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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1998
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 III
(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
--------------------
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
- -------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM MAXIMUM REGISTRATION
SECURITIES TO BE BE OFFERING AGGREGATE FEE(1)
REGISTERED REGISTERED PRICE PER OFFERING
UNIT(4) PRICE(4)
- -------------------------------------------------------------------------------
Convertible Preferred
Securities.............. 5,400,000 $42.50(1)(2) $229,500,000(1)(2) $67,702.50
- -------------------------------------------------------------------------------
Convertible Junior
Subordinated Debentures
of CalEnergy Company,
Inc..................... (3) -- -- --
- -------------------------------------------------------------------------------
Common Stock of
CalEnergy Company, Inc.. 5,653,800(4)(5) -- -- --
- -------------------------------------------------------------------------------
Preferred Securities
Guarantee(6)............ -- -- -- --
- -------------------------------------------------------------------------------
Total................. 5,400,000 100% $229,500,000 $67,702.50
- -------------------------------------------------------------------------------
(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 January 29, 1998.
(2) Exclusive of accrued interest and distributions, if any.
(3) $278,350,600 in aggregate principal amount of 6 1/2% Convertible Junior
Subordinated Debentures due 2027 (the "Convertible Junior Subordinated
Debentures") of CalEnergy Company, Inc. (the "Company") were issued and sold
to CalEnergy Capital Trust III (the "Trust") in connection with the issuance
by the Trust of 5,400,000 of its 6 1/2% 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 February 4, 1998
PROSPECTUS
5,400,000 Convertible Preferred Securities
CALENERGY CAPITAL TRUST III
6 1/2% Convertible Preferred Securities
(Liquidation Preference $50 per Convertible Preferred Security)
Guaranteed to the extent set forth herein by
and convertible into the Common Stock of
CALENERGY COMPANY, INC.
$50 per Convertible Preferred Security
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This Prospectus relates to the 6 1/2% Convertible Preferred Securities
(the "Convertible Preferred Securities") of CalEnergy Capital Trust III, 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 August 12, 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, 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 1/2% Convertible Junior Subordinated Debentures due 2027 (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 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN
THE CONVERTIBLE PREFERRED SECURITIES.
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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 , 1998
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(continued from front cover)
Holders of the Convertible Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 6 1/2% 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 September 1, 1997. See
"Description of the Convertible Preferred Securities--Distributions." The
distribution payable on September 1, 1997, which was calculated at the above
rate and based on a period that is shorter than a full quarter, was in the
amount of $0.17153 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 September 30, 1997, Senior Indebtedness consisting of borrowed money of the
Company aggregated approximately $953.8 million (of which $200 million had a
"Recourse Amount" to the Company (as defined in the applicable indenture) of
zero). At September 30, 1997, on a pro forma basis after giving effect to the
consummation of the Company's October 1997 offering of $350 million 7.63%
Senior Notes due 2007 (the "Note Offering"), the Stock Offering, the Direct
Sale and Acquisition (each as defined herein) Senior Indebtedness consisting of
borrowed money of the Company aggregated approximately $1,308.8 million (of
which $200 million had a "Recourse Amount" to the Company (as defined in the
applicable indenture) of zero). See "Capitalization."
The holder of the outstanding Common Securities (i.e., the Company) has
the right at any time to terminate the Issuer and, after satisfaction of
liabilities to creditors of the Issuer as provided by applicable law, to cause
the Junior Subordinated Debentures to be distributed to the holders of the
Convertible Preferred Securities and Common Securities upon liquidation of the
Issuer. See "Description of Convertible Preferred Securities--Liquidation
Distribution Upon Dissolution."
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 1.047 shares of the Common Stock for each of the Convertible Preferred
Securities (equivalent to a conversion price of $47.75 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 January 30, 1998, was $25.69 per share.
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The Convertible Preferred Securities are effectively redeemable at the
option of the Company, in whole or in part, from time to time, after September
1, 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 thirteen 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 their maturity,
September 1, 2027 (the "Stated 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 (i) shorten
the maturity of the Convertible Junior Subordinated Debentures to a date not
earlier than August 10, 2012, or (ii) cause the redemption of the Convertible
Preferred Securities in whole at the liquidation preference of $50 per each
Convertible Preferred Security plus accrued and unpaid distributions. See
"Description of the Convertible Preferred Securities--Conditional Right to
Shorten Maturity; Tax Event Redemption and Investment Company Event
Distribution" and "Description of the Convertible Junior Subordinated
Debentures."
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.
This Prospectus and the periodic filings of the Company under the
Exchange Act contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). These
forward-looking statements express beliefs and expectations regarding the
Company's future results and performance.
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Such statements are based on current expectation and involve a number of
known and unknown risks and uncertainties that could cause the actual results
and/or performance of the Company to differ materially from any expected future
results and/or performance, expressed or implied by the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements and any such statement is qualified by reference to
the following cautionary statements. In connection with the safe harbor
provisions of the Reform Act, the Company's management has identified important
factors that could cause actual results to differ materially from management's
expectations, including development uncertainty, operating uncertainty,
uncertainties relating to doing business outside the United States,
uncertainties relating to geothermal resources, uncertainties relating to
domestic and international (and in particular, Indonesian) economic conditions
and uncertainties regarding the impact of regulations, changes in government
policy, industry deregulation and competition. Reference is made to the
Company's Current Report on Form 8-K dated February 25, 1997, incorporated
herein by reference. The Company is not required to publicly release any
changes to these forward-looking statements for events occurring after the
date thereof or to reflect any other unanticipated events.
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."
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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 Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997 and September 30, 1997;
(iii) the Company's Current Reports on Form 8-K dated December 24, 1996
(as amended by Form 8-K/A dated February 18, 1997), February 25, 1997, February
26, 1997, March 28, 1997, May 7, 1997, May 19, 1997, July 7, 1997, July 15,
1997, July 18, 1997, August 6, 1997, August 8, 1997, August 15, 1997, August
27, 1997, September 2, 1997, September 11, 1997, September 24, 1997 (filed
September 24, 1997), September 24, 1997 (filed September 30, 1997), October 9,
1997, October 13, 1997, October 23, 1997, October 28, 1997, December 5, 1997,
December 11, 1997, December 16, 1997, January 5, 1998, January 12, 1998 and
January 29, 1998;
(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.
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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 and risk factors described in the documents
incorporated herein by reference. The term "Company" refers to CalEnergy
Company, Inc. and its operating subsidiaries, unless the context otherwise
requires.
ACQUISITIONS. The Company's recent growth has been achieved, in part,
through strategic acquisitions in the energy industry which complement and
diversify the Company's existing business. The Company intends to continue to
pursue an aggressive acquisition strategy for the foreseeable future. The
Company has recently completed several major acquisitions, including the
acquisition of Magma Power Company ("Magma"), Falcon Seaboard Resources, Inc.
("Falcon Seaboard") and Northern Electric plc ("Northern"). The Company has
successfully integrated Magma, Falcon Seaboard and Northern. See "The Company."
The Company has also recently completed the acquisition of Kiewit Diversified
Group's ownership interest in the Company's Common Stock as well as various
international power generation projects which were jointly owned by KDG and the
Company. See "The Company -- Energy Project Joint Venture Acquisition and Stock
Repurchase; Recent Public Offerings." 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
acquisition and integration of acquired businesses entails numerous risks,
including, among others, the risk of diverting management's attention from the
day-to-day operations of the Company, the risk that the acquired businesses
will require substantial capital and financial investments and the risk that
the investments will fail to perform in accordance with expectations. There
can be no assurance that acquisition opportunities, if any, can be consummated
on favorable terms or that the Company's integration efforts will be
successful.
HOLDING COMPANY STRUCTURE. As a holding company, the Company is dependent
on the earnings and cash flows of, and dividends from, its subsidiaries and
joint ventures to generate the funds necessary to meet its obligations,
including the payment of principal, interest and premium, if any, on the
Convertible Junior Subordinated Debentures. The availability of distributions
from the Company's subsidiaries and projects is subject to the satisfaction of
various covenants and conditions contained in the applicable subsidiaries' and
joint ventures' financing documents and to certain utility regulatory
restrictions. Furthermore, the Company is structuring other 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 September 30, 1997, the Company had
approximately $3,141.7 million of total consolidated indebtedness, which
included approximately $2,187.9 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 would
have been secured by the assets of such joint ventures and subsidiaries, and
$553.9 million of subordinated debt issued in connection with CalEnergy Capital
Trust's 6 1/4% Convertible
7
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Preferred Securities Term Income Deferrable Equity Securities (TIDES)SM (the
"1996 TIDES") and CalEnergy Capital Trust II's 6 1/4% Trust Convertible
Preferred Securities (the "6 1/4% Convertible Preferred Securities," with the
1996 TIDES, the 6 1/4% Convertible Preferred Securities and the Convertible
Preferred Securities sometimes being referred to herein as "Capital Trust
Convertible Preferred Securities"). As of September 30, 1997, on a pro forma
basis, after giving effect to the consummation of the Note Offering, the Common
Stock Offering, the Direct Sale and the Acquisition (each as defined herein),
there would have been approximately $4,094.1 million of total consolidated
indebtedness, which included approximately $2,790.3 million of the Company's
proportionate share of joint venture and subsidiary debt, which would be
effectively senior to the Convertible Junior Subordinated Debentures.
DEPENDENCE ON CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE 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 September 30, 1997, the Company's total consolidated liabilities
were $4,815.7 million (excluding deferred income), its obligations in respect
of Capital Trust Convertible Preferred Securities were $553.9 million, its
total consolidated assets were $6,385.0 million and its total stockholders'
equity was $150.4_ million. As of such date, on a pro forma basis, after giving
effect to the consummation of the Note Offering, the Common Stock Offering, the
Direct Sale and the Acquisition, the Company's total consolidated liabilities
would have been $5,820.7 million (excluding deferred income), its obligations
in respect of the Capital Trust Convertible Preferred Securities would have
been $553.9 million, its total consolidated assets would have been $7,315.4
million and its stockholders' equity would have been $854.3 million. The
Company's leverage level presents the risk that the Company might not generate
sufficient cash to service the Company's indebtedness, including the
Convertible Junior Subordinated Debentures, or that its leveraged capital
structure could limit its ability to finance future acquisitions, develop
additional projects, compete effectively and operate successfully under adverse
economic conditions. If the Company were unable to make payments on the
Convertible Junior Subordinated Debentures or the 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."
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 ("kW") hours, a "unit") that a regional electricity company (a
"RE") in the United Kingdom may charge. The Distribution Price Control Formula
is expected to have a five year duration and is subject to review by the
Director General of Electricity Supply (the "Regulator") at the end of each
five-year period and at other times in the discretion of the Regulator. At each
review, the Regulator can propose adjustments to the Distribution Price Control
Formula. In July 1994, a review resulted in a 17% reduction in allowed
distribution income compared to the original formula, before allowing for
inflation, effective April 1, 1995. In July 1995, a further review of
distribution prices was concluded by the Regulator for fiscal years 1997 to
2000. As a result of this further review, Northern's allowed distribution from
income was reduced by a further 11%, before allowing for inflation, effective
April 1, 1996. There can be no assurance that any further price reviews by the
Regulator will not have a material adverse effect on the Company's results of
operations.
Competition in Supply. Northern's supply business is also subject to
price control and is being progressively opened to competition. Northern
currently has an exclusive right, subject to price cap regulation, to supply
customers in its authorized area with a maximum demand of not more than 100 kW
("Franchise Supply Customers"). The market for customers with a maximum demand
above 1 megawatt ("MW") has been
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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 in the fall of 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 the United
Kingdom Parliament. On July 31, 1997, the United Kingdom Parliament passed the
windfall tax to be levied on privatized utilities which resulted in a third
quarter extraordinary charge to net income of the Company of $135.9 million.
See the Company's Current Report on Form 8-K dated July 7, 1997, incorporated
herein by reference. There can be no assurance that other possible changes in
tax or utility regulation by the United Kingdom government, by whichever party
it is controlled, would not have a material adverse effect on the Company's
results of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new energy projects, both domestically and
internationally, the completion of any of which is subject to substantial risk.
Development can require the Company to expend significant sums for preliminary
engineering, permitting, fuel supply, resource exploration, legal and other
expenses in preparation for competitive bids which the Company may not win or
before it can be determined whether a project is feasible, economically
attractive or capable of being financed. Successful development and
construction is contingent upon, among other things, negotiation on terms
satisfactory to the Company of engineering, construction, fuel supply and power
sales contracts with other project participants, receipt of required
governmental permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is substantially
leveraged, will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional energy and the
Company's ability to obtain contracts to supply portions of this demand.
There can be no assurance that development efforts on any particular
project, or the Company's efforts generally, will be successful. In this
regard, reference is made to certain uncertainties associated with the
Company's Casecnan Project as described in the Company's Current Reports on
Form 8-K dated May 19, 1997 and August 27, 1997, which are incorporated herein
by reference, and certain uncertainties associated with the Company's
Indonesian projects described in the Company's Current Reports on Form 8-K
dated January 12, 1998 and January 29, 1998, which are incorporated herein by
reference.
UNCERTAINTIES RELATED TO DOING BUSINESS OUTSIDE THE UNITED STATES. The
Company has various projects under construction outside the United States and a
number of projects under award outside the United States. The financing and
development of projects outside the United States entail significant political
and financial risks (including, without limitation, uncertainties associated
with privatization efforts in the countries involved, currency exchange rate
fluctuations, currency repatriation restrictions, changes in law or regulation,
change in government policy, political instability, civil unrest and
expropriation) and other structuring issues that have the potential to cause
substantial delays in respect of or material impairment of the value of the
project being developed, which the Company may not be capable of fully insuring
against. The uncertainty of the legal
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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 this regard, reference is made to certain
uncertainties associated with the Company's Indonesian projects described in
the Company's Current Reports on Form 8-K dated January 12, 1998 and
January 29, 1998, which are incorporated herein by reference.
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 may 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
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utility, steam host, water or gas supplier, gas transporter, wheeling utility
or other relevant project participant to fulfill its contractual obligations
could have a material adverse impact on the Company.
FUEL SUPPLY OPERATIONS. The primary fuel source for certain of the
Company's projects is natural gas and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining natural gas
through gas supply agreements and transporting that gas to the projects under
gas transportation agreements. Although the Company believes that it has
contracted for natural gas supply and transportation in sufficient quantities
to satisfy the needs of its projects, the gas suppliers are not required in all
cases to provide dedicated reserves in support of their contractual
obligations. Unless the gas projects were able to obtain substitute volumes of
natural gas including the requisite transportation services, for such volumes
at a price not materially higher than the sum of the contract price under the
existing gas supply agreements and any damages paid by the supplier for failure
to deliver, the sustained failure of a supplier to deliver natural gas in
accordance with its contract could have a material adverse effect on the cash
flows to the Company. In addition, under certain gas supply contracts the
Company is obligated to pay for a certain minimum quantity of natural gas even
if it cannot utilize it. The Company intends to manage its requirements for
contract volumes under the gas supply agreements so as to meet the minimum take
requirements through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-party
customers, if necessary. Finally, the state, federal and Canadian regulatory
authorities that have jurisdiction over natural gas transportation have the
right to modify aspects of the rates, terms and conditions of those contracts.
It is possible that such a modification could materially increase the fuel
transportation costs of the projects or give the transporter a right to
terminate or suspend or decrease its performance under its contract.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT UNCERTAINTIES. The Company
currently relies on long-term power purchase "Standard Offer No. 4" contracts
(each, an "SO4 Agreement") with a large customer, Southern California Edison
Company ("Edison"), to generate a substantial portion of its operating
revenues. 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 for each unit 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 expired in
August 1997 for the initial unit of the Navy I Project and expires in March
1999 for the initial unit of the BLM Project and January 2000 for the initial
unit of the Navy II Project, which three projects comprise the Coso Project in
California (the "Coso Project"). Such ten-year period expired in 1996 with
respect to one of the six geothermal plants in the Imperial Valley in
California operating under SO4 Agreements ("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, 1997, the time period-weighted average of Edison's
Avoided Cost of Energy was 3.3 cents per kWh, compared to the time
period-weighted average for the year ended December 31, 1997 selling prices for
energy of approximately 11.4 cents per kWh for all of the Company's SO4
Agreements. 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.
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Further, in recent years, the domestic power production industry has been
characterized by strong and increasing competition with respect to the
industry's efforts to obtain new power sales agreements, which has contributed
to a reduction in prices offered to utilities. In that regard, many utilities
often engage in "competitive bid" solicitations to satisfy new capacity
demands. In the domestic market, competition is expected to increase as the
electric utility industry becomes deregulated. In addition, recent deregulation
and industry restructuring activity may cause certain utilities or other
contract parties to attempt to renegotiate contracts or otherwise fail to
perform their contractual obligations, which in turn could adversely affect the
Company's results of operations. In particular, the state of California has
adopted a bill to restructure the electric industry by providing for a
phased-in competitive power generation industry, with a power pool and an
independent system operator, and for direct access to generation for all power
purchasers outside the power exchange under certain circumstances. Although the
bill contemplates that existing qualifying facility power sales contracts will
be honored, and all of the Company's California projects are qualifying
facilities, until the new system is fully implemented, it is impossible to
predict what impact, if any, it may have on the operations of those projects.
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling and operation of new and existing wells. Such laws and regulations
generally require the Company to obtain and comply with a wide variety of
licenses, permits and other approvals. The Company also remains subject to a
number of complex and stringent laws and regulations that both public officials
and private individuals may seek to enforce. There can be no assurance that
existing regulations will not be revised or that new regulations will not be
adopted or become applicable to the Company which could have an adverse impact
on its operations. The implementation of regulatory changes imposing more
comprehensive or stringent requirements on the Company, which would result in
increased compliance costs, could have a material adverse effect on the
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.
Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
qualifying facilities at prices based on Avoided Cost of Energy. The Company
does not know whether such legislation will be passed or what form it may take.
The Company believes that if any such legislation is passed, it would apply to
new projects only and thus, although potentially impacting the Company's
ability to develop new domestic projects, it would not affect the Company's
existing qualifying facilities. There can be no assurance, however, that any
legislation passed would not adversely impact the Company's existing domestic
projects.
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In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity consumers.
On September 1, 1997, the California legislature adopted an industry
restructuring bill that would provide for a phased-in competitive power
generation industry with a power pool and independent system operator and also
would permit direct access to generation for all power purchasers outside the
power exchange under certain circumstances. Under the bill, consistent with the
requirements of PURPA, existing qualifying facilities power sales agreements
would be honored. The Company cannot predict the final form or timing of the
proposed industry restructuring or the results of its operations.
The structure of such federal and state energy regulations have in the
past, and may in the future, be the subject of various challenges and
restructuring proposals by utilities and other industry participants. The
implementation of regulatory changes in response to such changes or
restructuring proposals, or otherwise imposing more comprehensive or stringent
requirements on the Company, which would result in increased compliance costs,
could have a material adverse effect on the Company's results of operations.
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 has not been 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 September 30, 1997,
on a pro forma basis, after giving effect to the consummation of the Debt
Offering, the Common Stock Offering, the Direct Sale and the Acquisition, there
would have been approximately $1,303.8 million principal amount of borrowed
money included in Senior Indebtedness (of which $200 million had a "Recourse
Amount" to the Company (as defined in the applicable indenture) of zero). 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 "--Holding Company Structure."
RIGHTS UNDER THE GUARANTEE. The Guarantee Trustee (as defined herein)
will hold 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 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
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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."
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 "Description of the Convertible Preferred
Securities--Distributions" and "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
TAX EVENT REDEMPTION AND INVESTMENT COMPANY EVENT DISTRIBUTION. Upon the
occurrence of an Investment Company Event (as defined below), the Company will,
except in certain limited circumstances,
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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. Upon the occurrence of a Tax
Event (as defined herein) in certain circumstances, the Company will have the
right, if certain conditions are met, (i) to shorten the maturity of the
Convertible Junior Subordinated Debentures to a date not earlier than August
10, 2012, or (ii) to redeem the Convertible Junior Subordinated Debentures, in
whole (but not in part), at 100% of the principal amount plus accrued and
unpaid interest, in which event the Convertible Preferred Securities will be
redeemed in whole at the liquidation preference of $50 per each Convertible
Preferred Security 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--Conditional Right to Shorten Maturity; Tax Event
Redemption and Investment Company Event 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--Potential Extension of Interest
Payment Period and Original Issue Discount."
SHORTENING OF STATED MATURITY OF CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES. Upon the occurrence of a Tax Event, the Company in certain
circumstances will have the right to shorten the maturity of the Convertible
Junior Subordinated Debentures to a date not earlier than August 10, 2012 and
thereby cause the Convertible Preferred Securities to be redeemed on such
earlier date. See "Description of the Convertible Preferred
Securities--Conditional Right to Shorten Maturity; Tax Event Redemption and
Investment Company Event Distribution."
EXCHANGE OF CONVERTIBLE PREFERRED SECURITIES FOR CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES. The Company, which is the holder of all of the
outstanding Common Securities, will have the right at any time to terminate the
Issuer and, after satisfaction of liabilities to creditors of the Issuer as
provided by applicable law, cause the Convertible Junior Subordinated
Debentures to be distributed to the holders of the Convertible Preferred
Securities and Common Securities in liquidation of the Issuer. See "Description
of the Convertible Preferred Securities--Liquidation Distribution Upon
Dissolution."
Under current United States federal income tax law and interpretations,
and assuming, as expected, that the Issuer will not be taxable as a
corporation, a distribution of the Convertible Junior Subordinated Debentures
upon a liquidation of the Issuer will not be a taxable event to holders of the
Convertible Preferred Securities. However, if a Tax Event were to occur that
would cause the Issuer to be subject to United States federal income tax with
respect to income received or accrued on the Convertible Junior Subordinated
Debentures, a distribution of the Convertible Junior Subordinated Debentures by
the Issuer could be a taxable event to the Issuer and the holders of the
Convertible Preferred Securities. See "United States Taxation--Receipt of
Convertible Junior Subordinated Debentures or Cash Upon Liquidation of the
Issuer."
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the
Company's 1996 Stock Option Plan (the "1996 Plan") and other employee stock
options plans or programs, as of September 30, 1997, the Company had
outstanding various options to its officers, directors and employees for the
purchase of 4,786,007 shares of Common Stock. All of the shares of Common Stock
issuable upon exercise of said options have been registered pursuant to
registration statements on Form S-8, and, when fully vested, are available for
immediate resale. 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.
15
<PAGE>
TRADING CHARACTERISTICS OF CONVERTIBLE PREFERRED SECURITIES. The
Convertible Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid distributions. A holder who disposes of
its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Convertible Junior Subordinated Debentures through the date of
disposition in income as ordinary income (i.e., original issue discount), and
to add such amount to its adjusted tax basis in its pro rata share of the
underlying Convertible Junior Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of original issue discount, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "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 such securities
to sell their Convertible Preferred Securities or the price at which such
holders may be able to sell their Convertible Preferred Securities. If such a
market were to develop, the Convertible Preferred Securities could trade at
prices that may be higher or lower than their initial offering price depending
on many factors, including prevailing interest rates, the price of 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 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 PortalSM Market, a subsidiary of the Nasdaq Stock
Market, Inc.
16
<PAGE>
CALENERGY CAPITAL TRUST III
CalEnergy Capital Trust III (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,
will act 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 pays
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."
17
<PAGE>
THE COMPANY
OVERVIEW
CalEnergy Company, Inc. is a fast-growing global power company whose goal
is to be a leading provider of low cost and reliable energy services throughout
the world as governments privatize or deregulate electricity and gas markets.
CalEnergy was founded in 1971 and, through its subsidiaries, manages and owns
interests in over 5,000 megawatts ("MW") of power generation facilities in
operation, construction and development worldwide, including 20 generating
facilities which it currently operates. In addition, through its subsidiary,
Northern Electric plc ("Northern"), the Company is engaged in the distribution
of electricity to approximately 1.5 million customers primarily in northeast
England as well as the supply of electricity and gas (together with other
related business activities) throughout England and Wales. The Company has
achieved significant growth in earnings and assets over the past five years
through: (i) acquisitions that complement and diversify the Company's existing
business, broaden the geographic locations of and fuel sources used by its
projects and enhance its competitive capabilities; (ii) enhancement of the
financial and technical performance of existing and acquired projects; and
(iii) development and construction of new plants and facilities ("greenfield
development").
The Company's management team has a proven track record of project
development, operation and acquisition integration. Since the arrival of the
current management team in 1991, the Company's operating and financial results
have improved significantly as a result of cutting costs, improving operating
efficiency at its existing plants, bringing all new greenfield projects into
operation on time and within budget and implementing an aggressive
international expansion and acquisition strategy. The senior management team
has an average of twelve years of independent power experience and owns
approximately 3% of the outstanding Common Stock of the Company on a fully
diluted basis after giving effect to the Acquisition (as defined below), the
Common Stock Offering and the Direct Sale.
The market capitalization of the Company has risen at a compound annual
rate of 27% from approximately $499 million in December 1991 to approximately
$2,146 million in September 30, 1997, the revenues of the Company have risen at
a compound annual rate of 46% from approximately $127 million in 1992 to
approximately $576 million in 1996 and net income available to common
stockholders has risen at a compound annual rate of 33% from approximately $30
million in 1992 to approximately $92 million in 1996.
On January 29, 1998, the Company reported that total revenues increased
229% to $628.0 million for the quarter ended December 31, 1997, from $191.0
million for the same period in 1996. Net income available to common
shareholders increased 61% to $34.1 million for the quarter ended December 31,
1997, or $0.43 per basic common share, compared to $21.2 million, or $0.34 per
basic common share for the same period in 1996, excluding the effects of an $87
million one-time, fourth quarter charge regarding the Company's Indonesian
projects. Including this charge, the net loss was $52.9 million for the quarter
ended December 31, 1997, or $0.67 per basic common share.
For the year ended December 31, 1997, revenues increased 294% to $2.3
billion from $576.2 million for the same period in 1996. Excluding the
extraordinary and non-recurring items, net income available to common
shareholders for the year ended December 31, 1997 increased 50% to $138.8
million, or $2.06 per basic common share, compared to $92.5 million, or $1.69
per basic common share for the same period in 1996. Including the one-time
Indonesian charge in the fourth quarter, the full year 1997 net income before
extraordinary item was $51.8 million or $0.77 per basic common share. In
addition, the year ended December 31, 1997 earnings results included an
extraordinary item in the amount of $135.9 million, or $2.02 per basic common
share. The extraordinary item reflects the so-called "windfall tax" on
Northern, acquired on December 24, 1996, assessed by the Labour Government in
the United Kingdom. Including the one-time Indonesian charge and the
extraordinary item, the net loss was $84.0 million for the year ended
December 31, 1997, or $1.25 per basic common share. See the Company's
Current Report on Form 8-K dated January 29, 1998, which is incorporated
herein by reference.
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<PAGE>
The one-time charge of $87 million for the fourth quarter of 1997
represents an asset valuation impairment under Financial Accounting Standard
No. 121 "Accounting for the Impairment of Long-Lived Assets" relating to
CalEnergy's assets in Indonesia. The charge includes all reasonably estimated
asset valuation impairments associated with the Company's assets in Indonesia
and gives effect to the political risk insurance on such investment. The
estimate assumes there will be no tax benefits associated with the asset
valuation impairment.
During 1995 to 1997, the Company consummated several significant
acquisitions, each of which has been successfully integrated and immediately
accretive to earnings. In January 1995, the Company acquired Magma Power
Company ("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, has made the Company
the world's largest independent geothermal power producer (based on the
Company's estimate of aggregate MW of electric generating capacity in operation
and construction).
In April 1996, the Company completed the purchase for approximately $70
million of its partner's interests in four electric generating plants in
Southern California, resulting in its sole ownership of the Imperial Valley
Projects' then 228 MW of aggregate net operating capacity.
In August 1996, the Company acquired Falcon Seaboard Resources, Inc.
("Falcon Seaboard") for approximately $226 million, thereby acquiring 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 December 1996, the Company acquired a majority of the common shares of
Northern. Northern is one of the twelve regional electricity companies (each, a
"REC") which came into existence as a result of the restructuring and
subsequent privatization of the electricity industry in the United Kingdom in
1990. Northern distributes electricity in its authorized area located in
northeast England which covers approximately 14,400 square kilometers and has a
population of approximately 3.2 million people. Northern also supplies
electricity and gas inside and outside its authorized area and owns interests
in three producing gas field operations in the North Sea.
RECENT EVENTS
On September 11, 1997, the Company announced that it had signed a
definitive agreement (the "KDG Agreement") with Kiewit Diversified Group Inc.
("KDG"), a wholly-owned subsidiary of Peter Kiewit Sons', Inc. ("PKS"), to
acquire all of KDG's ownership interest in the various international power
generation projects (the "Energy Project Joint Venture Acquisition") which are
jointly owned with the Company and managed by the Company as well as to
repurchase all of KDG's outstanding ownership interests in the Company's Common
Stock (the "Stock Repurchase," and together with the Energy Project Joint
Venture Acquisition, the "Acquisition"). Final closing of the transaction
occurred on January 2, 1998.
KDG's ownership interest in the Company consisted of 20,231,065 shares of
Common Stock (including options to acquire 1,000,000 shares of Common Stock)
which represented approximately 30% of the Company's outstanding shares (or
26%, on a fully diluted basis), in each case prior to the Common Stock Offering
and the Direct Sale, as well as the following power project interests: 45% of
the 165 net MW Mahanagdong project, 35% of the 150 net MW Casecnan project, 47%
of the 400 net MW Dieng project, 44% of the 400 net MW Patuha project, 30% of
the 400 net MW Bali project and 30% of CE Electric UK Holdings (the parent of
Northern). The Company was and continues to be the managing partner and
operator of each such project (collectively, the "Joint Venture Energy
Projects"). In addition, KDG's 50% interest in all other power project
opportunities which the Company had in development under the international
joint venture agreement with KDG were transferred to the Company. Upon
consummation of the Acquisition, the Company added over 1,000 net MW of
generating capacity in operation, construction and development to its project
portfolio (including
19
<PAGE>
approximately 850 net MW of operating, construction and development projects).
For projects under development and uncertainties relating to doing business
outside the United States see "Risk Factors."
The Company paid $1,159,215,000 for the Energy Projects Joint Venture
Acquisition and the Stock Repurchase from KDG. The Company funded such
Acquisition with available cash and the net proceeds of the Note Offering, the
Common Stock Offering and the Direct Sale.
On October 17, 1997, the Company consummated a public offering of
17,100,000 shares of Common Stock at a price of $37-7/8 per share in
simultaneous United States and international offerings (the "Common Stock
Offering"). In addition, 2,000,000 shares of Common Stock were purchased from
the Company in a direct sale by a trust affiliated with Walter Scott, Jr., the
Chairman and Chief Executive Officer of PKS, contemporaneously with the closing
of the Common Stock Offering (the "Direct Sale"). The Company received
approximately $700 million in net proceeds from the Common Stock Offering and
the Direct Sale. In addition, on October 28, 1997, the Company consummated the
Note Offering, a public offering of $350,000,000 aggregate principal amount of
its 7.63% Senior Notes due 2007. See the Company's Current Reports on Form 8-K
dated October 13, 1997, October 23, 1997 and October 28, 1997, each
incorporated herein by reference.
On December 16, 1997 the Company announced that CE Electric UK Funding
Company, an indirect subsidiary of the Company ("UK Funding Company"), closed
the sale (the "UK Note Offering") of $125 million of its 6.853% Senior Notes
due 2004, and $237 million of its 6.995% Senior Notes due 2007 (collectively,
the "UK Senior Notes"), and (pound)200 million of its 7.25% Sterling Bonds due
2022 (which are guaranteed as to scheduled payments of principal and interest
pursuant to a financial guarantee insurance policy issued by AMBAC Insurance UK
Limited) (the "Sterling Bonds," and collectively with the UK Senior Notes, the
"UK Notes"). The U.K. Senior Notes were rated BBB+, Baal and A- by Standard &
Poor's, Moody's and Duff & Phelps respectively. The Sterling Bonds were rated
AAA and Aaa by Standard & Poor's and Moody's, respectively. UK Funding Company
used the net proceeds from the UK Senior Note offering to refinance in full the
term loans incurred by its wholly-owned subsidiary, CE Electric UK Holdings, to
finance the acquisition of Northern and for other general corporate purposes.
On December 11, 1997, the Company announced that it has increased the
authorized purchase amounts in its stock repurchase program. With the increased
authorization, the Company is currently authorized to purchase from time to
time up to 3,000,000 shares of its Common Stock on the open market. The Common
Stock is traded on the New York, Pacific and London Stock Exchanges.
STRATEGY
The Company's growth strategy remains focused upon taking advantage of
the investment opportunities created by the continuing deregulation and
privatization in energy sectors throughout the world. In order to effectively
execute its growth strategy, the Company has organized its operations into
three geographic regions (the Americas, Asia and Europe) and two markets
(emerging and mature). As a market evolves in its life cycle from emerging to
mature, the investment opportunities available to the Company will evolve from
generation to distribution and supply.
The Company's strategy includes:
o GROWTH THROUGH INTERNATIONAL AND DOMESTIC ACQUISITIONS. The
Company has successfully completed four acquisitions during 1995 to
1997, each of which was immediately accretive to earnings. The Company
believes several of these acquisitions provided it with specialized
skills and experience that enhance its competitive position in the
areas it has targeted for future growth. For example, the Company's
acquisition of Northern, a United Kingdom ("UK") regional electric
company engaged in electric distribution and gas distribution and
supply, is the first step in its planned expansion into those sectors
in the U.S. and elsewhere throughout the world. In addition,
20
<PAGE>
since the UK is progressively deregulating its electric and gas supply
sectors, the Company believes that its Northern management team has
the knowledge and skills to compete in a competitive supply market.
Northern also possesses the sophisticated billing and information
systems that are believed by the Company to be critically important
components of the skill and technology base necessary to compete
effectively in a deregulated environment.
The Company believes that the electric industry in the United
States will also progressively deregulate over the next three to five
years and will largely follow the regulatory model established in the
UK (with incentive based rates or price caps). As currently regulated
U.S. electric distributors and electric and gas suppliers attempt to
rationalize their businesses to maintain profitability in a price
competitive market, the Company believes that opportunities will
become available to low cost and reliable providers of energy services
to gain market share in energy supply and provide additional services
to competitors (such as utility line construction and maintenance
services, metering, customer billing and information systems
services).
As a result, the Company believes that by acquiring a U.S. utility
operation and transferring the knowledge, skills and systems gained at
Northern, it can create a platform from which a U.S. energy
distribution and supply business can be profitably established and
expanded in a deregulated market. In this context, the Company sought
in 1997 to acquire a U.S. utility, New York State Electric & Gas
Corporation ("NYSEG"), through a two-step tender offer. When its
minimum tender condition was not met, the Company did not increase its
offer price and chose not to further pursue the NYSEG acquisition.
Consistent with its disciplined approach to acquisitions, the Company
will continue to evaluate other available opportunities from time to
time, but will not agree to pay prices which it believes to be
unjustified in its acquisition analysis. The Company still intends to
acquire a U.S. utility operation in the next few years, although it
currently has no specific acquisition plans.
o GROWTH THROUGH GREENFIELD DEVELOPMENT OF ENERGY PROJECTS. The
Company continues to view the international power generation sector as
an attractive market for the development of new greenfield energy
opportunities, an area in which it has demonstrated substantial
expertise. With the acquisition of Sovereign Exploration Ltd. (now
CalEnergy Gas (UK) Limited) as part of the Northern acquisition, the
Company has expanded its development strategy to include integrated
generation and upstream natural gas operations.
o PROFIT ENHANCEMENT THROUGH OPERATING EFFICIENCIES WHILE
MAINTAINING QUALITY AND RELIABILITY OF SERVICE. The Company
aggressively pursues profitability improvements through efficiency and
productivity gains at existing operations.
o CONTINUED DIVERSIFICATION OF REVENUE BASE AND FUEL SOURCES. The
Company believes that it presently has a diversified revenue base,
distributed among its net ownership of 1,689 MW in twenty-one
operating projects and its ownership of an operating electric utility.
The Company intends to seek continued diversification of its revenue
base and fuel sources through acquisitions and greenfield development.
---------------
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.
21
<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 nine months ended September 30, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- SEPTEMBER 30,
------------
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 1.7 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 income and loss of
non-consolidated subsidiaries, and (b) fixed charges, less capitalized
interest. "Fixed charges" represent interest (whether expensed or capitalized),
amortization of deferred financing and bank fees, and the portion of rentals
considered to be representative of the interest factor (one-third of lease
payments) and preferred stock dividend requirements of majority owned
subsidiaries.
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<PAGE>
CAPITALIZATION
The following table sets forth the historical and pro forma consolidated
capitalization of the Company at September 30, 1997. The table should be read
in conjunction with the Company's consolidated financial statements and notes
thereto incorporated herein by reference. Pro Forma consolidated capitalization
gives effect to the Common Stock Offering, the Direct Sale, the Note Offering
and the Acquisition as if each had occurred on September 30, 1997.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------
(IN THOUSANDS)
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Indebtedness:
Parent company debt
Senior discount notes........................... 529,640 529,640
Limited recourse senior secured notes (1)....... 200,000 200,000
Senior notes.................................... 224,191 224,191
7.63% Note Offering............................. -- 350,000
Subsidiary and project debt (2):
Construction loans.............................. 385,527 616,427
Project finance loans........................... 233,622 605,122
Salton Sea notes and bonds...................... 493,868 493,868
UK credit facility.............................. 653,630 653,630
Northern Electric Bonds......................... 421,260 421,260
--------- ---------
Total consolidated indebtedness................... 3,141,738 4,094,138
Deferred income................................... 28,044 28,044
Company-obligated mandatorily redeemable
convertible preferred securities of subsidiary
trusts.......................................... 553,930 553,930
Preferred securities of subsidiary................ 56,387 56,387
Minority interest................................. 125,834 2,000
Common stock and options subject to redemption 654,736 --
Stockholders' equity:
Preferred stock, no par value, 2,000 shares
authorized...................................... -- --
Common stock, $.0675 par value, 180,000 shares
authorized, 63,880 shares issued, 63,136 shares
outstanding - actual; 82,980 shares issued -
pro forma; 63,005 shares outstanding - pro forma 4,312 5,601
Additional paid-in capital........................ 561,263 1,238,581
Retained earnings................................. 266,415 266,415
Common stock and options subject to redemption.... (654,736) --
Treasury stock, 744 common shares at cost -
actual; 19,795 pro forma........................ (26,068) (659,491)
Unearned compensation - restricted stock.......... (475) (475)
Unrealized gain on investments, net............... 9,035 9,035
Cumulative effect of foreign currency translation
adjustments..................................... (9,372) (5,355)
--------- ---------
Total stockholders' equity........................ 150,374 854,311
--------- ---------
Total capitalization.............................. 4,711,043 5,588,810
========= =========
</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.
23
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Issuer will be reflected in the Company's
consolidated financial statements with the Convertible Preferred Securities
shown as Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary trusts.
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.
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<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 Convertible Preferred Security are
fixed at a rate per annum of 6 1/2% of the stated liquidation preference of $50
per each Convertible Preferred Security. 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 September 1,
1997, when, as and if available. The distribution payable on September 1, 1997,
which was calculated at the above rate and based on a period that is shorter
than a full quarter, was in the amount of $0.17153 per each 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
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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). 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 September 1,
2027 (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 shares of Common Stock for each
Convertible Preferred Security (equivalent to a conversion price of $47.75 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
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preceding sentence, neither the Issuer nor the Company will make, or be
required to make, any payment, allowance or adjustment for accumulated and
unpaid distributions, whether or not in arrears, on converted Convertible
Preferred Securities. The Company will make no payment or allowance for
distributions on the shares of Common Stock issued upon such conversion, except
to the extent that such shares of Common Stock are held of record on the record
date for any such distributions, except in certain limited circumstances. Each
conversion will be deemed to have been effected immediately prior to the close
of business on the day on which the related conversion notice was received by
the 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 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
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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 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 Convertible Preferred Security 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 Convertible
Preferred Security 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 September 1, 2000, upon not less than 20 nor more than 60 days'
notice. The Company therefore will be required to make 13 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."
CONDITIONAL RIGHT TO SHORTEN MATURITY; TAX EVENT REDEMPTION AND INVESTMENT
COMPANY EVENT DISTRIBUTION
If a Tax Event (as defined herein) shall occur and be continuing and in
the opinion of counsel to the Company experienced in such matters, there would
in all cases, after effecting the termination of the Issuer and the
distribution of the Convertible Junior Subordinated Debentures to the holders
of the Convertible Preferred Securities in exchange therefor, be more than an
insubstantial risk that an Adverse Tax Consequence (as defined herein) would
continue to exist, then the Company shall have the right:
(a) to shorten the Stated Maturity of the Junior Subordinated
Debentures to the minimum extent required, but in any event to a date not
earlier than August 10, 2012 (the action referred to in this clause (a)
being referred to herein as a "Maturity Advancement"), such that, in the
opinion of counsel to the Company experienced in such matters, after
advancing the Stated Maturity, interest paid on the Junior Subordinated
Debentures will be deductible for federal income tax purposes, provided,
however,
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that there shall be delivered to the Trustees an opinion of counsel
(which counsel shall be satisfactory to the Trustees) that such change in
maturity will not (i) cause the Trust to fail to be classified as a
grantor trust or (ii) result in a taxable event to the holder, or
(b) if in the opinion of counsel to the Company experienced in
such matters, there would in all cases, after effecting a Maturity
Advancement, be more than an insubstantial risk that an Adverse Tax
Consequence would continue to exist, to redeem the Junior Subordinated
Debentures, prior to September 1, 2000, in whole but not in part for
cash, upon not less than 30 nor more than 60 days' notice and within 90
days following the occurrence of the Tax Event, at 100% of the
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 Convertible Preferred Security plus accrued and unpaid
distributions. 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."
Holders of Convertible Preferred Securities should consult their own tax
advisors regarding the tax consequences to them of a Maturity Advancement.
See "United States Taxation--Proposed Tax Legislation" for a discussion
of certain legislative proposals that, if adopted could give rise to a Tax
Event, which may permit the Company to shorten the Stated Maturity of the
Convertible Junior Subordinated Debentures or cause a redemption of the
Convertible Preferred Securities prior to September 1, 2000.
"Tax Event" means that the Company shall have obtained an opinion of
nationally recognized independent tax counsel (reasonably acceptable to the
Company Trustees) experienced in such matters to the effect that, as a result
of (a) any amendment to or change (including any announced prospective change)
in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination on or after the date of the
Original Offering), which amendment or change is effective, is enacted or which
interpretation or pronouncement is announced on or after the date of the
Original Offering (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 (each of the circumstances referred to in clauses (i),
(ii) and (iii) being referred to herein as an "Adverse Tax Consequence").
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
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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.
"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 the Original
Offering.
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) 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 September
1, 2027, and may be redeemed, in whole or in part, at any time after September
1, 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
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irrevocable instructions and authority to pay such amount to the holders of
Certificated Securities upon surrender of their certificates. Notwithstanding
the foregoing, distributions payable on or prior to the redemption date for any
Convertible Preferred Securities called for redemption shall be payable to the
holders of such Convertible Preferred Securities on the relevant record dates
for the related distribution dates. If notice of redemption shall have been
given and funds are deposited as required, then upon the date of such deposit,
all rights of holders of such Convertible Preferred Securities so called for
redemption will cease, except the right of the holders of such Convertible
Preferred Securities to receive the redemption price, but without interest on
such redemption price. In the event that any date fixed for redemption of
Convertible Preferred Securities is not 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
The holder of all of the outstanding Common Securities (i.e., the
Company) has the right at any time to terminate the Issuer and, after
satisfaction of liabilities to creditors of the Issuer as provided by
applicable law, cause the Convertible Junior Subordinated Debentures to be
distributed to the holders of the Convertible Preferred Securities and Common
Securities in liquidation of the Issuer. Such right is subject to the Company
having received an opinion of counsel to the effect that such distribution will
not be a taxable event to holders of Convertible Preferred Securities.
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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 Convertible
Preferred Security 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)
September 1, 2037, 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 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) upon the receipt by the Trustee of written notice from the Company
in accordance with the terms of the Declaration directing the Trustee to
terminate the Trust; (v) upon the occurrence and continuation of an Investment
Company Event; (vi) the entry of a decree of a judicial dissolution of the
Company, (vii) the redemption of all the Trust Securities or (viii) 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
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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, 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
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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 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
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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.
Holders of 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 August 12, 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) keep the Shelf Registration Statement continuously effective until
two years after its effective date or such earlier date
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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
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 1/2% 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 has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
FORM, DENOMINATION AND REGISTRATION
The Convertible Preferred Securities are issued in fully registered form,
without coupons.
Global Certificate; Book-entry Form. Except as provided below,
Convertible Preferred Securities are evidenced by one or more global
certificates representing Convertible Preferred Securities (collectively, the
"Global Certificate"), which have been deposited with the Property Trustee as
custodian for DTC and registered in the name of Cede & Co. ("Cede") as DTC's
nominee. Except as set forth below, record ownership of a Global Certificate
may be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
A "qualified institutional buyer," as defined in Rule 144A under the
Securities Act ("QIB"), may hold its interests in the 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.
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Conveyance of notices and other communications by DTC to Participants, by
Participants to certain banks, brokers, dealers, trust companies and other
parties that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"), and by
Participants and Indirect Participants to owners of beneficial interests in the
Global Certificate held by DTC will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time. Redemption notices shall be sent to Cede. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will reduce the amount
of the interest of each Participant in such Convertible Preferred Securities in
accordance with its procedures.
Although voting with respect to the Convertible Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede will
itself consent or vote with respect to Convertible Preferred Securities. Under
its usual procedures, DTC would mail an Omnibus Proxy to the 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-offs times,
for submitting such requests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Convertible Preferred Securities represented by
a Global Certificate to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect to such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Neither the Company nor the Property Trustee (or any registrar, paying
agent or conversion agent under the 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
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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 that 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 has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Certificates among
Participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
cause the Convertible Preferred Securities to be issued in definitive form in
exchange for the Global Certificates. None of the Company, the Property Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC, its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Certificate.
PAYMENT AND PAYING AGENCY
Payments in respect of the Convertible Preferred Securities shall be made
to DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of Certificated Securities, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The Paying Agent shall initially be
The Bank of New York. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Issuer Trustees. In the event that
The Bank of New York shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).
REGISTRAR, TRANSFER AGENT AND CONVERSION AGENT
The Bank of New York acts as registrar, transfer agent and conversion
agent (the "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.
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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 will
rank (i) subordinate and junior in right of payment to all other liabilities of
the Company, except any liabilities that may be made pari passu expressly by
their terms, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock or
preferred securities of any affiliate of the Company and (iii) senior to Common
Stock. 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 August 12, 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 will be issued under the
Indenture. The Convertible Junior Subordinated Debentures were limited in
aggregate principal amount to $278,350,600, 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, at the Stated
Maturity, September 1, 2027, subject to the Company's right to shorten the
maturity thereof as described under "Description of the Convertible Preferred
Securities--Conditional Right to Shorten Maturity; Tax Event Redemption and
Investment Company Event Distribution."
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.
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INTEREST
Each Convertible Junior Subordinated Debenture bears interest at the rate
of 6 1/2% 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 September 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 1/2% on any
interest installment not paid when due.
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
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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 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 of $47.75, subject to the conversion price adjustments
described under "Description of the Convertible Preferred
Securities--Conversion Rights." The Issuer will covenant not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. Upon surrender of each $50 of liquidation
preference of Convertible Preferred Securities to the Conversion Agent for
conversion, the Issuer will distribute $50 principal amount of the Convertible
Junior Subordinated Debentures to the Conversion Agent on behalf of the holder
of the Convertible Preferred Securities so converted, whereupon the Conversion
Agent will convert such Convertible Junior Subordinated Debentures to Common
Stock on behalf of such holder. The Company's delivery to the holders of the
Convertible Junior Subordinated Debentures (through the Conversion Agent) of
the fixed number of shares of Common Stock into which the Convertible Junior
Subordinated Debentures are convertible (together with the cash payment, if
any, in lieu of fractional shares) will be deemed to satisfy the Company's
obligation to pay the principal amount of the Convertible Junior Subordinated
Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid
or duly provided for; provided, however, that if any Convertible Junior
Subordinated Debenture is converted after a record date for payment of
interest, the interest payable on the related interest payment date with
respect to such Convertible Junior Subordinated Debenture shall be paid to the
Issuer (which will distribute such interest to the converting holder) or other
holder of Convertible Junior Subordinated Debentures, as the case may be,
despite such conversion.
OPTIONAL REDEMPTION
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 September 1, 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 September 1, 2001; at a redemption price equal to $50.50 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 during the 12-month period
beginning September 1, 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
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opening of business 15 days before any selection for redemption of Convertible
Junior Subordinated Debentures and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have been
given to all holders of Convertible Junior Subordinated Debentures to be so
redeemed and (ii) register the transfer of or exchange any Convertible Junior
Subordinated Debentures so selected for redemption, in whole or in part, except
the unredeemed portion of any Convertible Junior Subordinated Debenture being
redeemed in part.
SUBORDINATION
The Indenture provides that the Convertible Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness of the Company as provided in the Indenture. No payment of
principal of (including redemption payments), or interest on, the Convertible
Junior Subordinated Debentures may be made (i) if any Senior Indebtedness is
not paid when due, any applicable grace period with respect to such default has
ended and such default has not been cured or waived, or (ii) if the maturity of
any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
and premium, if any, and interest due or to become due on, all Senior
Indebtedness must be paid in full before the holders of the Convertible Junior
Subordinated Debentures are entitled to receive or retain any payment. In the
event that, notwithstanding the foregoing, any payment or distribution of cash,
property or securities shall be received or collected by a 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 September 30, 1997, Senior Indebtedness consisting of
borrowed money of CalEnergy Company, Inc.
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aggregated approximately $953.8 million. See "Capitalization." At September 30,
1997, on a pro forma basis after giving effect to the consummation of the Note
Offering, the Common Stock Offering, the Direct Sale and the Acquisition,
Senior Indebtedness consisting of borrowed money of CalEnergy Company, Inc.
aggregated approximately $1,303.8 million.
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
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
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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 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
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request, and offered reasonable indemnity, to the Indenture Trustee to
institute such proceeding as Indenture Trustee, and the Indenture Trustee shall
not have received from the holders of a majority in aggregate principal amount
of the outstanding Convertible Junior Subordinated Debentures a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of a Convertible Junior Subordinated Debenture for
enforcement of payment of the principal of or interest on such Convertible
Junior Subordinated Debenture on or after the respective due dates expressed in
such Convertible Junior Subordinated Debenture.
The holders of a majority in aggregate outstanding principal amount of
all series of the Convertible Junior Subordinated Debentures affected thereby
may, on behalf of the holders of all the Convertible Junior Subordinated
Debentures of such series, waive any past default, except a default in the
payment of principal, premium, if any, or interest. The Company is required to
file annually with the Indenture Trustee and the Trustee a certificate as to
whether or not the Company is in compliance with all the conditions and
covenants under the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the 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
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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 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 who purchase the Convertible Preferred Securities upon original
issuance. It also 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, and by acceptance
of Convertible Preferred Securities, each holder covenants to treat the
Convertible Junior Subordinated Debentures as indebtedness and the Convertible
Preferred Securities as evidence of an indirect beneficial ownership 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. No assurance can be given, however, that such position of the
Company will not be challenged by the Internal Revenue Service or, if
challenged, that such a challenge will not be successful. If the Convertible
Junior Subordinated Debentures were treated as equity, the interest thereon
would be classified as dividends, and, among other things, payment to United
States Alien Holders would be subject to United States federal withholding tax
at a 30% (or lower treaty) rate.
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, will
render 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.
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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 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 includable in such holder's
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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.
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 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
(including any OID for which the holder does not receive payment) 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
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Proposed Legislation was not included in the tax legislation signed into law by
President Clinton on August 5, 1997. There can be no assurances, however, that
legislation enacted in the future will not contain provisions similar to the
Proposed Legislation. Any such legislation could be made applicable to the
Convertible Junior Subordinated Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Junior Subordinated
Debentures, such legislation could result in the distribution of the
Convertible Junior Subordinated Debentures 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
holder that is not a U.S. Holder for United States federal income tax purposes.
A "U.S. Holder" is a holder of Convertible Preferred Securities who or which is
a citizen or an individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, a corporation
or partnership created or organized (or treated as created or organized for
federal income tax purposes) in or under the laws of the United States or any
political subdivision thereof, or a trust or estate the income of which is
includable in its gross income for federal income tax purposes without regard
to its source. A trust is a U.S. Holder for federal income tax purposes if, and
only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States trustees have the authority to control all substantial decisions of the
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
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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 Purchasers
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 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
initial 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.
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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.
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SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust
and sold by Credit Suisse First Boston Corporation and Lehman Brothers Inc.
(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) 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
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 January 30, 1998, and has
been provided to the Trust and the Company by such Selling Holders.
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- ----------
Merrill Lynch Pierce Fenner & Smith, Inc............................. 498,100
Lipper Convertibles, L.P............................................. 430,000
Argent Classic Convertible Arbitrage Fund (Bermuda L.P.) (1)......... 325,000
Toronto Dominion (New York), Inc..................................... 306,000
Natwest Securities Limited........................................... 270,000
Credit Suisse First Boston Corporation............................... 215,000
HSBC Securities Inc.................................................. 200,600
Security Insurance Company of Hartford............................... 200,000
Swiss Bank Corp.-London Branch (2)................................... 175,000
Sogen International Fund (3)......................................... 165,000
AIM Charter Fund..................................................... 150,000
MFS Series Trust V-MFS Total Return Fund (4)......................... 139,500
BNP Arbitrage, SNC (5)............................................... 112,850
Van Kampen American Capital Harbor Fund (6).......................... 100,000
Surfboard and Co. (7)................................................ 100,000
The Northwestern Mutual Life Insurance Company (8)................... 100,000
SBC Warburg Dillon Read Inc.......................................... 90,000
Allstate Insurance Company........................................... 78,000
Tennessee Consolidated Retirement System............................. 75,000
Lutheran Brotherhood................................................. 75,000
LB Series Fund, Inc. High Yield Portfolio (9)........................ 60,000
The Travelers Indemnity Co........................................... 58,300
Pitney Bowes, Inc. Retirement Fund (10).............................. 55,000
Black Diamond Partners, L.P. (11).................................... 51,350
Black Diamond Ltd. (11).............................................. 49,640
The Retail Clerks Pension Plan....................................... 40,000
Lutheran High Yield Fund (12)........................................ 40,000
The Travelers Insurance Co........................................... 37,500
AIM Blue Chip Fund................................................... 35,800
Bank of America Pension Plan (13).................................... 30,000
MLPFS Safekeeping (14)............................................... 30,000
KA Management Limited ............................................... 29,071
Forest Fulcrum Fund LP............................................... 26,900
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NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- -------------- ----------
AIM V.I. Growth & Income............................................. 25,000
Pacific Life Insurance Co............................................ 25,000
Deeprock & Co. (13).................................................. 25,000
Duck Bill & Co. (13)................................................. 25,000
MFS Series Trust IV-MFS Utilities Fund (5)........................... 24,900
KA Trading LP........................................................ 21,929
General Motors Employees Domestic Group Pension Trust................ 20,000
McMahan Securities Co. L.P........................................... 19,700
Forest Global Convertible Fund Series A-5 ........................... 18,900
Commonwealth Life Insurance Company-(Camden-Teamsters
Non-Enhanced)(13).................................................. 15,000
Morehead Equity Fiduciary Trust Co. (15)............................. 15,000
MFS/Sunlife Series Trust-Utilities Series (5)........................ 11,600
Merrill Lynch World Income Fund, Inc. ............................... 10,000
Century National Insurance Company................................... 10,000
United National Insurance Company.................................... 10,000
Deutsche Bank New York Custody Services.............................. 10,000
Socgen International SICAV (3)....................................... 7,500
FMC Master Retirement Fund (3)....................................... 7,000
Worldwide Transactions Limited (16).................................. 5,380
Guaranty National Insurance Company.................................. 5,000
Double Black Diamond, L.P. (11)...................................... 4,435
Highbridge Capital Corp. (11)........................................ 4,430
The Travelers Life and Annuity Co.................................... 4,200
MFS Variable Insurance Trust-MFS Utilities Series (5)................ 3,000
First Montauk Securities ............................................ 3,000
Shepherd Investment International Ltd. (17).......................... 3,000
Stark International (17)............................................. 3,000
Deutsche Morgan Grenfell Inc......................................... 3,000
Forest Global Convertible Fund Series B-2 ........................... 2,700
Gersec Trust Reg..................................................... 2,000
LLT Limited (18)..................................................... 1,500
LDG Limited (19)..................................................... 1,200
MFS Series Trust I-MFS Convertible Securities Fund (5)............... 100
Other Holders........................................................ 703,915
-------
Total............................................ 5,400,000
- --------------
(1) Argent Financial Group (Bermuda) Ltd. may also be deemed beneficial
owner of these Convertible Preferred Securities.
(2) SBC Warburg Dillon Read Inc. may also be deemed beneficial owner of
these Convertible Preferred Securities.
(3) Societe Generale Asset Management Corp. may also be deemed beneficial
owner of these Convertible Preferred Securities.
(4) MFS Advisors may also be deemed beneficial owner of these Convertible
Preferred Securities.
(5) BNP/Cooper Neff Advisors, Inc. may also be deemed beneficial owner of
these Convertible Preferred Securities.
(6) Van Kampen American Capital Asset Management, Inc. may also be deemed
beneficial owner of these Convertible Preferred Securities.
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(7) California Public Employees' Retirement System may also be deemed
beneficial owner of these Convertible Preferred Securities.
(8) Northwestern Mutual Life Insurance Company Group Annuity Separate Account
may also be deemed beneficial owner of 20,000 of these Convertible
Preferred Securities.
(9) Lutheran Brotherhood may also be deemed beneficial owner of these
Convertible Preferred Securities.
(10) GEM Capital Management, Inc. may also be deemed beneficial owner of
these Convertible Preferred Securities.
(11) Carlson Capital, L.P. may also be deemed beneficial owner of these
Convertible Preferred Securities.
(12) Lutheran Brotherhood Research Corp. may also be deemed beneficial owner
of these Convertible Preferred Securities.
(13) Camden Asset Management LP may also be deemed beneficial owner of these
Convertible Preferred Securities.
(14) Merrill Lynch Pierce Fenner & Smith, Inc. may also be deemed beneficial
owner of these Convertible Preferred Securities.
(15) Fiduciary Trust Company International may also be deemed beneficial owner
of these Convertible Preferred Securities.
(16) Carlson Offshore Advisors, L.P. may also be deemed beneficial owner of
these Convertible Preferred Securities.
(17) Staro Asset Management may also be deemed beneficial owner of these
Convertible Preferred Securities.
(18) Forest Investment Management, L.P. may also be deemed beneficial owner
of these Convertible Preferred Securities.
(19) TQA Investor, LLC may also be deemed beneficial owner of these Convertible
Preferred Securities.
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 that Credit Suisse
First Boston Corporation acted as an Initial Purchaser in the Original Offering
and Credit Suisse First Boston Corporation, Merrill Lynch Pierce Fenner &
Smith, Inc. or their respective affiliates have provided, and may continue to
provide investment banking or financial advisory services to the Company.
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.
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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.
61
<PAGE>
LEGAL MATTERS
Certain matters of Delaware law relating to 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 January 31, 1998, Mr.
McArthur beneficially owned 162,309 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, six and nine month periods ended March 31, 1997 and 1996, June 30,
1997 and 1996, and September 30, 1997 and 1996, incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their report included in the Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 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.
62
<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
Page
AVAILABLE INFORMATION.................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......................... 6
RISK FACTORS............................................................. 7
CALENERGY CAPITAL TRUST II............................................... 17
THE COMPANY.............................................................. 18
RATIO OF EARNINGS TO FIXED CHARGES....................................... 22
CAPITALIZATION........................................................... 23
ACCOUNTING TREATMENT..................................................... 24
USE OF PROCEEDS.......................................................... 24
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES ..................... 25
DESCRIPTION OF THE GUARANTEE............................................. 40
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES ........... 43
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE........................................... 51
UNITED STATES TAXATION................................................... 52
ERISA CONSIDERATIONS..................................................... 56
SELLING HOLDERS.......................................................... 58
PLAN OF DISTRIBUTION..................................................... 61
LEGAL MATTERS............................................................ 62
===============================================================================
===============================================================================
5,400,000 Convertible
Preferred Securities
CALENERGY CAPITAL TRUST III
6 1/2% 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
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.
AMOUNT
SEC registration fee......................... $ 67,703
Printing, shipping and engraving expenses.... 130,000
Legal fees and expenses...................... 200,000
Accounting fees and expenses................. 100,000
Transfer Agent, Registrar and trustee fees
and expenses................................. 15,000
Miscellaneous expenses....................... 37,297
========
Total.................................... $550,000
========
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
II-1
<PAGE>
approval if the officer or director is adjudged to be liable to the corporation
in the performance of his duty. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
THE 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:
Exhibit No. Description
4.1 Certificate of Trust of CalEnergy Capital Trust III.
4.2 Amended and Restated Declaration of Trust of CalEnergy Capital
Trust III, dated as of August 12, 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, Craig M. Hammett and Gregory Abel, as
Trustees.
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<PAGE>
4.3 Indenture for the 6 1/2% Convertible Junior Subordinated
Debentures, dated as of August 12, 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 III 6 1/2% Convertible
Preferred Securities (included in Exhibit 4.2 above).
4.6 Form of CalEnergy Company, Inc. 6 1/2% Convertible Junior
Subordinated Debentures (included in Exhibit 4.3 above).
4.7 CalEnergy Company, Inc. Preferred Securities Guarantee, dated
as of August 12, 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 August 12, 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 Convertible Preferred Securities being registered
hereby.
8.1 Opinion of Willkie Farr & Gallagher as to certain tax matters.
10.1 Registration Rights Agreement, dated August 12, 1997, by and
among CalEnergy Capital Trust III, CalEnergy Company, Inc.,
Credit Suisse First Boston Corporation and Lehman Brothers Inc.
12.1 Statement of Ratio of Earnings to Fixed Charges and to Combined
Fixed Charges and Preferred Stock Dividends 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, independent
auditors.
23.4 Consent of Willkie Farr & Gallagher (included in the opinions
filed as Exhibits 5.1 and 8.1).
23.5 Consent of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc. (included in the opinion filed as Exhibit 5.2).
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included in the
opinion filed as Exhibit 5.3).
24.1 Powers of Attorney (included on signature pages 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 1/2% 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.
- -------------------
* Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
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
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<PAGE>
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, as amended (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:
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<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 February 4, 1998.
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/she 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 and February 4, 1998
David L. Sokol Chief Executive Officer
(principal executive
officer)
/s/ Craig M. Hammett
------------------------- Senior Vice President and February 4, 1998
Craig M. Hammett Chief Financial Officer
(principal financial
officer)
/s/ Gregory E. Abel
------------------------- President and Chief February 4, 1998
Gregory E. Abel Operating Officer,
CalEnergy Europe, and
Chief Accounting Officer
/s/ Edgar D. Aronson
------------------------- Director February 4, 1998
Edgar D. Aronson
/s/ Judith E. Ayres
------------------------- Director February 4, 1998
Judith E. Ayres
/s/ Richard K. Davidson
------------------------- Director February 2, 1998
Richard K. Davidson
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<PAGE>
/s/ David H. Dewhurst
------------------------- Director February 4, 1998
David H. Dewhurst
/s/ Richard R. Jaros
------------------------- Director February 4, 1998
Richard R. Jaros
------------------------- Director February , 1998
David R. Morris
/s/ Bernard W. Reznicek
------------------------- Director February 1, 1998
Bernard W. Reznicek
/s/ Walter Scott, Jr.
------------------------- Director February 4, 1998
Walter Scott, Jr.
/s/ John R. Shiner
------------------------- Director February 2, 1998
John R. Shiner
/s/ Neville G. Trotter
------------------------- Director February 4, 1998
Neville G. Trotter
/s/ David E. Wit
------------------------- Director February 4, 1998
David E. Wit
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CalEnergy
Capital Trust III certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska, on February 4, 1998.
CALENERGY CAPITAL TRUST III
By: /s/ Steven A. McArthur
-----------------------------
Steven A. McArthur
Trustee
POWER OF ATTORNEY
Each of the undersigned trustees of CalEnergy Capital Trust III. 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.
/s/ Steven A. McArthur
------------------------- Trustee February 4, 1998
Steven A. McArthur
/s/ Craig M. Hammett
------------------------- Trustee February 4, 1998
Craig M. Hammett
/s/ Gregory E. Abel
------------------------- Trustee February 4, 1998
Gregory E. Abel
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1 Certificate of Trust of CalEnergy Capital Trust III.
4.2 Amended and Restated Declaration of Trust of CalEnergy Capital
Trust III, dated as of August 12, 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, Craig M. Hammett and Gregory Abel, as
Trustees.
4.3 Indenture for the 6 1/2% Convertible Junior Subordinated
Debentures, dated as of August 12, 1997, among CalEnergy
Company, Inc., as Issuer, and The Bank of New York, as Trustee.
4.5 Form of CalEnergy Capital Trust III 6 1/2% Convertible
Preferred Securities (included in Exhibit 4.2 above).
4.6 Form of CalEnergy Company, Inc. 6 1/2% Convertible Junior
Subordinated Debentures (included in Exhibit 4.3 above).
4.7 CalEnergy Company, Inc. Preferred Securities Guarantee, dated
as of August 12, 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 August 12, 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 Convertible Preferred Securities being registered
hereby.
8.1 Opinion of Willkie Farr & Gallagher as to certain tax matters.
10.1 Registration Rights Agreement, dated August 12, 1997, by and
among CalEnergy Capital Trust III, CalEnergy Company, Inc.,
Credit Suisse First Boston Corporation and Lehman Brothers Inc.
12.1 Statement of Ratio of Earnings to Fixed Charges and to Combined
Fixed Charges and Preferred Stock Dividends 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, independent
auditors.
23.4 Consent of Willkie Farr & Gallagher (included in the opinions
filed as Exhibits 5.1 and 8.1).
23.5 Consent of Steven A. McArthur, General Counsel of CalEnergy
Company, Inc. (included in the opinion filed as Exhibit 5.2).
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included in the
opinion filed as Exhibit 5.3).
24.1 Powers of Attorney (included on signature pages 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 1/2% 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.
<PAGE>
CERTIFICATE OF TRUST
The undersigned, the trustees of CalEnergy Capital
Trust III, desiring to form a business trust pursuant to Delaware
Business Trust Act, 12 Del. C. ss. 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is "CalEnergy Capital Trust III".
2. The name and business address of the trustee of the
Trust which has its principal place of business in
the State of Delaware is as follows:
The Bank of New York, Delaware
23 White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: August 4, 1997
/s/ Steven A. McArthur
--------------------------
Name: Steven A. McArthur
Title: Regular Trustee
/s/ Craig Hammett
--------------------------
Name: Craig Hammett
Title: Regular Trustee
/s/ Gregory Abel
--------------------------
Name: Gregory Abel
Title: Regular Trustee
THE BANK OF NEW YORK,
DELAWARE, as
Delaware Trustee
By: /s/ Walter N. Gitlin
-------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
<PAGE>
-----------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
CALENERGY CAPITAL TRUST III
Dated as of August 12, 1997
------------------------------
<PAGE>
<TABLE>
<CAPTION>
Page
TABLE OF CONTENTS
Page
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ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions................................................................. 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application............................................ 10
SECTION 2.2 Lists of Holders of Securities.............................................. 11
SECTION 2.3 Reports by the Property Trustee............................................. 11
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................................................... 12
SECTION 2.7 Event of Default; Notice.................................................... 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name........................................................................ 15
SECTION 3.2 Office...................................................................... 15
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................................................. 25
SECTION 3.10 Certain Rights of Property Trustee.......................................... 28
SECTION 3.11 Delaware Trustee............................................................ 30
SECTION 3.12 Not Responsible for Recitals or
Issuance of Securities.................................................. 31
SECTION 3.13 Duration of Trust........................................................... 31
SECTION 3.14 Mergers..................................................................... 31
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common
Securities.............................................................. 33
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............................................................ 35
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.................................................. 41
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
Conversion Agent........................................................ 46
SECTION 7.5 Paying Agent to Hold Money in Trust..........................................47
SECTION 7.6 Replacement Securities...................................................... 47
SECTION 7.7 Outstanding Preferred Securities............................................ 48
SECTION 7.8 Preferred Securities........................................................ 48
SECTION 7.9 Temporary Securities........................................................ 48
SECTION 7.10 Cancellation................................................................ 49
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust........................................ 49
ARTICLE IX
TRANSFER
SECTION 9.1 General..................................................................... 51
SECTION 9.2 Transfer Procedures and Restrictions........................................ 52
SECTION 9.3 Deemed Security Holders..................................................... 58
<PAGE>
Page
SECTION 9.4 Book Entry Interests........................................................ 59
SECTION 9.5 Notices to Clearing Agency.................................................. 59
SECTION 9.6 Appointment of Successor Clearing
Agency.................................................................. 60
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability................................................................... 60
SECTION 10.2 Exculpation................................................................. 61
SECTION 10.3 Fiduciary Duty.............................................................. 61
SECTION 10.4 Indemnification............................................................. 63
SECTION 10.5 Outside Businesses.......................................................... 66
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year................................................................. 67
SECTION 11.2 Certain Accounting Matters.................................................. 67
SECTION 11.3 Banking..................................................................... 68
SECTION 11.4 Withholding................................................................. 68
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.................................................................. 69
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent............................................... 71
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of
Property Trustee........................................................ 73
SECTION 13.2 Representations and Warranties
of Delaware Trustee......................................................74
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights......................................................... 75
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices..................................................................... 78
SECTION 15.2 Governing Law............................................................... 79
SECTION 15.3 Intention of the Parties.................................................... 80
<PAGE>
Page
SECTION 15.4 Headings.................................................................... 80
SECTION 15.5 Successors and Assigns...................................................... 80
SECTION 15.6 Partial Enforceability...................................................... 80
SECTION 15.7 Counterparts................................................................ 80
</TABLE>
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALENERGY CAPITAL TRUST III
AUGUST 12, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of August 12, 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 III (the "Trust"), a trust under the Business Trust Act (as
defined herein) pursuant to a Declaration of Trust dated as of August 4, 1997
(the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on August 4, 1997, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain Debentures (as defined herein) of the Debenture Issuer (as
defined herein);
WHEREAS, as of the date hereof, no interests in
the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the
Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Additional Interest" means if the Trust is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other taxing
authority, such amounts as shall be required so that the net amounts received
and retained by the Trust after paying such taxes, duties, assessments and
governmental charges will not be less than the amounts the Trust would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
"Affiliate" has the same meaning as given to that term in
Rule 405 of the Securities Act or any successor rule thereunder.
2
<PAGE>
"Agent" means any Registrar, Paying Agent, Conversion Agent
or co-registrar.
"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 August 12, 1997.
"Code" means the Internal Revenue Code of 1986 as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning set forth in Section
7.1(a).
3
<PAGE>
"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.
"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(e).
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"Event of Default" in respect of the Securities means an
Event of Default (as defined in the Indenture) has occurred and is continuing
in respect of the Debentures.
4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Exchanged Global Preferred Security" has the meaning set
forth in Section 9.2(a).
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Preferred Security" has the meaning set forth in
Section 7.3(a).
"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 August 12, 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.
"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).
5
<PAGE>
"Liquidated Damages" has the meaning set forth in Section
14.1.
"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.
"Offering Circular" means the confidential offering circular,
dated as of August 7, 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 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
6
<PAGE>
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(b).
"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 August 12, 1997, of the Sponsor in respect of the
Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to
a Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant
or as an indirect participant, in each case in accordance with the rules of
such Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in
Section 3.8(c)(i).
7
<PAGE>
"Purchase Agreement" shall have the meaning set forth in
Section 7.3.
"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
14.1.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated August 12, 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).
"Related Party" means, with respect to the Sponsor, any
direct or indirect wholly owned subsidiary of the Sponsor or any other Person
that owns, directly or indirectly, 100% of the outstanding voting securities of
the Sponsor.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"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
8
<PAGE>
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 Preferred Security
bearing the Restricted Securities Legend.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(b).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Securities Custodian" means the custodian with respect to
the Rule 144A Global Preferred Security and any other Preferred Security in
global form.
"Shelf Registration Statement" has the meaning set forth in
Section 14.1.
"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 Delaware Trustee" has the meaning set forth in
Section 5.6(c).
"Successor Entity" has the meaning set forth in Section
3.14(b)(i).
"Successor Property Trustee" has the meaning set forth in
Section 5.6(b).
"Successor Securities" has the meaning set forth in Section
3.14(b)(i)(B).
9
<PAGE>
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Tax Event" means that the Debenture Issuer shall have
obtained an opinion of nationally recognized independent tax counsel
(reasonably acceptable to the Regular 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
August 7, 1997), which amendment or change is effective, is enacted or which
interpretation or pronouncement is announced on or after August 7, 1997
(collectively, a "Change In Tax Law"), 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) interest payable to
the Trust on the Debentures is not or will not be deductible for United States
federal income tax purposes or (iii) the Trust 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 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.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as
10
<PAGE>
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"Trust" means CalEnergy Capital Trust III, 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.
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.
11
<PAGE>
(a) Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide the Property Trustee (i) within 14 days after each
record date for payment of Distributions, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the Holders of
the Securities ("List of Holders") as of such record date, provided that
neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Property Trustee
by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any
other time, within 30 days of receipt by the Trust of a written request from
the Property Trustee for a List of Holders as of a date no more than 14 days
before such List of Holders is given to the Property Trustee. The Property
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity) provided that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations
under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, commencing May 15,
1998, 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.
12
<PAGE>
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent, if any, provided for in this Declaration that relate
to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to ss.
314(c)(1) may be given in the form of an Officer's Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the
Event of Default under the Declaration shall also not
be waivable; or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation 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
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the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority
to be waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the Declaration as
provided below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that the
relevant Super 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
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316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act.
Subject to the foregoing provisions of this Section 2.6(b), upon such waiver,
any such default shall cease to exist and any Event of Default with respect to
the Common Securities arising therefrom shall be deemed to have been cured for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by
the Property Trustee at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with respect
to the Securities actually known to a Responsible Officer of the Property
Trustee, unless such defaults have been cured before the giving of such notice
(the term "defaults" for the 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.
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(b) The Property Trustee shall not be deemed to have
knowledge of any default except:
(i) a default under Sections 501(1) and 501(2) of
the Indenture; or
(ii) any default as to which the Property Trustee
shall have received written notice or of which a Responsible Officer
of the Property Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "CalEnergy Capital Trust III," 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.
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SECTION 3.4 Authority.
(a) Subject to the limitations provided in this Declaration
and to the specific duties of the Property Trustee, the Regular Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any
matter over which the Regular Trustees have power to act, any power of the
Regular Trustees may be exercised by, or with the consent of, any one such
Regular Trustee.
(c) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6, provided, that the registration statement
referred to in 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
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Holders shall not have legal title to any part of the assets of the Trust, but
shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more
than one series of Common Securities, and, provided further, that there shall
be no interests in the Trust other than the Securities, and the issuance of
Securities shall be limited to simultaneous issuance of both Preferred
Securities and Common Securities on the Closing Date and any other date
Preferred Securities and Common Securities are sold pursuant to the
over-allotment option granted in the 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
circular (the "Offering Circular") 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 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;
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(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;
(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
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Securities and Holders of Common Securities as to such actions and applicable
record dates;
(f) to take all actions and perform such duties as may be
required of the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the
Trust Indenture Act to the Property Trustee, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses that are necessary or
incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act
as, registrar and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
(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
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Delaware and of each other jurisdiction in which such existence is necessary to
protect the limited liability of the Holders of the Preferred Securities or to
enable the Trust to effect the purposes for which the Trust was created;
(p) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine in
their discretion to be necessary or desirable in carrying out the activities of
the Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be
an Investment Company required to be registered under
the Investment Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as indebtedness of the Debenture
Issuer for United States federal income tax purposes;
provided that such action does not materially adversely
affect the interests of Holders; and
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust.
The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust
set forth in Section 3.3.
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.
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Any expenses incurred by the Regular Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees.
(a) The Trust shall not, and the Trustees (including the
Property Trustee) on behalf of the Trust shall not, engage in any activity
other than as required or authorized by this Declaration. In particular, the
Trust shall not and the Trustees (including the Property Trustee) shall cause
the Trust not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders of Securities pursuant to the terms of this Declaration and of
the Securities;
(ii) acquire any assets other than as
expressly provided herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other
than loans represented by the Debentures;
(v) possess any power or otherwise act in
such a way as to vary the Trust assets or the terms of
the Securities in any way whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other
than the Securities; or
(vii) other than as provided in this Declaration or
Annex I hereto, (A) direct the time, method and place of exercising
any trust or power conferred upon the Debenture Trustee with respect
to the Debentures, (B) waive any past default that is waivable under
the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of 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
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described in Clause (A), (B), (C) or (D), the Trust shall have
received an opinion of counsel to the effect that such modification
will not cause more than an insubstantial risk that for United States
federal income tax purposes the Trust will not be classified as a
grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of
and under the exclusive control of the Property Trustee on behalf of
the Holders of the Securities and, upon the receipt of payments of
funds made in respect of the Debentures held by the Property Trustee,
deposit such funds into the Property Trustee Account and make payments
to the Holders of the Preferred Securities and Holders of the Common
Securities from the Property Trustee Account in accordance with
Section 6.1. Funds in the Property Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration. The
Property Trustee Account shall be an account that is maintained with a
banking institution the rating on whose long-term unsecured
indebtedness is at least 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.
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(ii) engage in such ministerial activities as so
directed and as shall be necessary or appropriate to effect the
redemption of the Preferred Securities and the Common Securities to
the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by
the Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as so directed as shall be
necessary or appropriate to effect the distribution of the Debentures
to Holders of Securities upon the occurrence of certain special events
(as may be defined in the terms of the Securities) arising from a
change in law or a change in legal interpretation or other specified
circumstances pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default of which a Responsible
Officer of the Property Trustee has actual knowledge or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided, however, that if an Event of Default has occurred and is continuing
and such event is attributable to the failure of the Sponsor to pay interest or
principal on the 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 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)
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after any Holder of Preferred Securities shall have made a written request to
the Property Trustee to enforce such rights, such Holder of Preferred
Securities may, to the fullest extent permitted by law, institute a Direct
Action to enforce the Property Trustee's rights as holder of the Debentures,
without first instituting any legal proceeding against the Property Trustee or
any other Person. Except as provided in the preceding sentences, the Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated
and the proceeds of the liquidation distributed to the
Holders of Securities pursuant to the terms of the
Securities; or
(ii) a Successor Property Trustee has been appointed
and has accepted that appointment in accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Property Trustee occurs and is continuing, the Property Trustee
shall, for the benefit of Holders of the Securities, enforce its rights as
holder of the Debentures subject to the rights of the Holders pursuant to the
terms of such Securities. In no event, however, shall the Property Trustee, in
its capacity as holder of the Debentures, have the power to convert the
Debentures.
(h) The Property Trustee will act as Paying Agent and
Registrar 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
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or the authority of the Regular Trustees set forth in Section 3.6.
The Property Trustee must exercise the powers set forth in
this Section 3.8 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Property Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust
set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Property Trustee has actual knowledge, the Property
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent individual would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default
and after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the
express provisions of this Declaration and the
Property Trustee shall not be liable except for the
performance of such duties and 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
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(B) in the absence of bad faith on the part
of the Property Trustee, the Property Trustee may
conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished
to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of
any such certificates or opinions that by any
provision hereof are specifically required to be
furnished to the Property Trustee, the Property
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Declaration;
(ii) the Property Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require
the Property Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Property
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
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Account shall be to deal with such property in a similar manner as the
Property Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to
the Property Trustee under this Declaration and the Trust Indenture
Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except as it may otherwise
agree in writing with the Sponsor. Money held by the Property Trustee
need not be segregated from other funds held by it except in relation
to the Property Trustee Account maintained by the Property Trustee
pursuant to Section 3.8(c)(i) and except to the extent otherwise
required by law; and
(viii) the Property Trustee shall not be responsible
for monitoring the compliance by the Regular Trustees or the Sponsor
with their respective duties under this Declaration, nor shall the
Property Trustee be liable for any default or misconduct of the
Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or
parties;
(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;
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(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting
any action hereunder, the Property Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officer's Certificate which, upon
receipt of such request, shall be promptly delivered by the Sponsor or
the Regular Trustees;
(iv) the Property Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of
its choice or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope
of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any
of its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Property Trustee adequate
security and indemnity, reasonably satisfactory to the Property
Trustee, against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Property Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in
complying 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
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Default, of its obligation to exercise the rights and powers vested in
it by this Declaration;
(vii) the Property Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, security, bond, debenture,
note, other evidence of indebtedness or other paper or document, but
the Property Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the Property Trustee
shall not be responsible for any misconduct or negligence on the part
of any agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or its agents
alone shall be sufficient and effective to perform any such action and
no third party shall be required to inquire as to the authority of the
Property Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's taking
such action;
(x) whenever in the administration of this
Declaration the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder the Property Trustee (i) may request
instructions from the Holders of the Securities which instructions may
only be given by the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to direct the Property
Trustee 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)
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shall be protected in acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of ss. 3807 of the Business Trust Act.
SECTION 3.12 Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their 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
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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 have existence until September 1, 2037.
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;
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(iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with
any other organization on which the Preferred Securities are then
listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect;
(vi) such Successor Entity has a purpose
substantially identical to that of the Trust;
(vii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust reasonably
acceptable to the Property Trustee experienced in such matters to the
effect that:
(A) such merger, consolidation,
amalgamation or replacement will not adversely affect the
rights, preferences and privileges of the Holders of the
Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of
the Holders' interest in the new entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an
Investment Company; and
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(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will be treated as a grantor trust for United States
federal income tax purposes.
(c) Notwithstanding Section 3.14(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the Common
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date and on any other date Preferred
Securities are sold pursuant to the over-allotment option granted in the
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 Circular 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
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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 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
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Delaware; (2) there shall be at least one Regular Trustee who is an employee or
officer of, or is affiliated with the Sponsor; and (3) one Trustee shall be the
Property Trustee for so long as this Declaration is required to qualify as an
indenture under the Trust Indenture Act, and such Trustee may also serve as
Delaware Trustee if it meets the applicable requirements.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act
as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then for the
purposes of
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this Section 5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published; and
(iii) if the Trust is excluded from the definition
of an Investment Company solely by means of Rule 3a-5 and to the
extent Rule 3a-5 requires a trustee having certain qualifications to
hold title to the "eligible assets" of the trust, the Property Trustee
shall possess those qualifications.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture
Act, the Property Trustee and the Holder of the Common Securities (as if it
were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in
all respects comply with the provisions of ss. 310(b) of the Trust Indenture
Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be set forth in
Section 5.5 hereof.
SECTION 5.4 Qualifications of Regular Trustees and
Delaware 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
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c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Craig Hammett
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
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
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a successor Property Trustee possessing the qualifications to act as Property
Trustee under Section 5.3 (a "Successor Property Trustee") has been appointed
and has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Regular Trustees and the
Sponsor.
(c) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor.
(d) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as
the Property Trustee shall be effective:
(A) until a Successor Property Trustee has
been appointed and has accepted such appointment by
instrument executed by such Successor Property
Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof
distributed to the holders of the Securities.
(ii) No such resignation of the Trustee that acts as
the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and delivered
to the Trust, the Sponsor and the resigning Delaware Trustee.
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(e) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.6.
(f) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation or removal, the Property Trustee or Delaware Trustee
resigning or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees,
or, if there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the number
of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 5.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
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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 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
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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.
SECTION 5.11 Merger, Conversion, Consolidation or
Succession to Business.
Any Person into which the Property Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Property Trustee or
the Delaware Trustee, as the case may be, hereunder, provided such Person shall
be otherwise qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined herein) in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Preferred Securities and the Common
Securities in accordance with the preferences set forth in their respective
terms. If and to the extent that the Debenture Issuer makes a payment of
interest (including Compounded Interest (as defined in the Indenture), and
Additional Interest), premium and/or principal on the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount
to Holders.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue
one class of convertible preferred securities, representing undivided
beneficial interests in the assets of the Trust (the "Preferred Securities"),
having such terms (the "Terms") as are set forth in Annex I and one class of
convertible common securities, representing undivided beneficial interests in
the assets of the Trust (the "Common Securities"), having such terms as are set
forth in Annex I. The Trust shall issue no securities or other interests in the
assets of the Trust other than the Preferred Securities and the Common
Securities. The Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and nonassessable.
(d) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by
a Regular Trustee. In case any Regular Trustee of the Trust who shall have
signed any of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Regular Trustee; and any Securities may be signed on
behalf of the Trust by such persons who, at the actual date of execution of
such Security, shall be the Regular Trustees of the Trust, although at the date
of the execution and delivery of
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the Declaration any such person was not such a Regular Trustee.
(b) One Regular Trustee shall sign the Preferred Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Preferred Security shall not be valid until authenticated
by the manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular
Trustee, the Property Trustee shall authenticate the Preferred Securities for
original issue by executing the Property Trustee's certificate of
authentication contained in the Preferred 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,
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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 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 August 7, 1997, among the Trust, the Sponsor and the Initial Purchasers
named therein (the "Purchase Agreement").
(a) 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") and 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 (each, a "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 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) Book-Entry Provisions. This Section 7.3(b) shall apply
only to 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.
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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 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 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 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.
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 for exchange ("Registrar"), (ii) an office or
agency where Preferred Securities may be presented for payment ("Paying Agent")
and an office or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of the Preferred
Securities and of their transfer and exchange. The Trust may appoint the
Registrar, the Paying Agent and the Conversion Agent and may appoint one or
more co-registrars, one or more additional paying agents and one or more
additional conversion agents in such other locations as it shall determine. The
term "Paying Agent" includes any
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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 such Security is mutilated and is
surrendered to the Trust or in the case of the Preferred Securities to the
Property
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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.
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
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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 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
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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) following the distribution of Debentures
having a principal amount equal to the liquidation amount of the
Securities to the Holders, provided that, the Property Trustee has
received written notice from the Holder of all of the Outstanding
Common Securities directing the Property Trustee to terminate the
Trust (which direction is optional, and except as otherwise expressly
provided below, within the discretion of such Holder) and provided,
further, that such direction and such distribution is conditioned on
the Sponsors' receipt of an opinion of counsel to the effect that such
distribution will not be a taxable event to the Holders of Preferred
Securities;
(iv) upon the entry of a decree of judicial
dissolution of the Sponsor or the Trust;
(v) when all of the Securities shall have been
called for redemption and the amounts necessary
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for redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securities;
(vi) upon the occurrence and continuation of 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;
(vii) upon the distribution of the common stock of
the Sponsor to Holders of all outstanding Securities upon conversion
of all such Securities;
(viii) the expiration of the term of the Trust on
September 1, 2037; or
(ix) 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.
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(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
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.
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(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.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) 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 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
directions to transfer such Holder's beneficial interest in the Global
Preferred Security. No such transfer or exchange of an interest in the 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
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 transfers of beneficial interests in the Global Preferred Security
that are thereafter exchanged for interests in such Exchanged Global Preferred
Security.
(b) 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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(c) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Declaration (other
than the provisions set forth in subsection (e) 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.
(d) 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) 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.
(e) Legend.
(i) Until two (2) 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)
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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 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 ("RULE 144A"). 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" WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II)
IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO
THE EARLIER OF THE DATE WHICH IS TWO YEARS AFTER THE DATE OF ORIGINAL
ISSUANCE HEREOF AND THE LAST DATE ON WHICH CALENERGY COMPANY, INC.
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH
RESTRICTED SECURITIES (OR ANY PREDECESSOR) (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) IN A TRANSACTION MEETING THE
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REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, OR (E) 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 CLAUSES
(II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY
AND THE TRUSTEES FOR SUCH ISSUER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN
FORM AND SUBSTANCE. THIS LEGEND WILL BE REMOVED UPON 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.
(f) 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)
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with respect to such Global Preferred Security, by the Property Trustee or the
Securities Custodian, to reflect such reduction.
(g) 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.
(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
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as the Preferred Securities surrendered upon such transfer or
exchange.
(h) 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 (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.
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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 Global Preferred Securities, except as
provided in Section 9.2(d). Unless and until definitive, fully registered
Preferred Securities Certificates have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.2(d):
(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
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receive and transmit payments of Distributions on the Global Certificates to
such Participants. The Depositary will make book entry transfers among the
Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred
Security Holders is required under this Declaration, the Regular Trustees
shall, in the case of any Global Preferred Security, give all such notices and
communications specified herein to be given to the Preferred Security Holders
to the Depositary, and shall have no notice obligations to the Preferred
Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If the Depository elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Preferred Securities.
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).
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(c) Pursuant to ss. 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be
paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered
Person for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
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liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists
or arises between an Indemnified Person and any Covered
Person; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein provides that an Indemnified
Person shall act in a manner that is, or provides terms that are, fair
and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard
and shall not be subject to
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any other or different standard imposed by this Declaration or by
applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he is or
was a Company Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the Company Indemnified Person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees
and expenses) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged
to be liable to the Trust unless and only
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to the extent that the Court of Chancery of Delaware or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery
or such other court shall deem proper.
(iii) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person
is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority
vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written
opinion, or (3) by the Common Security Holder of the Trust.
(iv) Expenses (including attorneys' fees and expenses)
incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall
be paid by the Debenture Issuer in advance of the final disposition of
such action, suit or proceeding. Notwithstanding the foregoing, no
advance shall be made by the Debenture Issuer if a determination is
reasonably and promptly made (i) by the Regular Trustees by a majority
vote of a quorum of disinterested Regular Trustees, (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion or (iii) the Common Security Holder of
the Trust, that, based upon the facts known to the Regular Trustees,
counsel or the Common Security Holder at the time such determination
is made, such Company Indemnified Person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the
best interests of the Trust, or, with respect to any
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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 require the consent of the Regular Trustees and
not affect any rights or obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.4(a).
(vii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
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(viii) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a Company Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss, liability
or expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration or
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to
present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person,
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the Sponsor, the Delaware Trustee and the Property Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, books of account, records and
supporting documents, which shall reflect in reasonable detail, each material
transaction of the Trust. The books of account shall be maintained in
accordance with generally accepted accounting principles consistently applied.
(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss, which shall be examined by and
reported upon as of the end of each Fiscal Year by a firm of independent
certified public accountants selected by the Regular Trustees.
(c) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States
federal income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is
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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 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
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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);
(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
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this Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be
counsel to the Sponsor or the Trust) that such amendment is
permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities); and
(iii) to the extent the result of such amendment
would be to:
(A) cause the Trust to fail to continue to
be classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect
the powers of the Property Trustee in contravention of the
Trust Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company which is required to be registered under
the Investment Company Act;
(c) at such time after the Trust has issued any Securities
that remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder of Securities may be effected only with
such additional requirements as may be set forth in the terms of such
Securities;
(d) Section 9.1(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
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(g) notwithstanding Section 12.1(c), this Declaration may be
amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor; and
(iv) conform to any change in Rule 3a-5 or written
change in interpretation or application of Rule 3a-5 by any
legislative body, court, government agency or regulatory authority
which amendment does not have a material adverse effect on the rights,
preferences or privileges of the Holders.
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.
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(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 Securities 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
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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.
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
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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.
(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
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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.
(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
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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
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;
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(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 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
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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):
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give notice
of to the Holders of the Securities):
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
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The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 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
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necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding or investing trust assets, or (vii) the establishment of
fiduciary or other standards of responsibility or limitations on the acts or
powers of trustees that are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees as set forth or referenced in this
Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to
the Trust.
SECTION 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.
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
80
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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
------------------------------
Craig Hammett
as Trustee
/s/ Craig Hammet
------------------------------
Gregory Abel
as Trustee
/s/ Gregory Abel
------------------------------
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
---------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Mary La Gumina
---------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
CALENERGY COMPANY, INC.
as Sponsor
By: /s/ Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Senior Vice President and
General Counsel
<PAGE>
ANNEX I
TERMS OF
6 1/2% CONVERTIBLE PREFERRED SECURITIES
6 1/2% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of August 12, 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 Circular referred to below):
1. Designation and Number.
(a) "Preferred Securities." 4,500,000 Preferred Securities
of the Trust with an aggregate liquidation preference
with respect to the assets of the Trust of Two Hundred
and Twenty Five Million Dollars ($225,000,000), plus up
to an additional 900,000 Preferred Securities of the
Trust with an aggregate liquidation preference with
respect to the assets of the Trust of Forty Five Mil-
lion Dollars ($45,000,000) solely to cover over-allot-
ments, 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 1/2% Convertible
Preferred Securities (liquidation preference $50 per
Convertible Preferred Security)" (the "Preferred Secu-
rities"). The certificates evidencing the Preferred
Securities shall be substantially in the form of Exhib-
it A-1 to the Declaration, with such changes and addi-
tions 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." 139,176 Common Securities of the Trust
with an aggregate liquidation amount with respect to the
assets of the Trust of Six Million Nine Hundred Fifty Eight
Thousand and Eight Hundred Dollars ($6,958,800) plus up to an
additional 27,836 Common Securities of the Trust with an
aggregate liquidation
<PAGE>
amount with respect to the assets of the Trust of One Million
Three Hundred Ninety One Thousand and Eight Hundred Dollars
($1,391,800) 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 1/2% 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 1/2% (the "Coupon Rate") of the
stated liquidation amount of $50 per Security, such
rate being the rate of interest payable on the Debentu-
res 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 "Distri-
butions" as used herein includes any such interest
including any Additional Payments payable unless other-
wise stated. A Distribution is payable only to the
extent that payments are made in respect of the Deben-
tures 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 Dis-
tribution 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 first date of initial issuance of
any 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 September 1, 1997, when, as and if avail-
able for payment by the Property Trustee, except as
otherwise described below. The Debenture Issuer has
the right under the Indenture to defer payments of in-
terest on the Debentures by extending the interest pay-
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<PAGE>
ment period from time to time on the Debentures for
successive 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, as then in effect, 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, as then in
effect. 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 rele-
vant record dates shall be 15 days prior to the rele-
vant payment dates, except as otherwise described in
this Annex I to the Declaration. Subject to any appli-
cable laws and regulations and the provisions of the
Declaration, each such payment in respect of the Pre-
ferred 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 Circular. The rele-
vant 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 regis-
tered 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 spe-
cial record date or other specified date determined in
I-3
<PAGE>
accordance with the Indenture. If any date on which
Distributions are payable on the Securities is 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 Declara-
tion, 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
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<PAGE>
the Business Trust Act, be distributed on a Pro Rata basis to the Holders of
the Securities.
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 Tax
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 "Redemp-
tion 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.
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
I-5
<PAGE>
registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of the
Offering Circular.
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.
(c) The Holder of all of the outstanding Common Securities
has the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, cause the Deben-
tures to be distributed to the Holders of the Preferred
Securities and Common Securities in liquidation of the
Trust. Such right is subject to the Sponsor having re-
ceived an opinion of counsel to the effect that such
distribution will not be a taxable event to Holders of
Preferred Securities.
(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
I-6
<PAGE>
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-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
Redemp- tion/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 distribu-
tion 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 suffi-
cient amount of cash in connection with the
related redemption or maturity of the Deben-
tures, the Trust will deposit irrevocably with
I-7
<PAGE>
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 sufficient to
pay the amount payable on redemption to the
Holders of such Securities upon surrender of their
certificates. If a Redemption/Distribu- tion
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).
I-8
<PAGE>
(iv) In the event of any redemption in part, the
Trust shall not be required to (i) issue, regis-
ter the transfer of or exchange of any Preferred
Security during a period beginning at the open-
ing 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 Pre-
ferred Securities to be so redeemed and (ii)
register the transfer of or exchange of any Pre-
ferred Securities so selected for redemption, in
whole or in part, except for the unredeemed
portion of any Preferred Securities being re-
deemed in part.
(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 any of the
Preferred Securities through the close of business on September 1,
2027 (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
I-9
<PAGE>
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 1.047 shares of
Common Stock of the Debenture Issuer per $50 principal amount
of Debentures (which is equivalent to a conversion price of
$47.75 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 Conver-
sion Agent at the office referred to above an irrevo-
cable request to convert Securities on behalf of such
Holder (the "Conversion Request"), together, if the
Securities are in certificated form, with such certifi-
cates. 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 appro-
priate 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. Hold-
ers of Securities at the close of business on a Distri-
bution record date will be entitled to receive the
Distribution payable on such securities on the corre-
sponding 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 ac-
crued thereon) surrendered for conversion, or on ac-
count 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
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<PAGE>
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 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 uncon-
verted 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
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<PAGE>
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 issu-
ance 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
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 autho-
rized, 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 encumbranc-
es, except for transfer, stamp or withholding taxes.
Each of the Debenture Issuer and the Trust shall pre-
pare 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 applica-
ble), in order to enable the Debenture Issuer to law-
fully 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 Securi-
ties.
(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
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<PAGE>
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 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
I-13
<PAGE>
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 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
I-14
<PAGE>
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 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
I-15
<PAGE>
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 proceeding 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 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.
I-16
<PAGE>
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 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-
I-17
<PAGE>
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 termination 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 proportion in aggregate stated
liquidation preference of the 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 liquida-
I-18
<PAGE>
tion, 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.
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.
I-19
<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 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 ("RULE 144A"). 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" WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL
NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE EARLIER OF
THE DATE WHICH IS TWO YEARS AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE
LAST DATE ON WHICH CALENERGY COMPANY, INC. (THE "COMPANY") OR ANY AFFILIATE OF
THE COMPANY WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR)
(THE "RESALE RESTRICTION TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(E) 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 CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS
SECURITY AND THE TRUSTEES FOR SUCH ISSUER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND
SUBSTANCE. 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
A-1
<PAGE>
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 Securities:
[Include if Preferred Security
is in global form -- :as increased
or decreased as set forth on Schedule A
attached hereto]
CUSIP No.:[__________ -- Global Preferred Security]
ISISN No.:[__________ -- Global Preferred Security]
Convertible Preferred Securities
of
CalEnergy Capital Trust III
6 1/2% Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred Security)
CalEnergy Capital Trust III, 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 1/2%
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 August 12, 1997, as the same may be amended
A-2
<PAGE>
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 III
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 1/2% (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, Septem- ber 1 and December 1 of each year, commencing on September 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, as
then in effect, 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
A-5
<PAGE>
all amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
The Preferred Securities shall be redeemable as provided in
the Declaration.
The Preferred Securities shall be convertible into shares of
Common Stock of CalEnergy Company, Inc., through (i) the exchange of Preferred
Securities for a portion of the Debentures and (ii) the immediate conversion of
such Debentures into Common Stock of CalEnergy Company, Inc., in the manner and
according to the terms set forth in the Declaration.
A-6
<PAGE>
CONVERSION REQUEST
To: THE BANK OF NEW YORK,
as Property Trustee of
CalEnergy Capital Trust III
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 August 12, 1997,
by Steven A. McArthur, Craig Hammett and Gregory Abel as Regular Trustees, The
Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Property Trustee, CalEnergy Company, Inc., as Sponsor, and by the Holders, from
time to time, of undivided beneficial interests in the Trust to be issued
pursuant to the Declaration. Pursuant to the aforementioned exercise of the
option to convert these Preferred Securities, the undersigned hereby directs
the Conversion Agent (as that term is defined in the Declaration) to (i)
exchange such Preferred Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Preferred Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures on behalf of the
undersigned, into CalEnergy Common Stock (at the conversion rate specified in
the terms of the Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
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 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
(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 or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934,
as amended.)
A-9
<PAGE>
[Include the following if the Security bears a Restricted Securi-
ties Legend --
In connection with any transfer of any of the Preferred Securities evidenced by
this certificate, the undersigned confirms that such Preferred Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account with-
out transfer; or
(2) |_| transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(3) |_| transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933; or
(4) |_| transferred pursuant to another available
exemption from the registration requirements of the
Securities Act of 1933; or
(5) |_| transferred pursuant to an effective Shelf
Registration Statement (as defined in the
Declaration).
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Preferred 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 Preferred 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 by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A-10
<PAGE>
- -------------------------------- ----------------------------]
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 Preferred Security for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
trans- feror is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated: ___________________________ ___________________________
NOTICE: To be executed by
an executive officer]
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>
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
- -------- -------------------- ------------- ----------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-12
<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:
Convertible Common Securities
of
CalEnergy Capital Trust III
6 1/2% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
CalEnergy Capital Trust III, 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 undivided beneficial interests in the
assets of the Trust designat-
A2-1
<PAGE>
ed the 6 1/2% 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 August 12,
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 III
By: _________________________________
Name:
Title:
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed
at a rate per annum of 6 1/2% (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 September 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, as
then in effect, 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 Distribu-
A2-4
<PAGE>
tions will be payable to Holders as they appear on the books and records of the
Trust on the first record date after the end of the Extension Period. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Debenture Issuer may commence a new Extension Period, subject to the above
requirements.
The 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 III
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 August 12, 1997,
by Steven A. McArthur, Craig Hammett and Gregory Abel, as Regular Trustees, The
Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Property Trustee, CalEnergy Company, Inc., as Sponsor, and by the Holders, from
time to time, of 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
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.
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 ("RULE 144A"). 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, 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, OR (E)
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) OR (E) 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 RE-
<PAGE>
QUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-2
<PAGE>
CALENERGY COMPANY, INC.
6 1/2% Convertible Junior Subordinated
Debenture Due 2027
No._________ $200,000,000
CUSIP No. 129466 AF5
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 THE BANK OF NEW
YORK, AS PROPERTY TRUSTEE OF CALENERGY CAPITAL TRUST III, or registered
assigns, the principal sum of TWO HUNDRED MILLION Dollars ($200,000,000) on
September 1, 2027, provided that the Company may shorten the maturity of the
principal of this Security to a date not earlier than August 10, 2012, as
described on the reverse hereof.
Interest Payment Dates: March 1, June 1, September 1 and
December 1, commencing Septem-
ber 1, 1997
Regular Record Dates: the close of business on the
15th day immediately preceding
each Interest Payment Date, com-
mencing August 17, 1997
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed manually or by facsimile by its duly authorized officer.
Dated: _________________
CALENERGY COMPANY, INC.
By:______________________
Name:
Title:
<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
<PAGE>
REVERSE OF SECURITY
CALENERGY COMPANY, INC.
6 1/2% Convertible Junior Subordinated
Debenture Due 20271
1. Interest. CalEnergy Company, Inc., a Delaware corporation
(the "Company"), is the issuer of this 6 1/2% Convertible Junior Subordinated
Debenture Due 2027 (the "Security") limited in aggregate principal amount to
$200,000,000, issued under the Indenture hereinafter referred to. The Company
promises to pay interest on the Securities in cash from August 12, 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 September 1, 1997, at the rate of 6 1/2% 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 III (and its permitted successors or assigns under the
Declaration) (the "Trust") such additional amounts as may be necessary in order
that the amount of dividends or other distributions then due and payable by the
Trust on the Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
additional taxes,
- --------
1 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.
6
<PAGE>
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, as
then in effect, 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 1/2% 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,
as then in effect. Upon the expiration of any Extended Interest Payment Period
and upon the payment of all Additional Payments, if any, then due, the Company
may commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended
Interest Payment Period except at the end thereof.
If the Property Trustee is the sole holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the
Company shall give notice to the Regular Trustees, the Property Trustee and
the Trustee of its selection of such Extended Interest Payment Period at least
one Business Day prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) if the Preferred Securities are listed on the New York
Stock Exchange or other stock exchange or quotation system, the date the Trust
is required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Preferred Securities on the
record date or the date
7
<PAGE>
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 August 17, 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
8
<PAGE>
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 August 12, 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 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 $231,958,800 in aggregate principal amount (or up to
$278,350,600 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 September 1, 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 September 1, 2001, and at $50.50 per $50
principal amount of the Security, if redeemed during the 12-month period
beginning September 1, 2001 and thereafter at
9
<PAGE>
$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. Conditional Right to Shorten Maturity; Optional Redemption
Upon Tax Event. If a Tax Event shall occur and be continuing and in the opinion
of counsel to the Company experienced in such matters, there would in all
cases, after effecting the termination of the Trust and the distribution of the
Securities to the holders of the Preferred Securities in exchange therefor, be
more than an insubstantial risk that an Adverse Tax Consequence would continue
to exist, then the Company shall have the right:
(a) to shorten the Stated Maturity of the Securities to the minimum
extent required, but in any event to a date not earlier than August 10, 2012
(the action referred to in this clause (a) being referred to herein as a
"Maturity Advancement"), such that, in the opinion of counsel to the Company
experienced in such matters, after advancing the Stated Maturity, interest paid
on the Securities will be deductible for federal income tax purposes; provided,
however, that there shall be delivered to the trustees of the Trust an opinion
of counsel (which counsel shall be satisfactory to the trustees of the Trust)
that such change in the Stated Maturity will not (i) cause the Trust to fail to
be classified as a grantor trust or (ii) result in a taxable event to the
holders of the Preferred Securities, or
(b) if in the opinion of counsel to the Company experienced in such
matters, there would in all cases, after effecting a Maturity Advancement, be
more than an insub-stantial risk that an Adverse Tax Consequence would continue
to exist, to redeem the Securities, prior to September 1, 2000, in whole but
not in part for cash, upon not less than 30 nor more than 60 days' notice and
within 90 days following the occurrence of the Tax Event, at 100% of the
principal amount thereof plus accrued and unpaid interest, including Additional
Payments, if any, and following such redemption, all the Preferred Securities
will be redeemed by the Trust at the liquidation preference of $50 per each
Preferred Security plus accrued and unpaid distributions.
In lieu of the foregoing, the Company also shall have the
option of causing the Securities to remain outstanding and pay Additional
Interest on the Securities.
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
10
<PAGE>
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
September 1, 2027, provided that the Company may shorten the maturity of the
principal of this Security to a date not earlier than August 10, 2012, as
described in paragraph 8 above, and may be redeemed, in whole or in part, at
any time after September 1, 2000 or at any time in certain circumstances upon
the occurrence of a Tax Event. Upon the repayment of the Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount of the Securities so repaid or redeemed at the applicable
redemption price together with accrued and unpaid distributions through the
date of redemption; provided, that holders of the Trust Securities shall be
given not less than 30 nor more than 60 days notice of such redemption. Upon
the repayment of the Securities at maturity or upon any acceleration, earlier
redemption or otherwise, the proceeds from such repayment will be applied to
redeem the Preferred Securities, in whole, upon not less than 30 nor more than
60 days' notice. There are no sinking fund payments with respect to the
Securities.
11. Subordination. The payment of the principal of, interest
on or any other amounts due on the Securities is subordinated in right of
payment to all existing and future Senior Indebtedness (as defined below) of
the Company, as described in the Indenture. Each holder, by accepting a
Security, agrees to such subordination and authorizes and directs the Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and appoints the Trustee as its
attorney-in-fact for such purpose.
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Senior Indebtedness shall mean in respect of the Company (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
such obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness issued after the date of
original issuance of the Securities that is by its terms subordinated to or
pari passu with the Securities and (2) any indebtedness (including all other
debt securities and guarantees in respect of those debt securities) initially
issued to any other trust, or a trustee of such trust, partnership, or other
entity affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company (a "Financing Entity") in connection with the issuance
by such Financing Entity of preferred securities or other securities which by
their terms rank pari passu with, or junior to, the Preferred Securities. The
Preferred Securities shall rank pari passu with the 6 1/4% Term Income
Deferrable Equity Securities of the Company and the 6-1/4% Trust Convertible
Preferred 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 and the 6-1/4% Convertible Junior Subordinated Debentures Due 2012 of
the Company.
12. Conversion. The Holder of any Security has the right,
exercisable at any time beginning 60 days following August 12, 1997 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 1.047 shares of Common Stock for each Security (equivalent
to a conversion price of $47.75 per share of Common Stock of the Company),
subject to adjustment under certain circumstances, except that if a Security is
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<PAGE>
called for redemption, the conversion right will terminate at the close of
business on the Redemption Date.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or
transfer documents if required by the Security Registrar or Conversion Agent
and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any Holder
surrenders a Security for conversion after the close of business on the Regular
Record Date for the payment of an installment of interest and prior to the
opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date will be
paid to the registered Holder of such Security on such Regular Record Date. In
such event, such Security, when surrendered for conversion, need not be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares
issuable upon conversion of a Security is determined by dividing the principal
amount of the Security converted by the conversion price in effect on the
Conversion Date. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest. The outstanding principal
amount of any Security shall be reduced by the portion of the principal amount
thereof converted into shares of Common Stock.
13. Registration Rights. The holders of the Preferred
Securities, the Securities, the Guarantee and the shares of Common Stock of
the Company issuable upon conversion of the Securities (collectively, the
"Registrable Securities") are entitled to the benefits of a Registration
Rights Agreement, dated as of August 12, 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
13
<PAGE>
will use its reasonable best efforts to maintain such Shelf Registration
Statement continuously effective under the Securities Act until the second
anniversary of the effectiveness of the Shelf Registration Statement or such
earlier date as is provided in the Registration Rights Agreement (the
"Effectiveness Period").
The Company agrees that from and after the date on which any
Registration Default occurs, additional interest ("Liquidated Damages") will
accrue on the Securities, and accordingly, additional interest will accrue on
the Preferred Securities, in each case, from and including the day following
the day such Registration Default shall occur (or be deemed to occur as
described below) to but excluding the day on which such Registration Default
has been cured (or be deemed to be cured as described below). Liquidated
Damages will be paid quarterly in arrears, with the first quarterly payment due
on the first interest or distribution payment date, as applicable, following
the date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation amount, as applicable, to and including the
90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. Following the cure or deemed cure of a Registration Default,
Liquidated Damages will cease to accrue with respect to such Registration
Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the Issue Date, a
Shelf Registration Statement relating to the offer and sale of the
Registrable Securities has
not been filed with the Commission;
(ii) on or prior to the 270th day following the Issue Date,
the Registrable Securities are not the subject of a Shelf Registration
Statement which has become effective;
(iii) the Registrable Securities are the subject of a Shelf
Registration Statement which was effective but which has ceased to be
effective for any reason (other than pursuant to clause (iv) or (v)
below) prior to the end of the Shelf Registration Period (as defined
in the Registration Rights Agreement);
(iv) the occurrence of a Suspension (as defined in the
Registration Rights Agreement); or
14
<PAGE>
(v) the occurrence of an event contemplated by paragraph
3(c)(2)(iii) of the Registration Rights
Agreement (an "Amendment Event");
provided, however, that if the Registration Default consists of the occurrence
of any event contemplated by clause (iv) or (v) above, then such Registration
Default shall not be deemed to have occurred until the expiration of 30
Business Days after the date of the occurrence of such Suspension or Amendment
Event, provided that (a) the Trust and the Company thereafter reasonably
promptly comply with the requirements of paragraph 3(i) of the Registration
Rights Agreement, if applicable, and (b) in the case of such Amendment Event
resulting from an action taken by the Company or the Trust, such action was
taken in good faith; and provided, further, that a Registration Default shall
not constitute a default or Event of Default hereunder.
A Registration Default shall be deemed to have been cured and
cease to exist on the date subsequent to the occurrence of such Registration
Default on which:
(x) in the case of a Registration Default described in clause
(i), (ii) or (iii) above, the Shelf Registration Statement covering
such Registrable Securities shall become effective; or
(y) in the case of a Registration Default described in clause
(iv) or (v) above, upon the Company and the Trust taking action to
notify the Holders (for purposes of this clause (y), as that term is
defined in the Registration Rights Agreement) of the Registrable
Securities that such Suspension or Amendment Event has ended. For
purposes of this clause (y), taking action to notify Holders shall be
deemed sufficient when notice is first deposited in first class mail
or delivered to a courier service or filed with the Commission or
publicly disseminated by press release or other release to a news
reporting service.
14. Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the
15
<PAGE>
same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment
of this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary. In the event of redemption
or conversion of this Security in part only, a new Security or Securities for
the unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
15. Persons Deemed Owners. Except as provided in Section 4
hereof, the registered Holder of a Security may be treated as its owner for
all purposes.
16. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent
shall pay the money back to the Company at its written request. After that,
holders of Securities entitled to the money must look to the Company for
payment unless an abandoned property law designates another Person and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
17. Defaults and Remedies. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture. If an Event of
Default occurs and is continuing, the Trustee by notice to the Company or the
holders of at least 25% in aggregate principal amount of the then outstanding
Securities by notice to the Company and the Trustee may declare all the
Securities to be due and payable immediately.
The holders of a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. Subject to certain limitations,
16
<PAGE>
holders of a majority in principal amount of the then outstanding Securities
issued under the Indenture may direct the Trustee in its exercise of any trust
or power. The Company must furnish annually compliance certificates to the
Trustee. The above description of Events of Default and remedies is qualified
by reference to, and subject in its entirety by, the more complete description
thereof contained in the Indenture.
18. Amendments, Supplements and Waivers. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company and the
rights of the Holders of the Securities under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon
such Holder and upon all future Holders of this Security and of any Security
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Security.
19. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the
same rights it would have, as if it were not Trustee, subject to certain
limitations provided for in the Indenture and in the TIA.
Any Agent may do the same with like rights.
20. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
17
<PAGE>
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:*
---------------------------------------------
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
- --------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
19
<PAGE>
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account
without transfer; or
(2) [ ] transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(3) [ ] transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933; or
(4) [ ] transferred pursuant to another available
exemption from the registration requirements of the
Securities Act of 1933; or
(5) [ ] transferred pursuant to an effective Shelf
Registration Statement (as defined in Section
1007 of the Indenture).
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) or (4)
is checked, the Trustee may require, prior to registering any such transfer of
the Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act; provided, further, that after the date
that a Shelf Registration Statement becomes effective and so long as such Shelf
Registration Statement continues to be effective, the Trustee may only permit
transfers for which box (5) has been checked.
-----------------------------
Signature
Signature Guarantee:*
- ---------------------------------- -------------------------------]
Signature must be guaranteed Signature
- --------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
20
<PAGE>
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
----------------------------------- --------------------------------
NOTICE: To be executed by
an executive officer]
21
<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.
A-1
<PAGE>
Exhibit C
Purchase Agreement
4,500,000
CALENERGY CAPITAL TRUST III
6 1/2% CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER CONVERTIBLE PREFERRED SECURITY)
GUARANTEED TO A LIMITED EXTENT BY, AND
CONVERTIBLE INTO COMMON STOCK OF,
CALENERGY COMPANY, INC.
PURCHASE AGREEMENT
August 7, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, N.Y. 10010
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
CalEnergy Capital Trust III, 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 4,500,000 (the "Firm
Securities") of its 6 1/2% Convertible Preferred Securities (liquidation
preference $50 per convertible preferred security) (the "Preferred
Securities"). In addition, the Trust proposes to grant to the Initial
Purchasers an option to purchase up to an additional 900,000 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 outside the United States to certain
persons in reliance on Regulation S under the Securities Act ("Regulation S").
<PAGE>
The 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 1/2%
Convertible Junior Subordinated Debentures Due 2027 (the "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 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 Preferred Securities, the Guarantee, the 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) An offering circular relating to the Offered Securities to be
offered by the Initial Purchasers has been prepared by the Trust and the
Guarantor. Such offering circular, as amended or supplemented as of the date
of this Agreement, together with the documents incorporated by reference
therein 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 either
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 stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
2
<PAGE>
(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 its 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 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 Secu-
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rities 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 Junior Subordinated Debentures, the Trust
Agreement and the Indenture (the Guarantee, the 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 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 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 Junior Subordinated Debentures which will
be convertible into shares of Common Stock ("Underlying Shares") 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
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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 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 either 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
Junior Subordinated Debentures for 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 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
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
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<PAGE>
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 Junior Subordinated Debentures for the Preferred
Securities or the purchase of the 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 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.
(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
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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 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
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<PAGE>
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 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, 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.
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(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; and, 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 incorporated by reference in
the Offering Document presents 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 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.
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(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, 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.
(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
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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") by CE Electric (NY),
Inc. (the "Offeror") to acquire that number of shares of common stock, par
value $6.662/3 per share ("NYSE&G shares") of New York State Electric & Gas
Corporation ("NYSE&G") which, together with the NYSE&G shares beneficially
owned by the Company, would represent 9.9% of the total number of NYSE&G
shares outstanding, and the consummation of the transactions contemplated
thereby, did not and will 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 rules and
regulations of the New York Stock Exchange, 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 NYSE&G, that prohibit the acquisition by the Offeror of the
outstanding common stock of NYSE&G not already owned by it.
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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 "qualified institutional buyers"
in accordance with Rule 144A 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 1/2% Convertible Preferred Securities of CalEnergy Capital
Trust III 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) 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.
(d) 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
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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.
(e) 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.
(f) 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.
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 900,000 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 Preferred Security, plus accrued
and unpaid distributions from the First Closing Date (as defined below).
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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 August 12, 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 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. 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 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 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
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Global Securities will be held only in book-entry form through DTC, except in
the limited circumstances described in the Offering Document. 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 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 on each
Closing Date $1.25 per each Preferred Security purchased by such Initial
Purchaser on the respective 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 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) 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 Purchasers; provided, however, that
the Trust and the Guarantor will not be required to qualify as a
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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.
(d) During the period of three years hereafter, the Guarantor will
furnish to the 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 the 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.
(e) During the period of two 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.
(f) During the period of two 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 Preferred
Securities (as defined in the Offering Document).
(g) During the period of two 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.
(h) 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.
(i) 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 Preferred Securities, (c) any shares of Common
Stock of the Guarantor or any other capital stock of the Guarantor, 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
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<PAGE>
Common Stock of the Guarantor or other capital stock of the Guarantor, without
the prior written consent of the Initial Purchasers, 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 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 and CalEnergy Capital Trust II) 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.
(j) 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 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:
(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
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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 an announcement with positive implications
of a possible upgrading, and no implication of a possible downgrading, of such
rating); (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;
(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;
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(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 Nasdaq Stock
Market, Inc. as being eligible for trading in the PORTAL market.
(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
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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 Junior Subordinated
Debentures for the Offered Securities, the purchase of the 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 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 will indemnify and hold harmless each Initial
Purchaser against any losses, claims, damages or liabilities, to which that
Initial Purchaser may become subject, under the Securities Act or 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
Offering Circular, or any amendment or supplement thereto, or the Exchange Act
Reports incorporated therein, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading and will reimburse each Initial Purchaser for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Trust and the Guarantor will 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 in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Trust or the Guarantor by either Initial
Purchaser specifically for use therein, it being understood and agreed that
the only such information consists of the information described as such in
subsection (b) below; and provided, further, that, with respect to any untrue
statement contained in or omission from the 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 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 offering circular was corrected in the Offering
Circular, as amended and supplemented, and the Offering Circular, as amended
and supplemented, 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 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.
20
<PAGE>
(b) Each Initial Purchaser will indemnify and hold harmless the Trust
and the Guarantor against any losses, claims, damages or liabilities to which
the Trust or the Guarantor may become subject, under the Securities Act or 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 Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such 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 Purchaser specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Trust or the
Guarantor in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by such Initial Purchaser
consists of the following information in the Offering Circular furnished on
behalf of each Initial Purchaser: the last paragraph at the bottom of the
cover page concerning the terms of the offering by the Purchaser, the legend
concerning over-allotments and stabilizing on page 6 of the Offering Circular,
and the sixth paragraph and the third sentence of the seventh paragraph under
the caption "Plan of Distribution."
(c) Promptly after receipt by an indemnified party under this Section
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
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise
than under subsection (a) or (b) above, except to the extent it has been
materially prejudiced by such failure; and provided, further, that such
omission will not relieve it from any liability 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 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 employ 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 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, 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 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.
21
<PAGE>
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a) or (b) above (i) in such
proportion as is 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 in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities 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 shall be deemed to be
in the same proportion as the total net proceeds from the offering (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, 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 Trust, the Guarantor or the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which
is the subject of this subsection (d). Notwithstanding the provisions of this
subsection (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 obligations of the Trust and the Guarantor under this Section
shall be in addition to any liability which the Trust or the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
director, officer, employee and agent of the Initial Purchasers and to each
person, if any, who controls either Initial Purchaser within the meaning of
the Securities Act; and the obligations of each Initial Purchaser under this
Section shall be in addition to any liability which such Initial Purchaser may
otherwise have and shall extend, upon the same terms and conditions, to each
director, officer, employee or agent of the Trust or the Guarantor and to each
person, if any, who controls the Trust or the Guarantor within the meaning of
the Securities Act.
9. Default of Initial Purchasers. If either Initial Purchaser defaults
in its 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, 10
and 13 (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
22
<PAGE>
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 $150,000.
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 (i) Credit Suisse First Boston Corporation,
Eleven Madison Avenue, New York, New York 10010, Attention: Investment Banking
Department - Transaction Advisory Group (fax 212-325-8278); and (ii) Lehman
Brothers Inc., Three World Financial Center, New York, New York 10010,
Attention Syndicate Department (Fax 212-526-6588), with a copy, in the case of
any notice pursuant to Section 8(d), to the Director of Litigation, Office of
the General Counsel, Lehman Brothers Inc., 3 World Financial Center, New York,
New York 10285;
(b) if to the Trust or the Guarantor, shall be delivered or sent by
mail, telex or facsimile transmis- sion 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 either
Initial Purchaser.
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
23
<PAGE>
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 WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS. 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.
24
<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 III
By Craig Hammett, solely in his ca-
pacity as trustee and not in his individ-
ual capacity,
/s/ Craig Hammett
-----------------------------------
Craig Hammett
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
Accepted:.
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Jonathan Bram
-----------------------------------
Name: Jonathan Bram
Title: Director
LEHMAN BROTHERS INC.
By /s/ Joseph G. Sauvage
-----------------------------------
Name: Joseph G. Sauvage
Title: Managing Director
0191584.03-01S4a
<PAGE>
SCHEDULE A
----------
Number of
Purchaser Firm Securities
- --------- ---------------
Credit Suisse First Boston Corporation........................2,250,000
Lehman Brothers Inc...........................................2,250,000
Total................................................4,500,000
<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 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
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 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 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 Junior
Subordinated Debentures, sell to the Trust the 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 the 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 Junior Subordinated Debentures,
the sale to the Trust of the 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 agreements 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 reasonably likely to have
<PAGE>
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 Junior Subordinated Debentures, the sale to the Trust of the
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;
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
<PAGE>
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 Preferred Securities will generally be considered the owner of
an undivided interest in the 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 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 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 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;
and 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 applicable law relating to
fiduciary duties; and under the Delaware Business Trust Act and the terms of
<PAGE>
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 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 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 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 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
Incorporation, the
<PAGE>
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 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
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 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 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 Junior Subordinated Debentures
for Offered Securities, the purchase of the 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 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 relate to or place 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 Junior Subordinated Debentures for Offered Securities or the purchase
of the 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 Junior Subordinated Debentures
for the Offered Securities or the distribution of 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 Junior Subordinated Debentures and
(iv) the purchase of the 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,
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.
19. The cash tender offer (the "Tender Offer") by CE Electric (NY),
Inc. (the "Offeror") to acquire that number of shares of common stock, par
value $6.662/3 per share ("NYSE&G shares") of New York State Electric & Gas
Corporation ("NYSE&G") which, together with the NYSE&G shares beneficially
owned by the Company, would represent 9.9% of the total number of NYSE&G
shares outstanding, and the consummation of the transactions contemplated
thereby, did not and will not (A) conflict with the corporate charter of the
Guarantor or the Offeror or (B) 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.
<PAGE>
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) 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 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. Indenture, dated as of February 26, 1997, relating to 6-1/4%
Convertible Junior Subordinated Debentures Due 2012 between CalEnergy
Company, Inc. and The Bank of New York, as Trustee.
25. Master Trust Deed, dated October 22, 1990, relating
to(pound)55,00,000 12.661% Bonds due 1999 of Northern Electric plc.
26. 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.
27. 10-1/4% Senior Discount Notes due 2004 of CalEnergy Company, Inc.
28. 9-7/8% Limited Recourse Senior Secured Notes Due 2004 of CalEnergy
Company, Inc.
29. 6-1/4% Convertible Junior Subordinated Deferrable Interest Debentures
Due 2016 of CalEnergy Company, Inc.
30. 9-1/2% Senior Notes due September 15, 2006 of CalEnergy Company, Inc.
<PAGE>
31. 6-1/4% Convertible Junior Subordinated Debentures Due 2012 of
CalEnergy Company, Inc.
32. 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.
33. Purchase Agreement, dated August 7, 1997, among CalEnergy Capital
Trust III, CalEnergy Company, Inc., Credit Suisse First Boston
Corporation and Lehman Brothers Inc.
34. Registration Rights Agreement, dated August 12, 1997, among CalEnergy
Capital Trust III, CalEnergy Company, Inc. and the Purchasers named
therein.
35. Common Securities Purchase Agreement, dated August 12, 1997, between
CalEnergy Capital Trust III and CalEnergy Company, Inc.
36. Debenture Purchase Agreement, dated August 12, 1997, between
CalEnergy Capital Trust III and CalEnergy Company, Inc.
37. Letter of Representations, dated August 12, 1997, among CalEnergy
Capital Trust III, 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 Junior Subordinated Debentures, the
sale to the Trust of the 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 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
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 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 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
Junior Subordinated Debentures for Offered Securities or the purchase of the
Junior Subordinated Debentures by the Trust.
<PAGE>
EXHIBIT I
---------
1. Purchase Agreement, dated August 7, 1997, among CalEnergy Capital
Trust III, CalEnergy Company, Inc., Credit Suisse First Boston
Corporation and Lehman Brothers Inc.
2. Registration Rights Agreement, dated August 12, 1997, among CalEnergy
Capital Trust III, CalEnergy Company, Inc. and the Purchasers named
therein.
3. Common Securities Purchase Agreement, dated August 12, 1997, between
CalEnergy Capital Trust III and CalEnergy Company, Inc.
4. Debenture Purchase Agreement, dated August 12, 1997, between
CalEnergy Capital Trust III and CalEnergy Company, Inc.
5. Letter of Representations, dated August 12, 1997, among CalEnergy
Capital Trust III, 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 Trustee 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>
CALENERGY COMPANY, INC.,
AS ISSUER
TO
THE BANK OF NEW YORK,
AS TRUSTEE
----------------
INDENTURE
DATED AS OF AUGUST 12, 1997
----------------
$231,958,800
(SUBJECT TO INCREASE TO UP TO $278,350,600 IN
THE EVENT AN OVER-ALLOTMENT OPTION IS EXERCISED)
6 1/2% CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES DUE 2027
<PAGE>
CalEnergy Company, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- -----------
<S> <C>
ss.310(a)(1) ....................................................................... 609
(a)(2) ....................................................................... 609
(a)(3) ....................................................................... Not Applicable
(a)(4) ....................................................................... Not Applicable
(b) ....................................................................... 608, 610
ss. 311(a) ....................................................................... 613
(b) ....................................................................... 613
ss. 312(a) ....................................................................... 701
....................................................................... 702(a)
(b) ....................................................................... 702(b)
(c) ....................................................................... 702(c)
ss. 313(a) ....................................................................... 703(a)
(a)(4) ....................................................................... 101, 1004
(b) ....................................................................... 703(a)
(c) ....................................................................... 703(a)
(d) ....................................................................... 703(b)
ss. 314(a) ....................................................................... 704
(b) ....................................................................... Not Applicable
(c)(1) ....................................................................... 102
(c)(2) ....................................................................... 102
(c)(3) ....................................................................... Not Applicable
(d) ....................................................................... Not Applicable
(e) ....................................................................... 102
ss. 315(a) ....................................................................... 601
(b) ....................................................................... 602
(c) ....................................................................... 601
(d) ....................................................................... 601
(e) ....................................................................... 514
ss. 316(a) ....................................................................... 101
(a)(1)(A) ....................................................................... 502
....................................................................... 512
(a)(1)(B) ....................................................................... 513
(a)(2) ....................................................................... Not Applicable
(b) ....................................................................... 508
(c) ....................................................................... 104(c)
ss. 317(a)(1) ....................................................................... 503
(a)(2) ....................................................................... 504
(b) ....................................................................... 1003
ss. 318(a) ....................................................................... 107
</TABLE>
- --------------
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties ................................................................................................ 1
Recitals of the Company ................................................................................ 1
ARTICLE ONE
Definitions and Other Provisions
of General Application....................................... 2
SECTION 101. Definitions ............................................................................. 2
Act ................................................................................................... 3
Additional Interest ................................................................................... 3
Additional Payments ................................................................................... 3
Adverse Tax Consequence ............................................................................... 3
Affiliate ............................................................................................. 3
Agent ................................................................................................. 3
Board of Directors .................................................................................... 3
Board Resolution ...................................................................................... 3
Business Day .......................................................................................... 4
Change in Tax Law ..................................................................................... 4
Closing Price ......................................................................................... 4
Commission ............................................................................................ 4
Common Securities ..................................................................................... 4
Common Stock .......................................................................................... 4
Company ............................................................................................... 4
Company Request ....................................................................................... 5
Compounded Interest ................................................................................... 5
Conversion Agent ...................................................................................... 5
Conversion Date ....................................................................................... 5
iii
<PAGE>
Page
----
Corporate Trust Office ................................................................................ 5
Declaration ........................................................................................... 5
Defaulted Interest .................................................................................... 5
Delaware Trustee ...................................................................................... 5
Event of Default ...................................................................................... 6
Extended Interest Payment Period ...................................................................... 6
Guarantee ............................................................................................. 6
Holder ............................................................................................... 6
Indenture ............................................................................................. 6
Initial Purchasers .................................................................................... 6
Interest Payment Date ................................................................................. 6
Investment Company Event .............................................................................. 6
Maturity .............................................................................................. 6
Notice of Conversion .................................................................................. 7
Officer's Certificate ................................................................................. 7
Opinion of Counsel .................................................................................... 7
Outstanding ........................................................................................... 7
Paying Agent .......................................................................................... 8
Person ............................................................................................... 8
Predecessor Security .................................................................................. 8
Preferred Securities .................................................................................. 8
Property Trustee ...................................................................................... 8
Purchase Agreement .................................................................................... 8
Redemption Date ....................................................................................... 8
Redemption Price ...................................................................................... 8
iv
<PAGE>
Page
----
Reference Date ........................................................................................ 8
Registration Default .................................................................................. 8
Registration Rights Agreement ......................................................................... 9
Regular Record Date ................................................................................... 9
Regular Trustee ....................................................................................... 9
Responsible Officer ................................................................................... 9
Restricted Securities Legend .......................................................................... 9
Securities ............................................................................................ 9
Security Register ..................................................................................... 9
Senior Indebtedness ................................................................................... 9
Shelf Registration Statement .......................................................................... 10
Special Event ......................................................................................... 10
Special Record Date ................................................................................... 10
Stated Maturity ....................................................................................... 10
Subsidiary ............................................................................................ 10
Tax Event ............................................................................................. 10
Trading Day ........................................................................................... 11
Trust ................................................................................................ 11
Trustee .............................................................................................. 11
Trust Indenture Act ................................................................................... 11
Trust Securities ...................................................................................... 12
Vice President ........................................................................................ 12
Voting Stock .......................................................................................... 12
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 102. Compliance Certificates and Opinions ....................................... 12
SECTION 103. Form of Documents Delivered to Trustee ..................................... 13
SECTION 104. Acts of Holders; Record Dates .............................................. 13
SECTION 105. Notices, Etc., to Trustee and the
Company .................................................................... 15
SECTION 106. Notice to Holders; Waiver .................................................. 16
SECTION 108. Effect of Headings and Table of
Contents ................................................................... 17
SECTION 109. Successors and Assigns ..................................................... 17
SECTION 110. Separability Clause ........................................................ 17
SECTION 111. Benefits of Indenture ...................................................... 17
SECTION 112. Governing Law .............................................................. 17
SECTION 113. Legal Holidays ............................................................. 17
ARTICLE TWO
Security Forms ............................................................. 18
SECTION 201. Forms Generally ............................................................ 18
SECTION 202. Initial Issuance to Property Trustee ....................................... 18
ARTICLE THREE
The Securities ............................................................. 20
SECTION 301. Title and Terms ............................................................ 20
SECTION 302. Denominations .............................................................. 21
SECTION 303. Execution, Authentication, Delivery and
Dating ..................................................................... 22
SECTION 304. Temporary Securities ....................................................... 22
vi
<PAGE>
Page
----
SECTION 305. Registration, Registration of Transfer
and Exchange ............................................................... 23
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities ................................................................. 24
SECTION 307. Payment of Interest; Interest Rights
Preserved .................................................................. 25
SECTION 308. Persons Deemed Owners ...................................................... 27
SECTION 309. Cancellation ............................................................... 27
SECTION 310. Right of Set Off ........................................................... 28
SECTION 311. CUSIP Numbers .............................................................. 28
SECTION 312. Extension of Interest Payment Period;
Notice of Extension ........................................................ 28
SECTION 313. Paying Agent, Security Registrar and
Conversion Agent ........................................................... 30
ARTICLE FOUR
Satisfaction and Discharge .................................... 32
SECTION 401. Satisfaction and Discharge of Indenture .................................... 32
SECTION 402. Application of Trust Money ................................................. 33
ARTICLE FIVE
Remedies ............................................. 33
SECTION 501. Events of Default .......................................................... 33
SECTION 502. Acceleration of Maturity; Rescission and
Annulment .................................................................. 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee ..................................................... 36
SECTION 504. Trustee May File Proofs of Claim ........................................... 37
vii
<PAGE>
Page
----
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities ................................................... 38
SECTION 506. Application of Money Collected ............................................. 38
SECTION 507. Limitation on Suits ........................................................ 38
SECTION 508. Unconditional Right of Holders to
Receive Principal and Interest and
Convert .................................................................... 39
SECTION 509. Restoration of Rights and Remedies ......................................... 40
SECTION 510. Rights and Remedies Cumulative ............................................. 40
SECTION 511. Delay or Omission Not Waiver ............................................... 40
SECTION 512. Control by Holders ......................................................... 40
SECTION 513. Waiver of Past Defaults .................................................... 41
SECTION 514. Undertaking for Costs ...................................................... 41
SECTION 515. Waiver of Stay or Extension Laws ........................................... 42
SECTION 516. Enforcement by Holders of Preferred
Securities ................................................................. 42
ARTICLE SIX
The Trustee ........................................... 43
SECTION 601. Certain Duties and Responsibilities ........................................ 43
SECTION 602. Notice of Defaults ......................................................... 43
SECTION 603. Certain Rights of Trustee .................................................. 44
SECTION 604. Not Responsible for Recitals or Issuance
of Securities .............................................................. 45
SECTION 605. May Hold Securities ........................................................ 45
SECTION 606. Money Held in Trust ........................................................ 45
SECTION 607. Compensation and Reimbursement ............................................. 46
viii
<PAGE>
Page
----
SECTION 608. Disqualification; Conflicting Interests .................................... 47
SECTION 609. Corporate Trustee Required; Eligibility .................................... 47
SECTION 610. Resignation and Removal; Appointment of
Successor .................................................................. 47
SECTION 611. Acceptance of Appointment by Successor ..................................... 49
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business ..................................................... 49
SECTION 613. Preferential Collection of Claims
Against Company ............................................................ 50
ARTICLE SEVEN
Holders' Lists and Reports
by Trustee and Company ...................................... 50
SECTION 701. Company to Furnish Trustee Names and Ad-
dresses of Holders ......................................................... 50
SECTION 702. Preservation of Information; Communica-
tions to Holders ........................................................... 50
SECTION 703. Reports by Trustee ......................................................... 51
SECTION 704. Reports by Company ......................................................... 51
ARTICLE EIGHT
Consolidation, Merger, Conveyance,
Transfer or Lease ........................................ 52
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms .............................................................. 52
SECTION 802. Successor Substituted ...................................................... 53
ix
<PAGE>
Page
----
ARTICLE NINE
Supplemental Indentures .................................................... 53
SECTION 901. Supplemental Indentures Without Consent
of Holders ................................................................. 53
SECTION 902. Supplemental Indentures with Consent of
Holders .................................................................... 54
SECTION 903. Execution of Supplemental Indentures ....................................... 56
SECTION 904. Effect of Supplemental Indentures .......................................... 56
SECTION 905. Conformity with Trust Indenture Act ........................................ 56
SECTION 906. Reference in Securities to Supplemental
Indentures ................................................................. 57
ARTICLE TEN
Covenants; Representations
and Warranties .......................................... 57
SECTION 1001. Payment of Principal and Interest .......................................... 57
SECTION 1002. Maintenance of Office or Agency ............................................ 57
SECTION 1003. Money for Security Payments to Be Held
in Trust ................................................................... 58
SECTION 1004. Statement by Officers as to Default ........................................ 59
SECTION 1005. Limitation on Dividends; Covenants as to
the Trust .................................................................. 59
SECTION 1006. Payment of Expenses of the Trust ........................................... 60
SECTION 1007. Registration Rights ........................................................ 61
x
<PAGE>
Page
----
ARTICLE ELEVEN
Redemption of Securities;
Conditional Right to Shorten Maturity .............................. 63
SECTION 1101. Right of Redemption ........................................................ 63
SECTION 1102. Applicability of Article ................................................... 64
SECTION 1103. Election to Redeem; Notice to Trustee ...................................... 64
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed ................................................................... 64
SECTION 1105. Notice of Redemption ....................................................... 65
SECTION 1106. Deposit of Redemption Price ................................................ 66
SECTION 1107. Securities Payable on Redemption Date ...................................... 66
SECTION 1108. Securities Redeemed in Part ................................................ 66
SECTION 1109. Optional Redemption ........................................................ 67
SECTION 1110. Conditional Right to Shorten Maturity;
Tax Event Redemption ....................................................... 68
ARTICLE TWELVE
Subordination of Securities ................................... 69
SECTION 1201. Agreement to Subordinate ................................................... 69
SECTION 1202. Default on Senior Indebtedness ............................................. 69
SECTION 1203. Liquidation; Dissolution; Bankruptcy ....................................... 70
SECTION 1204. Subrogation ................................................................ 71
SECTION 1205. Trustee to Effectuate Subordination ........................................ 73
SECTION 1206. Notice by the Company ...................................................... 73
SECTION 1207. Rights of the Trustee; Holders of Senior
Indebtedness ............................................................... 74
SECTION 1208. Subordination May Not Be Impaired .......................................... 74
xi
<PAGE>
Page
----
ARTICLE THIRTEEN
Conversion of Securities ..................................... 75
SECTION 1302. Conversion Procedures ...................................................... 76
SECTION 1303. Conversion Price Adjustments ............................................... 78
SECTION 1304. Reclassification, Consolidation, Merger
or Sale of Assets .......................................................... 84
SECTION 1305. Notice of Adjustments of Conversion
Price ...................................................................... 85
SECTION 1306. Prior Notice of Certain Events ............................................. 85
SECTION 1307. Certain Defined Terms ...................................................... 86
SECTION 1308. Dividend or Interest Reinvestment Plans .................................... 87
SECTION 1309. Certain Additional Rights .................................................. 87
SECTION 1310. Restrictions on Common Stock Issuable
Upon Conversion ............................................................ 88
SECTION 1311. Trustee Not Responsible for Determining
Conversion Price or Adjustments ............................................ 89
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors ...................................... 89
</TABLE>
xii
<PAGE>
EXHIBIT A Form of the Security
ANNEX I Form of Amended and Restated Declaration of
Trust among the Company, as Sponsor, The Bank
of New York, The Bank Of New York (Delaware),
and Steven A. McArthur, Craig Hammett and
Gregory Abel, as trustees, dated as of August
12, 1997.
- --------------
Note: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
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INDENTURE, dated as of August 12, 1997, between CalEnergy
Company, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
302 South 36th Street, Suite 400, Omaha, Nebraska 68131, and The Bank of New
York, a New York banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, CalEnergy Capital Trust III, a Delaware business
trust (the "Trust"), formed under the Amended and Restated Declaration of Trust
among the Company, as Sponsor, The Bank of New York, as property trustee (the
"Property Trustee"), and The Bank of New York (Delaware) (the "Delaware
Trustee") and Steven A. McArthur, Craig Hammett and Gregory Abel, as trustees,
dated as of August 12, 1997 (the "Declaration"), pursuant to the Purchase
Agreement (the "Purchase Agreement") dated August 7, 1997, among the Company,
the Trust and the Initial Purchasers named therein, will issue and sell up to
4,500,000 (or 5,400,000 if the over-allotment option is exercised in full) of
its 6 1/2% Convertible Preferred Securities (the "Preferred Securities") with a
liquidation preference of $50 per Preferred Security, having an aggregate
liquidation amount with respect to the assets of the Trust of $225,000,000 (or
$270,000,000 if the over-allotment option is exercised in full);
WHEREAS, the trustees of the Trust, on behalf of the Trust,
will execute and deliver to the Company Common Securities evidencing an
ownership interest in the Trust, registered in the name of the Company, in an
aggregate amount equal to three percent of the capitalization of the Trust,
equivalent to 139,176 Common Securities (or 167,012 Common Securities if the
over-allotment option is exercised in full), with a liquidation preference of
$50 per Common Security, having an aggregate liquidation amount with respect to
the assets of the Trust of $6,958,800 (or $8,350,600 if the over-allotment
option is exercised in full) (the "Common Securities");
WHEREAS, the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase from the Company
Securities (as defined below) in an aggregate principal amount of $231,958,800
(or $278,350,600 if the over-allotment option is exercised in full);
WHEREAS, the Company is guaranteeing the payment of
distributions on the Preferred Securities, and payment of the Redemption Price
and payments on liquidation with
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respect to the Preferred Securities, to the extent provided in the Preferred
Securities Guarantee Agreement (the "Guarantee") between the Company and The
Bank of New York, as guarantee trustee, for the benefit of the holders of the
Preferred Securities from time to time;
WHEREAS, the Company has duly authorized the creation of an
issue of its 6 1/2% Convertible Junior Subordinated Debentures Due 2027 (the
"Securities"), of substantially the tenor and amount hereinafter set forth and
to provide therefor the Company has duly authorized the
execution and delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities, and
any Preferred Securities are outstanding, the Declaration provides that the
holders of Preferred Securities may cause the Conversion Agent to (a) exchange
such Preferred Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock; and
WHEREAS, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
I
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
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(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Interest" has the meaning specified in
Section 301.
"Additional Payments" means Compounded Interest
and Additional Interest, if any.
"Adverse Tax Consequence" means each of the circumstances
referred to in clauses (i), (ii) and (iii) of the first sentence of the
definition of "Tax Event."
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent
or co-registrar.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
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"Business Day" means any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New York are
authorized or required by any applicable law or executive order to remain
closed.
"Change in Tax Law" has the meaning specified in
the definition of "Tax Event."
"Closing Price" has the meaning specified in
Section 1307.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Securities" has the meaning specified in
the recitals to this Instrument.
"Common Securities Guarantee" means any guarantee that the
Company may enter into for the benefit of holders of Common Securities of the
Trust.
"Common Stock" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Article Thirteen, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided, that if at
any time there shall be more than one such resulting class, the shares of each
such class then so issuable on conversion shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable
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provisions of this Indenture, and thereafter "Company" shall mean such
successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President, a Vice President, its Treasurer or
its Secretary, and delivered to the Trustee.
"Compounded Interest" has the meaning specified in
Section 312.
"Conversion Agent" means the Person appointed to act on
behalf of the holders of Preferred Securities in effecting the conversion of
Preferred Securities as and in the manner set forth in the Declaration and
Section 1302 hereof.
"Conversion Date" has the meaning specified in
Section 1302.
"Corporate Trust Office" means the principal office of the
Trustee in New York, New York, at which at any particular time its corporate
trust business shall be administered and which at the date of this Indenture is
101 Barclay Street, Floor 21 West, New York, New York 10286.
"Declaration" has the meaning specified in the
Recitals to this instrument.
"Defaulted Interest" has the meaning specified in
Section 307.
"Delaware Trustee" has the meaning specified in
the Recitals to this instrument.
"Depositary" means, with respect to any Securities issued in
the form of one or more Global Security, a clearing agency registered under the
Exchange Act that is dedicated to act as Depositary for the Securities.
"Direct Action" means a proceeding instituted by a holder of
Preferred Securities directly against the Company to enforce rights under the
Securities in certain circumstances, as specified in Section 516.
"Dissolution Event" means that the Trust is to be dissolved
in accordance with the Declaration and the Securities held by the Property
Trustee are to be distributed to the holders of Trust Securities issued by The
Trust pro rata in accordance with the Declaration.
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"Event of Default" has the meaning specified in
Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Extended Interest Payment Period" has the meaning
specified in Section 312.
"Global Security" has the meaning specified in
Section 314.
"Guarantee" has the meaning specified in the
Recitals to this instrument.
"Holder" means a Person in whose name a Security
is registered in the Security Register.
"Indenture" means this instrument as originally executed or
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, including, for all purposes of this instrument and any such
supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively, and shall include the terms of the Securities.
"Initial Purchasers," with respect to the Preferred
Securities, means Credit Suisse First Boston Corporation and Lehman Brothers
Inc.
"Interest Payment Date" has the meaning specified
in Section 301.
"Investment Company Event" has the meaning
specified in the Declaration.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Maturity Date" means the date on which the Securities mature
and on which the principal shall be due and payable together with all accrued
and unpaid interest thereon, including Compounded Interest and Additional
Interest, if any.
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"Non Book-Entry Preferred Securities" has the
meaning specified in Section 314.
"Notice of Conversion" means the notice to be given by a
holder of Preferred Securities to the Conversion Agent directing the Conversion
Agent to exchange such Preferred Securities for Securities and to convert such
Securities into Common Stock on behalf of such holder.
"Officer's Certificate" means a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Trustee. The officer signing an Officer's Certificate given pursuant to Section
1004 shall be the principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means,
as of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except: (i) Securities theretofore cancelled by
the Trustee or delivered to the Trustee for cancellation; (ii) Securities for
whose payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of such Securities; provided, that
if such Securities or portions of Securities are to be redeemed prior to
maturity, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306, converted into
Common Stock pursuant to Section 1301, or in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; provided, however, that in determining whether the
Holders of the requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the
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Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the
Company to pay the principal of or interest on any
Securities on behalf of the Company.
"Person" means any individual, corporation, company,
partnership, joint venture, trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Securities" has the meaning specified
in the Recitals to this instrument.
"Property Trustee" has the meaning specified in
the Recitals to this instrument.
"Purchase Agreement" has the meaning specified in
the Recitals to this instrument.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Date" has the meaning specified in
Section 1303(c).
"Registration Default" has the meaning specified
in Section 1007.
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"Registration Rights Agreement" has the meaning
specified in Section 1007.
"Regular Record Date" has the meaning specified in
Section 301.
"Regular Trustee" means any trustee of the Trust other than
the Property Trustee and the Delaware Trustee.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the treasurer, any assistant treasurer, any trust
officer or assistant trust officer, the controller or any assistant controller
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Securities Legend" has the meaning
specified in Section 202.
"Securities" has the meaning specified in the
Recitals to this instrument.
"Security Register" and "Security Registrar" have
the respective meanings specified in Section 305.
"Senior Indebtedness" means in respect of the Company (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
such obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (vi) all obligations of the type referred
to in clauses (i) through (v) above of
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other Persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness issued after the date of original issuance of the Securities
that is by its terms subordinated to or pari passu with the Securities and (2)
any indebtedness (including all other debt securities and guarantees in respect
of those debt securities) initially issued to any other trust, or a trustee of
such trust, partnership, or other entity affiliated with the Company that is,
directly or indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity of preferred
securities or other securities which by their terms rank pari passu with, or
junior to, the Preferred Securities.
"Shelf Registration Statement" has the meaning
specified in Section 1007.
"Special Event" has the meaning specified in the
Declaration.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal, together with any accrued and unpaid
interest (including Compounded Interest), of such Security or such installment
of interest is due and payable, as such date may, in the case of the stated
maturity of the principal on any Security, be shortened as provided pursuant to
the terms of such Security and this Indenture and, in the case of any
installment of interest, subject to the deferral of such date in the case of
any Extended Interest Payment Period.
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof or (ii) any other Person (other
than a corporation) in which such Person, or one or more other Subsidiaries of
such Person or such Person and one or more other Subsidiaries thereof, directly
or indirectly, has at least a majority ownership and power to direct the
policies, management and affairs thereof.
"Tax Event" means that the Company shall have obtained an
opinion of nationally recognized independent tax counsel (reasonably acceptable
to the Regular Trustees)
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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 August 7, 1997), which amendment or
change is effective, is enacted or which interpretation or pronouncement is
announced on or after August 7, 1997 (collectively, a "Change In Tax Law"),
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 Securities, (ii) interest payable to the Trust on the Securities is not
or will not be deductible for United States federal income tax purposes or
(iii) the Trust 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 Securities 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 Securities 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.
"Trading Day" has the meaning specified in
Section 1307.
"Trust" has the meaning specified in the Recitals
to this instrument.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such
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date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and
Preferred Securities.
"Vice President," when used with respect to the Company or
the Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" of any Person means capital stock of such
Person which ordinarily has voting power for the election of directors (or
Persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason
of any contingency.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act or reasonably requested by the Trustee in connection
with such application or request. Each such certificate or opinion shall be
given in the form of an Officer's Certificate, if to be given by an officer of
the Company, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the applicable requirements of the Trust Indenture Act and any
other applicable requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
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(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments
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(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee or the Company, as the case may be, deems
sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action, or to vote on any action, authorized or permitted to be given or
taken by Holders. If not set by the Company prior to the first solicitation of
a Holder made by any Person in respect of any such action, or, in the case of
any such vote, prior to such vote, the record date for any such action or vote
shall be the 30th day (or, if later, the date of the most recent list of
Holders required to be provided pursuant to Section 701) prior to such first
solicitation or vote, as the case may be. With regard to any record date, only
the Holders on such date (or their duly designated proxies) shall be entitled
to give or take, or vote on, the relevant action.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or
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direction, whether or not such Holders remain Holders after such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from
setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set
shall automatically and with no action by any Person be cancelled and of no
effect), and nothing in this paragraph shall be construed to render ineffective
any action taken by Holders of the requisite principal amount of Outstanding
Securities of the date such action is taken.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action with regard to any particular
Security may do so with regard to all or any part of the principal amount of
such Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of such
principal amount, in each case, by specifying the same in a written notice to
the Company.
SECTION 105. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at
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the address of its principal office specified in the first paragraph
of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at such Holder's address as it appears in
the Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice when mailed to a Holder in the aforesaid manner shall be conclusively
deemed to have been received by such Holder whether or not actually received by
such Holder. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give such notice
by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
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SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness, the holders of
Preferred Securities (to the extent provided herein) and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Security or the last date on which a Holder has the
right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) or conversion of the
Securities need not be made on such date, but may be made on the next
succeeding Business Day (except that, if such Business Day is in the next
succeeding calendar year, such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, shall be the immediately preceding Business Day)
with the same force and effect as if made on the Interest Payment
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Date or Redemption Date, or at the Stated Maturity or on such last day for
conversion, provided, that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be substantially in the form of Exhibit A which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
The Company shall furnish any such legend not contained in Exhibit A to the
Trustee in writing. Each Security shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Exhibit
A are part of the terms of this Indenture and to the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 202. Initial Issuance to Property Trustee.
The Securities initially issued to the Property Trustee of
the Trust shall be in the form of one or more individual certificates in
definitive, fully registered form without distribution coupons and shall bear
the following legend (the "Restricted Securities Legend") unless the Company
determines otherwise in accordance with applicable law:
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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. 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 ("RULE 144A"). 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, 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, OR (E)
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) OR (E) 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.
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ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is limited to the sum of (a)
$231,958,800 and (b) such aggregate principal amount (which may not exceed
$278,350,600 aggregate principal amount) of Securities, if any, as shall be
purchased by the Trust pursuant to an over-allotment option in accordance with
the terms and provisions of the Purchase Agreement, dated August 7, 1997, among
the Company, the Trust and the Initial Purchasers named therein, except for
Securities authenticated and delivered upon registration of, transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305,
306, 906, 1108 or 1301.
The Securities shall be known and designated as the "6 1/2%
Convertible Junior Subordinated Debentures Due 2027" of the Company. Their
Stated Maturity shall be September 1, 2027, which date may be shortened,
subject to the conditions specified in Section 1110 of this Indenture, to a
date not earlier than August 10, 2012, and they shall bear interest at the rate
of 6 1/2% per annum from August 12, 1997 or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly
provided for, as the case may be, payable quarterly (subject to deferral as set
forth herein), in arrears, on March 1, June 1, September 1 and December 1 (each
an "Interest Payment Date") of each year, commencing September 1, 1997 until
the principal thereof is paid or made available for payment, and they shall be
paid to the Person in whose name the Security is registered at the close of
business on the regular record date for such interest installment, which shall
be the close of business on the date which is 15 days prior to each Interest
Payment Date (the "Regular Record Date"). Interest will compound quarterly and
will accrue at the rate of 6 1/2% per annum on any interest installment in
arrears for more than one quarter or during an extension of an interest payment
period as set forth in Section 312 hereof.
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest in computed,
will be computed on the basis of the actual number of days elapsed in such a
30-day month. In the event that any date
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on which interest is payable on the Securities is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
If at any time while the Property Trustee is the Holder of
any Securities, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding, transfer or stamp taxes) imposed by the United States, or any
other taxing authority, then, in any case, the Company will pay as additional
interest ("Additional Interest") on the Securities held by the Property
Trustee, such additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying such
taxes, duties, assessments or other governmental charges will be equal to the
amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other government charges been imposed.
The principal of and interest on the Securities shall be
payable at the office or agency of the Company in the United States maintained
for such purpose and at any other office or agency maintained by the Company
for such purpose in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
The Securities shall be redeemable as provided in Article
Eleven hereof.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Twelve hereof.
The Securities shall be convertible as provided in Article
Thirteen hereof.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $50 and integral multiples
thereof.
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SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, its President or one
of its Vice Presidents. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and make available for
delivery such Securities as in this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable
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for definitive Securities upon surrender of the temporary Securities at any
office or agency of the Company designated pursuant to Section 1002, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
(a) General.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security
at an office or agency of the Company designated pursuant to Section 1002 for
such purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate
principal amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, the Securities which the Holder making the exchange is entitled
to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
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Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906, 1108 or 1301 not
involving any transfer.
The Company shall not be required (i) in the case of a
partial redemption of the Securities, to issue, register the transfer of or
exchange any Security during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) Transfer Procedures and Restrictions.
The Securities may not be transferred except in compliance
with the Restricted Securities Legend unless otherwise determined by the
Company in accordance with applicable law. Upon any distribution of the
Securities to the holders of the Preferred Securities in accordance with the
Declaration, the Company and the Trustee shall enter into a supplemental
indenture pursuant to Section 901(6) to provide for transfer procedures and
restrictions with respect to the Securities substantially similar to those
contained in the Declaration to the extent applicable in the circumstances
existing at the time of such distribution.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the
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destruction, loss or theft of any Security and (ii) such security or indemnity
as may be required by them to save each of them and any agent of either of them
harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at
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its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to
each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the
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proposed payment pursuant to this Clause, such manner of payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue (including in each such case
Compounded Interest), which were carried by such other Security.
In the case of any Security which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment
Date (other than any Security whose Maturity is prior to such Interest Payment
Date), interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company shall
not make nor be required to make any other payment, adjustment or allowance
with respect to accrued but unpaid interest (including Additional Payments) on
the Securities being converted, which shall be deemed to be paid in full.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 307) interest (including Additional
Payments) on such Security and for all other purposes whatsoever, whether or
not such Security be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be
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promptly cancelled by it. The Company may at any time deliver to the Trustee
for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of as
directed by a Company Order; provided, however, that the Trustee shall not be
required to destroy the certificates representing such cancelled Securities.
SECTION 310. Right of Set Off.
Notwithstanding anything to the contrary in this Indenture,
the Company shall have the right to set off any payment it is otherwise
required to make hereunder to the extent the Company has theretofore made, or
is concurrently on the date of such payment making, a payment under the
Guarantee.
SECTION 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers
in notices of redemption as a convenience to Holders; provided, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
SECTION 312. Extension of Interest Payment Period; Notice of Extension.
(a) The Company shall have the right, at any time during the
term of this Security, from time to time to defer payments of interest by
extending the interest payment period of such Security for up to 20 consecutive
quarters (an "Extended Interest Payment Period") during which Extended Interest
Payment Period no interest (including any Additional Payments) shall be due and
payable; provided, that no Extended Interest Payment Period may extend beyond
the Maturity Date, as then in effect, 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 1/2% compounded quarterly for each
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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, as then in effect. Upon the expiration of any
Extended Interest Payment Period and upon the payment of all Additional
Payments, if any, then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period except at the end
thereof.
(b) If the Property Trustee is the sole Holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Regular Trustees, the Property
Trustee and the Trustee of its selection of such Extended Interest Payment
Period at least one Business Day prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) if the Preferred Securities are listed
on the New York Stock Exchange or other stock exchange or quotation system, the
date the Trust is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distributions are payable, but
in any event not less than ten Business Days prior to such record date.
(c) If the Property Trustee is not the sole holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give the Holders of the Securities and the Trustee written
notice of its selection of an Extended Interest Payment Period at least ten
Business Days prior to the earlier of (i) the next succeeding Interest Payment
Date or (ii) if the Preferred Securities are listed on the New York Stock
Exchange or other stock exchange or quotation system, the date the Company is
required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Securities of the record date
or the date such distributions are payable, but in any event not less than two
Business Days prior to such record date.
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(d) The quarter in respect of which any notice is given
pursuant to paragraphs (b) and (c) hereof shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period permitted
under paragraph
(a) hereof.
SECTION 313. Paying Agent, Security Registrar and Conversion Agent.
The Trustee will initially act as Paying Agent, Security
Registrar and Conversion Agent. The Company may change any Paying Agent,
Security Registrar, co-registrar or Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity.
SECTION 314. Global Security.
(a) In connection with a Dissolution Event,
(i) the Securities in certificated form may
be presented to the Trustee by the Property Trustee in exchange for a global
Security in an aggregate principal amount equal to the aggregate principal
amount of all outstanding Securities (a "Global Security"), to be registered in
the name of the Depositary, or its nominee, and delivered by the Trustee to the
Depositary for crediting to the accounts of its participants pursuant to the
instructions of the Regular Trustees. The Company upon any such presentation
shall execute a Global Security in such aggregate principal amount and deliver
the same to the Trustee for authentication and delivery in accordance with this
Indenture. Payments on the Securities issued as a Global Security will be made
to the Depositary; and
(ii) if any Preferred Securities are held in
non book-entry certificated form, the Securities in certificated form may be
presented to the Trustee by the Property Trustee and any certificates which
represent Preferred Securities, other than Preferred Securities held by the
Depositary or its nominee ("Non Book-Entry Preferred Securities"), will be
deemed to represent beneficial interests in Securities presented to the Trustee
by the Property Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non Book-Entry Preferred Securities until
such certificates representing Preferred Securities are presented to the
Security Registrar for transfer or reissuance at which time such certificates
representing Preferred Securities will be cancelled and a Security, registered
in the name of the holder of the certificate representing Preferred Securities
or the transferee of the holder of such certificate representing Preferred
Securities, as the case may be, with an aggregate
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principal amount equal to the aggregate liquidation amount of the certificate
representing Preferred Securities cancelled, will be executed by the Company
and delivered to the Trustee for authentication and delivery in accordance with
this Indenture. On issue of such Securities, Securities with an equivalent
aggregate principal amount that were presented by the Property Trustee to the
Trustee will be deemed to have been cancelled.
(b) A Global Security may be transferred, in whole but not in
part, only to another nominee of the Depositary, or to a nominee of such
successor Depositary.
(c) If at any time the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary or if at any time the
Depositary shall no longer be registered or in good standing under the Exchange
Act or other applicable statute or regulation, and a successor Depositary for
such series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition, as the case may be,
the Company will execute, and, subject to Article Three of this Indenture, the
Trustee, upon written notice from the Company and receipt of a Company Order,
will authenticate and deliver the Securities in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Security in exchange for
such Global Security. In addition, upon an Event of Default or if the Company
may at any time determine that the Securities shall no longer be represented by
a Global Security, the Company will execute, and subject to Section 305 of this
Indenture, the Trustee, upon receipt of an Officer's Certificate evidencing
such determination by the Company, will authenticate and make available for
delivery the Securities in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for such Global Security.
Upon the exchange of the Global Security for such Securities in definitive
registered form without coupons, in authorized denominations, the Global
Security shall be cancelled by the Trustee. Such Securities in definitive
registered form issued in exchange for the Global Security shall be registered
in such names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.
ARTICLE FOUR
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Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation have become due and payable and
the Company has deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal and interest (including any
Additional Payments) to the date of such deposit (in the case
of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions
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precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee. All
moneys deposited with the Trustee pursuant to Section 401 (and held by it or
any Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of
the following events that has occurred and is continuing (whatever the reason
for such Event of Default and whether it shall be occasioned by the provisions
of Article Twelve or be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) default in the payment of the principal of (or premium,
if any, on) any Security when due whether at Maturity, upon
redemption, by declaration or otherwise; or
(2) default in the payment of any interest upon any Security,
including any Additional Payments in respect thereof, when it becomes
due
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and payable, and continuance of such default for a period of 30 days;
provided, that a valid extension of the interest payment period by the
Company pursuant to this Indenture shall not constitute a default in
the payment of interest (including any Additional Payments) for this
purpose; or
(3) failure by the Company to issue and deliver Common Stock
upon an election to convert the Securities into Common Stock in
accordance with Article Thirteen hereof; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach
for a period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(5) entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of substantially all of the property of the
Company, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any
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other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company to the entry of a decree or order for
relief in respect of itself in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company, or the filing by
the Company of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the consent by
the Company to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of
substantially all of the property of the Company, or the making by the
Company of an assignment for the benefit of creditors, or the
admission by the Company in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action; or
(7) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the
distribution of Securities to holders of Preferred Securities in
liquidation or redemption of their interests in the Trust, (ii) the
redemption of all of the outstanding Preferred Securities of the Trust
or (iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in
every such case, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities may declare the principal of all the
Securities and any other amounts payable hereunder to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal and all accrued
interest shall become immediately due and payable.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the
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Trustee as provided in this Article hereinafter, the Holders of a majority in
aggregate principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with
the Trustee a sum sufficient to pay
(A) all overdue interest
(including any Additional Payments) on
all Securities,
(B) the principal of any Securities which have
become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest (including
any Additional Payments) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days;
provided that a valid extension of the interest payment period by the
Company pursuant to this Indenture shall not constitute a default in
the payment of any interest (including Additional Payments) for this
purpose, or
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(2) default is made in the payment of the
principal of any Security at the Maturity thereof,
the Company will, upon written demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal and interest, as applicable (including
any Additional Payments), and, to the extent that payment thereof shall be
legally enforceable, interest on any overdue principal and on any overdue
interest (including any Additional Interest), at the rate borne by the
Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the
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Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or interest (including any Additional Payments), upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due
the Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including any Additional Payments) on the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
principal and interest (including any Compounded Interest),
respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
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(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of
a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest
and Convert.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject to Sections
307 and 312) interest (including any Additional Payments) on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to convert such Security in accordance
with Article Thirteen and to institute suit for the enforcement of any such
payment and right to convert, and such rights shall not be impaired without the
consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; provided, that
(1) such direction shall not be in conflict
with any rule of law or with this Indenture; and
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(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Section 902 hereof, the Holders of not less than a
majority in principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of, premium, if any, or
interest (including any Additional Payments) on any Security (unless
such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by
acceleration has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected; provided, however, that
if the Securities are held by the Trust or a trustee of the Trust,
such waiver shall not be effective until the holders of a majority in
liquidation preference of Trust Securities of the Trust shall have
consented to such waiver; provided, further, that if the consent of
the Holder of each outstanding Security is required, such waiver shall
not be effective until each holder of the Securities of the Trust
shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to
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require such an undertaking or to make such an assessment in any suit
instituted by the Company or the Trustee or in any suit for the enforcement of
the right to receive the principal of and interest (including any Additional
Payments) on any Security or to convert any Security in accordance with Article
Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution pursuant to this Indenture of any lawful power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 516. Enforcement by Holders of Preferred Securities.
(1) Notwithstanding anything to the contrary contained
herein, if the Trustee as Holder of the Securities fails to enforce
its rights under the Securities (other than rights arising from an
Event of Default described in Section 516(2)) after any holder of
Preferred Securities shall have made a written request to the Trustee
to enforce such rights, such holder of Preferred Securities may, to
the fullest extent permitted by law, institute a Direct Action to
enforce the Trustee's rights as Holder of the Securities, without
first instituting any legal proceeding against the Trustee or any
other Person.
(2) Notwithstanding anything to the contrary contained
herein, if an Event of Default has occurred and is continuing and such
Event of Default is attributable to the failure of the Company to pay
interest (including any Additional Payments) (subject to Section 312)
or principal on the Securities on the date such interest or principal
is otherwise payable, the Company acknowledges that, in such event, a
holder of Preferred Securities may institute a Direct Action for
enforcement of payment to such Holder of the principal of or interest
on the Securities having
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a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such Holder, on or after the respective due
date specified in the Securities, without first instituting any legal
proceeding against the Trustee or any other Person.
(3) Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of or
interest on the Securities held by the Trust or the Trustee and the
Company shall be subrogated to the rights of the holder of such
Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such
holder in any Direct Action.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
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SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel of its choice and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or
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document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to reasonable examination of the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without
negligence or willful misconduct, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Company of the Securities or the
proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company, in its individual or any other capacity, may become
the owner or pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability
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for interest on any money received by it hereunder except as otherwise agreed
with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
fees, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to
all property and funds held by it hereunder for any amount owing it pursuant to
this Section 607, except with respect to funds held in trust for the benefit of
the Holders of the Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(6) or Section
501(7), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable Federal or state bankruptcy,
insolvency or other similar law.
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The provisions of this Section shall survive the termination
of this Indenture.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall
be a Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000 and has its
Corporate Trust Office in New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the
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resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by Company Order may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; provided, that on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder. Upon request of
any such successor Trustee, the Company shall execute any and all instruments
required to more fully and certainly vest in and confirm to such successor
Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semiannually, not later than February 15 and August 15 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders as of a date not more than
15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding
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rights and duties of the Trustee, shall be as provided by
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year, commencing May
15, 1998, the Trustee shall transmit by mail to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided, that
any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 shall be filed with the Trustee within 15 business days after the same is
so required to be filed with the Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates).
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge with or into
any other Person or, directly or indirectly, sell, convey, transfer or lease
all or substantially all of its properties and assets on a consolidated basis
to any Person, unless:
(1) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by purchase,
conveyance, transfer or lease, all or substantially all of the
properties and assets of the Company on a consolidated basis shall be
a corporation, partnership or trust, shall be organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, the due and punctual
payment of the principal of (and premium, if any) and interest on all
the Securities and the performance or observance of every covenant of
this Indenture on the part of the Company to be performed or observed
and shall have provided for conversion rights in accordance with
Article Thirteen;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company
or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental
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indenture, comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
This Section shall only apply to a merger or consolidation in
which the Company is not the surviving corporation and to conveyances, leases
and transfers by the Company as transferor or lessor.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company on a consolidated
basis in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Company Order, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
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(3) to make provision with respect to the conversion rights
of Holders pursuant to the requirements of Article Thirteen; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture; provided, that such action
pursuant to this clause (4) shall not materially adversely affect the
interests of the Holders of the Securities or, so long as any of the
Preferred Securities shall remain outstanding, the holders of the
Preferred Securities; or
(5) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the Trust Indenture Act; or
(6) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if
any, to be placed on Securities, and all other matters required
pursuant to Section 305(b) or otherwise necessary, desirable or
appropriate in connection with the issuance of Securities to holders
of Preferred Securities in the event of a distribution of Securities
by the Trust if a Special Event occurs and is continuing.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal of, or
(subject to Section 312) any installment of interest (including any
Additional Payments) on, any Security, or reduce the
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principal amount thereof, or reduce the rate or (subject to Section
312) extend the time for payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Security or
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date), or materially adversely affect the right to convert any
Security as provided in Article Thirteen (except as permitted by
Section 901(3)), or modify the provisions of this Indenture with
respect to the subordination of the Securities in a manner adverse to
the Holders,
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security
affected thereby;
provided that if the Securities are held by the Trust or a trustee of the
Trust, such supplemental indenture shall not be effective until the holders of
a majority in liquidation preference of Trust Securities shall have consented
to such supplemental indenture; provided, further, that if the consent of the
Holder of each Outstanding Security is required, such supplemental indenture
shall not be effective until each holder of the Trust Securities of the Trust
shall have consented to such supplemental indenture.
So long as any Preferred Securities are outstanding, no supplemental
indenture shall, without the consent of each holder of Preferred Securities,
amend Section 516 so as to eliminate or materially impair the right of such
holders to institute Direct Actions in the circumstances set forth therein.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any
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proposed supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture, whether or not such Holders
remain Holders after such record date; provided, that unless such consent shall
have become effective by virtue of the requisite percentage having been
obtained prior to the date which is 90 days after such record date, any such
consent previously given shall automatically and without further action by any
Holder be cancelled and of no further effect.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby. No such supplemental indenture
shall directly or indirectly modify the provisions of Article Twelve in any
manner which might terminate or impair the rights of the Senior Indebtedness
pursuant to such subordination provisions.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act.
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SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the United States an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer, exchange, or
conversion, and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in the United States for such purposes. The
Company will give prompt
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written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal or interest so becoming
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (i) comply with the provisions of the
Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities) in the making of any payment in respect of the Securities, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held in
trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or
interest on any Security and remaining unclaimed for two years after such
principal or
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interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of any such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after the date hereof,
an Officer's Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture (without regard
to any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. The Company shall file with
the Trustee, within five Business Days after becoming aware of any material
default or Event of Default an Officer's Certificate specifying such default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 1005. Limitation on Dividends; Covenants as to the Trust.
(a) In the event that (i) an Event of Default shall have
occurred and be continuing, (ii) the Company shall be in default with respect
to its payment of any obligations under the Guarantee, or (iii) the Company
shall have given notice of its election of an Extended Interest Payment Period
as provided herein and such period, or any extension thereof, shall be
continuing, then, in each case, the Company shall not
(i) declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock (other than (A)
purchases or acquisitions of shares of Common Stock in connection with
the satisfaction by the Company of its obligations under any employee
benefit plans, (B) as a result of a reclassification of capital stock
of the Company or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of capital
stock of the Company,
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(C) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of
such capital stock of the Company or the security being converted or
exchanged or (D) stock dividends paid by the Company which consist of
stock of the same class as that on which the dividend is being paid);
(ii) make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company which rank pari passu with or junior
to the Securities; or
(iii) make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee and the Common
Securities Guarantee).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common Securities of the
Trust; provided, however, that any successor of the Company as provided in
Article Eight hereunder may succeed to the Company's ownership of such Common
Securities and (ii) that it shall use its reasonable efforts, consistent with
the terms and provisions of the Declaration, to cause the Trust (x) to remain a
statutory business trust, except in connection with the distribution of the
Securities to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations of the Trust, each as permitted by the
Declaration, and (y) to otherwise continue to be classified as a grantor trust
for United States Federal income tax purposes.
SECTION 1006. Payment of Expenses of the Trust.
In connection with the offering, sale and issuance of the
Securities to the Property Trustee in connection with the sale of the Trust
Securities by the Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including commissions to the
Initial Purchasers payable pursuant to the Purchase Agreement and compensation
of the Trustee under the Indenture in accordance with the provisions of Section
607 of the Indenture;
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(b) be responsible for and pay for all debts and obligations
(other than with respect to the Trust Securities) of the Trust, pay for all
costs and expenses of the Trust (including, but not limited to, costs and
expenses relating to the organization of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions to the underwriters in
connection therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, the costs and expenses relating to the operation of the
Trust, including without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
SECTION 1007. 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 August
12, 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
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in the Registration Rights Agreement (the "Effectiveness Period").
The Company agrees that from and after the date on which any
Registration Default occurs, additional interest ("Liquidated Damages") will
accrue on the Securities, and accordingly, additional interest will accrue on
the Preferred Securities, in each case, from and including the day following
the day such Registration Default shall occur (or be deemed to occur as
described below) to but excluding the day on which such Registration Default
has been cured (or be deemed to be cured as described below). Liquidated
Damages will be paid quarterly in arrears, with the first quarterly payment due
on the first interest or distribution payment date, as applicable, following
the date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation amount, as applicable, to and including the
90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. Following the cure or deemed cure of a Registration Default,
Liquidated Damages will cease to accrue with respect to such Registration
Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the Issue Date, a
Shelf Registration Statement relating to the offer and sale of the
Registrable Securities has not been filed with the Commission;
(ii) on or prior to the 270th day following the Issue Date,
the Registrable Securities are not the subject of a Shelf Registration
Statement which has become effective;
(iii) the Registrable Securities are the subject of a Shelf
Registration Statement which was effective but which has ceased to be
effective for any reason (other than pursuant to clause (iv) or (v)
below) prior to the end of the Shelf Registration Period (as defined
in the Registration Rights Agreement);
(iv) the occurrence of a Suspension (as defined
in the Registration Rights Agreement); or
(v) the occurrence of an event contemplated by
paragraph 3(c)(2)(iii) of the Registration Rights
Agreement (an "Amendment Event");
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provided, however, that if the Registration Default consists of the occurrence
of any event contemplated by clause (iv) or (v) above, then such Registration
Default shall not be deemed to have occurred until the expiration of 30
Business Days after the date of the occurrence of such Suspension or Amendment
Event, provided that (a) the Trust and the Company thereafter reasonably
promptly comply with the requirements of paragraph 3(i) of the Registration
Rights Agreement, if applicable, and (b) in the case of such Amendment Event
resulting from an action taken by the Company or the Trust, such action was
taken in good faith; and provided, further, that a Registration Default shall
not constitute a default or Event of Default hereunder.
A Registration Default shall be deemed to have been cured and
cease to exist on the date subsequent to the occurrence of such Registration
Default on which:
(x) in the case of a Registration Default described in clause
(i), (ii) or (iii) above, the Shelf Registration Statement covering
such Registrable Securities shall become effective; or
(y) in the case of a Registration Default described in clause
(iv) or (v) above, upon the Company and the Trust taking action to
notify the Holders (for purposes of this clause (y), as that term is
defined in the Registration Rights Agreement) of the Registrable
Securities that such Suspension or Amendment Event has ended. For
purposes of this clause (y), taking action to notify Holders shall be
deemed sufficient when notice is first deposited in first class mail
or delivered to a courier service or filed with the Commission or
publicly disseminated by press release or other release to a news
reporting service.
ARTICLE ELEVEN
Redemption of Securities;
Conditional Right to Shorten Maturity
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the election of the
Company, as a whole or in part, at any time or from time to time after
September 1, 2000, at the Redemption Prices set forth in Section 1109 below.
(b) The Securities may, subject to the conditions specified
in Section 1110 of this Indenture, be redeemed as a whole but not in part at
the election of the Company at
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any time within 90 days following the occurrence of a Tax Event.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by Section 1101, shall be made in accordance with such provision and
this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities pursuant to
Section 1101 shall be evidenced by a Company Order. In case of any redemption
at the election of the Company, the Company shall, at least 60 days and no more
than 90 days prior to the Redemption Date fixed by the Company, notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed and provide a copy of the notice of redemption given
to Holders of Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed (unless
such redemption affects only a single Security), the particular Securities to
be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $50 or
any integral multiple thereof) of the principal amount of the Securities.
If Securities selected for partial redemption are converted
into Common Stock in part before termination of the conversion right with
respect to the portion of the Securities so selected, the converted portion of
the Securities shall be deemed (so far as may be) to be the portion selected
for redemption. Securities (or portions thereof) which have been converted into
Common Stock during a selection of Securities to be redeemed shall be treated
by the Trustee as Outstanding for the purpose of such selection. In any case
where more than one Security is registered in the same name, the Trustee in its
discretion may treat the aggregate principal amount so registered as if it were
represented by one Security.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption as
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aforesaid and, in case of any Securities selected for partial redemption as
aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not
apply with respect to any redemption affecting only a single Security, whether
such Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 (or in the case of a redemption at the
election of the Company, not less than 20) nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at such Holder's
address appearing in the Security Register.
All notices of redemption shall identify the Securities to be
redeemed (including, if relevant, CUSIP or ISIN number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after said date, and
(4) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
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SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date.
If any Security called for redemption is converted into
Common Stock, any money deposited with the Trustee or with any Paying Agent or
so segregated and held in trust for the redemption of such Security shall
(subject to any right of the Holder of such Security to receive interest as
provided in the last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest (including Additional Payments, if any) to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to the terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
SECTION 1108. Securities Redeemed in Part.
In the event of any redemption in part, the Company shall not
be required to (i) issue, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before any
selection for redemption of Securities and ending at the
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close of business on the earliest date in which the relevant notice of
redemption is deemed to have been given to all holders of Securities to be so
redeemed and (ii) register the transfer of or exchange any Securities so
selected for redemption, in whole or in part, except for the unredeemed portion
of any Securities being redeemed in part.
Any Security which is to be redeemed only in part shall be
surrendered at a place of payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
The Company may not redeem fewer than all of the Outstanding
Securities unless all accrued and unpaid interest (including Additional
Payments) has been paid on all of the Outstanding Securities.
SECTION 1109. Optional Redemption.
(a) The Company shall have the right to redeem the
Securities, in whole or in part, at any time or from time to time on or after
September 1, 2000, upon not less than 20 nor more than 60 days' notice, at a
Redemption Price equal to $51.00 per $50 principal amount of the Securities to
be redeemed plus any accrued and unpaid interest, including Additional
Payments, if any, to the Redemption Date, if redeemed before September 1, 2001,
and at $50.50 per $50 principal amount of the Security, if redeemed during the
12-month period beginning September 1, 2001 and thereafter at $50 per $50
principal amount of the Securities plus, in each case, accrued and unpaid
interest, including Additional Payments, if any, to the Redemption Date. Any
redemption pursuant to this Section 1109 shall be made pursuant to the
provisions of Sections 1101 through 1108 hereof.
(b) If a partial redemption of the Securities would result in
the delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
listed, the Company shall not be permitted to effect such partial redemption
and may only redeem the Securities in whole.
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SECTION 1110. Conditional Right to Shorten Maturity; Tax Event Redemption.
If a Tax Event has occurred and is continuing and in the
opinion of counsel to the Company experienced in such matters, there would in
all cases, after effecting the termination of the Trust and the distribution of
the Securities to the holders of the Preferred Securities in exchange therefor
upon liquidation of the Trust, be more than an insubstantial risk that an
Adverse Tax Consequence would continue to exist, then, notwithstanding Section
1109(a) but subject to Section 1109(b), the Company shall have the right:
(a) to shorten the Stated Maturity of the Securities to the minimum
extent required, but in any event to a date not earlier than August 10, 2012
(the action referred to in this clause (a) being referred to herein as a
"Maturity Advancement"), such that, in the opinion of counsel to the Company
experienced in such matters, after advancing the Stated Maturity, interest paid
on the Securities will be deductible for federal income tax purposes; provided,
however, that there shall be delivered to the trustees of the Trust an opinion
of counsel (which counsel shall be satisfactory to the trustees of the Trust)
that such change in the Stated Maturity will not (i) cause the Trust to fail to
be classified as a grantor trust or (ii) result in a taxable event to the
holders of the Preferred Securities, or
(b) if in the opinion of counsel to the Company experienced in such
matters, there would in all cases, after effecting a Maturity Advancement, be
more than an insubstantial risk that an Adverse Tax Consequence would
continue to exist, to redeem the Securities, prior to September 1, 2000, in
whole but not in part for cash, upon not less than 30 nor more than 60 days'
notice and within 90 days following the occurrence of the Tax Event, at $50 per
$50 principal amount of the Securities plus accrued and unpaid interest,
including Additional Payments, if any. The redemption payment of $50 per $50
principal amount of the Securities plus accrued and unpaid interest, including
Additional Payments, if any, shall be made prior to 12:00 noon, New York time,
on the date of such redemption or such earlier time as the Company determines
provided that the Company shall deposit with the Trustee an amount sufficient
to make such redemption payment by 10:00 a.m. on the date such redemption
payment is to be made. In lieu of the foregoing, the Company also shall have
the option of causing the Securities to remain outstanding and pay Additional
Interest on the Securities.
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ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of
Securities by such Holder's acceptance thereof likewise covenants and agrees,
that all Securities shall be issued subject to the provisions of this Article
Twelve; and each Holder of a Security, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of, premium, if any,
and interest (including Additional Payments) on all Securities issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and junior in right of payment to the prior payment in full of all Senior
Indebtedness, whether outstanding at the date of this Indenture or thereafter
incurred; provided however, that no provision of this Article Twelve shall
prevent the occurrence of any default or Event of Default hereunder.
SECTION 1202. Default on Senior Indebtedness.
In the event and during the continuation of any default by
the Company in the payment of principal, premium, interest or any other payment
due on any Senior Indebtedness continuing beyond the period of grace, if any,
specified in the instrument evidencing such Senior Indebtedness, unless and
until such default shall have been cured or waived or shall have ceased to
exist, or in the event that the maturity of any Senior Indebtedness has been
accelerated because of a default, then no payment shall be made by the Company
with respect to the principal of (including redemption payments), premium, if
any, or interest on the Securities.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraph of this Section 1202, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and
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owing on the Senior Indebtedness and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 1203. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding up or liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts
(including principal, premium, if any, and interest) due or to become due upon
all Senior Indebtedness shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is made
on account of the principal (and premium, if any) or interest (including
Additional Payments) on the Securities; and upon any such dissolution or
winding up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the Securities or the
Trustee would be entitled, except for the provisions of this Article Twelve,
shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders of the Securities or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the Holders of Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee or the Holders of the Securities before all Senior Indebtedness is
paid in full, or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust for the benefit
of and shall be paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives, or
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to the trustee or trustees under any indenture pursuant to which any
instruments evidencing such Senior Indebtedness may have been issued, and their
respective interests may appear, as calculated by the Company, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness.
For purposes of this Article Twelve, the words, "cash,
property or securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article Twelve with respect to the Securities to the payment of all Senior
Indebtedness which may at the time be outstanding; provided, that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the holders of
such Senior Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment. The consolidation of the Company with,
or the merger of the Company with or into, another Person or the liquidation or
dissolution of the Company following the conveyance, transfer or lease of all
or substantially all its properties and assets on a consolidated basis to
another Person upon the terms and conditions provided for in Article Eight
hereof shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 1203 if such other Person
shall, as a part of such consolidation, merger, conveyance, transfer or lease,
comply with the conditions stated in Article Eight hereof. Nothing in Section
1202 or in this Section 1203 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607 hereof.
SECTION 1204. Subrogation.
Subject to the payment in full of all Senior Indebtedness,
the rights of the Holders of the Securities shall be subrogated to the rights
of the holders of such Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company, as the case may be, applicable
to such Senior Indebtedness until the principal of (and premium, if any,) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the
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Trustee would be entitled except for the provisions of this Article Twelve, and
no payment over pursuant to the provisions of this Article Twelve, to or for
the benefit of the holders of such Senior Indebtedness by Holders of the
Securities or the Trustee, shall, as between the Company, its creditors other
than holders of Senior Indebtedness, and the Holders of the Securities, be
deemed to be a payment by the Company to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article Twelve are
and are intended solely for the purposes of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Twelve of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company, as the case may be,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Twelve, the Trustee, subject to the provisions of
Section 603, and the Holders of the Securities, shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, as the case may be,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Twelve.
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SECTION 1205. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve and appoints the Trustee as such Holder's attorney-in-fact
for any and all such purposes.
SECTION 1206. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Twelve. Notwithstanding
the provisions of this Article Twelve or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment of monies to or by the Trustee
in respect of the Securities pursuant to the provisions of this Article Twelve,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the Trustee from the
Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Section 603 hereof, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 1206 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (and premium, if any) or interest on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 603, shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of such Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or
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distribution pursuant to this Article Twelve, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the right of such Person under this Article Twelve, and, if
such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Twelve in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are set forth in this Article Twelve, and no
implied covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of such Senior
Indebtedness and, subject to the provisions of Section 603, the Trustee shall
not be liable to any holder of such Senior Indebtedness if it shall pay over or
deliver to Holders of Securities, the Company or any other Person money or
assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article Twelve or otherwise. With respect to the holders of
Senior Indebtedness, the Trustee undertakes to perform or to observe only such
of its covenants or obligations as are specifically set forth in this Article
Twelve and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 1208. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture,
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regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, such Senior Indebtedness, or otherwise amend or supplement in
any manner such Senior Indebtedness or any instrument evidencing the same or
any agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Rights.
Subject to and upon compliance with the provisions of this
Article, the Securities are convertible, at the option of the Holder, at any
time beginning 60 days following the first date of original issuance of the
Securities and on or before redemption as provided below or the close of
business at their Stated Maturity, into fully paid and nonassessable shares of
Common Stock of the Company at an initial conversion rate of 1.047 shares of
Common Stock for each $50 in aggregate principal amount of Securities (equal to
a conversion price of $47.75 per share of Common Stock), subject to adjustment
as described in this Article Thirteen. A Holder of Securities may convert any
portion of the principal amount of the Securities into that number of fully
paid and nonassessable shares of Common Stock (calculated as to each conversion
to the nearest 1/100th of a share) obtained by dividing the principal amount of
the Securities to be converted by such conversion price. In case a Security or
portion thereof is called for redemption, such conversion right in respect of
the Security or portion so called shall expire at the close of business
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on the Business Day prior to the corresponding Redemption Date, unless the
Company defaults in making the payment due upon redemption.
SECTION 1302. Conversion Procedures.
(a) In order to convert all or a portion of the Securities,
the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice
of Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the Holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the Declaration to
convert such Preferred Securities into Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $50 principal amount of Securities
for each Preferred Security) and (ii) to immediately convert such Securities,
on behalf of such holder, into Common Stock of the Company pursuant to this
Article Thirteen and, if such Preferred Securities are in definitive form,
surrendering such Preferred Securities, duly endorsed or assigned to the
Company or in blank. So long as any Preferred Securities are outstanding, the
Trust shall not convert any Securities except pursuant to a Notice of
Conversion duly executed and delivered to the Conversion Agent by a holder of
Preferred Securities.
If a Notice of Conversion is delivered on or after the
Regular Record Date and prior to the subsequent Interest Payment Date, the
Holder will be entitled to receive the interest payable on the subsequent
Interest Payment Date on the portion of Securities to be converted
notwithstanding the conversion thereof prior to such Interest Payment Date.
Except as otherwise provided in the immediately preceding sentence, in the case
of any Security which is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company shall
not make nor be required to make any other payment, adjustment or allowance
with respect to accrued but unpaid interest on the Securities being converted,
which shall be deemed to be paid in full. Each conversion shall be deemed to
have been effected immediately prior to the close of business on the day on
which the Notice of Conversion was received (the "Conversion Date") by the
Conversion Agent from the Holder or from a holder of the
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Preferred Securities effecting a conversion thereof pursuant to its conversion
rights under the Declaration, as the case may be. The Person or Persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
as of the Conversion Date. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.
(b) The Company's delivery upon conversion of the fixed
number of shares of Common Stock into which the Securities are convertible
(together with the cash payment, if any, in lieu of fractional shares) shall be
deemed to satisfy the Company's obligation to pay the principal amount at
Maturity of the portion of Securities so converted and any unpaid interest
(including Additional Payments) accrued on such Securities at the time of such
conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the current market price of such fractional interest on the date on which the
Securities or Preferred Securities, as the case may be, were duly surrendered
to the Conversion Agent for conversion, or, if such day is not a Trading Day,
on the next Trading Day, and the Conversion Agent in turn will make such
payment, if any, to the Holder of the Securities or the holder of the Preferred
Securities so converted.
(d) In the event of the conversion of any Security in part
only, a new Security or Securities for the unconverted portion thereof will be
issued in the name of the Holder thereof upon the cancellation thereof in
accordance with Section 305.
(e) In effecting the conversion transactions described in
this Section, the Conversion Agent is acting as agent of the holders of
Preferred Securities (in the exchange of Preferred Securities for Securities)
and as agent of the Holders of Securities (in the conversion of Securities into
Common Stock), as the case may be, directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Securities held
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by the Trust from time to time for Preferred Securities in connection with the
conversion of such Preferred Securities in accordance with this Article
Thirteen and (ii) to convert all or a portion of the Securities into Common
Stock and thereupon to deliver such shares of Common Stock in accordance with
the provisions of this Article Thirteen and to deliver to the Trust a new
Security or Securities for any resulting unconverted principal amount.
(f) All shares of Common Stock delivered upon any conversion
of restricted securities shall bear a restrictive legend substantially in the
form of the legend required to be set forth on such Securities and shall be
subject to the restrictions on transfer provided in such legend and in Section
305(b) hereof. Neither the Trustee nor the Conversion Agent shall have any
responsibility for the inclusion or content of any such restrictive legend on
such Common Stock; provided, however, that the Trustee or the Conversion Agent
shall have provided to the Company or to the Company's transfer agent for such
Common Stock, prior to or concurrently with a request to the Company to deliver
to such Conversion Agent certificates for such Common Stock, written notice
that the Securities delivered for conversion are restricted securities.
SECTION 1303. Conversion Price Adjustments.
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities
are outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the conversion
privilege and the conversion price in effect immediately prior to such action
shall be adjusted so that the Holder of any Securities thereafter surrendered
for conversion shall be entitled to receive the number of shares of capital
stock of the Company which he would have owned immediately following such
action had such Securities been converted immediately prior thereto. An
adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date in the case of a dividend or other
distribution and shall become effective immediately after the effective date in
case of a subdivision, combination or reclassification (or immediately after
the record date if a record date shall have been established for such event).
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If, as a result of an adjustment made pursuant to this subsection (a), the
Holder of any Security thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes or series of capital stock of
the Company, the Board of Directors (whose determination shall be conclusive
and shall be described in a Board Resolution filed with the Trustee) shall
determine the allocation of the adjusted conversion price between or among
shares of such classes or series of capital stock.
(b) In case the Company shall, while any of the Securities
are outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (f) below) on the record date mentioned
below, the conversion price for the Securities shall be adjusted so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the date of issuance of such rights or warrants by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not so delivered after
the expiration of such rights or warrants, the conversion price shall be
readjusted to the conversion price which would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company shall not issue any rights or warrants
in respect of shares of Common Stock held in the treasury of the Company. In
case any rights or warrants referred to in this subsection in respect of which
an adjustment shall have been made shall expire unexercised within 45 days
after the same shall have been distributed or issued by the Company, the
conversion price shall be readjusted at the time of such expiration to the
conversion price that would have been in
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effect if no adjustment had been made on account of the distribution or
issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness, shares of any class or series
of capital stock, cash or assets (including securities, but excluding any
rights or warrants referred to in subparagraph (b), any dividend or
distribution paid exclusively in cash and any dividend or distribution referred
to in subparagraph (a) of this Section 1303), the conversion price shall be
reduced so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subparagraph (c) by a fraction
of which the numerator shall be the current market price per share (determined
as provided in subparagraph (f)) of the Common Stock on the date fixed for the
payment of such distribution (the "Reference Date") less the fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors),
on the Reference Date, of the portion of the evidences of indebtedness, shares
of capital stock, cash and assets so distributed applicable to one share of
Common Stock and the denominator shall be such current market price per share
of the Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following the Reference Date, provided,
however, that in the event the numerator shall be less than one, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder of
Securities shall have the right to receive upon conversion the amount of such
distribution such Holder would have received had such Holder converted each
Security immediately prior to the Reference Date. In the event that such
dividend or distribution is not so paid or made, the conversion price shall
again be adjusted to be the conversion price which would then be in effect if
such dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of this
subparagraph (c) by reference to the actual or when issued trading market for
any securities comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the current market
price per share of the Common Stock (determined as provided in subparagraph
(f)). For purposes of this subparagraph (c), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, shares of
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capital stock, cash or assets other than such shares of Common Stock or such
rights or warrants (making any conversion price reduction required by this
subparagraph (c)) immediately followed by (2) a dividend or distribution of
such shares of Common Stock or such rights or warrants (making any further
conversion price reduction required by subparagraph (a) or (b)), except (A) the
Reference Date of such dividend or distribution as defined in this subparagraph
shall be substituted as (a) "the record date in the case of a dividend or other
distribution," and (b) "the record date for the determination of stockholders
entitled to receive such rights or warrants" and (c) "the date fixed for such
determination" within the meaning of subparagraphs (a) and (b) and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed outstanding for purposes of computing any adjustment of the conversion
price in subparagraph (a).
(d) In case the Company shall pay or make a dividend or other
distribution on the Common Stock exclusively in cash (excluding any cash
dividend on Common Stock to the extent that the aggregate cash dividend per
share of Common Stock in any quarter does not exceed the greater of (i) the
amount per share of Common Stock of the immediately preceding quarterly
dividend on Common Stock to the extent such preceding quarterly dividend did
not require an adjustment of the conversion price pursuant to this subsection
(d) (as adjusted, if applicable, to reflect subdivisions or combinations of
Common Stock), and (ii) 15% of the current market price per share determined as
of the Trading Day immediately preceding the date of declaration of such
dividend, and excluding any dividend or distribution in connection with the
liquidation, dissolution or winding-up of the Company), the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
effectiveness of the conversion price reduction contemplated by this subsection
(d) by a fraction of which the numerator shall be the current market price per
share (determined as of the Trading Day immediately preceding the date of
declaration of such dividend) of Common Stock on the date fixed for the payment
of such distribution less the amount of cash so distributed (and not excluded
as provided above) applicable to one share of Common Stock and of which the
denominator shall be such current market price per share of the Common Stock
(determined as of the Trading Day immediately preceding the date of declaration
of such dividend), such reduction to become effective immediately prior to the
opening of business on the day following the date fixed for the payment of such
distribution; provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal
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to or greater than the current market price per share (determined as of the
Trading Day immediately preceding the date of declaration of such dividend) of
Common Stock on the record date mentioned above, in lieu of any conversion
price adjustment pursuant to this clause (d), adequate provision shall be made
so that each Holder of Securities shall have the right to receive upon
conversion an amount of cash which equals the amount by which such portion of
cash so distributed applicable to one share of Common Stock exceeds the greater
of (A) the per share amount of the immediately preceding quarterly cash
dividend on its Common Stock (as adjusted to reflect any of the events listed
in Sections 1303 or 1304) and (B) 15% of the current market price per share of
the Common Stock as of the Trading Day immediately preceding the date of
declaration of such dividend. If an adjustment is required to be made pursuant
to this subsection (d) as a result of a distribution that is a quarterly
dividend, such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend permitted to be
excluded as provided above. If an adjustment is required to be made pursuant to
this subsection (d) as a result of a distribution that is not a quarterly
dividend, such adjustment shall be based upon the full amount of the
distribution. In the event that such dividend or distribution is not so paid or
made, the conversion price shall again be adjusted to be the conversion price
which would then be in effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Common Stock shall expire and such tender or exchange offer
shall involve the payment by the Company or such Subsidiary of consideration
per share of Common Stock having a fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds 110% of the Closing
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time, the conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect immediately
prior to the effectiveness of the conversion price reduction contemplated by
this subsection (e) by a fraction (which shall not be greater than one) of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Price of the Common Stock on the Trading Day next succeeding the
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Expiration Time and of which the denominator shall be the sum of (i) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (ii) the product of the number of shares of the Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Closing Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become retroactively effective immediately prior to the opening of
business on the day following the Expiration Time.
(f) For the purpose of any computation under subparagraphs
(b) or (c), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
ten consecutive Trading Days selected by the Company commencing not more than
20 Trading Days before, and ending not later than, the earlier of the day in
question and, if applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; provided, however, that if
another event occurs that would require an adjustment pursuant to (e),
inclusive, the Board of Directors may make such adjustments to the Closing
Prices during such ten Trading Day period as it deems appropriate to effectuate
the intent of the adjustments in this Section 1303, in which case any such
determination by the Board of Directors shall be set forth in a Board
Resolution and shall be conclusive. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the New York
Stock Exchange or on such successor securities exchange as the Common Stock may
be listed or in the relevant market from which the Closing Prices were obtained
without the right to receive such issuance or distribution, and (2) when used
with respect to any tender or exchange offer, means the first date on which the
Common Stock trades regular way on such securities exchange or in such market
after the Expiration Time of such offer.
(g) The Company may make such reductions in the conversion
price, in addition to those required by subparagraphs (a) through (f), as it
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income
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tax purposes. The Company from time to time may reduce the conversion price by
any amount for any period of time if the period is at least twenty (20) days,
the reduction is irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such reduction would be in the
best interest of the Company, which determination shall be conclusive. Whenever
the conversion price is reduced pursuant to the preceding sentence, the Company
shall mail to holders of record of the Securities a notice of the reduction at
least fifteen (15) days prior to the date the reduced conversion price takes
effect, and such notice shall state the reduced conversion price and the period
it will be in effect.
(h) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the conversion price; provided, however, that any adjustments which by reason
of this subparagraph are not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(i) If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value to the Holder of the Securities.
SECTION 1304. Reclassification, Consolidation, Merger or Sale of Assets.
In the event that the Company shall be a party to any
transaction (including without limitation (a) any recapitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), (b) any consolidation of the
Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger or consolidation which
does not result in a reclassification, conversion, exchange or cancellation of
the outstanding shares of Common Stock of the Company), (c) any sale or
transfer of all or substantially all of the assets of the Company or (d) any
compulsory share exchange pursuant to which the Common Stock is converted into
the right to receive other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction (i) whereby
the Holder of each Security then outstanding shall have the right thereafter to
convert such Security only into the kind and amount of securities, cash and
other property receivable
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upon consummation of such transaction by a holder of the number of shares of
Common Stock of the Company into which such Security could have been converted
immediately prior to such transaction and (ii) to provide for adjustments
which, for events subsequent to the effective date of such provision, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article Thirteen. The above provisions shall similarly apply to successive
transactions of the foregoing type.
SECTION 1305. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed with the Trustee, the Conversion
Agent and the transfer agent for the Preferred Securities and the Securities;
and
(b) a notice stating the conversion price has been adjusted
and setting forth the adjusted conversion price shall as soon as practicable be
mailed by the Company to all record holders of Preferred Securities and the
Securities at their last addresses as they appear upon the stock transfer books
of the Company and the Trust.
SECTION 1306. Prior Notice of Certain Events.
In case:
(i) the Company shall (i) declare any dividend (or
any other distribution) on its Common Stock, other than (A) a dividend
payable in shares of Common Stock or (B) a dividend payable in cash
that would not require an adjustment pursuant to Section 1303(c) or
(ii) authorize a tender or exchange offer that would require an
adjustment pursuant to Section 1303;
(ii) the Company shall authorize the granting to all
holders of Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or series or of any other
rights or warrants;
(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the
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outstanding Common Stock, or a change in par value, or from par value
to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of
the sale or transfer of all or substantially all of the assets of the
Company or of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall (a) if any Preferred Securities are outstanding, cause
to be filed with the transfer agent for the Preferred Securities, and shall
cause to be mailed to the holders of record of the Preferred Securities, at
their last addresses as they shall appear upon the stock transfer books of the
Trust or (b) shall cause to be mailed to all Holders at their last addresses as
they shall appear in the Security Register, at least fifteen days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record (if any) is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
SECTION 1307. Certain Defined Terms.
The following definitions shall apply to terms used in this
Article Thirteen:
(1) "Closing Price" of any common stock on any day
shall mean the last reported sale price regular way on such day or, in
case no such sale takes place on such day, the average of the reported
closing bid and asked prices regular way of such common stock, in each
case on the NYSE Composite Tape or, if the common stock is not listed
or admitted to trading on such exchange,
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on the principal national securities exchange on which such common
stock is listed or admitted to trading, or, if not listed or admitted
to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of
Directors of the Company for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the Board of
Directors.
(2) "Trading Day" shall mean a day on which any
securities are traded on the national securities exchange or quotation
system used to determine the Closing Price.
SECTION 1308. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment
of additional optional amounts in shares of Common Stock under any such plan,
and the issuance of any shares of Common Stock or options or rights to purchase
such shares pursuant to any employee benefit plan or program of the Company
(including without limitation, the Company's Employee Stock Option Plan,
Employee Stock Purchase Plan and 401(k) Plan) or pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security outstanding
as of the date the Securities were first issued (whether or not subsequently
amended), shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the Company to which any
of the adjustment provisions described above applies. There shall also be no
adjustment of the conversion price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Company except as
specifically described in this Article Thirteen.
SECTION 1309. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare
or make a distribution on its Common Stock referred to in Section 1303(c)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 1303(c)), the Holder of the Securities, upon the
conversion thereof subsequent to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution and
prior to the effectiveness of the conversion price adjustment in respect of
such distribution, shall also be entitled to receive for each share of Common
Stock into which the
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Securities are converted, the portion of the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash and assets
so distributed applicable to one share of Common Stock; provided, however,
that, at the election of the Company (whose election shall be evidenced by a
resolution of the Board of Directors) with respect to all Holders so
converting, the Company may, in lieu of distributing to such Holder any portion
of such distribution not consisting of cash or securities of the Company, pay
such Holder an amount in cash equal to the fair market value thereof (as
determined in good faith by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors). If any
conversion of Securities described in the immediately preceding sentence occurs
prior to the payment date for a distribution to holders of Common Stock which
the Holder of Securities so converted is entitled to receive in accordance with
the immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences
of indebtedness, shares of capital stock, cash or assets to which such Holder
is so entitled, provided, that such due bill (i) meets any applicable
requirements of the principal national securities exchange or other market on
which the Common Stock is then traded and (ii) requires payment or delivery of
such shares of Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets no later than the date of payment or
delivery thereof to holders of shares of Common Stock receiving such
distribution.
SECTION 1310. Restrictions on Common Stock Issuable Upon Conversion.
(a) Shares of Common Stock to be issued upon conversion of a
Security in respect of Restricted Preferred Securities (as defined in the
Declaration) shall bear such restrictive legends as the Company may provide in
accordance with applicable law.
(b) If shares of Common Stock to be issued upon conversion of
a Security in respect of Restricted Preferred Securities are to be registered
in a name other than that of the Holder of such Preferred Security, then the
Person in whose name such shares of Common Stock are to be registered must
deliver to the Conversion Agent a certificate satisfactory to the Company and
signed by such Person, as to compliance with the restrictions on transfer
applicable to such Preferred Security. Neither the Trustee nor any Conversion
Agent or Registrar shall be required to register in a name other than that of
the Holder shares of Common
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Stock or such Preferred Securities issued upon conversion of any such Security
in respect of such Preferred Securities not so accompanied by a properly
completed certificate.
SECTION 1311. Trustee Not Responsible for Determining Conversion Price or
Adjustments.
Neither the Trustee nor any Conversion Agent shall at any
time be under any duty or responsibility to any Holder of any Security to
determine whether any facts exist which may require any adjustment of the
conversion price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same. Neither
the Trustee nor any Conversion Agent shall be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock or of
any securities or property, which may at any time be issued or delivered upon
the conversion of any Security; and neither the Trustee nor any Conversion
Agent makes any representation with respect thereto. Neither the Trustee nor
any Conversion Agent shall be responsible for any failure of the Company to
make any cash payment or to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property upon the surrender
of any Security for the purpose of conversion, or, except as expressly herein
provided, to comply with any of the covenants of the Company contained in
Article Ten or this Article Thirteen.
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. No Recourse.
No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of any Security, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer or director, past, present or future as such, of the
Company or of any predecessor or successor corporation, either directly or
through the Company or any such predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate
obligations, and that no such personal liability whatever shall attach to, or
is or shall be incurred by, the incorporators, stockholders,
89
<PAGE>
officers or directors as such, of the Company or of any predecessor or
successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom; and that any and all such personal liability of every
name and nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer or director as such, because of the creation
of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or implied therefrom, are hereby expressly waived and released
as a condition of, and as a consideration for, the execution of this Indenture
and the issuance of such Securities.
90
<PAGE>
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
-----------------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
THE BANK OF NEW YORK,
AS TRUSTEE
By: /s/ Mary La Gumina
-----------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 12th day of August, 1997 before me personally came
Steven A. McArthur, to me known, who, being by me duly sworn, did depose and
say that he is the Senior Vice President, General Counsel and Secretary of
CalEnergy Company, Inc., one of the corporations described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of the Board of Directors of such corporation.
/s/ Nkechi Obiora
---------------------------------
Notary Public State of New York
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 12th day of August, 1997 before me personally came
Mary La Gumina, to me known, who, being by me duly sworn, did depose and say
that he is a(n) Assistant Vice President of The Bank of New York, a corporation
described in and which executed the foregoing instrument; and that he signed
his name thereto by authority of the Board of Directors of such corporation.
/s/ Nkechi Obiora
---------------------------------
Notary Public State of New York
<PAGE>
EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
[Include Restricted Securities Legend: THIS SECURITY HAS AND ANY COMMON STOCK
(AND RELATED RIGHTS) ISSUED ON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAW. 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 ("RULE 144A"). 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, 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, OR (E) 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) OR (E) 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,
<PAGE>
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.]
A-2
<PAGE>
CALENERGY COMPANY, INC.
6 1/2% Convertible Junior Subordinated
Debenture Due 2027
No._________ $___________
[CUSIP No. _________]
CALENERGY COMPANY, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called "the Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum [indicated on
Schedule A hereof]* [of ______ Dollars]** ($_____________________) on September
1, 2027, provided that the Company may shorten the maturity of the principal of
this Security to a date not earlier than August 10, 2012, as described on the
reverse hereof.
Interest Payment Dates: March 1, June 1, September 1 and
December 1, commencing
September 1, 1997
Regular Record Dates: the close of business on the
15th day immediately preceding
each Interest Payment Date,
commencing August 17, 1997
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
- --------
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed manually or by facsimile by its duly authorized officer.
Dated: _________________
CALENERGY COMPANY, INC.
By:________________________
Name:
Title:
<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
<PAGE>
[FORM OF REVERSE OF SECURITY]
CALENERGY COMPANY, INC.
6 1/2% Convertible Junior Subordinated
Debenture Due 2027*
(1) Interest. CalEnergy Company, Inc., a Delaware corporation
(the "Company"), is the issuer of this 6 1/2% Convertible Junior Subordinated
Debenture Due 2027 (the "Security") limited in aggregate principal amount to
$231,958,800 (or $278,350,600 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 August 12, 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 September 1, 1997, at the rate of 6 1/2% 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 III (and its permitted successors or assigns under the
Declaration) (the "Trust") such additional amounts as may be necessary in order
that the amount of dividends or other distributions then due and payable by the
Trust on the Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
additional taxes, duties and other governmental charges of whatever nature
- --------
* 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.
A-6
<PAGE>
(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, as then in effect, 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 1/2% 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, as then in effect. Upon the expiration of
any Extended Interest Payment Period and upon the payment of all Additional
Payments, if any, then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period except at the end
thereof.
If the Property Trustee is the sole holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the
Company shall give notice to the Regular Trustees, the Property Trustee and the
Trustee of its selection of such Extended Interest Payment Period at least one
Business Day prior to the earlier of (i) the next succeeding Interest Payment
Date or (ii) if the Preferred Securities are listed on the New York Stock
Exchange or other stock exchange or quotation system, the date the Trust is
required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Preferred Securities on the
record date or the date
A-7
<PAGE>
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 August 17, 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
A-8
<PAGE>
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 August 12, 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 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 $231,958,800 in aggregate principal amount (or up to
$278,350,600 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 September 1, 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 September 1, 2001, and at $50.50 per $50
A-9
<PAGE>
principal amount of the Security, if redeemed during the 12-month period
beginning September 1, 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) Conditional Right to Shorten Maturity; Optional
Redemption Upon Tax Event. If a Tax Event shall occur and be continuing and in
the opinion of counsel to the Company experienced in such matters, there would
in all cases, after effecting the termination of the Trust and the distribution
of the Securities to the holders of the Preferred Securities in exchange
therefor, be more than an insubstantial risk that an Adverse Tax Consequence
would continue to exist, then the Company shall have the right:
(a) to shorten the Stated Maturity of the Securities to the minimum
extent required, but in any event to a date not earlier than August 10, 2012
(the action referred to in this clause (a) being referred to herein as a
"Maturity Advancement"), such that, in the opinion of counsel to the Company
experienced in such matters, after advancing the Stated Maturity, interest paid
on the Securities will be deductible for federal income tax purposes; provided,
however, that there shall be delivered to the trustees of the Trust an opinion
of counsel (which counsel shall be satisfactory to the trustees of the Trust)
that such change in the Stated Maturity will not (i) cause the Trust to fail to
be classified as a grantor trust or (ii) result in a taxable event to the
holders of the Preferred Securities, or
(b) if in the opinion of counsel to the Company experienced in such
matters, there would in all cases, after effecting a Maturity Advancement, be
more than an insubstantial risk that an Adverse Tax Consequence would
continue to exist, to redeem the Securities, prior to September 1, 2000, in
whole but not in part for cash, upon not less than 30 nor more than 60 days'
notice and within 90 days following the occurrence of the Tax Event, at 100% of
the principal amount thereof plus accrued and unpaid interest, including
Additional Payments, if any, and following such redemption, all the Preferred
Securities will be redeemed by the Trust at the liquidation preference of $50
per each Preferred Security plus accrued and unpaid distributions.
In lieu of the foregoing, the Company also shall have the
option of causing the Securities to remain outstanding and pay Additional
Interest on the Securities.
A-10
<PAGE>
(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
September 1, 2027, provided that the Company may shorten the maturity of the
principal of this Security to a date not earlier than August 10, 2012, as
described in paragraph 8 above, and may be redeemed, in whole or in part, at
any time after September 1, 2000 or at any time in certain circumstances upon
the occurrence of a Tax Event. Upon the repayment of the Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount of the Securities so repaid or redeemed at the applicable
redemption price together with accrued and unpaid distributions through the
date of redemption; provided, that holders of the Trust Securities shall be
given not less than 30 nor more than 60 days notice of such redemption. Upon
the repayment of the Securities at maturity or upon any acceleration, earlier
redemption or otherwise, the proceeds from such repayment will be applied to
redeem the Preferred Securities, in whole, upon not less than 30 nor more than
60 days' notice. There are no sinking fund payments with respect to the
Securities.
(11) Subordination. The payment of the principal of, interest
on or any other amounts due on the Securities is subordinated in right of
payment to all existing and future Senior Indebtedness (as defined below) of
the Company, as described in the Indenture. Each holder, by accepting a
Security, agrees to such subordination and authorizes and directs the Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate
A-11
<PAGE>
the subordination so provided and appoints the Trustee as
its attorney-in-fact for such purpose.
Senior Indebtedness shall mean in respect of the Company (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
such obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness issued after the date of
original issuance of the Securities that is by its terms subordinated to or
pari passu with the Securities and (2) any indebtedness (including all other
debt securities and guarantees in respect of those debt securities) initially
issued to any other trust, or a trustee of such trust, partnership, or other
entity affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company (a "Financing Entity") in connection with the issuance
by such Financing Entity of preferred securities or other securities which by
their terms rank pari passu with, or junior to, the Preferred Securities. The
Preferred Securities shall rank pari passu with the 6 1/4% Term Income
Deferrable Equity Securities of the Company and the 6-1/4% Trust Convertible
Preferred 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 and the 6-1/4% Convertible Junior Subordinated Debentures Due 2012 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
A-12
<PAGE>
initial conversion rate of 1.047 shares of Common Stock for each Security
(equivalent to a conversion price of $47.75 per share of Common Stock of the
Company), subject to adjustment under certain circumstances, except that if a
Security is called for redemption, the conversion right will terminate at the
close of business on the Redemption Date.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or
transfer documents if required by the Security Registrar or Conversion Agent
and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any Holder
surrenders a Security for conversion after the close of business on the Regular
Record Date for the payment of an installment of interest and prior to the
opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date will be
paid to the registered Holder of such Security on such Regular Record Date. In
such event, such Security, when surrendered for conversion, need not be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares
issuable upon conversion of a Security is determined by dividing the principal
amount of the Security converted by the conversion price in effect on the
Conversion Date. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest. The outstanding principal
amount of any Security shall be reduced by the portion of the principal amount
thereof converted into shares of Common Stock.
(13) Registration Rights. The holders of the Preferred
Securities, the Securities, the Guarantee and the shares of Common Stock
of the Company issuable upon conversion of the Securities (collectively,
the "Registrable Securities") are entitled to the benefits of a Registration
Rights Agreement, dated as of August 12, 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
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<PAGE>
Registrable Securities, (ii) it will use its reasonable best efforts to cause
such Shelf Registration Statement to be declared effective under the Securities
Act (subject to certain exceptions under the Registration Rights Agreement) no
later than 270 days after the Issue Date and (iii) it will use its reasonable
best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act until the second anniversary of the
effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement (the "Effectiveness Period").
The Company agrees that from and after the date on which any
Registration Default occurs, additional interest ("Liquidated Damages") will
accrue on the Securities, and accordingly, additional interest will accrue on
the Preferred Securities, in each case, from and including the day following
the day such Registration Default shall occur (or be deemed to occur as
described below) to but excluding the day on which such Registration Default
has been cured (or be deemed to be cured as described below). Liquidated
Damages will be paid quarterly in arrears, with the first quarterly payment due
on the first interest or distribution payment date, as applicable, following
the date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation amount, as applicable, to and including the
90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. Following the cure or deemed cure of a Registration Default,
Liquidated Damages will cease to accrue with respect to such Registration
Default.
"Registration Default" shall mean any of the
following events:
(i) on or prior to the 180th day following the Issue Date, a
Shelf Registration Statement relating to the offer and sale of the
Registrable Securities has not been filed with the Commission;
(ii) on or prior to the 270th day following the Issue Date,
the Registrable Securities are not the subject of a Shelf Registration
Statement which has become effective;
(iii) the Registrable Securities are the subject of a Shelf
Registration Statement which was effective but which has ceased to be
effective for any reason (other than pursuant to clause (iv) or (v)
below) prior
A-14
<PAGE>
to the end of the Shelf Registration Period (as defined
in the Registration Rights Agreement);
(iv) the occurrence of a Suspension (as defined
in the Registration Rights Agreement); or
(v) the occurrence of an event contemplated by
paragraph 3(c)(2)(iii) of the Registration Rights
Agreement (an "Amendment Event");
provided, however, that if the Registration Default consists of the occurrence
of any event contemplated by clause (iv) or (v) above, then such Registration
Default shall not be deemed to have occurred until the expiration of 30
Business Days after the date of the occurrence of such Suspension or Amendment
Event, provided that (a) the Trust and the Company thereafter reasonably
promptly comply with the requirements of paragraph 3(i) of the Registration
Rights Agreement, if applicable, and (b) in the case of such Amendment Event
resulting from an action taken by the Company or the Trust, such action was
taken in good faith; and provided, further, that a Registration Default shall
not constitute a default or Event of Default hereunder.
A Registration Default shall be deemed to have been cured and
cease to exist on the date subsequent to the occurrence of such Registration
Default on which:
(x) in the case of a Registration Default described in clause
(i), (ii) or (iii) above, the Shelf Registration Statement covering
such Registrable Securities shall become effective; or
(y) in the case of a Registration Default described in clause
(iv) or (v) above, upon the Company and the Trust taking action to
notify the Holders (for purposes of this clause (y), as that term is
defined in the Registration Rights Agreement) of the Registrable
Securities that such Suspension or Amendment Event has ended. For
purposes of this clause (y), taking action to notify Holders shall be
deemed sufficient when notice is first deposited in first class mail
or delivered to a courier service or filed with the Commission or
publicly disseminated by press release or other release to a news
reporting service.
A-15
<PAGE>
(14) Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment
of this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary. In the event of redemption
or conversion of this Security in part only, a new Security or Securities for
the unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
(15) Persons Deemed Owners. Except as provided in
Section 4 hereof, the registered Holder of a Security may be
treated as its owner for all purposes.
(16) Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years, the Trustee and the Paying Agent
shall pay the money back to the Company at its written request. After that,
holders of Securities entitled to the money must look to the Company for
payment unless an abandoned property law designates another Person and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
(17) Defaults and Remedies. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture. If an Event of
Default occurs and is continuing, the Trustee by notice to the Company or the
holders of at least 25% in aggregate principal amount of the then outstanding
Securities by notice to the Company and the
A-16
<PAGE>
Trustee may declare all the Securities to be due and payable immediately.
The holders of a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Securities
issued under the Indenture may direct the Trustee in its exercise of any trust
or power. The Company must furnish annually compliance certificates to the
Trustee. The above description of Events of Default and remedies is qualified
by reference to, and subject in its entirety by, the more complete description
thereof contained in the Indenture.
(18) Amendments, Supplements and Waivers. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company and the
rights of the Holders of the Securities under the Indenture at any time by
the Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
(19) Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the
same rights it would have, as if it were not Trustee, subject to certain
limitations provided for in the Indenture and in the TIA. Any Agent may do
the same with like rights.
(20) No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company
A-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
A-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.
A-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
exemption from the registration requirements
of the Securities Act of 1933; or
(5) |_| transferred pursuant to an effective Shelf
Registration Statement (as defined in Section 1007
of the Indenture).
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) or (4)
is checked, the Trustee may require, prior to registering any such transfer of
the Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act; provided, further, that after the date
that a Shelf Registration Statement becomes effective and so long as such Shelf
Registration Statement continues to be effective, the Trustee may only permit
transfers for which box (5) has been checked.
_______________________
Signature
Signature Guarantee:*
________________________]
Signature must be guaranteed Signature
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that
- ------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A-20
<PAGE>
it has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: _______________________ _____________________________
NOTICE: To be executed by
an executive
officer]
A-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>
========================================================================================================================
Amount of increase in
Principal Amount of this Principal Amount of this Signature of
Global Security Amount of decrease in Global Security authorized officer
including upon exercise in Principal Amount following such decrease of Trustee or
Date Made of over-allotment option of this Global Security or increase Securities Custodian
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
========================================================================================================================
</TABLE>
A-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.
<PAGE>
ANNEX I
AMENDED AND RESTATED DECLARATION OF TRUST
<PAGE>
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of August 12, 1997
====================================
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of August 12, 1997, is executed and delivered
by CalEnergy Company, Inc., a Delaware corporation (the "Guarantor"), and The
Bank of New York, a New York banking corporation, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of CalEnergy
Capital Trust III, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of August 12, 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 4,500,000 Preferred Securities, having an
aggregate stated liquidation preference of $225,000,000, designated the 6 1/2%
Convertible Preferred Securities (plus up to an additional 900,000 Convertible
Preferred Securities, having an aggregate liquidation preference of
$45,000,000, 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
2
<PAGE>
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Person" of a Person means any Person that is authorized
to bind such Person; provided, however that the Authorized Officer signing an
Officer's Certificate given pursuant to Section 314(a)(4) of the Trust
Indenture Act shall be the principal executive, financial or accounting
officer of such Person.
"Common Securities" means the convertible common securities
representing common undivided beneficial interests in the assets of the
Issuer.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the series of convertible junior subordinated debt
securities of the Guarantor designated the 6 1/2% Convertible Junior
Subordinated Debentures Due 2027 held by the Property Trustee of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Preferred
Securities to the extent the Issuer shall have funds available therefore, (ii)
the amount payable upon redemption to the extent the Issuer has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation preference and all accrued and unpaid
3
<PAGE>
Distributions on the Preferred Securities to the date of payment, to the
extent the Issuer shall have funds available therefor, and (b) the amount of
assets of the Issuer remaining available for distribution to Holders upon
liquidation of the Issuer (in either case, the "Liquidation Distribution"). If
an event of default under the Indenture has occurred and is continuing, the
rights of holders of the Common Securities to receive payments under the
Common Securities Guarantee are subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Indenture, dated as of August 12, 1997, among
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee,
and any indenture supplemental thereto pursuant to which the Debentures are to
be issued to the Property Trustee of the Issuer.
"Majority in liquidation preference of the Securities" means, except
as provided by the Trust Indenture Act, Holder(s) of Preferred Securities,
voting separately as a class, representing more than 50% of the stated
liquidation preference (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Preferred
Securities then outstanding.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
pro-
4
<PAGE>
vided for in this Preferred Securities Guarantee shall include:
(a) a statement that the officer signing the Certificate has read the
covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken upon which the statements or opinions contained in
such Certificate are based;
(c) a statement that, in such officer's opinion, such officer has
made or caused to be made such examination or investigation as is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Guarantee Trustee" means The Bank of New York until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, the chairman of the board of directors, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Preferred Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other
5
<PAGE>
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 February 15 and August 15 of each year, commencing August
15, 1997, 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
6
<PAGE>
by the Guarantor or the 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, commencing May 15, 1998,
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.
7
<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.
8
<PAGE>
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
Preferred Securities Guarantee 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 Preferred Securities Guarantee 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 Issuer, 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 President and
General Counsel
THE BANK OF NEW YORK, as
Preferred Guarantee Trustee
By: /s/ Mary La Gumina
--------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
<PAGE>
=================================
COMMON SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of August 12, 1997
=================================
<PAGE>
COMMON SECURITIES GUARANTEE AGREEMENT
This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common Securities
Guarantee"), dated as of August 12, 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 III, a
Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of August 12, 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 139,176 Common Securities, having an aggregate
stated liquidation amount of $6,958,800 (plus up to an additional 27,836
Common Securities, having an aggregate liquidation amount of $1,391,800, 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 1/2% 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 1/2% 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 rights of
<PAGE>
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 there-tofore 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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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
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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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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.
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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):
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Steven A. McArthur
Craig Hammett
Gregory Abel
CalEnergy Capital Trust
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
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 pre-paid, 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
and General Counsel
Opinion of Willkie Farr & Gallagher
<PAGE>
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Telephone: (212) 821-8000
Facsimile: (212) 821-8111
February 4, 1998
CalEnergy Capital Trust III
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Re: CalEnergy Company, Inc.;
CalEnergy Capital Trust III;
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to CalEnergy Company, Inc., a Delaware
corporation (the "Company"), and CalEnergy Capital Trust III, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"), in
connection with the preparation of a Registration Statement on Form S-3, as
filed by the Company and the Trust with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"), on
the date hereof (such registration statement being hereinafter referred to as
the "Registration Statement"), relating to the registration under the Act of
(i) Convertible Preferred Securities (liquidation preference $50 per Trust
Convertible Preferred Security) (the "Convertible Preferred Securities")
representing undivided beneficial ownership interests in the assets of the
Trust; (ii) the 6-1/2% Convertible Junior Subordinated Debentures due 2027 (the
"Convertible Junior Subordinated Debentures") of the Company, which may be
distributed under certain circumstances to the holders of the Convertible
Preferred Securities; (iii) the shares of common stock, par value $.0675 per
share (the "Common Stock"), of the Company, issuable upon conversion of the
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CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 2
Convertible Preferred Securities and the Convertible Junior Subordinated
Debentures; and (iv) the Preferred Securities Guarantee of the Company (as
defined below).
The Convertible Preferred Securities were issued pursuant to an Amended and
Restated Declaration of Trust (the "Declaration"), dated as of August 12, 1997,
among the Company, as sponsor, The Bank of New York, as property trustee (the
"Property Trustee"), The Bank of New York (Delaware), as Delaware trustee (the
"Delaware Trustee"), and Steven A. McArthur, Craig M. Hammett and Gregory E.
Abel, as the initial regular trustees (together, the "Regular Trustees").
Capitalized terms used but not otherwise defined herein have the meanings
ascribed to them in the Registration Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the certificate
of trust (the "Certificate of Trust") filed by the Delaware Trustee and the
Regular Trustees with the Secretary of State of the State of Delaware on August
4, 1997; (ii) a Declaration of Trust, dated as of August 4, 1997 (the "Original
Declaration"); (iii) the Declaration (including the form of the terms of the
Convertible Preferred Securities annexed thereto); (iv) specimen form of
Convertible Preferred Security; (v) the preferred securities guarantee
agreement, dated as of August 12, 1997 (the "Preferred Securities Guarantee"),
between the Company and The Bank of New York, as trustee; (vi) specimens of the
Convertible Junior Subordinated Debentures, which were issued pursuant to an
indenture dated as of August 12, 1997 (the "Indenture"), between the Company
and The Bank of New York, as trustee; (vii) the Indenture; and (viii) certain
resolutions of the Board of Directors of the Company relating to the issuance
of the Convertible Junior Subordinated Debentures and the shares of Common
Stock issuable upon conversion thereof. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. In making our examination of documents executed by
parties other than the Trust and the Company, we have assumed that such
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CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 3
parties had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such
parties of such documents and that such documents constitute valid and binding
obligations of such parties. As to any facts material to the opinions expressed
herein which were not independently established or verified, we have relied
upon oral or written statements and representations of officers, trustees and
other representatives of the Company, the Trust and others. We have further
assumed for purposes of this opinion (i) the due formation or organization,
valid existence and good standing of each entity other than the Company that is
a party to any of the documents reviewed by us under the laws of the
jurisdiction of its respective formation or organization, (ii) that no event
has occurred subsequent to the filing of the Certificate of Trust that would
cause a dissolution or liquidation of the Trust under the Original Declaration
or the Declaration, as applicable and (iii) that activities of the Trust have
been and will be conducted in accordance with the Original Declaration or the
Declaration, as applicable, and the Delaware Business Trust Act, 12 Del. C.
Sections 3801 et seq.
The opinions expressed herein are limited to the laws of the State of New York,
the General Corporation Law of the State of Delaware and the federal laws of
the United States of America, and we express no opinion with respect to the
laws of any other country, state or jurisdiction.
Based on and subject to the foregoing and to the other qualifications and
limitations set forth herein, we are of the opinion that:
1. The Preferred Securities Guarantee is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
2. The Convertible Junior Subordinated Debentures are valid
and binding obligations of the Company, entitled to the benefits of
the Indenture and enforceable against the Company in accordance with
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CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 4
their terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and except to the
extent that the waiver of stay or extension laws contained in Section
515 of the Indenture may be unenforceable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Legal Matters" in the Registration Statement and in the related
Prospectus. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Willkie Farr & Gallagher
Opinion of Steven A. McArthur
<PAGE>
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Telephone: (402) 341-4500
Facsimile (402) 231-1658
February 4, 1998
CalEnergy Capital Trust III
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of CalEnergy Company, Inc.,
a Delaware corporation (the "Company"). This opinion is being furnished in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of (i) 5,400,000 6-1/2% Convertible Preferred Securities
(liquidation preference $50 per each of the Convertible Preferred Securities)
(the "Convertible Preferred Securities") representing undivided beneficial
ownership interests in the assets of CalEnergy Capital Trust III, a statutory
business trust formed under the laws of the State of Delaware (the "Trust");
(ii) the 6-1/2% Convertible Junior Subordinated Debentures due 2027 (the
"Convertible Junior Subordinated Debentures") of the Company, which may be
distributed under certain circumstances to the holders of the Convertible
Preferred Securities; (iii) the shares of common stock, par value $.0675 per
share (the "Common Stock"), of the Company, issuable upon conversion of the
Convertible Preferred Securities and the Convertible Junior Subordinated
Debentures; and (iv) the Preferred Securities Guarantee of the Company (as
defined below).
The Convertible Preferred Securities were issued pursuant to an amended and
restated declaration of trust, dated as of August 12, 1997 (the "Declaration")
among the Company, as sponsor, Steven A. McArthur, Craig M. Hammett and Gregory
E. Abel, as regular trustees, The Bank of New York (Delaware), as Delaware
trustee, and The Bank of New York, as property trustee, and are guaranteed by
the Company as to the payment of distributions and as to payments on
liquidation, redemption and otherwise pursuant to a Preferred Securities
Guarantee Agreement, dated as of August 12, 1997 (the "Preferred Securities
Guarantee"), between the Company and The Bank of New York, as trustee. The
proceeds from the sale by the Trust of the Convertible Preferred Securities
were invested in the Convertible Junior Subordinated Debentures, which
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CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 2
were issued pursuant to an Indenture, dated as of August 12, 1997 (the
"Indenture"), between the Company and The Bank of New York, as trustee.
In connection with this opinion, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of (i) the Registration Statement
on Form S-3, as filed by the Company and the Trust with the Securities and
Exchange Commission (the "Commission") under the Act on the date hereof (such
registration statement being hereinafter referred to as the "Registration
Statement"), relating to the Convertible Preferred Securities, the Preferred
Securities Guarantee, the Convertible Junior Subordinated Debentures and the
Common Stock; (ii) an executed copy of the Declaration filed as an exhibit to
the Registration Statement; (iii) the form of the Common Stock certificate
filed as an exhibit to the Registration Statement and a specimen certificate
thereof; (iv) the Restated Certificate of Incorporation of the Company as
currently in effect; (v) the By-laws of the Company as currently in effect;
(vi) certain resolutions of the Board of Directors of the Company relating to
the issuance of the Convertible Junior Subordinated Debentures and the shares
of Common Stock issuable upon conversion; (vii) an executed copy of the
Preferred Securities Guarantee filed as an exhibit to the Registration
Statement; (viii) the form of Convertible Preferred Securities filed as an
exhibit to the Registration Statement and a specimen certificate thereof; (ix)
the designation of the terms of the Convertible Preferred Securities; (x) the
form of the Convertible Junior Subordinated Debentures filed as an exhibit to
the Registration Statement and a specimen certificate thereof; (xi) an executed
copy of the Indenture; and (xii) an executed copy of the Registration Rights
Agreement, dated August 12, 1997, by and among the Trust and Credit Suisse
First Boston Corporation and Lehman Brothers Inc. as initial purchasers, filed
as an exhibit to the Registration Statement.
In my examination, I have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents
submitted to me as certified or photostatic copies and the authenticity of the
originals of such copies. In making my examination of documents executed by
parties other than the Company or the Trust, I have assumed that such parties
had the power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such
documents and that such documents constitute valid and binding obligations of
such parties. In addition, I have assumed that the shares of Common Stock to be
issued upon conversion of the Convertible Preferred Securities and the
Convertible Junior Subordinated Debentures, if any, will be in the form
reviewed by
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CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 3
me. As to any facts material to the opinions expressed herein, I have relied
upon oral or written statements and representations of officers, trustees and
other representatives of the Company, the Trust and others.
The opinions expressed herein are limited to the Federal laws of the United
States of America, the laws of the State of New York and the General
Corporation Law of the State of Delaware, and I express no opinion with respect
to the laws of any other country, state or jurisdiction.
Based upon and subject to the foregoing, I am of the opinion that the shares of
Common Stock issuable upon conversion of the Convertible Preferred Securities
and the Convertible Junior Subordinated Debentures, have been duly authorized
and reserved for issuance upon conversion and, when certificates representing
the Common Stock in the form of the specimen certificate examined by me have
been manually signed by an authorized officer of the transfer agent and
registrar for the Common Stock and are issued upon conversion of the
Convertible Preferred Securities and the Convertible Junior Subordinated
Debentures, such shares of Common Stock will be validly issued, fully paid and
nonassessable.
This letter is being delivered to you in my capacity as the Senior Vice
President and General Counsel of the Company and addresses matters only as of
the date hereof and is solely for the benefit of the addressees hereof and may
not be relied upon in any manner by any other person without my prior written
consent. I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. I also consent to the reference to me
under the heading "Legal Matters" in the Registration Statement and in the
related Prospectus. In giving this consent, I do not thereby admit that I am
included in the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission.
Sincerely,
/s/ Steven A. McArthur
Steven A. McArthur
Senior Vice President
and General Counsel
<PAGE>
Exhibit 5.3
[Letterhead of Morris, Nichols, Arsht & Tunnell]
February 4, 1998
CalEnergy Capital Trust III
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, NE 68131
Re: CalEnergy Capital Trust III
Ladies and Gentlemen:
We have acted as special Delaware counsel to CalEnergy Capital Trust
III, a Delaware statutory business trust (the "Trust"), in connection with
certain matters of Delaware law relating to (i) the issuance of the 6 1/2%
Convertible Preferred Securities (the "Preferred Securities") to the several
initial purchasers named in the Purchase Agreement (the "Initial Purchasers")
dated as of August 7, 1997 (the "Purchase Agreement") among the Initial
Purchasers, the Trust and CalEnergy Company, Inc., a Delaware corporation (the
"Company") and (ii) the registration of 5,400,000 Preferred Securities
pursuant to a Registration Statement on Form S-3 as filed by the Trust and the
Company with the Securities and Exchange Commission on or about the date
hereof (the "Registration Statement").
The Preferred Securities have been issued pursuant to the Purchase
Agreement and the Amended and Restated Declaration of Trust of the Trust dated
as of August 12, 1997 (the "Governing Instrument"). Capitalized terms used
herein and not otherwise herein defined are used as defined in the Governing
Instrument.
In rendering this opinion, we have examined and relied upon copies
of the following documents in the forms provided to us: the Certificate of
Trust of the Trust as filed in the Office of the Secretary of State of the
State of Delaware (the "State Office") on August 4, 1997 (the "Certificate");
a Declaration of Trust dated as of August 4, 1997 (the "Original Governing
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CalEnergy Capital Trust III
February 4, 1998
Page 2
Instrument"); the Governing Instrument; the Indenture dated as of August 12,
1997 between the Company and The Bank of New York, as Trustee; the Purchase
Agreement; the Trust's Confidential Offering Circular dated August 7, 1997
relating to the Preferred Securities (the "Offering Circular"); the
Registration Statement; and the Registration Rights Agreement dated August 12,
1997 among the Trust, the Company, Credit Suisse First Boston Corporation and
Lehman Brothers Inc. (the "Registration Rights Agreement"); and a certificate
of good standing of the Trust obtained as of a recent date from the State
Office. In such examinations, we have assumed the genuineness of all
signatures, the conformity to original documents of all documents submitted to
us as drafts or copies or forms of documents to be executed and the legal
capacity of natural persons to complete the execution of documents. We have
further assumed for purposes of this opinion: (i) the due formation or
organization, valid existence and good standing of each entity (other than the
Trust) that is a party to any of the documents reviewed by us under the laws
of the jurisdiction of its respective formation or organization; (ii) the due
authorization, execution and delivery by, or on behalf of, each of the parties
thereto of the above-referenced documents; (iii) that no event has occurred
subsequent to the filing of the Certificate that would cause a dissolution or
liquidation of the Trust under the Original Governing Instrument or the
Governing Instrument, as applicable; (iv) that the activities of the Trust
have been and will be conducted in accordance with the Original Governing
Instrument or the Governing Instrument, as applicable, and the Delaware
Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware Act"); (v)
that each Holder of Preferred Securities has made payment of the required
consideration therefor and received a Preferred Securities Certificate in
consideration thereof in accordance with the terms and conditions of the
Governing Instrument, the Offering Circular and the Purchase Agreement; (vi)
that the Preferred Securities have been issued and sold to, and held or
transferred by, the Preferred Securities Holders (and any subsequent
transferee), and all transfers have been made, in accordance with the terms,
conditions, requirements and procedures set forth in the Governing Instrument,
the Offering Circular, the Purchase Agreement and, as applicable, the
Registration Statement; (vii) that none of the Preferred Securities has been
called for redemption, redeemed, converted or canceled (except in connection
with a permitted transfer) and all of the Preferred Securities remain
outstanding; (viii) that the Sponsor has directed the Regular Trustees to take
the actions contemplated by Section 3.6(b) of the Governing Instrument; and
(ix) that the documents examined by us are in full force and effect, express
the entire understanding of the parties thereto with respect to the subject
matter thereof and have not been amended, supplemented or otherwise modified,
except as herein referenced. No opinion is expressed with respect to the
requirements of, or compliance with, federal or state securities or blue
<PAGE>
CalEnergy Capital Trust III
February 4, 1998
Page 3
sky laws. We have not participated in the preparation of the Offering
Circular, the Registration Statement or any other offering materials relating
to the Securities and we assume no responsibility for their contents. As to
any fact material to our opinion, other than those assumed, we have relied
without independent investigation on the above-referenced documents and on the
accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects
to matters of Delaware law, it is our opinion that the Preferred Securities
constitute validly issued and, subject to the qualifications set forth below,
fully paid and nonassessable beneficial interests in the assets of the Trust.
We note that pursuant to Section 11.4 of the Governing Instrument, the Trust
may withhold amounts otherwise distributable to a Holder and pay over such
amounts to the applicable jurisdictions in accordance with federal, state and
local law and any amount withheld will be deemed to have been distributed to
such Holder and that, pursuant to the Governing Instrument, Preferred Security
Holders may be obligated to make payments or provide indemnity or security
under the circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "LEGAL
MATTERS" in the Prospectus forming a part thereof. In giving this consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
This opinion speaks only as of the date hereof and is based on our
understandings and assumptions as to present facts, and on our review of the
above-referenced documents and the application of Delaware law as the same
exist as of the date hereof, and we undertake no obligation to update or
supplement this opinion after the date hereof for the benefit of any person or
entity with respect to any facts or circumstances that may hereafter come to
our attention or any changes in facts or law that may hereafter occur or take
effect. This opinion is intended solely for the benefit of the addressee
hereof in connection with the matters contemplated hereby and may not be
relied on by any other person or entity or for any other purpose without our
prior written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
Tax Opinion of Willkie Farr & Gallagher
<PAGE>
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Telephone: (212) 821-8000
Facsimile: (212) 821-8111
February 4, 1998
CalEnergy Capital Trust III
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Re: CalEnergy Company, Inc.;
CalEnergy Capital Trust III;
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to CalEnergy Company, Inc., a Delaware
corporation (the "Company"), and CalEnergy Capital Trust III, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"), in
connection with the preparation of a Registration Statement on Form S-3, as
filed by the Company and the Trust with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"), on
the date hereof (such registration statement being hereinafter referred to as
the "Registration Statement"), relating to the registration under the Act of
(i) 5,400,000 6-1/2% Convertible Preferred Securities (liquidation preference
$50 per each of the Trust Convertible Preferred Securities) (the "Convertible
Preferred Securities") representing undivided beneficial ownership interests in
the assets of the Trust; (ii) the 6-1/2% Convertible Junior Subordinated
Debentures due 2027 (the "Convertible Junior Subordinated Debentures") of the
Company, which may be distributed under certain circumstances to the holders of
the Convertible Preferred Securities; (iii) the shares of common stock, par
value $.0675 per share (the "Common Stock"), of the Company, issuable upon
conversion of the Convertible Preferred Securities and the Convertible Junior
Subordinated Debentures; and (iv) the Preferred Securities Guarantee of the
Company (as defined in the Registration Statement).
<PAGE>
CalEnergy Capital Trust III
CalEnergy Company, Inc.
Page 2
We hereby confirm that, although the discussion set forth in the above
captioned registration statement 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. It is possible that
contrary positions may be taken by the Internal Revenue Service and that a
court may agree with such contrary positions.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Legal Matters" in the Registration Statement and in the related
Prospectus. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
CALENERGY CAPITAL TRUST III
6 1/2% 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
-----------------------------
August 12, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
CalEnergy Capital Trust III, 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 Credit
Suisse First Boston Corporation and Lehman Brothers Inc. (the "Purchasers"),
upon the terms set forth in the Purchase Agreement dated August 12, 1997 (the
"Purchase Agreement"), among the Purchasers, the Guarantor and the Trust, 6
1/2% Convertible Preferred Securities (liquidation preference $50 per
Convertible Preferred Security) (the "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 Preferred Securities,
the 6 1/2% Convertible Junior Subordinated Debentures Due 2027 (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 Preferred Securities or the Debentures (collectively,
together with the Guarantee of the Guarantor of the 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
<PAGE>
dated August 7, 1997, in respect of the 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 Preferred Securities,
Debentures, shares of Common Stock, Rights and Guarantee of such 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
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.
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<PAGE>
"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
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 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 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 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 August 12, 1997 (the
"Declaration")), 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 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 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
3
<PAGE>
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 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 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 to state
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).
4
<PAGE>
(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.
(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
5
<PAGE>
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 to state 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 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
6
<PAGE>
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 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.
(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
7
<PAGE>
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 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
8
<PAGE>
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 Credit Suisse First Boston
Corporation 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
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.
9
<PAGE>
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 its 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 or delayed, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a 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.
10
<PAGE>
(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 or delayed.
(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 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
11
<PAGE>
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 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.
12
<PAGE>
(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 III
By Craig Hammett, solely in his
capacity as trustee and not in
his individual capacity,
/s/ Craig Hammett
-----------------------------------
Craig Hammett
By Steven A. McArthur, solely in his
capacity as trustee and not in his
individual capacity,
/s/ Steven A. McArthur
-----------------------------------
Steven A. McArthur
CALENERGY COMPANY, INC.
By /s/ Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
and General Counsel
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Robert Hanson
--------------------------
Name: Robert Hanson
Title:
<PAGE>
Exhibit 12.1
CALENERGY COMPANY, INC.
Ratio of Earnings to Fixed Charges
(Dollars in Thousands, Except Ratio)
<TABLE>
<CAPTION>
Nine Months
Ended September 30, 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... $208,675 $108,216 $135,713 $97,051 $55,836 $61,258 $50,732
Loss on equity investment
in unconsolidated
subsidiary ............. 5,321 3,966 5,221 362 __ __ __
Undistributed income
from less than
fifty-percent-owned
subsidiaries ........... (3,301) __ __ __ __ __ __
Preferred stock dividends
of subsidiaries, gross
of tax.................. (3,187) __ __ __ __ __ __
Dividends on convertible
preferred securities of
subsidiary trusts....... (13,955) (3,067) __ __ __ __ __
Capitalized interest, net
of amortization......... (31,189) (29,878) (37,476) (31,160) (9,196) (6,174) (5,202)
--------------------------------------------------------------------
162,364 79,237 103,458 66,253 46,640 55,084 45,530
--------------------------------------------------------------------
Fixed Charges:
Interest expense and
amortization of
deferred finance
charges on all
indebtedness......... 216,106 116,521 165,900 134,637 62,837 30,205 20,459
Interest portion of
lease rentals........ 2,261 45 60 60 109 247 253
Dividends on convertibe
preferred securities
of subsidiary trusts 13,955 3,067 4,691 __ __ __ __
Preferred stock dividends
of subsidiaries, gross
of tax .............. 3,187 __ __ __ __ __ __
--------------------------------------------------------------------
Total fixed charges. 235,509 119,633 170,651 134,697 62,946 30,452 20,712
--------------------------------------------------------------------
Earnings before income
and fixed charges...... $397,873 $198,870 $274,109 $200,950 $109,586 $85,536 $66,242
====================================================================
Ratio of earnings to
fixed charges.......... 1.689 1.662 1.606 1.492 1.741 2.809 3.198
====================================================================
</TABLE>
Acknowledgment of Deloitte & Touche
<PAGE>
Exhibit 15.1
February 4, 1998
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, June 30, 1997 and 1996, and September 30, 1997 and
1996, as indicated in our reports dated April 29, 1997, August 12, 1997, and
October 13, 1997, respectively; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our reports referred to above, which are included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30,
1997, and September 30, 1997, are being used in this Registration Statement.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
<PAGE>
EXHIBIT 15.2
4 February 1998
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 III for the
registration of 5,400,000 6-1/2% Convertible Preferred Securities,
$270,000,000 6-1/2% Convertible Junior Subordinated Debentures of CalEnergy
Company, Inc. and 5,653,800 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 meaning of Sections 7 or 11 of the Securities Act of 1933.
Yours faithfully
ERNST & YOUNG
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of CalEnergy Company, Inc. 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
February 4, 1998
<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 III 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."
/s/ COOPERS & LYBRAND L.L.P.
San Diego, California
February 3, 1998
<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. for the
registration of 5,653,800 shares of its Common Stock and CalEnergy Capital
Trust III for the registration of 5,400,000 of its Convertible Preferred
Securities and $270,000,000 6-1/2% Convertible Junior Subordinated Debentures
due 2027, and to the incorporation by reference therein of our report dated
June 20, 1996 with respect to the consolidated financial statements of
Northern Electric plc included in the Current Report on Form 8-K/A dated
February 18, 1997 of CalEnergy Company, Inc. filed with the Securities and
Exchange Commission.
Ernst & Young
Chartered Accountants
Newcastle Upon Tyne, England
4 February 1998
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
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 2 Rector Street, New York,
of the State of 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 Washington, D.C. 20429
Corporation
New York Clearing House New York, New York 10005
Association
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4
to Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 27th day of January, 1998.
THE BANK OF NEW YORK
By: /s/ JAMES W.P. HALL
-----------------------
Name: JAMES W.P. HALL
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of
T H E B A N K O F N E W Y O R K
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 September 30,
1997, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN THOUSANDS
- ------ ------------
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .............................. $ 5,004,638
Interest-bearing balances ...................... 1,271,514
Securities:
Held-to-maturity securities ..................... 1,105,782
Available-for-sale securities ................... 3,164,271
Federal funds sold and Securities purchased under
agreements to resell .............................. 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned
income .............................. 34,916,196
LESS: Allowance for loan and
lease losses ......................... 581,177
LESS: Allocated transfer
risk reserve ......................... 429
Loans and leases, net of unearned income,
allowance, and reserve ......................... 34,334,590
Assets held in trading accounts ...................... 2,035,284
Premises and fixed assets (including capitalized
leases) ............................................. 671,664
Other real estate owned .............................. 13,306
Investments in unconsolidated subsidiaries and
associated companies ................................ 210,685
Customers' liability to this bank on acceptances
outstanding ......................................... 1,463,446
Intangible assets .................................... 753,190
Other assets ......................................... 1,784,795
---------
Total assets ......................................... $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices ............................. $27,270,824
Noninterest-bearing .................. 12,160,977
Interest-bearing ..................... 15,109,847
In foreign offices, Edge and Agreement
subsidiaries, and IBFs .......................... 14,687,806
Noninterest-bearing .................... 657,479
Interest-bearing ..................... 14,030,327
Federal funds purchased and Securities sold under
agreements to repurchase ............................ 1,946,099
Demand notes issued to the U.S. Treasury ............. 283,793
Trading liabilities .................................. 1,553,539
Other borrowed money:
With remaining maturity of one year or less ..... 2,245,014
With remaining maturity of more than one
year through three years ....................... 0
With remaining maturity of more than three years. 45,664
Bank's liability on acceptances executed and
outstanding ......................................... 1,473,588
Subordinated notes and debentures .................... 1,018,940
Other liabilities .................................... 2,193,031
---------
Total liabilities .................................... 52,718,298
----------
EQUITY CAPITAL
Common stock ......................................... 1,135,284
Surplus .............................................. 731,319
Undivided profits and capital reserves ............... 2,943,008
Net unrealized holding gains (losses) on available-
for-sale securities .................................. 25,428
Cumulative foreign currency translation adjustments .. (16,342)
-----------
Total equity capital ................................. 4,818,697
-----------
Total liabilities and equity capital ................. $57,536,995
===========
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>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
CALENERGY CAPITAL TRUST III
(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, Nebraska 68131
(Address of principal executive offices) (Zip code)
Convertible Preferred Securities
(Title of the indenture securities)
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of 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 Washington, D.C. 20429
Corporation
New York Clearing House New York, New York 10005
Association
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 27th day of January, 1998.
THE BANK OF NEW YORK
By: /s/ JAMES W.P. HALL
-----------------------
Name: JAMES W.P. HALL
Title: VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of
T H E B A N K O F N E W Y O R K
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 September 30,
1997, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN THOUSANDS
- ------ ------------
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .............................. $ 5,004,638
Interest-bearing balances ...................... 1,271,514
Securities:
Held-to-maturity securities ..................... 1,105,782
Available-for-sale securities ................... 3,164,271
Federal funds sold and Securities purchased under
agreements to resell .............................. 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned
income .............................. 34,916,196
LESS: Allowance for loan and
lease losses ......................... 581,177
LESS: Allocated transfer
risk reserve ......................... 429
Loans and leases, net of unearned income,
allowance, and reserve ......................... 34,334,590
Assets held in trading accounts ...................... 2,035,284
Premises and fixed assets (including capitalized
leases) ............................................. 671,664
Other real estate owned .............................. 13,306
Investments in unconsolidated subsidiaries and
associated companies ................................ 210,685
Customers' liability to this bank on acceptances
outstanding ......................................... 1,463,446
Intangible assets .................................... 753,190
Other assets ......................................... 1,784,795
---------
Total assets ......................................... $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices ............................. $27,270,824
Noninterest-bearing .................. 12,160,977
Interest-bearing ..................... 15,109,847
In foreign offices, Edge and Agreement
subsidiaries, and IBFs .......................... 14,687,806
Noninterest-bearing .................... 657,479
Interest-bearing ..................... 14,030,327
Federal funds purchased and Securities sold under
agreements to repurchase ............................ 1,946,099
Demand notes issued to the U.S. Treasury ............. 283,793
Trading liabilities .................................. 1,553,539
Other borrowed money:
With remaining maturity of one year or less ..... 2,245,014
With remaining maturity of more than one
year through three years ....................... 0
With remaining maturity of more than three years. 45,664
Bank's liability on acceptances executed and
outstanding ......................................... 1,473,588
Subordinated notes and debentures .................... 1,018,940
Other liabilities .................................... 2,193,031
---------
Total liabilities .................................... 52,718,298
----------
EQUITY CAPITAL
Common stock ......................................... 1,135,284
Surplus .............................................. 731,319
Undivided profits and capital reserves ............... 2,943,008
Net unrealized holding gains (losses) on available-
for-sale securities .................................. 25,428
Cumulative foreign currency translation adjustments .. (16,342)
-------
Total equity capital ................................. 4,818,697
---------
Total liabilities and equity capital ................. $57,536,995
===========
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>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
CALENERGY COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
(Address of principal executive offices) (Zip code)
Guarantee of Convertible Preferred Securities of
CalEnergy Capital Trust III
(Title of the indenture securities)
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of 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 Washington, D.C. 20429
Corporation
New York Clearing House New York, New York 10005
Association
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York,
and State of New York, on the 27th day of January, 1998.
THE BANK OF NEW YORK
By: /s/ JAMES W.P. HALL
-------------------------------
Name: JAMES W.P. HALL
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of
T H E B A N K O F N E W Y O R K
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 September 30,
1997, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN THOUSANDS
- ------ ------------
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .............................. $ 5,004,638
Interest-bearing balances ...................... 1,271,514
Securities:
Held-to-maturity securities ..................... 1,105,782
Available-for-sale securities ................... 3,164,271
Federal funds sold and Securities purchased under
agreements to resell .............................. 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned
income .............................. 34,916,196
LESS: Allowance for loan and
lease losses ......................... 581,177
LESS: Allocated transfer
risk reserve ......................... 429
Loans and leases, net of unearned income,
allowance, and reserve ......................... 34,334,590
Assets held in trading accounts ...................... 2,035,284
Premises and fixed assets (including capitalized
leases) ............................................. 671,664
Other real estate owned .............................. 13,306
Investments in unconsolidated subsidiaries and
associated companies ................................ 210,685
Customers' liability to this bank on acceptances
outstanding ......................................... 1,463,446
Intangible assets .................................... 753,190
Other assets ......................................... 1,784,795
---------
Total assets ......................................... $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices ............................. $27,270,824
Noninterest-bearing .................. 12,160,977
Interest-bearing ..................... 15,109,847
In foreign offices, Edge and Agreement
subsidiaries, and IBFs .......................... 14,687,806
Noninterest-bearing .................... 657,479
Interest-bearing ..................... 14,030,327
Federal funds purchased and Securities sold under
agreements to repurchase ............................ 1,946,099
Demand notes issued to the U.S. Treasury ............. 283,793
Trading liabilities .................................. 1,553,539
Other borrowed money:
With remaining maturity of one year or less ..... 2,245,014
With remaining maturity of more than one
year through three years ....................... 0
With remaining maturity of more than three years 45,664
Bank's liability on acceptances executed and
outstanding ......................................... 1,473,588
Subordinated notes and debentures .................... 1,018,940
Other liabilities .................................... 2,193,031
---------
Total liabilities .................................... 52,718,298
----------
EQUITY CAPITAL
Common stock ......................................... 1,135,284
Surplus .............................................. 731,319
Undivided profits and capital reserves ............... 2,943,008
Net unrealized holding gains (losses) on available-
for-sale securities .................................. 25,428
Cumulative foreign currency translation adjustments .. (16,342)
-------
Total equity capital ................................. 4,818,697
---------
Total liabilities and equity capital ................. $57,536,995
===========
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 |
