with
Rule 144A under the Securities Act to a transferee
that the Transferor reasonably believes is purchasing
the Preferred Securities for its own account or an
account with respect to which the transferee
exercises sole investment discretion and the
transferee and any such account is a "qualified
institutional buyer" within
D-2
<PAGE>
the meaning of Rule 144A, in a transaction meeting
the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United
States or any other jurisdiction.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903 (c) (2) or (3) or Rule 904(c)(1) of Regulation S
are applicable thereto, we confirm that such sale has been made in accordance
with the applicable provisions of Rule 903 (c) (2) or (3) or Rule 904(c)(1), as
the case may be.
Upon giving effect to this request to exchange a beneficial
interest in a 144A Global Preferred Security for a beneficial interest in a
Regulation S Global Preferred Security, the resulting beneficial interest shall
be subject to the restrictions on transfer applicable to Regulation S Global
Preferred Securities pursuant to the Declaration and the Securities Act.
D-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Trust and the Initial Purchasers under
the Purchase Agreement, and you and each of them are entitled to rely on the
contents of this certificate. Terms used in this certificate and not otherwise
defined in the Declaration have the meanings set forth in Regulation S under the
Securities Act.
---------------------------
[Insert Name of Transferor]
By:
----------------------
Name:
Title:
Dated:
----------------------
D-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL PREFERRED SECURITY TO 144A GLOBAL
PREFERRED SECURITY
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER
FROM REGULATION S GLOBAL PREFERRED SECURITY
TO 144A GLOBAL PREFERRED SECURITY
(Pursuant to Section 9.2(d) of the Declaration)
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
RE: 6-1/4% Trust Convertible
Preferred Securities of
CalEnergy Capital Trust II
Dear Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Declaration of Trust, dated as of February 26, 1997 (the "Declaration"), of
CalEnergy Capital Trust II, a Delaware business trust (the "Trust"), among
CalEnergy Company, Inc., as Sponsor, and the several trustees named therein.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Declaration.
This letter relates to _________ (number) Preferred Securities
which are evidenced by one or more Regulation S Global Preferred Securities and
held with the Depositary through Euroclear or CEDEL or both in the name of
_____________________ (the "Transferor"). The Transferor has requested a
transfer of such beneficial interest in the Preferred Securities to a Person who
will take delivery thereof in the form of an equal number of Preferred
Securities evidenced by one or more 144A Global Preferred Securities, which
amount, immediately after such transfer, is to be held with the Depositary.
In connection with such request and in respect of such
Preferred Securities, the Transferor hereby certifies that:
[CHECK ONE]
E-1
<PAGE>
o such transfer is being effected pursuant to and in accordance
with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Preferred
Securities are being transferred to a Person that the
Transferor reasonably believes is purchasing the Preferred
Securities for its own account, or for one or more accounts
with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A;
or
o such transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
o such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
o such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than
Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Preferred Securities are being trans-
ferred in compliance with the transfer restrictions
applicable to the Preferred Securities and in accordance with
the requirements of the exemption claimed, which certification
is supported by such legal opinions or other information
provided by the Transferor or the transferee (a copy of
which the Transferor has attached to this certification) in
form reasonably acceptable to the Trust, to the effect that
such transfer is in compliance with the Securities Act;
and such Preferred Securities are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
E-2
<PAGE>
Upon giving effect to this request to exchange a beneficial
interest in Regulation S Global Preferred Securities for a beneficial interest
in 144A Global Preferred Securities, the resulting beneficial interest shall be
subject to the restrictions on transfer applicable to 144A Global Preferred
Securities pursuant to the Declaration and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Trust and the Initial Purchasers under
the Purchase Agreement, and you and each of them are entitled to rely on the
contents of this certificate. Terms used in this certificate and not otherwise
defined in the Declaration have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ______________________
E-3
<PAGE>
ANNEX I
TERMS OF SECURITIES
<PAGE>
ANNEX I
TERMS OF
6-1/4% TRUST CONVERTIBLE PREFERRED SECURITIES
6-1/4% TRUST CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of February 26, 1997 (as amended from time to
time, the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Offering Memorandum referred to below):
1. Designation and Number.
(a) "Preferred Securities." 3,000,000 Preferred Securities of the
Trust with an aggregate liquidation preference with respect to
the assets of the Trust of One Hundred and Fifty Million
Dollars ($150,000,000), plus up to an additional 600,000
Preferred Securities of the Trust with an aggregate
liquidation preference with respect to the assets of the Trust
of Thirty Million Dollars ($30,000,000) solely to cover
over-allotments, as provided for in the Purchase Agreement
(the "Additional Preferred Securities"), and a liquidation
preference with respect to the assets of the Trust of $50 per
preferred security, are hereby designated for the purposes
of identification only as "6-1/4% Trust Convertible Preferred
Securities (liquidation preference $50 per Convertible
Preferred Security)" (the "Preferred Securities"). The
certificates evidencing the Preferred Securities shall be
substantially in the form of Exhibit A-1 to the Declaration,
with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or
practice or to conform to the rules of any stock exchange or
other organization on which the Preferred Securities are
listed.
(b) "Common Securities." 92,784 Common Securities of the Trust
with an aggregate liquidation amount with respect to the
assets of the Trust of Four Million Six Hundred Thirty-Nine
Thousand Two Hundred Dollars ($4,639,200) plus up to an
additional 18,557 Common Securities of the Trust with an
aggregate liquidation amount with
<PAGE>
respect to the assets of the Trust of Nine Hundred
Twenty-Seven Thousand Eight Hundred Fifty ($927,850) to meet
the capital requirements of the Trust in the event of an
issuance of Additional Preferred Securities, and a liquidation
amount with respect to the assets of the Trust of $50 per
Common Security, are hereby designated for the purposes of
identification only as "6-1/4% Trust Convertible Common
Securities (liquidation amount $50 per Convertible Common
Security)" (the "Common Securities" and, together with the
Preferred Securities, the "Securities"). The certificates
evidencing the Common Securities shall be substantially in the
form of Exhibit A-2 to the Declaration, with such changes and
additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate
per annum of 6-1/4% (the "Coupon Rate") of the stated
liquidation amount of $50 per 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 any such
interest including any Additional Payments 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.
(b) Distributions on the Securities will be cumulative, will
accrue from the date of initial issuance of the Securities and
will be payable quarterly in arrears, on the following dates,
which dates correspond to the interest payment dates on the
Debentures: March 1, June 1, September 1, and December 1 of
each year, commencing on June 1, 1997, when, as and if
available for payment by the Property Trustee, except as
otherwise described below. 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
I-2
<PAGE>
periods not exceeding 20 consecutive quarters (each an
"Extension Period"), during which Extension Period no interest
shall be due and payable on the Debentures; provided, that no
Extension Period shall last 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 deferral, 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 Period. Prior to the expiration of any Extension
Period, the Debenture Issuer may elect to continue to defer
payments of interest for another Extension Period, provided,
that such Extension Period, together with all previous and
further consecutive Extension Periods, may not exceed 20
consecutive quarters and provided further that such Extension
Period may not extend beyond the maturity of the Debentures.
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 expiration 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.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust
on the relevant record dates. The relevant record dates
shall be 15 days prior to the relevant payment dates, except
as otherwise described in this Annex I to the Declaration.
Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment in respect of
the Preferred Securities being held in book-entry form
through The Depository Trust Company (the "Depositary") will
be made as described under the heading "Description of the
Convertible Preferred Securities -- Form, Denomination and
Registration" in the Offering Memorandum. The relevant record
dates for the Common Securities shall be the same record dates
as for the Preferred Securities. Distributions payable on
any Securities that are not punctually paid on any
Distribution payment date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures, will
cease to be payable to the Person in whose name such
Securities are registered on the relevant record date, and
such defaulted Distribution will instead be payable to the
Person in whose name such Securities are registered on the
special record date or other specified date determined in
accordance with the Indenture. If any date on which
Distributions are payable on the Securities is
I-3
<PAGE>
not a Business Day, then payment of the Distribution payable
on such date will be made on the next succeeding day that is a
Business Day (and 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.
(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into Common Stock of
the Debenture Issuer pursuant to the terms of the Securities
as forth in this Annex I to the Declaration, no payment,
allowance or adjustment shall be made with respect to
accumulated and unpaid Distributions on such Securities, or be
required to be made; provided that Holders of Securities
at the close of business on any record date for the payment
of Distributions will be entitled to receive the Distributions
payable on such Securities on the corresponding payment date
notwithstanding the conversion of such Securities into Common
Stock of the Debenture Issuer following such record date.
(e) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein)
among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution of
the Trust (each a "Liquidation") the then Holders of the Securities on the date
of the Liquidation, as the case may be, will be entitled to receive out of the
assets of the Trust available for distribution to Holders of Securities, after
paying or making reasonable provision to pay all claims and obligations of the
Trust in accordance with Section 3808(e) of the Business Trust Act,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $50 per Security plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"), unless, in
connection with such Liquidation, Debentures in an aggregate principal amount
equal to the aggregate stated liquidation amount of such Securities, with an
interest rate equal to the Coupon Rate of, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on, such
Securities, shall, after paying or making reasonable provision to pay all claims
and obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act, be distributed on a Pro Rata basis to the Holders of the Securities.
I-4
<PAGE>
If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis in
accordance with paragraph 9 below.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part,
whether at maturity or upon redemption (either at the option
of the Debenture Issuer or pursuant to a Special Event), the
proceeds from such repayment or payment shall be
simultaneously applied to redeem Securities having an
aggregate liquidation amount equal to the aggregate principal
amount of the Debentures so repaid or redeemed at a redemption
price per Security equal to the redemption price of the
Debentures, together with accrued and unpaid Distributions
thereon through the date of the redemption, payable in cash
(the "Redemption Price"). Holders will be given not less than
30 (or in the case of a redemption at the option of the
Debenture Issuer, not less than 20) nor more than 60 days'
notice of such redemption.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities
will be redeemed Pro Rata and the Preferred Securities to be
redeemed will be as described in paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event shall occur and be continuing
the Sponsor shall cause the Regular Trustees to dissolve the
Trust and, after paying or making reasonable provision to
pay all claims and obligations of the Trust in accordance with
Section 3808(e) of the Business Trust Act, cause Debentures
to be distributed to the Holders of the Securities in
liquidation of the Trust within 90 days following the
occurrence of such Tax Event (the "90 Day Period"); provided,
however, that such dissolution, liquidation and distribution
shall be conditioned on (i) the Regular Trustees' receipt
of an opinion of a nationally recognized independent tax
counsel 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 the 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
Debentures, and (ii) the Sponsor being unable to avoid such
Tax Event within such 90-day period by taking some ministerial
action or
I-5
<PAGE>
pursuing some other reasonable measure that, in the sole
judgment of the Sponsor, will have no adverse effect on the
Trust, the Sponsor or the Holders of the Securities and will
involve no material cost ("Ministerial Action").
If (i) the Debenture Issuer has received an
opinion (a "Redemption Tax Opinion") of a nationally
recognized independent tax counsel (reasonably acceptable to
the Regular Trustees) experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial
risk that the Debenture Issuer would be precluded from
deducting the interest on the Debentures for United States
federal income tax purposes, even after the Debentures were
distributed to the Holders of Securities upon liquidation of
the Trust as described in this paragraph 4(c), or (ii) the
Regular Trustees shall have been informed by such tax counsel
that it cannot deliver a No Recognition Opinion, the Debenture
Issuer shall have the right, upon not less than 30 nor more
than 60 days' notice, and within 90 days following the
occurrence of such Tax Event, to redeem the Debentures in
whole (but not in part) for cash, at par plus accrued and
unpaid interest and, following such redemption, all the
Securities will be redeemed by the Trust at the liquidation
preference of $50 per Security plus accrued and unpaid
distributions; provided, however, that, if at the time there
is available to the Debenture Issuer or the Trust the
opportunity to eliminate, within such 90 day period, the Tax
Event by taking some Ministerial Action, the Trust or the
Debenture Issuer will pursue such Ministerial Action in lieu
of redemption. In lieu of the foregoing options, the Sponsor
will also have the option of causing the Preferred Securities
to remain outstanding and pay Additional Interest on the
Debentures.
"Tax Event" means that the Sponsor shall
have received an opinion of a nationally recognized
independent tax counsel (reasonably acceptable to the Regular
Trustees) experienced in such matters (a "Dissolution Tax
Opinion") 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 therefor or
therein, or (b) any amendment to, or change in, an
interpretation or application of any 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
I-6
<PAGE>
of the Offering Memorandum), which amendment or change is
effective or which interpretation or pronouncement is
announced on or after the date of the Offering Memorandum,
there is more than an insubstantial risk that (i) the Trust is
or will be subject to United States federal income tax with
respect to interest received on the Debentures, (ii) the Trust
is, or will be within 90 days of the date thereof, subject to
more than a de minimis amount of taxes, duties, assessments or
other governmental charges of whatever nature imposed by the
United States, or any other taxing authority, or (iii)
interest payable by the Debenture Issuer to the Trust on the
Debentures is not or will not be deductible by the Debenture
Issuer for United States federal income tax purposes.
Notwithstanding anything in the previous sentence to the
contrary, a Tax Event shall not include any Change in Tax Law
that requires the Debenture Issuer for United States federal
income tax purposes to defer taking a deduction for any
original issue discount ("OID") that accrues with respect to
the Debentures until the interest payment related to such OID
is paid by the Debenture Issuer in money; provided, that such
Change in Tax Law does not create more than an insubstantial
risk that the Debenture Issuer will be prevented from taking a
deduction for OID accruing with respect to the Debentures at a
date that is no later than the date the interest payment
related to such OID is actually paid by the Debenture Issuer
in money.
If an Investment Company Event (as
hereinafter defined) shall occur and be continuing, the
Sponsor shall cause the Regular Trustees to dissolve the Trust
and, after paying or making reasonable provision to pay all
claims and obligations of the Trust in accordance with Section
3808(e) of the Business Trust Act, cause the Debentures to be
distributed to the Holders of the Securities in liquidation of
the Trust within 90 days following the occurrence of such
Investment Company Event.
"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 or
regulatory authority (a "Change in 1940 Act Law"), to the
effect that the Trust is or will be considered an Investment
Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes
effective on or after the date of the Offering Memorandum.
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<PAGE>
After the date fixed for any distribution of
Debentures: (i) the Securities will no longer be deemed to be
outstanding, (ii) the Depositary or its nominee (or any
successor Clearing Agency or its nominee), as record Holder of
Preferred Securities represented by global certificates, will
receive a registered global certificate or certificates
representing the Debentures to be delivered upon such
distribution and (iii) any certificates representing
Securities, except for certificates representing Preferred
Securities held by the Depositary or its nominee (or any
successor Clearing Agency or its nominee), will be deemed to
represent Debentures having an aggregate principal amount
equal to the aggregate stated liquidation amount of such
Securities, with accrued and unpaid interest equal to accrued
and unpaid Distributions on such Securities until such
certificates are presented to the Debenture Issuer or its
agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding
Securities unless all accrued and unpaid Distributions have
been paid on all Securities for all quarterly Distribution
periods terminating on or before the date of redemption.
(e) If the Debentures are distributed to the Holders of the
Securities, pursuant to the terms of the Indenture, the
Debenture Issuer will use its best efforts to have the
Debentures listed on any exchange on which the Preferred
Securities were listed immediately prior to the distribution
of the Debentures.
(f) "Redemption or Distribution Procedures."
(i) Notice of any redemption of, or notice of dis-
tribution of Debentures in exchange for the
Securities (a "Redemption/Distribution Notice")
will be given by the Trust by mail to each Holder
of Securities to be redeemed or exchanged not less
than 30 (or in the case of a redemption at the
option of the Debenture Issuer, not less than 20)
nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case
of a redemption, will be the date fixed for
redemption of the Debentures. For purposes of the
calculation of the date of redemption or exchange
and the dates on which notices are given pursuant
to this paragraph 4(f)(i), a Redemption/
Distribution Notice shall be deemed to be given
on the day such notice is first mailed by
first-class mail, postage pre-
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<PAGE>
paid, to Holders of Securities. Each Redemp-
tion/Distribution Notice shall be addressed to the
Holders of Securities at the address of each such
Holder appearing in the books and records of the
Trust. No defect in the Redemption/Distribution
Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect
to any other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be
redeemed shall be redeemed Pro Rata from each
Holder of Preferred Securities, it being under-
stood that, in respect of Preferred Securities
registered in the name of and held of record by the
Depositary or its nominee (or any successor
Clearing Agency or its nominee), the distribution
of the proceeds of such redemption will be made to
each Clearing Agency Participant (or Person on
whose behalf such nominee holds such securities) in
accordance with the procedures applied by such
agency or nominee.
(iii) If Securities are to be redeemed and the Trust
gives a Redemption/Distribution Notice, which
notice may only be issued if the Debentures are
redeemed as set out in this paragraph 4 (which
notice will be irrevocable), then (A) with re-
spect to Preferred Securities held in book-entry
form, by 12:00 noon, New York City time, on the
redemption date, provided that the Debenture Issuer
has paid the Property Trustee a sufficient amount
of cash in connection with the related redemption
or maturity of the Debentures, the Trust will
deposit irrevocably with the Depositary or its
nominee (or successor Clearing Agency or its
nominee) funds sufficient to pay the applicable
Redemption Price with respect to such Preferred
Securities and will give the Depositary irrevocable
instructions and authority to pay the applicable
Redemption Price to the Holders of such Preferred
Securities represented by the Global Preferred
Securities, and (B) with respect to Preferred
Securities issued in certificated form and Common
Securities, provided that the Debenture Issuer has
paid the Property Trustee a sufficient amount of
cash in connection with the related redemption or
maturity of the Debentures, the Trust will
irrevocably deposit with the Paying Agent funds
suffi-
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<PAGE>
cient to pay the amount payable on redemption to
the Holders of such Securities upon surrender of
their certificates. If a Redemption/Distribution
Notice shall have been given and funds deposited as
required, then on the date of such deposit, all
rights of Holders of such Securities so called for
redemption will cease, except the right of the
Holders of such Securities to receive the
Redemption Price, but without interest on such
Redemption Price. Neither the Regular Trustees nor
the Trust shall be required to register or cause to
be registered the transfer of any Securities that
have been so called for redemption. If any date
fixed for redemption of Securities is not a
Business Day, then payment of the amount payable on
such date will be made on the next succeeding day
that 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 each case
with the same force and effect as if made on such
date fixed for redemption. If payment of the
Redemption Price in respect of any Securities is
improperly withheld or refused and not paid either
by the Trust or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee,
Distributions on such 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).
(iv) In the event of any redemption in part, the Trust
shall not be required to (i) issue, register the
transfer of or exchange of any Preferred Security
during a period beginning at the opening of
business 15 days before any selection for
redemption of 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 Preferred Securities
to be so redeemed and (ii) register the transfer of
or exchange of any Preferred Securities so
selected for redemption, in whole or in part,
except for the unredeemed portion of any Preferred
Securities being redeemed in part.
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<PAGE>
(v) Redemption/Distribution Notices shall be sent by
the Regular Trustees on behalf of the Trust to (A)
in the case of Preferred Securities held in
book-entry form, the Depositary and, in the case of
Securities held in certificated form, the Holders
of such certificates and (B) in respect of the
Common Securities, the Holder thereof.
(vi) Subject to the foregoing and applicable law
(including, without limitation, United States
federal securities laws), the Sponsor or any of its
subsidiaries may at any time and from time to time
purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
5. Conversion Rights.
The Holders of Securities shall have the right at any time, beginning
60 days following the first date of original issuance of the Preferred
Securities through the close of business on February 25, 2012 (or, in
the case of Securities called for redemption, prior to the close of
business on the Business Day prior to the redemption date), at their
option, to cause the Conversion Agent to convert Securities, on behalf
of the converting Holders, into shares of Common Stock, par value
$0.0675 per share (the "Common Stock"), of the Debenture Issuer in the
manner described herein on and subject to the following terms and
conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of
Common Stock of the Debenture Issuer pursuant to the Holder's
direction to the Conversion Agent to exchange such Securities
for a portion of the Debentures theretofore held by the
Trust on the basis of one Security per $50 principal amount of
Debentures, and immediately convert such amount of Debentures
into fully paid and nonassessable shares of Common Stock of
the Debenture Issuer at an initial conversion rate of 1.1655
shares of Common Stock of the Debenture Issuer per $50
principal amount of Debentures (which is equivalent to a
conversion price of $42.90 per share of Common Stock of the
Debenture Issuer, subject to certain adjustments set forth
in the terms of the Debentures (as so adjusted, "Conversion
Price")).
(b) In order to convert Securities into Common Stock of the
Debenture Issuer the Holder shall submit to the Conversion
Agent at the office referred to above an irrevocable request
to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the
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<PAGE>
Securities are in certificated form, with such certificates.
The Conversion Request shall (i) set forth the number of
Securities to be converted and the name or names, if other
than the Holder, in which the shares of Common Stock of the
Debenture Issuer should be issued and (ii) direct the
Conversion Agent (a) to exchange such Securities for a portion
of the Debentures held by the Trust (at the rate of exchange
specified in the preceding paragraph) and (b) to immediately
convert such Debentures on behalf of such Holder, into Common
Stock of the Debenture Issuer (at the conversion rate
specified in the preceding paragraph). The Conversion Agent
shall notify the Trust of the Holder's election to exchange
Securities for a portion of the Debentures held by the Trust
and the Trust shall, upon receipt of such notice, deliver to
the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section. The
Conversion Agent shall thereupon notify the Debenture Issuer
of the Holder's election to convert such Debentures into
shares of Common Stock of the Debenture Issuer. Holders of
Securities at the close of business on a Distribution record
date will be entitled to receive the Distribution payable on
such securities on the corresponding Distribution payment date
notwithstanding the conversion of such Securities following
such record date but prior to such distribution payment date.
Except as provided above, neither the Trust nor the Sponsor
will make, or be required to make, any payment, allowance or
adjustment upon any conversion on account of any accumulated
and unpaid Distributions accrued on the Securities (including
any Additional Payments accrued thereon) surrendered for
conversion, or on account of any accumulated and unpaid
dividends on the shares of Common Stock of the Debenture
Issuer issued upon such conversion. The Debenture Issuer shall
make no payment or allowance for distributions on the shares
of Common Stock of the Debenture Issuer issued upon such
conversion, except to the extent that such shares of Common
Stock of the Debenture Issuer are held of record on the record
date for any such distributions and except as provided in
Section 1309 of the Indenture. Securities shall be deemed to
have been converted immediately prior to the close of business
on the day on which a Notice of Conversion relating to such
Securities is received the Trust in accordance with the
foregoing provision (the "Conversion Date"). The Person or
Persons entitled to receive the Common Stock of the Debenture
Issuer issuable upon conversion of the Debentures shall be
treated for all purposes as the record holder or holders of
such Common Stock of the Debenture Issuer at such time. As
promptly as
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<PAGE>
practicable on or after the Conversion Date, the Debenture
Issuer shall issue and deliver at the office of the Conversion
Agent a certificate or certificates for the number of full
shares of Common Stock of the Debenture Issuer issuable upon
such conversion, together with the cash payment, if any, in
lieu of any fraction of any share to the Person or Persons
entitled to receive the same, unless otherwise directed by the
Holder in the notice of conversion and the Conversion Agent
shall distribute such certificate or certificates to such
Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints
The Bank of New York "Conversion Agent" for the purpose of
effecting the conversion of Securities in accordance with this
Section. In effecting the conversion and transactions
described in this Section, the Conversion Agent shall be
acting as agent of the Holders of Securities directing it to
effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Securities from time to time
for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this Section
and (ii) to convert all or a portion of the Debentures into
Common Stock of the Debenture Issuer and thereupon to deliver
such shares of Common Stock of the Debenture Issuer in
accordance with the provisions of this Section and to deliver
to the Trust a new Debenture or Debentures for any resulting
unconverted principal amount.
(d) No fractional shares of Common Stock of the Debenture Issuer
will be issued as a result of conversion, but in lieu thereof,
such fractional interest will be paid in cash (based on the
last reported sale price of the Common Stock of the Debenture
Issuer on the date such Securities are surrendered for
conversion) by the Debenture Issuer to the Trust, which in
turn will make such payment to the Holder or Holders of
Securities so converted.
(e) The Debenture Issuer shall at all times reserve and keep
available out of its authorized and unissued Common Stock of
the Debenture Issuer, solely for issuance upon the
conversion of the Debentures, free from any preemptive or
other similar rights, such number of shares of Common Stock of
the Debenture Issuer as shall from time to time be issuable
upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Debenture Issuer shall be
entitled to deliver upon conversion of Debentures, shares of
Common Stock of the Debenture Issuer reacquired and
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<PAGE>
held in the treasury of the Debenture Issuer (in lieu of the
issuance of authorized and unissued shares of Common Stock of
the Debenture Issuer), so long as any such treasury shares are
free and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock of the Debenture
Issuer issued upon conversion of the Debentures shall be duly
authorized, validly issued and fully paid and nonassessable.
The Trust shall deliver the shares of Common Stock of the
Debenture Issuer received upon conversion of the Debentures to
the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for transfer,
stamp or withholding taxes. Each of the Debenture Issuer and
the Trust shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and
shall comply with all applicable requirements as to
registration or qualification of the Common Stock of the
Debenture Issuer (and all requirements to list the Common
Stock of the Debenture Issuer issuable upon conversion of
Debentures that are at the time applicable), in order to
enable the Debenture Issuer to lawfully issue Common Stock of
the Debenture Issuer to the Trust upon conversion of the
Debentures and the Trust to lawfully deliver the Common Stock
of the Debenture Issuer to each Holder upon conversion of the
Securities.
(f) The Debenture Issuer will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of
Common Stock of the Debenture Issuer on conversion of
Debentures and the delivery of the shares of Common Stock of
the Debenture Issuer by the Trust upon conversion of the
Securities. The Debenture Issuer shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of
Common Stock of the Debenture Issuer in a name other than that
in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Trust or
Debenture Issuer, as the case may be, the amount of any such
tax, or has established to the satisfaction of the Trust or
Debenture Issuer, as the case may be, that such tax has been
paid.
(g) Nothing in the preceding paragraph (f) shall limit the
requirement of the Trust or Debenture Issuer, as the case may
be, to withhold taxes pursuant to the terms of the Securities
or set forth in this Annex I to the Declaration or to the
Declaration itself or otherwise
I-14
<PAGE>
require the Property Trustee or the Trust to pay any amounts
on account of such withholdings.
6. Voting Rights - Preferred Securities.
(a) Except as provided under paragraphs 6(b) and 7, in the
Business Trust Act and as otherwise required by law and the
Declaration, the Holders of the Preferred Securities will have
no voting rights.
Subject to the requirements set forth in this paragraph,
following an Event of Default, the Holders of a majority in
liquidation amount of the Preferred Securities, voting
separately as a class may direct the time, method, and place
of conducting any proceeding for any remedy available to the
Property Trustee, or direct the exercise of any trust or power
conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee, as holder
of the Debentures, to (i) exercise the remedies available
under the Indenture with respect to the Debentures, (ii) waive
any past default and its consequences that is waivable under
the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be
due and payable, or (iv) consent to any amendment,
modification, or termination of the Indenture or the
Debentures where such consent shall be required; provided,
however, that where a consent under the Indenture would
require the consent or act of the Holders of greater than a
majority in principal amount of Debentures affected thereby (a
"Super Majority"), the Property Trustee may only give such
consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of
the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding. The Property Trustee shall be under no obligation
to revoke any action previously authorized or approved by a
vote of the Holders of the Preferred Securities. Other than
with respect to directing the time, method and place of
conducting any remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property Trustee
shall be under no obligation to take any action in accordance
with the directions of the Holders of the Preferred Securities
under this paragraph unless the Property Trustee has obtained
an opinion of independent tax counsel to the effect that for
the purposes of United States federal income tax the Trust
will not be classified as other than a grantor trust on
account of such action and each Holder will be treated as
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<PAGE>
owning an undivided beneficial interest in the Debentures.
If a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of
the Debenture Issuer to pay interest or principal on the
Debentures on the date such interest or principal is otherwise
payable (other than pursuant to a valid extension of the
interest payment period by the Debenture Issuer pursuant to
Section 312 of the Indenture) (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 (a "Direct Action") 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 specified
in the Debentures. In addition, if the Property Trustee fails
to enforce its rights under the Debentures (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, thereafter 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. In
connection with any Direct Action, the Debenture Issuer will
be subrogated to the rights of such Holder of Preferred
Securities under the Declaration to the extent of any payment
made by the Debenture Issuer to such Holder of Preferred
Securities in such Direct Action.
Any required approval or direction of Holders of Preferred
Securities may be given at a separate meeting of Holders of
Preferred Securities convened for such purpose, at a meeting
of all of the Holders of Securities in the Trust or pursuant
to written consent. The Regular Trustees will cause a notice
of any meeting at which Holders of 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 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
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<PAGE>
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 the Preferred Securities
will be required for the Trust to redeem and cancel Preferred
Securities or to distribute the Debentures in accordance with
the Declaration and the terms of the Securities.
Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are
owned by the Sponsor or any Affiliate of the Sponsor shall not
be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if such Preferred Securities
were not outstanding.
7. Voting Rights Common Securities.
(a) Except as provided under paragraphs 7(b), (c) and 8, in the
Business Trust Act and as otherwise required by law and the
Declaration, the Holders of the Common Securities will have no
voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to
appoint, remove or replace any Trustee or to increase or
decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after the
Event of Default with respect to the Preferred Securities
has been cured, waived, or otherwise eliminated and subject to
the requirements of the second to last sentence of this
paragraph, the Holders of a Majority in liquidation amount of
the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceed-
ing for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property
Trustee under the Declaration, including (i) directing the
time, method, place of conducting any proceeding for any
remedy available to the Debenture Trustee, or exercising any
trust or power conferred on the Debenture Trustee with respect
to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 606 of the
Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be
due
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<PAGE>
and payable, or (iv) consent to any amendment, modification,
or termination of the Indenture or the Debentures where such
consent shall be required; provided that, where a consent or
action under the Indenture would require the consent or act of
the Holders of greater than a majority in principal amount of
Debentures affected thereby (a "Super Majority"), the Property
Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in
liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of
the Debentures outstanding. Pursuant to this paragraph 7(c),
the Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to
the Property Trustee or the Debenture Trustee as set forth
above, the Property Trustee shall be under no obligation to
take any action in accordance with the directions of the
Holders of the Common Securities under this paragraph unless
the Property Trustee has obtained an opinion of independent
tax counsel to the effect that for the purposes of United
States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action and each
Holder will be treated as owning an undivided beneficial
interest in the Debentures. If the Property Trustee fails to
enforce its rights under the Debentures after a Holder of
Common Securities has made a written request, such Holder of
Common Securities may institute a legal proceeding directly
against the Debenture Issuer or any other Person to enforce
the Property Trustee's rights under the Debentures, without
first instituting any legal proceeding against the Property
Trustee or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities
convened for such purpose, at a meeting of all of the Holders
of Securities in the Trust or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which
Holders of Common 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 Common
Securities. Each such notice will include a statement setting
forth (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
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<PAGE>
which written consent is sought and (iii) instructions
for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common
Securities or to distribute the Debentures in accordance with
the Declaration and the terms of the Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.1 of
the Declaration, if any proposed amendment to the
Declaration provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special
rights of the Securities, whether by way of amendment
to the Declaration or otherwise, or (ii) the dissolu-
tion, winding-up or termination of the Trust, other
than as described in Section 8.1 of the Declaration,
then the Holders of Securities as a class, will be
entitled to vote on such amendment or proposal (but not
on any other amendment or proposal) and such amendment
or proposal shall not be effective except with the
approval of the Holders of at least a Majority in
liquidation amount of the Securities affected thereby,
voting together as a single class; provided, however,
if any amendment or proposal referred to in clause (i)
above would adversely affect only the Preferred Securi-
ties or only the Common Securities, then only the
affected class will be entitled to vote on such amend-
ment or proposal and such amendment or proposal shall
not be effective except with the approval of a Majority
in liquidation amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the
holder of the Debentures is required under the Inden-
ture with respect to any amendment, modification or
termination on the Indenture or the Debentures, the
Property Trustee shall request the written direction of
the Holders of the Securities with respect to such
amendment, modification or termination and shall vote
with respect to such amendment, modification or termi-
nation as directed by a Majority in liquidation amount
of the Securities voting together as a single class;
provided, however, that where a consent under the
Indenture would require the consent of the holders of
greater than a majority in aggregate principal amount
of the Debentures (a "Super Majority"), the Property
Trustee may only give such consent at the written
direction of the Holders of at least the same propor-
tion in aggregate stated liquidation preference of the
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<PAGE>
Securities; provided, further, that the Property Trustee shall
not take any action in accordance with the directions of the
Holders of the Securities under this paragraph 8(b) unless the
Property Trustee has obtained an opinion of tax counsel to the
effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor
trust on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount of
all Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
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13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request to
the Sponsor at its principal place of business.
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EXHIBIT 4.7
PREFERRED SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of February 26, 1997
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of February 26, 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 II, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of February 26, 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 3,000,000 Preferred Securities, having an
aggregate stated liquidation preference of $150,000,000, designated the 6-1/4%
Trust Convertible Preferred Securities (plus up to an additional 600,000 Trust
Convertible Preferred Securities, having an aggregate liquidation preference of
$30,000,000, 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
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(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 6-1/4% 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
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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 February 26, 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-
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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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<PAGE>
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 pertinent 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' Certificate;
(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).
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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
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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 Securities, 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.
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THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.
CALENERGY COMPANY, INC.,
as Guarantor
By: /s/ Steven A. McArthur
--------------------------------
Name: Steven A. McArthur
Title: Senior Vice Presi-
dent and General
Counsel
THE BANK OF NEW YORK, as
Preferred Guarantee Trustee
By: /s/ Byron Merino
--------------------------------
Name: Byron Merino
Title: Assistant Treasurer
<PAGE>
EXHIBIT 4.8
COMMON SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of February 26, 1997
<PAGE>
COMMON SECURITIES GUARANTEE AGREEMENT
This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common
Securities Guarantee"), dated as of February 26, 1997, is executed and delivered
by CalEnergy Company, Inc., a Delaware corporation (the "Guarantor"), for the
benefit of the Holders (as defined herein) from time to time of the Common
Securities (as defined in the Declaration) of CalEnergy Capital Trust II, a
Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of February 26, 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 92,784 Common Securities, having an
aggregate stated liquidation amount of $4,639,200 (plus up to an additional
18,557 Common Securities, having an aggregate liquidation amount of $927,850, to
meet the capital requirements of the Trust in the event of an issuance of
Additional Preferred Securities (as such term is defined in the Declaration)),
designated the 6-1/4% Convertible Common Securities;
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Common Securities Guarantee, to pay to the Holders
of the Common 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 in substantially identical terms to this Common Securities
Guarantee for the benefit of the holders of the 6-1/4% Trust Convertible
Preferred Securities (the "Preferred Securities") (the "Preferred Securities
Guarantee") except that 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 this Common Securities Guarantee are
subordinated to the
<PAGE>
rights of Holders of Preferred Securities to receive Guarantee Payments under
the Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Common Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Common
Securities Guarantee for the benefit of the Holders.
ARTICLE I
SECTION 1.1. In this Common Securities Guarantee, unless the
context otherwise requires, the terms set forth below shall have the following
meanings.
(a) Capitalized terms used in this Common Securities Guarantee
but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Common Securities Guarantee have the same meaning
when used in this Common Securities Guarantee unless otherwise defined
in this Common Securities Guarantee.
(c) A term defined anywhere in this Common Securities
Guarantee has the same meaning throughout;
(d) All references to "the Common Securities Guarantee" or
"this Common Securities Guarantee" are to this Common Securities
Guarantee as modified, supplemented or amended from time to time;
(e) All references in this Common Securities Guarantee to
Articles and Sections are to Articles and Sections of this Common
Securities Guarantee unless otherwise specified; and
(f) A reference to the singular includes the plural and vice
versa.
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"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Common Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions which are required to be paid on such Common 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 Common 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 Common Securities as provided in the Declaration), the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Common Securities to the date of payment, to the extent the
Issuer has funds available therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer (in
either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Common Securities.
ARTICLE II
SECTION 2.1. 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 which 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 2.2. 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 this Common Securities Guarantee
are subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments under the Preferred Securities Guarantee.
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<PAGE>
SECTION 2.3. The Guarantor hereby waives notice of acceptance
of this Common 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 2.4. The obligations, covenants, agreements and duties
of the Guarantor under this Common Securities Guarantee shall in no way be
affected or impaired by 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 Common
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, amount payable upon redemption,
Liquidation Distribution or any other sums payable under the terms of
the Common Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the
Common Securities (other than an extension of time for payment of
Distributions, 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 Common 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,
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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 Common
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 2.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders or any other Persons to give notice
to, or obtain consent of, the Guarantor with respect to the happening of any of
the foregoing.
SECTION 2.5. The Guarantor expressly acknowledges that any
Holder of Common Securities may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Common Securities Guarantee,
without first instituting a legal proceeding against the Issuer or any other
Person.
SECTION 2.6. This Common Securities Guarantee creates a
guarantee of payment and not of collection.
SECTION 2.7. The Guarantor shall be subrogated to all (if any)
rights of the Holders of Common Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Common 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
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Common Securities Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Common Securities Guarantee. If any amount shall
be paid to the Guarantor
5
<PAGE>
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 2.8. The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with respect to the
Common Securities and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.4 hereof.
SECTION 2.9. The Guarantor acknowledges its obligation to
issue and deliver common stock upon the conversion of the Common Securities.
ARTICLE III
SECTION 3.1. So long as any Common Securities remain
outstanding, if (i) the Guarantor shall be in default with respect to its
Guarantee Payments or other obligations hereunder, (ii) 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
or (iii) the Guarantor shall have given notice of its selection of an Extended
Interest Payment Period as provided in the Indenture and such period, or any
extension thereof, shall be continuing, 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
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<PAGE>
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 the Preferred Securities
Guarantee).
SECTION 3.2. This Common 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.
ARTICLE IV
SECTION 4.1. This Common Securities Guarantee shall terminate
upon (i) full payment of the amount payable upon redemption of the Common
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
Common Securities or (iii) full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Issuer. Notwithstanding the
foregoing, this Common Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any Holder of Common
Securities must restore payment of any sums paid under the Common Securities or
under this Common Securities Guarantee.
7
<PAGE>
ARTICLE V
SECTION 5.1. All guarantees and agreements contained in this
Common 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 Common 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 Common
Securities Guarantee without the prior approval of the Holders of at least a
Majority of the aggregate stated liquidation amount of the Common Securities
then outstanding.
SECTION 5.2. Except with respect to any changes which do not
adversely affect the rights of Holders (in which case no consent of Holders will
be required), this Common Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in liquidation amount of
all the outstanding Common 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 5.3. All notices provided for in this Common
Securities Guarantee 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 Issuer, in care of the Regular
Trustees at the Issuer's mailing address set forth
below (or such other address as the Issuer may give
notice of to the Holders of the Common Securities):
Steven A. McArthur
John G. Sylvia
Gregory Abel
CalEnergy Capital Trust
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
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<PAGE>
Omaha, Nebraska 68131
(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
Common 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 Common Securities, 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 5.4. This Common Securities Guarantee is solely for
the benefit of the Holders and is not separately transferable from the Common
Securities.
SECTION 5.5. THIS COMMON 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.
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THIS COMMON SECURITIES GUARANTEE is executed as of the day and
year first above written.
CALENERGY COMPANY,
INC., as Guarantor
By: /s/ Steven A. McArthur
--------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel
and Secretary
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Exhibit 10.1
CALENERGY CAPITAL TRUST II
6-1/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(CONVERTIBLE PREFERRED SECURITIES)
(LIQUIDATION PREFERENCE $50 PER CONVERTIBLE PREFERRED SECURITY)
GUARANTEED TO A LIMITED EXTENT BY, AND
CONVERTIBLE INTO COMMON STOCK OF,
CALENERGY COMPANY, INC.
REGISTRATION RIGHTS AGREEMENT
February 26, 1997
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Lehman Brothers Inc.
3 World Financial Center
New York, N.Y. 10285-1600
Ladies and Gentlemen:
CalEnergy Capital Trust II, a statutory business trust formed under the
laws of the State of Delaware (the "Trust") by CalEnergy Company, Inc., a
Delaware corporation (the "Guarantor"), proposes to issue and sell to Lehman
Brothers Inc. and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Purchasers"), upon the terms set forth in the Purchase Agreement dated February
20, 1997 (the "Purchase Agreement"), among the Purchasers, the Guarantor and the
Trust 6-1/4% Convertible Preferred Securities (liquidation preference $50 per
Convertible Preferred Security) (the "Convertible Preferred Securities") (the
"Initial Placement"). As an inducement to you to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder, the
Trust and the Guarantor agree with you, (i) for the benefit of the Purchasers
and (ii) for the benefit of the holders from time to time of the Convertible
Preferred Securities, the 6-1/4% Convertible Junior Subordinated Debentures Due
2012 (the "Debentures") and the Common Stock, par value $0.0675 per share (the
"Common Stock"), of the Guarantor (together with the related Rights) issuable
upon conversion of the Convertible Preferred Securities or the Debentures
(collectively, together with the Guarantee of the
<PAGE>
Guarantor of the Convertible Preferred Securities, the "Securities"), including
the Purchasers (each of the foregoing a "Holder" and together the "Holders"),
as follows:
1. Definitions. Capitalized terms used herein without definition shall
have their respective meanings set forth in or pursuant to the Purchase
Agreement or the Confidential Offering Memorandum dated February 20, 1997, in
respect of the Convertible Preferred Securities. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:
"Act" or "Securities Act" means the Securities Act of 1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers selected or approved by the Trust and the
Guarantor in accordance with the provisions set forth in Section 6 hereof, that
shall administer an underwritten offering, if any.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities.
"Registrable Securities" means, with respect to any Holder, all
Securities held by such Holder; provided, however, that a Security ceases to be
a Registrable Security when (i) it has been effectively registered under the Act
and disposed of in accordance with the Shelf Registration Statement or (ii) it
is, in the written opinion of counsel to the Trust and the Guarantor, permitted
to be freely sold or distributed to the public pursuant to any exemption from
the registration requirements of the Securities Act, including subsection (k) of
Rule 144, but excluding Rule 144A; and provided that all references to
Registrable Securities herein shall mean, with respect to any Security or
Securities, collectively the associated Convertible Preferred Securities,
Debentures, shares of Common Stock, Rights and Guarantee of such Convertible
Preferred Securities and shall not be deemed to apply separately in respect of
such associated Securities.
"Shelf Registration" means a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Period" has the meaning set forth in Section 2(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
covering resales of the Registrable Securities of the Trust and the Guarantor
pursuant to the provisions of Section 2 hereof filed with the Commission which
covers some or all of the Registrable Securities, as applicable, on an
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appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement,
selected or approved by the Trust and the Guarantor in accordance with the
provisions set forth in Section 6 hereof.
2. Shelf Registration. (a) The Trust and the Guarantor shall, within
180 days following the date of original issuance (the "Issue Date") of the
Convertible Preferred Securities, prepare and file with the Commission a Shelf
Registration Statement relating to the offer and sale of the Registrable
Securities by the Holders from time to time in accordance with the methods of
distribution set forth in such Shelf Registration Statement and, thereafter,
shall each use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective under the Act (subject to Section 2(d) below)
no later than 270 days after the Issue Date, provided, however, that no Holder
shall be entitled to have the Registrable Securities held by it covered by such
Shelf Registration unless such Holder is in compliance with Section 3(m) hereof.
(b) The Trust and the Guarantor shall each use its reasonable best
efforts (i) to keep the Shelf Registration Statement continuously effective in
order to permit the Prospectus forming part thereof to be usable by Holders for
a period of two years from the date the Shelf Registration Statement is declared
effective or such shorter period that will terminate upon the earlier of the
following: (A) when all the Convertible Preferred Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement, (B) when all Debentures issued to Holders in respect of Convertible
Preferred Securities that had not been sold pursuant to the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement, (C) when
all shares of Common Stock (together with the related Rights) issued upon
conversion of any such Convertible Preferred Securities or any such Debentures
that had not been sold pursuant to the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or (D) when, in the written
opinion of counsel to the Trust and the Guarantor, all outstanding Securities
held by persons which are not Affiliates of the Trust or the Guarantor have
ceased to be Registrable Securities (in any such case, such period being called
the "Shelf Registration Period") and (ii) after the effectiveness of the Shelf
Registration Statement, promptly upon the request of any Holder to take any
action reasonably necessary to register the sale of any Registrable Securities
of such Holder on such Shelf Registration Statement and to identify such Holder
as a selling securityholder.
(c) In the event of a "Registration Default" (as defined in the
Indenture governing the Debentures (the "Indenture") and in the Amended and
Restated Declaration of Trust of the Trust, dated as of February 26, 1997 (the
"Declaration")) additional interest ("Liquidated Damages") will accrue on the
Debentures and the Convertible Preferred Securities from and including the day
following the day such Registration Default shall occur (or be deemed to occur
as described in the Indenture and the Declaration) to but excluding the day on
which such Registration Default has been cured (or be deemed to be cured as
described in the Indenture and the Declaration). Liquidated Damages will be paid
quarterly in arrears, with the first quarterly payment due on the first interest
or distribution payment date, as applicable, following the date on which such
Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day following such
Registration Default and one-half of
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one percent (0.50%) thereof from and after the 91st day following such
Registration Default. Following the cure of a Registration Default, Liquidated
Damages will cease to accrue with respect to such Registration Default.
(d) Notwithstanding any other provision hereof, the Trust and the
Guarantor or the Guarantor acting alone may postpone or suspend the filing or
the effectiveness of the Shelf Registration Statement (or any amendments or
supplements thereto), or the sale of Securities pursuant thereto, if (i) such
action is required by applicable law or regulation, or (ii) such action is taken
in good faith and for valid business reasons (not including avoidance of the
Trust's and Guarantor's obligations hereunder), including the acquisition or
divestiture of assets, other pending corporate developments, public filings with
the Commission or other similar events, so long as the Trust and the Guarantor
promptly thereafter comply with the requirements of Section 3(i) hereof, if
applicable. The Trust and the Guarantor shall be deemed not to have used their
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if either the Trust or the Guarantor intentionally
takes any action not referred to in clause (i) or (ii) of this Section 2(d) that
would result in Holders of Registrable Securities covered thereby not being able
to offer and sell any such Registrable Securities during that period.
Notwithstanding the occurrence of any event referred to in such clauses (i) or
(ii) (a "Suspension"), such event shall not, except as set forth in the
Indenture and the Declaration, suspend, postpone or in any other manner affect
the running of the time period by which the Shelf Registration Statement must be
filed, declared effective, or during which it must remain effective, in order to
prevent the occurrence of a Registration Default pursuant to the Indenture or
the Declaration, and, if the filing or effectiveness of the Shelf Registration
Statement is postponed or suspended as a result of a Suspension, a Registration
Default shall nonetheless exist under the Indenture and the Declaration if all
other requirements set forth for the occurrence of a Registration Default shall
be satisfied, and the provisions of the Debentures and the Convertible Preferred
Securities requiring the payment of additional interest during the period of
such Registration Default, as set forth in the Indenture and the Declaration,
shall be applicable. The Trust and the Guarantor agree to notify the Holders of
the occurrence of a Suspension as promptly as practicable after such occurrence
and to mail notice thereof to Holders reasonably promptly following the
termination of any suspension.
3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Trust and the Guarantor shall furnish to the Purchasers, prior
to the filing thereof with the Commission, a copy of any Shelf Registration
Statement, and each amendment thereof and each amendment or supplement, if any,
to the Prospectus included therein (provided that, for this purpose, amendments
or supplements shall not be deemed to include documents incorporated by
reference into such Shelf Registration Statement) and shall each use its
reasonable best efforts to reflect in each such document, when so filed with the
Commission, such comments as the Purchasers reasonably may propose on a timely
basis.
(b) The Trust and the Guarantor shall take such action as may be
necessary so that (i) any Shelf Registration Statement and any amendment thereto
and any Prospectus forming part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in each
case) complies in all material respects with the Securities Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any amendment or
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supplement to such Prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading (except, in each case, for any untrue statements of a material fact
or omissions of a material fact made in reliance on and in conformity with
information furnished to the Guarantor or the Trust by or on behalf of Holders
or underwriters).
(c) (1) The Trust and the Guarantor shall advise the Purchasers and,
in the case of clause (i), the Holders and, if requested by the Purchasers or
any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective
amendment thereto (exclusive of documents incorporated by
reference) has become effective; and
(ii) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
(2) The Trust and the Guarantor shall advise the Purchasers
and the Holders and, if requested by the Purchasers or any such Holder,
confirm such advice in writing:
(i) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that
purpose;
(ii) of the receipt by the Trust or the Guarantor of
any notification with respect to the suspension of the
qualification of the securities included therein for sale in
any jurisdiction or the initiation of any proceeding for such
purpose;
(iii) of the happening of any event that requires the
making of any changes in the Shelf Registration Statement or
the Prospectus (exclusive of documents incorporated by
reference) so that, as of such date, the Shelf Registration
Statement and the Prospectus do not contain an untrue
statement of a material fact and do not omit to state a
material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading (which advice may be accompanied by an instruction
that such notice constitutes material non-public information
and to suspend the use of the Prospectus until the requisite
changes have been made), and which instruction shall require
that such Holders shall not communicate such material
non-public information to any third party and shall not sell
or purchase, or offer to sell or purchase any securities of
the Trust or the Guarantor after receipt of such advice and
prior to the effectiveness of any action required to be taken
by the Trust or the Guarantor pursuant to Section 3(i) hereof;
and
(iv) if the Guarantor determines that the filing of a
post-effective amendment to the Registration Statement would
be appropriate.
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(d) The Trust and the Guarantor shall use their reasonable best efforts
to prevent the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of any Shelf Registration Statement at the earliest
possible time.
(e) The Trust and the Guarantor shall furnish to each Holder of
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto (including any reports or other documents
incorporated therein by reference), including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits (including
those incorporated by reference).
(f) The Trust and the Guarantor shall, during the Shelf Registration
Period, deliver to each Holder of Securities included within the coverage of any
Shelf Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and each of the Trust and the Guarantor consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling Holders
of Securities and the underwriters, if any, in connection with the offering and
sale of the Securities covered by the Prospectus or any amendment or supplement
thereto during the Shelf Registration Period, provided that such use complies
with this Agreement and with all applicable laws and regulations.
(g) Prior to any offering of Securities pursuant to any Shelf
Registration Statement, the Trust and the Guarantor shall register or qualify
such Securities or cooperate with the Holders of Securities included therein and
their respective counsel in connection with the registration or qualification of
such Securities for offer and sale under the securities or blue sky laws of such
jurisdictions in the United States as any such Holders reasonably request in
writing and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Securities covered by such Shelf
Registration Statement; provided, however, that neither the Trust nor the
Guarantor will be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(h) Unless any Securities shall be in book-entry only form, the Trust
and the Guarantor shall cooperate with the Holders of Securities to facilitate
the timely preparation and delivery of certificates representing Securities to
be sold pursuant to any Shelf Registration Statement free of any restrictive
legends and in such permitted denominations and registered in such names as
Holders may request in connection with the sale of Securities pursuant to such
Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by Section
3(c)(2)(iii), subject to Section 2(d), the Trust and the Guarantor shall
reasonably promptly prepare a post-effective amendment to any Shelf Registration
Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading (except, in each case, for an untrue statement of
a material fact or omission of a material fact made in reliance on and in
conformity with written information furnished to the Guarantor or the Trust by
or on behalf of Holders or underwriters specifically for use therein). The Trust
and the Guarantor agree to notify the Holders to suspend use of the Prospectus
as promptly as practicable after the occurrence of such an event, and the
Holders shall suspend use of the Prospectus, and not
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communicate such material non-public information to any third party, and not
sell or purchase, or offer to sell or purchase, any securities of the Trust or
the Guarantor, until the Trust or the Guarantor have amended or supplemented
the Prospectus so it does not contain any such misstatement or omission. At
such time as such public disclosure is otherwise made or the Trust and the
Guarantor determine in good faith that such disclosure is not necessary, the
Trust and the Guarantor agree promptly to notify the Holders of such
determination and to amend or supplement the Prospectus if necessary, so it
does not contain any such untrue statement or omission therein and to furnish
the Holders such numbers of copies of the Prospectus as so amended or
supplemented as the Holders may reasonably request.
(j) Not later than the effective date of any Shelf Registration
Statement hereunder, the Trust and the Guarantor shall provide a CUSIP number
for the Convertible Preferred Securities and the Debentures in the event of and
at the time of any distribution thereof to Holders, registered under such Shelf
Registration Statement, and provide the applicable trustee with certificates for
such Securities, in a form eligible for deposit with The Depository Trust
Company.
(k) The Trust and the Guarantor shall use their best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to their security holders or otherwise provide in accordance
with Section 11(a) of the Securities Act as soon as practicable after the
effective date of the applicable Shelf Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act.
(l) The Trust and the Guarantor shall use their reasonable best efforts
to cause the Indenture, the Declaration and the Guarantee to be qualified under
the Trust Indenture Act in a timely manner.
(m) The Trust and the Guarantor may require each Holder of Securities
to be sold pursuant to any Shelf Registration Statement to furnish to the Trust
and the Guarantor such information regarding the Holder and the distribution of
such Securities as the Trust and the Guarantor may from time to time reasonably
require for inclusion in such Shelf Registration Statement and the Guarantor and
the Trust may exclude from such registration the Securities of any Holder that
fails to furnish such information within a reasonable time after receiving such
request.
(n) The Trust and the Guarantor shall, if requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters reasonably
agree should be included therein and to which the Trust and the Guarantor do not
reasonably object and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after they are
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(o) Subject to Section 6 and Section 2(d), the Trust and the Guarantor
shall enter into such customary agreements (including underwriting agreements in
customary form) which are reasonably acceptable to the Trust and the Guarantor
and shall take all other reasonably requested actions in order to expedite or
facilitate the registration or the disposition of the Registrable Securities,
and in connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures substantially
identical to those set forth in Section 5 (or such other provisions and
procedures acceptable to the Managing Underwriters, if any, and reasonably
acceptable to the Guarantor and the Trust) with respect to all parties to be
indemnified pursuant to Section 5.
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(p) Subject to Section 6 and Section 2(d), the Trust and the Guarantor
shall (i) make reasonably available for inspection by the Holders of Securities
to be registered thereunder, any underwriter participating in any disposition
pursuant to such Shelf Registration Statement, and any attorney, accountant or
other agent retained by such Holders or any such underwriter all reasonably
requested customary and relevant financial and other records, pertinent
corporate documents and properties of the Trust and the Guarantor and its
subsidiaries; (ii) cause the Guarantor's officers, directors and employees and
the Trustees to supply all such information reasonably requested by such Holders
or any such underwriter, attorney, accountant or agent in connection with any
such Shelf Registration Statement as is customary for similar due diligence
examinations, in each case pursuant to confidentiality arrangements reasonably
requested by the Guarantor and the Trust; provided, however, that the foregoing
inspection and information gathering shall, to the greatest extent possible, be
coordinated on behalf of the Holders and the other parties entitled thereto by
one counsel designated by and on behalf of such Holders and reasonably
acceptable to the Guarantor and the Trust; (iii) make such representations and
warranties to the Holders of Securities registered thereunder and the
underwriters, if any, in form, substance and scope as are customarily made by
the Guarantor and the Trust to Holders or to underwriters in underwritten
offerings; (iv) obtain opinions of counsel to the Trust and the Guarantor (who
may be the General Counsel of the Guarantor) and updates thereof addressed to
each selling Holder and the underwriters, if any, covering such matters as are
customarily covered in opinions requested by Holders or underwriters in
underwritten offerings (it being agreed that the matters to be covered by such
opinion shall include, without limitation, as of the date of the opinion and as
of the effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, including the documents incorporated by reference
therein, of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (v) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Guarantor (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Guarantor or of any business acquired by the Guarantor for
which financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to each such Holder of
Securities registered thereunder and the underwriters, if any, in customary form
and covering matters of the type customarily covered in "cold comfort" letters
delivered to Holders or underwriters in connection with underwritten offerings;
and (vi) deliver such customary documents and certificates as may be reasonably
requested by any such Holders and the Managing Underwriters, if any, including
those to evidence compliance with Section 3(i) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Trust and the Guarantor. The foregoing actions set forth in clauses (iii), (iv),
(v) and (vi) of this Section 3(p) shall be performed at each closing under any
underwritten offering to the extent required thereunder.
(q) The Trust and the Guarantor will use its reasonable best efforts to
cause the Common Stock relating to such Shelf Registration Statement to be
listed on each securities exchange, if any, on which any shares of Common Stock
are then listed.
(r) In the event that any broker-dealer registered under the Exchange
Act and selected or approved in accordance with the provisions set forth in
Section 6 hereof shall underwrite any Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules and the By-Laws of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder
of such Securities or as an underwriter, a placement or sales agent or a broker
or dealer in respect thereof, or otherwise, the Guarantor and the
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Trust shall take reasonable steps to (subject to Section 2(d) and 3(p)) assist
such broker-dealer in complying with the requirements of such Rules and By-Laws,
including, without limitation, by (A) if such Rules or By-Laws, including Rule
2720 thereto, shall so require, engaging (at the expense of the Holders) a
"qualified independent underwriter" (as defined in Rule 2720) selected or
approved by the Trust and the Guarantor to participate in the preparation of the
Shelf Registration Statement relating to such Securities and to exercise usual
standards of due diligence in respect thereto, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Conduct Rules of the NASD.
(s) The Trust and the Guarantor shall use their reasonable best efforts
to comply with all applicable rules and regulation of the Commission.
4. Registration Expenses. Except as otherwise provided in Section 6,
the Guarantor shall bear all fees and expenses incurred in connection with the
performance of its obligations under Sections 2 and 3 hereof and shall bear or
reimburse the Holders for the reasonable fees and disbursements of one firm of
counsel designated by the Guarantor and reasonably acceptable to the Purchasers
to act as counsel for the Holders in connection therewith; provided, however
that the Trust and the Guarantor shall not be responsible for any fees and
expenses of any underwriter (including any discounts, commissions or legal fees
and expenses) other than the reasonable fees and expenses of counsel in
connection with state blue sky qualifications of the Registrable Securities.
5. Indemnification and Contribution. (a) In connection with any Shelf
Registration Statement, the Trust and the Guarantor, jointly and severally,
agree to indemnify and hold harmless each Purchaser and each Holder of
Securities covered thereby (including the Purchasers), each director, officer,
employee and agent of the Purchasers and each person who controls any Purchaser
or any such Holder within the meaning of either the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser or Holder may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus or any
Exchange Act filing incorporated therein, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that (i) the Guarantor and the Trust will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in, or omission
or alleged omission from, any of such documents in reliance upon and in
conformity with written information furnished to the Guarantor by any Purchaser
through Lehman Brother Inc. or any such Holder specifically for use therein and
(ii) the foregoing indemnity with respect to any untrue statement or alleged
untrue statement contained in, or omission or alleged omission from, any
preliminary prospectus relating to a Shelf Registration Statement shall not
inure to the benefit of any Holder (or any person controlling such Holder) from
whom the person asserting any such loss, claim, damage or liability purchases
any of the Securities that are the subject thereof if such person did not
receive a copy of the final prospectus (or the final prospectus as supplemented)
at or prior to the written confirmation of the sale of such Securities to such
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person and the untrue statement or alleged untrue statement or omission or
alleged omission contained in the preliminary prospectus was corrected in the
final prospectus (or the final prospectus as supplemented) and the corrected
prospectus was made available to such Holder prior to the time of such sale.
This indemnity agreement will be in addition to any liability which the
Guarantor or the Trust may otherwise have.
The Trust and the Guarantor, jointly and severally, also agree to
indemnify or contribute to Losses (as defined below) of, as provided in Section
5(d), any underwriters of Securities registered under the Shelf Registration
Statement, their officers, directors, employees and agents and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Purchasers and the selling Holders provided in this
Section 5(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 3(o) and Section 6
hereof.
(b) As a condition to the inclusion of a Holder's Registrable
Securities in a Shelf Registration Statement, such Holder shall agree to
indemnify and hold harmless (i) the Trust and the Guarantor, (ii) each of the
directors of the Guarantor, (iii) each of its officers who signs such Shelf
Registration Statement, and (iv) each person who controls the Trust or the
Guarantor within the meaning of either the Securities Act or the Exchange Act to
the same extent as the foregoing indemnity from the Trust and the Guarantor, but
only with reference to written information relating to such Holder furnished to
the Guarantor by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under Section 5(a)
or (b) of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 5, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve it from any
liability it may have to any indemnified party otherwise than under Section 5(a)
or (b), except to the extent that it has been materially prejudiced by such
failure; and provided that such omission will not relieve it from any
liabilities which it may otherwise have to an indemnified party. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 5 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that the indemnified party shall have the right to appoint counsel to represent
the indemnified party and their respective controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the indemnified party against the indemnifying party under this
Section 5 if the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such action,
or if, in the written opinion of counsel to either the indemnifying party or the
indemnified party, representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, and in
that event the fees and expenses of one firm of separate counsel (in addition to
the fees and expenses of local counsel) shall be paid by the indemnifying party.
No indemnifying party shall, without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a
10
<PAGE>
party and indemnity could have been sought hereunder by such indemnified party
unless such settlement includes an unconditional release of such indemnified
party from all liability on any claims that are the subject matter of such
action. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be
unreasonably withheld.
(d) In the event that the indemnity provided in Section 5(a) or (b) is
unavailable to or insufficient to hold harmless an indemnified party for any
reason, then each indemnifying party shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which such indemnified party may be subject in such proportion as
is appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Shelf Registration Statement which resulted in such
Losses; provided, however, that in no case shall the Purchasers or any
subsequent Holder of any Security be responsible, in the aggregate, for any
amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to the Shelf Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the indemnifying
party, on the one hand, or by the indemnified party, on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 5(d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each person who controls a
Holder within the meaning of either the Securities Act or the Exchange Act shall
have the same rights to contribution as such Holder, and each person who
controls the Guarantor or the Trust within the meaning of either the Securities
Act or the Exchange Act, each officer of the Guarantor who shall have signed the
Shelf Registration Statement and each director of the Guarantor shall have the
same rights to contribution as the Guarantor, subject in each case to the
applicable terms and conditions of this Section 5(d). No party shall be liable
for contribution with respect to any action, suit, proceeding or claim settled
without its written consent, which consent shall not be unreasonably withheld.
(e) The provisions of this Section 5 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Guarantor or the Trust or any of the officers, directors, employees, agents
or controlling persons referred to in Section 5 hereof, and will survive the
sale by a Holder of Securities covered by the Shelf Registration Statement.
6. Underwritten Offering. The Holders of Registrable Securities covered
by the Shelf Registration Statement who desire to do so may sell such
Registrable Securities in an underwritten offering in accordance with the
conditions set forth below and subject to Section 2(d) and 3(p). In any such
underwritten offering, (a) the investment banker or bankers and manager or
managers that will
11
<PAGE>
administer the offering will be selected or approved by the Guarantor and the
Trust, and (b) the underwriting arrangements with respect thereto will be
approved by the Holders of a majority of the Registrable Securities to be
included in such offering; provided, however, that such underwriting
arrangements must be reasonably acceptable to the Guarantor and the Trust. No
Holder may participate in any underwritten offering contemplated hereby unless
(a) such Holder agrees to sell such Holder's Registrable Securities in
accordance with such approved underwriting arrangements, (b) such Holder
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such approved underwriting arrangements and (c) at
least 25% of the outstanding Registrable Securities held by all Holders are
included in such underwritten offering. The Holders participating in any
underwritten offering shall be responsible for any expenses customarily borne by
selling securityholders, including underwriting discounts and commissions and
fees and expenses of counsel to the selling securityholders and shall reimburse
the Trust and the Guarantor for the fees and disbursements of their counsel,
their independent public accountants and any printing expenses incurred in
connection with such underwritten offering.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Trust and the Guarantor have not,
as of the date hereof, entered into, and shall not, on or after the date hereof,
enter into, any agreement with respect to their securities or otherwise that
conflicts with the rights granted to the Holders herein or the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Trust and the Guarantor have obtained the written
consent of the Purchasers.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Guarantor in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each Holder,
the address of such Holder set forth in the books and records of the
Trust or the registrar and transfer agent for the Securities;
(2) if to the Purchasers, initially at the address set forth
in the Purchase Agreement; and
(3) if to the Trust or the Guarantor, initially at its address
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Purchaser or the Trust and the Guarantor by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties and the
Holders, including, without the need for an
12
<PAGE>
express assignment or any consent by the Trust or the Guarantor thereto,
subsequent Holders of Securities. The Trust and the Guarantor hereby agree to
extend the benefits of this Agreement to any Holder of Securities and any such
Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
13
<PAGE>
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Trust and the Guarantor
and the several Purchasers in accordance with its terms.
Very truly yours,
CALENERGY CAPITAL TRUST II
By John G. Sylvia, solely in his ca-
pacity as trustee and not in his individ-
ual capacity,
/s/ John G. Sylvia
----------------------------------------
John G. Sylvia
By Steven A. McArthur, solely in his
capacity as trustee and not in his indi-
vidual capacity,
/s/ Steven A. McArthur
----------------------------------------
Steven A. McArthur
CALENERGY COMPANY, INC.
By /s/ Steven A. McArthur
-------------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By LEHMAN BROTHERS INC.
By /s/ Todd C. Guenther
---------------------
Name: Todd C. Guenther
Title: Associate
<PAGE>
Exhibit 12.1
CALENERGY COMPANY, INC.
Ratio of Earnings to Fixed Charges
(Dollars in Thousands, Except Ratio)
<TABLE>
<CAPTION>
Three Months
Ended March 31 Year Ended December 31,
---------------- -------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income from
continuing operations... $57,154 $20,958 $135,713 $97,051 $55,836 $61,258 $50,732
Loss on equity investment
in unconsolidated
subsidiary ............. 2,668 962 5,221 362 __ __ __
Capitalized interest, net
of amortization......... (8,317) (11,550) (37,476) (31,160) (9,196) (6,174) (5,202)
--------------------------------------------------------------------
51,505 10,370 103,458 66,253 46,640 55,084 45,530
--------------------------------------------------------------------
Fixed Charges:
Interest expense and
amortization of
deferred finance
charges on all
indebtedness......... 70,622 34,779 165,900 134,637 62,837 30,205 20,459
Interest portion of
lease rentals........ 15 15 60 60 109 247 253
Dividends on convertibe
preferred securities
of subsidiary trusts 2,718 -- 4,691 -- -- -- --
Preferred stock dividends
of subsidiaries, gross
of tax .............. 2,790 -- -- -- -- -- --
--------------------------------------------------------------------
Total fixed charges. 76,145 34,794 170,651 134,697 62,946 30,452 20,712
--------------------------------------------------------------------
Earnings before income
and fixed charges...... $127,650 $45,164 $274,109 $200,950 $109,586 $85,536 $66,242
====================================================================
Ratio of earnings to
fixed charges.......... 1.676 1.298 1.606 1.492 1.741 2.809 3.198
====================================================================
</TABLE>
<PAGE>
Exhibit 15.1
June 30, 1997
CalEnergy Company, Inc.
302 South 36th Street - Suite 400
Omaha, Nebraska
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of CalEnergy Company, Inc. 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
<PAGE>
EXHIBIT 15.2
30 June 1997
The Board of Directors
Northern Electric plc
Carliol House
Market Street
Newcastle Upon Tyne
NEI 6NE
Dear Sirs
We are aware of the incorporation by reference in the Registration Statement
(Form S-3) of CalEnergy Company, Inc. and CalEnergy Capital Trust II for the
registration of 3,600,000 6-1/4% Trust Convertible Preferred Securities,
$180,000,000 6-1/4% Convertible Junior Subordinated Debentures of CalEnergy
Company, Inc. and 4,195,800 shares of Common Stock of CalEnergy Company, Inc.
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
meeting of Sections 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
CalEnergy Company, Inc. 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
June 30, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
CalEnergy Company, Inc. (the "Company") and CalEnergy Capital Trust II 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
June 30, 1997
<PAGE>
Exhibit 23.3
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. and CalEnergy
Capital Trust II for the registration of 3,600,000 6-1/4% Trust Convertible
Preferred Securities, $180,000,000 6-1/4% Convertible Junior Subordinated
Debentures of CalEnergy Company, Inc. and 4,195,800 shares of Common Stock
of CalEnergy Company, Inc. and to the incorporation by reference therein of our
report dated 20 June 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
20 June 1997
<PAGE>
Exhibit 25.1
================================================================================
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, NE 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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
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
(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 26th day of June, 1997.
THE BANK OF NEW YORK
By: /s/ THOMAS E. TABOR
--------------------------
Name: THOMAS E. TABOR
Title: ASSISTANT TREASURER
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
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 December 31,
1996, 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 .................. $ 6,024,605
Interest-bearing balances .......... 808,821
Securities:
Held-to-maturity securities ........ 1,071,747
Available-for-sale securities ...... 3,105,207
Federal funds sold in domestic offices
of the bank: .......................... 4,250,941
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................31,962,915
LESS: Allowance for loan and
lease losses ..............635,084
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 31,327,402
Assets held in trading accounts ...... 1,539,612
Premises and fixed assets (including
capitalized leases) ................ 692,317
Other real estate owned .............. 22,123
Investments in unconsolidated
subsidiaries and associated
companies .......................... 213,512
Customers' liability to this bank on
acceptances outstanding ............ 985,297
Intangible assets .................... 590,973
Other assets ......................... 1,487,903
-----------
Total assets ......................... $52,120,460
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,929,642
Noninterest-bearing ......11,245,050
Interest-bearing .........14,684,592
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 12,852,809
Noninterest-bearing .........552,203
<PAGE>
Interest-bearing .........12,300,606
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ............ 1,360,877
Securities sold under agreements
to repurchase....................... 226,158
Demand notes issued to the U.S.
Treasury ........................... 204,987
Trading liabilities .................. 1,437,445
Other borrowed money:
With original maturity of one year
or less .......................... 2,312,556
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,014,717
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,721,291
-----------
Total liabilities .................... 48,095,648
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,354,095
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 7,030
Cumulative foreign currency transla-
tion adjustments .................. ( 9,916)
-----------
Total equity capital ................ 4,024,812
-----------
Total liabilities and equity
capital ........................... $52,120,460
===========
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.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
<PAGE>
Exhibit 25.2
================================================================================
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 Capital Trust II
(Exact name of obligor as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, NE 68131
(Address of principal executive offices) (Zip code)
----------------------
Trust Convertible Preferred Securities
(Title of the indenture securities)
=============================================================================
<PAGE>
<TABLE>
<S> <C>
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
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
(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.
</TABLE>
<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 26th day of June, 1997.
THE BANK OF NEW YORK
By: /s/ THOMAS E. TABOR
----------------------
Name: THOMAS E. TABOR
Title: ASSISTANT TREASURER
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
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 December 31,
1996, 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 .................. $ 6,024,605
Interest-bearing balances .......... 808,821
Securities:
Held-to-maturity securities ........ 1,071,747
Available-for-sale securities ...... 3,105,207
Federal funds sold in domestic offices
of the bank: .......................... 4,250,941
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................31,962,915
LESS: Allowance for loan and
lease losses ..............635,084
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 31,327,402
Assets held in trading accounts ...... 1,539,612
Premises and fixed assets (including
capitalized leases) ................ 692,317
Other real estate owned .............. 22,123
Investments in unconsolidated
subsidiaries and associated
companies .......................... 213,512
Customers' liability to this bank on
acceptances outstanding ............ 985,297
Intangible assets .................... 590,973
Other assets ......................... 1,487,903
-----------
Total assets ......................... $52,120,460
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,929,642
Noninterest-bearing ......11,245,050
Interest-bearing .........14,684,592
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 12,852,809
Noninterest-bearing .........552,203
<PAGE>
Interest-bearing .........12,300,606
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ............ 1,360,877
Securities sold under agreements
to repurchase....................... 226,158
Demand notes issued to the U.S.
Treasury ........................... 204,987
Trading liabilities .................. 1,437,445
Other borrowed money:
With original maturity of one year
or less .......................... 2,312,556
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,014,717
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,721,291
-----------
Total liabilities .................... 48,095,648
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,354,095
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 7,030
Cumulative foreign currency transla-
tion adjustments .................. ( 9,916)
-----------
Total equity capital ................ 4,024,812
-----------
Total liabilities and equity
capital ........................... $52,120,460
===========
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.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
<PAGE>
Exhibit 25.3
================================================================================
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, NE 68131
(Address of principal executive offices) (Zip code)
----------------------
Guarantee of Trust Convertible Preferred Securities
of CalEnergy Capital Trust II
(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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
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
(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 26th day of June, 1997.
THE BANK OF NEW YORK
By: /s/ THOMAS E. TABOR
------------------------------
Name: THOMAS E. TABOR
Title: ASSISTANT TREASURER
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
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 December 31,
1996, 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 .................. $ 6,024,605
Interest-bearing balances .......... 808,821
Securities:
Held-to-maturity securities ........ 1,071,747
Available-for-sale securities ...... 3,105,207
Federal funds sold in domestic offices
of the bank: .......................... 4,250,941
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................31,962,915
LESS: Allowance for loan and
lease losses ..............635,084
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 31,327,402
Assets held in trading accounts ...... 1,539,612
Premises and fixed assets (including
capitalized leases) ................ 692,317
Other real estate owned .............. 22,123
Investments in unconsolidated
subsidiaries and associated
companies .......................... 213,512
Customers' liability to this bank on
acceptances outstanding ............ 985,297
Intangible assets .................... 590,973
Other assets ......................... 1,487,903
-----------
Total assets ......................... $52,120,460
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,929,642
Noninterest-bearing ......11,245,050
Interest-bearing .........14,684,592
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 12,852,809
Noninterest-bearing .........552,203
<PAGE>
Interest-bearing .........12,300,606
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ............ 1,360,877
Securities sold under agreements
to repurchase....................... 226,158
Demand notes issued to the U.S.
Treasury ........................... 204,987
Trading liabilities .................. 1,437,445
Other borrowed money:
With original maturity of one year
or less .......................... 2,312,556
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,014,717
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,721,291
-----------
Total liabilities .................... 48,095,648
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,354,095
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 7,030
Cumulative foreign currency transla-
tion adjustments .................. ( 9,916)
-----------
Total equity capital ................ 4,024,812
-----------
Total liabilities and equity
capital ........................... $52,120,460
===========
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.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
